The Capitalist's Guide to Climate Change
Comprehensive climate change legislation recently died in the Senate, but that doesn't mean everyone has given up their interest in keeping the Earth's climate on an even keel. Gen Y, for example, has to live here for a few more decades and could be expected to take an interest. But how about business in general? It doesn't seem like corporate leaders are clamoring for more to be done. But if you think there's no such thing as a capitalist who's also concerned about climate change then think again.
Top hedge fund manager Jeremy Grantham just sent out his second quarter letter to investors and in it he offers a one-page segment called "Everything You Need to Know About Global Warming in 5 Minutes." So what does he think the business-minded need to know about climate change? Among Grantham's key points is a brush up on risk analysis and the possible costs of doing nothing.
Pascal asks the question: What is the expected value of a very small chance of an infinite loss? And, he answers, "Infinite." What is the cost of lowering CO2 output and having the long-term effect of increasing CO2 turn out to be nominal? The cost appears to be equal to foregoing, once in your life, six months' to one year's global growth - 2 percent to 4 percent or less. The benefits, even with no warming, include: energy independence from the Middle East; more jobs, since wind and solar power and increased efficiency are more labor-intensive than another coal-fired power plant; less pollution of streams and air; and an early leadership role for the US in industries that will inevitably become important.If you're intrigued by Grantham's take on these complex issue, then the full section is well-worth a read (it's in pdf form. Hat tip to Treehugger for the pointer.) Do you think your company's have been paying appropriate attention to the business risks posed by climate change?Conversely, what are the costs of not acting on prevention when the results turn out to be serious: costs that may dwarf those for prevention; and probable political destabilization from droughts, famine, mass migrations, and even war. And, to Pascal's real point, what might be the cost at the very extreme end of the distribution: definitely life changing, possibly life threatening.
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