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Jeremy Grantham on population growth, China and climate sceptics – Part 1

Jeremy Grantham on population growth, China and climate sceptics – Part 1

http://www.globalfundexchange.com/blog/2013/04/17/jeremy-grantham-on-population-growth-china-and-climate-sceptics-part-1/

‘The world’s most powerful environmentalist’ on battling the ‘misinformation machine’ and why China is his ‘secret weapon’

Jeremy Grantham, co-founder of GMO, speaks during the Ira Sohn Investmen Research Conference: Photograph: Daniel Acker/Getty Images
‘China knows this is serious’… environmental philanthropist Jeremy Grantham.

The following interview by Leo Hickman of the Guardian  with Jeremy Grantham, the environmental philanthropist and legendary fund manager, was published in the Guardian on Saturday.

Leo Hickman:  ”As I have done for my interviews with the likes of Al GoreBill McKibben and James Lovelock (in 2010 and 2012), I have taken the time to transcribe the full interview so readers can see what Grantham said in the kind of detail that the print edition of the Guardian can’t provide. The interview lasted three hours, so I have split the transcript in two. I will publish part two tomorrow, but here’s part one…”

Jeremy Grantham on why he has stepped up his environmental activities:

It’s data driven. We [the Grantham Foundation for the Protection of the Environment] were gracefully moving into the environment, save these animals and habitats, and all these good things, then the data on resources – starting about four years ago – made me realise that some of these were really urgent. That we were already entering a foodcrisis, for example. This time last year I thought it was clear from the data that we were already five years into a food crisis and it is highly unlikely to go away. And unless we get our act together it is likely to become a cascading problem.

On how much time we have to tackle the world’s environmental problems:

We’re already in a bad place. We’re on a sliding scale. The language “it’s too late” is very unsuitable for most environmental issues. It’s too late for the dodo and for people who’ve starved to death already, but it’s not too late to prevent an even bigger crisis. The sooner we act on the environment, the better. The sooner we cut off the carbon dioxide going into the air, etc. The worse accidents we will prevent from happening are 20, 30, 40 years from now. The same applies to food. The faster we act to improve the situation, the fewer Africans – North Africans, in particular – will come to grief. What is happening through the market mechanism is that the rich countries, by being unnecessarily sloppy – and by the Chinese getting richer in a real hurry and eating more meat – we are pricing up grain so that the poor are getting hungry. It’s hard to see this stopping in the immediate future. It’s also very hard to see the poor and hungry getting richer at the same speed as the way we are driving up the price of grain.

On feeding a growing human population:

There is a stretching disparity between the haves and have nots. It’s not the win-win of globalisation that we all grew up with studying in Econ 101. The irony is that as China gets richer, it burns more coal. They put pressure on the global environment and on global grain prices. So in order to give them a nice middle class, variegated diet, they could cause poorer Asians and Africans to starve. There is no mechanism to prevent that. Egypt runs a trade deficit. Their population is programmed to grow dramatically. Three million at the time of Napoleon. Eighty-three million, said their standard when they marched into the Olympic Games last year. And they’re on their way to 140m. They’ve always been very efficient, but they can’t feed much more than half their people. The price of grain from about 2002-2008 – a tiny window – tripled. Why did it grow so sharply? We knew population was growing, but it was growing steadily, if dramatically. When I was born there were two billion, now there are seven billion. It’s the kind of curve than anyone in finance would look at and jump nervously, when you see an exponential curve like that. That’s one factor, but nothing particular to the period of 2002-2008…

On the rising price of oil:

…2002 was a nothing year. The only numbers I was paying attention to in 2002 was for oil. A little wheel was turning at the back of my brain that noted that oil was beginning to act differently. Our firm specialises in the study of investment bubbles. We have the best data. Over the years, we have put together a database that has 330 bubbles of which about 40 are really important ones. What we found about the important bubbles is that every single one had burst completely back to the original trend. Three years up to something triple, and then three years down. They actually tend to go down a little more quickly than they went up, which is surprising. But they always broke. I used to specialise in asking financial audiences to give me an example of the paradigm shift, a major shift in a major financial asset class. And never was one offered. Six years ago I wrote about the paradigm shift in the New York Times. It had 100 years of oil prices – very volatile, but a very central, steady trend line of about 16 dollars a barrel in today’s currency. But then around OPEC in 1972/3, the price trend leaps up to $36.

