The carbon debate: mother of all Money Matters

December 16, 2009 | 00:00

The carbon debate: mother of all Money Matters

Climate change on earth is a natural process. Fluctuations in sea levels have been going on for millions of years. Carbon dioxide concentrations  have never been stable. The earth's climate system can't be halted with a few billion euros to combat carbon emissions. But the CO2 debate has become a major catalyst for new forms of politics, innovation and change. Effectively it is becoming the mother of all Money Matters.

Mathijs van Gool
Adapt or die. That's what the world has learned thanks to a string of forceful presentations and films. The carbon debate has long stopped being about whether or not we're generating climate change with our high concentrations of carbon emissions -- instead it's become synonymous with urgent and rapid social intervention. It dominates politics, investment, power relations and every other factor in play when it comes to averting our destruction by system Earth.

But for geologists and other scientists the CO2 debate is far from being as clear-cut as the near-religious fervour of politicians and policy-makers would have us believe. A lack of knowledge on the issue among the general public has made it possible to link carbon emissions to climate change and to tap into feelings of fear about what that would mean. As a result it's now almost universally accepted that tackling carbon emissions is absolutely imperative. Even though it will do little to change the tenor of the debate as it's being conducted now, let's take a quick scientific look at the relationship between carbon dioxide and climate before we turn to the financial side of the matter.

Climate change has been a fact of life since the earth began. Sea levels rise and fall by some 100 to 150 metres during cycles of several million years. The earth self-corrects. Fishermen have discovered mammoth bones on the sea-bed in the North Sea – testimony to the fact that this was dry land some 20,000 years ago, during the last Ice Age. The rich coal seams in western Europe were formed in a tropical climate, with tropical vegetation. The existing diversity of flora and fauna has been brought about by millions of years of changes in temperature, fluctuations in sea levels, concentrations of sunlight, geological tectonics, infinitesimal adjustments in the earth's rotation, global cooling, biological evolution, etcetera.

Which leads us to an important scientific and sociopolitical question: if we manage to reduce the concentration of carbon dioxide – let’s assume, for the sake of argument, that we are successful in doing so – does this mean a certain halt to further rises in temperature and sea levels? The majority of geologists, geophysicists and meteorologists will tell you that no such certainty exists. With or without humanity, Earth has a track record of major climate fluctuations and they will simply continue.

But unfortunately for the scientists, politicians couldn't wait for the definitive answer to such questions. Carbon emissions must be slashed, no matter what. Thus carbon dioxide has become the ultimate market driver in the industrial world. All over the world, politicians have become convinced that something must be done. And it's here that something very unusual is happening. Namely this: the carbon fear argument has given rise to countless new initiatives, some of which are pointless  but very many of which – and that's the big surprise – might well contribute to a broad-based improvement in the quality of life for large numbers of people.

We can broadly distinguish three types of measures:

  1. measures designed to store carbon dioxide that has already been produced
  2. measures to reduce carbon emissions
  3. measures designed to protect people against the effects of climate change.

Capital that will be invested in carbon storage can be viewed as a waste of money. Whether carbon is captured and stored or not, the earth's climate will continue to change.
However, investment in the (future) reduction of carbon emissions and in measures to protect people against the effects of climate change, while they won't prevent natural climate changes from taking place, can indirectly generate a great impulse to boost the quality of life on earth.

The carbon debate has led to a global ethical revival with enormous impact in a whole range of areas, such as the balance of power in the world, the environment and the economy. Now that the financial crisis has started to move down the political agenda, the carbon debate looks like becoming the mother of all Money Matters. Let’s explore the major implications of this.

Power and distribution
The question is whether western countries that have already produced so much carbon dioxide should cut their emissions or whether that should fall to the developing nations currently pumping the atmosphere full of greenhouse gases. Should the rich and guilty economies of the west foot the bill for the measures poorer countries need to take to combat climate change? Politicians have a new issue to chew on over the coming decades. The financial consequences are huge.

Innovation
The carbon debate has resulted in a drive towards innovation in all sectors. After all, all products have to become carbon-neutral. New industrial activities will flourish as never before. This whole transition will take another 50 to 100 years and the required investment are inestimably large.

Sustainability
The ethical revival has resulted in a drive towards a transition to a sustainable existence of man on earth. This touches on virtually all the things we do and of course impacts all areas of industry. Here too, the financial implications are immense but incalculable.

Environment
Greater sustainability should benefit the environment in the short and long term. Care for the environment will remain a continuous driver for major financial and organisational efforts. And once we've succeeded in reducing man's impact on his environment to a minimum, we'll  continue to be amazed at the pure natural forces of our planet that will treat us to ... continued changes in climate.

Mathijs van Gool is an independent financial analyst who contributes regularly to European Energy Review. He worked for many years as Chief Analyst at the Dutch financial newspaper Financieele Dagblad. Before that he worked in the oil services sector at Schlumberger. He is a geologist by training. His EER-column “Money Matters” is devoted to the financial aspects of developments in the energy sector.

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