The Winners of Climate Change — Introduction to the Series Responses

on 5 Oct, 12:03

The Winners of Climate Change — Techno-fixes

The Winners of Climate Change — Techno-fixes

The information for the article below comes from Windfall — The Booming Business of Global Warming, from author McKenzie Funk. Focused on the crucial fact that global warming, along with the humans it affects and who are affecting it, is global, this book means to provide an answer to the increasingly urgent question “What are we doing about climate change?”*

Techno-fixes represent the ideal that innovation and market forces can save us from climate change. They are more proof that technological defenses against climate change are generally going first to people who can afford them, those who are emitting the most carbon, who are taking care of themselves before turning to the developing world.


Over the last century, Europe’s Alps have lost half their ice, one-fifth of it since the 1980s. The Pitztal, in the Austrian state of Tyrol, is the highest of the five Austrian resorts used for fall and spring skiing. One measure of the Pitztal Glacier’s decline is that one of the ski lifts built atop it has had to be moved three times in twenty-five years, another is the giant, insulated blanket the resort cloaks over the glacier every summer, hoping to slow the melt. Some 80 million tourists come to the Alps each ski season. Some 1.2 million Tyroleans, including nearly everyone in the Pitztal, depend on glacier skiing for their livelihoods.

Across Europe, across the world, an economy is imperiled. In early 2007, slopes were bare the week before the famed Hahnenkamm World Cup race in Pitztal’s neighboring Kitzbühel, and helicopters had to fly in 160,000 cubic feet of snow at a cost of more than $400,000. The next winter, dome-encased indoor ski areas, including the seven-hundred-vertical-foot SnowWorld Landgraaf in the low-lying Netherlands, were officially added to the European race circuit.

In 2009 Pitztal produced its latest salvo in the war against melt: it deployed a snowmaker, one of the world’s first models of the IDE All Weather Snowmaker, a $2 million device capable of shooting out thirty-five thousand cubic feet of snow in twenty-four hours at any temperature on any day of the year. “The economic impact of global warming is beginning to show,” the snowmaker’s press release read. “IDE’s All Weather Snowmaker brings under your control what previously could not be controlled!” It came from Israel, the “start-up nation”, a country which has historically challenged its harsh environment relying on Enlightenment ideals: faith in reason, faith in capitalism, faith that any problem has a rational solution if man is rational enough to find it.

Snowmaking has become a billion-dollar global industry. Cannons now spray man-made snow on nearly half of Austria’s ski terrain, sucking up roughly 500,000 gallons of water per acre of artificial snow. Across the Alps, snowmakers use more water than does Vienna, a city of 1.7 million people—as much water per acre, it turns out, as a typical field of wheat.

Water scarcity

“If there’s a market for anything, it’s water. In 2020, about one-third of the world’s population will have no access to secured freshwater. The average water consumption globally is between fifty to a hundred liters a day. So now multiply that by 2.5 billion people! That’s all you need. If you ask, what’s a market potential, that’s a market potential!”
Dr. Etan Bar, environmental-engineering professor at Ben-Gurion University

For the desalination industry, melting glaciers are particularly auspicious: what comes after melt is drought. Glaciers and snowfields are water reservoirs, trapping water from precipitation uphill in winter and releasing it in summer, just when it is most needed. In the glaciers, disappearing ice is disappearing water storage.

Diminishing glaciers and winter snowfall are already affecting people from all over the globe:

Where Consequence
Tropical Andes Seventy-seven million people have their water supplies declining due to shrinking glaciers, along with the hydropower providing half the electricity in Bolivia, Ecuador, and Peru.
Asia Two billion people in five major river basins—the Ganges, Indus, Brahmaputra, Yangtze, and Yellow—depend on Himalayan meltwater. The range’s glaciers, which irrigate millions of acres of rice and wheat in China, India, and Pakistan, lose an estimated four to twelve gigatons of ice a year.
Spain The Pyrenees have lost nearly 90 percent of their glacial cover over the last century ago. The country is becoming so dry so quickly that some warn of “Africanization”—of the Sahara jumping across the Strait of Gibraltar.
Southern California, United States 40 percent of the water supply is on track to disappear by 2020 due to melt in the Rockies and Sierra Nevada.

Wherever rising heat and melt has induced drought, people are trying brand-new ways to cope with the situation:

Where Action
Peru A scientist won a World Bank award for his proposal to paint the Andes white and repel the sun’s lethal heat.
India’s Ladakh region A retired engineer built a $50,000 artificial glacier in the shadow of the Himalaya, collecting runoff in rock-lined ponds that would freeze and attach to an existing glacier in winter.
Barcelona, Spain In 2008, Barcelona imported five million gallons transported in a converted oil tanker, becoming the first city in mainland Europe to resort to emergency water imports.
China The central government is diverting rivers at a scale the world had never seen: the $62 billion, three-canal, 1,812-combined-mile South-North Water Transfer Project will someday move 4.5 trillion gallons each year from the Tibetan Plateau, home to nearly forty thousand melting glaciers, to the cities in the country’s arid, industrializing north. In the meantime until the project is completed, China’s Weather Modification Office produces rain by shooting silver-iodide pellets into its skies using rocket launchers and 37-millimeter anti-aircraft guns.

Desalination plants

“People will drink Pellegrino out of the tap, and they’ll take showers in Pellegrino.”
An engineer from desalination plant builder Poseidon Resources, claiming the water they produce could be engineered to have the exact mineral content and taste of Pellegrino

Massive desalination plants are also on the rise. Between 2003 and 2008, 2,698 plants were built worldwide, and hundreds more were under construction. After building the then biggest and most efficient desalination plant in the world—the 86-million-gallon-per-day (mgd) plant in Ashkelon, Israel—, Israel Desalination Enterprises won contracts to build nearly four hundred of the world’s desalination plants, including:

  • the largest plant in China, a $119 million job
  • a 43-mgd plant in desiccating Australia, a $145 million job
  • a giant, 109-mgd plant north of Tel Aviv in Hadera, a $495 million job
  • two contentious 50-mgd plants in Carlsbad and Huntington Beach, California

There is a problem though: desalination plants use vast amounts of power. Power plants use vast amounts of water for cooling. If they are fueled by coal, or, to a lesser degree, natural gas, they also emit vast amounts of carbon—the Carlsbad desalination plant, the largest in the United States, may get most of its energy from coal; it will then emit 97,000 metric tons carbon emissions a year, that is more than a dozen island nations. Carbon furthers warming, warming furthers drought, and desalination begins to resemble a snake eating its own tail.

As much as snowmaking won’t save the mountain glaciers, desalination will not save the world. If anything, it can only save the rich parts from the fate befalling the rest.

