Global warming a hot topic for personal finances

NEW YORK - Global warming is challenging celebrity worship as the latest obsession in worldwide media. Magazines from Newsweek to Scientific American have devoted issues to it and now financial writers are getting in on the act.

David Korten in his book, The Great Turning, says if global warming triggers climate change and disrupts world agriculture, financial markets will also react severely - creating "the mother of all market corrections".

Overlay other widely circulated premises that oil and gas production may have reached its peak, or may be subject to regional supply shutdowns, and it's clear a menacing leviathan is lurking.

On a personal level, energy prices have socked almost every consumer this year, curtailing other financial goals. A Fidelity Investments survey has found more than three-quarters of American households saying steep fuel prices in recent months have hurt their ability to save for retirement.

Is it a stretch to say that global warming is also a significant personal finance issue?

Most of the electricity generated in the United States is produced by fossil fuels, namely coal and natural gas. The more power that is produced - with the exception of energy from nuclear, hydroelectric and alternative technologies - the more atmosphere-heating carbon dioxide is spewed into the air.

While coal is cheap and abundant on most continents, the costs to the environment are hurting the physical and economic health of everyone. Scientists have found pollutants released by burning coal circle the globe.

In lieu of a huge changeover to alternative energy systems - something that will happen over decades - the cost of "cleaning up" fossil-fuel power will rise.

Homeowners will foot the bill for cleaner power and heat in terms of higher utility payments.

Another troubling scenario is the reduction of oil or natural-gas supplies through terrorist attacks, especially as so much oil and gas production is concentrated in the Middle East.

"A single well-designed attack could send oil prices to well over US$100 ($150) a barrel and devastate the world's economy," the Committee on the Present Danger, an anti-terrorism group in Washington, said in a paper co-written by former Secretary of State George Shultz and former CIA Director James Woolsey.

Woolsey, now an energy consultant, advocates the production of cellulosic ethanol from agricultural waste; "plug-in" hybrid cars that recharge using cheap electricity at night; improved diesel vehicles; and a reduction in the amount the US borrows to pay for imported oil.

"The US, in essence, borrows about US$2 billion a day, every day, principally from Asian states, to finance its consumption," the paper says.

"The single largest category of imports is the US$1 billion a day borrowed to import oil. The accumulating debt increases the risk of a flight from the dollar or major increases in interest rates."

The committee's paper is bolstered by a recent report by the Council on Foreign Relations that concludes "the lack of sustained attention to energy issues is undercutting US foreign policy and US national security".

Global warming and escalating energy prices may make the North American status quo of vehicle-based commuting, large suburban homes, mammoth shopping malls and urban sprawl economically unsustainable.

Yet such dire pronouncements are daunting for most people.

How do you personalise this issue? A useful starting point is reducing your "carbon footprint", which is the amount of carbon dioxide your lifestyle is generating from your home-energy use and transport habits. That could include choosing the most energy-efficient appliances and materials if renovating or building as well as using a smaller vehicle.

Tax incentives needed to get better efficiency from such products would be helpful too.

Reducing your carbon footprint will not only make a difference environmentally, it will also lower your expenses, simplify your lifestyle and free up more money to save for your financial goals.

* John Wasik, author of The Merchant of Power, is a Bloomberg News columnist.