Economics and Climate Change

September 26, 2017 by Denis Pombriant

There are plenty of analyses of the costs associated with a warming planet including those associated with major weather incidents like hurricanes and tornadoes, crop failures, greater demand for electricity to control personal climate, and much more.

This piece is not about that because there are other unexplored issues to consider and if we’re lucky and take action soon, we might never need to experience the many downsides presented above. Instead, let’s explore the factors that will drive economic progress in the near future that can also mitigate the risks.

Although they have not been explored in the popular press to any great degree, K-waves (short for Kondratiev waves) have been flowing through the economies of capitalist countries since the Industrial Revolution that began around the time of America’s founding in the 18th century. We believe a new K-wave is forming around the subject of sustainability.

A K-wave is an economic cycle that lasts for between 50 and 60 years. During that time, economies focus on many things but there is usually one or perhaps several primary economic drivers that set the tone for the age. We live in The Age of Information and Telecommunication and in your lifetime, you have probably noticed how computers, data, the Internet, analytics, social media, and devices like smartphones, tablets, and PCs have made up a big part of economic activity. We’re now witnessing the beginning of the Internet of Things (IoT) in which sensing devices are integrated with many other devices to capture data and enable distant computers to figure out if a machine is running as it should or if a service call is needed, for example. Sensors can tell us when to replenish supplies or order parts all thanks to the Internet and powerful algorithms.

The IoT is a good example of extending the current K-wave but it’s also an example of the commoditization that ultimately robs a K-wave of its economic power by shaving margins. In its purest sense, the IoT represents automation that lowers costs and reduces labor requirements. Essentially this means that the IoT will be an important part of economic progress in the same way that car manufacturing and steel making are, but none of them are primary drivers of the economy.

That’s just an example but as you can see, information is a big part of our lives today and so is telecommunications though you might take for granted your computer’s connection to the Internet or your phone’s wireless access to it. Telecommunications is much more than copper telephone lines and includes satellites, fiber optics, and digital media all of which enable you to communicate in ways that weren’t available as recently as the late 20th century.

As they age K-waves become less powerful and eventually a new disruptive technology appears replacing the old disrupter and touching off a new cycle. Before the Age of Information and Telecommunications there was an Age of Oil, Electricity, the First Electronics and the Automobile and the very first age was the Industrial Revolution itself in which we invented steam engines to power textile manufacturing, which also sparked our ability to harness the energy in coal.

The age we’re in is nearing its 50th birthday and there are many signs that it is commoditizing and less likely to be the economic driver of the future. What might the next age encompass?

We believe the world is entering an Age of Sustainability in which, across the planet, people will leverage new disruptive technologies including solar power, wind, geothermal energy, and geoengineering to solve the earth’s most pressing climate issues. This will unleash a wave of creativity in business and industry that will generate millions of new jobs and provide a more livable world for everyone. It will also prepare us for a new population explosion.

By mid-century demographers expect there will be 10 billion or more people living on the planet or 2.5 billion more than today. That’s like adding another China plus another India to today’s population. Developing the food, water, housing and other resources that these people will need will take all of our best efforts and it will be made possible by a new economic paradigm that’s getting under way right now.

How can you tell the new economic wave is starting? There are numerous data points to consider like these,

  1. Today more people work in alternative energy than work in the coal industry—by a factor of more than 2 to 1. According to a Department of Energy report there are 373,807 jobs in solar energy production and only 160,119 in coal Xxx
  2. Alternative energy is reaching cost parity with other forms of generation thanks to exponential improvements in the technology for over a decade. That means it makes good business sense for producers to include clean power in their portfolios.
  3. Virtually every nation on earth signed on to the Paris Climate Accord committing itself to lowering its carbon footprint. Xxx Paris
  4. Electric vehicles are no longer a costly curiosity. Some of the top electric car companies include Ford, Lit Motors, Canadian Electric Vehicles, Fisker Automotive, VIA Motors, General Motors, AeroVironment, Wheego Electric Cars, Tesla, and Faraday Future. Quick—how many of them have you never heard of?
  5. Also, Volvo recently announced that its 2019 lineup will only include hybrid or electric vehicles (EV). Also, GM recently introduced the Bolt an EV with a range of over 200 miles on a single charge.

So this new Age of Sustainability is beginning. There’s a lot of money to be made in the new paradigm from new forms of power generation to inventing whole new industries and those who get to the new paradigm first have the most to gain. There’s also more work to do. In future posts we’ll talk about some of them, like removing carbon from the air, making abundant fresh water for irrigation, and creating an abundance of cheap electricity that will encourage some out of the box thinking about new sustainability solutions. Thanks for reading.


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