Your fu­ture?

What do you want for If you’re in­vest­ing in your fu­ture, where should you put your money down?

NZ Lifestyle Block - - The Good Life -

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.

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