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The Profits of Doom
For most of the world's population, climate change means nothing but trouble. For a few, it means laughing all the way to the bank.

Every cloud has a silver lining. And every hurricane, every melting glacier, every millimeter of sea-level rise. That’s the uncomfortable message delivered by McKenzie Funk’s Windfall: while global warming may bring catastrophe to billions, it will also make some people very rich. Banks, hedge funds, and smart investors had this epiphany, Funk says, around 2007, after the Intergovernmental Panel on Climate Change reported that 11 of the previous 12 years had been the warmest in human history. In the words of a Deutsche Bank press release at that time, “The debate around climate change is shifting away from cost and risk toward the question of how to capitalize on exciting opportunities.”

by McKenzie Funk, Penguin Press, 320pp., $27.95

This, of course, was precisely when others were having their own epiphany after watching Al Gore’s An Inconvenient Truth. The difference is in how these two epiphanies played out. For most people, says Elke Weber of Columbia University’s Center for Research on Environmental Decisions, it’s difficult to achieve a sense of urgency because the “time-delayed, abstract, and often statistical nature of the risks of global warming does not evoke strong visceral reactions.” The pursuit of profit works in the opposite way; the viscera and the frontal lobe of the brain operate in tandem. Strike now, before the other guy does; place your bets decisively on disaster.

So where exactly should you invest? John Deere would be one good bet. If drought destroys wheat farming in Australia, American farmers will need more tractors. The Schroder Global Climate Change Fund favors big supermarket chains: “If climate change will be a negative for crop yields, then people will just have to spend more on food. Retailers are a clear beneficiary.” Water may be the biggest profit center of all. With “hydrocommerce” already a $400 billion-a-year industry, the chief economist of Citigroup predicts that water will “become eventually the single most important physical commodity-based asset class, dwarfing oil, copper, agricultural commodities, and precious metals.”

Funk divides his tour of these new profit centers into three segments: The Melt, The Drought, and The Deluge. But a single theme runs through all three: there will be winners and losers, and how the competition shakes out will be determined by money and power. Not surprisingly, perhaps, those who will make the greatest profits from climate change, and have the best chance of resisting its impact, live in countries that are principally responsible for causing it in the first place.

As this implies, some of the shakeout will occur at the political level—within, between, and among nation states. Funk devotes a chapter to the aspirations of Greenland, which he thinks may become “the first country in the world created by global warming.” In this Danish possession (which is 50 times larger than the mother country), massive deposits of minerals will appear miraculously from beneath melting glaciers. Valuable fish stocks are migrating into Greenland’s coastal waters as ocean temperatures climb. Disaster tourists are flocking to watch icebergs calve and collapse. The independence movement is salivating.

Climate change also destabilizes societies; it is what national security types call a “threat multiplier.” If you’re a Bangladeshi driven from your home by rising seas, you may try to flee to India, but you’ll soon find the longest fence in the world in the way—2,100 miles, floodlit, electrified. If you’re a Senegalese, you may pay a smuggler hundreds of dollars to take you to southern Europe in a flimsy boat. And if you arrive alive (which many don’t), you’ll have to contend with “Fortress Europe,” whose borders will be guarded in the future by a surveillance network of radar, sensors, infrared cameras, and drones—the kind of defenses only rich countries can afford. (In case you’re looking for more investment opportunities, don’t forget all those privately owned detention centers for illegal migrants.)

Funk hits his richest vein in the world of business. It’s a world ruled by men: there’s nary a woman among all his bankers, hedge fund managers, generals, desalinators, warlords, scenario planners, fire chiefs, genetic engineers, inventors of inflatable smokestacks that will climb 15 miles into the sky to pump emissions from power plants into the stratosphere. In Funk’s Mad Max world of climate change, women have only walk-on parts. There are three protesters against oil drilling in Alaska, one dressed in a polar bear costume. A member of a Japanese cult helps to build a wall of trees across the Sahel by beaming invisible light energy at a row of seedlings. Oh, and there’s Ayn Rand—but we’ll get to her in a moment.

“We are always wowed by the smartest guys in the room…when we are in the room,” Funk writes. But to his enormous credit, he does not stay in the room. He plunges into the real world to show how the smartest guys’ ideas play out in practice. Flying around South Sudan in an ancient DC-9, braving overcrowded river ferries in Bangladesh, he lets his reporting speak for itself, without the need for a John Williams sound track to tell us how we’re supposed to feel. Yet at the same time he has a finely tuned sense of irony. He notices, for example, that Shell’s main Arctic oil-drilling ship bears the word Majuro on its hull. Majuro is the capital of the Marshall Islands, which is likely to be one of the first small island states to go underwater. While the country waits to drown, it makes money selling flags of convenience to foreign-owned ships.

