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The Intergovernmental Panel on Climate Change (IPCC) have published a report that predicts in stark terms both the historic and predicted changes to the earth’s climate from human activities. This is what they say in the accompanying press release: “Scientists are observing changes in the Earth’s climate in every region and across the whole climate system, according to the latest Intergovernmental Panel on Climate Change (IPCC) Report, released today. Many of the changes observed in the climate are unprecedented in thousands, if not hundreds of thousands of years, and some of the changes already set in motion—such as continued sea level rise—are irreversible over hundreds to thousands of years”.
However they also say that “strong and sustained reductions in emissions of carbon dioxide (CO2) and other greenhouse gases would limit climate change. While benefits for air quality would come quickly, it could take 20-30 years to see global temperatures stabilize”.
Although there are a few people who do not accept the scientific consensus in the IPCC report, Governments are likely to accept the findings and implement policies accordingly. This is already happening with the UK being at the forefront of measures to reduce carbon emissions which are seen as the main cause of global warming. With the Government’s “net zero by 2050” policy we are already seeing major impacts and the imposition of enormous costs on many aspects of our life. All of this is reinforced by media coverage of floods and wild fires that are typically blamed on climate change.
Many such reports are anecdotal in nature – they may simply be random events that occur for non-specific reasons, while reporting of such events is now more common in the modern connected world. But the IPCC report does say “It is virtually certain that hot extremes (including heatwaves) have become more frequent and more intense across most land regions since the 1950s, while cold extremes (including cold waves) have become less frequent and less severe, with high confidence that human-induced climate change is the main driver of these changes”. They also say that heavy precipitation events have increased since the 1950s over most land areas and it is likely that human-induced climate change is the cause. It has also contributed to increases in agricultural and ecological droughts.
The IPCC report is effectively a call for action and that will no doubt be reinforced by the upcoming COP26 summit in Glasgow in November where politicians will be promoting their virtuous visions no doubt. Whether they turn into actions remains to be seen – the past experience suggests they may only turn into token gestures. Economic decisions often thwart the best policies.
What happens if we don’t cut CO2, and methane and other carbon emissions? The IPCC report gives a number of scenarios based on scientific models of differing levels of emissions. Under the high and very high GHG emissions scenarios, global warming of 2°C (relative to 1850– 1900) would be exceeded during the 21st century. Global warming of 2°C would be extremely likely to be exceeded in the intermediate scenario and under the very low and low GHG emissions scenarios, global warming of 2°C is unlikely to be exceeded.
That might seem to be good news, but because of the time lag of the impact of changes in emissions, under the high emissions scenario their best estimate is of a temperature rise of 2.4 °C by 2041-2060 and 4.4 °C by 2081-2100. The latter would be disastrous for many parts of the world with increases in the intensity and frequency of hot extremes (heatwaves and heavy precipitation). The Arctic might become ice free in summer under all the scenarios and sea levels will rise “for centuries to millennia due to continuing deep ocean warming and ice sheet melt”. This could mean a rise of 2 to 3 metres in sea levels if warming is limited to 1.5 °C or 19 to 22 metres with 5 °C of warming!
With so many of the world’s cities on seaboards you can see that flood defences may be totally inadequate to cope with such rises and incapable of being built to resist them. Investments in City of London property would be one casualty. The current Thames flood barrier may be overwhelmed in future years even if GHG emissions stop growing.
The changes will likely affect the Northern Hemisphere more than the Southern, and there is some good news. For example, the reports says that the growing season has lengthened by two days per decade since the 1950s in the Northern Hemisphere. Farming might extend further north and unproductive land brought into use, but droughts might also remove a lot of marginal land from farming activity. These impacts will be greatly affected by the increase in GHG emissions.
Who can really affect the emissions? Only the big emitters such as the USA, China and Russia can have much impact. The UK produces less than 2% of world emissions.
Does the decarbonisation of transport, particularly in the UK, help at all? In reality not. For example, converting users to electric cars is likely to have minimal impact because the energy requirement and associated CO2 emissions to construct the batteries and make the steel for the car bodies offsets most of the likely benefit. The cost of building a network of charging points and enhancing the electric grid to cope will also be high. Investing in electric car makers or buying electric cars is not going to save the planet.
Is it worth considering investing in disaster insurers, although there are now few such listed vehicles? Munich Re produced a good report on this area which you can read here: https://www.munichre.com/en/risks/natural-disasters-losses-are-trending-upwards.html . An interesting point they make is that less than half of all losses are insured and it is even less in developing countries. It is very clear that poorer countries in less developed markets are those that are going to suffer from more extreme weather events and rising sea levels.
The big problem which the IPCC report does not cover is that GHG emissions are directly related to the size of the human population and their activities. Particularly what they consume, where they live and how they earn an income.
