The good news, according to Grantham, is that environmentally sound technologies like renewable energy and energy efficiency are expanding at an exponential rate. Battery cost continues to decline as capacity rises, and wind and solar power are now cheaper than coal and oil energy. Electric cars are beginning to proliferate.
However, the acceleration of “green” technology will not be enough to stem the tide of climate change, said Grantham, as its impacts are already emerging, causing an estimated $330 billion in damage in 2017 alone. By 2050, over 50 percent of energy production will still be generated from fossil fuels and the global climate will have warmed an average of 2 degrees Celsius—even with the effort to reduce greenhouse gas emissions, temperature increase will approach 3 degrees Celsius by 2100.
“Capitalism has a problem with the long-term. Anything that is more than 20 years out doesn’t exist,” said Grantham. “Corporations handle externalities very badly ... they often don’t handle them at all. They ignore the tragedies of the commons. We deforest the land, misuse our soil, pollute our water and treat our air like an open sewer. The sensible capital response is deliberately slowed down by well-funded and talented programs of obfuscation.”
As populations in emerging markets continue to rise and productivity levels off, food scarcity will become a serious challenge before the turn of the century, said Grantham, because many major grain-producing regions will succumb to drought or topsoil loss, while the world’s rice-producing river deltas risk being inundated by sea-level rise.
Even more concerning to Grantham are the potential effects of toxic chemical pollution beyond greenhouse gasses.
“I think chemicals will turn out to be a harsher button that climate change,” says Grantham. “Climate hange is a bit like warming the frog in the pan. Toxic chemicals are lowering sperm counts and causing insects to go missing. These issues can excite people to action.”
Much of Grantham’s keynote address counted off the real and potential consequences of climate change and chemical pollution, including sea level rise, extreme weather events, loss of topsoil, loss of flying insects, declines in fertility, declines in crop productivity and an increase in diseases and autoimmune disorders.
Many of these impacts are already evident, but political forces may keep some of the information about them suppressed and distort market prices to continue to favor major polluters, said Grantham, who likened it to the attempts by tobacco producers to suppress information about the health risks of smoking.
“We’ve witnessed a 30-year, well-funded program to disguise the issues and a Republican party where the majority don’t believe the facts,” said Grantham. “How many of these people participating in the market does it take to distort prices?”
While policymakers in the European Union have more leeway to control or ban chemicals that may be detrimental to the environment and human health, in the U.S. there’s more protection for chemical companies. Thus, Grantham said the battle at home has to be fought financially.
Grantham argued that U.S. investors can divest from oil and chemical producers and only accept 3 basis points difference in their overall portfolio performance. If uninformed or purely dishonest participants were not distorting market prices, divesting from such companies might result in significant outperformance.