Paul Gilding

Beware the coming climate storm. A moment is approaching when science and markets will collide, but then merge, with chilling consequences for investors who miss the moment, and great excitement for those who are well prepared.

The signs are all around us now. Signs that a storm of climate action will soon rage through the economy, sweeping away denial and, along with it, those companies, politicians, investors and industries that aren’t ready.

Signs like our past two Prime Ministers and opposition leaders  in Australia being removed with climate change a central issue in their downfalls. Signs like 2008 being the first year when the money invested globally in new renewable energy generation projects was greater than that invested in new fossil fuel energy generation. Signs like the last decade being the hottest on record, as of course each decade has been since 1980. Signs like the first new car company IPO in the USA for half a century being a disruptive electric car company.

There is great investment and excitement now in renewables, with over $100 billion invested in 2008 and the same in 2009, despite the uncertain financial climate. Yet we see growth in coalmines, new coal export facilities and a lack of action in politics in Australia and the US. What is an investor to do with such confusing signals?

Simple. Observe the science, because the science drives everything else.

The facts are now very straightforward on the problem and its causes, as stated by the peak US science body The National Academies of Sciences. They said last month the science of climate change is in the category of those theories that had “been so thoroughly examined and tested, and supported by so many independent observations and results, that their likelihood of subsequently being found to be wrong is vanishingly small. Such conclusions and theories are then regarded as settled facts.”

So this is not a philosophy or a political viewpoint. These are facts. Smart investors deal in rational analysis, not ideological perspectives or wishful thinking. As US Senator Daniel Patrick Moynihan said “Everyone is entitled to his own opinion, but not to his own facts.”

So if you believe in facts, you will be understand that science will, in the end, overcome resistance and denial, as argued by Professor Stephan Lewandowsky from the University of Western Australia: “The laws of physics will relentlessly assert themselves, unswayed by public opinion, political shenanigans, or elections. Ultimately, the laws of physics will speak so loudly that no amount of wishful thinking can prevent them from being heard.”

The reason we can be so confident that this storm, when it hits, will be ferocious and effective at driving change, is by considering what happens when science meets markets. The science dictates that when we act it will now have to be dramatic action.

We know that to avoid catastrophic risk we must keep warming below two degrees and, as a result, this is the target agreed to by governments from US, to China, to India to Australia. If you don’t like political metrics then consider that this is also the target endorsed by hundreds of global corporations from GE to Rio to HSBC.

Acting as late as we are, achieving this target will require us to virtually eliminate CO2 emissions from coal oil and gas within a few decades. This means eliminating whole industries and replacing them, which is where the science meets the market.

Markets are particularly good at challenges like this, using what Austrian economist Joseph Schumpter called “creative destruction”. Markets are unconcerned about collateral damage and friendly fire. They won’t deliver the change steadily or calmly. Markets don’t play politics and will have no regard for sunk capital or prior commitments.

When we act on climate this will be creative destruction on steroids, with the resulting economic storm wreaking havoc and wiping out companies and whole sectors, while creating tomorrow’s new economy and corporate giants. It will be volatile, chaotic and exciting for investors, with fortunes made and lost based on the quality of judgements.

It’s hard to look at today’s politics and investment strategies and accept this analysis. It’s hard to imagine so many people being so wrong. It was also hard to imagine, in 2007, that the world’s governments would nationalise banks and car companies and spend trillions bailing out the financial system. It was hard to imagine, in the USA in 1940, that the coming four years would see military spending go from 1.6 per cent to 37 per cent of GDP and that government would take over and direct the economy, with actions like banning the production of private vehicles. In hindsight, though, such things are always obvious. And with the benefit of hindsight in 10 years time, the coming climate storm will have been obvious as well.

There is only question you have to ask yourself when you see the signals that are now flashing in bright neon lights, screaming “warning, warning, everything is about to change”. Am I ready?

For over a decade I have gone out of my way to buy fuel from BP. They’ve always seemed the best of the bad, with their solar business, climate policy leadership and forward thinking culture and people. The other day I couldn’t bring myself to do it. In fact I doubt I’ll ever drive into a BP station again.

Although BP has rather bigger problems on its mind than whose fuel I buy in Australia, while driving past I started considering a potential development that would certainly get their attention. It all starts with BP’s CEO Tony Hayward now famous approach to leadership on environmental questions. He proudly explained his views in a frank speech at Stanford University last year. He said too many BP people were “working to save the world” whereas they should focus on making money because BP’s “primary purpose in life is to create value for shareholders.”