Ashkelon, Israel  On the hunt for potable water, Israeli desalination engineers invented the world’s greatest snowmaker, a product now in use in the melting Alps. Source: McKenzie Funk

Ashkelon, Israel
On the hunt for potable water, Israeli desalination engineers invented the world’s greatest snowmaker, a product now in use in the melting Alps.
Source: McKenzie Funk

Sea-level rise

Experts in flooding, the Dutch are not especially worried about climate change—and would gladly sell you a seawall. Their faith in techno-fixes is grounded in a landscape that has become almost entirely man-made. Two-thirds of its population lives and 70 percent of its GDP is generated below sea level. In a testament to its seawalls, the Netherlands lie at the bottom of Maplecroft’s Climate Change Vulnerability Index, near northerly Iceland, Denmark, Finland, and Norway: 160th out of 170 countries surveyed.

As the rest of the planet began worrying about the sea, the Netherlands started aggressively promoting its water management expertise abroad, from dredging and engineering firms to amphibious architects. It does not lack prominent international success stories: Manhattan looks the way it does partly thanks to land reclamation by early Dutch settlers in what was then New Amsterdam, and the Netherlands’ continued existence itself is its best advertising.

Artificial islands

“We can transform you from climate refugees to climate innovators”
Dutch Docklands’ Paul van de Camp addressing the president of the Maldives

Rather than erecting barriers to keep the water out, development company Dutch Docklands intends to build a floating world on top of the water. It designs not houseboats but islands and infrastructure: highways, apartment buildings, parks, airports, churches, and mosques, envisioning floating and hybrid cities as big as 100,000-person Delft. Their IP-protected designs are eminently exportable, mainly aimed at low-level, sinking islands, like Tuvalu and Kiribati. These islands can’t expect to save themselves by ringing their various atolls with seawalls—the scale and cost of it is inconceivable, but artificial islands hold more promise.

Maldives, the lowest-lying country in the world, a relatively wealthy tourism destination for the rich and famous, has already been feeling the effects of climate change: hotel chains cannot make long-term investments into beach resorts whose beaches are eroding away. Dutch Docklands’ website stated they would soon ink agreements with the Maldives for everything from floating villas to a floating marina. Greenstar, a two-million-square-foot floating garden island with shops, restaurants, and a conference center that was originally designed for Dubai, would be recycled and rebranded as a Maldivian national icon. “The green-covered, star-shape building symbolizes Maldivians’ innovative route to conquer climate change,” read the ad copy. “This will become the Number 1 location for conferences about climate change, water management, and sustainability.”

Protecting from the flood

“The consequence of ‘New Orleans’ is that the Americans have placed orders with a number of Dutch companies to the value of 200 million dollars”
Piet Dircke, director of Dutch multinational Arcadis’ international water program

At a cost of $7.5 billion, in 1997 Netherlands completed its Delta Works: dikes, dams, and tidal barriers that make up the world’s greatest coastal defense network. The Maeslantkering is the crown jewel of the Delta Works, an enormous storm-surge barrier at the mouth of the port in Rotterdam, one of the largest moving structures on the planet. The barrier consists of two curved, floating gates, each one twice as long as the Statue of Liberty is tall, that swing closed when there is a storm surge of at least three meters high. Built to withstand all but a one-in-ten-thousand-year storm (even though climate change could muddy the math), the Maeslant barrier took six years and $500 million to build and install. Since then, it has been used only once, in 2007.

When it comes to seawalls, storm-surge barriers, and other city-scale defenses, Dutch firms are confident their services will be needed. After helping build storm-surge barriers for Venice, New Orleans, London, and St. Petersburg—metropolises that could afford to pay much more than any island nation could—, Dutch companies would target New York City. Dutch multinational Arcadis, a $3.3 billion, twenty-two-thousand-employee engineering firm, offered a proposal to safeguard the city. “You can’t seal off New York with just one barrier,” Arcadis’ international water program director Piet Dircke said. “You need an East River gate. On the New Jersey side you need a gate. At the Verrazano Narrows you need a gate. And you need a gate near Jamaica Bay if you also want to protect JFK airport. There are four holes, luckily not more than that.” The task would be lucrative: the Narrows gate alone would come at a cost roughly estimated at $6.5 billion.

Dircke’s proposal for the Narrows would protect Manhattan from a twenty-two-foot surge. However, it comes with one downside, one unavoidable evil: when water from the storm surge is blocked, it doesn’t just disappear, it flows elsewhere. If a surge came barreling toward a Verrazano barrier, it would do the hydrological equivalent of a bounce, landing instead somewhere else. Wall Street, the most moneyed place in the world, would be saved. But Arrochar and Midland Beach on Staten Island, Bath Beach and Gravesend in Brooklyn—these and other immigrant-heavy neighborhoods, just outside the Narrows, poorer than the core, just above sea level, would be destined for an even bigger surge, and they would likely be underwater.

When Hurricane Sandy hit New York City in late October 2012, there was not yet a barrier, just a hint of what was to come. Water flooded subway tunnels and power stations, and the cityscape went dark. Across the stormy Atlantic, in the Netherlands, Arcadis’ stock jumped 5.6 percent, capping a 43 percent rise for the year.

Rotterdam Harbor, the Netherlands  The Netherlands, protected from storm surges by massive barriers like the Maeslant, pictured here, is selling its flood-fighting expertise to a worried world. Source: McKenzie Funk

Rotterdam Harbor, the Netherlands
The Netherlands, protected from storm surges by massive barriers like the Maeslant, pictured here, is selling its flood-fighting expertise to a worried world.
Source: McKenzie Funk

Climate genetics

Genetic modification is the logic of climate adaptation taken one step further: instead of changing how and where life is lived, it changes, however modestly, what life is.


The yellow-fever mosquito, Aedes aegypti, is better known as the primary carrier of dengue fever, for which there is still no vaccine. Urbanization, globalized trade, and increasing air travel have helped grow dengue into a global epidemic three thousand times more prevalent than it was in the 1960s, causing as many as a hundred million infections and twenty-two thousand deaths in more than a hundred countries each year. Aedes like it hot, and they prefer humans to any other animal. They are attracted by the CO2 we exhale with every breath, and their potential range expands, many scientists believe, with every ton of CO2 our industries emit.

In 2009, the first dengue outbreak in the United States in seventy-five years took place in Florida. To battle it, the Mosquito Control District would dispatch sprayer-equipped helicopters, raining insecticide over the city. Because the Florida legislature had limited local governments’ taxing authority, the district was burning through its cash reserves. So it wanted genetically modified (GM) mosquitoes approved, and released into the city. The flagship product of British company Oxitec, the patent-protected Aedes aegypti OX513A carries a suicide gene that would theoretically doom the next generation to an early death. Sent out by the millions to breed with native Aedes, it would make dengue transmission impossible. After “sterile” Oxitec mosquitoes were released every week for six months, native Aedes aegypti population would be reduced “to zero or near zero.”