On the unwillingness to process unpleasant data:

I find the parallels between how some investors refuse to recognise the trends and our reaction to some of our environmental challenges very powerful. There is an unwillingness to process unpleasant data. In a bull market you want to believe good news. You don’t want to hear that the market is going to go off a cliff. You don’t want to listen to the climate people who are telling you it is getting worse and even worse unless you do this and that. You want to listen to the good news. There were always people willing to tell you that smoking was OK and that stuff about cancer was exaggerated. There’s a professor at MIT who defended tobacco who now defends carbon dioxide saying it seems to have lost its greenhouse effect, or whatever. And then there are the vested interests. They are the single most powerful force because you are dealing with an audience who wants to hear good news and into the stock market come all the bullish stock market giant firms telling you everything’s fine because they love bull markets because they make a fortune. They don’t even mind crashes because they don’t do so badly there either. What they would die at is if the market went up at its long-term trend line at 1.8%, plus inflation, a year. But we’re not going back to 2% growth. Maybe we’ll do 1% and it will be reported as 1.5% and once again people don’t want to hear that. They want to hear Ben Bernanke‘s news that it should return to 3%…
Me calling bubbles correctly is all data driven and based on the optimism that is built into humans. Every time we see a bubble, we see an army of people screaming, “No, no, it’s not a bubble, everything is fine.” We see the climate and scores of people screaming the same that everything is fine, or that it’s a plot. It’s par for the course. The general public don’t want to hear it and will choose to listen to the optimistic interpretation. It’s a real uphill struggle. You don’t stop the bubble really until the damage is done. It goes so high that it can’t sustain itself and just pops. And maybe that will happen here and our job is to try to do a better job than we did in the tech bubble.

On climate sceptics:

The misinformation machine is brilliant. As a propagandist myself [he has previously described himself as GMO’s “chief of propaganda” in reference to his official title of “chief investment strategist”], I have nothing but admiration for their propaganda. [Laughs.] But the difference is that we have the facts behind our propaganda. They’re in the “screaming loudly” rather than the “fact based” part of the exercise, because they don’t have the facts. They are masters at manufacturing doubt. What I have noticed on the blogs and in the comments section under articles is that over several years, as the scientific evidence for climate change gets stronger, the tone of the sceptics is getting shriller and more vicious and nastier all the time. The equivalent on the other side is a weary resignation, sorrow and frustration and amazement that people on the other side can’t look at the facts. The sceptics are getting angrier and more vicious every year despite the more storms we have, and the more mad crazy weather we have…
One of the problems is that typically you are not dealing with the facts. Putting in more facts makes the sceptics more angry. They have profound beliefs – as opposed to knowledge – that they are willing to protect by all manner of psychological tricks. So you have people who are very smart – even great analysts and hedge fund managers – who on paper know that their argument is wrong, but who promote it fiercely because they are libertarians. Libertarians believe that any government interference is bad. Anyone with a brain knows that climate change needs governmental leadership and they can smell this is bad news for their philosophy. Their ideology is so strongly held that remarkably it’s overcoming the facts. They are using incredible ingenuity to steer their way around facts that they do not choose to accept philosophically. Laying down more facts just makes them more angry. You may win over a few neutrals. They are the people you can win over. But it’s very hard to win over the hardcore sceptics, of which there are plenty.
We can try to bypass them on one level and we try to contest the political power of the sceptics. They are using money as well as propaganda to influence the politicians, particularly in America. It almost doesn’t even exist in countries outside the US, UK and Australia. A cynic would say that the petrol-chemical industry also happens to be Anglo-Saxon. Where are the great oil companies based? They still have great power. The oil companies seem to have pulled back from directly supporting climate sceptics over the past few years because – in England, in particular – they were embarrassed and it became untenable to be so obvious. But they’re still influential. You don’t have go via back-channels any more, courtesy of the US Supreme Court, because it is completely legal for a corporation to invest tons of money in advertising programmes to say who is good and who is bad in a race for the Senate without even asking permission from the people who actually own the company. Corporations are treated as human beings and money is treated as having the right to speak. There’s dark money and light money. The anonymity they adopt is legal. They don’t have to say who their donors are. It is quite remarkable. And then you get the Something Something for the Environment, which are actually just sceptics funded by the bad guys. And then there are the thinktanks who have become propaganda-tanks. I used to respect the Cato Institute when it came out with reports on this, that and the other, and they have received a lot of hydrocarbon funding. But when the University of East Anglia break-in was engineered they had something like 20 press conferences the following month. The response to the break-in was almost immediate and co-ordinated. I don’t think it was suspiciously rapid, but I do think it was unusually and unexpectedly rapid. It’s very likely that it was simply a terrific response of their behalf. They moved very fast. The good guys are learning slowly, but surely, to step up their response time…
If you’re saying something that people don’t want to hear or accept, a significant proportion of them will reply with hostility. Not because they know the facts, or because they have researched it themselves, but because they’re so psychologically involved in believing good news that they will oppose it with a reflex. In addition, if the solutions proposed sound like they involve the government, you will have all the political rightwing try to block it as a reflex, even if it means them overriding hard science, which is what’s going on today. Changing people’s minds is almost impossible, even among scientists. Max Planck said, to paraphrase, that science advances one funeral at a time. You could add that economics advances the same way. You have to wait to get rid of the people who have career investment in a topic before a new generation can see the light.

