Category Archives: EARTH WATCH

Green markets won’t save us

Markets are an unreliable guide for navigating a problem as large and complex as climate change.
By Katharina Pistor – How can one make wise decisions about a perpetually unknowable future? This question is as old as humankind, but it has become existential in light of climate change. Although there is sufficient evidence that anthropogenic climate change is already here, we cannot possibly know all the ways that it will ramify in the coming decades. All we know is that we must either reduce our environmental footprint or risk another global crisis on the scale of the ‘little ice age’ in the 17th century, when climatic changes led to widespread disease, rebellion, war and mass starvation, cutting short the lives of two-thirds of the global population.

The British economist John Maynard Keynes famously argued that investors are driven ultimately by ‘animal spirits’. In the face of uncertainty, people act on gut feelings, not ‘a weighted average of quantitative benefits multiplied by quantitative probabilities’, and it is these instinct-driven bets that may (or may not) pay off after the dust settles. And yet policy-makers would have us trust animal spirits to help us overcome the uncertainty associated with climate change.

Humanity has long sought to reduce uncertainty by making the natural world more legible, and thus subject to its control. For centuries, natural scientists have mapped the world, created taxonomies of plants and animals, and (more recently) sequenced the genomes of many species in the hope of discovering treatments against all imaginable maladies.

What maps, taxonomies and sequences are to chemists and biologists, numbers and indicators are to social scientists. Prices, for example, signal the market value of goods and services, and the expected future value of financial assets. If investors have largely ignored certain assets, the reason might be that they were improperly measured or priced. more>

Bad stimulus: Government payments to individuals are a terrible way to solve America’s structural economic problems

By Albena Azmanova and Marshall Auerback – The new Democratic administration is poised to make its first proud step in delivering on its electoral promise to build back (America) better: the successful adoption of a $1.9 trillion stimulus package, the main components of which are a third round of stimulus checks, a renewal of federal unemployment benefits, and a boost to the child tax credit, as well as funding for school reopenings and vaccinations. It will probably not include a federal minimum wage hike.

Biden’s stimulus is not the stuff of economic revolution—it’s a mix of common sense and keeping the lights on. And the fundamental thinking behind the stimulus approach reflects a continuation of neoliberal policies of the past 40 years; instead of advancing broader social programs that could uplift the population, the solutions are predicated on improving individual purchasing power and family circumstances.

Such a vision of society as a collection of enterprising individuals is a hallmark of the neoliberal policy formula—which, as the stimulus bill is about to make clear, is still prevalent within the Democratic and the Republican parties. This attention to individual purchasing power promises to be the basis for bipartisan agreement over the next four years.

The reality is that social programs on health care and education, and a new era of labor and banking regulation, would put the wider society on sounder feet than a check for $1,400.

There are very few federally elected officials who behave as though they understand that economic insecurity can breed political instability and governing paralysis.

Globalization, deindustrialization, the contraction of the public sector, and the rise of contract labor via the gig economy have made individuals feel insecure in their private circumstances. This has contributed to the appeal of populist politicians, whose tenures generally are corrosive to liberal democracies. Moreover, these tendencies have together undermined our social contract as a whole, depriving governments of the means and resources to tend to the public interest. more>

To Tackle Inequality, We Need to Start Talking About Where Wealth Comes From

Thatcherite narrative on wealth creation has gone unchallenged for decades.
By Laurie Macfarlane – Do people in Britain resent the rich? According to two new studies published this week, the answer to this question is: not really.

The studies, one commissioned by Trust for London and another by Tax Justice UK, explore public attitudes towards wealth based on focus groups held across England. Both found that most people are relatively content with people getting rich, and that attacks on the wealthy are often viewed negatively.

This presents a dilemma for progressives. In recent years left-wing leaders on both sides of the Atlantic have taken a more confrontational approach towards the super-rich. In Britain, the Labour Party’s war cry under the leadership of Jeremy Corbyn has been ‘For the many, not the few’, while in the US Bernie Sanders has made no secret of his contempt for billionaires.

But what if it turns out that ordinary people don’t agree? One response to this dilemma, as outlined by Sonia Sodha in the Observer, is to accept that “the belief that Britain is a meritocracy is ingrained in our collective psyche”, and adjust policies and narratives accordingly. This would mean ditching the class-war rhetoric and instead putting forward solutions designed to appeal to a meritocratic worldview. This might include, for example, closing tax loopholes and increasing particular taxes on grounds of fairness and efficiency.

