by Judith Curry
For most of the world’s population, climate change means nothing but trouble. For a few, it means laughing all the way to the bank. – George Black
“The debate around climate change is shifting away from cost and risk toward the question of how to capitalize on exciting opportunities.”
For most people, says Elke Weber of Columbia University’s Center for Research on Environmental Decisions, it’s difficult to achieve a sense of urgency because the “time-delayed, abstract, and often statistical nature of the risks of global warming does not evoke strong visceral reactions.” The pursuit of profit works in the opposite way; the viscera and the frontal lobe of the brain operate in tandem. Strike now, before the other guy does; place your bets decisively on disaster.
Funk divides his tour of these new profit centers into three segments: The Melt, The Drought, and The Deluge. But a single theme runs through all three: there will be winners and losers, and how the competition shakes out will be determined by money and power.
Funk devotes a chapter to the aspirations of Greenland, which he thinks may become “the first country in the world created by global warming.” In this Danish possession (which is 50 times larger than the mother country), massive deposits of minerals will appear miraculously from beneath melting glaciers. Valuable fish stocks are migrating into Greenland’s coastal waters as ocean temperatures climb. Disaster tourists are flocking to watch icebergs calve and collapse. The independence movement is salivating.
Funk hits his richest vein in the world of business. His most subtle and illuminating chapter looks at Shell’s huge bet on the Arctic petroleum rush—the quest for 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas that “has men running around like Elizabethan invaders, claiming virgin territory.”
But when climate legislation foundered and U.N. conferences failed to secure significant global agreements on carbon emissions, Shell’s philosophy pivoted. Its focus was no longer on how oil and gas production would worsen global warming but on how global warming would open up opportunities for oil and gas production. Shell dropped all new funding for wind and solar energy; instead, it began sinking billions into Arctic oil and Canadian tar sands.
In terms of ‘laughing all the way to the bank’, Al Gore is enjoying a hearty chuckle [link].
Spiegel has an interview with Richard Branson, with subtitle In an interview, British entrepreneur Sir Richard Branson argues that climate change will only be taken seriously when companies can find ways to profit from it. The battle to prevent global warming, he argues, requires brains and creativity. Excerpts:
Branson: The fight against greenhouse gases offers huge opportunities for profit. In order to promote this idea, some friends and I have founded the Carbon War Room. We think that one way to look at climate protection is to regard it as a business model, because our only option to stop climate change is for industry to make money from it.
SPIEGEL: You are going to visit Germany in the near future. What are your expectations?
Branson: My expectation is that your entrepreneurs and politicians will support us in developing innovative business models and brilliant new technologies, which can be found in Germany in particular.
SPIEGEL: The German photovoltaic industry is actually doing really bad right now.
Branson: The whole European solar energy sector is in a state of crisis, especially because of the cheap competitors from China. I have lost a lot of money myself. However, this is how economic life works: Some companies win, others lose. The good news for all of us is that the price for solar energy systems is falling. In some countries solar energy will soon be as cheap as electricity produced from coal. Healthy competition is putting pressure on the manufacturers to come up with innovative products, further increasing our progress in the field. I would say that the environment is the winner here.
SPIEGEL: With your airlines, you’re one of the big polluters of the environment yourself. What are you doing about this?
Branson: We have been investing profits yielded by our transportation companies into the development of new technologies that lower carbon emissions. Those investments have amounted to around $3 billion over the years. Our main goal is to find a new fuel which will replace the kerosene produced from oil.
SPIEGEL: So? Are there any concrete prospects you could talk about?
Branson: The development of fuels from plants or waste materials such as industrial waste gas is in an advanced state. This will be a huge market, once we have scaled up production of these fuels. Just thinking of how much money we will save because we don’t have to pay the taxes and duties levied on kerosene anymore makes me feel real good.
SPIEGEL: Wouldn’t it be better for our climate if in the future people would just fly less? About 3 percent of all carbon emissions can be attributed to aviation alone.
Branson: It would be the wrong approach to lead humanity back to the dark ages. What we need to do instead is use our brains and our creativity. I firmly believe in progress.
T. Boone Pickens and Warren Buffett
But he doesn’t see global warming as a problem for Berkshire anytime soon. “I don’t think that when making an investment decision on Berkshire Hathaway (BRKA), or all companies, that climate change should be a factor in the decision-making process,” Buffett said. Munger is even more skeptical: “I think a lot of the people who claim that climate change is going to cause more hurricanes and natural disasters are over-claiming,” he said, to much applause.
The title of this article about billionaire T. Boone Pickens’ adventures with investing in wind power pretty much sums it up: T. Boone Pickens: ‘I’ve Lost My A–‘ in Wind Power – ‘The Jobs Are in the Oil and Gas Industry’
I think Richard Branson makes a good point: climate change will only be taken seriously when companies can find ways to profit from it. Whether they attempt to profit from the actual reality of climate change, predictions of climate change, or from policies that are implemented to prevent AGW, is almost immaterial.
Making profits in a dynamic, highly uncertain environment is very challenging, and Shell has certainly had a tough time of it recently [link], as has T. Boone Pickens.
A more useful framework for this, and Branson touches on this I think, is the framework of thrivability, discussed on this previous post. Excerpts:
An ability to grow, evolve and thrive over time in the face of short-term performance threats, including the ability to accelerate movement towards fundamentally new functionality and roles in our institutions.
It is a time to imagine what we can generate for the world. Not only can we work to minimize our footprint but we can also create positive handprints. It is time to strive for a world that thrives.
It seems that the profit motive can lead us to thrivability, whereas intergovernmental policies are stuck on sustainability polices that are in conflict with survivability issues in the developing world. Sound government policies that enable thrivability and antifragility will be politically palatable and might actually be successful in reducing vulnerability to climate variability/change while providing the impetus to develop 21st century technologies and infrastructure.
I suspect that investors that manage to make robust investments — that don’t rely on the uncertainties of climate predictions and the fickleness of government regulations — will probably be the ones that profit financially.