Unless there is a concerted effort to halt the growth in population and to restrict urbanisation, I doubt that the growth in GHG emissions will be halted. More population means more farming to feed the people and that is a big contributor to methane emissions which is a significant GHG factor (this is highlighted in the latest IPCC report). Similarly construction of homes and offices is a big contributor. Nobody has yet figured out how to produce cement without generating carbon. Hence the suggestion that we should revert to constructing houses out of wood. Investing in growing trees for timber might be one interesting investment approach to look at. But that is a 20+ years project and it can take 50 years to grow to harvestable size for timber, or longer in northern latitudes.
In conclusion, it’s worth reading the IPCC report (see link below) and pondering how you think the Government should deal with these issues. Please don’t fall into the trap of encouraging your local council to declare a “climate change emergency” as some have already done. Their initiatives such as closing roads to restrict traffic and persuading everyone to cycle will have no impact whatsoever. Gesture politics is what we do not need.
Even the UK Government alone will have no impact unless they can persuade other major countries to take suitable steps. But will they is the key question? If they don’t all we can do is to try to mitigate the impacts by weather proofing our properties and the transport network while purchasing air conditioning to cope with the heatwaves.
I am sure some readers of this article will consider that I am being too defeatist and that we can all contribute to reducing the problem by eating less meat, looking at the food miles of what we consume, cutting out long holiday flights, changing your central heating boiler, reducing investments in oil/gas/coal producers and other peripheral affectations. But only Governments can really tackle the problem which we should all encourage them to do.
IPCC Sixth Assessment Report: https://www.ipcc.ch/assessment-report/ar6/
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
Post Date: August 14, 2021
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There are a number of points in this post that I take issue with.
Firstly, the suggestion that there might be meaningful disagreement with the scientific consensus that climate change resulting from human activity is occurring and that urgent action is required to reduce the impact.
The truth, as detailed here: https://en.wikipedia.org/wiki/Scientific_consensus_on_climate_change#:~:text=Nearly%20all%20actively%20publishing%20climate,consensus%20to%20be%20at%20100%25 is that virtually all qualified specialists in the field are in agreement. Almost all the opposition is from people with qualifications in other fields. It would seem foolish to me to be influenced by individuals who are not climate experts on such a complex subject. Especially from vociferous opponents with no relevant expertise whatsoever.
The post appears to suggest that the linkage between extreme weather events and climate change is purely anecdotal and driven by 24 hour media. The author then goes on to acknowledge that, whilst no single event can be attributed to climate change, proper statistical analysis by climate experts shows that extremes are more frequent and “virtually certain” to be driven by human-induced climate change. Why make the point about individual events, if you accept the expert opinion that they are more likely to occur as a result of human-induced climate change?
“Who can really affect the emissions? Only the big emitters such as the USA, China and Russia can have much impact. The UK produces less than 2% of world emissions.”
This is true but a) unless developed countries like the UK set a good example, how can we expect less developed economies (and the US) to act? b) Whilst China is the biggest emitter overall, per capita emissions are not much more than those of the UK and behind Germany and Poland. NB India is a significantly bigger emitter than Russia but its per capita emissions are a fraction of those of western nations. So, if we want to realistically move to a “low emissions” scenario, the West has to “put its money where its mouth is”, set a good example and assist nations such as India to reduce their emissions without further impoverishing their populace. See this for who emits how much: https://www.ucsusa.org/resources/each-countrys-share-co2-emissions
“For example, converting users to electric cars is likely to have minimal impact because the energy requirement and associated CO2 emissions to construct the batteries and make the steel for the car bodies offsets most of the likely benefit.”
This is a myth, peddled by fossil fuel companies and those wedded to the internal combustion engine. See https://www.bbc.co.uk/news/science-environment-51977625 for the facts.
“Please don’t fall into the trap of encouraging your local council to declare a “climate change emergency” as some have already done. Their initiatives such as closing roads to restrict traffic and persuading everyone to cycle will have no impact whatsoever. Gesture politics is what we do not need.”
If local authorities actually could persuade everyone to cycle (or walk), rather than using cars for short journeys, it certainly WOULD have an impact on the UK’s emissions (and on our nation’s health!). Another excuse for inaction.
“I am sure some readers of this article will consider that I am being too defeatist and that we can all contribute to reducing the problem by eating less meat, looking at the food miles of what we consume, cutting out long holiday flights, changing your central heating boiler, reducing investments in oil/gas/coal producers and other peripheral affectations. But only Governments can really tackle the problem which we should all encourage them to do.”
Governments can create incentives, economic and otherwise but climate change can only be addressed if individuals and businesses act. Suggesting otherwise is not defeatist. It is irresponsible.
Finally, the author resorts to the discredited 18th century Malthusian argument that population growth is the primary concern and unsustainable. Historically, Malthus grossly underestimated the ability of human ingenuity to overcome constraints. It is undoubtedly true that it would be easier to resolve these issues if population growth slowed. History has also shown that the keys to reducing population growth are development: education and opportunity for families to support themselves without the need for large numbers of children to support parents.