I understand quite a bit about saving the world and about creating value for shareholders. I’ve spent roughly half my working life as an environmental campaigner, including as global head of Greenpeace, and the other half as a business owner and corporate advisor working with the CEOs of a number of the world’s largest companies. The former taught me how people think and act on environmental issues, the latter taught me about the relationship between profits and good corporate citizenship. BP’s Deep Horizon disaster may bring these two issues together in ways that I never expected. As a result Tony Hayward may, ironically and unintentionally, do more to “save the world” than anyone before him at BP. Here’s why.

We live today in a global market which no one can control. It is too complex and too global for governments to effectively regulate. It also has too many inbuilt tendencies and pressures for even the most powerful and visionary CEO’s or investors to push against the tide except in marginal ways.  Yet this powerful beast of a machine is pushing us all towards a cliff, with all key indicators showing the global ecosystem and resource supply, on which our economy depends, is now on the edge of catastrophic, system wide failure – what I call the Great Disruption. The global economic consequences of such failure will be profound, not least of all being the end of economic growth.

As long argued would occur, this has now started with diminishing resources driving us to dangerously drill deeper for oil, dig up dirty tar sands and take more and more risk. In that context, the Deep Horizon disaster starts to look like the beginning of the end, a haunting specter of things to come as we push past our limits in a desperate bid for shrinking resources to feed our gluttonous economy.

With the public now increasingly aware of such challenges, BP’s business strategy under Hayward was seriously misguided. He ignored the clear lessons of decades of global experience in this area by investors and companies: good corporate citizenship boosts profits and companies that do good for the world do better for their shareholders. They attract and retain better people, they get an easier run from regulators, they face less risk, they find investors who are more patient and they are more closely in touch with the values of society and therefore their customers and employees. What struck me as I drove past the BP station was the potential for all those drivers of profitability to be reversed. What would happen if a viral campaign focused the world’s general environmental concern sharply onto BP, as the modern age’s perfect example of the sort of company we don’t want to exist anymore?

What if good people didn’t want to work for BP? If regulators subtly but consistently made life harder for BP, through thousands of little decisions taken by people who didn’t like the company? If nervous investors got worried that BP had a fundamentally flawed culture that made it more risky to invest in? If customers around the world just drove on by to the next gas station? What would happen, if this approach took hold through a viral mind shift around the world, is that BP would quite simply be removed from the economy. BP would become the historic first scalp of a new approach – “Global market regulation, by the people, for the people”.

Hard to imagine? The brutal logic of the market is very powerful. A company like BP lives and is valued on its ability to turn hard assets, in its case oil and gas reserves, into cash. What determines its ability to do this efficiently are its people, customers, regulatory support and capital. If these capacities drop off significantly relative to competitors, the assets are worth more outside the company than within. This translates into the company being valued less than its assets and the company is taken over or its assets are sold. The impact on BP would be fast and simple – it would cease to exist. However, the impact on the broader market and on environmental campaigning might last for much longer and be very deep. What Tony Hayward has done is to create the perfect storm for just this to happen, starting with investors attitudes.

Under Hayward, at the direction of the Board of Directors, BP shifted its focus sharply onto generating cash for shareholders. For BP employees the message was clear – cut corners, cut costs and deliver in the short term. No more saving the world, people, get back to making cold hard cash. In response to this very public shift, the company’s owners, the pension funds and other investors, stood by and watched. They didn’t raise the warning that should have been obvious to any modern investment risk manager. They should have said: yes, we want shareholder returns, but don’t send a signal to your people that protecting the environment doesn’t matter, because if you do, our investment will be at risk. If BP ceases to exist as a result of this chosen direction, no investor will make that mistake again.

Hayward’s approach also sent clear signals to BP’s employees and executives. BP’s leadership role on climate change and sustainability resulted in many of the company’s people becoming passionate advocates on these issues. Indeed, I’ve worked with many BP executives and they are some of the most committed corporate people I know on sustainability. They have felt BP was a place they could make a difference to the world and prove that good business and good environmental performance go together. Under Hayward’s short-term cash focus, many of these people, including top executives like Viv Cox, have moved on while many others will be questioning if they still belong there. Losing such creative and forward thinking people seriously undermines a company’s culture and its value creation prospects.

With the US oil disaster, customer and brand risk will be high on the risk screen at BP. Soon after I left Greenpeace in 1994, the Shell oil company faced a barrage of criticism for trying to dump a disused oilrig in the North Sea. Greenpeace occupied the rig and a largely spontaneous consumer boycott erupted in Germany, costing Shell tens of millions of dollars, every day, in lost sales. With the share price falling, Shell backed off and the consumers returned.

