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Capitalism To The Rescue

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Posted May 28, 2006 in Politics , Venture Capital and Technology

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Like with Alberta and Calgary's boomtown with the Tar Sands, Coal's clean burning fuel days will come. We are not there yet as I have looked at some interesting clean burning coal plans that China has no interest in right now.

I was just reading "The Weather Makers" - some good stuff in there but complicated.

Gore's Sundance movie and slide presentation will b getting big show especially if we have another bad storm season.

Posted by: howard | May 28, 2006 6:19:26 PM

Nice post.

By equating politics to profits consumers and investors can and already do motivate companies to adapt behaviours we desire.

Free market and consumer power at it's best.

Namaste

Al

Posted by: Al | May 28, 2006 6:56:35 PM

Nicely said.

There is an inconvenient truth lurking here. The energy consumption footprint we U.S. types have is large, and modulo extreme cleverness, probably not sustainable.

One way out that I do wish more people would take seriously is getting off planet. We have the tech and the wealth to start experimenting. What we lack is the will. I think that those of us in our mid 30s or older find the idea silly, the realm of alien abductees. But the fact is that it really isn't. A serious effort could put a habitat on the moon.

This ties back to energy via the huge resources the solar system offers. The best fusion reactor around is sitting there, mostly not exploited.

Posted by: fishbane | May 28, 2006 7:36:13 PM

While it's correct that industrial emissions contribute to the global warming, you need to keep in mind that some research points that most of the current warming, nicely represented in the graph above, is actually an effect of the regular variations in global temperature. We are essentially just coming out of the so-called "miniature ice-age", which had its peak during the 18th and the 19th centuries.

Unfortunately, a lot of research in this direction is pushed aside in favor of hipper "industry is to blame for everything" approach, and sometimes even actively attacked and debauched as "conformist".

Posted by: Berislav Lopac | May 28, 2006 7:54:33 PM

"Because I think capitalism can help us find a way out of this mess just as it got us into it."

In German we have an expression for that: "Den Bock zum Gärtner machen". My loose but befitting analogy would be "to appoint the rapist as counsellor".

I don't know how one can think that a system that is so thoroughly unsustainable, unfree, and inequitable by design as capitalism in the form that we experience it can in any way 'heal itself'. That's an oxymoron. If it WAS able to heal itself, it wouldn't have gotten itself into this mess in the first place, but that thought may be a bit too lateral for the average mind.

Regarding free market... I dare anyone to show me even ONE free market. There is no such thing. It's an oxymoron, too. Markets are so protected, regulated, vicious and unbalanced that to use the word 'free' for it makes my shudder - unless 'the American' interpretation of 'free' is vastly different from mine, which is quite possible, given that the US wanted to 'free' Iraq, only to create one Mother of a Hell there.

And if there's a dissenting voice, there's always someone with money finding someone else willing to carry out the dirty deed and bump them off. The Kennedy family has seen many of those, and there are countless examples all over the world, from Patrice Lumumba to Martin Luther King, where the good guy ended up with a bullet in his head.

Free market and capitalism should be relegated to where they belong: the wastebin of history. That said and to prevent any simple mind from accusing me being a communist, what we need is something new, not something slightly altered, the same old system only in different clothes.

Capitalism has failed us (and the Earth/Universe), and Communism never really was. As long as money is more important than compassion, as long as we live in a world of separation, and as long as we 'value' ourselves by our bank balance and our material possessions, as long we will continue on the downward path. Our children will 'thank' us for our arrogance, ineptitude and downright stupidity.

Posted by: Helmar | May 29, 2006 4:22:09 AM

{{ For the sake of argument, I'll set aside for a moment arguments about human contribution to current large-scale climate trends and assume that the apparent rise in average temperatures does result from human activity. }}

There is an argument to be made that not only is enlarging democratic participation (and its inseperable economic correlate: somewhat free-market capitalism) our best hope for taking action to counter harmful effects arising from climate change, it may also be what has prevented any human-caused climate change from being far worse than it has actually been.

