Finance Friday – October 21, 2016

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1000x.

Turns out Kigali might be more memorable than Paris.

Last week the “Kigali accord” was reached, which will largely eliminate use of HFC’s, chemical coolants used in refrigeration and air conditioning.

Two elements stand out:  first, the agreement is legally binding, unlike the Paris accords.  Second, the impact is stunning: the greenhouse effect of HFC’s is 1000x more powerful than CO2. That means that the volume of HFC’s is tiny, but they are responsible for about 8% of all emissions-related impact.

How did they do it?  In part, clever structure. This agreement is an amendment to the Montreal protocol of 1987, which got rid of ozone-harming CFC’s – so it retains the legal strength of the original treaty.

This is good news for our climate, of course, and it also raises some broader questions for all sorts of investment decisions:

  • Are we focusing on the opportunities with highest potency?  Many argue that this HFC effort will be much more impactful with much less effort (relatively) than other global agreements. High ROI.
  • Are we using the simplest and strongest available forms?  Using the existing protocol as a base eliminated all of the energy of creating a new structure, and left the Kigali agreement stronger to boot.  What already works, and how can we re-use it?

 

The best summary article I’ve found on the agreement is here.

 

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