A loyal MR reader asks:
Are the markets adapting to the warmer world?…
# Are the prices of real estate in cooler areas of the world going up at the expense of the prices in warmer areas of the world?
# Is R&D money being invested in cheaper and more efficient cooling systems for buildings, cars, individual people?
# Are the shares of wine producers in the UK or Germany going up? As the south of the UK gets warmer, the quality of the wine should increase. What is happening to wines from regions where grapes won’t grow in the future?
# How about ski resorts? Would you start a new one now?
It is hard to specify the relevant comparison or "event study" (what should the price of a UK winery be?), but I haven’t heard of significant market price adjustments in secondary assets. This NYT article, about real estate price effects, is mostly speculative. Corn and ethanol prices are way up, so why not Canadian real estate? Most of all, the time horizon of many pending global climate changes might be thirty years or more, maybe a century. The claim of Nicholas Stern is that "we," standing in for the social welfare function, should care about the future more than markets do; evaluating that view, here are my posts on the social discount rate.
A few of you asked for posts on carbon taxes but that has been covered already. A carbon tax will work only with some probability, mostly because international cooperation may not be forthcoming. That means it is best to sub in a carbon tax for some other tax, in balanced budget fashion. Here is a more general post on global warming.
#This counts for at least two more in a series of 50. I’ll say I’m up to 30.
Addendum: Glen Whitman links to David Friedman.
In a recent debate within a British political party, there was a discussion over hypothecated carbon tax on air flights. My intuition suggested that this would be bad thing, mainly because cause and effects to do with climate mitigation and adaptation are weakly linked, as well as hypothecation being a rather inefficient way to use taxes. That said, consensus was “Hey, what a great idea hypothecation is!” Ach well.
Stern claims in his LSE lecture that R&D spending in energy is half of what it was in the 1970s, due to privatisation and cheap energy. See http://www.bbc.co.uk/mediaselector/check/player/nol/newsid_6130000/newsid_6133500?redirect=6133578.stm&news=1&nbram=1&bbwm=1&bbram=1&nbwm=1 for more.
Your loyal reader suffers from a common global warming fallacy. There’s no reason to expect that warmer places will get enough warmer to drive people away and make them go to cooler places. The changes we’re talking about are a few degrees increase in global average temperature. This will likely result in some places becoming much hotter and some places becoming much cooler (much more than a few degrees!), but there’s no telling where most of these places are, yet!
“global warming” doesn’t even spread its effects evenly and make everywhere warmer. instead: a change of 1 degree in average global temperature might actually be a more significant warming in one area and a slight cooling in another. either area might shift enough to change wind patterns, which effect other areas significantly. a ski resort might be a great idea in an area whose climate changes to 10 degrees cooler in winter as a result of global warming. that’s why it is more properly known as “global climate change.”
The papers tell us the Champagne producers have been buying vineyard acreage in the south of England on land that shares Champagne’s geology.
If climate change and the impact it has is much quicker than what is being told to us via MSM then what we are facing is more then how do I survive financially or what the markets are doing, but how do I or any of us survive .
Below is well worth considering.
http://www.signs-of-the-times.org/articles/show/125454-Fire+and+Ice%3A+The+Day+After+Tomorrow
R&D money is certainly being invested into cooling in the UK and probably other EU countries – certainly within the fields of engineering and architecture. This is a likely result of greater regulation, as the 2005 Building Regulations are quite strict on efficiency, asking for a minimum SAP rating of 80, where 100 is considered 100% energy efficient for heating and cooling. Some very desirable new builds and conversions are exceeding SAP ratings of 100 by incorporating community CHP (Combined Heat & Power) for example.
There was a terrific post on this topic in Naked Capitlism right before the IPCC report was released (I saw it at Selves and Others).
http://www.nakedcapitalism.com/2007/01/thinking-unthinkable-global-warming.html
Here are some excerpts from the beginning. The whole post is very much worth reading (it goes through a back-of-the-envelope analysis). And the site has other posts on financial markets participants’ reactions to climate change.
“What a difference a year makes. Global warming had been dismissed in the business press as the creation of tree-huggers, liberals, and other enemies of free enterprise. Suddenly, it’s a hot cause (no pun intended)….
The odd thing, given the high profile it has gotten in the mainstream media and now among politicians, is how little global warming is acknowledged by financial analysts and investors. Oh, to be sure, oil has gone in a remarkably short period of time from $77 a barrel to just over $50 due to weirdly warm winter weather. Alternative energy funds are in vogue (although the dramatic decline in oil prices has dimmed enthusiasm for them)….
But I haven’t seen much in the way of serious thinking as to what climate change could mean for commerce in the long term, say ten to thirty years…..
Let’s consider, on a gross, crude level, what global warming could do to the world economy. Mind you, I did not go looking for the best data, I merely chose some facts from the popular media that seemed to be representative and came from credible sources…..”
Meltdown
Unstoppable Global Warming Every 1500 Years
and
The Politically Incorrect Guide to Global Warming
Just for balance.
I don’t think that climate change will affect real estate price. In the mountains you have cold weather which attracts people who like the snow and skiing which proves that at a cold climate that real estate is expensive due to ski resorts. Then at the beach where it is warm it attracts people who like the ocean and living near the ocean isn’t cheap. There are many places where the people evolve around the climate and is not an issue or the price of real estate.
I think the climate change will effect the economy in certain ways in the next 50 to 100 years. I think things like the price of UK winerys and and different building materials and cooling and heating systems will be a small part of the impact. I think energy use will increase with the change in the climate and this could definitely pose a problem with the issues with energy we already have. I don’t think real estate will be majorly effected due to climate change though.
Please come to Tibia money, we will give you a great surprise.
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