Energy Investment and Uncertainties Related to Climate Change

"The energy industry's decision-making process for energy investment is much more complicated today than it was before globalisation and liberalisation. The change can be explained simply by an environment which is more complex, full of uncertainties and unpredictable...With respect to climate change, the International Energy Agency (IEA) writes that 'uncertainties on greenhouse gas (GHG) emissions create uncertainties in the political responses to increased GHG concentration. Uncertainties in the economic impact of climate change create uncertainties in mitigation policy that will be put in place. All these uncertainties, combined with the uncertainties about the cost of abatement technologies, create considerable uncertainties in the financial implications to companies'...The current approach to investment decision in a risky environment is: risk segmentation, risk analysis and risk mitigation...Risks related to investment in the energy industry fall into four categories: economic risk, political risk, legal risk and force majeure...The rationale used for investment decision is still to maximise the expected discounted cash flow (its net present value NPV) but, as the IEA puts it elegantly: 'Investment was made if the discounted revenues exceeded the discounted costs. Now, investment is made, only if the discounted revenues exceed the discounted costs by a margin sufficient to overcome the value of waiting'." (Chevalier 2009, pp. 50 & 51)

Climate Truth

In her essay "Truth and Politics", philosopher Hannah Arendt states that humans only accept truth, as long as the truth is not to their disadvantage and does not interfere with their pleasures. Hannah Arendt differentiates between "rational truth" (scientific and philosophic) and "factual truth" (truth based on human related facts, events, that serve political opinion). She writes that the "truth" of our thinking is only guaranteed, if our thinking is exposed to the general public, taking into account their thoughts respectively.
In an article of Professor Dr. Gerhard Schulze, Chair of Empirical Social Research at the University of Bamberg (Neue Zürcher Zeitung - Dec 31, 2009), I found an interesting quote from Professor Stephen H. Schneider, Climatologist at Stanford University and former scientific advisor of Al Gore (text translated from German): "On one hand, scientists are ethically bound to the scientific methodology. This means that uncertainty and differentiation are always taken into account. On the other hand it is in the interest of every human being to make our world a better place to live. To make the world a better place for everyone, support from every person is needed. Broad support can only be achieved if we reach the general public and make them aware of the problems, our world has to deal with. A large and global community is only reached through divulging scary scenarios, through issuing bald and dramatic statements. Although some level uncertainty always remains, these uncertainties are hardly raised publicly in order to keep the awareness creation and communication process as efficient as possible. There is no standard formula to cover the scientist's dual ethical and moral commitment."

The Search and Need of Certitude

Doubt is a challenging psychological condition. how long are we able to endure doubt?
how strong is our need of certitude? how can we overcome doubt or disbelief? is it through faith? is it through ideology? is it through the human nature and drive to reproduce and fight for the survival of humankind?

Let's consider the current debate on climate change and its expected impact on our planet: can we bear not knowing the exact impacts of climate change in the near future? do we deny global warming and climate change because we are afraid of its uncomfortable consequences? are we taking the necessary steps in the reduction of CO2 emissions to prevent the earth's surface temperature to increase beyond 2° C? or through our own psychologic defense mechanism, are we rejecting scientific or visual evidence (retraction of polar ice caps and glaciers, hurricanes, floods, drought and desertification in Australia and Africa) and thus fall into inaction?

Welcome Message

The purpose of this Blog is to provide you with an open discussion platform to the various facets of climate change and its consequences on our plant and humanity.

Some directions in using this blog:

- all contributors and contributions are welcome
- there is no right or wrong
- respect every author's contribution
- verbal and obscene attacks against contributors will be filtered
- express your own opinion
- use reasoning and argumentation
- be open and allow challenging feedbacks to your own views
- try to be concise

Enjoy using this open platform - help safeguarding planet earth, your contribution counts!