As an opening remark, the word “risk” is inapt in discussing climate change and its effect upon the economy. Risk is definable, and more importantly is measurable. “Uncertainty,” the appropriate word is not quantifiable, and the damage from uncertainty remains unknowable until it becomes certain. There is a large industry in the financial sector of US economy that earns its living by taking on risk; the property and casualty insurance business. Anyone that wishes to avoid risk is able to pay a premium and layoff the risk of financial damage to the insurance companies. Notwithstanding catastrophes such as the recent cold spell and storm damage in south-central US, including the lengthy lack of electricity in the whole of the state of Texas, that event has not and will not be a catastrophe to the property and casualty industry.
Earlier this month, the US Senate Committee on Banking, Housing and Urban Affairs conducted hearings on “Protecting the Financial System from Risks Associated with Climate Change.” Among the persons selected to inform the Committee was my favorite economist, John H. Cochrane, who specializes in Financial Systems and Monetary Policy. A perfect match of expertise and subject matter. He publishes a blog, The Grumpy Economist in which he has summarized his recent testimony given to the Committee. The findings in this One-Page Essay come from Professor Cochrane’s blog. After introducing himself to the Committee, he began with the following:
“Climate change is an important challenge. But climate change poses no measurable risk to the financial system. This emperor has no cloths. “Risk” (sic) means unforeseen events. We know exactly where the climate is going over the horizon that financial regulation can contemplate. Weather is risky, but even the biggest floods, hurricanes, and heat waves have essentially no impact on our financial system. Moreover, the financial system is only at risk when banks as a whole lose so much, and so suddenly, that they blow through their reserves and capital, and a run on their short-term debt erupts. That climate may cause a sudden, unexpected and enormous economic effect, in the next decade, which could endanger the financial system, is an even more fantastic fantasy. Sure, we don’t know what will happen in 100 years, but banks did not fail in 2008 because they bet on radios not TV in the 1920s. Banks failed over mortgage investments made in 2006. Trouble in 2100 will come from investments made in 2095. Financial regulation does not and cannot pretend to look past 5 years, or so, and there is just no climate risk to the financial system at this horizon. Sure a switch to renewables might lower oil company profits. Oil stockholders may lose money. But “risk” to the “financial system” cannot mean that nobody ever loses any money! Tesla could not have been built if people could not take “risks.” Yes, we are in transition to a decarbonized economy, but the transitions from horses to cars and from trains to planes, from typewriters to computers did not cause even blips in the financial system. Companies and industries come and go all the time.”
Personally, I do not put any faith in atmospheric science accurately quantifying “proof” that climate change is man-made, and poses a threat to the planet. Richard Lindzen, an MIT atmospheric physicist phrases his doubt somewhat as follows. “Among the huge complexities of climate change, it is unlikely a single agent, a common atmospheric component, garners the whole blame.” The science that actually informs climate change is solar science, and the sciences that confirm solar causes of climate changes are earth sciences and historical records. Dr. Cochrane in his testimony questioned:
“Why is there a push for regulators to force financial firms to “disclose” absurdly fictitious “climate risks,” and change investments to avoid them. These proposals aim simply to defund the fossil fuel industry before alternatives are in place, and to steer funds to fashionable but unprofitable investments and away from unfashionable ones, by regulatory subterfuge rather than above-board legislation or transparent environmental agency rule-making.”
Climate change is assuredly occurring. It was commonly predicted years before Al Gore had climate change delivered to him as a threat by fossil fuel conspirators who were already reshaping data to bolster theories of twentieth century industrialization as a coming catastrophe. Climate change was already known to happen over cycles of 1500 years. Self-serving scientists had their eyes on obtaining huge research grants by pushing fossil fuels instead of solar cycles as the cause of expected global climate warming and making a political event of it. So, to answer Dr. Cochrane’s question, why is climate threat hyped so much? The answer is money and power. It has since been taken up as part of the “woke” phenomena that chases away the truth by intimidation of truth-seekers. The word that best defines the intentions of those who are most profiting by the climate-change bubble is “corruption.” Truth will be revealed before catastrophic climate conditions occur.
Publiustoo.com March 25, 2021