Global Warming: Who Loses—and Who Wins? : Water

If Al Gore’s movie, An Inconvenient Truth, is to be believed, you should start selling coastal real estate now. Gore’s film maintains that an artificial greenhouse effect could raise sea levels 20 feet in the near future, flooding Manhattan, San Francisco, and dozens of other cities; Micronesia would simply disappear below the waves. Gore’s is the doomsday number, but the scientific consensus is worrisome enough: In 2005, the National Academy of Sciences warned that oceans may rise between four inches and three feet by the year 2100. Four inches may not sound like a lot, but it would imperil parts of coastal Florida and the Carolinas, among other places. A three-foot sea-level rise would flood significant portions of Bangladesh, threaten the national survival of the Netherlands, and damage many coastal cities, while submerging pretty much all of the world’s trendy beach destinations to boot. And the Asian Tigers? Shanghai and Hong Kong sit right on the water. Raise the deep a few feet, and these Tiger cities would be abandoned.
The global temperature increase of the last century—about one degree Fahrenheit—was modest and did not cause any dangerous sea-level rise. Sea-level worries turn on the possibility that there is some nonlinear aspect of the climate system, a “tipping point” that could cause the rate of global warming to accelerate markedly. One reason global warming has not happened as fast as expected appears to be that the oceans have absorbed much of the carbon dioxide emitted by human activity. Studies suggest, however, that the ability of the oceans to absorb carbon dioxide may be slowing; as the absorption rate declines, atmospheric buildup will happen faster, and climate change could speed up. At the first sign of an increase in the rate of global warming: Sell, sell, sell your coastal properties. Unload those London and Seattle waterfront holdings. Buy land and real property in Omaha or Ontario.
An artificial greenhouse effect may also alter ocean currents in unpredictable ways. Already there is some evidence that the arctic currents are changing, while the major North Atlantic current that moves warm water north from the equator may be losing energy. If the North Atlantic current falters, temperatures could fall in Europe even as the world overall warms. Most of Europe lies to the north of Maine yet is temperate because the North Atlantic current carries huge volumes of warm water to the seas off Scotland; that warm water is Europe’s weathermaker. Geological studies show that the North Atlantic current has stopped in the past. If this current stops again because of artificial climate change, Europe might take on the climate of present-day Newfoundland. As a result, it might depopulate, while the economic value of everything within its icy expanse declines. The European Union makes approximately the same contribution to the global economy as the United States makes: Significantly falling temperatures in Europe could trigger a worldwide recession.
While staying ready to sell your holdings in Europe, look for purchase opportunities near the waters of the Arctic Circle. In 2005, a Russian research ship became the first surface vessel ever to reach the North Pole without the aid of an icebreaker. If arctic sea ice melts, shipping traffic will begin transiting the North Pole. Andrew Revkin’s 2006 book, The North Pole Was Here, profiles Pat Broe, who in 1997 bought the isolated far-north port of Churchill, Manitoba, from the Canadian government for $7. Assuming arctic ice continues to melt, the world’s cargo vessels may begin sailing due north to shave thousands of miles off their trips, and the port of Churchill may be bustling. If arctic polar ice disappears and container vessels course the North Pole seas, shipping costs may decline—to the benefit of consumers. Asian manufacturers, especially, should see their costs of shipping to the United States and the European Union fall. At the same time, heavily trafficked southern shipping routes linking East Asia to Europe and to America’s East Coast could see less traffic, and port cities along that route—such as Singapore—might decline. Concurrently, good relations with Nunavut could become of interest to the world’s corporations.
Oh, and there may be oil under the arctic waters. Who would own that oil? The United States, Russia, Canada, Norway, and Denmark already assert legally complex claims to parts of the North Pole seas—including portions that other nations consider open waters not subject to sovereign control. Today it seems absurd to imagine the governments of the world fighting over the North Pole seas, but in the past many causes of battle have seemed absurd before the artillery fire began. Canada is already conducting naval exercises in the arctic waters, and making no secret of this.
Then again, perhaps ownership of these waters will go in an entirely different direction. The 21st century is likely to see a movement to create private-property rights in the ocean (ocean property rights are the most promising solution to overfishing of the open seas). Private-property rights in the North Pole seas, should they come into existence, might generate a rush to rival the Sooners’ settlement of Oklahoma in the late 1800s.

Whatever happens to our oceans, climate change might also cause economic turmoil by affecting freshwater supplies. Today nearly all primary commodities, including petroleum, appear in ample supply. Freshwater is an exception: China is depleting aquifers at an alarming rate in order to produce enough rice to feed itself, while freshwater is scarce in much of the Middle East and parts of Africa. Freshwater depletion is especially worrisome in Egypt, Libya, and several Persian Gulf states. Greenhouse-effect science is so uncertain that researchers have little idea whether a warming world would experience more or less precipitation. If it turns out that rain and snow decline as the world warms, dwindling supplies of drinking water and freshwater for agriculture may be the next resource emergency. For investors this would suggest a cautious view of the booms in China and Dubai, as both places may soon face freshwater-supply problems. (Cost-effective desalinization continues to elude engineers.) On the other hand, where water rights are available in these areas, grab them.
Much of the effect that global warming will have on our water is speculative, so water-related climate change will be a high-risk/high-reward matter for investors and societies alike. The biggest fear is that artificially triggered climate change will shift rainfall away from today’s productive breadbasket areas and toward what are now deserts or, worse, toward the oceans. (From the human perspective, all ocean rain represents wasted freshwater.) The reason Malthusian catastrophes have not occurred as humanity has grown is that for most of the last half century, farm yields have increased faster than population. But the global agricultural system is perilously poised on the assumption that growing conditions will continue to be good in the breadbasket areas of the United States, India, China, and South America. If rainfall shifts away from those areas, there could be significant human suffering for many, many years, even if, say, Siberian agriculture eventually replaces lost production elsewhere. By reducing farm yield, rainfall changes could also cause skyrocketing prices for commodity crops, something the global economy has rarely observed in the last 30 years.
Recent studies show that in the last few decades, precipitation in North America is increasingly the result of a few downpours rather than lots of showers. Downpours cause flooding and property damage, while being of less use to agriculture than frequent soft rains. Because the relationship between artificially triggered climate change and rainfall is conjectural, investors presently have no way to avoid buying land in places that someday might be hit with frequent downpours. But this concern surely raises a red flag about investments in India, Bangladesh, and Indonesia, where monsoon rains are already a leading social problem.
Water-related investments might be attractive in another way: for hydropower. Zero-emission hydropower might become a premium energy form if greenhouse gases are strictly regulated. Quebec is the Saudi Arabia of roaring water. Already the hydropower complex around James Bay is one of the world’s leading sources of water- generated electricity. For 30 years, environmentalists and some Cree activists opposed plans to construct a grand hydropower complex that essentially would dam all large rivers flowing into the James and Hudson bays. But it’s not hard to imagine Canada completing the reengineering of northern Quebec for hydropower, if demand from New England and the Midwest becomes strong enough. Similarly, there is hydropower potential in the Chilean portions of Patagonia. This is a wild and beautiful region little touched by human activity—and an intriguing place to snap up land for hydropower reservoirs.