Sodha is right to point out that this strategy is more likely to chime with people’s existing attitudes towards wealth. As the authors of the Tax Justice UK report note: “The participants in our focus groups largely believe in meritocracy. Those with wealth were seen as having acquired it through hard work.” Participants in the Trust for London research expressed similar views.

But does this mean that progressives should accept the way things are and move on? Not necessarily. As a well-known philosopher once said: “The philosophers have only interpreted the world in various ways; the point, however, is to change it.”

People’s views aren’t formed in a vacuum: they are shaped by social and political forces that evolve over time. Margaret Thatcher’s neoliberal revolution wasn’t just successful because it reorganized the economy – it was successful because it embedded a particular narrative about how wealth is created and distributed in society. This is a world where, so long as there is sufficient competition and free markets, every individual will receive their just rewards in relation to their true contribution to society. There is, in Milton Friedman’s famous terms, “no such thing as a free lunch”. It’s a world where businesses are the “wealth creators” who create jobs and drive innovation, and business owners are entitled to the financial rewards of success – regardless of how enormous they are.

The problem, of course, is that it bears little resemblance to how the economy actually works. While it is true that working hard will generally help you earn more money, this causality doesn’t hold in reverse: not all wealth has been attained through hard work. In practice, the distribution of wealth has little to do with contribution, and everything to do with politics and power. more>

Updates from Chicago Booth

India’s economic recovery from its COVID-19 lockdown
By Chuck Burke – In response to COVID-19’s rise, India ordered most of the country’s 1.3 billion residents to stop working and remain indoors starting in March 2020—the world’s largest lockdown. The government began relaxing restrictions in June, and research finds that while India’s economy improved rapidly in the following months, the outlook for a return to prelockdown levels remained unclear.

In a report for Chicago Booth’s Rustandy Center for Social Sector Innovation, Booth’s Marianne Bertrand and Rebecca Dizon-Ross, Centre for Monitoring Indian Economy’s Kaushik Krishnan, and University of Pennsylvania’s Heather Schofield examined household-level survey data to establish a more comprehensive view of India’s initial recovery than national economic indicators could provide. These charts and maps highlight a selection of their main findings. more>

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Updates from McKinsey

The emerging resilients: Achieving ‘escape velocity’
The experience of the fast movers out of the last recession teaches leaders emerging from this one to take thoughtful actions to balance growth, margins, and optionality.
By Cindy Levy, Mihir Mysore, Kevin Sneader, and Bob Sternfels – In 2019, McKinsey asked companies to prepare for the possibility of a recession. Of course, we had no idea then that the COVID-19 pandemic would be the trigger, nor that the recession would cut as deeply as it has. But it was clear then that the foregoing growth cycle was already of unusual duration. The pace was slowing, furthermore, and the potential for shocks was greater than for renewed growth. In the same article, we discussed what top-performing companies had done in the previous downcycle, the financial crisis of 2008–09. We looked at 1,500 public companies in Europe and the United States, analyzing performance on a sector-by-sector basis. Companies in the top quintile of their peers through that crisis were dubbed the “resilients.”

Once economic and business results of the second quarter of 2020 became known, we began to hunt for the clues that were contained in nearly 1,500 earnings releases across Europe and the United States. This article seeks to understand whether the shape of the next class of resilients is visible in the data, and what lessons this would hold for companies within each sector.

The present downcycle: Six times faster than the previous one

Today, we are in the middle of the deepest recession in living memory. As pandemic-triggered lockdowns took hold around the world in early 2020, economies contracted quickly. The International Monetary Fund and World Bank foresee a global contraction in economic output in 2020 of around –5 percent; the Organization of Economic Cooperation and Development estimates an even worse result, at –7.6 percent. At any rate, the drop will far exceed the last global contraction, which was –1.7 percent in 2009.

