April 12, 2007

Is global warming over-hyped ?

Global Warming
A colleague asked me today whether global warming is over-hyped. This is an interesting question, and I had two responses to it.

Firstly, global warming is a part of something broader – climate change, which is a symptom of a larger issue – that billions of people consuming more and more resources are having a serious impact on our shared environment.

The current push to reduce carbon dioxide emissions is a very topical concern, but remember it was preceded by at least two previous waves of concern – sulphur dioxide emissions causing acid rain in the 1970s, and CFC emissions thinning the ozone layer in the 1980s. Both were fashionable and powerful and very real concerns in their own time. They were largely addressed through public disquiet, government action, and technology solutions, and they have faded in public consciousness.

With effective action, the same will happen with CO2, which is a very real problem today. However, the overriding challenge of pressure on resources will remain, and will raise its head in numerous different ways and through new symptoms over time. The search for technology solutions and a new economic paradigm must continue.

Secondly, the environmental challenge is both hype and reality, in the same way that the growth of the internet and the emergence of China and India are both hype and reality. The sience surrounding the current issue of global warming is clearly sound. But whether the market opportunity is hype or reality depends on what you do with it. For example, if you participate in the environment sector by investing at random in ‘environment stocks’ without understanding what those companies are doing, then you are likely to be a victim of hype. On the other hand, if you work with a firm that delivers a unique solution to a very real and growing problem, then the opportunity of this space is very much reality.