Thinkers

Preventing the next stock-market crash


Is the #carbon #bubble going to burst?

tar sands in alberta
The Herd, Jeff Wallace via Flickr

Recently, I’ve been giving some thought to a factor that’s been largely ignored by the media in their reporting of COP 23 and the recent climate summit in Paris, namely, the risk of a spectacular stock-market crash. Why so?

At present, two parallel worlds exist: an old world that sees the future as an extrapolation of the past, pretending to ignore the development of renewable forms of energy; and a new world that advocates a radical change in our attitudes toward energy and the environment.

Nothing much new in all that, except that this asymmetry carries with it a major threat to economic stability. As proof of this, just consider the decision taken recently by a large number of major economic players to stop financing fossil fuels, or even to sell their shares in this sector while they still retain some value, in order to invest in renewable sources of energy.

The reality today is that the big money has started flowing in a new direction, greatly to the detriment of fossil fuels. The insurance industry has woken up to the risks inherent in climate change, as much out of self-interest as ethical principle. And the pension funds, the stock-brokers, the banks and big companies are already discreetly abandoning ship before it sinks. Fossil energy shares are beginning to look like junk to get rid of fast.

Does this not remind you of something? Possibly the sub-prime crisis of 2008 or the Internet bubble of 2000 ?

As far as the environment is concerned, it’s obvious that everything is moving too slowly. The situation is much more serious than predicted, and Emmanuel Macron was brave to point out: "We’re losing the battle [against climate-change]!" But in the world of economics, everything is moving very fast. Too fast? The old world companies will soon be running on empty, not of oil but of financial liquidity. If they’re no longer able to invest in new coal mines, oil wells, tar sand deposits or fracking, there’ll be a risk of some resounding bankruptcies. Some are already predicting this for the next decade…

Let’s not be fooled by appearances. This might be excellent news for the environment, but it would be a worldwide catastrophe for humanity. With a chain reaction of bankrupt businesses and tens of millions of people unemployed and left behind, many will think nostalgically of the 1929 stock-market crash… Ironically, there’s a risk that the collapse of our society will be brought about more quickly by the prevention of climate change than by climate change itself! 

So it’s absolutely vital to bring the old world along in the energy transition, to force it to evolve, against its instincts. Getting rid of fossil fuels shouldn’t mean getting rid of the companies linked to them. These companies are in the process of moving from the status of accused parties to future victims. But if they fall, we all fall with them. Consequently, far from fighting against them, we should be helping them, supporting them, showing them the advantages of diversifying into the new world, protecting them from the Kodak syndrome. They’ve got the savoir-faire, the technology, the experience, and the financial resources (for a few more years…) to save the planet, while saving themselves. Let’s do this without violence, but firmly, because they need to be shaken up a bit to understand exactly what’s going on.

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