To see the challenges we have in incorporating the reality of climate change into practical policies that help make our economic system more sustainable, you just have to look at the pushback Mark Carney (Governor of the Bank of England) received for saying something that is really quite tame:
"Mark Carney … declared that the warming climate presented major risks for the global economy and global financial stability, and that businesses and regulators needed to move more quickly to try to contain the potential economic damage even though it may seem uncertain and far off."
The effects of climate change, Carney argued, will be far-reaching, although largely unpredictable today:
"Consider that a housing bubble largely concentrated in a handful of Sun Belt American states, Spain and Ireland set in motion events that eight years ago caused a financial crisis from which the world economy has still not fully healed. It's easy to imagine how the effects of a shifting climate could similarly ripple through both the financial system and the real economy in ways that are impossible to predict with any precision today."
What is more, Carney continued, climate change constitutes "a cost on future generations that the current generation has no incentive to fix." He framed this discussion as one that is potentially existential for the energy industry:
"If global governments get more aggressive about restricting carbon emissions, it could mean that billions of investment in oil and gas extraction will be rendered useless and undermine both some of the most widely held investments and the government finances of oil-producing regions."
Carney, who made his comments in a speech to a group of insurers in London (article in the first url below), was quickly rebuffed by investors claiming the Governor had "spoken out-of-turn" (article in the second url below). The critics argued that a topic like this does not fall within the Bank of England's remit. Moreover, Carney was accused of missing the point:
"Several oil and gas companies, including Royal Dutch Shell, have … argued that the stranded-assets concept overlooks projected demand for energy, especially in fast-growing developing countries."
While this is true, what the investors quoted in the article miss is that the idea of stranded assets has nothing to do with potential demand. More specifically, it is tied to the capacity of the planet to absorb the levels of carbon dioxide we are currently emitting (and will continue to emit in the future). Once we realize (collectively) that we face the very real danger of creating an ecosystem that is uninhabitable, the fact that demand for fossil-fuel-based energy has historically been strong is not going to help us much.
Take care
David
David Chandler & Bill Werther
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Climate Change Is a Worry For Central Bankers, Too
Climate Change Is a Worry For Central Bankers, Too
By Neil Irwin
October 1, 2015
The New York Times
Late Edition – Final
A3
http://www.nytimes.com/2015/10/01/upshot/one-of-the-worlds-most-powerful-central-bankers-is-worried-about-climate-change.html
Mark Carney under attack from investors
http://www.nytimes.com/2015/10/01/upshot/one-of-the-worlds-most-powerful-central-bankers-is-worried-about-climate-change.html
Mark Carney under attack from investors
By Madison Marriage and Richard Stovin-Bradford
October 5, 2015
The Financial Times FTfm
Late Edition – Final
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