Climate Change – Have we got it right? Part 2


The science is comparatively simple. Six molecules of carbon dioxide plus six molecules of water in the presence of chlorophyll in plant leaves plus incoming solar energy (a.k.a. sunlight) produces one molecule of carbohydrate plus, and this is the important bit, six molecules of oxygen – 6 CO2 + 6H2O + solar energy = C6H12O6 + 6O2.

So carbon dioxide is an important part in a plant’s carbon cycle but strangely, though it is so important, it is actually a trace element in the atmosphere as well. Therefore, it can be argued that if the carbon dioxide content of the atmosphere is increased then there is increased plant growth. It follows therefore that the trees and other plants welcome any increase in carbon dioxide in the atmosphere and adds to their photosynthetic activity.

If you agree with this then surely it follows on, from the points of view of trees and plants, that any increase in carbon dioxide in the air from petrol engines, etc., is welcome. It may be deduced that any attempt by man to reduce the output of carbon dioxide is actually counterproductive in terms of plant growth and the production of oxygen. I must state here and now that I completely accept there are other pollutants such as sulphur which are harmful to the environment but, given the above, is carbon dioxide?

I am also aware of the counter-argument against carbon dioxide. It is stated that by having excess CO2 in the atmosphere it captures incoming infra-red rays consequentially raising the world’s temperature. To deal with this argument you can do no better than to read John Emsley, The Good Chemical Guide – Rhone-Poulenc: “The Earth’s atmosphere keeps the temperature reasonably stable, smoothing out the daily changes and seasonal ones. The vapour that does this so effectively is water. Without water, the average temperature of the planet would be 33C colder than it is. Water is very good at trapping a lot of the infra-red rays which would otherwise be lost to space, and water vapour alone is responsible for a warming of roughly 32C, or about 97% of the greenhouse effect. Carbon dioxide helps a little bit as well, accounting for about 1C.”

To the urban dweller in London, trees are pleasant to look at, provide nice shade in summer but those pesky falling leaves in autumn are a real nuisance. They do not appreciate the tree is actually taking heat out of the atmosphere during the process of photosynthesis and, due to the enormous latent heat of evaporation, by the trees as the water is transported from the roots to the canopy and evaporated off as vapour in the atmosphere. Just ask anyone living in the Empty Quarter of Saudi Arabia what they think of trees. They love them and not surprisingly, as the moisture content in the air is virtually zero as there are no trees in that part of the world.

Some cynics say that the carbon dioxide hysteria is nothing more than a ruse by desperate scientists to get more funding so they are not out of a job. The same can be said of politicians who use it as an excuse to raise taxes and then do not spend the money on protecting the environment.

Both groups would be better occupied in using the billions of dollars collected from the taxpayers to try and save the world’s watersheds and stop the deforestation to grow bio-fuels.

Whilst it has to be accepted that, at the present rate of consumption, fuel oil will soon run out as a resource it should not be blamed for the greenhouse effect. Mankind has to look seriously at the looming energy crisis but without this senseless and useless diversion of the public’s attention and money to false global warming scares and the evil carbon dioxide emissions. The powers that be must examine the causes and not the symptoms.

So what has all this got to do with a financial column in a provincial newspaper? Well, as stated above, people should be made aware of the potential misdirection (some might say misappropriation) of their hard earned money. The other reason is, as a potential investor, caveat emptor. Today, illiquid assets promising fixed returns are a common feature of some of the more questionable funds being promoted in the market. The more sinister products also incorporate assets that are essentially impossible to value.

Some potential investments cater to ethical investors who want to earn decent returns from socially responsible financial products. Many forestry funds fall into this category, but on scrutiny more than a few fail to provide a robust investment strategy to back up their claims of above market rate guaranteed returns.

Market traded timber, as a commodity, has a verifiable price which can be used to forecast the value of an investment in that commodity. Teak is a good example of this. However, for some other timber products, which are not traded, there is no such data.

With no verifiable market price and no empirical/historical data available it is impossible for an investor to check the price assumptions that are used to generate future guaranteed prices and returns on investment. This is something to bear in mind the next time a ‘once in a lifetime’ forestry fund with guaranteed returns of 20% or whatever arrives in your email inbox. If you are interested in these types of funds then look for direct investments into such companies as Plum Creek Timber as it is large, listed and liquid. Alternatively, look at funds which invest directly into this sort of company. Above all – remain liquid.

Please be careful when you are trying to save the planet. You may save yourself a lot of damage as well.