A Local Problem or a Global Problem? The Monsoon Was Not Soon Enough.

India is now in the midst of its annual monsoon season. 80% of India’s rainfall occurs during this season and is critical to its agricultural system. However, in many places it started 3-4 weeks late.  Cumulative rainfall appears to be catching up, maybe now only 18-20% below normal in many places, 40% below normal in others. Daily rainfall is now running 50 to 80% above long term averages although June had the lowest cumulative rainfall in more than 80 years. In some spots, Uttar Pradesh (UP) being one, the lower rainfall is being characterized as producing “drought conditions.”  In a parochial sense, I care about UP.  Our company, DWP, sells solar systems to the farmers there (see on this blog, “600 Million Points of Light…”). A late start to the rain meant easier logistics selling in the area in June.  However, if this means lower plantings and shorter harvests—which it does—the farmers won’t have enough income to buy the systems later in the season. And, the price of certain foodstuffs will likely rise, further reducing spendable income. If this occurs countrywide—which is the case—it could mean demand for foodstuffs on the world market will rise as India tries to feed its people.

Maybe this is just one of those statistical events.  After all, the last four seasons have produced bumper crops in India. Or maybe, those climate change folks are right.  They have been saying that one manifestation of climate change could be changing weather patterns with shorter, but more intense “seasons.”  Some of them pointed to Katrina a few years back as an example of what could happen. Of course, that faded when the next year proved to be a mild hurricane season in the Atlantic/Gulf region. I will bet that some of them will point to this year’s monsoon season as supporting their case.  In any event, weather/climate will likely force India to add food shortages to its list of problems this year.

India is taking somewhat of a wait and see attitude on Climate Change—as are many people. If nothing else, India believes that the western world should not be asking it to reduce carbon emissions when the developed countries are the ones that have put most of the carbon into the system up to now. On one level India is right.  The western world needs to take some very aggressive steps to reduce its use of carbon. On another level, all the evidence says that India will likely suffer the most of any major country if global warming does occur—and there is some evidence that some of the effects of emissions are quite local.  In addition, moving countries toward energy independence and fueling (if you will pardon the expression) a new technological wave, it is possible that pro-active steps to reduce carbon emissions may actually save lives and add to economic growth. If I felt there was a significant risk to humanity from the carbon path we are on—and I do—and I could change my position geopolitically—which I also believe—I would be doing everything I possibly could as a country to be a major participant in this carbon reduction cycle. As I said in my first post on this blog, we may be 10 years away from a more universal recognition that we have a problem.  We are getting some early signals. How many do we need?

Why ContraCarbon?

I am not against Carbon per se. Let’s understand that Carbon is important to survival on this planet. It is the fourth most present element in the universe exceeded by hydrogen, helium and oxygen. It is present in all Earth life forms and constitutes about 19% of the human body only surpassed by oxygen.  There is essentially a fixed amount of it on Earth, and it is being converted from one form to another continually as part of what is known as the Carbon Cycle. If you really want to know more about Carbon, Wikipedia currently has 16 pages on the topic of which two are References for those nuts who don’t get enough out of the first 14.  http://en.wikipedia.org/wiki/Carbon

My primary problem is with the incremental change in the Carbon cycle that has been caused by man in one way or another. The poster-child for this change is the increasing amount of CO2 that is being put into the atmosphere.  The primary source of this incremental CO2 is the combination of Carbon, in various chemical forms, with oxygen–typically as a fuel source for transportation, power or chemical transformation.   A secondary problem is the lack of self-sufficiency, nation by nation, of the Carbon,  primarily in a liquid or gaseous form, that will be our main fuel and chemical source for some time .  We ultimately have to become less reliant on Carbon or figure out some way to restore the Carbon cycle to the point where we aren’t putting excess CO2 into the atmosphere.

I don’t plan on spending a lot of time on whether we are experiencing global warming.  In fact, I much prefer to view the problem as one of anthropogenic (man-made) Climate Change. I will comment on the impact and pace of Climate Change on our lives and what we can do about it. I will also try to point readers to other sources for those who want more detail on a particular point made. I came at this topic as critically important to the planet via investing.  While Chief Investment Officer at Neuberger Berman–a role from which I retired in 2008–I created a small unit to do research on paradigmatic issues–paradigm shifts that, if one got them right, could change the risk profile of investments related to the shifts.  The truth is, the traditional role of CIO at Neuberger didn’t really exist. Neuberger consists of several very experienced and successful investment management teams, doing extensive bottoms-up research on specific investment ideas . The last thing they need is someone else telling them what to do.  My primary job was not to screw things up.  What I discovered, though, is that the bottoms-up work actually led to concentrated investing around specific macro themes. I felt that if I could verify or support those themes–those paradigmatic ideas–it would point out and possibly reduce the risks of the investments that were being made.  Thus, the small paradigmatic unit was created.  The work started with Energy demand and supply. That quickly morphed into research on China and India, the major new incremental users of energy as they became part of the global economy.  The work on all three topics naturally morphed into the issue of Climate Change. 

While the initial reason for all this research related to investment opportunities, it was apparent that Climate Change had significantly broader implications for the planet, and, more specifically, for my grandchildren.  Over the last four years I have devoted significant energy (if you will pardon the term) to the topic, on the investment  and the policy front. I have spoken to many groups on Climate Change. I have also been involved with a small group at the UN (UNEP)  focusing on Private Capital and Climate Change.  I don’t believe that the technological solutions to restoring a balanced Carbon cycle have all been determined nor have certain potential solutions been implemented. I believe it is true that conservation could go a long way to solving the problem, but, unless the price of Carbon rises significantly and becomes much less volatile, conservation will be a marginal contributor to the solution.

I am interested in all ideas that can contribute to solutions. I am not interested in a shouting match on whether there is a Climate Change problem.  There is definitely a problem of too much CO2 going into our atmosphere.  Facts and data go a long way to having a healthy and useful dialogue on the issue of Climate Change and the solutions to the CO2 (and equivalent pollutants) problems.  This first posting is pretty basic.  We can get more esoteric as time passes. We can also have some fun as well discussing this serious problem and related problems. And, maybe, we can add something to the debates and the solutions that are useful and profitable.  Let the games begin.