So, I'm inclined to agree with your conclusion (that free markets are critically important to having any lasting positive effect on global climate), but not with your premise (that capitalism caused it).

(More detail here. One day I'll get trackback working...)

Posted by: Roland Turner | May 29, 2006 9:41:23 AM

fred, the chart you publish is unfathomable -- and worse, the data source is not cited. regardless of how one views global warming, can't we at least debate the situation using reasonably clear, understandable data, from attributed, hopefully unbiased sources?

wikipedia may be a cool web site and a half decent encyclopedia but puh-lease, it is not a great source for unbiased scientific data, at least of the sort you would presumably want to rely on when making global resource allocation and international trade treaty decisions.

also, the chart you publish (assuming its from some bona-fide peer-reviewed scientific source and not Mad magazine or Hustler) demonstrates little if anything about anything. please. define "anomoloy" in context of that graph. it seems to mean deviation, but from what? some average global temperature? and if so, how was the average temperature of 1860 measured exactly? sorry, NFW was any data being collected prior to say, 1920, that could in any way be compared to the data we collect today (if nothing else, just ain't enough of it to look at.)

even if its a fact, global warming may or may not be a crisis. glaciers advance and recede constantly. species evolve and die out every day. are we effecting, maybe creating, such changes? DUH. of course we are. but the only issue is, are we soiling our own bed? and if so, what kind of bed do we want? will we sacrifice, say, cheap energy, and modern farming techniques for say, more cute furry animals and happy Hollywood celebrities?

regardless, the "earth" and "nature" are indifferent. earth and nature survived the meteor that destroyed the dinosaurs. earth and nature survived mount st. helens, the roman empire, the bubonic plague, etc. so earth and nature will definitely survive the reign of homo sapiens, and any/all of our feeble narcissistic ego-centric attempts at "control" -- or "de-control". homo sapiens, however, needs to decide what its priorities are. there was no garden of eden. so there's no such place to return to.

Posted by: steve | May 29, 2006 10:43:56 AM

"Our political system may get its act in gear at some point"

Not as long as the main contributors to your political candidate, red or blue for that matter, are Exon Mobile, Wal Mart Haliburton, Enron, etc.

Your assertion, "I believe in the power of free markets. There are times when markets can fail us, but I think they are few and far between." is just a laughing matter.

All those companies mentioed above are the symbol of success in a capitalistic society.

Posted by: Jeff | May 29, 2006 2:29:39 PM

Interesting read. I think that conservation, carbon credits, and other schemes can have little or no impact on climate change. Where capitalism will rescue us, is in dramatic technological breakthroughs.

Specifically, nanotechnology that will drive down the cost of solar energy to below the $/Watt of most competing technologies. There is also tidal power, wind power, and ultimately fusion - although that could be 75 years away.

Posted by: Eric Decker | May 29, 2006 9:57:12 PM

I share your capitalist optimism, Fred, and I think we're seeing some early signs that we're right. For example, the Investor Network on Climate Risk (INCR) at http://www.incr.com/ is a group of huge institutional investors like CALPERS that is pressuring companies in their portfolios to look for the risks and opportunities in climate change. That said, it is crucial to remember that there cannot be naturally efficient markets for things with massive negative or positive externalities - like defense and the environment. These areas require governmental action (regulation, investment,...) or the economy will over- or under-invest. At the moment, I think that every government in the world is falling short, failing to make the policy adjustments that will catalyze the capitalist reaction that can solve the problem.