On the UK’s unseasonably cold spring in 2013, and recent icy winters:

The scientists are getting very concerned privately – they are conservative in public and have yet to write it up – that blocking processes are sticking in the system. The jet stream is behaving very strangely. One very senior atmospheric scientist said to me recently off the record that we are liable to wake up one day and find ourselves on the latitude – which we are in the UK – of Montreal. It’s a liveable place, but not like London. They have underground tunnels because of their winters. The Gulf Stream is having a few wobbles, too, and the theory there is the melting in Greenland and the Arctic is creating a lot of cold, fresh water, which is a possible source for loss of power in the conductor, so it moves less warm water up from the Caribbean.

On how he chooses where to spend his foundation’s money:

We don’t fund the hard science of solar technology. That would take hundreds of millions. But what we are funding is bringing together the data and put it together and representing it conveniently to the outside world. And we want to train people with a good range of skills so they can produce good PhDs for the future at LSE and Imperial. We also fund old-fashioned style investigative journalism which is dying out in newspapers because the newspaper industry has become incredibly tough. The first people to get fired were the environmental journalists. We had a prize for environmental journalism which we brought in at the top of the market, but we discontinued it last year because there was basically no leverage left for the two-and-a-half environmental journalists left. All we were interested in was the net result of whether it could produce a more effective presentation of the facts. We got going in the nick of time to see that it could drag up environmental journalism, but then all the “dragees” were suddenly looking for different jobs, or put on different beats. Or that they were already working for the handful of independent investigative organisations. We fund about a dozen fledgling journalistic projects. Our argument was they are all fledgling so let’s fund them all first, then winnow them down later – come back in 3-4 years and pick eight and, a couple of years later, pick five. In the end, it doesn’t matter if there are one or two, but that they are the best. They whole point really is to allow these people to do their thing and to play to their skills and to pick the people who are highly motivated and very skilled. None of them would be very happy if we tried to tell them what precisely to do and we don’t know what they should do.

On assessing if the money his foundation spends has achieved its objectives:

It’s a great problem for philanthropists and NGOs. The problems where you can measure the impact are not common in the environmental field. If you can measure them, they tend to be over decades. One is the wildlife population of Namibia. That is by far and away the most successful [conservation project the foundation has funded], by the way. You can see the population of the various types of antelope have improved. But that is unusual. But the ones you feel are most important are the vaguest of them all. How do measure the shift in attitudes towards processing the data? There are guys working on studying the changes in attitudes in the media. But you have to take a leap of faith that they are smart and dedicated.

On whether he tries to persuade other philanthropists to support his causes:

No, I don’t. We might discuss such things informally over lunch. There’s a handful of hedge fund managers, mainly, who have decided to be aggressive about the environment, thank heavens. This doesn’t exist in England where you could get them all on the finger of one hand. I can try to persuade them. I gave a talk in London recently at the head office of a major financial player and someone went to considerably effort to make sure a couple of hundred potential philanthropists and wealthy individuals were there for me to have a go at them. A lot of them left their business cards and if you do that you are kind of asking for trouble. [Laughs.] I believe the majority left their cards, which as things go, is a huge potential hit because even if you get one or two that could be significant. They were a receptive audience. I try to paint the picture of how I got to where I am [as an investor] and then of how fact based the issues appear to be to me. I now try to add my thoughts about food and the “carbon math”…

On the “carbon math”:

…It’s simple, comprehensible maths, as Bill McKibbenexplained in Rolling Stone last year. There are five times the amount of proven carbon reserves as we can possibly allow to be burned if we want to remain under 2C of warming, which is now not even considered to be a safe margin. We must burn just a fifth of what’s there. We will burn all the cheap, high-quality oil and gas, but if we mean to burn all the coal and any appreciable percentage of the tarsands, or even third derivative, energy-intensive oil and gas, with fracking for shale gas on the boundary, then we’re cooked, we’re done for. Terrible consequences that we will lay at the door of our grandchildren. Some things might change very quickly, though. For example, the business mathematics of alternative energy are changing much faster than the well-informed business man realises.

