Trading the Weather: Why the Climate Transition Is Economics, Not Ideology

When I asked a farmer about climate, he said, ​“You mean the weather?” A power trader told me, ​“I basically trade the weather.” Both are right. Weather is the invisible hand that moves food prices, energy bills, and transport costs. And behind the weather sits the ocean, the chief regulator of our climate system.

For 10,000 years, humanity has followed the same arc: taking useful energy and turning it into useful materials — calories, steel, electricity, transportation. That is the climate transition equation. We’ve gone from wood to coal to oil to electrons, from animal labor to mechanization to automation. Each step has been about making energy-to-materials conversions cheaper, faster, and more reliable. The next step is no different.

Volatility Is the Rule, Not the Exception

One big critique of the climate transition is that it feels like a coastal elite ideology that imposes cost burdens and dictates behavior. That fear is real. Commodity price volatility is baked in — grains, fuel, electricity: all of these spike due to weather, supply chain shocks, geopolitical events. Consider:

• The average price per dozen of eggs was $4.10 at the end of 2024, which is twice as much as in August 2023. One virus outbreak in poultry supply chains was enough to push a basic staple out of reach for many families.
   
• In grid-constrained regions, the construction of just one large data center can spike local power prices as demand strains infrastructure.
   
• European winters that run colder or warmer than expected ripple through natural gas markets worldwide, changing household bills across continents.

When feedstocks for food, energy, or transportation are overly concentrated — one fertilizer source, one pipeline, one shipping lane — the entire system becomes fragile. That fragility often shows up as costs for households and businesses.

Affordability matters. If the transition causes regressively higher costs, then it fails. It has to be pragmatic, rooted in physics, chemistry, biology — and economics.

The Ocean as an Economic Regulator

Here’s the piece that often gets overlooked: the ocean regulates weather, and weather regulates GDP. Oceans absorb over 90% of the excess heat from greenhouse gas emissions. In 2023, they took in around 287 zettajoules of heat — the energy equivalent of eight Hiroshima bombs every second. That heat drives volatility: erratic rainfall, disrupted trade winds, unpredictable winters, and shifting currents.

The effects are measurable:

• Roughly 30% of the U.S. economy is directly weather-sensitive, including agriculture, construction, transportation, and energy.
   
• A +1°C increase in temperature volatility reduces global GDP growth by ~0.3% and increases growth volatility by ~0.7%.
   
• The OECD estimates that extreme weather shocks already reduce output by 0.3% of GDP annually in developed economies.

In short, the ocean is setting the thermostat for a third of the economy. 

From Green Premium to Green Discount

For decades, the knock on cleaner technologies was cost: ​“green premiums” made them harder to scale. But cost curves are bending:

• In 2024, more than 90% of new global renewable energy capacity was cheaper than fossil fuel alternatives.
   
• Lithium-ion battery cell prices have dropped 97% since 1991.
   
• In food systems, innovations like precision fermentation and bio-based fertilizers can cut exposure to volatile fossil inputs.

These shifts show how innovation can move us from premium to discount — not overnight, but steadily. Lower, more predictable costs in food, power, and transport mean less vulnerability to the next shock.

Alpha vs. Beta in the Transition

Think of progress in two buckets:

• Beta: steady, incremental improvements — efficiency upgrades, crop rotation, demand response in power grids.
   
• Alpha: breakthroughs that reset the cost curve — advanced batteries, green hydrogen, new materials, bio-basedsynthetic fertilizers.

The U.S. has a track record here. Solar, wind, and batteries all went from niche and expensive to mainstream and affordable in under two decades thanks to entrepreneurship, capital markets, and scale. That same dynamic can repeat across areas like food and transport systems.

A 10,000-Year Arc

Seen this way, the climate transition isn’t a new ideology — it’s the next stage of an old economic arc. Every generation has faced the challenge of converting energy into materials more efficiently. Sometimes the driver was scarcity, sometimes technology, sometimes opportunity. Today, the driver is volatility.

Farmers know it when rainfall shifts. Traders know it when natural gas spikes. Families know it when eggs or fuel double in price. We’re all, in our own ways, trading the weather.

A 21^st Century Approach to Turning Useful Energy to Useful Materials

If taking useful energy and turning it into useful materials defines physical GDP, then increased weather volatility will keep moving the ​“stock prices” of food, energy, and transport. We can’t afford to ignore it.

That means:

1. Measure: Build better tools to track how weather and ocean heat volatility impact GDP sectors.
    
2. Underwrite: Create insurance and hedging markets that spread the risk of volatility.
    
3. De-risk: Use public and private capital to scale technologies that move us from ​“green” premium to ​“green” discount.

This transition is not about belief. It is about making daily life more affordable and less vulnerable. The sooner we recognize that, the sooner we can stop being at the mercy of weather — and start trading it on our own terms.

Discover related insights on weather on the S2G Podcast episode, Extreme Weather and the Future of Forecasting.

Photo source: Dave Hoefler