One of the key reasons for the shortfall is the continuing disinformation campaign about the gravity of the issue. For those who are still wondering a) if this is real and b) if we're contributing, check out the Intergovernmental Panel on Climate Change at http://www.ipcc.ch/ IPCC is an international organization that includes . The best document for laypeople is the "IPCC Third Assessment Report" which was authored by hundreds of the top experts in related scientific fields, including:
- 122 Lead Authors
- 515 Contributing Authors
- 21 Review Editors
- 337 Expert Reviewers

This group of top scientists concluded, among other things:
- “The increase in temperature in the 20th century is likely to have been the largest of any century during the past 1,000 years.” (This comes with a chart much scarier than the one Fred posted.)
- “The projected rate of warming is... to be without precedent during at least the last 10,000 years...
- “Global average temperature and sea level are projected to rise under all IPCC SRES scenarios.
- “Concentrations of atmospheric greenhouse gasses and their radiative forcing have continued to increase as a result of human activities.
- “There is new and stronger evidence that most of the warming observed over the last 50 years is attributable to human activities.
- “Human influences will continue to change atmospheric composition throughout the 21st century.”

So, let’s maintain our optimism – and let’s start those companies that can take advantage of the trend while saving us all. But let’s being first by acknowledging the problem and kicking our government into taking action to kick-start the private sector.

Posted by: Lucinda | May 29, 2006 11:00:59 PM

I'm not sure what I think about human influence on global warming. It seems feasible that it is both significant and reversible.

I do however have a problem with a graph of what is possibly a cyclical environmental process that covers less than a single cycle. Geological and climatalogical time frames are well beyond the 150 years the cited graph covers.

I don't need a 5 year running average. I need a 100 year running average.

Posted by: Erik Schwartz | May 30, 2006 2:19:15 PM

Nice post Fred. Having just come off a winter when the highs and lows were 10 degrees on average above normal, and where "normal" temperatures are an aberration these days, I find myself missing the times just a few short years ago when I actually had to wear a jacket in December. No matter what the naysayers and the "give us more data folks" say, it's here and it's real. Simply pick any city and take the ratio of days above normal to days below normal and the answer is shockingly clear. I'm surprised the data isn't even stronger than the chart you gave exhibits, I would have guessed more like a 1.5C deviation from normal in recent years.

Anyway, you could always short PII and the outdoor clothing stores in November. Wall Street analysts can't factor global warming into their models, at least not yet :)

Great post and nice call for action and for the creation of a "carbon beta basket." I would love to add some environmentally sensitive investments provided the valuations aren't extreme already like those of Evergreen Solar and Daystar. A list of environmentally conscious "mainstream" companies would be welcome.

Posted by: Steve | May 30, 2006 3:11:13 PM

Fred, good post. I was going to write in over the weekend about the "option value" AEP and other like-minded companies are buying with their investment in scrubbers, clean tech, etc. It is the world-is-an-unpredictable-place approach, not the why-do-it-unless-you-have-to approach. Well lo and behold you could wake up one Tuesday morn and have a Treasury Secretary nominee who is also chairman of the Nature Conservancy (and Goldman Sachs, natch) and a huge proponent of the Dreaded Kyoto. Nominated by a Republican President I might add.

http://thinkprogress.org/2006/05/30/treasury-secretary-kyoto/

-Motts

Posted by: Motts McGregor | May 30, 2006 5:00:53 PM

An long, interesting and often funny article in the washington post that has some thought-provoking (and likely half baked) skepticism about that graph and many other of the best-promoted stats about global warming (hint: note the temp between '40 and '80)

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/23/AR2006052301305_pf.html

Posted by: Chris Marstall | May 31, 2006 12:12:14 AM

Please dig a little deeper into the facts. Nice chart, but:
1. what is the source
2. most temperatures were taken in cities, you need to take into account the well documented "heat island effect" that causes very localized temperature increases due to things like large buildings blocking cooling winds, pavement absorbing heat, etc.
3. 140 years is nothing in the big picture of climatic cycles. Consider the latest ice core samples showing that the north pole used to be green and lush, consider that greenland was named greenland because it had no ice when the vikings landed there and started herding animals, only to be frozen out when the ice came. Consider that antartica is cooling and the ice shearing is due to katabatic winds.

The bottom line is that you look at one brief period and extrapolate out to an unreasonable conclusion. That is like proclaiming the Internet dead in 2001. Stick to what you actually spend time on, VC investing.

Posted by: Tom | Jun 4, 2006 1:13:04 PM

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