Today is the 53rd anniversary of the modern environmental movement started in 1970, Earth Day.
Earthday.org, provides a history of how Earth Day came to be, specifically noting:
“In the decades leading up to the first Earth Day, Americans were consuming vast amounts of leaded gas through massive and inefficient automobiles. Industry belched out smoke and sludge with little fear of the consequences from either the law or bad press. Air pollution was commonly accepted as the smell of prosperity. Until this point, mainstream America remained largely oblivious to environmental concerns and how a polluted environment threatens human health.”
A movement generated over 50-years ago has is led to EARTHDAY.ORG’s mission, which is to diversify, educate and activate the environmental movement worldwide. Growing out of the first Earth Day in 1970, EARTHDAY.ORG is the world’s largest recruiter to the environmental movement, working with more than 150,000 partners in over 192 countries to drive positive action for our planet.
Learn more about the history of Earth Day and earthy.org initiatives.
Climate change has no doubt been a growing hot topic since 1970. The importance of our home, Earth, where we live, but also the home which we live day-in-and day-out, an economic lifeblood of our modern survival has brought debate, division, and hope for global collaboration. As we continue to develop and evolve, the reliance on financial stability and prosperous economies is just as vital as maintaining and caring for a healthy, clean, and hospitable ecosystem.
In his book, The Next Age of Uncertainty, Stephen Poloz outlines five long-term forces that are in motion in the world today, and that he believes will shape our economic future.
Population aging
Technological progress
Rising inequality
Growing debt
Climate change
We will explore and dive into each of these forces in this blog series. We will review how they relate to you as a homeowner, or a future homeowner, and how the next age of uncertainty will impact our future economy.
In honour of Earth Day today, we will start with the fifth force, climate change. Poloz describes climate change as a “…source of economic and financial volatility through specific weather events, such as floods, more frequent sever tropical storms, droughts, wildfires, and polar vortexes. These events cause dislocation of individuals, fatalities, destruction of homes and other infrastructure, and otherwise interrupt the normal flow of life and business. They put strains on government finances and can spill over into financial markets through their impacts on insurance companies and other financial institutions.”
He acknowledges, “Given that climate change itself is a collective problem arising from the failure of our system to capture the consequences of the behaviour of self-interested individuals, it absolutely demands a collective response. In other words, politics - to move forward. That addressing climate change is necessarily political makes it one of the most important sources of future economic uncertainty on the horizon.” Furthermore, “There is widespread and growing agreement that a continued rise in accumulated greenhouse gas (GHG) emissions will mean increasingly volatile weather, flooding, destruction of certain communities, and growing shortage of drinking water.”
Although this force impacts the world, the difficulty will be to find political solutions to a problem that has its greatest effect on future generations.
GHG emissions are by-product of economic progress and for over thirty years it has been consistently fossil fuels to supply 80% of the global energy needs. Further to that, 80% of global oil production is refined into transportation fuels where motor vehicles emit 2.5 billion times of carbon dioxide per year.
The bottom line is the world is highly dependent on fossil fuels and has been for years. Poloz states,
“It is simply not possible to suddenly stop producing and using fossil fuels, as some idealist advocate, without tramatic consequenes for living standards. The goal is to achieve net zero emissions – a situation in which humankind produces a level of emissions low enough that they can be absorbed by the planet. This can be achieve in a variety of ways including, reducing the use of fossil fuels, investing in green energy sources in compensation, capturing GHG emissions to keep them out of the atmosphere, and planting more trees to help mother nature absorb more.”
There are alternative sources of energy that do not create GHG emissions which include:
Solar
Wind
Geothermal
Tidal
Hydroelectric
Nuclear energy
All more expensive than hydrocarbon-based energy is today because GHG emissions have historically been free.
Solutions to curb carbon emissions has been to escalate carbon taxation to put a price to the GHG emissions, and for governments to regulate emissions while creating incentives to build technology that reduce carbon emissions. Collective agreements and treaties, such as the Paris Agreement of 2016 signed by 196 countries with the goal to keep the rise in global temperature well below 2 degrees Celsius above pre-industrial levels help to bring nations together to combat climate change collectively.
Investors are another channel that have a say in the outcomes of company production and climate change. Companies with large carbon footprints will find it increasingly difficult and costly to finance their initiatives if they are not considering greener or net zero supply chains and processes.
The pandemic has also helped to accelerate climate change targets with companies committing to meet net zero standards by 2050. Many are taking initiatives that include all three levels of scope:
Scope 1 emissions – Emissions in direct control of the company.
Scope 2 emissions – Indirect emissions caused by the generation of power used by the company.
Scope 3 – Those emissions produced by consumer use of the company’s products.
With there being many different possible paths to net zero, Poloz expects the policy response to climate change to be a source of more uncertainty for the future, not less.
Whether governments globally can work on a unified approach to climate change or not, the hope is that investors will continue to vote with their portfolios, holding companies to the net zero pledge for 2050 and beyond.
For a view on where Canada stands on their promises on climate change, Wendy Stueck, a writer for the Globe and Mail, has provided a fantastic overview of the current promises of the government in her article, Is Canada keeping its promises on climate change? The Globe tracks its progress.
