by Taylor J. Kovar, CEO/Founder – Kovar Wealth Management

 

–Hey Taylor – I read a few articles about the recent climate report that makes things sound pretty dire. If we try to meet those new emissions goals, how do you think that will affect our economy and industries?

 

–Hey Grace – That’s the big question, which sadly doesn’t have a clear answer. If it was as simple as changing one bit of behavior and suddenly the greenhouse gases were no more, we’d be in business. As it stands, we have to change a lot of the ways we do business in order to get those carbon emissions as low as the researchers say they need to be.

 

  1. Fossil fuels. This is kind of the whole ballgame. Coal and oil and gas are non-renewable resources that we depend on but also put a lot of CO2 into the atmosphere. Climate policy targets the companies producing and using the most fossil fuels. At this point, energy production is still very dependent on these products. Industries will have to invest a lot of time and money into switching to solar, hydro, wind, etc. That’s an investment that bigger companies can make, and many are. For smaller businesses with a vehicle fleet or some type of private energy operation, the shift is a lot more daunting. That’s not to mention the workers physically extracting these resources who will be out of a job.
  2. Personal choice. One fear that doesn’t get discussed as much is what will happen to the ordinary consumer after stricter laws get passed. Will there be a forced buy-back program with cars? What materials will be available for construction? As we move toward using more sustainably sourced items, that means a lot of products (especially cheaper plastics) will be taken off the shelves. The supply chain and shipping methods will have to reinvent themselves, and that won’t happen without some growing pains.
  3. The cost of inaction. The crux of the debate is short versus long term. While we think about the immediate impact of reducing gas consumption, central banks are starting to panic about all the loans that will default as properties go underwater or catch on fire. Businesses out west are closing because of unhealthy air from wildfires and flooding in New York just shut down the entire subway. If weather keeps getting more severe, some studies think we’ll lose about 20% of the global GDP over the next 25 years.

 

I guess the answer, Grace, is that climate policy changes will affect our economy in a lot of ways. It’s encouraging to see that new energy sectors are big job creators, but people also need to be mindful of all the things that will get upended by new regulations.