“If something is profitable, it will be done,” says Martin Wolf of the Financial Times. We explore how profits will drive the energy transition and how and where water from the Colorado River will be used.
Topics covered include:
- How profits have led to higher energy market share for natural gas and renewal energy
- What is hindering a faster transition to renewables
- What is contributing to a water shortage in the southwestern U.S,. and how will it be resolved
- Why big infrastructure projects often aren’t the best solution to solve a problem
- Why some regulation is helpful
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Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today’s episode, 425. It’s titled “How Profits Motivate Change.”
Last Saturday LaPriel and I attended a presentation by Kirsten Engel. She is a professor of law at the University of Arizona. She teaches and researches in the areas of environmental and administrative law. Engel served as a member of the Arizona House of Representatives and the Arizona Senate, and last fall she lost an election to represent Arizona in US Congress, in the House of Representatives.
Engel mentioned two things that really stood out to me. One I knew, and then one really caused me to ponder. The first is that 72% of water use in Arizona is for agriculture. And her presentation was all about the water situation in Arizona and other areas around the Southwest.
I knew the water usage by agriculture in Arizona was very high, I’ve mentioned it on the podcast, and that’s similar to other areas in the Southwest.
There is a deep agricultural heritage in Arizona and other Southwestern states. She also mentioned though that that percentage is dropping; as water becomes more expensive, it becomes uneconomical to pursue agriculture in certain areas of the state.
If Something Is Profitable
Martin Wolf, who is a columnist with The Financial Times, wrote “Start with a simple proposition. If something is profitable, it will be done. One profits when revenue or benefits are greater than the cost.” Wolf was referring to the transition to renewable energy.
He wrote, “Asset managers may dispose of shares in fossil fuel businesses, and banks may refuse to finance them. Some investors might refuse to own or fund companies that do things they consider wicked. But my fellow columnists, Stuart Kirk, is correct that someone else will then own and finance them, provided they are profitable. Those actors might be foreign governments and businesses, or domestic private entities. Regulation might curb some activities, but political resistance is likely to make such regulation difficult. If one doubts just how difficult it is to halt a profitable business, take a look at the history of drug prohibition.”
I have made that point in regards to ESG investing, that if investors choose not to own particular securities, but households and businesses continue to buy the products of those companies, then if there’s less desire to own the stock shares, then the value of those shares could fall, the price; but because of the profits, the dividend yield could go higher, and those companies could actually outperform other areas of the market, the companies that pursue activities that might be objectionable.
In order to really change what is going on in the world and the economy, what needs to change are the profits. Where are the profits to be made?
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