Finding cure to mosquito-borne illnesses is among the top priorities to the world’s largest charitable organization, the $33.5 billion Gates Foundation. The foundation has given:

  • a $19.7 million grant to a mosquito-modding consortium that included Oxitec and a number of public universities (geared toward open-source mosquito varieties, not OX513A.)
  • $13 million to a group in Asia and Australia trying to infect Aedes with a dengue-zapping bacteria
  • $62 million to the long-stalled international Dengue Vaccine Initiative
  • half a billion dollars and counting to a partnership with pharmaceutical giant GlaxoSmithKline (GSK) to hasten a long-awaited malaria vaccine

Some people are worried about transgenic mosquitos released in the wild. If Aedes aegypti is wiped out, might not Aedes albopictus, the Asian tiger mosquito which can also transmit dengue, come fill its ecological niche? Oxitec claims to have found a solution to this problem: Oxitec’s campaign against aegypti could happily morph into a campaign against albopictus. Another concern is potentially more worrisome. Studying Oxitec’s papers and regulatory filings, researchers at the U.S. Department of Agriculture and Germany’s Max Planck Institute found out that, in the lab, nearly 3.5 percent of the larvae born to a modded male and wild female somehow survived, even without antidote tetracycline. (OX513A mosquitoes are not technically sterile. By inserting into them a synthetic DNA known as tTA—a fusion of DNA segments from the bacteria E. coli and the herpes simplex virus—, Aedes aegypti can mate and produce offspring, but these would not grow past the larval stage without the presence of the common antibiotic tetracycline). Considering that 100 million mosquitoes would be weekly released in a 5 million people city, nearly 3.5 percent of these is a big number. “There is the plausible concern,” they wrote, “that females could inject tTA—the fusion of E. coli and herpes DNA—“into humans.”

But if releasing GM mosquitoes in the wild sounds spooky, it gets even more so. Some scientists are warming up to the idea of modifying bacteria and wild animals—not just crops—to adapt to the new climatic reality. In 2012, a study by NYU professor S. Matthew Liao proposed reengineering humans themselves to produce smaller, less resource-hungry, less emissions-intensive offspring. Months later, the first conferences on using “de-extinction” and “synthetic biology” to preserve the natural world were convened by the National Geographic Society and Wildlife Conservation Society. If we can create a GM bacteria that induces plants’ roots to grow, then the Sahel needs not become the Sahara. We can already manipulate stem cells. We can already reconstruct lost genomes. We can already clone. The polar bear need not ever go extinct. If a species disappears because Arctic sea ice disappears, we already have the power to bring it back to life.


In the United States, genetically modified crops have penetrated the market almost completely since their arrival, making up 94 percent of planted cotton, 93 percent of soybeans, 88 percent of corn. They have spread to two dozen other countries, and the value of the global GM market has jumped by 7,500 percent. The numbers will only rise along with the temperatures, for the world is on the verge of seeing not only crops with drought-resistant tweaks but millions more farmers—Chinese, Nigerian, Indonesian, Brazilian—with just enough money to buy genetically modified seeds.

Emerging in the race for climate-ready crops is publicly-traded firm Monsanto, with revenues of $11 billion a year. Its stock is held by everyone from Deutsche Bank’s climate funds to the Gates Foundation. It was a subcontractor for the Gates-funded African Agricultural Technology Foundation, which had received $40 million to develop drought-tolerant corn for five sub-Saharan countries. In 2009, the continent’s first varieties were tested under the South African sun. Two years later, Monsanto’s MON 87460—also a genetically modified, drought-resistant variety of maize—was quietly deregulated for use in Iowa, Indiana, and Nebraska, United States.

Since 2008, Monsanto and what is called the five other “Gene Giants”—BASF, DuPont, Bayer, Dow, and Syngenta— have requested at least 2,195 patent filings related to “abiotic stress tolerance”—resistance to extreme temperatures, resistance to droughts, resistance to anything in the environment that is not living but not friendly. Dominating the climate-patent race was the $2.5 billion partnership between Monsanto and BASF, “the biggest joint biotech R&D program on record”. When they identified a useful gene sequence in one plant, they would often file for a patent on it that applied to multiple plants. One issued to BASF in late 2009 is representative. “We claim . . . a transgenic plant cell transformed with an isolated polynucleotide,” begins U.S. patent 7,619,137. The plant cell was found in any of the following: “maize, wheat, rye, oat, triticale, rice, barley, soybean, peanut, cotton, rapeseed, canola, manihot, pepper, sunflower, tagetes, potato, tobacco, eggplant, tomato, Vicia species, pea, alfalfa, coffee, cacao, tea, Salix species, oil palm, coconut, perennial grasses, and a forage crop plant.”

The Gates Foundation, which shares its founder’s focus on techno-fixes, and whose collaboration with Monsanto has helped Monsanto justify products meant for people who couldn’t afford them, has notably spent not a penny on helping the world cut carbon emissions. “We believe the best way for the foundation to address climate change is to help poor farmers adapt,” read an overview of its agricultural strategy.

*McKenzie Funk spent six years reporting Windfall, traveling around the globe interviewing people who, driven by ideology, fear, or hard-nosed realism—or all three—, thought they were doing the necessary thing to come out ahead in a new, warmed world, people who thought climate change would make them rich.

McKenzie Funk and his book, Windfall

McKenzie Funk and his book, Windfall

on 28 Sep, 10:02

The Winners of Climate Change — Extreme weather

The Winners of Climate Change — Extreme weather

The information for the article below comes from Windfall — The Booming Business of Global Warming, from author McKenzie Funk. Focused on the crucial fact that global warming, along with the humans it affects and who are affecting it, is global, this book means to provide an answer to the increasingly urgent question “What are we doing about climate change?”*

Extreme weather is an opportunity for growth, but it is a growth born of scarcity, of someone else’s crisis—the zero-sum economics of distress. For there to be winners, there also necessarily has to be losers.


“If you could have a private fire force that would specifically work to save YOUR home in the event of a threatening wildfire, and the price of this protection would be $35,000 (financing available), plus $1,600 per year thereafter, how likely would it be for you to hire them?”
Question from Private firefighting company Golden Valley Fire Suppression’s online survey

The wet will become wetter. The dry will become drier. That which burns will burn more often. Across the globe, the first decade of the new millennium was a decade of fire: Fire in Alaska and Spain and Siberia and Corsica and Bolivia and Indonesia and British Columbia. In New Mexico and Oregon and Colorado and Texas and Arizona. In the Black Hills of South Dakota and the swamplands of North Carolina. In Greece, the worst fires in half a century during the worst drought in millennia. In Australia, the worst fire in recorded history during the worst drought in recorded history. In Russia, fires so destructive that the president said out loud that climate change was real. The largest fires in Georgia’s recorded history, in Florida’s recorded history, and in Utah’s recorded history.

