A Code Red Political Crisis is Coming

The UN has declared a Code Red Climate Emergency. As we all know addressing climate change has enormous implications for investment strategies, but can governments collectively deliver the joined-up and effective policies required to save the planet? The jury is out…

Blain’s Morning Porridge – August 10th 2021 – A Code Red Political Crisis is Coming

“It was the day my Granny exploded.”

This Morning –  The UN has declared a Code Red Climate Emergency. As we all know addressing climate change has enormous implications for investment strategies, but can governments collectively deliver the joined-up and effective policies required to save the planet? The jury is out…

The United Nations Intergovernmental Panel on Climate Change released its blockbuster 4000 page report yesterday – a remarkable document utterly free of any doubt, caveats, hesitations or repetitions as to their absolute certainty humans are entirely responsible for global warming. 194 Nations agreed the text. Even an attempt by the Saudis to water down “Carbon Warming” to “Greenhouse Gas Warming” was rejected.

If you work in finance or simply read the Morning Porridge for “insider views” on your pension pot, then get real about investing in climate change mitigation. It does not matter whether you personally understand the science or even believe climate change is real or not – the weather and our environment is going to be the most significant long-term force acting on investment since Noah built his Ark.

While the headlines are all about the threats posed by rising temperatures and what the talking political heads are saying, for investors the questions are multiple and complex: how to prepare, what does it mean, and how does it impact strategy?

Costs and values are going to change – for instance; insurance is likely to be spanked but evolve, while real green clean energy becomes so much more valuable. Separating genuine climate mitigants from the chaff of unfulfilled pipe-dreams will be critical. There will be lots of bad decisions, and a few good ones – choosing the right ones will be…. Rewarding. Understanding the politics of climate change will be on aspect of that process.

Climate Change just got mighty serious. Just how much impact the UN report will have in catalysing a response is highlighted by how it was immediately and vigorously briefed against by the usual suspects:

The first email I opened this morning was from a somewhat right-leaning source cataloguing how flawed the report is; questioning the credentials of the scientists, screaming it’s based on unproven science, bogus data and unjustifiable suppositions, and that far more effort needs to be spent on examining alternative weather theories and “facts”. It was all a bit “Donald Trump”: “I don’t need to prove their was electoral fraud.. you need to prove there wasn’t!

The crux of this particular note was how the entire west coast of the US burning down is nothing unusual. The author says it’s happening now because we’ve stopped it happening earlier by fighting fires, while protecting “spotted owls” and other environmental circuses made the forests more combustible by allowing trees to grow (how foolish of us) and scrub to build up etc. Thus: it’s actually Democrat party Governors’ bad forest management that’s caused wildfires to become more intense – case proved. Therefore.. and by association, Biden has a lot to answer for… !

I am not going to bother defending the UN against climate change deniers.

Smart folk understand the Earth’s temperature is variable. I’ve written many times about the mini-ice age in the 15th century creating enormous wealth for Northern Europe by flooding the Baltic and North Sea with colder water which attracted the shoals of herring. We understand many forests need fires to regenerate … but weather patterns drive the climate.

The simple reality is; over our lifetimes the amount of greenhouse gas – CO2 but others also, have risen faster than any previous historical core sample, bog chronology or rock core shows. The rise is now creating climate instability and a pace of change such as we’ve never seen before. Consequences are inevitable. We have to pay for these consequences of rapid industrialisation. The costs will not fall fairly.

I’ll go with the UN science and agree human activity has created “irreversible” damage to global climate, and that, cutting through the noise… it’s going to cost trillions to address and solve.

The question is how?

How can we actually manage the response to climate change? Through governments and diplomacy? By action? Even in wartime economies political systems struggle to harness the means of production to address the enemy threat. Aligning an economy with strategic objectives is never easy.

The sheer incompetence of Nazi Germany’s mis-management of its economy during the Second World War is documented in Adam Tooze’s excellent “The Wages of Destruction”. The UK’s curt dismissal of Churchill’s government in 1945 highlights how precarious his position had been under the wartime coalition. The ability of the Soviet Economy to transfer whole industries into Siberia out of the reach of invading German panzer-armies was remarkable but massively costly, trading Russian armies by the dozen to create time from the shift – costs that would have been unpalatable in the West.

Yet the success of the US as the Arsenal of Democracy illustrates a free-market economy tends to do better – but again with significant costs.

Private companies respond well to promises of feather-bedded Government cost-plus contracts. The opportunities for profit in a war-time economy – effectively right through WW2, Korea, The Cold War, Vietnam and the Space Race – fuelled the extraordinary American half-century, but ultimately the inflation of the 1970s, boom/busts the speculation of the 80s, the greed of the 90s and the global financial crisis that began in 2007.

