What the Cold War and the Space Race can tell us about climate change
Of the global challenges humanity has met in the past century, climate change arguably poses the biggest test for international collaboration.
21 March 2018
Reactions to global challenges vary, but generally land somewhere on a scale between hostile and collaborative.
The Cold War was largely hostile and competitive, and ended with the dissolution of the USSR; deemed a victory for “The West”.
The Space Race was competitive in the start (i.e. Apollo vs. Vostok) but collaborative by the end (i.e. the International Space Station).
The challenge of climate change creates a similar set of potential outcomes, from the hostile to the competitive and all the way to the collaborative.
At one extreme, incentives to cheat – “environmental arbitrage” - provide higher profitability for polluters as pollution impacts are externalised. Those not cheating will face higher costs to abate the impacts (which are internalised). This is a negative outcome for those wishing to abate climate change.
At the other end of the scale, collaboration and positive forms of competition can see vast advances in industries. Take China’s nascent advancement in electric vehicles (EVs) as an example. By building a new industry, the rest of the world has been challenged to innovate too.
If we take the Space Race as precedent for when a challenge is taken seriously, then the investment implications can be substantial. At its peak during the Apollo missions, NASA’s budget was approximately three times what it is now, in real terms. The technological spinoffs were substantial. Water purification is a prime example – the water needs of crew on a spacecraft demanded extensive recycling of waste water back to drinkable water. The race also needed a way to generate power without carrying further fuel into orbit. This led to advances in solar cells, which allowed for power generation from an abundant source. The invention of freeze dried foodstuffs and advances in tyres – to name but a few – were also prompted by the sprint to space.
Climate change likely provides an even greater challenge than the Space Race or the Cold War. The reactions could develop into healthy competition and collaboration and see meaningful investment. However, whilst positive steps like the Paris Climate Agreement suggest hostility is indeed giving way to collaboration, the levels of investment in abating climate technology remain too low.
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.