Here are the highlights from the latest National Oceanic and Atmospheric Administration report on current climate conditions (full report here):
While this report does not prove that global warming is occurring, it is far more persuasive evidence than that the February blizzards proved that global warming was some sort of hoax.
The costs of global warming would be huge. Mostly it would show up in weather-related events, and many of those events are insured. This will lead to rising losses at insurance companies, the most vulnerable of which are probably the big re-insurers like Everest Re (RE) and the General Re part of Berkshire Hathaway (BRK.B). However, over time, that will simply lead to a “hard market" where insurance premiums will rise. The costs will be felt throughout the economy in the form of ever-rising insurance premiums.
If the rising temperatures were to lead to the melting of the Greenland or Antarctic ice caps, the consequences would be far beyond anything that could be insured. Many, if not most, of the major cities of the world would literally be underwater (and not just be worth less than the mortgage). If, for example, the world had been five degrees (F) colder for recorded civilization, civilization would still have probably come about. However the ice caps would have been much larger, and sea levels correspondingly lower. As a result, New York city would have probably been built well out into what is now the Atlantic. The process of going to current temperatures would have been just as disastrous as moving to a world five degrees hotter from current temperatures.
We don’t know for sure that global warming is occurring, although the preponderance of the evidence is pretty high that it is. Then again, I don’t know for sure that my house will burn down in the next year, yet I still buy a homeowners insurance policy. Shifting the tax system to one that is more based on the amount of carbon we use than one based on the amount of income we earn seems to be a very cheap insurance policy.
It would also have other, more near-term benefits. For starters, using less oil would mean a much lower trade deficit. The trade deficit is much more damaging to the country’s economy than is the budget deficit, and more than half of the trade deficit is due to our oil import bill.
A steep and rising tax on oil would mean that the magic of the market would be turned to finding ways to use energy more efficiently, or to finding alternative sources. Firms able to do so would reap enormous profits, and if their competitors were able to cut energy costs and they were not, their companies would suffer. The cap-and-trade bill that is currently under consideration in the Senate is at best a weak first step, but it is a step in the right direction.
Of course, it will not really matter if we cut our carbon emissions and countries like China -- which just passed us as the largest energy-consuming country -- don’t do anything. However, it seems to me that it is a lead pipe cinch that if we don’t act, neither will they. Cumulatively, we have put the bulk of the CO2 in the atmosphere, and on a per capita basis we still put out far more CO2 than do the Chinese.
However, we would have to offset the carbon taxes by cutting other taxes. Since a carbon tax would be on the regressive side, the best way to do the offset would be to use the funds to cut the payroll tax, which is extremely regressive. Cutting the payroll tax would also give employers an incentive to hire, thus helping cut unemployment. Very cheap insurance indeed.
- The combined global land and ocean average surface temperature for June 2010 was the warmest on record at 16.2°C (61.1°F), which is 0.68°C (1.22°F) above the 20th century average of 15.5°C (59.9°F). The previous record for June was set in 2005.
- June 2010 was the fourth consecutive warmest month on record (March, April and May 2010 were also the warmest on record). This was the 304th consecutive month with a global temperature above the 20th century average. The last month with below-average temperature was February 1985.
- The June worldwide averaged land surface temperature was 1.07°C (1.93°F) above the 20th century average of 13.3°C (55.9°F) -- the warmest on record.
- It was the warmest April–June (three-month period) on record for the global land and ocean temperature and the land-only temperature. The three-month period was the second warmest for the world's oceans, behind 1998.
- It was the warmest June and April–June on record for the Northern Hemisphere as a whole and all land areas of the Northern Hemisphere.
- It was the warmest January–June on record for the global land and ocean temperature. The worldwide land on average had its second warmest January–June, behind 2007. The worldwide averaged ocean temperature was the second warmest January–June, behind 1998.
- Sea surface temperature (SST) anomalies in the central and eastern equatorial Pacific Ocean continued to decrease during June 2010. According to NOAA's Climate Prediction Center, La Niña conditions are likely to develop during the Northern Hemisphere summer 2010.
While this report does not prove that global warming is occurring, it is far more persuasive evidence than that the February blizzards proved that global warming was some sort of hoax.
The costs of global warming would be huge. Mostly it would show up in weather-related events, and many of those events are insured. This will lead to rising losses at insurance companies, the most vulnerable of which are probably the big re-insurers like Everest Re (RE) and the General Re part of Berkshire Hathaway (BRK.B). However, over time, that will simply lead to a “hard market" where insurance premiums will rise. The costs will be felt throughout the economy in the form of ever-rising insurance premiums.
If the rising temperatures were to lead to the melting of the Greenland or Antarctic ice caps, the consequences would be far beyond anything that could be insured. Many, if not most, of the major cities of the world would literally be underwater (and not just be worth less than the mortgage). If, for example, the world had been five degrees (F) colder for recorded civilization, civilization would still have probably come about. However the ice caps would have been much larger, and sea levels correspondingly lower. As a result, New York city would have probably been built well out into what is now the Atlantic. The process of going to current temperatures would have been just as disastrous as moving to a world five degrees hotter from current temperatures.
We don’t know for sure that global warming is occurring, although the preponderance of the evidence is pretty high that it is. Then again, I don’t know for sure that my house will burn down in the next year, yet I still buy a homeowners insurance policy. Shifting the tax system to one that is more based on the amount of carbon we use than one based on the amount of income we earn seems to be a very cheap insurance policy.
It would also have other, more near-term benefits. For starters, using less oil would mean a much lower trade deficit. The trade deficit is much more damaging to the country’s economy than is the budget deficit, and more than half of the trade deficit is due to our oil import bill.
A steep and rising tax on oil would mean that the magic of the market would be turned to finding ways to use energy more efficiently, or to finding alternative sources. Firms able to do so would reap enormous profits, and if their competitors were able to cut energy costs and they were not, their companies would suffer. The cap-and-trade bill that is currently under consideration in the Senate is at best a weak first step, but it is a step in the right direction.
Of course, it will not really matter if we cut our carbon emissions and countries like China -- which just passed us as the largest energy-consuming country -- don’t do anything. However, it seems to me that it is a lead pipe cinch that if we don’t act, neither will they. Cumulatively, we have put the bulk of the CO2 in the atmosphere, and on a per capita basis we still put out far more CO2 than do the Chinese.
However, we would have to offset the carbon taxes by cutting other taxes. Since a carbon tax would be on the regressive side, the best way to do the offset would be to use the funds to cut the payroll tax, which is extremely regressive. Cutting the payroll tax would also give employers an incentive to hire, thus helping cut unemployment. Very cheap insurance indeed.
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.