3.3.3.4 Cascade governance

As outlined in Chapter 1.5, the linkages between different ESTPs create the potential for cascading dynamics, where one tipping process triggers one or more others. The same cascading potential exists in highly connected human systems – i.e. complex networks of economic, technological and social interactions that span across borders and sectors, underpin the functioning of our globalised world (Helbing, 2013; Centeno et al., 2015, Homer-Dixon et al., 2015). The 2008 financial crisis demonstrated the systemic risks posed by highly interconnected global financial markets. Interlinked financial institutions and complex derivatives markets meant that the failure of a few single entities could trigger a cascade of failures, leading to a global economic downturn (Ruhl et al., 2020). The cascading dynamics in Earth and human systems can interact, so the passing of an ESTP can trigger cascading failures in social and economic systems (see Chapter 2.4), drawing attention to the couplings between them. For instance, persistent extreme weather events and increasing sea level rise from the crossing of an ESTP can result in mutually reinforcing crises within the agriculture, infrastructure and financial sectors. Recently, the term polycrisis has been used to describe such conditions where multiple crises occur across interconnected global systems (Homer-Dixon et al., 2021).

Cascade governance is a form of systemic risk governance (Schweizer and Renn, 2019), which recognises that systemic connections can act as transmitters and pathways of risk, making highly connected systems vulnerable to chain reactions that are hard to predict (Juhola et al., 2022). The central objective of cascade governance is to minimise the risk of cascading dynamics by managing systemic linkages, including by deliberately decoupling subsystems, slowing down flows (of materials or information, for example) and ensuring transparency and traceability of chain processes in a participatory and polycentric manner (Galaz et al., 2017; Nyström et al., 2019). Depending on the system in question, this might demand a set of regulatory measures. For instance, to manage the danger of systemic risk within the banking sector, where the collapse of an individual bank can have contagion effects, macroprudential regulations have been suggested (Renn et al., 2019; Lamperti et al., 2019). Other measures include strengthening the absorptive capacity of each of the nodes in the financial network in response to external shocks by requiring higher capital and liquidity ratios, and encouraging modularity and diversity in the sector (Haldane and May, 2010).

Cascade governance is challenging and not yet a capacity or toolset widely available to policymakers around the world. Both predictive abilities regarding complex system behaviour and an understanding of the effectiveness of possible interventions (such as weakening or breaking key links between systems to stop a cascade in progress) are limited at this point. Further, there are psychological tendencies to underestimate and neglect systemic risks (Schweizer et al., 2022). Given these limitations, the primary goal of cascade governance regarding ESTP impacts should be prevention. This can have two dimensions: preventing the transgression of ESTPs as triggers of social-ecological cascades (see Chapter 3.2) and preventing cascading dynamics in social systems by building resilience to environmental pressure due to ESTPs.

Since prevention cannot always be guaranteed, cascade governance requires the development of comprehensive crisis preparedness plans that account for the potential ripple effects of systemic risks. Regular systemic risk assessments are needed to identify potential vulnerabilities and interdependencies within critical systems. Monitoring and early warning systems are valuable in this context (see 3.3.3.3), and should be combined with other tools, such as dynamic network mapping and iterative learning dialogues (Keys et al., 2019). Further, to address the deep uncertainties regarding tipping points and cascading risks, flexible governance approaches perform best where resources can be mobilised rapidly, aims and activities can be adjusted within networks of actors, and communication flows effectively – e.g. between private-sector organisations and government agencies. This should also include the development of redundancy and back-up systems within critical infrastructure and supply chains to ensure that essential functions can continue in the face of severe disruptions.

Cascade governance should therefore be seen as part of transformative responses which simultaneously deconstruct vulnerability, reduce the connectivity through which cascades can be transmitted, and reduce the key drivers of ESTP events (notably GHG emissions). Such responses imply rapid social and cultural changes (see positive social tipping points – Section 4).