Economic Incentives for Climate Change

My Comments: What are your thoughts about climate change? Do you believe it’s real? If it is, how will it impact your life? Or the lives of your children and grandchildren? Will it affect where you choose to live, what to eat, how to invest your money?

Personally, I think it’s very real, that it will have a profound effect on the lives of my children and grandchildren, and I’m afraid for them. For many reasons. And I’m frustrated in my inability to do anything about it other than write and try to persuade others there’s a manifest problem on the horizon.

By Scott Minerd, Global CEO Guggenheim Partners LLC \ 23 JAN 2020 \  https://tinyurl.com/vhn759z

As events here in Davos head into the home stretch, the conference hosted by the World Economic Forum, an invitation-only affair, has once again proven its power to attract both the important and self-important. In a lot of ways many of the attendees clearly hold themselves in high esteem.

The issues of climate change have dominated the entire conference. The importance of the topic cannot be overstated. Almost every attendee has commented and sometimes lectured on the responsibility of diverse stakeholders to urgently solve the problem.

Yet beyond moralizing, few real and concrete proposals were offered by various speakers.

When confronted with the possibility that the UN’s 17 Sustainable Development Goals (SDGs) may not be realized by 2030, the cognitive dissonance of many participants is to attack the messenger before examining the facts.

The truth is that in the first five years since the SDGs were promulgated, very little progress has been made to reaching them on schedule. Based on the underlying trends it is possible that the goals may not be realized until the end of the century.  If the causes of climate change are proven to be real, then the world will likely reach a tipping point well before the goals—which were designed to allay catastrophe—are obtained.

I have found it alarming that any attempt to highlight the facts around the lack of progress is met with scorn and derision. Attacks range from being labeled as a heretic to someone who favors climate change. Yet, responsible responses are few and far between.

Common theories supporting a sudden acceleration in progress include new technologies and hope. Failure to convert to this practically religious faith that all will be well by the end of the decade is tantamount to treason.

The truth is that existing technologies to reduce carbon emissions already exist but are not being implemented on a scale necessary to achieve the goal. For instance, it is well established that it is cheaper to generate a kilowatt of electricity from solar than it is from fossil fuels. Yet, at same time, the fossil fuel energy complex barrels ahead by increasing output whether in the form of oil or one of its primary products, electricity.

With the clear evidence that the solution exists, why do the carbon industries stick to their antiquated ways of producing energy? Why do policymakers continue to enable it? Simply it is a combination of vested interest and huge legacy costs which have to be amortized through the income statement.

If the advertised crisis is to be avoided, policymakers need to establish a strong set of economic incentives. A carbon tax associated with offsetting reductions in the income tax is just one way to address the issue. There are other ideas that exist that should be the focus of discussion.

It is an inconvenient truth that stakeholders will by and large be driven by their own economic self-interest. This is a concept that even predates Adam Smith.

The time has come for the moralizing and greenwashing that dominate much of the discussion to end and realistic practical solutions to become the primary focus of debate.

The World Economic Forum is an excellent place to air these ideas and promote their advancement. Perhaps next year the conference participants will focus more on solutions and less on hysteria.

3 thoughts on “Economic Incentives for Climate Change

  1. Tony Broadhurst

    I’m a warmist; I think we are affecting the environment and CO2 is the culprit, but I have zero fear of it. All the models don’t take in to account technological improvements….. (and a government that can’t set up a website is not going to affect the thermostat of the planet….laughable to think so. The Paris Accord was a joke perpetrated on the us public by the previous sucker in chief).
    Gen 4 nuclear is of course the answer; plants can’t melt down, and they burn nuclear waste as fuel. We may even solve for cold fusion before long. AGW is nothing to worry about.

    1. Tony Kendzior

      Tony Broadhurst – I’m relieved that you’re not worried. However, I am. Not for myself because odds are I’ll be dead soon. But I have children and grandchildren and they are going to be affected. I cannot deny scientific trends, regardless of who is to blame for the numbers. Nuclear may be one of the answers, until I remember Fukishima in Japan. Miami Beach will be underwater in 50 years, people will still need food and a place to live. How and where do you plan to live. Or will you just shut the off switch and leave it to someone else to deal with? I don’t have any survivable answers but pretending it will reverse itself is not a responsible position to take. Tony

  2. TB

    If you want to spend your sunset years worrying about something that may or may not happen, and worst case is we adapt, as we always have, so be it. We have just finished the greatest decade in history, and the world has never been cleaner, safer, more wealthy or more peaceful. If you bring up Fukushima, you are not up to speed on the latest tech. (and you’d think the people who invented the word “tsunami” would know enough not to put the backup generators in the basement.
    Miami is not going to flood over night. IN the mean time, the wealthy folks who live there will move elsewhere, to houses built by NOT wealthy people. The Bernie bros will love the transfer of wealth. As someone who fancies themselves a market observer, tell me, why aren’t insurance companies and reinsurance companies freaking out or charging premiums?

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