BP will likewise assume any boycott that erupts now will be short lived and will fade once the media and political storm dies down. They maybe right, but they may be very, very wrong.

Environmental groups around the world have historically struggled with boycotts. They were hard work to maintain, draining resources for years before having an impact, if they ever did. But in today’s world two things have changed that should have the risk people at BP scurrying for their web monitoring services.

The first, as outlined above, is that the evidence is clear on how to run a campaign to deliberately undermine a company’s value by mobilising and focusing public concern for environmental issues and corporate responsibility. It is broader and easier than a consumer boycott, instead focusing on employees, investors, regulators and consumers, all targeted at once. This would be modern, market focused, non-violent guerilla warfare. No one has ever organized such a deliberate value destruction campaign, but plenty of people know how to do it if they chose to.

The second and the key to likely success is the connected world of the internet. When I was at Greenpeace we would need to send activists to visit individual outlets urging a boycott, picket offices to engage employees and approach each individual investor. Today a powerful idea can spread like wildfire, recruiting quiet supporters deep inside the global economy – inside investment houses, inside government and most worrying of all, inside BP.

The scary thing for BP is that such a movement may not come from a mainstream environmental group, all of whom BP has relationships with. The threat is more likely to grow through a spontaneous web based, viral movement, probably driven by people they’ve never heard of, like the guy in Louisiana who set up a Boycott BP Facebook page that now has 650,000 supporters. This is scary for BP because these movements are based on ideas and are organized by informal networks of friends. There’s no one to call, no one to negotiate with, just a viral cancer that steadily eats away at BP’s value, until one day it’s all over.

Why would such a movement take hold? Simply because nothing else is working. Despite unprecedented levels of public support, government action and corporate engagement on climate change and sustainability, nothing of consequence is actually changing. CO2 emissions are rising, companies like BP are investing in filthy tar sands oil and governments appear powerless to stem the tide. So with all the old tactics failing, there is a huge vacuum in what is effectively a free market of campaigning approaches. In that context, there could be great appeal in global market regulation by the people, for the people, with a company’s removal from the economy a kind of environmental capital punishment.

BP is perfectly positioned to be the guinea pig. I’m sure the US oil disaster will be shown to be the direct result of cash grabbing compromises on environmental and human safety. So there is arguably no company more deserving of such punishment and certainly no more powerful symbol for the consequences of putting short term shareholder value at the centre of business strategy.

Who knows if such a movement will erupt in this case, but it no doubt will before long. When it does, the world, and the market, will be a very different place. If the Deep Horizon disaster signals the end of the old economy, then a popular movement that brings down BP would be the beginning of the new one.

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Amongst all the focus on carbon trading around the world, the power and simplicity of taxes has taken a bit of a back seat. This may be changing with new moves in China and Australia, along with renewed debate elsewhere, to use direct taxes and charges to drive social and environmental objectives.

With trading schemes struggling to get up in democracies like Australia and the US, and governments everywhere facing huge mountains of debt, taxes may start to make a comeback. China is reported to be considering a carbon tax from 2012 and is also directly targeting high-energy users like aluminium by dramatically increasing their electricity charges as reported here. In Australia, where the government has shelved plans for carbon trading until 2013 after it failed to get the legislation through the Senate and decided the issue was politically unappealing, there is now a proposal for a mining “super profits tax”. It’s basically a higher tax rate being applied to mining and resource companies when, and only when, projects are very profitable.

The government argues this is about more equitably sharing the huge profits mining giants have reaped in the resources boom as China gobbles up the Australia’s resources. The money raised will used to build infrastructure, lower the standard company tax rate and boost investment in pensions for the public as whole. There is of course a huge uproar against this, with a well-funded campaign by mining companies that have become accustomed to the boom, not to mention the resulting huge executive bonuses. They are crying lost jobs, investment driven off shore and Australia becoming uncompetitive. Some are threatening an investment strike with the shelving of planned projects.

These cries are self-serving, short term and should be ignored by intelligent policy makers. Putting aside the irony of the Australian government embracing a new resources tax as it runs full speed away comprehensive climate action, this is still good economic and environmental policy. Here’s why.