On the falling costs of alternative energy:

Read my next quarterly newsletter entitled, “The Race of Our Lives”, [will be available here] on why civilisations fall and why they’ve always fallen and why we may not because we have two advantages that they did not – a voluntary fall in fertility, which is just amazing, and alternative energy. Every wave of technology has seen an incremental increase in energy needed – steam engines, cars, air conditioning, iPads – they all add to our energy needs and mean we dig a deeper hole, but we feel we are making wonderful progress. But now we have a technology wave which protects us from needing to burn every last ton of coal. Solar, wind, biomass, intelligent grids, and storage – please, more storage – protect us. That is the best part of capitalism. The price of solar panels is now 25% of what it was two years ago and that’s the bit people have missed. If these prices were to be held – they may not be – we are competitive, without a carbon tax, in the areas that have the sun – California, North Africa, Spain, etc. You can build a solar farm and it can be commercial. Meanwhile, the price of hydrocarbons are getting more expensive all the time, because you’ve extracted all the easy stuff first and with China rising and still growing at 7% a year. And that’s just China. Don’t forget India which actually has more coal power plants down to be built on the books at the moment than China. Now you start to get an idea of, wow, why this does not compute. If it computes, it’s only at the enormous increase in cost of digging and shipping coal. Meanwhile, back at the ranch, solar and wind power are getting cheaper and cheaper. Those lines are going to cross big time in the next 20 years. There is no such thing as “locked in and committed” because you can reverse. They might build a few more coal-fired plants, but then they will stop completely. The pay-off for China of getting out of the way of those lines crossing is so great.

On why China is his big hope:

China is my secret weapon. I call them the Chinese cavalry riding to the rescue. They have the capital. They have an embarrassment of capital – 50% of their GDP is capital investment. We have a shortage of capital and also have debts. Their problem is how to invest all that capital. My partners worry all the time about them wasting their money. What better programme could they possibly have, with huge social pay-off, than a massive replacement of sustainable energy? When you think what it would mean to them – it would get rid of their pollution – it makes sense. Because of that pollution, they announced recently an incredible increase of 65% in their plans to install by 2015 – just three short years away – 36GW, which is equivalent to 20 vast, state-of-art coal plants, of solar. Throw in wind, too. And, by the way, we will have many breakthroughs in storage. If I had to make a bet, I would say that’s the most promising, important breakthrough of the next several years. Everyone is working on this. If you have a big smart grid – and all the desert of Xinjiang and all the wind of Inner Mongolia – and it’s all swirling around with relatively little loss and you have a grid smart enough to go in there Chinese-style and turn your fridge off for half an hour to save energy, and do this and do that, you don’t need nearly the back-up. The bad guys will tell you that you need 100% back-up and messianic environmentalists will tell you that you need 0%. But maybe 20% back-up will be needed as everyone is working on storage. I’m certain it will happen. Some technologies take time then go, “Bang!”. Look at video conferencing. It has been around forever and the quality was terrible. But now it is so clear and instant. Technology has a habit of boring you to death and disappointing you for 20 years then suddenly it delivers a new world…
I have very high hopes for China because they have embedded high scientific capabilities in their leadership class. And that is huge. They know this is serious. They can calculate the social threat of getting this pollution, weather instability, water out of control. And they are acting much faster now than we are. They have it within their capabilities of coming back in 30 years with the guarantee of complete energy independence – all alternative and sustainable forever. They have an embarrassment of capital. We have an embarrassment of debt. So they can set a stunning pace, which they are doing. And they could crank it up. To hell with their five-year plans, they should move up to 25-year plans for alternative energy – energy security, reducing pollution and low cost. They would have such low-cost energy at the end of it they will be the terror of the capitalist system. With low energy and low labour, that’s the ball game. Five years into a 25-year programme and any capitalist will be urging their government to copy them.

On the Scandinavian countries:

I am inspired by [them]. They have to cope with short-term election cycles and a parliamentary system and all four of them nevertheless act responsibly, not just on alternative energy and environmental issues, but also on social issues that matter. They are, by and large, models of good behaviour. They say in America to me what’s the solution to all this, I say cede your government to Denmark. [Laughs]. They are good enough that they would get the job done.

