Understanding climate change as a financial issue explains the US Regime.
Here’s the blunt reality: the pressure to cut emissions and respond to a changing climate are going to alter what we do and don’t see as valuable. Climate action will trigger an enormous shift in the way we value things.
If we can’t burn oil, it’s not worth very much. If we can’t defend coastal real estate from rising seas (or even insure it, for that matter), it’s not worth very much. If the industrial process a company owns exposes them to future climate litigation, it’s not worth very much. The value of those assets is going to plummet, inevitably… and likely, soon.
Currently, though, these assets are valued very highly. Oil is seen as hugely valuable, coastal real estate is seen as hugely valuable, industrial patents are seen as hugely valuable.
When there’s a large difference between how markets think assets should be valued and what they are (or will) actually be worth, we call it a “bubble.”
Experts now call the differences between valuations and worth in fossil fuel corporations, climate-harmful industries and vulnerable physical assets the “Carbon Bubble.” It is still growing.
And here’s the thing about bubbles: they always pop.
People whose job it is to measure risk in financial markets are extremely concerned about the magnitude of the Carbon Bubble and the damage it will do as it bursts. Because when it bursts, trillions of dollars of imaginary assets will simply vanish in a very short time. [emphasis mine]
image source (not recommended)
The pop comes when people understand that growth in these industries is over and that, in fact, these industries are now going to contract. That’s when investors start pulling out and looking for safer bets.
What triggers the drop is investors ceasing to believe the company has a strong future.
… the pop is way closer than most people understand.
A crisis in investor confidence is the biggest threat to fossil fuel companies — not environmentalists, regulations, clean energy competitors or climate agreements. [emphasis mine]
image source (not on topic)
I focus on three of several actions fossil fuel companies take.
How would you maintain this confidence?
- You’d support putting a price on carbon, since this makes you look moderate and engaged, but you’d make sure that the definition of a “reasonable” price on carbon was so low and took so long to implement that it was no real threat to your business, and at worst would replace the dirtiest fossil fuels with others (switching for example from coal to gas).
- You would ally with extremists and other sources of anti-democratic power, in order to be able to fight democratic efforts to cut emissions through the application of threats, instability and violence.
- Most of all, you’d invest as heavily as possible in new infrastructure and supply.
If you were going to put in place a presidential administration that was dedicated to taking these actions, it would look exactly like what we have now: a cabinet and chief advisors in which nearly every member is a climate denialist with ties to the Carbon Lobby. [emphasis mine]
Now Tillerson's support for a GOP-crafted carbon tax makes sense.
The difference between the Carbon Bubble deflating rapidly now and popping spectacularly in a decade or more could mean literally trillions more dollars in profits for the kind of people now helicoptering into Washington.
But that same delay would also bring on climate catastrophe, damage our democracy and bring financial ruin for the investors who are left holding those assets when the bubble pops. If history is any guide, those investors will be pensions and mutual funds and small timers — in other words, regular people. [emphasis mine]
… the Trump gang … consider his gang’s actions through the lens of the Carbon Bubble. Understand that the amounts of money at stake are vast, nearly inconceivable to most of us, and highly concentrated in the hands of the people in Trump’s cabinet and their close friends and business allies.
Journalists are unused to thinking about climate change as being an economic and financial issue — much less the core political issue of our day — so for a lot of us this whole problem is invisible, despite the credibility of everyone pointing it out. It sounds like a conspiracy theory, frankly, because we are so cognitively unprepared to see the Bubble in front of us. [emphasis mine]
Ruth, IMNVHO, your best post ever. As the Cabaret song says, money makes the world go 'round.