Jeremy Grantham on Investing in Green Tech | Conversations with Tyler
In a thought-provoking discussion with Tyler Cowen, Jeremy Grantham, a British investor renowned for his ability to spot economic bubbles, shares his perspective on the impending burst of the fossil fuel bubble and the crucial role of green technology in addressing climate change.
Grantham, through his Grantham Foundation, is actively investing in green technology to make it more affordable and efficient.
Finite Resources and Commodity Prices
The finite nature of resources continues to impact commodity prices.
Even if growth rates decelerate, the finite store of resources continues to diminish.
Grantham believes that this finite supply argument will become binding as we approach the limits of our resources.
Impact of Biden Climate and Taxes Act
The Biden Climate and Taxes Act has the potential to significantly improve the climate situation.
Grantham praises the Act for sending a strong message to the world that the US is waking up to the reality of climate change.
Concerns Over Loss of Topsoil
The loss of topsoil, particularly in the Midwest, is a major concern.
Grantham argues that if agricultural practices conducive to erosion are not changed, we will start to lose productivity.
He criticizes the lack of attention given to this and other slow-burning issues, such as water shortages and the loss of insects.
Shortcomings of Capitalism
Capitalism’s short-term time horizons and inability to effectively deal with commons issues like climate change and soil erosion are criticized by Grantham.
He argues that capitalism tends to respond to problems only when they become acute, rather than anticipating and preventing them.
Increasing Severity of Climate Change
Grantham warns of the increasing severity of climate change, citing recent severe droughts and floods in various parts of the world.
He criticizes the lack of investment in mitigation measures and suggests that the world is in denial about the reality of sea level rise.
Real Estate Values and Climate Change
Grantham predicts that real estate values in areas prone to flooding will decline due to the inability to secure insurance, except from government subsidies.
He believes that once insurance becomes unattainable, house prices will start to decline, possibly leading to a panic and a sharp drop in prices.
Underestimation of Global Warming Costs
Grantham criticizes economists’ estimates of the costs of global warming, arguing that they are trivial and underestimate the real impact.
He believes that a 10-degree Centigrade increase in temperature would lead to the extinction of our species, and that even a 2-degree increase would cause societal failures.
The lesson we draw from that is we have to change the task. We have to redesign our way around lithium. – Jeremy Grantham
The Super Bubble
Grantham describes the current economic situation as a ‘super bubble,’ comparing it to other major economic bubbles in history.
He believes that these bubbles are a result of human behavior and occur when economic conditions are nearly perfect and there is a slow, steady buildup of euphoria.
Brexit’s Impact on the UK
Grantham views Brexit as one of the worst self-inflicted wounds in modern times for the UK economy.
He believes that it has lowered the growth rate of the UK and led to a loss of industrious Europeans who were contributing to the economy.