On environmentalism’s track record of making predictions:

Go and read Limits to Growth, which I did recently. They pretty much predicted doom and gloom 20 years from now. They have been grossly misinterpreted and are pretty much on schedule. There are details that are over and under, but it is amazingly accurate. The William Ophuls model is that we are hard-wired to collapse. Given half a chance we will over-reach. We are over-confident that we will solve every problem. But we will leave it too late and we will crash. All the confidence that people try to give you – the “infinite capacity of the human brain”, unquote – all of that hinges on the apparent infinite supply of hydrocarbons. No civilisation looked durable and resilient until coal and then we acquired this amazing power. We are now coming to the end of that era. If we don’t use that window to fix it and have a sustainable replacement, we are toast. Don’t worry about peak oil, worry about peak temperature. All our flora and fauna has thrived in the last 10,000 years since the end of the last ice age, a period which has seen unbelievable stable weather by long-term standards. Now it is becoming unstable. If you drive the temperature above 40C, well-known brands of corn will not produce. They just stop. You might be able to twist and turn and get it to produce at 41C, and you might move further north in latitude, but temperatures rises are very bad news for grain. The wider point is it [temperature rise] is generally bad for everything that evolved in one stable environment. It has no resilience to produce outside the temperatures experiences during this 10,000 year period. Quite a few grains are now topping out in terms of productivity. I look around and I say just look at the food-producing problems we face. In fact, let’s make it even simpler: look at the grain-producing problems we face around the world. We’ve just had three consecutive monster-bad grain harvests. Not one of those three poor harvests was more likely than a one-in-25-year harvest. But the terrible thing is they went, “whack, whack, whack”. I took some grief when I wrote about the first one and said next year was bound to be less bad, but the next year became a monster. I’ve done more research and reading in the last two years than I ever did at college. I’ve read all the classics. All the limits to growth, all the end of civilisations stuff, all the peak everything stuff, all the soil destruction stuff.

On confronting our environmental problems:

Asking, “Are we too late?”, is not the logic for this problem. It is too late for the dodo. It is too late for the one third of arable land that we have destroyed in 10,000 years. It’s too late for 10% of global biodiversity, and almost certainly another 10%, and 50/50 for yet another 10% after that. But it would be nice to end up with a planet that we can still relate to, that still has a fairly handsome biodiversity. We can still do that. There is one chance that the real pessimists are right. The chance that on our way to a 4-8C rise, and a 10-15ft rise in the oceans, which is probably what’s going to happen over the next two centuries, that things will get worse before they get better, because there is inertia built into the system. You can easily imagine resource wars breaking out unless we put our best foot forward on alternative energy. This would buy us time for everything else to be solved. If you can become energy sustainable in the next 40 years and suck up the pain that will have been paid by then, then you have probably bought the time for another 40 years to transfer the whole of global agriculture into a fully sustainable system before we run out of the resources to run old-fashioned agriculture. And if you do that then, in turn, you have probably bought enough time to deal with the intractable long-term issue of metals, which are entropy writ large. No matter how careful you are with them, they slip through your fingers. In the end, you will need to use organic replacements, which will take a long, long time [to develop]. We’d better start working on it now, but not too many are and they’re not getting much funding. You’ve got to get the population down and you’ve got to ignore the Economist magazine and others talking about rising population as a terrible economic problem. It is a necessary, short-term, intermediate pain to pay for the absolute minimum hope of survival, which is a gracefully declining population, because if you don’t do that you will have a rapidly imploding population one day.

Continue to PART 2

by Anric

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Desertification now crisis affecting 168 countries worldwide, study shows

Desertification now crisis affecting 168 countries worldwide, study shows

http://www.globalfundexchange.com/blog/2013/04/17/desertification-now-crisis-affecting-168-countries-worldwide-study-shows/

  • By Ed King for RTCC
  • Severe land degradation is now affecting 168 countries across the world, according to new research released by the UN
MDG : Burkina Faso : Desertification

A Burkinabe man from the village of Selbo village, in northern Burkina Faso, gestures near grass he planted to help stop the advance of the Sahara desert. Photograph: Issouf Sanogo/AFP/Getty Images

Severe land degradation is now affecting 168 countries across the world, according to new research released by the UN Desertification Convention (UNCCD).

The figure, based on submissions from countries to the UN, is a marked increase on the last analysis in the mid-1990s, which estimated 110 states were at risk.

In an economic analysis published last week the Convention also warns land degradation is now costing US$490 billion per year and wiping out an area three times the size of Switzerland on an annual basis.

“Land degradation and drought are impeding the development of all nations in the world,” UNCCD Executive Secretary Luc Gnacadja told RTCC.

“This is a challenge that is causing governments to take this issue seriously, but how do you get them to take it seriously? By showing them the rate of return on restoring degraded land is one of the smartest investments of our time.

He added: “Desertification, land degradation and drought is an issue of market failure. The lack of economic market valuation has led to land being perceived as a cheap resource.”

The causes of land degradation are varied, but are widely attributed to drought, climate change, intensive farming practices and poor water management.

