The Carbon Bubble

THE CARBON BUBBLE: WHAT HAPPENS TO US WHEN IT BURSTS
By Jeff Rubin

In previous books like Why Your World Is About to Get a Whole Lot Smaller, economist Jeff Rubin has talked at length about the impact climate change is likely to have on the global economy. In The Carbon Bubble he specifically addresses the situation in this country: what is happening now and what will is likely to happen in the near future.

The story thus far: Prime Minister Stephen Harper’s Alberta-centric mission to turn Canada into an energy superpower now lies in ruins. Slower economic growth in the U.S., environmental concerns, political roadblocks, and the development of new energy alternatives, have combined to make Alberta’s bitumen, which is one of the dirtiest and most expensive sources of oil on the planet, a pariah industry. The bubble of the carbon economy has burst, and Rubin doubts it will ever fully recover.

This is, however, not a bad thing (unless you own oil stock, or are an Alberta Tory). Eventually, we were going to have to wean ourselves off of carbon anyway if we’re to save the planet, and while the carbon bubble may have burst there are still lots of other opportunities out there to make money out of climate change.

Since this is, at heart, a book on investing, Rubin concludes by suggesting some steps you can take to “save your portfolio before you save the world.” In particular, he sees a lot of upside for Canadians in agriculture (climate change will lead to longer growing seasons), water (we have a lot of it), and arctic shipping (the Northwest Passage becoming increasingly ice free).

Time will tell the value of this advice. A couple of counterpoints, however, spring to mind.

In the first place, while feeding a crowded planet will probably lead to growth in the agricultural sector, the fact is that today’s industrial farming is a highly carbon-intensive business. And with more of the world’s population than ever living in megacities, the idea that we can all turn into locavores is a non-starter.

Then there is the larger question of whether we can really trust the market to be self-correcting when it comes to such matters as saving the planet. The advice to “save your portfolio before you save the world” suggests by its short-sighted sense of priorities that there is ultimately no conflict between these two positions: the one will lead to the other, as though being guided by an invisible hand.

However, in Naomi Klein’s recent bestseller, This Changes Everything, capitalism and environmentalism were seen as utterly incompatible. In her analysis, it’s not just the fossil fuel industry that’s the problem, but the whole idea of mass production, mass consumption, and the pursuit of short-term profits. For Rubin, the only thing that has changed is that carbon stocks are experiencing a fast sunset and new sectors of the market will now rise to take their place.

Will climate change lead to an adjustment in the market, or will it change everything? Investors have to be optimists, but at the very least we are entering an age of extremes.

Notes:
Review first published May 23, 2015.