Tag Archives: Climate change

Limited liability is causing unlimited harm

The purpose of limited-liability protection was to encourage investment in corporations, yet it has evolved into a source of systemic market failure.
By Katharina Pistor – In a recent tweetOlivier Blanchard, a former chief economist of the International Monetary Fund, wondered how we can ‘have so much political and geopolitical uncertainty and so little economic uncertainty’. Markets are supposed to measure and allocate risk, yet shares in companies that pollute, peddle addictive painkillers, and build unsafe airplanes are doing just fine. The same goes for corporations that openly enrich shareholders, directors and officers at the expense of their employees, many of whom are struggling to make a living and protect their pension plans. Are markets wrong, or are the red flags about climate change, social tensions, and political discontent actually red herrings?

Closer inspection reveals that the problem lies with markets. Under current conditions, markets simply cannot price risk adequately, because market participants are shielded from the harms that corporations inflict on others. This pathology goes by the name of ‘limited liability’, but when it comes to the risk borne by shareholders, it would be more accurate to call it ‘no liability’.

Under the prevailing legal dispensation, shareholders are protected from liability when the corporations whose shares they own harm consumers, workers and the environment. Shareholders can lose money on their holdings, but they also profit when (or even because) companies have caused untold damage by polluting oceans and aquifers, hiding the harms of the products they sell or pumping greenhouse-gas emissions into the atmosphere. The corporate entity itself might face liability, perhaps even bankruptcy, but the shareholders can walk away from the wreckage, profits in hand.

The stated justification for limited liability is that it encourages investment in—and risk-taking by—corporations, leading to economically beneficial innovations. But we should recognize that sparing owners from the harms their companies cause amounts to a hefty legal subsidy. As with all subsidies, the costs and benefits should be reassessed from time to time. And in the case of limited liability, the fact that markets fail to price the risk of activities that are known to cause substantial harm should give us pause. more>

Updates from McKinsey

Climate risk and decarbonization: What every mining CEO needs to know
Building a climate strategy won’t be quick or easy—but waiting is not an option.
By Lindsay Delevingne, Will Glazener, Liesbet Grégoir, and Kimberly Henderson – In the mining industry, the impact of climate change and how the industry can respond to it has increasingly been a topic of discussion over the past decade.

Mining is no stranger to harsh climates; much of the industry already operates in inhospitable conditions. But forecasts of hazards such as heavy precipitation, drought, and heat indicate these effects will get more frequent and intense, increasing the physical challenges to mining operations.

Under the 2015 Paris Agreement, 195 countries pledged to limit global warming to well below 2.0°C, and ideally not more than 1.5°C above preindustrial levels. That target, if pursued, would manifest in decarbonization across industries, creating major shifts in commodity demand for the mining industry and likely resulting in declining global mining revenue pools. Mining-portfolio evaluation must now account for potential decarbonization of other sectors.

The mining sector itself will also face pressure from governments, investors, and society to reduce emissions. Mining is currently responsible for 4 to 7 percent of greenhouse-gas (GHG) emissions globally. Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption, respectively) amount to 1 percent, and fugitive-methane emissions from coal mining are estimated at 3 to 6 percent. 1 A significant share of global emissions—28 percent—would be considered Scope 3 (indirect) emissions, including the combustion of coal.

The mining industry has only just begun to set emission-reduction goals. Current targets published by mining companies range from 0 to 30 percent by 2030, far below the Paris Agreement goals. Mines theoretically can fully decarbonize (excluding fugitive methane) through operational efficiency, electrification, and renewable-energy use. Capital investments are required to achieve most of the decarbonization potential, but certain measures, such as the adoption of renewables, electrification, and operational efficiency, are economical today for many mines. more>

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Updates from McKinsey

Ten principles for successful oil and gas operator transitions
Incoming operators face several challenges when taking over an asset, including managing the transition, improving performance, and capturing value. Ten principles can guide the way.
By Pat Graham, Maximilian Mahringer, and Andy Thain – In the past five years, many oil and gas assets experienced an operator change after concessions expired and new operators or national oil companies acquired the rights, or after international oil companies divested or acquired assets. Regardless of the circumstances, a transition between operators represents a critical inflection point for an asset. On one hand, it gains a fresh lease on life through better access to capital, the adoption of new operating methods, or the application of new technologies that enhance its value. On the other hand, an operator change can trigger instability and increase risk before and after the transition. Indeed, many new operators fail to capture the value they expected.

