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.
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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.
Read more: http://www.smh.com.au/business/markets/climate-change-a-huge-financial-risk-warns-bank-of-england-20150930-gjy3th.html#ixzz3nKEZSKrd
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I think some of the bloggers are misreading the message of Mr Carney. He is not implying that he supports GLOBAL WARMING . He points out that the anti global warming policy currently in place and still to come will put many investments and industries that use carbon at financial risk . It is the constant fluctuations of these environmental rules that make it difficult to continue to invest and support these industries unless the there is more national government support to either relax the rules or offer financial support
He was an excellent head of BANK of CANADA during the past financial crisis
I did say I agreed with him – I just took it a bit further, and provided a suggestion of what businesses facing this uncertainty might do about it.
A lost decade or more for world economic growth is the main risk to central banks, investment, budgets, debt leverage, and citizens. It is a very real possibility mixed in with data uncertainty about where China is in controlling debt and risk. This is not the time to continue the policy game of carbon taxation and other global NGO schemes as though nothing changed in affordability. In other words, the well is running dry for policy over reach schemes. At a minimum, the damage list of undermined institutions is growing long.
I thought non scientists weren’t allowed to comment on Climate Change.
Lord Lawson got vilified by the ‘Green Mob’ because of his non consensus views on the subject and has forthwith been banned from uttering any comment against the sacred doctrine on media channels by its devotees
Its OK if you support climate change – Pachauri, climate fanatic former head of the IPCC, is a railway engineer…
Silver ralph Says:
“Is this Sparks guy for real?
It has to be a wind-up.”
Which part of the humor in my comment are you referring to? remember the bank of England is depending on your opinion..
The first expectation of any bank governor is to study the data. If he’d done that he would have realized several things; the ‘climate change’ models are very wrong in their forecasts of warming, there has been no significant change in the number of severe or catastrophic weather events, the polar bears are alive and thriving, and the North-west passage is not navigable for commercial vessels despite all the alarmist forecasts.
It would have been better if Mr Carney had pointed out that, when you build your business on a very speculative model, there’s a good chance you’ll lose a lot of money. The Renewables industry is finding that out.«
Absolutely it would make sense to go to where the regulations are more business friendly. After all, hands up one person who would put their house and other capital on the line with such governmental policy uncertainty undercutting business confidence and assurity?
car·ny/car·nie
a carnival or amusement show.
“a carny atmosphere”
a person who works in a carnival or amusement show.
That just about sums up old Mark, I’d say.
An example of that phenomenon which is replete in quality assessment circles ISO and BS standards. It is an obligation to show to that you have a policy to deal with whatever is demanded of you by some outside mediator. In this way it is possible that all producers at the BBC, no matter what show they are proposing, have some content to describe such elements as sexual equality, racial diversity and probably, most probably, climate change. In such ways people are subsumed into the great airless aridity of oppressive conformities which through there distribution can be said to be truth. No wonder Spain is in financial trouble, it has always been a warm place, what chance does it have? Yet the amazing diversity of weather in the US seems nothing but a stimulus to industry. The hot wheat lands of the prairie feed the world while the vast waste of Antarctica are just that, waste. We are not dealing with science or enquiry but the proving of a political theory which has been so invested in that if it failed now the certainty proposed politics would be so badly undermined as to look back to 1848, the year of revolutions. If Antarctica were brought back into food production is would almost seem like a natural response, a thankful change to feed the burgeoning population of the world, that’s joke by the way.
Yesterday, in Britain, the once scientific adviser to the Blair Government opined that he had got it wrong about those diesel engines that he had proposed back then as being the future and infinitely more acceptable than petrol technology. In the light of the VW imbroglio it even looks as though he might be saying that he had been misled by the industry and not just goofed-up. When certainty is king we are all the victims of ignorance. Such is the power that the ‘quality standard’ demands that there is to remain a tick box pertaining to the slavish adherence to imposed norms. The Governor of the Bank of England for all his notable attributes and especially in a free, democratic industrialised capitalist system is but an opinion. It is the market and its innovators that will fashion the environment and improve the condition of mankind and not this hopeful sentimentalising. We rush to the element that we believe that we can influence and yet the biggest dangers to mankind are inherent in the ever restructuring nature of Mother Earth. In this sense the |Governor’s sentiment is but a rain dance, a capitulation to the unknown, that place “where dragons be”. It also says some thing for the efficacy of capitalism that as with so many banking scandals of late which the Governor of the Bank of England seems to have been incapable of spotting, that the most capitalist country in the world despite its clamour for riches is the one that has caught the cheats, something that the sometime capitalist country of Great Britain could not. Diesel gained green credentials and stopped enquiry. Thank goodness the US has, still, no such acceptances. If VW is climate change, or the non-enquiry into sex scandals involving gangs of Asians in Britain, associated with racial laws and imposed morality, then the blanket attributions and the coralling of opinion seems like that Civil War pronouncement, “they couldn’t hit an elephant at this distance”. What did he know.
Not paying attention to the effects of Solar Minima on English weather variability is a huge financial risk to UK based businesses, especially farmers.
A few wet-cool Summers in row like 2012 could put half or more of them out of business.
I am already warning UK farmers of such summer weather conditions through most of the next five years.
UK weather is dominated by the NAO. Increased CO2 forcing is supposed to increase positive NAO, yet the NAO turned increasingly negative from 1995 along with solar plasma density/pressure.
That is much as the Bank of England needs to know about anthropogenic climate change.
TATA has been divesting for quite some time. No surprise that SSI is going the same way.
eg http://www.bbc.co.uk/news/business-29628813
While, for sure, their reasons are complex, competition is always the issue and if you are forced to spend more and more time and capital dealing with an unstable (political) environment then this must impact ones competitiveness.
If, hypothetically, TATA (SSI or whoever) were to propose building a new UK plant atop some 500 years worth of shale gas then they would quickly face the wrath of every green group, every SIF, every MP looking for the green vote, every EU directive aimed at ‘levelling the playing field’ etc etc. In the end it is much cheaper and easier to just build the plant atop the shale gas fields of a more business friendly nation.
Globally, nothing changes, the Steel is still produced. Just not in your region. Redcar takes a massive hit and some town somewhere else throws a party. The amount of Steel produced remains constant and takes exactly the same amount of energy (and CO2) to produce that it required yesterday in Redcar. Redcar becomes another ‘Social Security’ (US readers – think Detroit) stronghold and everyone, bar the residents of Redcar, continues on as normal.
Back on July 8, JC did a review of a 2006 study of the effect of th ‘Fu-Liou’ effect, and buried in it was the revelation that CO2 effects are analysed on the basis of double-doubling (the 4X effect) of
cO2. I am aware of no scenario of fossil fuel use that could result in such an increase…or even 2X, for that matter.
Only if you bet on it! (Climate Change that is)