Right now, the most obvious example is in fossil fuels, where prices continue to rise faster than general inflation, because of the increasingly credible view that earth's "peak" annual oil production is upon us, or behind us.
A whole array of emerging investment class outperformers are forming around earth's pending environmental disasters. There are many approaches to identifying them. For example:
- (1) Issue-by-issue: We've highlighted agriculture supply/demand pressure emerging from not only demographic shifts but also weather volatility and dessication driven partly by global warming. Another "issue" example is water scarcity, and we've also highlighted some investment implications of this.
- (2) Sizing earth's needs: Our recent post "The New S&P, and Earth's Fate" highlighted another conceptualization of investment landscapes and earth's sustainability. The "S&P" is Socolow and Pacala's article on ways to reduce CO2 emissions by 7 billion tons by 2054 -- in 1 billion ton increments or "wedges."
- (3) Price of C02. Today we're highlighting a crucial debate, blogged in "Climate Progress" beginning on April 8, of what price C02 will need to be and what kind of technological breakthroughs will be needed to prevent C02 from rising above 450 parts per million in earth's atmosphere. 450 ppm is the level at which earth's future becomes much less predictable, and potentially disastrous. The global and regional carbon policy and credit debate outcomes will go a long way to informing investors where to place their bets. A high price of carbon will only accelerate investors' demands for solutions, and this will accelerate investment returns for those who invest accordingly.
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