Parallels between Y2K and Net-Zero

I entered the capital markets a few years before the end of the last millennium (sounds like a long time ago, but it's less than 25 years). Those of you who were around at the time will remember the alarm clock sounding around the Y2K problem, which, people feared, could be incredibly disruptive with financial markets failing, planes falling our of the sky, hospitals grinding to a halt, etc. People were going to die, people were going to lose everything. Seemed like this was a problem worth throwing a few dollars at to ensure this wouldn't happen. The issue, at its core, was simple. Most computer systems at the time only used two digits to indicate the year in a date stamp, so 23 for the year 2023. However, with the clock going from 1999 to 2000, the computer clock would go from 99 to 00. In other words, the computer would think that anything with that date stamp would be 99 years ago, rather than tomorrow.

So when the year 2000 hit and no financial systems failed, no planes fell out of the sky, hospitals continued to function, and no one died as a result of Y2K, lots of people were going: "See, it was all a scam and scaremongering, and we spent all this money for nothing." That to me is a completely nonsensical argument. What people should have said was: "OK, so none of these predictions happened, SO WE MUST HAVE DONE THE RIGHT THINGS AND SPENT THE MONEY WISELY, IT WAS EFFECTIVE."

Something similar is going on with carbon markets right now. Despite substantial scientific research showing that we need to halt global warming (see figure below if you need a reminder why), a large number of people still believe this is a made up issue. As the numbers below show, the issue is real. So real that it will require trillions of dollars of investment to stop this from happening. The good news is that many environmental solutions now have valid economic value propositions (e.g. by reducing operating costs, or delivering products that have command a premium, etc), as opposed to end-of-pipe solutions that are generally seen as a cost centre. So even though we need to spend trillions of $ to get to net zero, this is not a sunk cost without benefits, this money will create economic opportunities, employment, drive innovation, etc. If this money is being spent (in an effective and efficient manner), then we should be able to get to net zero by 2050. At that time, I am sure there will be lots of people shouting: This was a colossal waste of money as none of the dire predictions came out. Conveniently forgetting these predictions did not happen because the money was spent.

So while we are faced with scepticism, I think that were are on the cusp of a new economic reality in which we are truly pricing environmental costs but at the same time leveraging credit-driven capital flows to ensure we develop and commercialize the projects and technologies that will get us to net zero. Money talks, always, and this pragmatic approach with end-to-end exchanges, such as Changeblock, delivering high-integrity credits at a fraction of the costs it takes others and in a much shorter time to market than the status quo, with the ICVCM delivering an integrated assessment framework that has broad support, with multi-level verification ensuring credit integrity and science/evidence based asset/technology/project monitoring and true price asset price discovery, we are moving in the right direction.

Y2K was an interesting moment, with 'paradigm shift'm being the word of choice. We saw a definitive dip into the new millennium, but I believe the ESG markets will prove different, more resilient and, above all, more profitable while delivering a better environment for this and future generations. Let's learn the lesson from Y2K and not shoot the messenger, not disparage investments, but judging actions on their merits and acknowledging the actual returns made.