The effects of climate change on wildfire is not limited to the lack of water or the heat of the hottest days. Early spring snowmelt means longer growing seasons, eventually more fuel. Higher average temperatures means summers are effectively longer, and fuels have more time to dry. Warmer winters means parasitic larvae—pine beetles, spruce beetles, bark beetles, tent caterpillars—can flourish and expand their range, killing vast forests, creating more dead, desiccated fuel. If there is sustained drought, trees can’t generate the chemicals to fend off the pests. In the western United States, spring-summer temperatures had risen just 0.87 degree Celsius since the mid-1970s, but the fire season was now seventy-eight days longer.

Also responsible is widespread urbanization. In the 1960s, wildfires burned 100 buildings in an average year in Los Angeles, United States. In the 1990s, they burned 300. In the 2000s, it was 1,500. “Normally, we consider the fuel to be trees and shrubs and brush,” said Chief Sam, head of a private army of for-profit firemen. “But now it’s not just trees. The homes are the fuel.”

In California, United States, already by 2009 thousands of private contractors were battling wilderness forest fires on behalf of government agencies. Of the Forest Service’s $1.5 billion firefighting budget, more than half ended up in the private sector. Firefighting cost the federal government more than twice what it had cost a decade earlier.

Other private firefighting companies contract not for the government, but for the insurance industry, protecting the homes of those customers who are up-to-date with their bills:

  • Firebreak Spray Systems, working for AIG’s insurance division, offers its proprietary system to coat insured customer’s houses with a liquefied chemical retardant
  • Fireprotec clears a defensible space around clients’ homes and offers evacuation services to its richest customers
  • Golden Valley Fire Suppression offers spray-foam services as well as “Land Clearing with use of a goat herd.”


“People often expect it to be a big negative for insurers. You get a big sell-off of stock. But unless a really serious one comes through, they’ll put the premiums up and actually get the benefit of improved margins.”
Terry Coles, manager at F&C Global Climate Opportunities Fund, explaining how a good hurricane season helps insurance companies hike rates

Global warming poses a grave danger to insurance companies, but it is also something else: free advertising on a biblical scale. Increased risk is a problem only if not hedged or somehow priced in. Otherwise, it is a business opportunity.

When category 5 Hurricane Andrew struck Florida and Louisiana, United States, in 1992, insurers paid out more than $23 billion in claims, or $1.27 for every dollar of premium collected that year. They turned to catastrophe-modeling using a century of weather data to predict future losses, and then they raised premiums accordingly. After category 5 Hurricane Katrina devastated New Orleans in 2005, they paid out more than $40 billion but, thanks to an expanded market and better models, only 71.5 cents per dollar collected. That year, the industry still made $49 billion in profits. It has profited, sometimes more, sometimes less, every year since.

The innovators

Silicon Valley would also be eager to join the insurance industry. The Climate Corporation, founded in 2006, harnesses the power of big data—climate modeling, hyperlocal weather forecasts—to sell crop insurance to farmers in the Midwest and weather insurance to the whole world. By 2011, it had compiled fifty terabytes of raw data and raised more than $60 million from such backers as Google Ventures, Allen & Company, the Skype founders, and the green-tech kingmaker Vinod Khosla, who said it would “help farmers globally deal with the increasingly extreme weather brought on by climate change.”

As the Climate Corporation found new ways to underwrite customers’ bets, its own bets were underwritten by the traditional reinsurance industry. “If we have a loss, the reinsurer covers 100 percent of the loss,” the CEO told a crowd at Stanford. “I mean, venture capitalists don’t want to be betting on the weather. They want to bet on a team that can help other people’s capital bet on the weather.”

Growth is everywhere for the innovative:

  • AIG offers rich policyholders clustered on risky coastlines its Hurricane Protection Unit: men with GPS units and satellite phones appearing on the scene after a storm blew through to evacuate valuable artwork and other possessions.
  • Munich Re—the world’s largest reinsurer, with thirty-seven thousand employees in fifty countries and as much as $5 billion in annual profits— offers protection to investors from carbon-credit defaults, and its weather derivatives helps solar projects hedge against cloudy days, wind projects against calm days.
  • Munich Re hosted a “Climate liability workshop” a day after Little Tujunga Canyon was on fire in Los Angeles. (It might be prudent to phrase policies so as to limit climate liability, they determined.)
  • Reinsurers Willis Group from the UK and RenaissanceRe from Bermuda pour money into hurricane research, the latter also into hurricane modification: weakening storms by seeding the clouds with aerosols or particles of carbon.
  • Liberty Mutual introduced the world’s first insurance policy to protect corporate executives from lawsuits “stemming from the alleged improper release of carbon dioxide,” after the Inuit of Kivalina sued energy companies in July 2008.


“I expect to see in the near future a massive expansion of investment in the water sector, including the production of fresh, clean water from other sources (desalination, purification), storage, shipping and transportation of water. I expect to see pipeline networks that will exceed the capacity of those for oil and gas today. I see fleets of water tankers (single-hulled!) and storage facilities that will dwarf those we currently have for oil, natural gas and LNG. There will be different grades and types of fresh water, just the way we have light sweet and heavy sour crude oil today. Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.”
Citigroup’s chief economist Willem Buiter’s vision for the future of water

While there were record floods in China, there were unprecedented droughts in Australia. We still have the exact same amount in our ecosphere, but the ultimate effect of global warming is that percentage that is freshwater is getting smaller, the percentage that is salt water is getting larger, and the maldistribution of freshwater is getting much more severe. The “supply/demand imbalance” for water—fueled by population growth, accelerated by carbon emissions—is only increasing, making the situation ripe for speculation.

For the climate investor, water is the obvious thing. Carbon emissions are invisible. Temperatures are an abstraction. But melting ice, empty reservoirs, lapping waves, and torrential rainstorms are physical, tangible—the face of climate change. Water is what makes it real. After An Inconvenient Truth, during 2007’s record melt in the Arctic Ocean, at least fifteen water mutual funds launched globally, more than doubling the number in existence. In two years, the amount of money under management had ballooned tenfold to $13 billion. Credit Suisse, UBS, and Goldman Sachs hired dedicated water analysts, the latter calling water “the petroleum of the next century” and referring to “major multi-year droughts” in Israel, Australia, and the American West. “At the risk of being alarmist,” Goldman said in a 2008 report, “we see parallels with Malthusian economics.”

Saving every drop of water

“Our prosperity has always been based on water. But those fields are going to die, and then see where the people go.”
René Acuña, director of the Mexicali Economic Development Council, explaining the consequences to Mexicali from having the All-American Canal covered with concrete

A hundred miles east of San Diego, next to the border with Mexico, is the All-American Canal: California’s first and biggest claim on the waters of the Colorado River, the biggest irrigation canal on the planet. For most of a century, the All-American Canal had been lined with dirt, and at least twenty-two billion gallons—enough for 122,000 American households—were lost each year through its porous walls. The Imperial Irrigation District (IID), which controls 20 percent of the Colorado’s flows, would now line the canal with concrete, and San Diego would pay the $290 million in construction costs. The problem was that for most of a century the lost water had, ignoring the international border, percolated up in the Mexicali Valley, supporting the Mexicali agriculture and providing potable water to its million inhabitants. Take it away, and soon hundreds of people would be out of work, tens of thousands of people would be out of drinking water, and sensitive wetlands would be drained. Every drop of water saved would go to the City of San Diego. Most of the city’s water, if history was any guide, would go to keeping four hundred parks and golf courses green. Residents themselves would dump half their water into their yards.