Desertification is low on many countries’ radar – illustrated by Canada’s recent withdrawal from the UNCCD – but its links to climate change and food security are starting to resonate with governments and business, particularly given fears over the world’s ability to feed a soaring population.

The UN’s Food and Agriculture Organisation (FAO) predicts demand for food will increase 60% by 2050. Experts say the world will need an additional 120 million hectares of agricultural land to support the required food production – that is a new farm the size of South Africa.

Meanwhile recent studies by the UK Met Office and USAID have linked the severe drought that hit East Africa in 2011 and falling rice yields in South East Asia to man-made climate change.

Since 2000, the prices of staples such as of meat, dairy, cereals and sugar have doubled, reflecting a lack of elasticity in the food market’s supply chain.

Vicious circle

Efforts to boost agricultural production often lead to deforestation, a major contributor to global greenhouse gas emissions.

This has a knock on effect in terms of reducing the planet’s store of natural carbon sinks and destroying the ‘ecosystem services’ trees provide such as water storage, exacerbating the problem.

The UNCCD hopes to adopt a ‘Zero Net Land Degradation by 2030′ resolution at its 2013 Conference of the Parties in Namibia later this year, and there are signs sustainable land management could form one of the Sustainable Development Goals set to be announced in 2015.

Last week former Finland President Tarja Halonen, now Chairman of the UN Global Sustainability Panel, indicated that the links between rural poverty, famine and land management should “guide the work” on those new set of targets.

“Sustainable land management, prevention of land degradation and rehabilitation of land is the most cost effective and cost beneficial ways to eradicate rural poverty,” she added.

In Africa alone a UNCCD expert panel estimates 4-12% of agricultural GDP is lost due to deteriorating environmental conditions, contributing to the high levels of chronic hunger and conflict on the continent.

This situation is acute in Somalia, Ethiopia, Djibouti and Kenya, where the combination of weak governments and a lack of annual rains linked to climate change are driving desertification levels.

In China over 400 million people are affected by soil erosion, causing annual economic losses of US$10 billion, while the UNCCD says Indian reports of degradation have increased “by a factor of six”.

Original source document: click here

by Anric

 

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Where’s the Water of the Future

Where’s the Water of the Future

http://www.globalfundexchange.com/blog/2013/03/21/wheres-the-water-of-the-future/

Today is world water day. Fresh water. The planet has only so much to meet the needs of a growing world population. And global warming throws more uncertainty into the mix by increasing chances of extreme weather, such as more intense droughts in some places.
Dry spells, such as the devastating drought that gripped much of the United States last year, come with economic costs in the developed world and deadly consequences in poorer countries.
There is no secret source of water of the future.
Conservation is the best answer, agreed panelists at a discussion held Thursday, Feb. 28, at the New York Academy of Sciences.

‘You can’t build your way out of the problem. We aren’t making any new water.’
– Brian Richter, director of global freshwater strategies for The Nature Conservancy

Better than building
Using the available water is much cheaper than building more reservoirs, pipelines, desalinization plants (to remove salt from seawater) and other infrastructure, said panelist Brian Richter, director of global freshwater strategies for The Nature Conservancy. [Dry and Drying: Images of Drought]
“‘I related it to my personal banking account,’” Richter said, quoting a friend. “‘If I am overdrafting my personal bank account it is going to do me no good to open up another account.’ You can’t build your way out of the problem. We are not making any new water.”
The good news is, he said, “We’re wasting so much, so there is a lot of potential to do a whole lot better.”

Curbing demand
History shows that conservation is realistic, said panelist Peter Gleick, co-founder of the nonprofit Pacific Institute.
Between 1900 and 2005, the U.S. gross domestic product (goods and services produced by the economy) grew rapidly. Water use paralleled this growth until 1980, then it leveled off.
“The assumption that our demand for water has to go up with population and economy is a false assumption,” Gleick said.
In reality, it is unlikely the United States could have found the water it needed if water withdrawals had continued to grow, he said.
A number of factors tamped down demand for water over the past three decades, he said. Irrigation systems have become more efficient, losing less water to evaporation; Americans are eating less beef, which requires water to raise; toilets, washing machines and industrial processes require less water; Americans are reusing treated wastewater, although “we don’t do it much and could do it more,” Gleick said.
In fact, wastewater treatment infrastructure could be distributed within particular areas, rather than centralized in a single plant, allowing water to be recycled within those areas. Wastewater would be treated, redistributed to users, then returned for treatment, reducing the substantial costs associated with pumping water across long distances, noted Upmanu Lall of Columbia University’s The Earth Institute.