The distress has hit all industry sectors, some harder than others. Yet even in the relatively protected sectors of healthcare, pharmaceuticals, and technology, companies are seeing moderate declines in revenue. Heavily affected sectors have experienced revenue declines of between 25 percent and 45 percent. These include transportation and tourism, automotive, and oil and gas—sectors containing some of the largest employers in Europe and the United States. more>

From an industrial renaissance to an economy of value

By Francisco Jaime Quesado – While having to endure the ongoing era of a global pandemic, we are facing the prospect of an effective industrial renaissance that can change the way our economy works

In the new global economy, in which industry is becoming more important, companies have a new challenge – to redefine its value chain and to integrate the existing global networks with new ideas, new solutions and new proposals of competence. This industrial renaissance will be a contract of trust in this new agenda of change and a new effective vision for the future as it should mobilize those that have a set of effective value creations in the economy.

A post-pandemic industrial renaissance is the point of contact between those that believe in the power of people to create new solutions to more complex problems that are arising in society and those that want innovation and creativity to be the platform for the creation of value in a globally competitive economy. This ‘renaissance’ is, in essence, the confirmation of a process of integration of people into society – an individual’s contribution must be a commitment to the organization of society and its main elements.

The next stage in the process of rebirth must apply to the most critical factors of competence and trust, which includes a focus on innovation and the sharing of positive dynamics. We need society to have a new challenge. Society must be able to be the real platform of a more entrepreneurial society that is centered on new areas of knowledge and sectors of value.

In a modern and active society, the keyword is ‘co-creation’, which is used to promote a dynamic and active creation process that involves each citizen in the next big challenge for society. more>

The Texas Power Grid Failure Is a Climate Change Cautionary Tale

By Justin Worland – For scientists, the havoc wreaked by the extreme winter weather that hit Texas in mid-February dropping several inches of snow and leaving millions without power did not come as a surprise. Ten years ago, in 2011, energy regulators warned the state’s electric-grid operators that they were ill-prepared for an unprecedented winter storm. And for decades before that, climate scientists had cautioned that a warming planet would cause climate chaos, raising the average global temperature while driving unusual weather events like this one. For Texas, it was always just a matter of time.

Despite these warnings, the state was unprepared—which Texans realized as soon as the storm swept in. Equipment froze at power plants, leaving about half of the state’s electricity-generating capacity offline. Natural gas wells iced over, slowing the fuel supply that heats homes. Millions were left without electricity, at least one city turned off its water supply, and Harris County, where Houston is located, reported hundreds of cases of carbon monoxide poisoning as Texans turned on their own generators to warm up. “This shows a disastrous level of underpreparation,” says Daniel Cohan, an associate professor of civil and environmental engineering at Rice University in Houston, speaking to TIME shortly after he had lost water pressure. “We knew this weather event was coming … What went wrong?”

The catastrophe can be linked to a string of planning failures that didn’t take that threat seriously. Much of the electricity infrastructure in Texas wasn’t hardened-think of insulation and other protections that allow it to function in extreme winter weather. Several power plants remained offline for scheduled maintenance, ignoring weather forecasters’ warnings of the fast-approaching storm. And the storm disrupted the supply of fuel needed to run other such plants.

The cascade of failures in Texas signals what is perhaps the greatest challenge ahead in this climate-changed world: accepting that business as usual isn’t working. Across the planet, humans have built civilization to withstand the vagaries of a 20th century climate. The extreme weather events of the 21st century will look nothing like those that came before—and hundreds of years of past preparation will not suffice. “The future is not going to be like the past,” says Melissa Finucane, a co-director of the Rand Climate Resilience Center. “If we could just plan a little better, we could anticipate some of these problems.” more>

Updates from McKinsey

America 2021: Renewing the nation’s commitment to climate action
To America’s leaders, innovators, and changemakers; here’s how you can help build a low-carbon economy that is resilient, competitive, prosperous, and fair.
By Dickon Pinner and Matt Rogers – The new federal administration has arrived in Washington with ambitious plans to address the climate crisis—and in so doing, revitalize the US economy and reclaim a leadership position on the international stage. During their campaign, President Joe Biden and Vice President Kamala Harris highlighted “the opportunity to build a more resilient, sustainable economy—one that will put the United States on an irreversible path to achieve net-zero emissions, economy-wide by no later than 2050 […] and, in the process, create millions of good-paying jobs.”

