top of page
2023-12-22 15.37.11.jpg

EMPTY FRIDGE OR OVERFLOWING GARBAGE CAN?

Making the Business Case

From garbage can to fridge

We believe that embracing the ever more defining reality of climate change and resource constraints as our context, rather than our burden, helps those decision-makers see and measure true value propositions. This will benefit them, whether they are a household, a company, a city or a country. And it is also beneficial for humanity.

What impedes many decision-makers from recognizing these value propositions is a deeply held misconception about the nature of the problem. Many see it as an “inconvenient truth” or a “free-rider problem.” In contrast, I view the challenge more akin to an “empty fridge” problem, rather than just an inconvenient “overflowing garbage can.” This shifted perspective fosters emotional engagement and highlights clear incentives to act, unlike the sense of disconnection or helplessness associated with the latter analogy.

 

The great misconception

Even after the 28th COP, the world is still far from robust agreements on how to collectively tackle the climate crisis. Many are therefore discouraged, and fewer respond vigorously to the crisis. Also, with others not acting, many lack the courage to act themselves. Such behavior makes a future of climate change and resource constraints even more inevitable.

It also reveals that the public conversation is trapped in a dangerous misconception: it makes us believe that acting depends on others also pulling their weight. The reality is exactly the opposite. The less others prepare themselves for the predictable future of climate change and resource constraint, the more exposed I am to the risks of our predictable future. In other words, the need to proactively prepare myself for this future becomes even more essential for my own benefit, whether I am a household, a company, a city, or an entire country.

In short, the implications of failed COPs are the exact opposite of what most media stories preach. In contrast to those stories, the failed outcomes heighten the need for oneself, if one wants to stay operational in the predictable future, to vigorously respond to the emerging future, and prepare oneself for it (such preparations are also, by the way, beneficial for society at large).

The question becomes how to hedge against a future we do not want but is ever more likely to come. Or said more simply: what will be valuable in a predictable future of climate change and resource constraints?

 

Why it is “not about climate”

The word ‘future’ has nearly become synonymous with climate change. Most conceive the “climate challenge” as a collective choice problem about managing our carbon emissions. The reality, though, is far broader than carbon emissions. Even more importantly, it’s not an all-out collective choice problem. Recognizing this has direct, practical implications for any asset owner or investor. The implications become even more practical and powerful the less others address the problem.

Let me elaborate.

Certainly, climate change will be part of the package that shapes our future. Just that climate change will be accompanied by many other environmental pressures. And all these pressures compound. The simple reason is that economies are in fierce competition for what ecosystems can regenerate, leading to climate change, biodiversity loss, pollution, water stress, and food and energy insecurity. The competition has been so hard, that currently human demand exceeds, by at least 70%, what Earth’s ecosystems can renew.

 

This regenerative capacity of the planet, even though it can be overused for some time, is ultimately the overarching material factor that limits everything. Regeneration simultaneously limits:

  • fossil fuel use (since the CO2 emissions are more limiting to fossil fuel use than the remaining stocks underground),

  • mineral and ores exploitation (as these materials are plentiful underground; but bringing the ores and minerals out of the ground requires much regeneration to compensate for the high ecological costs, including energy demand, of extraction and concentration), and

  • food and fibers inputs, as well as any other biological product or service economies depend on.

Hence regeneration is the unifying theme for all physical dependencies of the human economy, from resource input to waste emission. This makes regeneration a more complete perspective of the world than merely carbon emissions. It becomes a helpful lens to connect all the "environmental dots". And it can be quantified with biocapacity accounting,

Incentives are aligned

Even more importantly, through this broader lens, the self-interest for addressing those challenges becomes more evident. Because, were there no self-interest, there would be too little agency. Indeed, the misbelief that “we have to wait for others” kills a sense of agency and thwarts proactive efforts to prepare for the predictable future. With no sense of agency, the story is merely depressing and paralyzing.

By rejecting the great misconception, while rather recognizing that the less others act, the more we have incentive to prepare ourselves, the more obvious becomes that our self-interest is entirely aligned with aggressive, effective climate action. By regaining a sense of agency, this perspective becomes liberating rather than burdensome.

Implications for investors

Investors also gain from recognizing the predictable future of climate change and resource constraints as their emerging context, not as their burden. They benefit from not seeing it as a collective choice problem about carbon emissions, but as a recognition that better understanding the future has no downside, particularly for investors whose projects entirely live in the future.

If competition for regeneration, with consequent climate change and resource constraints, is a good description of our evolving context, then what do you, as an investor, see as able to hold value? How do we identify, assess, and monitor investment options?

Measures of  Success

For investors, a pivotal question is how much their investment reduces global overshoot per million dollars investment. This is measurable.

Knowing this is crucial, because:

  1. most investments don’t reduce overshoot, and

  2. those which do will be more likely to gain in value and avoid getting stranded.

2023-06-04 16.43.13.jpg
bottom of page