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Investment Implications of an Abrupt Climate Change

Eric Sprott, CA & Kevin Bambrough, Market Strategist
Sprott Asset Management June 5th, 2006

It appears that the debate on global warming is about to come to an abrubt end. One can even say that, among the scientific community, it has already ended. Extreme weather events and continued melting of the polar ice caps in 2005 have exemplified the implications of global warming. The concern has now shifted to focusing on the rate of change and its broad implications for all life on the planet.

The atmospheric conditions of the last 400,000 years have been clearly established by analyzing ice cores from Antartica. The chart below makes it shockingly clear that we have caused greenhouse gases to spike in an unnatural manner the likes of which the planet has never seen before. Human activity has caused both CO2 (Carbon Dioxide) and CH4 (Methane Gas) levels to exceed the upper end of the range for the last 400,000 years. We are now in uncharted territory and may well be on the cusp of experiencing a warming of the planet at a rate well beyond what can be predicted using our limited knowledge of history.

There have been times in the past when and abrupt change in the planet's climate has occurred. We have eight such episodes in the past 730,000 years. We also have had a few abrupt changes confined to specific regions of the earth over the past 11,000 years. Such episodic convulsions in the earth's climate are entirely natural. However, we are now setting ourselves up for a catastrophic event for which Man is solely responsible.

Rising levels of greenhouse gases are intervening dangerously with natural conditions and, in the process, have been gradualy warming our planet. The effects have begun to accelerate and sudden shifts in the climate patterns may now be in the offing.

Figure 1: Intricate link between greenhouse gases concentration and temperature established

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