Compared to the challenges of addressing Climate Change, wars are relatively simple affairs. More and better ships, planes and boots-on-the-ground to beat the other side. Climate change introduces multiple new conundrums – who pays for the problem of the commons? If we constrain our economy, how can we guarantee others are doing the same thing. Distrust between the US and China is already at impossible levels.

It will require political leadership of the highest order to coordinate the response to climate change…..

Whatever the optics of Biden’s re-joining the climate agenda, the USA has been treading water on Climate Change since 2009. Trying to pass any climate policies will remain a political impasse. The distance between Alexandria Ocasio-Cortez’ New Green Deal and die-hard Republicans looking to ring-fence their local fossil fuel industry looks impossible to bridge. Don’t look to the USA for leadership.

Can Europe replace it? The European Green Taxonomy is a fascinating initiative but is a bureaucratic monstrosity due to its genesis among the 27 members of the EU each horse-trading their way to an acceptable compromise. Here in the UK Boris came up with a forgettable sound-bite yesterday about making Coal history, banking ICE Cars and lots of Cash to combat climate change now.. yawn.

Over in China, Climate change is just as real, just as threatening, and just as much an economic imperative as it is in the west. China has just as much at stake and to lose as the west, and may prove more ruthless to ensure success.


As we watch we the forests burning are we missing the trees for the wood? Yesterday I took puppy for a long walk over Hamble’s old airfield. I have never seen so much Ragwort, a pretty but dangerous weed deadly to livestock. Insects love it – but through the morning I was increasingly concerned; despite the cornucopia of Ragwort and other flowering weeds I saw less than a dozen bees, only a few Cabbage-White butterflies, and blue-bottles on dog-mess.

Where have all the insects gone? If the insects have gone – then we really are in trouble.

Five Things to Read This Morning

BBC – Make Coal history says PM after Climate Warning

FT – US Debt investors spooked by Delta Variant concerns

FT – Time is running short to avert “hell on earth”

BBerg – The Climate Change Emergency is About Numbers. Here’s how to fight it.

WSJ – SoftBank Posts lower profits as Tech cools

Out of time… and back to my holiday… till next week.

Bill Blain

Strategist – Shard Capital


  1. Bill, you are right about the reduction in insect numbers.
    Best estimates are 1-2% p/a globally.
    I remember the kitchen window of my childhood farmhouse being covered in moths on summer evenings and night time driving through rural France in the 1980s in a snow storm of insects.
    Now….even the humble Cabbage-White is noticeably down in numbers on our allotment compared to earlier years.
    Some moths still appear on our windows but are becoming a rarity and when did you last have to wash bug splatter off the car windscreen?
    The late E.O. Wilson (a pre-eminent biologist) famously said “If invertebrates were to disappear, I doubt the human species could last more than a few months”

    • I received a deal of similar comments by email this morning: this one from a reader in Provence:

      Two observations: I’m writing this from the house in Provence. From the moment we arrived two weeks ago (to a dry, hot, typical med climate summer) I’ve been struck by a TOTAL ABSENCE of insects. No swarms of moths around the light at night on the patio, nothing stuck to the headlamps of the car, windscreen etc. Very few flies even. A few scorpions in the house. But apart from that nothing. Its very noticeable. Even the bird life is sparse to the point of invisibility. Its the first time in 30 years I’ve seen this phenomenon . The French blame continued pesticide use for the apocalypse but in our neck of the woods there haven’t been pesticides of any kind for decades.

      Second observation: the market will have to drive our response to climate change through the sustainable production of goods, certifiable and therefore more attractive to consumers. China can however copy the USSR dictatorial WW11 methods of location, addressing the problem but also inviting political instability . Question: to what extent, like the failed crops across two years that supposedly triggered the French revolt in 1789, will climate change introduce global political instability? Big potential bearing on economies everywhere.

  2. The UN report says it is undeniable that climate change is down to human activity. The cure, if there is one, is either less activity or less humans. Governments are focusing on the former, but having less children is the most useful thing we can all do to tackle climate change.

  3. Lets assume the new patterns of drought and rain we are now seeing are permanent ( or will last for another 20 years. California is pretty much screwed. The hundreds of thousands of farm laborers in California’s Central Valley and the ubiquitous landscape contractors in Los Angeles are out of work. Las Vegas could become the biggest Ghost Town in the history of the American West if Lake Mead dries up. Brazil and Northern Argentina are suffering from drought ( and frosts) and that is reducing soy, corn, coffee yields. China better be nice if it wants US grains ( and pork) cause the Parana River in Argentina is to low for ships to navigate. Florida orange growers are smiling. Californian and Brazilian ones not so much.

  4. Climate change has been politicized and leads people to dismiss its urgency. When the weather man in the US is alarmingly warning me of the “37 million people in harms way of heavy rain or hot temperatures”, I tune out. Quit trying to scare me and give me the facts. Don’t let twitter and facebook ban opposing views and for god’s sake get China to commit to reducing coal usage or it won’t make a difference what the rest of the world does. I would prefer to spend my waning years paying for things I enjoy than sending it to the electric company to pay for half baked government ideas that line the pockets of their favored corporations and elites.

