Guest essay by Eric Worrall
The Bank of England has stepped into the climate fray, with a claim that climate change poses a huge financial risk to UK based businesses. For once I believe the Bank of England is absolutely correct (more below).
According to the Sydney Morning Herald;
Bank of England Governor Mark Carney said Britain’s insurers face potentially “huge” exposure to shifts in climate-change policy and Group of 20 nations need to do more to combat associated financial-stability risks.
“The challenges currently posed by climate change pale in significance compared with what might come,” Mr Carney said in a speech at a Lloyd’s of London dinner.
“Once climate change becomes a defining issue for financial stability, it may already be too late.”
England’s central bank has been looking into the economic and financial-stability risks posed by climate change and Carney spoke as the BoE published a report on the impact on the British insurance industry. As well as physical and liability risks, British insurers, which manage almost £2 trillion in assets, also face threats from the re-pricing of investments in fossil fuels in the move toward a lower carbon economy, Mr Carney said.
“The exposure of UK investors, including insurance companies, to these shifts is potentially huge,” Mr Carney said. General insurers are the most directly exposed to such losses, he said.
Why do I agree with Mark Carney, that climate change poses a huge financial risk to UK based businesses? The reason has nothing to do with the weather, which, given the multi-decadal decline of weather extremes, is currently surprisingly benign.
In my opinion, the biggest climate related risk for owners of UK based businesses, is the risk of lunatic political interventions, which destroy the financial viability of your business.
WUWT reported that Shell recently abandoned exploring the US Arctic, because of regulatory uncertainty.
In the UK a similar scandal has erupted, with the closure of Redcar steel, a major steel works. One of the reasons given for the closure, and loss of thousands of jobs, is that the excessive green tariffs UK based steel plants and other intensive energy users have to pay, are making it impossible to compete with foreign businesses. (h/t Roger Helmer MEP)
Gareth Stace, director of UK Steel, said: ‘Sympathy and warm words are welcome, but Ministers must now get behind British steel and deliver the support that we urgently need.’
He called on the government to ‘create a level playing field for British steel by fully compensating the industry for the high cost of electricity caused by the imposition of climate change policies‘.
What should UK businesses do, to avoid catastrophic regulatory instability, and unsustainable, politically imposed green costs? One option surely well worth considering is to relocate business assets and infrastructure to Asia.
Asia does not appear to have abandoned cheap energy and economic sanity. As WUWT recently reported, China and Japan are stepping in, to finance energy / industrial infrastructure, and to facilitate economic activity on a scale which the Western world no longer wishes to embrace.
Businesses should also seriously consider moving their head office and share market listing, as well as their physical assets. There have been multiple suggestions over the years, that the global assets of businesses should be fully included in any carbon accounting regime, regardless of the regulatory regime in the country where the assets are physically located. Keeping the business head office in the UK might still leave a business vulnerable to future regulatory instability.