Sunday, July 25

A debate over climate change

We had a presentation on climate change in the office and I just want to pick up on one part of it. Here is the particular slide.

Let me explain the slide first. The X axis shows GDP growth while the Y axis shows the Emissions CO2 per capita. So you end up with (a) Lesser Developed, (b) Industrialising, © Industrialised, and (d) Low Carbon Economy. The last fourth quadrant being the nirvana land, yes?

So what’s the trajectory like? If we do nothing, then the red line is operational and we will keep on going up the increased wealth with increased emissions route. The parallel bottom descending lines from the red line to the dark blue line are due to green new deals, a climate change deal if you will. The top light blue line relates to a catastrophic climate event which will pull the entire world or the country back into lesser developed status while the yellow line exhibits what will happen if we have a technological breakthrough via carbon sequestration or some other fancy technology.

This is just an illustrative slide to show what potential trajectories there can be, but I have 3 issues

1. cost: This slide does not talk about what will be the impact of adopting the green deals or the geo engineering technical solutions. If you factor that in, then the optimistic blue line at the bottom will be pulled up sharply increasing the trend line. In other words, if a country like India has to actually pay for carbon storage or other carbon emission technologies, it can very well decrease its growth rate.

2. combination: There is a strong possibility that all four elements are simultaneously applied, we can have growth, we can have new green deals, we can have geo engineering and we can end up with a catastrophic climate event such as typhoons or cyclones or something like that. Then where do we go? In other words, the choice is frankly now out of our hands.

3. Other factors such as water shortage: What happens if we have a catastrophic non climate event such as volcanic eruptions? Or severe drought? or water shortage? What then?

I further pointed out that the cost of getting people to work on this via the private sector seems to be a bit wonky, the PE ratio’s of green tech companies are hovering around the 60-100 mark. That’s ridiculous. What on earth are those valuations telling me? That’s a clear and present danger of a huge bubble.

So I am going to sit this one out I am afraid, not very clear and until and unless there is more clarity, not going to invest in this sector. This doesnt mean that I am going to stop my attempts to reduce pollution and the like, that’s on the supply side but on the demand and fixing side? Jury is still out.

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