  5. I keep reading people saying pollution is all China’s fault, yet they fail to point out that the US outsourced all their manufacturing to China. 🙄

    Also read an article yesterday stating that China is opening lots of coal plants, which is true, they just also failed to say that they’re leading the world in solar and wind as well.

    Not defending China, just tired of US deflecting. We’re all in this together.

  6. I agree, I don’t remember a time when there were so few insects (and you can add Swallows and Frogs to the list) so what killed them? Around here, in deepest Gloucestershire, all I seem to hear is farm machinery spraying herbicide, pesticide, chemicals to encourage growth then kill off the foliage so that the seeds/tubers can be more profitability harvested.
    And don’t get me started on feeding anti-biotics to healthy livestock just in case they get sick.
    Maybe we should be taking a closer look at all this before worrying about climate change, which is already ‘baked into the pie’ so to speak.

  7. Even here in beautiful, lush British Columbia the loss of insects is remarkable. When we moved in to our house in the Point Grey area of Vancouver 40 years ago we watched bats hunting in the evening, needed screens to protect us from mosquitos, scraped our windshields after even a short highway drive and fought a constant battle in the garden against ravenous bugs.
    I haven’t seen a bat here for 20 years; all the insect-eating birds have gone leaving only seed-eaters; very few honey bees or bumble-bees , and even wasps are disappearing. Mozzies love me but I haven’t been bitten this summer.
    I have no doubt about where the blame lies. The City periodically sprays from the air because of a codling moth outbreak. It treats the parks with weed-killers in case someone trips over a dandelion and road and railway verges are poisoned. For the gardener the shops are full of pesticides and herbicides, many of which are known carcinogens. When will we learn?

  8. Multiple serious weather-related famínes in Russia between 1870 and 1915 laid the groundwork for the revolution that eventually consumed the country. Many other historical examples of the same. The cause wasn’t Global warming, but simply the vagaries of weather, and that’s certainly not getting any better. Food security is, and always has been the Achilles Heel of the human race.

  9. History is wonderful in teaching us things about the present. Few historians are physicists or biophysical economists which is unfortunate because we miss important lessons, specifically the role of energy in our lives and our evolutionary imperative to maximise our energy consumption.

  10. History is wonderful in teaching us things about the present. Few historians are physicists or biophysical economists which is unfortunate because we miss important lessons, specifically the role of energy in our lives and our evolutionary imperative to maximise our energy consumption.

  11. Right, THIS time they’re serious! In 1989 they were just bluffing.

    “UNITED NATIONS (AP) _ A senior U.N. environmental official says entire nations could be wiped off the face of the Earth by rising sea levels if the global warming trend is not reversed by the year 2000.

    Coastal flooding and crop failures would create an exodus of ″eco- refugees,′ ′ threatening political chaos, said Noel Brown, director of the New York office of the U.N. Environment Program, or UNEP.

    He said governments have a 10-year window of opportunity to solve the greenhouse effect before it goes beyond human control.

    As the warming melts polar icecaps, ocean levels will rise by up to three feet, enough to cover the Maldives and other flat island nations, Brown told The Associated Press in an interview on Wednesday.”

  12. Unsettled? by Dr Steven E Koonin (former Undersecretary for Science in the Obama administration) is worth reading (it is available via Amazon). He offers a measured analysis of the claims made and the supporting data and articles on which they were made. A pupil of the late Dr Richard Feynmann he is a disciple of the application of the scientific method: make a guess; compute the consequences of the guess; compare the consequences with nature/experiments/experience/observation; if it (the guess) disagrees with the experiment it is wrong. See http://www.youtube.com/watch?v=b240PGCMwV0
    We have been bombarded over the past thirty years with many predictions that have not been fulfilled. Why should we believe this latest lot especially as everything is attributed to human action and none to the natural world, starting with the activities of the sun?

    David Andrews

  13. The scientific method requires that, to advance any hypothesis to the level of theory, all other hypotheses explaining the observed behavior must be disproven. The burden of proof is on the party who wishes to advance their hypothesis. I would think this is especially true if they wish to impose their belief on humanity and spend $trillions which could alternatively be spent in other ways to benefit humanity.

  14. I find it amazing that people dispute the scientists. Common sense says that burning a 100 million barrels (42 gallons / barrel) of oil a day (BP) will have an effect on the environment you live in. It has been known since the 1880s that Carbon in the atmosphere leads to warming. It doesn’t take a very clever person to put the two together and realize we are making a difference. If we add to that very simple observations on weather formations and ice melts one has to be a screw short to doubt what is going on. Politicizing this is frankly immoral, a lot of people are going to suffer… But hey ho.

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