All-American Canal, California  During a historic drought in Southern California, the All-American Canal was reengineered in order to get more water to San Diego, less to Mexico. Source: McKenzie Funk

All-American Canal, California
During a historic drought in Southern California, the All-American Canal was reengineered in order to get more water to San Diego, less to Mexico.
Source: McKenzie Funk

Owning the water

“There’s no risk. If some guy doesn’t pay, we still own the water. It’s like you turn off a tap.”
John Dickerson,financial manager at Summit Global Management

California’s sixteen-person Summit Global Management had bought billions of gallons of water in two vital, desiccating river systems: California’s Colorado and Australia’s Murray-Darling. While both systems had experienced unprecedented recent droughts, the fund’s financial managers had experienced the opposite: a flood of money.

Summits’ first water fund, opened in 1999, was up 200 percent after its first decade and had $600 million under management. Similar to its competitors Pictet, Terrapin, and Credit Suisse, Summits had picked stocks within the convoluted $400 billion field of “hydrocommerce”: the business of storing, treating, and delivering water for use in households, manufacturing, and agriculture. They bought:

  • shares of builder-operator multinationals such as France’s Veolia and Suez, its compatriot and major rival in water treatment and desalination
  • diggers of ditches, layers of pipelines, and manufacturers of filters, pumps, meters, membranes, valves, and electronic controls
  • privatized utilities in cities big and small

Summit then took a more significant step in response to creeping global drought. It decided that hydrocommerce—things merely related to water—wasn’t enough. They wanted actual water: “wet water,” as Summit’s financial manager John Dickerson called it. Raw water. The thing itself. Summit’s second hedge fund, the Summit Water Development Group, opened in June 2008 to amass water rights in Australia and the American West. Already the new fund had attracted hundreds of millions of dollars. “The real future,” Dickerson said, “is going to be the direct assets—not through the medium of a utility, not through the medium of a pump company—but the direct, physical water assets.”

Dickerson planned to eventually take the Summit Water Development Group, his “wet water” fund, public—meaning a way for anyone to finally be able speculate on water, plus a big payout for early fund investors who had put up the minimum $5 million buy in. In the meantime, he was playing what he called an “aggregation game.” Across the American West, up and down the Colorado River system, Summit took stakes in private reservoirs with the goal of accumulating enough water to sell as a package to suburban boomtowns within the basin. Once resold, the ditches’ water would be left in the river to be taken up by city pipes.

With a fracking boom and an equally water-intensive hunt for other unconventional oils, petroleum interests were on a water-buying spree. According to one study, energy companies controlled more than a quarter of the upper Colorado basin’s flow, more than half of its water storage. Farther south, in Texas, the onset of fracking corresponded to the driest year in state history, and ranchers and cities alike were priced out of the water market. To frack a single well can take as many as six million gallons. In 2011, petroleum companies drilled twice as many new water wells as they did oil and gas wells. For the Summit Water Development Group, all this was very good news.

The catastrophic drought in Australia’s Murray-Darling basin was also good news for Summit. Australia had liberalized its system, creating what has become the planet’s freest and most bustling water market. In the Murray-Darling, Summit had secured what outsiders estimated to be at least 10,000 megaliters, or 2.6 billion gallons. He planned to become something other than a short-term speculator: a long-term rentier. Once Summit purchased Australian farmers’ water, he said, the firm banked it and leased it right back to them and their neighbors. Returns were already a safe 5 to 6 percent a year.

Water (stock) market

In an era of increasing scarcity, many economists argue, the best way to cut our profligate waste of water is to have active water markets. Trading would provide incentives to conserve and use water efficiently, allowing a scarce resource to flow to the highest-value activities.

Waterfind, Australia’s largest water brokerage, plans to become a true stock market—the Nasdaq of water. Its own software platform allows trades up and down the Murray-Darling. It features exchange rates for different parts of the river system, owing to evaporation and local regulations. These are paper trades, conducted by phone and Internet. Buyer and seller could be hundreds of miles apart. One would turn off his pumps, and the other would turn his on. The water market in 2008, near the peak of the drought, was worth $1.3 billion, and it had been growing by 20 percent a year. The price of a megaliter (equivalent to 264,000 gallons) fluctuated wildly. “In the temporary markets last season,” Waterfind’s PR manager said, “the low was right around $200. The high was right around $1,200.” In general, though, during the drought, the price went up.

The sellers in the burgeoning water markets are family farmers. Small-time ranchers sold to corporate farms or citrus growers or the government; water flowed uphill to cities and vineyards. In 2010, the biggest purchaser was the federal government, on a $3.1 billion run of buybacks for what it called “environmental flows.” By 2030, climate change is expected to decrease local rainfall by 3 percent, decrease surface water flows by 9 percent, and increase evaporation by up to 15 percent. Lining up behind the government were Summit and a growing cast of other funds: Australia’s own Causeway Water Fund and Blue Sky Water Partners, Singapore’s Olam International, Britain’s Ecofin fund, and a company called Tandou Limited, which was owned by a New Zealand corporate raider, the American hedge fund Water Asset Management, and Ecofin.

By 2008, near the end of the decade of drought and historic evisceration of the $35 billion farming sector, on a macro level, Australia’s economy had survived remarkably unhurt, undeniably helped by its water trading system. However, undeniable were also the distortions: Australia, which had been one of the planet’s great exporters of rice and wheat, saw its rice production down to 1 percent of normal, its wheat production to 59 percent. That year, what aid agencies dubbed the “global food crisis” led to protests in Egypt, Senegal, Bangladesh, and dozens of other countries. Adelaide’s wine industry, on the other hand, was still thriving.

Illegal immigrants

“Climate change is best viewed as a threat multiplier which exacerbates existing trends, tensions and instability. There will be millions of ‘environmental’ migrants by 2020 with climate change as one of the major drivers of this phenomenon . . . Europe must expect substantially increased migratory pressure.”
Spanish diplomat Javier Solana, the EU foreign relations chief and former head of NATO

In large part because industrial trawlers from France, Spain, Japan, and other foreign countries have been scouring the coast of northwest Africa since at least 1979, Senegal is running out of fish. Gone are the schools of lucrative tuna and the sharks, left behind are smaller herring, along with unemployed fishermen, many of whom found new work as human traffickers. Migrants would pay nearly $1,000 to be ferried nearly a thousand miles to southernmost Europe. The boats were fishermen’s pirogues, equipped with two engines and two GPS units and packed with dozens of young men. The weeklong crossing sometimes stretched to two weeks when captains got lost, leaving boats desperately short of food and water. In record-breaking 2006, thousands died en route—as many as six thousand, or one every six migrants, according to a Spanish estimate.

