Paris Accord – the Cost and Benefit to the U.S.

The most pressing international issue at the moment, other than the pandemic, is the climate crisis. To be clear, there is no debate among scientists about whether the climate is changing because of these human activities;

• The burning of fossils fuels and the resulting release of carbon dioxide into the atmosphere (60%).
• The leakage of other greenhouse gases into the atmosphere (40%), including:
  •  Methane (natural gas).
  • Hydrofluorocarbons (HFCs - super greenhouse gases used in refrigeration, air conditioning, foam blowing, aerosols, fire protection and solvents).
  • Black soot (a substance that is formed as a result of combustion or is separated from fuel during combustion).

What is not known precisely is exactly how fast global warming will occur, although there is consensus on the range of impacts over time.

The Paris accord is a voluntary, December 2015, international agreement within the United Nations Framework Convention on Climate Change. It has been signed by 195 countries and ratified by 190, where each nation sets a voluntary five-year plan to reduce greenhouse gases and seeks to meet those goals. According to the BBC, these are the key elements of the agreement.

• A pledge to keep global temperatures "well below" 2.0C (3.6F) above pre-industrial times and preferably to 1.5C (2.7F).
• Each country sets its own emission-reduction targets, known as national determined contributions, which are reviewed every five years to raise ambition.
• Rich countries are required to help poorer nations adapt to climate change and switch to renewable energy.
• UN scientists say limiting the rise to 1.5C could prevent small island states from sinking beneath the waves, help millions of people avoid the impacts of extreme weather and limit the chances of an ice-free Arctic summer.

The U.S. is the only country to withdraw from the accord, and the withdrawal became effective on November 4, 2020. The U.S. is now planning to reenter the accord.

Benefits. As the largest emitter of carbon dioxide, an international accord without U.S. participation is not likely to succeed, so it is to our benefit and the global benefit for the U.S. to participate. Some benefits to the U.S. and the global population include less disruption to agriculture and precipitation, minimizing sea level rise, slowing the growth of extreme weather events, fewer wildfires, less need to respond militarily to climate-related civil unrest around the globe, and other related impacts that could disrupt society and the environment as the climate changes and the world warms. If suppressing global warming is not successful, these benefits will become costs.

Cost. The cost of rejoining the Paris Accord, other than those avoidable future costs above, is the initial U.S. commitment to provide $3 billion in funding to the international Green Climate Fund (GCF), a unique global platform to respond to climate change by investing in low-emission and climate-resilient development. According to the GCF, as of July 2020, the U.S. has only confirmed a $1 billion commitment of the $8.31 billion pledges committed globally by 45 countries. And, of course, there are the real but necessary costs and investments of transitioning to a sustainable, clean energy economy.

It's not a new issue. As a final note, this is not a newly discovered issue. I still have the first story I read about the issue from Scientific American in July 1959 (that's when I read it). This was the tagline for the article: "by burning billions of tons of fossil fuels, man may alter the earth's climate." That article references that the basic idea about climate change was first stated by British physicist John Tyndall in 1861. By 1960, Scientist Roger Revelle had briefed Congress on the issue. I don't know about your junior and senior high school, but mine taught us about the greenhouse effect in the 1960s. I thought everybody learned about it in school, but apparently that wasn't universal.

---

Texas Energy Crisis – Lessons Learned

According to stories in the Texas Tribune/ProPublica and the Wall Street Journal, the Texas energy crisis resulted from cold weather which caused a number of power plants to shut down because the low temperatures had made operation unsafe. Here are the basics:

• The Electric Reliability Council of Texas (ERCOT) was forced to order blackouts to prevent damage to the system.
• About 46,000 megawatts of power — enough to provide electricity to 9 million homes on a high-demand day — were taken off the grid.
• The cold weather and lack of natural gas made it difficult to restart enough power plants to meet the extraordinarily high electricity demand caused by the cold.
• Texas owns its own power grid, and is the only one in the nation not under federal jurisdiction. In addition, ERCOT is not connected to the other national grids, so it couldn’t bring in power from outside the state.
• Experts hired by the Texas Public Utility Commission, which oversees the state’s electric and water utilities, concluded that power-generating companies ... had failed to understand the “critical failure points” that could cause equipment to stop working in cold weather.

Lessons learned? There is value in better preparing for rare weather events, and maybe we are all better together if our grids are modernized and fully connected. Other states with deregulated power markets, including California, have made reforms and added additional safeguards after experiencing similar catastrophes.

---

Sustainable equity funds returned 19.04% in 2020

The February 24, 2021, edition of Fortune’s CEO Daily, reported that “green investing paid off in spades last year.” The newsletter provided these takeaways in a new report from Morgan Stanley:

• The median return on sustainable equity funds was 19.04%—compared to 14.77% for non-sustainable. 
• Sustainable bond funds also outperformed non-ESG counterparts, yielding 6.74% compared to 5.86%.
• Sustainable funds at the start of 2020 had grown 42% since 2018, and accounted for $17.1 trillion dollars under professional management in the U.S.—or about one of every three dollars. 

Fortune says that “the fact that Tesla soared while Exxon tanked could be one big reason for the variance—and could easily reverse as we emerge from the pandemic. At the very least, the study should provide further proof that doing what’s right for the environment and doing what’s right for your finances aren’t necessarily at odds.”