I am more optimistic: with the right incentives and policies, people and businesses can innovate and develop solutions to the problem of climate change. This is already happening. The cost of solar has fallen sharply (https://www.solarpowerportal.co.uk/news/solar_pv_costs_fall_82_over_the_last_decade_says_irena). The cost and efficiency of EVs is also on a steep curve of improvement. The cement problem that is highlighted is also being addressed. See https://www.mckinsey.com/industries/chemicals/our-insights/laying-the-foundation-for-zero-carbon-cement
Such comments as “Almost all the opposition is from people with qualifications in other fields” are not helpful. I made it clear that the opposition was a minority but to suggest that the opposition is ignorant or scientifically unqualified is wrong. I accept most of the IPCCs comments in their report.
As regards the benefit of electric vehicles, over their lifetime they may reduce CO2 emissions but in the short term they do not because the CO2 from building the existing vehicles they replace has already been expended.
I could spend a lot of time in picking holes in your arguments but it would be pointless to do so because clearly you do not want to take a balanced view of the arguments but are in the “we need to do everything to defeat climate change regardless of cost”. That is a distortion of the IPCC report.
As regards Malthusian views, ultimately we cannot control or reduce CO2 emissions unless there is some constraint on population growth. At least that is true if we are to maintain an industrialised society with current farming practices.
I do not argue that “we need to do everything to defeat climate change regardless of cost”. I do, however argue that there is plenty that can be done. Moreover recent advances such as the reduced cost of solar PV and wind turbines demonstrate that when incentives are there and production scales up, the economics of technologies that reduce CO2 emissions can improve dramatically. Heat pumps for example are very expensive currently. With initial subsidies and scaling up of production to meet higher demand, I’m sure that those costs could be brought down.
I argue that innovation is the answer, with encouragement of technologies such as this: https://www.rolls-royce.com/innovation/small-modular-reactors.aspx#/ [and the low-carbon cement mentioned in my earlier comment].
We need to take this problem seriously and do all that we REASONABLY can to counter it.
I certainly agree with your last sentence which is why I wrote the original article. But Governments will have more influence than individuals.
To say “governments will have more influence than individuals” is either massively simplistic, or a complete misunderstanding of how society really works. And it suggests individuals can feel no personal responsibility for helping to combat climate change, because any significant change can only, and must, come from government.
A government isn’t some amorphous organisation with its own consciousness – it’s an organisation made up of individual people. I.e. politicians – who have their own opinions and ambitions, but also know that these mean little if they or their party don’t get (re)elected. Therefore they take great notice of the opinions of the electorate, and change or implement policies accordingly.
So when individuals / the public / the electorate change their behaviour or opinions, as in recent years re: climate change, it leads directly to changes in government policy. Hence the rise of Green Party and the increasingly climate-aware policies of the larger parties.
Therefore individuals can not only make small positive changes in their own lives, but can also influence wider change by influencing others including politicians – at the ballot box but also via petitions, protests, contacting their representatives and so on.
The one thing that 45 years of investing have taught me is that it is difficult. Even when a long-term trend is clear, the investing implications are often not.
For example the cigarette industry has clearly been doomed since the evidence on its health effects became irrefutable in the early 1960’s. Despite that, tobacco shares have been a great investment. (I have never bought any for ethical reasons, but that is a different issue.)
Similarly a UK listed company client of mine made coal mining machinery. They could see that the coal industry was dying, and kept diversifying. Each diversification was a disaster, while their coal mining machinery business went from strength to strength.
Accordingly there is no easy path from knowing what is happening on climate change, and from knowing what the national policy implications are (I will save space by not spelling those out) to deciding what shares you should buy and which ones you should sell.
For example, on the one hand oil companies risk being left with stranded reserves. On the other hand, they may be making large amounts of cash for many years.
Should you buy oil companies? I don’t know. I sold my BP holding last year, but have no idea whether that was the right decision or not. Investing is difficult!
James Lovelock’s Gaia Theory recognises Planet Earth as a self regulating system sustaining conditions for life. The activities of billions of people are pushing the system to a tipping point. The opportunities for investing in transformational technologies and cultural changes are substantial. I would be interested to join a group of investors with a range of engineering and industrial backgrounds who can apply their understanding to these emerging investment opportunities for the transition to Net Zero.
I do not dispute that global temperatures are increasing but as the kink in the (in)famous hockey stick shows, there are discontinuities i.e. the increase has not been monotonic. Between roughly 1940-80 temps first fell and then stabilised before regaining inter-war levels. This is despite gases, particularly CO2, increasing significantly during this period and particularly at the outset when WW2 spewed billions of extra tons into the atmosphere. In the early 1970s I distinctly remember press reports of ‘going into a mini ice age’. My point is that I have not seen an explanation for this aberration. If we understood more why it occurred, then we might have a better fix on a solution.
That apart, my view is that investors should stick to the knitting and leave it governments to erect the correct market signals.