Jeremy Grantham brought a pessimistic cloud into the Morningstar Investment Conference. The GMO co-founder warned the audience of financial professionals that climate change was a global force that has reached the point of no return. While the most often considered concern is rising sea levels wiping out major coastal cities, Grantham said the real problem is agriculture production declines and population growth. This double whammy is likely to be a particular problem in Africa, where he said failed states are creating an even greater migration problem Europe is ill-prepared to handle.
“We are moving too slowly,” Grantham said, pointing to melting ice caps and water temperatures that are rising faster than air temperatures. This causes evaporation at much higher levels and results in increased natural diasters.
During the recent period of climate change, floods have increased by 15 times and droughts by 10 times, threatening coastal cities, which isn’t Grantham’s top concern.
“I don’t worry about Miami or Boston,” he said, saying that the capitalistic system “will take care of that” by changing residential living patterns. His real worry is low-lying rice producing regions throughout Asia and Africa where poor populations will not have the same options as residents of wealthy coastal cities.
These regions will likely lose their primary food supply due to several factors, including increasing global wealth. With the global population expected to increase from 7.5 billion to 11.5 billion by 2100, according to UN forecasts, more demand through a wealthier population will increasingly compete for grain and meat, Grantham noted.
The problem is increased food competition will come as agricultural output is projected to decline. He cites forecasts that say the early had only 30 to 70 good harvest years left, with soil quality being a problem. The overuse of pesticides is on a path to make farmland untillable, as erosion is also a largely unaddressed problem. But motivating change can be a challenge. “With conservative farmers to deal with it will take decades and we haven’t even started,” he said.
He said a declining fertility rate “is the last best hope” to reduce the demand side of the equation. He cites “toxicity” surrounding pesticides and other chemicals for a 50% loss of sperm count in the developed world. While dropping fertility rates in the developed world is positive, Africa remains a region of concern. Hotter climate, less water, and irresponsible land management practices are part of the problem, but it is the region’s exploding population that is really an issue.
While the world population is expected to level off, Africa’s population is expanding despite the decreasing means to support its population, with Nigeria leading the way. He pointed to nearly 300 million Nigerians alone wanting to migrate to the UK as a looming problem that is only going to get worse.
“The scale of the problem is much too great for Europe to handle,” he said, noting that a causality will be a less liberal region.
What is needed is a global “decarbonization” movement, but it won’t be easy. “Capitalism and mainstream economics cannot deal with the problem,” he said, pointing to the need for tough decisions that might come at the expense of quarterly corporate profits.
There are potential solutions, however. Technology is rising to the challenge at a rapid pace that even environmentalists don’t recognize. Wind and solar power costs are dropping rapidly and even without subsidies are becoming cost-effective than coal and nuclear power plants. Grantham expects that in 40 years the world will be awash in cheap green energy, and in 80 years full decarbonization may have occurred. The problem is that much of the damage is irreversible and the climate will continue to grow hotter and the weather problems will continue. The issue isn’t ending climate change, but just slowing its advance.