Whether the men fleeing for Europe should be considered some of the world’s first climate refugees is debatable, but the many factors, in aggregate, are exactly what Europe fears. Africa would warm 1.5 times faster than the rest of the world, warned the IPCC (Intergovernmental Panel on Climate Change)—and the Western Sahara region would warm the most. Today’s boat people could be but a hint of what is to come. The Continent’s response, notwithstanding its efforts at emissions cuts in Copenhagen and at other climate summits, is also a hint of what is to come. It has been creating a “Fortress Europe,” in the words of Amnesty International—an “armed lifeboat,” in the words of the journalist Christian Parenti. A virtual wall to keep Africans out.

The European effort might be not as conspicuous as the new fence near the All-American Canal along the United States border with Mexico, or as the twenty-one-hundred-mile fence India being completed around sinking Bangladesh, or as the twin fences Israel announced in 2010 to seal off the Sinai from sub-Saharan migrants, but it is comprehensive:

  • pan-European border agency Frontex’s Spanish and Italian patrol boats cruise the Senegalese coast
  • European planes and helicopters run aerial surveillance
  • soon, a satellite link would connect immigration-control centers in Europe and Africa to help track boat people
  • the Continent would be secured by the proposed European Border Surveillance System: a complex of infrared cameras, ground radars, sensors, and aerial drones.

A web of detention centers is rising all over Europe. The controversial Return Directive, a common deportation policy passed by the European Parliament, allows to have migrants held without charge for up to eighteen months before being shipped home. More than two hundred sites spread between two dozen countries, from a former Jewish internment camp in France to an abandoned tobacco factory in Greece to an empty airline hangar in Austria. Together, they have room for as many as forty thousand migrants.

In Britain, most of the prisons are run by private contractors such as the Serco Group, the MITIE Group, and especially G4S, the world’s second-largest private employer, after Walmart. The contractors carry out deportations, too, escorting shackled Nigerians or Angolans or Bangladeshis on a coach-class flight home. Outside the EU, G4S had run Australia’s refugee detention system. In the United States, the prisoner market is dominated by the Corrections Corporation of America, whose lobbyists helped draft Arizona’s controversial 2010 immigration bill, apparently because it was good for the bottom line: the more migrants arrested under the new law, the more demand there would be for the corporation’s jails.

Climate change would only grow the market.

India-Bangladesh border  The world's longest border fence is being built around Bangladesh to keep migrants at bay. Source: McKenzie Funk

India-Bangladesh border
The world’s longest border fence is being built around Bangladesh to keep migrants at bay.
Source: McKenzie Funk

*McKenzie Funk spent six years reporting Windfall, traveling around the globe interviewing people who, driven by ideology, fear, or hard-nosed realism—or all three—, thought they were doing the necessary thing to come out ahead in a new, warmed world, people who thought climate change would make them rich.

McKenzie Funk and his book, Windfall

McKenzie Funk and his book, Windfall

Featured image by Official U.S. Navy Page.

on 21 Sep, 11:50

The Winners of Climate Change — A new world map

The Winners of Climate Change — A new world map

The information for the article below comes from Windfall — The Booming Business of Global Warming, from author McKenzie Funk. Focused on the crucial fact that global warming, along with the humans it affects and who are affecting it, is global, this book means to provide an answer to the increasingly urgent question “What are we doing about climate change?”*

While Arctic countries will have access to vast expanses of previously unaccessible land, suddenly within reach from retreating ice, poorer countries will have their sovereignty contested, having their farmland acquired by foreign nations and corporations. In between, new countries will be formed, others will split, and yet others will become failed states. The landscape is being globally altered by climate change.

The Arctic

“Global warming is not as catastrophic for us as it might be for some other countries. If anything, we’ll be even better off. More of Russia’s territory will be freed up for agriculture and industry.”
Spokesman for the Ministry of Natural Resources of Russia

“We shall save on fur coats and other warm things.”
Vladimir Putin, President of Russia

The Arctic represents the first way to profit off climate change: expansion into virgin lands and virgin resources. In the shallow Arctic, nearly every patch of seabed could be claimed by someone. The less ice there is, the more petroleum there is within reach, and the more pressure there is to stake a claim. Carving up the Arctic is the last great imperial partition.

Ratification of the the UN Convention on the Law of the Sea—the so-called constitution of the oceans, a treaty signed at the latest count by 164 countries—has almost everything to do with oil and gas. While the treaty establishes navigational rules and each nation’s rights to the fish and minerals within two hundred nautical miles of its coastline, it also allows nations to claim further territory based on how far their continental shelves extend under the surface. “This is part of our land,” the basic argument goes. “It just happens to be underwater.”

This provision, Article 76 of the Law of the Sea, will allow the five nations with Arctic Ocean frontage—Canada, Denmark, Norway, Russia, and the United States—to divide and share the north, turning the world into a different place. The United States, through its foothold in the form of Alaska, would secure its share of polar petroleum—some $650 billion worth, by one count; in terms of seabed it could someday own, with its maritime borders extended and each of its island holdings surrounded by an oversize doughnut of sovereign ocean, would grow by 4.1 million square miles, surpassing China, Canada, and Russia, with their own expanded holdings, to become the world’s largest country.

Oil and gas

I think it’s important to recognize that this [melt] is also an opportunity.
Norway’s petroleum and energy minister

“As a noted historian said, ‘The wealth generated by [Alaska’s] Prudhoe Bay and the other fields on the North Slope since 1977 is worth more than all the fish ever caught, all the furs ever trapped, all the trees chopped down; throw in all the copper, whalebone, natural gas, tin, silver, platinum, and anything else ever extracted from Alaska, too. The balance sheet of Alaskan history is simple: One Prudhoe Bay is worth more in real dollars than everything that has been dug out, cut down, caught or killed in Alaska since the beginning of time.’ Yes, oil is everything to us.”
Barack Obama’s appointed director to the Alaska Gas Pipeline Project

According to the U.S. Geological Survey, an estimated ninety billion barrels of oil and 1,670 trillion cubic feet of natural gas, or 22 percent of the world’s untapped deposits, is thought to be hiding in the high north.

Shell’s chief Arctic strategist, Robert Jan Blaauw, explained the role of the Arctic within the global energy scheme: “Today, we share the planet with 6.9 billion people. By 2050, there will be 9 billion people. In order to meet rapidly growing demand, especially from China and India, diverse sources of energy need to be developed in parallel. Renewable energy, yes, in ever greater volumes. We need to reduce CO2 emissions. But also fossil fuels and nuclear. We need them all. As conventional oil and gas sources run out, we need to look at unconventional resources and unconventional locations. And that’s exactly where the Arctic comes in.”