At its source
New York City itself offers an example of good planning, said Adam Freed, director of the Nature Conservancy’s Global Security Water Program, who said that cities are often focal points for the global water crisis. [Earth in the Balance: 7 Crucial Tipping Points]
About 2,000 square miles of watershed (land that drains into a particular waterway) has been set aside in the Catskill Mountains and the Hudson River Valley to supply the city with clean water. By investing in protecting the watershed from pollution, the city has saved itself the much larger costs associated with treating the water it needs, Freed said.
This strategy of protecting the water at its source needs to be replicated elsewhere, he said.

Water and money
The private sector has an important role to play, said Brooke Barton, who leads the water program of Ceres, an organization that advocates for sustainable leadership in business.
A number of large companies, such as Coca-Cola and Ford, have recently made commitments to address water use. But the private sector still has far to go, she said. In a study conducted last year, Ceres researchers found that many large companies were far behind the curve with regard to water conservation, Barton said.
The investment community is likely to play an important role in change by pushing companies to gather more data about risks associated with water use, she said.
The cost of water use is often hidden, changing water’s price could affect usage, just as gas consumption changes with price, Richter pointed out, with a caveat: “We do have to be careful not to raise the price out of the [range of] affordability of the poor.”

Future climate
Warming brought by climate change is expected to intensify the water cycle — the processes by which water travels between the oceans, land and atmosphere — by increasing evaporation. This is expected to cause changes in extreme weather, including more heat waves and heavy downpours, as well as intense droughts in some, not necessarily the same, places.
These changes will affect water resources, Gleick said.
“Our water systems were designed for yesterday’s climate, and managed for yesterday’s climate,” he said.
Although current changes are the result of human activity, climate change itself isn’t a new phenomenon. Lall said that in the past, nature has shown great variability, at least as large as anything projected for the future. Knowledge of this history can provide a place to start with regard to adaptation, he said.

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by Anric

 

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Saudi Arabia to build world’s largest desalination plant

http://www.globalfundexchange.com/blog/2013/02/12/saudi-arabia-to-build-worlds-largest-desalination-plant/

The Saline Water Conversion Corporation yesterday announced its plan to establish the world’s largest desalination plant in Rabigh, northwest of Jeddah, with a capacity of 600,000 cubic meters of water daily.

“Work on the project will start in the first quarter of 2014 and will be completed in 2018,” said Muhammad Al-Thubaity, director general of SWCC in the Western Region, adding that allocation for the multibillion riyal project has been made in this year’s budget.

He said the new plant would supply water to north Jeddah, Makkah and Taif. The capacity of the present desalination plant in Rabigh has been increased to 20,000 cubic meters daily to supply drinking water to Khalees and Rabigh.

Al-Thubaity said the new Rabigh plant, which will follow reverse osmosis system, would meet water requirements of cities and villages around Rabigh. He emphasized SWCC ‘s determination to supply adequate amount of water to all parts of the Kingdom.

SWCC currently produces around 20.7% of the total world production of desalinated water. Around 88.5 percent of water supplied by SWCC is produced by large MSF plants, 10.6 percent produced by large RO plants, which are combined with existing dual MSF/power plants and 0.9 percent is produced by small size (satellite) RO, MSF and ME plants.

SWCC announced last year that it wanted to add nearly four million cubic meters of capacity to its desalination portfolio over the next 15 years. SWCC , the largest procurer of desalination infrastructure in the world, anticipates a gap of about 1.5 million cubic meters between water demand and supply from current facilities by 2025.

New plants are under construction in Ras Al-Khair and Jeddah, which will provide an extra 1.3 million cubic meters. SWCC has identified capacity expansions at Shuqaiq, Shuaiba and Jubail, plus two new plants apiece at Alkhobar and Yanbu, as a way of adding a further two million cubic meters to its capacity.

by Anric

 
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Posted by on February 12, 2013 in Investments, Water

 

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Picture of the Week – Colorado River 1950s vs Today

Picture of the Week – Colorado River 1950s vs Today

http://www.globalfundexchange.com/2013/01/23/picture-of-the-week-colorado-river-1950s-vs-today/

Related articles:

Water Use in Southwest Heads for a Day of Reckoning

Read our latest Q&A by Anric Blatt outlining the most compelling investment themes for 2013 and beyond. Click Here

Colorado River reservoir falls to lowest level ever

Still wondering what the best investment themes will be going forward ?