Resource extraction is very different to other economic activity. If a country misses a trend like solar power, high-speed broadband or competitive manufacturing, it’s really hard and expensive to catch up. The train of economic opportunity has often left the station. Resources are different. When a major global company threatens to take their wind turbine manufacturing offshore they can do just that and it’s gone. However when BHP goes and invests in a mine in Kazakhstan instead of Australia, the minerals stay put. Is there potential loss? Yes, clearly investment leads to jobs, taxes and other benefits so in the short term there may be but what about the economic impacts in the medium to long term?

To answer that we need to consider the other way mining resources are different. Unlike innovation, knowledge and technology, which we create, mineral resources are limited and we can’t make any more of them. We have now arrived at a point where the global economy is stretching our capacity to feed it with these natural finite resources. That’s why when we grow the global economy up against those physical limits, as we did in 2007 and 2008, the prices of things that come directly from the earth, like food and oil, rise so rapidly. I cover this in detail in my writing on The Great Disruption.

Where will this approach to growth lead us? Consider the current state of our system, which is well and truly up against its limits, as having a starting measure of 100. This measure of 100 represents our current burden on a strained system, one where we have barely adequate resources to feed our economic and social needs. Then we plan to go to around 9 billion people by 2050. That takes our system to 150. Then we plan to increase the per capita income (and consumption) in that time frame by around 2 – 3 times as well, taking our system up to 300 to 450. So if prices spike and the system shows strain at 100, guess what happens at 450? Many things, but one of them is that resources become a lot more valuable and we use them a lot more carefully.

The economic implications of this are clear for countries that have a strong natural resource base. These resources are of absolutely limited supply and their value will keep going up. And up and up. This means those countries have plenty of time to extract them and the longer they leave it the more value they will get for doing so. The finite nature of those resources also means it is good policy to invest the resulting income to build long term economic security, not to grab the quick bucks or short term jobs on offer.

More broadly, it also means we will have to accept that an economy built on “stuff” is inherently risky when the supply of the original “stuff” is limited, as argued by proponents of peak oil. So we are all going to need to use our resources much more efficiently, and the higher the prices we pay for them the more efficiently we will use them. This means we need to steadily shift our tax base away from employment, which we want more of, and towards stuff and pollution instead, which we want less of. So the logic of higher taxes at the start of the “stuff” value chain, by taxing mining companies more, and lower taxes for activities further down the chain by taxing other companies less, is good environmental as well as economic policy.

So for Australian readers in particular: as you watch the debate on this issue rage over the coming months, consider both your economy and your kids’ economy. Think about where we are all heading and what kind of economy we need to build. And when a mining CEO earning $6 million a year talks about his heartfelt concern for Australian miners’ jobs and Australia’s economy, just observe the whole process with that great quote in mind “Hell hath no fury like a vested interest disguised as a moral principle.” And realise that this is just the beginning of a long and inevitable economic transformation.

When we focus on news that reinforces our environmental challenges, of which there’s no shortage, we forget just how exciting the opportunities in fixing them are and how fast these solutions are now accelerating. Every story about melting icecaps or raging floods brings a smarter, cleaner world closer. My favourite example at the moment is electric cars. While they had a bad start, we are now on the verge of the breakthrough we’ve been waiting for, with around 30 models coming into the market from the major car companies and new start-ups over the next 3 years.

If we get this right, it’s hard to overstate the significance of the upside. This is a real game changer for our transport and energy systems. Forget any old ideas you have about niche markets, limited range and slow cars. There are some very exciting cars on the way and some business concepts that could change not just personal transport but the whole electricity sector. How will this unfold?

Imagine for example not charging your car overnight, but pulling into a “battery change station” where a machine simply takes out your battery pack and replaces it with a fully charged one, all in a few minutes, while you go and pick up a coffee. The batteries will have been charged by 100% renewable energy and you will have a contract that guarantees the price you pay, eliminating fears of petrol price rises. That’s the vision now being implemented across a number of countries by the very well funded Better Place and its founder Shai Aggasi as you can read here.

But it gets even better. You could also have a car that plugs into the grid when you’re not driving it. This means when the power is cheap because demand is low you will be able to charge your car and when there is high demand and power is expensive you can sell it back to the grid and make a profit. So your car effectively becomes a power station and you become a mini power company! An additional benefit of this is that the car fleet acts as a giant battery, enabling storage of intermittent renewables like solar PV and wind power.

By the way, they are also dramatically cheaper to run because electricity is so efficient at energy conversion. If you want some more details on the numbers take a look at this excellent summary by Andrew Simpson from Curtin University.

If you’re worried these electric cars will be boring to drive then take a look at Tesla Motors who are producing the Tesla Roadster that will go from 0 – 100kh/h in 4 seconds. Who said greenies don’t know how to have fun!

