Global Warming

It is the economic picture which is more worrying if you live in the OECD and are a climate change denier. Many countries including New Zealand have grown their economies at the expense of foreign debt. (both private and public) Now that the global economy is continuing to limp along; this outstanding and ongoing debt is proving to be a major problem.

To think for a moment that politics can overturn the realities of climate change would be a major mistake to make. The unpalatable truth for someone in my perspective is simply this. Climate change is unable to be taken seriously because to take it seriously would result in detrimental economic consequences that no-body could afford right now. I mean the US should be shouting loud and clear about closing down coal burning power stations until carbon sequestration technology is perfected.

This higher voice will never happen now since the only feasible alternative is nuclear energy. After the recent accident in Japan, nuclear energy is seen as unsafe. We will continue to kid ourselves that we can keep up with electricity demand with renewable energies and forget what happens on a cloudy day or when the wind isn’t blowing in the middle of summer. It seems obvious that coal powered power stations will proliferate as the best backup energy plan. The increasing demand for electricity in China and elsewhere is relentless. New power stations are added on line on a weekly basis and many of these are coal fired.

It goes without saying that this all paints an ominous picture of the future. What was already a bad situation from a greenhouse gas perspective is just likely to get even worse. Methane gas is up to 20x more potent that CO2, but the half life of methane is much shorter. 20 years later in the atmosphere and methane all but disappears as a major contributor to greenhouse gases. Unfortunately the same cannot be said for CO2. Its half life is 5x longer.

The planet is now locked into a unpredictable climate situation for the next 100 years plus, and the chances of a sudden spike in methane emissions at some point during that period seems inevitable. Increasing levels of greenhouse gases can only increase upwards and beyond 450 from here, well past the safe limits of 350 passed some time ago that would prevent any tipping point. The planet is warming and there is absolutely nothing that man can now do about this phenomenon. It is simply too little and far too late.

As the planet warms, the climate will change and the weather will become more and more unpredictable. Weather patterns are already shifting and the shift of weather patterns is playing havoc with some farmers and cities who have to make do with much less water. Sure such events have occurred many times in the past. After all - droughts do occur from time to time. Yet some of the draughts that we are experiencing right now are record breaking. Then there are the record rains and snows that result in overflowing rivers. The devastation caused is vast and entire season’s crops are ruined. Tens of thousands of homes and businesses become overwhelmed with water. These events can have a major hit on a countries GDP.

No-body is denying that such dramatic climate events occur, the discussion is more about frequency. A once in a hundred year event that occurs twice in a few years is not something to be trifled with. How on earth are insurance companies going to be able to cope for starters?

The main area of concern has more to do with government and state planning. How are governments going to pay for the increasing number of natural and financial disasters when they are already struggling to pay off previous ones? The quick answer is they can’t. Something is going to give and that something has a lot to do with everyone’s standard of living in the OECD. We are all going to have to make do with much less. (and some more than others)

To be fair, OECD governments have a lot on their plates at the moment. The latest recession now has a name. It is called the great recession. This all means that the first “real” oil shortage has left chaos in its wake economically. As the price of oil went up in 2008, more and more people had less expendable income. They spent less and as they spent less; demand for all manner of goods and services fell including oil. The first cracks starting to appear in America where the boom market in sub prime mortgages had started to take a hit. More than a few banks and financial institutions came under increasing pressure to stay afloat as property prices started to fall dramatically. Some needed to be bailed out, some were left to fail.

Here in New Zealand, our government does not have the luxury of being the world’s biggest economy and therefore can not print money at will. The only option available to our government is to reign in our government debt by balancing the budget. While our government debt as a % of GDP is manageable; this clearly comes at the expense of private debt which is well out of control. The Christchurch earthquake was the last thing our government needed at this delicate time. The current budget deficit has now blown out to scary levels. This “one” off event will set New Zealand back by several years no matter what spin the politicians give it as boosting economic growth in the recovery mode.