The international investment banking community announced at COP26 that they had lined up $130 trillion to finance the world’s transition from fossil fuels to net-zero emissions energy by 2050.
According to the Financial Times, this represents 40% of the global financial system assets. What could go wrong? How about a repeat of the Great Recession?
In the 2015 Academy award-winning movie The Big Short, director Adam McKay takes the viewer from the initial concept of a legitimate, well-founded and simple financial concept through a 30-year incubation to the ultimate corrupt, greed-driven, cancer that took down the international banking order and partially collapsed the global economy.
It was called The Great Recession. In the US alone eight million jobs were lost, six million homes were defaulted on, and $5 trillion in savings and stock market value disappeared.
According to author Michael Lewis of the namesake book, this was allowed to happen because at best, the big banks, the public and the government never bothered to check the facts, or at worst, willingly ignored the truth.
Only 13 years later the investment bankers are back and ready for an encore performance.
There are many parallels between the Great Recession and what I am suggesting would be the Climate Change Recession. The Great Recession was fueled by greed for money, and the Climate Change Recession is being fueled by greed for political power.
Both willfully lost sight of foundational principles, both ignored important warning signs, and both compounded the losses by blind faith in their exaggerated claims.
In The Big Short, the foundational principle was that the financial risk to sub-prime mortgages contained in Collateralized Debt Obligations (CDOs, a type of financial bond) was low because American housing prices had never gone down. The banks somehow forgot that they did in the Great Depression.
At COP26 the foundational principle is that the Earth’s climate has been naturally constant for many thousands of years and is now changing due to human emissions of carbon dioxide.
They have ignored many multi-disciplined scientific studies built up over decades that the climate changes naturally and in the last 10,000 years it has been warmer than today at least 90% of the time.
Some of these studies exist in the IPCC’s reports, and COP26 has somehow forgotten that.
In The Big Short, the banks ignored the first warning signal that take-home pay was stagnant while housing prices soared, and missed the second warning signal of steadily increasing mortgage defaults.
At COP26 they have missed the first warning signal that global warming paused for an extended period (1998-2012) while carbon dioxide emissions soared, and missed the second warning signal that past and current periods of climate change are also related to both ocean oscillation events such as El Nino and cyclical variations of the Sun.
In the Big Short, the public believed the bond-rating agencies that the CDO bonds made up of NINJ (No Income No Job) mortgages deserved triple-A credit ratings.
The bond-rating agencies were wrong, but because they only expressed an opinion they broke no laws—unless you count the expectation that they should do their job ethically and professionally.
At COP26 they believe that the science is settled; carbon dioxide emissions are an existential threat to humanity.
The mainstream media mostly ignores prominent former IPCC-supporting scientists that now acknowledge human activities are not going to cause catastrophic global warming, and that natural causes are slowly being better understood.
The mainstream media is wrong, they are presenting scientific opinion as fact, but they have broken no laws unless you count the expectation that they should do their job ethically and professionally.
The Big Short meltdown was triggered when with mathematical certainty NINJ mortgagees finally defaulted as higher interest payments kicked in and the CDO bonds lost most of their value.
The actual Big Short was a financial instrument called Credit Default Swaps, which was a bet that the CDOs would fail exactly in the manner which they did.
The COP26 meltdown will be triggered when with mathematical certainty carbon dioxide-caused catastrophic global warming fails to materialize. This is because those flawed forecasts have overstated the sensitivity of carbon dioxide to global warming.
Additionally, the COP26 delegates are silent on that relationship being logarithmic: the amount of carbon dioxide has to be doubled each time to achieve the same temperature increase. The proof is that the Earth has had up to 12 times the CO2 in the atmosphere with no runaway global warming.
In The Big Short, the biggest loser turned out to be the taxpayer because of what has come to be known as a moral hazard. The big banks were reckless and took extreme risks in exchange for extreme profits because they knew if they failed the government would be forced to bail them out.
At COP26 the investment bankers want to take advantage of a similar moral hazard and lend “all the money needed” to transition the world’s economy to net-zero carbon dioxide emissions by 2050. They know governments will be forced to backstop projects of this scale.
They will provide financing for an obscene amount of money to build green energy projects that have not yet worked reliably, and are designed to meet an undefined “net zero” goal for a problem that they forecast but does not exist. That is both reckless and extreme.
But when these expensive green energy projects fail, although it will be future generations of taxpayers and consumers who will bail them out, the biggest loser will be the planet.
Our focus on carbon dioxide has kept us from dealing with resolvable environmental problems such as chemical pollution, loss of wildlife habitat, plastics in the oceans, and overfishing.
I have written a book on why we should short COP26: “Sunlight on Climate Change: A Heretic’s Guide to Global Climate Hysteria.” It explains in understandable terms the science of how both natural and human-caused global warming work.
If more people understand the science and demand the truth, perhaps we can stop the industry that gave us Collateralized Debt Obligations from gifting us with Net Zero Energy Debt Obligations.
If you would like to financially “short” COP26, buy stocks in fossil fuel companies.
Ron Barmby (www.ronaldbarmby.ca) is a Professional Engineer with a Bachelor’s and Master’s degree, whose 40+ year career in the energy sector has taken him to over 40 countries on five continents. He recently published “Sunlight on Climate Change: A Heretic’s Guide to Global Climate Hysteria” (Amazon, Barnes & Noble) to explain in understandable terms the science of how both natural and human-caused global warming work.
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