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Opinion: Canada's climate plan lacks that maple-smoked back bacon sizzle.
Today's meeting in Toronto between Bank of England's Mark Carney and Environment Minister Catherine McKenna was informative and revealing on how banking and insurance industries are adapting and addressing climate change risks. I would like to thank Catherine McKenna for having this meeting, and keeping it fun and engaging. These issues need to be discussed openly, it helps inform market makers, businesses, and citizens.
Yes, financial markets are finally starting to do the math. As with all good things, global banking wants to create a "green bond" class of asset to help underwrite and support $5-7,000,000,000,000 / year in green investment in the green economy.
In 2010, I predicted the 2050 green market to be $350,000,000,000,000. Mark Carney seems to think it will only be $230,000,000,000,000. Does Mark need to think bigger and be more optimistic? I predicted a $8.5 Trillion/yr., Mark asserts a $5-7 Trillion/yr. green market. I can't wait to see if I'm closer.
The UK is home to insurances' "Mr. Creosote", Lloyd's, they underwrite many high-risk projects. Want to use a canoe to transport gold across the Atlantic Ocean solo? If you can afford it, Lloyd's will lovingly support all of your great ideas and dreams, sorry, no mints. Please don't sue me Lloyd's.
Mark spoke about the increase in insurance risks with respect to extreme weather events. Infrastructure, our food security, wildfires, floods, storm surges, etc., will all have impacts on insurance coverage. Will this drive costs of insurance too high for small business? Will banking losses drive higher banking costs for customers? Climate will be impacting a spectrum of risks, many of which were not discussed. Perhaps future talks will address this scope and cover the basics.
The talk of green bonds is spooky. The carbon market also gives me the willies. If you have read Liar's Poker, or a good ABCP horror story, we see that financial markets are perhaps not the best mechanism for these mission-critical efforts. How can we address climate when Berlusconi's grandmother transfers $85,000,000,000,000 into her bakery operations? I want to hear talk about a secure green bond. Inventing new weak money won't solve climate change.
Financial markets are at risk of being gamed by insiders; Nano-trading, math algorithms, high-frequency asset removal, insider trading, etc. Will this industry of mice be reliable & efficient with $7,000,000,000,000 per year in cheese? What will be the security compliance for the green bond? How do we know that it won't end up in Panama, again? Sorry, but without compliance audits and a secure "platform", I doubt the stability and transparency of a green market. Show me the security, show me how with won't be an ABCP repeat with a "green" theme.
The biggest risks of climate seem to need stronger and bolder plans, I'm not seeing how this bridge to a green economy will be a success without naming the big tools to do it. As a designer, I can assure you that the free market won't deliver the best solution on its own. That being said, Catherine did mention the role of Government. It's obvious that climate will require all hands on deck, but how smart is the ship we are sending on this mission? Can Government even trust the lifejackets we are being sold?
FYI, I don't like bankers, lawyers, politicians, and economists involved when it comes to mission critical planning. Of the money that will be invested in the green economy, how much of it will be wasted? Some tend to rubber stamp before verifying a secure strategy, those rubber stamped bonuses are some big cheese.
Climate change isn't like launching a new smartphone or carbon market, we are only going to get one chance to get the complexity right. So far, I have not heard a convincing plan. Paying "green" bankers millions per year to stare at shiny green paper will result in how much value-added benefit to climate efforts? When we talk about sustainability, what value are some adding to our climate security? Everything looks great on paper and sounds nice, until the real rubber stamp screeches on the real road. How much parasitic load can our climate plan take before it fails?
Canada needs a more ambitious plan for climate, I know that I do. For over 20 years, I have thought of ways and means to succeed on climate change. Not with new financial instruments, carbon markets, trading new currencies, but with new tools that deliver green energy. We need new tools that will work when our current crop of decision makers has retired. We need a secure and working plan that will succeed for the people that will be paying for it.
My green design to render both fossil fuels and nuclear energy is just $50,000,000,000! $50 billion sounds like a lot, but it's not. Capturing a big slice of a $350 trillion market pie is good boating for Canada. Smart green investments should pay bigger green benefits. Some solutions that I see coming down the design pipeline just won't deliver security and long-term benefit.
This is why I think that investing any further in fossil fuels and nuclear is an inferior strategy, nor can it deliver a longer profit yield over time. If a 2-bit designer like me can think of better tools, think of how many others are working towards similar goals. The reality is that dirty energy can't compete, but Canada can in the new green economy. Canada can compete against the "big players". After neglecting our manufacturing, there is little hope to restore Canada's traditional big revenue streams. Knowledge economies don't need 1,000,000 sq.m floor spaces to hit economies of scale, all we need is our ideas and smart leadership to make them happen. Sometimes smaller is better, ask Intel.
Yes, Mr. Creosote, does care what he eats, only the best. If we feed Mr. Creosote the wrong menu, he is going to explode. When Mr. Creosote explodes, it makes a huge mess. Let's make sure that Mr. Creosote gets the correct menu items before he makes his big dinner order.