Alaska’s Lease Sale 193 took place in 2008, the first offshore auction in the Chukchi Sea in seventeen years, under which 45,900 square miles of Arctic seabed would be offered up in 9-square-mile chunks. It would be the most lucrative lease sale in the history of the Arctic Ocean, and Shell would scramble ahead of its rivals with high bids totaling $2.1 billion.

Snøhvit, Norway  Norway's Snøhvit, or Snow White, is the northernmost natural gas facility in the world—and some oil companies' model for the future of the Arctic. Source: McKenzie Funk

Snøhvit, Norway
Norway’s Snøhvit, or Snow White, is the northernmost natural gas facility in the world—and some oil companies’ model for the future of the Arctic.
Source: McKenzie Funk

Shipping lanes

The more ice retreats, the more the Northwest Passage—a frozen-over shortcut between the Atlantic and the Pacific—becomes a viable alternative to the Panama Canal. It is internationally accepted that Canada owns the land on both sides of the Northwest Passage, however the United States, supported by the European Union and China, claims that Canada does not own the waterway itself, but should be an international strait open to container ships and oil tankers from all nations—like Malacca, Gibraltar, Bab-el-Mandeb, the Dardanelles, and the Bosporus. This newly available shipping route will allow container ships traveling between China’ east coast and the United States’ east coast to save some four thousand miles and hundreds of thousands of dollars in transit fees and fuel costs.

Devon Island, Nunavut, Canada  A Canadian soldier stands guard at the edge of the Northwest Passage, an emerging shipping lane as the Arctic melts. Source: McKenzie Funk

Devon Island, Nunavut, Canada
A Canadian soldier stands guard at the edge of the Northwest Passage, an emerging shipping lane as the Arctic melts.
Source: McKenzie Funk

A new nation is born

Greenland’s is an extreme case of the dilemma facing many citizens of the developed world: if climate change wouldn’t much hurt them personally—if it might even help—why not embrace it? Greenland, a colony of Denmark for three centuries, was now on the verge of an oil and mineral boom that could help it become the first nation created by global warming.

Thanks to the warming of the planet and consequent ice melt, Greenland’s following industries will benefit:

Industry Description
Oil and gas The nineteenth richest of the world’s five hundred known petroleum provinces lies in Greenland’s patch of the North Atlantic
Mineral extraction Massive deposits of zinc, gold, diamonds, and uranium
Fishing Valuable fish stocks—cod, herring, halibut, and haddock—are migrating into Greenlandic waters, moving north as oceans warm
Tourism Rush of disaster tourism, people coming to see the glaciers slide into the sea
Agriculture Expansion of the South Greenland agricultural season—already three weeks longer than it was in the early 1990s—meaning potato farms and carrot gardens and more grass for more sheep
Energy-intensive industries Plans for a new aluminum smelter—360,000 tons a year, the biggest in the world—to be built by Alcoa and run on hydropower from the island’s gushing rivers
Server farms Warehouses of computer processors working for Google or Cisco or Amazon, taking advantage of the cheap electricity and high latitude
Water exports The Greenland’s ice cap is the world’s biggest water reservoir, with estimated volume of 1.7 million km3

In a referendum in November 2008, which passed by 75.5 percent, Greenlanders established “self-governance”, a half-step towards full independence. Under the agreement with Denmark, Greenland will split mineral revenues with them after keeping the first $15 million. The more it warms, the more they drill, the more revenues will go up, and the $650 million annual grant that Denmark gives Greenland in subsidies will go down. Eventually, over five or ten or fifteen or twenty years the grant will hit zero, and Greenland will declare independence. Greenlanders will then be recognized as a distinct people under international law, and Greenlandic will become the official language of the country.

This is a secession at the speed of climate change, a slow burn.

Niaqornat, Greenland  Betting on future mineral wealth as the ice recedes, Greenlanders voted 75.5 percent in favor of greater independence from Denmark in a 2008 referendum. Source: McKenzie Funk

Niaqornat, Greenland
Betting on future mineral wealth as the ice recedes, Greenlanders voted 75.5 percent in favor of greater independence from Denmark in a 2008 referendum.
Source: McKenzie Funk

Outsiders profit from the new nation

The first annual Greenland Sustainable Mineral and Petroleum Development Conference took place in May 2008, shortly before the referendum. Only one native Greenlander gave a talk, the other speakers, mostly Canadians and Australians and Brits and Swedes, discussed the island’s tough logistics but “world-class commercial terms”. They described the mineral rush:

  • West Greenland gold discoveries and South Greenland gold mining;
  • two-and-a-half-carat diamonds found by the Canadian firm Hudson Resources;
  • rubies drilled by the Canadian firm True North Gems;
  • open-pit molybdenum mines proposed by the Canadian firm Quadra Mining;
  • uranium and rare earth minerals finds by an Australian-owned, eventually Chinese-backed company with a local name, Greenland Minerals and Energy.

British company Angus and Ross‘ CEO Nick Hall evidenced how the fortunes of his company were directly linked to climate change. In 2003 Angus and Ross took over the lease to mine mountain of marble above a giant fjord called the Black Angel. Its zinc deposit had been one of the richest on the planet but, by 1990, it had been exhausted, polluted and abandoned. In 2006 two geologists on a day hike discovered a deposit as pure as the original at the edge of the retreating South Lakes Glacier, which before the melt had been hidden by a hundred-foot-thick wall of glacial ice. It was the “upside of global warming,” as Hall freely admitted.

After his presentation, Nick Hall was surrounded by Australian financiers in pressed suits handing him business cards representing British money, while a Canadian would offer him the services of her logistics company: nurses, medics, and other camp staff. Hall himself was evidencing an uncomfortable truth for the northern “winners” of global warming, be they Inupiat, Greenlandic, Icelandic, or Canadian: local residents did not have the capital, expertise, or population base to transform the Arctic on their own. There was the danger that they would get most of the change and most of the degradation, and wealthier outsiders would get most of the profits.

Black Angel Mine, Greenland  As Greenland’s glaciers recede, revealing mineral deposits, mines like Black Angel are expected to help fund its push for independence from Denmark. Source: McKenzie Funk

Black Angel Mine, Greenland
As Greenland’s glaciers recede, revealing mineral deposits, mines like Black Angel are expected to help fund its push for independence from Denmark.
Source: McKenzie Funk

Farmland grabs

Due to the effects of climate change, some countries find that their land is not enough to support their own population. While the Arctic nations can expand into previously unoccupied land, other countries do not have such a luxury. In a territorial shift unseen since the colonial days, happening quietly and bloodlessly behind closed doors, they are appropriating poorer’s countries land in what has been called the global farmland grab.

