The economics of real and perceived climate change

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Climate change and the extreme weather events it intensifies have been the subject of much discussion lately. One can hardly listen to the evening news or open a newspaper without seeing an article about record rainfall or forest fires. But people tend to perceive these events differently. Some see it as clear evidence of human-influenced climate change. Others see them simply as the natural cycles of the planet with no correlation to human involvement.

However one views these events, they represent a real and deadly challenge to humanity. Our good future depends on how we respond to this challenge. However, not everything should be understood as a disaster. This challenge also brings a time of great economic opportunity.

Two new markets are emerging. First, there are the products and services needed to mitigate the effects of climate change. Second, there are the new economic models that are developing with the transition to a green economy. Every American and capitalist should relish the opportunity to lead the world in these two markets.

The fact that we may perceive the relationship between extreme weather events, rising temperatures and climate change differently is irrelevant. The fact is that the planet is warming and extreme weather events are becoming more regular. This will lead to sea level rise, freshwater shortages and the need for more efficient cooling systems. We are already seeing the strain on power plants during peak summer operations.

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The transition to a green economy is already underway, driven in large part by the declaration of the 195 signatories to the Paris Climate Agreement, all of whom see climate change as a problem. This new consensus will drive global demand. Efforts to achieve the goals of the Accord have sparked a wave of innovation and a technological revolution.

These two emerging markets highlight the real and growing demand for skills, services and products that address the problem of climate change. Whether we understand climate change as real or perceived, this movement is underway. So what opportunities should we anticipate?

Consider first the technological revolution. Cities around the world are facing a litany of problems from higher temperatures and inclement weather. The technology to solve these challenges does not currently exist. Innovation, however, is on the way and creating well-paying civil engineering and skilled labor jobs. Eliminating carbon pollution may start with software and civil engineers, but it will shift and ripple throughout the economy.

It is imperative that the products created by this innovation be made in the United States and distributed worldwide. Profits, when reinvested, will drive innovation and improved living standards for all.

Second, consider the funding that is flowing into this new green economy. A huge opportunity already exists in this space. The Paris Agreement created the Green Climate Fund which receives $100 billion a year to help developing countries finance climate activities. That alone represents a $500 billion opportunity. This amount does not represent any of the expenditures that the signatory countries will themselves devote to climate change.

The United Nations sums up the real opportunity perfectly: “It should be remembered here that adaptation is only one part of the complex puzzle of climate action. global resilience in both the developing and developed worlds are factored into the annual cost will be well over $500 billion and possibly even over $1 trillion, but the benefits of the investments will be far greater. important – moving to a green economy could generate a direct economic gain of $26 trillion through 2030 compared to the status quo.

Climate change, perceived threat or real problem? The question is irrelevant. The climate opportunity is real. The United States can choose not to participate in this endeavor and fall behind. Or, the United States can continue to be the leader it is today and secure its place as a relevant player on the world stage for future generations. It is time to unleash the power of capitalism and for the United States to lead this charge. Don’t let your perception fool you, the opportunity is real and the cost of complacency is enormous.

— Kristopher Reinhardt is a financial adviser in the Netherlands. He holds a Master of Science in Finance and has spent his entire career working in financial services. He is an active member of the Holland Climate Collaborative.

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