What is the business behind climate change?

What is the business behind climate change?

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Life on earth depends
on a Goldilocks climate – not too hot and not too cold. Humankind is changing that. Industrialisation has raised
temperatures around 1 degree. Experts think a further
rise of another degree is possible by 2052, even
after big emissions cuts. Crops will be more
likely to fail, displacing human populations. In Paris in 2015,
industrialised nations agreed they would limit global
warming to less than 2 degrees above pre-industrial levels,
but there has been more hot air than action. Nations cannot agree how much
each should cut emissions. Rising populism has
fostered scepticism about global warming. Under Donald Trump,
the US has threatened to withdraw from
the Paris accord. They have a collective
action problem. Everyone would benefit from
cutting emissions, eventually. No one wants to be
the prime mover. So there is no progress. The reason is that the
costs of global warming remain an externality
for most individuals. There is no immediate
benefit in reducing them. As a result, impacts
are an externality to most politicians,
too, except when protesters from
Extinction Rebellion disrupt the traffic, as
they did recently in London. They are preoccupied
with getting elected every few years. It is, as they sometimes
say in business, NMP, or next management’s problem. By the same logic as
temperatures rise, people will start
bearing direct costs. For example, some populous
parts of the world will become too hot to
inhabit in the summer or to visit as tourists. The facts such as these will
create an electoral incentive to slash emissions. Then nations will
start taking action. Squabbling will continue. One flashpoint will be
output of polluting coal. This is expected to peak at well
over 8bn metric tonnes in 2030. Many in China and India see
western demands for production cuts as self-serving. Even within developed nations
there will be conflicts. US researchers have predicted
hefty economic damage to Texas and Florida
later this century, coupled with more modest
benefits for the states of Washington and Oregon. What will the consequences
be for investors? The value of big oil companies,
such as Royal Dutch Shell, would fall. If reserves cannot be
exploited fully they need to be discounted heavily. The value of renewables
groups, like Denmark’s Orsted, would go up reflecting
a growing market. Their technologies would depend
less and less on subsidies to make profits. Nuclear generation
would make a resurgence as a supplier of
baseload electricity. That would bolster
the price of uranium, which has been depressed
since the Fukushima disaster. Extreme weather would
become more common. That would make farming
investment riskier, but agricultural commodities
trading more lucrative. Demand for catastrophe
insurance would continue to rise sharply,
bolstering Lloyd’s of London and the market for
catastrophe bonds. Some competing companies
appear more committed to a low-carbon economy
than competing nations. JPMorgan estimates
three-fifths of car sales would be hybrids or
fully electric by 2030. That compares with
2 per cent in 2015. Lex believes big traditional
carmakers, such as VW and GM, will succeed in
switching wholesale into electric vehicle output. They understand mass
production, after all. That will leave Tesla where it
is now, as a niche business, if it is not bought out. Another interesting niche will
be hydrogen fuel cell vehicles. Toyota has made a
side bet these will be needed for hauling heavy loads. The reason? Growth in the weight-to-power
ratio of batteries has been linear. Exponential growth
would be needed for battery-powered vehicles to
become universal, experts say. Businesses will need to make a
lot of other intelligent bets to build the low-carbon economy. Governments will belatedly
impose the incentives and penalties needed. The one certainty
of climate change is that business as usual
will not be an option.

9 thoughts on “What is the business behind climate change?

  • The SideShifter Post author

    The only reasonable and quick (and cheap) solution to global warming is injecting sulphites in the stratosphere. They will stop some sunlight from reaching the ground and lower the temperature no matter how high the CO2 concentration is (this is what happens when a strato volcano erupts). We will see another decade or 2 of fearmongering, empty promises and missed emissions deadlines and then all of a sudden this ''last resort'' cure will appear.

  • bossadave Post author

    Wishful thinking from JP Morgan

  • zoreto Post author

    "the business of climate change"… says it all really.

  • Joseph Henry Post author

    Agricultural commodities will become very lucrative? By 2040 Financial Times will change name to Starvation Times

  • Trigger Troll Post author

    The best why to deal with climate change is turn it into a business. You collect income tax from all the resources companies and give it back as royalties cheques . We distribute wealth to the people in the form of carbon bucks that can be used to purchase solar panels or electric cars and high efficiency furnaces etc. The carbon tax is useless. You can’t buy anything with it. A carbon buck however would get everyone on board to go green. NO MORE TAXES.

  • Jim R Post author

    At the 0:25 mark it say "crops will be more likely to fail"… with more CO2 ? Plant photosynthesis requires sunlight, water and CO2. CO2 is plant food, plants love it, the more the better.. which is why greenhouses triple and even quadruple the CO2 to promote growth. For most of earth's history the CO2 levels were 4 or 5 times higher than today. Most plants consider the climate today to be in a CO2 drought. More CO2 would be a blessing in the fight against world hunger.

  • Stephanie Rodriquez Post author


  • 0 1 Post author

    Its not populism. At least look up the definition. Don Trump is no populist, are you kidding?

  • Lee Gee Post author

    Mentions US, doesn't mention China.

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