The vague, blatantly inadequate "agreement" that President Barack Obama wrangled out of the Copenhagen climate conference -- or, to give the meeting its official name, the U.N. Climate Change Conference -- is nonetheless a game changer.
Oh, not because any of the countries that have signed on have committed to actually do much of anything. But because the very inadequacy of this agreement forces all meaningful action back onto national governments.
If you want to know where the profits -- and costs -- of global climate change will be for the next decade, you need to study not the technologies of climate change but the nature of the governments and economies that will stumble toward addressing this problem.
The nature of the U.S. system, for example, tells an investor a great deal about how to make money on global climate change in the next few years.
Designed to confound
Sometimes, looking at the challenges of global climate change, I think this problem was designed by some mad economist: It plays to just about every weakness in capitalist market economies.Shall I count the ways?
First, you can't prove that climate change is caused by human activity or that the consequences will be a disaster -- or that climate change is even happening. And that leaves plenty of room for honest dissent. And for pandering dishonest dissent, too.
I think the best explanation for the data is that climate change is man-made. And I think that extrapolating from current trends such as the drying of California, sub-Saharan Africa and Australia makes a good case that global damage, if we don't do anything, is going to be greater than the $9 trillion estimated in the 2006 Stern Review on climate change.
But is any of that absolutely certain? No way. The climate is a complex system that we don't understand very well. All we can say, if we're honest about it, is that the theory that man-made carbon dioxide and other greenhouse gases are warming the planet and creating a massive change in our climate fits the facts better than other theories.
That leaves the United States well short of a consensus. And if you need a refresher to what happens to our political process when you don't have a consensus, just look at the nearly terminal dysfunctionality of the U.S. Senate on health care in the past few weeks.
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Of course, those who don't believe that global climate change theory is correct would put the benefit of "fixing" it at $0. On the cost end, I've seen everything from $20 billion (based on fixing the problem with a solar umbrella) to $10 trillion. Put those numbers in your cost-benefit analysis and you can justify every conclusion from spending nothing to spending whatever it takes.
Third, this is one of those situations where you're asked to pay now in real hard cash for hard-to-quantify benefits later that market economies are so terrible at pricing. How much would you pay today to avoid a broken leg tomorrow? That's easy. You've got some idea of how inconvenienced you'd be, what services you might have to pay for, your tolerance for pain and what's on your schedule that you'd have to postpone or cancel if you broke a leg.
But now let's make the problem harder: How much would you pay today for a 60% chance of a broken leg? Or a 50-50 chance that the broken leg would happen to either you or your neighbor Fred? Or that it's an 80% chance of a broken leg, a 15% chance of two broken legs and a 5% chance of death?
On sale now: Ice age avoidance?
I live in New York City. One potential climate change scenario is that the melting of Greenland's ice cap could send so much fresh water into the North Atlantic that it stalled the Gulf Stream.One possible result (it has happened before; look up the Younger Dryas) would be to cover parts of North America, including New York, and Europe with glaciers. What would I pay to avoid that tomorrow? Well, tell me how likely it is, for a start. And then I'll fork over some tax money for a fix.
We're actually not talking about how much I'd pay now to avoid a disaster to myself. We're talking about cash for kids here. If the computer projections are right, we need to take decisive action within the next 20 years or we'll pass a tipping point that makes it extremely difficult (and even more horrendously expensive) to fix the problem, if it's still fixable at all.
In other words, if I don't put up the cash now, my kids or their kids are going to either learn a lot about how to dig a snow cave, or they're going to inherit a beachfront apartment on what is now the third floor in north Manhattan.
I could go on, but I think even those three problems suggest the shape of any potential climate change solution in the U.S. and globally.
Continued: Politics enters into it