From our analysis of production profiles following upstream operator transitions, we found that only about 20 percent were executed successfully, meaning they maintained or improved production levels throughout the transfer phase. Between 15 and 20 percent stagnated, while 60 to 70 percent declined.

Why were failure rates so high? We identified several reasons why incoming operators struggled to maintain production output:

Lack of collaboration between acquirer and incumbent. Failing to establish an effective working relationship can lead to multiple issues, such as reluctance among incumbents to invest in areas that fail to yield an economic payback before exit, decline in employee engagement, and challenges in the transfer of data and operating procedures.

Excessive level of change from day one. Transferring operatorship always involves changes to governance, operating processes, and IT systems—some of which will need to be implemented from day one. However, tackling too much change too soon can be disruptive, destroying good incumbent practices and cultural features that the acquirer should seek to retain.

Loss of essential capabilities. When exiting an operatorship, incumbents often relocate critical talent to more attractive prospects in their portfolios. This is particularly true of asset-leadership teams, specialists, and those with scarce skills. Replacing such capabilities can be costly and time consuming for the incoming operator.

Lack of attention to cultural differences. Every operator has their own way of aligning the organization’s vision, translating that vision into reality, and finding ways to create business value. No matter how similar ways of working may appear on the surface, different companies often interpret key terms such as “respect” or “risk-taking” in different ways, with different expectations of the behaviors needed to support them. Bringing these differences into the open and deciding which ones need to be addressed, and how, is a vital step in any transition. more>

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Updates from Georgia Tech

Scientists Transform Barbecue Lighter Into a High-Tech Lab Device
By Josh Brown – Researchers have devised a straightforward technique for building a laboratory device known as an electroporator – which applies a jolt of electricity to temporarily open cell walls – from inexpensive components, including a piezoelectric crystal taken from a butane lighter.

Plans for the device, known as the ElectroPen, are being made available, along with the files necessary for creating a 3D-printed casing.

“Our goal with the ElectroPen was to make it possible for high schools, budget-conscious laboratories, and even those working in remote locations without access to electricity to perform experiments or processes involving electroporation,” said M. Saad Bhamla, an assistant professor in Georgia Tech’s School of Chemical and Biomolecular Engineering. “This is another example of looking for ways to bypass economic limitations to advance scientific research by putting this capability into the hands of many more scientists and aspiring scientists.”

In a study reported January 10 in the journal PLOS Biology and sponsored by the National Science Foundation and the National Institutes of Health, the researchers detail the method for constructing the ElectroPen, which is capable of generating short bursts of more than 2,000 volts needed for a wide range of laboratory tasks.

One of the primary jobs of a cell membrane is to serve as a protective border, sheltering the inner workings of a living cell from the outside environment.

But all it takes is a brief jolt of electricity for that membrane to temporarily open and allow foreign molecules to flow in — a process called electroporation, which has been used for decades in molecular biology labs for tasks ranging from bacterial detection to genetic engineering. more>

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Updates from ITU

Addressing challenges for teaching the Internet of Things
By Anna Forster – The Internet of Things (IoT) has become one of the fastest growing fields and an increasing number of jobs require expertise in this field. Yet very few academic institutions offer targeted degrees in the field of IoT.

The Internet of Things is changing how we interact with the world around us. Connected smart watches can provide real-time insights into our health and wellbeing; smart home devices such as connected refrigerators and lights can increase energy efficiency; and connected streetlights can help to manage traffic flow during peak rush-hour.

As more devices become connected, we need to ensure that today’s students have the right skills to drive this technology forward.