Funk’s greatest strength is his ability to situate a vivid local narrative in its larger political and economic context. Take the giant insurance company AIG, which features large in his account of zooming around the tonier zip codes of Los Angeles with a team of private firefighters from a company called Firebreak Spray Systems. This Oregon-based outfit is contracted to protect homes that are insured by AIG’s Private Client Group (only residences valued at more than $1 million qualify). As fire rages in the foothills of the Sierras, Firebreak’s chief Sam DiGiovanna scans the addresses and demands of his crew: “Is that one ours? Let’s find ours and spray it”—with a chemical fire retardant developed by Monsanto. The reader is left with the queasy feeling that houses that are not “ours” can be left to burn.

The argument for privatizing firefighting—advanced by the likes of the Koch brothers–funded Reason Foundation—runs like this: California is a high-tax state; as wildfires increase, so will the demand for firefighting; public fire brigades mean higher taxes; ergo, turn things over to the private sector.

This libertarian philosophy is even more flagrant in the case of Phil Heilberg, a former AIG trader turned land-grabber who puts one in mind of a speculator in chemotherapy futures gleeful over news of higher cancer rates. His special interest is the violent breakup of small, impoverished states. “I want a country that’s weaker,” he says. “There’s a cost to dealing with strong countries: resource nationalism.” In Africa, he strikes deals with local warlords like General Paulino Matip, whom Funk calls “the most feared man in South Sudan.” Heilberg recently leased a million acres of farmland in this newly independent country, where he dreams of transforming a world of cowherders and tiny plots of corn and sorghum into a hive of American-style agribusiness. Ayn Rand is his favorite author, he tells Funk: the pursuit of profit is a moral act, “a kind of enlightened selfishness. Place yourself above all else.”

Yet Funk is not interested only in this cartoonish worship of greed. His most subtle and illuminating chapter looks at Shell’s huge bet on the Arctic petroleum rush—the quest for 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas that “has men running around like Elizabethan invaders, claiming virgin territory.” Until a few years ago, Shell was hailed as the paradigm of an enlightened oil company, warning of the dangers of climate change and pushing cap-and-trade legislation in Washington. “People always think…the market will solve all of it,” said Shell CEO Jeroen van der Veer in 2008. “That of course is nonsense.”

But when climate legislation foundered and U.N. conferences failed to secure significant global agreements on carbon emissions, Shell’s philosophy pivoted. Its focus was no longer on how oil and gas production would worsen global warming but on how global warming would open up opportunities for oil and gas production. Shell dropped all new funding for wind and solar energy; instead, it began sinking billions into Arctic oil and Canadian tar sands.

There is a dark, perverse logic here: the less governments do to control carbon emissions, the greater the market incentive to increase them. Markets are not immoral but amoral. If governments create the right framework, private capital can achieve enlightened results. If they don’t, well, just get out there, grab your windfall, and damn the social consequences. As Bangladesh’s leading environmentalist, Atiq Rahman, remarks to Funk as he considers the lack of international investment in his country’s mortal struggle with climate change, “Money doesn’t get to the poor. That is the nature of money.”

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George Black has reported from five continents, chronicling civil war in Central America, the democracy movement in China, and climate change in countries from Bangladesh to Peru. His most recent book, Empire of Shadows, is about the 19th century exploration of Yellowstone. MORE STORIES ➔
Comments (5)
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Gee, I didn't see any mention of Al Gore's personal wealth creation via strategic alliances with the many major banking institutions around the world. His continued escape from scrutiny on this is a modern day wonder.
Nor any mention of the alternative energy scams that have created a cycle of croney/party/politician fundraising off taxpayers while generating electricity at multiple times the costs of hydroelectric/oil/gas/nuke.
Guess what, John Deere sells tractors in Australia too. Maybe you need to rethink your view of economics before you berate those you think are the evil doers.
Higher prices does not necessarily mean more profit - it is margin that counts. Stores will be squeezed as prices from suppliers rise while customers resist paying more. And volumes may go down.
As a sort of cautionary reminder I would ask all users to look up Quotes Earth Day 1970 and then take a long, calming breath before going back to work. A little perspective is always useful.