2008 was the year of the “food crisis”. Australia’s Murray-Darling basin, along with most of its rice and wheat exports, was decimated by drought. In China’s grain-growing north, fifty million acres and six million people suffered the worst water shortages in five years. Big banks, Goldman Sachs in particular, would soon be accused of distorting commodities markets, overwhelming the grain exchanges of the American Midwest with speculation. Prices were becoming volatile. “If food stocks are low, a small shortfall in production can cause a big jump in price,” explained Nicholas Minot, a senior fellow at the International Food Policy Research Institute. “Demand for food is inelastic. People will always pay to keep eating.” In spring food prices suddenly spiked worldwide: soybeans had doubled, corn and wheat tripled, rice quintupled, and the world’s grain stockpiles shrank to a two-month supply. The governments of Vietnam, Cambodia, India, and Brazil banned food exports; hungry rioters took to the streets in countries worldwide. The panic was already beginning.

The 2008 food crisis triggered in earnest the farmland rush:

Country Land leased/seeking to lease, in acres
  • 3 million in the Philippines
  • more than 2 million in Kazakhstan
  • 25,000 in Cameroon
  • 200,000 in Russia
  • untold tens of thousands in Brazil
  • 670,000 in Mongolia
  • nearly 2 million in Sudan
  • 3 million in Madagascar—a deal that failed after it helped spark a coup
  • 850,000 in Ethiopia
  • more than 1 million in Madagascar
  • more than 20,000 in Paraguay and Uruguay
  • 100,000 in Kenya
  • 300,000 in Cambodia
Saudi Arabia
  • 1.2 million in Indonesia
  • 1.2 million in Tanzania
  • 1.2 million in Ethiopia,
  • the first 25,000 of 250,000 acres of wheat and corn in Sudan
United Arab Emirates
  • 800,000 in Pakistan
  • as many as 250,000 in Ukraine
  • as many as 125,000 in Romania
  • a million in Sudan

Overall, rich countries and corporations acquired an estimated 200 million acres of land—the equivalent of the combined cropland of Britain, France, Germany, and Italy, or almost 40 percent of arable Africa, or every inch of Texas—, mainly in Sudan, Ethiopia, Ukraine, Brazil, and Madagascar.

Profiting from food shortages

“I would not be surprised if in a day or a week oil goes to $150 a barrel. Like that: Boom! We’re seeing the death knell of the financial instrument—of the paper world. We’re going to see the rise of the commodity. A bushel of corn can’t be $15.”
Phil Heilberg, former Wall Street trader, currently one of the largest private landholders in Africa

South Sudan is a symbol of what can happen the more populations boom, temperatures rise, rivers run dry, and food prices—and thus the value of farmland—shoots through the roof.

In late-2008, former Wall Street trader Phil Heilberg leased a million acres of land in South Sudan, turning him into one of the largest private landholders in Africa. Irrigated by an offshoot of the Nile, it was level and fertile, safe from drought, and largely free from land mines. What little agriculture that existed in South Sudan was mostly small-scale: families with a few cows, tiny plots planted with sorghum and corn.

Heilberg knew he was betting not on a bubble but on something real: an actual food shortage. He imagined the landscape transformed by American-style agribusiness, complete with irrigation and fertilizers and four-hundred-horsepower combines. He planned to farm the land with joint-venture partners and sell crops locally before selling internationally. There was a local market for it: Sudan was in the midst of a long-running famine, neighboring Kenya had an accelerating drought, and aid groups were willing to pay top dollar for food.

Juba, South Sudan  As food prices spiked, the hedge fund manager Phil Heilberg (right) cut a deal with Gabriel Matip, the son of a feared South Sudanese general, for millions of acres of farmland. Source: McKenzie Funk

Juba, South Sudan
As food prices spiked, the hedge fund manager Phil Heilberg (right) cut a deal with Gabriel Matip, the son of a feared South Sudanese general, for millions of acres of farmland.
Source: McKenzie Funk

Farming moves northward

“Climate change means some places in Africa will be drier and others will be wetter. We’ll be looking to take advantage of that.”
David Murrin, manager at London’s Emergent Asset Management

The savviest farmland buyers saw global warming as a double boon. While in the short term it was fueling droughts that destroyed entire harvests in China, Australia, and the American Midwest and causing food prices to spike, in the longer term it was expanding farming to higher-latitude countries like Ukraine, Russia, Romania, Kazakhstan, and Canada, which become more productive as the climate heats up.

“You don’t need to be a rocket scientist to suggest that production belts in the Northern Hemisphere are shifting northwards,” said Carl Atkin, the head of agribusiness research at the British real estate behemoth Bidwells. He enumerated the richest areas in the world, as they appear in the USDA’s Inherent Land Quality Assessment: “You’ve got a splotch in North America. A splotch in South America. Pockets in the U.K. But the main interest is this black soil going up through Russia and the Ukraine: some of the best soil in the world.” Political and environmental factors—frigid winters and short growing seasons—had kept prices low; a hectare of black earth in Romania was a fifth of the price of a hectare in England. Overlay a climate-change map on the soil map, Atkin said, maybe add population data, and you could make a fortune. Bidwells had been bringing financial clients to Romania for big land purchases, done plot-by-plot. “We reaggregate small plots that were reallocated to everybody post-Communism,” he said. “You’re getting loads of villagers in a room with the mayor, and the mayor is saying, ‘All right, who wants to sell their plot, and who doesn’t?’”

As climate change pushed farming to higher latitudes, the money followed:

Company Investment
Farmland investors British-run Landkom and Swedish-run Black Earth Farming hundreds of millions of dollars in agricultural operations in Ukraine and Russia
British-run Agrifirma $20 million to buy or option 170,000 acres and survey another 6 million in Brazil
World’s largest asset manager BlackRock $250 million in British farmland
France’s Pergam Finance $70 million into former ranches in Uruguay and Argentina
Canada’s Agcapita $18 million into the country’s future corn belt
Grain and cattle venture One Earth Farms  $100 million, partnering more than forty First Nations tribes covering more than two million acres across Alberta, Manitoba, and Saskatchewan, in Canada.

In addition to farmland investors, banks with prominent climate-change funds, such as Deutsche Bank and Schroders, also have separate farmland funds. And even universities have their endowments invested into farmland. In 2011 it was revealed that Harvard and Vanderbilt were invested in London’s Emergent Asset Management, which had, by one rough estimate, sunk more than $500 million into agriculture projects everywhere from Mozambique and South Africa to Zambia. Emergent is run by J. P. Morgan alumni David Murrin, who prophesied a global-warming-fueled commodities crisis that would trigger an armed conflict between a declining West and a rising China over Africa. With its African farmland fund and a new climate-change fund focused in part on water projects, Emergent’s funds are, according to Murrin, the best way to profit in the meantime.

*McKenzie Funk spent six years reporting Windfall, traveling around the globe interviewing people who, driven by ideology, fear, or hard-nosed realism—or all three—, thought they were doing the necessary thing to come out ahead in a new, warmed world, people who thought climate change would make them rich.

McKenzie Funk and his book, Windfall

McKenzie Funk and his book, Windfall

Featured image by dirkb86.

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