This is all in addition to the clean cites, no air pollution and countless new jobs created as we build the infrastructure for this transport and energy revolution.

Heard all this before and wondering if its real? Warren Buffet certainly thinks its is. He invested US$230 million in Chinese electric car company BYD in 2008 and his 10% stake is now worth close to $2 billion. China plans to put a million electric cars on the road by 2012 so BYD is looking like delivering on its name for its owners (BYD stands for Build Your Dream!).

As a transition this dramatic takes off in a market, it’s hard to tell where it will head but in any outcome the implications for consumers, business and markets are certainly profound.  Alan Kohler makes an interesting argument in his investment newsletter The Eureka Report as to why all cars will be electric within 20 years. He points out that when people come to believe that the electric car is going to be the clear winner, they will suddenly realise their old petrol car will have close to zero resale value within a few years. At that point there will be a rush to go electric, to avoid the inevitable price collapse in second hand petrol cars. This will of course be self-reinforcing when it takes off.

Of course we can’t be sure which technologies, business models and companies will succeed. What we can now safely accept however is that with so many people and so much money focused on making this work, the time has clearly arrived when the internal combustion engine is heading for a rapid sunset.

Let you mind run over the implications of that for the oil industry and peak oil….

So next time you read about a melting glacier, remember how much fun driving into the future is going to be.

Throughout my 35 years in sustainability it has always seemed odd that while so-called economic rationalism reigned over our political, economic and business worlds, rational thought wasn’t applied to issues like climate change. The risks were always clear, as defined by rational science, while a logical analysis of the economics showed acting early was cheaper than acting late. Yet a strange kind of religious and ideological zealotry took hold, as otherwise sensible, educated people ignored rational thought. It was a failure of reason.

While Copenhagen failed to deliver any agreement however, it may well mark a return to rational thought and with it some profound shifts in markets, politics and our approach to sustainability. Perhaps historians will mark this point and refer to the world BC and AC – Before Copenhagen and After Copenhagen.

What will historians say changed at the end of 2009? And if we could read their conclusions now, would it change our present responses – not as historians but as the creators of that history? Perhaps they will write something like this:

The old world ended at Copenhagen. It was the moment a critical mass of people came to accept that the old way of doing things was finished. They started to prepare for a new world, and for the shift to the war footing that would deliver it.

While Copenhagen failed to deliver action on reducing emissions, it delivered a very clear outcome. It shattered assumptions that had previously framed the debate and so provided an historic shift in the approach to the issue.

For a start it was the end of the debate about the science. Copenhagen marked the victory of reason over ideological and religious zealotry.

The debates continued on the detail and that was of course a healthy part of the process. There is always uncertainty in science and such debates test the strength of assumptions. But After Copenhagen there was a critical mass of powerful and influential people who accepted that despite the uncertainties, it was time to act. They kept debating 1 vs 2 degrees of warming and levels of CO2 at 350 vs 450ppm but they stopped debating the rules of physics and chemistry. They knew if you increase the thickness of the atmosphere’s blanket the world gets warmer. While many remained frustrated at the lack of action despite this acceptance, this was a critical turning point because the mathematics of what accepting the science meant for the economy were profound.

It was also the end of any chance of a measured and careful transition. That moment probably passed in 2000 but it was firmly dead and buried with the lack of an agreement in 2009. With actual emissions reduction now years away, the lags in the climate system dictated that a crisis driven, war like response was now inevitable, even with the high 2 degree target. As a result, assumptions about the pace of change and the process by which it would be delivered were finished. It was clear After Copenhagen that when the change came, the pace would be rapid, the process chaotic and the transformation radical.

This meant the level of national economic and company business risk posed by delay was now much greater than the risk posed by the change itself. As a result, business came on board at Copenhagen, now seriously worried that delay would lead to such rapid change, their companies faced catastrophic commercial risk.

Perhaps the shift of greatest historical significance was that it was now clear the pursuit of global consensus was an illusion. The major powers had played along with the UN process because the complexity of reaching consensus gave them an excuse to avoid action. They could profess support for a global deal, knowing it wouldn’t happen. But once there was a danger of it becoming real, they dropped that idea like a hot potato. There was nothing in history to suggest they were ever going to let large numbers of small, poor countries help determine the rules. As history shows, those with power don’t give it up lightly.

