Seeing is believing. Sometimes we need to see the issues in order to understand them and to empathize with the challenges that people are facing. In August 2019, my wife and I visited Indonesia. It was an incredible trip that we are specifically making so that we could see wild orangutans living in the rainforest on the island of Borneo. Before we arrived there, our first stop landed us in Jakarta, the countries capital. Jakarta is a city with a population of about 11 million people, over 10% of which are listed as living in poverty or more than 1.1 million people. That in itself is a staggering figure, but not uncommon among many other places around the world. What really resonated with me during that trip was discussions about moving the country’s capital city to the island of Borneo as the current city was sinking into the ocean. The city is quite literally in quicksand! A combination of sea levels rising due to melting ice caps, and increased water extraction from the ground is causing the city to sink about 10 cm every single year into the ocean. It is expected that within the next couple of decades sea levels will overtake the city leaving millions homeless. This is the direct impact that climate change is happening on millions of people all around the world including northern communities in Canada. Here is another date for you, September 1, 2020. That is the date that my daughter Jayelle was born. With any luck, Jayelle will live well past the year 2100. The question is… what will the world look like then? According to the International Panel on Climate Change (IPCC), the world could look dramatically different by the end of the century, with potentially billions of people living in poverty being forced to have left their homes due to rising sea levels among other impacts. This is not the world my daughter deserves to inherit nor is it the one anyone else’s sons and daughters should either. I believe that in order to be successful in altering the course we are currently on, we need to take meaningful steps in the next ten years and we must become a carbon neutral society by the middle of the century.
This is a subject that I am particularly passionate about and have spent time reading and studying in order to try and better understand the challenges we face and what we can do about it. Admittedly, I am not a climate scientist and do not plan on becoming one. Through conversations, I have met a number of really inspiring people in this field. I prefer to leave the science to them, but from my reading and many conversations I have come to some realizations.
First, there are no simple solutions to this problem.
Second, there is no realistic path to net zero emissions that involves completely abandoning the use of fossil fuels. This is simply a non-starter in my opinion as too much of our global economy is reliant on materials or processes that require fossil fuels as an input.
Banning the use of fossil fuels would create a catastrophic global crisis far sooner than climate change will. But, knowing this doesn’t mean that we cannot make meaningful changes and in fact I believe we must make certain changes very soon if we are to be successful.
51 billion tons. This is the approximate global green house gas emissions annually. According to experts, if we are going to avoid a global crisis, we need to get net emissions to zero which means we need to find ways to reduce our output but also suck back the remaining output that we cannot reduce, in an economically feasible way.
Here are three areas where I believe that we can make meaningful changes over the next decade:
Production of Electricity
Transport and Shipping
Electricity is arguably the most important discovery in history. The ability to harness electricity has quite literally helped us to reach for the stars and has raised the standard of living for billions of people across the world. With that, the demand for electricity is expected to double or triple by the year 2050. The problem is that most electricity globally is still produced from burning fossil fuels and contributes to about 27% of global greenhouse gasses. This is an astronomical figure and with demand increasing exponentially the need to produce more green electricity is essential to achieving net zero for carbon emissions. Solar and wind power plants are becoming more efficient all the time, but relying solely on these technologies is unlikely to replace global demand in such a short period of time and we also need to utilize other existing technologies including hydro electric dams and nuclear power.
Agriculture is responsible for about 7 billion tons of greenhouse gas production annually across the globe. This equates to approximately 14% of overall green house gas emissions. 80% of which comes raising animals. As global demand for meat continues to climb this number is likely to increase. So what can be done? Well to begin with, we can try and consume less meat ourselves. It’s no secret that western countries are the biggest meat consumers. If we were all able to reduce our meat consumption by about 25% annually, it would reduce global emissions by about 8%. Additionally, the development of plant based proteins has made huge strides and could one day replace a much larger portion of our daily diet. This largely relies on the ability of companies producing them at a cost that is much closer to the cost of animal meat, but in time I believe it can get there.
Transport and Shipping is responsible for 16% of all global emissions with aviation, trucking and shipping accounting for all emissions growth in the sector. It appears clear that electric cars are the future of personal transportation. Currently however, long haul shipping remains a challenge that is unlikely to be solved by electricity in the near future and so we evaluate other solutions. Hydrogen fuel is showing incredible promise and has potential to replace jet fuel and diesel engines. The technology and knowhow exists, but again the production of hydrogen fuel must have green inputs otherwise it will defeat the purpose. Additionally, we must reduce the cost of green fuel sources to be competitive with current fossil fuels. Currently the premium on green fuel sources ranges from 100-400% higher in costs. In order to become a true alternative these costs must come down. The good news is, there are businesses today that believe they can accomplish this including some local Manitoba businesses.
Reducing emissions is only part of the story. As I mentioned in the beginning, expecting that we will stop using fossil fuel in our society is unrealistic and frankly a non-starter. We can and should reduce our emissions significantly, but this will not get us to net zero emissions in the time that we need to in order to avoid a global crisis. We must also continue to develop technology which extracts carbon from the atmosphere. Currently, the costs of extraction range around $200 per ton but some believe that costs could be reduced to about $100 per ton in time. If current emissions remain unchanged, the cost of getting to net zero emissions would be $5.1 trillion annually or about 6% of global GDP. Since I don’t think it’s feasible to expect that the world is going to shift $5.1 trillion in this direction annually it is likely a combination of reduction and carbon extraction that will be required to get us to net zero by 2050 as recommended by the IPCC.
This brings me to my final point. I believe that people are generally good and not evil. I believe that most people in the world are just out their trying to make a living and take care of their family and we cannot hold it against anyone for doing so even if we don’t agree with how they are doing it from an environmental perspective. On Borneo, a large percentage of the rainforest has been cut down to make room for palm oil plantations. This has had a dramatic impact on the habitat of many indigenous species bringing some, including the Orangutan, to the brink of extinction. Do you blame the farmer who is just trying to feed his family? No, how can you? I firmly believe that if you want to take better care of the world and win the fight against climate change then we need to collectively take care of people first. We need to provide incentives for people to earn their living in a way that is more climate friendly. We need to try and better understand the challenges that people are facing in the world and adjust our consumer behavior to provide incentives for more people to be successful. If we can take care of people, then the environment will follow accordingly. Just like financial planning, small differences today can have huge impacts in the future and so we must start acting today. Afterall, my daughter’s world might depend on it.
-Grant White, CIM®, CFP®
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with iA Private Wealth Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.