Their vision recognizes that the global transition to a low-carbon economy is well under way. The cost of many clean-energy technologies fell significantly during the past decade—as much as 90 percent for some renewable-energy projects. The capital markets are funding the use of these technologies at historically low costs of capital, thereby accelerating scale-up investments. A climate-friendly policy tilt is taking hold in many places. With China, Japan, and the European Union having announced targets to achieve net-zero emissions, more than 110 countries, accounting for more than 70 percent of global GDP, have made net-zero pledges. Of the US states, 23 have established emissions-reduction goals and 12 have instituted carbon-pricing policies. Groups representing prominent American companies have endorsed the use of market-based mechanisms to promote emissions reductions. Some large businesses, along with four former Federal Reserve chairs (including the new treasury secretary), have voiced support for a nationwide carbon tax. These trends are creating possibilities for American leadership, innovation, entrepreneurship, competitive advantage, and economic growth.

With the wind at their backs, government agencies and private-sector organizations can continue advancing the new national climate agenda that’s been set in motion already. The stimulus and government appropriations bill of December 2020, which received bipartisan support, set out tax incentives and funding for energy innovation and climate-related programs. And within days of his inauguration, President Biden signed executive orders initiating the process to reenter the Paris Agreement, positioning climate as a foreign-policy and national-security issue and calling on federal agencies to coordinate an all-government push to cut greenhouse-gas emissions, purchase clean-energy technologies, support innovation, conserve nature, and create economic opportunities across America. 1 Making good on these intentions will require new information, products, operations, and market innovations from public officials and business leaders. To inform their work, this memo highlights four sets of practices with notable potential to deliver the prosperity, security, and social-justice outcomes that the administration has prioritized. more>

EU vows to work with international partners to be climate neutral by 2050

New Europe Online/KG – The Europe Union can be a powerful promoter of climate ambitions also because it can offer a model of a socially just Green Deal transition, which leaves no one behind. “We can share our experience of tools such as the Coal Regions in Transition Initiative, and the Just Transition Mechanism. We can show that economic and energy diversification is possible and can create better jobs and growth for societies,” Energy Commissioner Kadri Simson said on February 1 at the EsadeGeo Annual Energy Meeting “Geopolitics of the Green Deal Month”.

Europe accounts for around 8% of global emission. “So, to address global climate change, we need others to follow the same path – to become our partners in the clean energy transition,” Simson noted.

“Europe has two assets to advocate here: our high climate ambition and our just transition policy model. The European Union showed leadership announcing its climate neutrality goal for 2050. Last December EU leaders also agreed to step up commitment to reduce emissions by 2030. This is now the EU’s nationally determined contribution under the Paris Agreement,” the Commissioner said, adding that several other major international partners have announced as well net zero commitments. “We can look at 2021 with optimism. As a year of global climate action. Thanks to the COP 26 but also the actions of G20 and G7 led by the UK and Italy, Europe will be a driving force of this collective effort,” she said.

“So, as I said, we want to be leaders, but we have important work to do as partners. The Green Deal is not just an agenda to transform Europe’s economy and society. It has an impact beyond our borders, and most of all, on our closest partners and in our neighborhood. That’s why this must be a focus of our external energy action,” Simson stressed. more>

Updates from ITU

G20: Call to action on international standards
ITU – Organizers of the Riyadh International Standards Summit held on 4 November 2020 issued a call to action for the recognition, support and adoption of international standards. This is the first ever summit on standardization held within G20-related activities.

The Riyadh International Standards Summit was initiated by Saudi Standards, Metrology and Quality Organization (SASO) and was organized with the International Electrotechnical Commission (IEC), International Organization for Standardization (ISO), International Telecommunication Union (ITU), Saudi Communications & Information Technology Commission (CITC), and Saudi Food and Drug Authority (SFDA). The event was hosted by SASO and the G20 Saudi Secretariat as part of the International Conferences Programme honouring the G20 Saudi presidency year, 2020. It forms part of the Kingdom of Saudi Arabia’s efforts, during its presidency, to enhance cooperation between countries of the world in various fields.

Originally intended to take place in the Kingdom of Saudi Arabia, which currently holds the G20 Presidency, in light of the global pandemic, the Summit instead took place virtually and welcomed participants from all over the world.

The Riyadh International Standards Summit concluded with the call to action for “each country to recognize, support, and adopt international standards to accelerate digital transformation in all sectors of the economy to help overcome global crises, such as COVID-19, and contribute towards the achievement of the United Nations Sustainable Development Goals (SDGs)”. more>

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