Season 5, Post 4: “Nothing has made a difference”

These were the cheery words used to describe attempts to tackle climate change to-date. They were spoken by Sir Dieter Helm CBE, a Professor of Economics at the University of Oxford and a leading expert in the field. Your author was privileged to join a small group meeting with Sir Dieter last week to hear about both the problems of, and solutions for, managing climate change.

The stark reality, Sir Dieter reminded us, is that since 1990, two parts per million of carbon have been added to the planet’s atmosphere annually, “without fail.” Put another way, the world is getting more polluted. Sure, both the Great Financial Crisis and the COVID-19 pandemic led to a reduction in emissions ­– since these are correlated with economic activity – but this is only half the problem. Climate change is a function of both emissions and sequestration – the capturing, removal and storage of carbon dioxide from the earth’s atmosphere. To crack climate change, according to Sir Dieter, governments need to implement policies to address both these challenges.

Solving the problem is, of course, non-trivial. Cynically – but correctly – Sir Dieter highlighted that any government’s track record will be determined by the (often arbitrary) goals it sets. Take the UK, which Sir Dieter suggested existed in a state of “hubris” over its climate policy: sure, the country now has very little carbon-emitting industry (which it is happy to publicise), but this only shifts the problem elsewhere. The goods imported to the country will have generated perhaps a larger carbon footprint, owing to production and subsequent transportation, than had they been produced domestically. More positively, for the UK, it has at least fast-tracked the closure of most of its coal plants (which are heavy carbon-emitters) and is placing a large bet on renewables. The UK may be “the best place in the world to do offshore wind”, per Sir Dieter.

What to make of the above? We have sympathy with Sir Dieter’s stance that COP (the annual Climate Change Conference hosted by the UN) is “not working” and that a more holistic approach to solving climate change is necessary. However, whether solutions such as a cross-border carbon tax – one of Sir Dieter’s mooted ideas – are practically workable remains to be seen. We also think it makes sense for countries to diversify their energy sources. Renewables are almost certainly the way forward (as we first argued in 2018), but the challenge of intermittency needs to be managed. Better battery storage solutions and smarter grids both make sense, while longer-term, green hydrogen should also feature in the energy mix.

25 January 2023

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

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Alex Gunz, Fund Manager ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​