Investing in Global Warming

Daily Reckoning/UK
July 2, 2006

Until recently, it has been easy for a large segment of the political and intellectual leadership in the developed world to look down their collective noses and to dismiss the "global warming crowd" as a bunch of fringe kooks. For example, for many years, it has been possible for some segment of the respectable scientific community to say that increased levels of carbon dioxide were not a major threat because the world's oceans would absorb most of the excess CO2 molecules. But on this subject, the scientific jury has in recent times been walking back into the courtroom, and those jurors do not look happy. Pretty soon, the accepted scientific verdict will be that global warming is real and that carbon dioxide buildup is among the guiltiest of guilty parties.

Thus, I believe that in the not-too-distant future, the big leadership of the world is going to awaken to the seriousness of what I have just told you about global warming in the first part of this essay. What do I mean when I say "big leadership"? I mean all of it, the top honchos, whether US or Chinese or Russian or European, or whomever. The government of Sweden is already there, with its active commitment to eliminate Sweden's dependence on oil within 20 years. The other side of that eliminate-oil-dependence coin is an overt Swedish commitment to mitigate global warming.

Investing in global warming: Future leading growth industries
When this new consciousness dawns, almost overnight, the collective national policies of reducing, mitigating, and controlling carbon emissions are going to cause some sectors of global manufacturing to become the leading growth industries in the history of mankind. Why?

Because it will have to be this way. Not controlling carbon dioxide emissions will be tantamount to endorsing the inundation of large swaths of the Earth's dry land, and the destruction of large segments of mankind. Like I said before, gloom and doom.

So if you are an investor, can you spot the trend? Very simply, within the next few years, we will see distinct movements in world energy markets. There will be less investment opportunity in the growth of energy supplies from sources that emit carbon dioxide and other greenhouse gases. And there will be more investment opportunity in the growth of energy supplies from sources that do not emit greenhouse gases. As one particular example, the production and installation of windmills in the not very distant future will simply explode.

The current worldwide production of electricity from windmills breaks down along lines that over 86% of world generation capacity is split between Europe (72%) and the United States (14%). But wind power still generates only 0.7% of the world's electricity. This will have to change, and change dramatically, as it dawns on leadership cadres and entire populations that global warming is a reality.

Already, nations as diverse in traditional energy sources as Iran and Costa Rica are investing in wind power. A nation such as Jamaica, favoured by year-round trade winds, could reduce its use of imported oil by as much as 80% or more if it made an aggressive effort to install a base of wind power for electricity generation. And as another example, and according to figures in the recently published 2006 edition of the BP Statistical Review of World Energy, in China, wind power generates less than 1% of electricity, but use of wind power has increased by over 28% a year since 1995.

The overall targets in Europe for wind power growth are substantial, even without taking into account Sweden's ambitious program to move away from fossil fuels. By 2010, wind power is projected to deliver 33% of all new electricity generation capacity and provide electricity for over 86 million people.

Investing in global warming: Wind turbines
The offshore wind turbines currently on the market can operate at a higher efficiency than their land-based counterparts. With blade rotors that sweep an area as large as a football field and an overall reach as tall as a 30-story building, these offshore wind turbines can be developed in large-scale "wind farms." These wind farms can provide power for large coastal population centres, where available land area is limited. A 100-megawatt wind farm over the course of 20 years will displace the need for nearly 1 million tons of coal or nearly 600 million cubic meters of natural gas.

Using the installed windmill base of one manufacturer alone as a basis for comparison, using wind turbines, versus traditional fuel generation, provides the benefit of keeping more than 11 million tons of greenhouse gases from being emitted each year. This company's installed base of wind turbines provides the same amount of electricity annually needed to power about 1.5 million US households. These turbines can generate an amount of electricity comparable to the energy produced by 9.5 million barrels of oil.

Thus, there is no question but that wind power, with its ability to reduce the need to emit carbon dioxide into the atmosphere, is an investment opportunity for the future.