Investors are told to think long-term. The financial industrial complex has preached the faith of long-term returns over hope for short-term gains. Just how well global economies have learned that lesson will be tested in the new week in Peru.
Delegations from almost 200 countries will gather for the Lima Climate Change Conference beginning Tuesday. The goal of the talks is to hammer out the framework for a new global treaty on fossil fuel emissions to be negotiated next summer in Paris. The last deal began in Kyoto, Japan, in 1997 and expired two years ago. The United States never officially signed on. Neither did China or India.
The U.S. has since forged its own emissions agreement with China. That pact brings together two countries with the largest appetites for fossil fuels and two of the largest polluters. America and China have set the bar for a global climate change deal beginning with the talks in the coming week in Peru.
However, fossil fuel energy is cheaper now compared with a month ago when the U.S.-China announcement was made. It is significantly less expensive than what it was in September when 700,000 people demonstrated at the United Nations climate summit. As recently as two months ago, the global benchmark for oil was $100 per barrel. That same barrel is now valued closer to $70 per barrel. The price of coal, a widely used fuel to generate electricity in the United States and China, also has cooled considerably.
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While cheaper fossil fuel hurts investors in energy stocks, it also provides an immediate stimulus for consumers in economies that depend on them. That short-term gain could erode the motivation in making the investments necessary now for the long-term returns on emission reductions.
Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow @HudsonsView on Twitter.