Read our latest Q&A by Anric Blatt outlining the most compelling investment themes for 2013 and beyond. Click Here

by Anric

 

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Macro update

Macro update

http://www.globalfundexchange.com/blog/2012/12/13/macro-update/

The following quote from Scott Minerd, CIO of Guggenheim is an encouraging one: “The resilience of the data following Hurricane Sandy shows how much momentum there is in the U.S. economy. As we head into Christmas, we will probably have a strong selling season, helping to bolster the economy even further. The news out of China has also been exceptionally good, with the economy expanding faster than expected, indicating things have bottomed out there.”

Interestingly, the latest data seems to indicate that Asia and the United States have disconnected from Europe. We saw a hard sell-off in Europe, while U.S. markets remained unchanged. At the same time, gold prices moved higher. The trend over the last few months has been that when risk assets go up, gold goes up, and when risk assets go down, gold follows. Seeing Europe sell-off while gold and the dollar moved higher shows that the rest of the world is decoupling from what is happening in the eurozone. As a result, Europe is unlikely to be a major drag on the U.S. markets at this point. It is amazing how problems, such as those in the eurozone, dominate the headlines, but ultimately become non-events. The pending change of government in Italy is almost certainly another example of this.”

Macro and Political Uncertainty Keeps a Lid on Commodities

The negotiations related to the fiscal cliff in the US and fears that a deal will not be reached by the end of 2012 kept investors nervous during November and December. Although US presidential elections are behind us and new Chinese leadership is in place, investors remained defensively positioned regardless of continued monetary easing. The stronger dollar also did not help the commodity sector and neither has a lack of progress on the EU banking union negotiations. Oil prices remained mainly resilient, but commodity-related equities were down because of increased market uncertainty.

The media’s attention has focused recently on grandiose claims that the US will overtake Saudi Arabia as the world’s top oil producer by 2017. We think that is very optimistic, although we do expect US shale oil growth to continue and to be a leading contributor to non-OPEC supply. If US oil production growth continues at the same pace as in 2012 (10% p.a.) that would imply that OPEC would have to cut output to balance the market, which would certainly be in their interest given their budgetary requirements. With a more realistic growth rate of 6% p.a. an OPEC cut would not be required (See Graph below)

Update from Mike Rothman at Cornerstone Analytics

Mike estimates that global oil demand for the Oct and Nov period averaged 91.8 million barrels/day, an ALL-TIME HIGH and a year-over-year growth of 1.8 million barrels per day.  This data point proves to be a huge problem for the consensus that continues to push a bearish oil story.

 

* For the year as a whole, Mike argues that global oil demand growth is more than 3 times the consensus growth estimate.  Mike DOES NOT buy into the “missing oil” story and asserts that the consensus will simply have to revise their demand numbers upwards because historically missing oil NEVER shows up.

* Oil demand in China was up roughly 7.9% year-over-year during November, including an inventory draw of 200,000 barrels/day during the month.

* Global oil demand has been led by an incredible shift in developed versus emerging market oil demand, a factor that many market analysts are simply missing.

We find Mike Rothman’s research tremendously valuable: Here is a link to his site

China November Electricity Output Up 7.9% on Year

China’s electricity output in November totaled 401.1 billion kilowatt hours, up 7.9% compared with the same period a year earlier, data from the National Bureau of Statistics showed Sunday. In the 11 months ended Nov. 30, China’s electricity output totaled 4.384 trillion kWh, up 4.4%

Based on preliminary data from China Customs and the NEA, we estimate China’s apparent oil demand rising slightly less than 3% during November. We generate our figure by summing net crude imports, net refined product imports and adding in domestic oil production. In assessing crude stockpiling behavior, though, we estimate that China pulled down crude stocks during the month on the order of 200,000 b/d – as compared with a stockbuild of 300,000 b/d in the corresponding month last year. When we net out this stockpiling, oil demand was up about 7.9% . This rate is notably aligned with a coincident reading for the country’s electricity production – which was up about 8% year/year.

 

Outstanding new Vital Assets Video from Global Fund Exchange Chief Information Officer, Nicholas Yeager. Click here to view

 

 

by Anric

 
 

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Jeremy Grantham's Advice – I suggest we all listen

GRANTHAM:

The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly.

Summary

    Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population.

    From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress.

 Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum.

    The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water.

 Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin.

 The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety).

 The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run out of everything and crash. We must substitute qualitative growth for quantitative growth.

 But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.

 Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.

 Climate change is associated with weather instability, but the last year was exceptionally bad. Near term it will surely get less bad.

 Excellent long-term investment opportunities in resources and resource efficiency are compromised by the high chance of an improvement in weather next year and by the possibility that China may stumble.

 From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.

 We all need to develop serious resource plans, particularly energy policies. There is little time to waste.

Click here to read the most recent macro synopsis from Global Fund Exchange

 

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