What do you want for If you’re investing in your future, where should you put your money down?
WE ALL INSTINCTIVELY want to store for the future, squirrel things away for a rainy day, fund a stress-free old age.
The big question is: what do we actually need (rather than want) in the future, and can the future deliver it? The supplementary question then becomes: how do we store it?
Living off monetary savings – reverse annuity, in essence – or from some form of rental has long been a common way for a fortunate few New Zealanders. The other storage methods we currently take for granted are forms of universal welfare: like pensions, superannuation, Kiwisaver, much more recent constructs and many less than 100 years old. All these forms of storage assume that the future will deliver on request.
With the arguable exception of social housing (a physical asset), these forms of storage use digital monetary recording to track and compare our expectations of obtaining stuff in the future. Stored numbers. The problem is that money can de-value, and rapidly. In 1920s Germany it’s said people would take a wheelbarrow of currency to the baker and come home with a loaf of bread. Zimbabwe has had a similar experience, even issuing a $1 trillion dollar note, until its currency failed – it will no longer be legal tender by the end of the 2015. History lists a string of others.
I have previously written about how it would be useful to anticipate your future requirements and buy them now. That’s difficult with bread, but more doable in terms of good quality hand tools, plastic pipe and other long-lasting infrastructure. Generally, I can’t think of a better way to avoid relying on digital money.
Presumably our monetary system ought to have taken account of our combined debt. If we think it through, every ton of CO2 we have failed to sequester physically is a cost we have avoided, and that should show up as a debit from our carefully-hoarded loot if we ever get around to true costing. Avoiding CO2 sequestration/mitigation/ abatement is essentially choosing digital wealth over our future physical well-being.
But if physical wellbeing is reduced to the point where we are no longer ‘well beings’, what use is the extra proxy going to be?
As I wrote this column, President Obama was announcing the first meaningful reductions in CO2 emissions and there was a debate about the future of Solid Energy. Ironically, they arrived simultaneously on Radio New Zealand News.
Both are part of that ‘future wealth’ debate. Firstly, we’ve always needed energy to do the things we do to create ‘wealth’. Coal is one of those energy sources, the one which kicked everything off when James Watt applied some lateral thinking to Newcomen’s beam engine. It’s second-only to oil in useful bang-foryour-buck and still accounts for 29% of total energy used worldwide and 40% of global electricity (as of 2013, the most
recent reliably-tracked year).
In blunt terms, we are all shareholders in Solid Energy and therefore shareholders in the production of something physically detrimental – as it is presently used – to our future climate and to our future quality of life.
The Obama decree has to have worsened the chances of Solid Energy staging an income-based recovery. It follows that it has reduced our chances of deriving income from selling the coal or the company to someone else. It has also reduced anyone’s chances of sharing in other income from the energy produced by burning it (the coal, not the company).
That is the problem with fossil fuels from here on in. It becomes a choice between benefitting financially and benefitting in terms of physical habitat. The answer is blindingly obvious: use energy sources which are renewable and you won’t be forced to make the choice and your future legacy won’t be written in red ink.
Indeed, if you want to invest in the future, renewable energy has to be one of the safest bets. It has the best chance of long-term continuance and the least chance of being outlawed or ostracised. Demand should be – all things being equal – insatiable for a long, long time.
Which brings us to the increasinglyheard phrase ‘stranded assets’. These are things that are owned but which can no longer be cashed-in and covers assets like the lignite deposits held by Solid Energy. More and more, those who own the
rights to fossil energy – coal in particular – will find that the music has stopped and they’re holding the unsellable parcel.
This doesn’t help whoever is caught holding the parcel, which looks like the NZ taxpayer in the Solid Energy case, but it helps the individual or entity who/ which divested early. Divesting sends the right message in terms of incentivising others to change.
However, we need to be aware of the tendency for powerful interests to offload stranded assets – that is, divest themselves of both loss and liability
– even though they held the parcels when the music stopped. We saw the socialisation of debt but the privatisation of profit with the ‘too big to fail’ banks in 2008. Taxpayers bailed them out and they went right back to the rounds of bonuses and golf. We see the same effect when taxpayers fund seismic surveys which are handed free to oil companies. The result is always for the remaining wealth to end up in ever-richer hands, leaving more and more folk ever-more worse off.
Inequality aside, leaders in the current system who make the right moves should be applauded. For example, Dunedin became the first city council in NZ to vote for divestment. Whether that attitude would see them courageous enough to veto the oil industry setting up a local base – developers always promise jobs and local wealth – remains to be seen, but it’s a brave start. It certainly removes the probability of being caught with stranded assets, which in hindsight will look like brilliant leadership.
Will the Obama move look like brilliant leadership? No. It will look oxymoronic as it’s too little, too very late, and he simultaneously allowed oil exploration in the Arctic. It has, however, helped to sound the death-knell for the global coal industry.
What it will do in America is speed up large-scale solar energy. The most likely
NZ Lifestyle Block early contender uses the well-proven technology of mirror arrays in the desert, computer-tracked to focus on a boiler which drives a steam turbine/generator.
The other mover has been China. Her coal usage dropped 11% in 2014, and looks like dropping more than that this year. That’s monumental. If demand had driven coal to a peak physicallyproducible rate (like Peak Oil) the peak could have been anticipated around 2027; we may be seeing peak production now brought on by the pragmatic leadership of the world’s biggest user. That’s a huge game changer, and we should sit up and take note when the two biggest economies on the planet are preparing to strand their own assets.
There have always been folk caught with stranded assets. The old goldfield sites dotted around our country all bear silent testament to someone who held a claim at the point where it became worthless. The trick is to avoid being the one holding the parcel when the music stops. The other day (see page 57) I was driving around looking for the owner of a lost dog. One house I visited had PV panels covering its north-facing roof. “Monocrystalline?” I asked. “Yep, 4 kilowatts of it,” he replied, and he could have added “… of unstrandable asset.”
Right after we’ve had the debate about www.teu.ac.nz/2015/02/votesdivest-fossil/ http://350.org/dunedin-the-firstcity-in-nz-to-divest/ https://coalactionnetworkaotearoa. wordpress.com/2013/09/29/fiveout-of-five-anglican-diocesesvote-to-divest-from-fossil-fuels/ what the future is increasingly looking like, we should start lobbying hard for our leaders at all levels to be divesting us of assets which are heading for Strandingsville and investing our money in ones with a guaranteed future. The longer, the better.