Instead they started the process of forming what was to become the Coalition of the Cooling, a group of powerful nations and their friends who had sufficient economic and political muscle to define the inevitable economic transition. If power was going to shift away from the sole superpower, it was in the interests of both the US and the group of large emerging powers to form a new club to guide the future. With the addition of their various allies, the future could then be negotiated with 10 people in the room. China had arrived.

What those in power missed until much later though was the strength of public concern and as a result the rising influence of civil society. Tens of thousands of advocates had gone to Copenhagen, assuming their intellectual and political contribution would help leaders get the right outcome. They left angry at the failure of world leaders but determined to force change from the bottom up.

The combination of civil society, particularly the youth movement, along with the simple mathematics of climate science, led to what most investors missed completely until it was too late.

After Copenhagen, coal was finished.

It was surprising so many missed this because the data was clear for all to see. Investment in clean energy outstripped investments in fossil fuel energy every year from 2008 on. More importantly, once 2 degrees was accepted as the maximum target, it was all over for coal. There just wasn’t any room in the remaining carbon budget for coal to keep growing. So once the world’s powers decided the science was in, coal was out.

This was the case anyway and would have unfolded over the decades to come, but when civil society decided to give up on the direct political process and focus all of its attention on coal, sentiment shifted quite rapidly.

It was of course technically illogical to focus just on coal, after all it was only 20% of global greenhouse gas emissions. But it was already clear the market would kill off oil, with electric cars and / or peak oil. All the alternative NGO campaign targets were too complex and missed the key ingredients : a powerful enemy that can be demonized, a simple NO campaign and definable physical targets to focus on. The movement had learnt the dangers of diffusion by putting so much into Copenhagen for so little tangible result.

So the group with nothing to lose, the Angry Islanders joined with the youth driven movement Our Climate Our Time and directed its powerful emotional message entirely onto coal.

Campaigns erupted everywhere – targeting every coal mine, every coal company and every coal train and ship. It was a market smart campaign with investors targeted as owners, banks as lenders and coal executives as climate criminals. It took a few years to build momentum but once the US and China jointly announced a ban on new coal plants, the house of cards came tumbling down. The valuation of coal companies collapsed, under the combined weight of public disdain, regulatory threat and shrinking market, with alternative technologies now competing on price. With investors running scared having seen their coal investments drop 75% in value over a month of carnage, the industry went into terminal decline, confined to the margins thereafter.

The litigation against directors and fund managers however, carried on for a decade more. Regulators took action against directors who hadn’t explained the key risks to investors. Shareholders asked why these risks weren’t obvious to directors given the science and why they were misled about the commercial potential of CCS.

So back to the present as we head into 2010.

Who knows how the future will actually unfold, but some parts of the above are clear. The focus on Copenhagen failed to deliver for the global climate movement. It was always going to, as I argued in my last column, but even I didn’t think it would fail quite so spectacularly. So a shift in focus is inevitable for climate campaigners. We don’t know where it will shift to, but we’ll find out in 2010.

The business community are the biggest losers from Copenhagen. Despite their really serious focus and coordinated calls for action leading up to Copenhagen, they now face heightened risk of discontinuous change. The lack of a regulatory result, combined with the political acceptance of the need for even stronger action than before, creates a huge gulf between present reality and the inevitable future. That gap will close at some point and do so suddenly. For companies determining their business strategies this poses massive risk. It makes the coal scenario painted above far from fanciful. Markets are driven by sentiment and sudden sentiment shifts are now inevitable. The challenge is working out where and when they will strike. I’d certainly be nervous if I was a coal executive or investor.

For policy makers it’s back to the drawing board. With no genuine global agreement anytime soon, perhaps they will abandon trading schemes and revert to the much simpler approach of national carbon taxes and bilateral deals, following the trade model. Meanwhile all but the lowest carbon economies now face ever increasing risk from delay. When the global market shift gets momentum, being stranded with high per capita carbon emissions could be competitive disaster for nations that are slow to act.

On personal level, part of the challenge is dealing with despair and frustration. Community activists, corporate leaders, policy makers and scientists have put so much effort into action on climate change, for little result. Sure we’ve seen great progress in understanding and have many new allies on board but negligible action to even delay the now inevitable crisis. The climate responds to emissions not to political accords.

So take a moment to grieve for the lost opportunity, shed a tear like Bill McKibben did and say thanks to all those who have thrown their all at it.

We have led the horse to water but it’s not yet thirsty enough to drink.

But don’t stay there. We don’t have time for despair. We now have to move on to the new world, the one After Copenhagen. So after some Christmas rest and reflection, decide what you’re going to do and get back to work. We have a civilisation to save.

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