Designing a curriculum to teach IoT can be a challenge, in part because IoT is not a stand-alone technology, scientific discipline or paradigm. Rather, it is a combination of existing and well-established fields, including communication networks, embedded programming, artificial intelligence and computer security.

Education professionals must find a way to combine these rather isolated fields together into a meaningful program, and to explore and teach their interactions. Additionally, students need to obtain practical experience.

Students must be equipped with the right tools and skills to keep up-to-date with the extremely fast pace of their field. The market is nowadays exploding with new products, technologies and standards; what they learn during their studies will surely be outdated by the time of their graduation.

Therefore, a successful IoT curriculum is built on three dimensions: technical content, soft skills and teaching paradigms. more>

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Updates from McKinsey

Climate risk and response: Physical hazards and socioeconomic impacts
By Jonathan Woetzel, Dickon Pinner, Hamid Samandari, Hauke Engel, Mekala Krishnan, Brodie Boland, and Carter Powis – After more than 10,000 years of relative stability—the full span of human civilization—the Earth’s climate is changing. As average temperatures rise, climate science finds that acute hazards such as heat waves and floods grow in frequency and severity, and chronic hazards, such as drought and rising sea levels, intensify.

In this report, we focus on understanding the nature and extent of physical risk from a changing climate over the next one to three decades, exploring physical risk as it is the basis of both transition and liability risks.

We estimate inherent physical risk, absent adaptation and mitigation, to dimension the magnitude of the challenge and highlight the case for action. Climate science makes extensive use of scenarios ranging from lower (Representative Concentration Pathway 2.6) to higher (RCP 8.5) CO2 concentrations. We have chosen to focus on RCP 8.5, because the higher-emission scenario it portrays enables us to assess physical risk in the absence of further decarbonization.

In this report, we link climate models with economic projections to examine nine cases that illustrate exposure to climate change extremes and proximity to physical thresholds. A separate geospatial assessment examines six indicators to assess potential socioeconomic impact in 105 countries. We also provide decision makers with a new framework and methodology to estimate risks in their own specific context.

We find that physical risk from a changing climate is already present and growing. Seven characteristics stand out. Physical climate risk is:

Increasing: In each of our nine cases, the level of physical climate risk increases by 2030 and further by 2050. Across our cases, we find increases in socioeconomic impact of between roughly two and 20 times by 2050 versus today’s levels. We also find physical climate risks are increasing across our global country analysis even as some countries find some benefits (such as expected increase in agricultural yields in countries such as Canada).

Spatial: Climate hazards manifest locally. The direct impacts of physical climate risk thus need to be understood in the context of a geographically defined area. There are variations between countries and within countries. more>

From the Revolution of 2020 to the Evolution of 2050

By Basil A. Coronakis – European societies are already on the move and 2020 will shape the direction that they go in. Within 30 years, in one way or another, the new world’s political condition will be settled.

The potential options for 2050 are numerous, from too extreme to everything in-between. The point is that whichever option is good, as well as whichever is bad, is a question that cannot be given a reply by either science or faith, but only philosophically.

However, since the “kings” of our society, and not the “philosophers”, will decide for the next big social step to take (or not),

Under the circumstances, we stand before two extreme scenarios and cannot say which of the two is the good and which is the bad, as we are all part of the problem. As a result, none of us can have an objective view. Therefore, will consider scenario A and scenario B without qualifying any.

Scenario A, which is likely to be the most probable as our “kings” are far for “adequately philosophizing”, and which although may have huge collateral damage and a generalized social upside-downs, in terms of long-term survival of humankind is not necessarily the worse.

Scenario A ends with an anarchy dominated chaotic social explosion that, when settled, will bring a new social order where the last will be first and the first the last. Of course, this will be the way of the “Parable of the Workers” from Matthew 20-16 in the New Testament but based on nature’s law of selection according to which the strong survives and the week disappear.

Scenario B is rather unlikely as it provides, after a smooth transition, that we will be living in the ideal city by 2050 – the contemporary version of Plato’s Utopia.

The so-called “in the between” will be simply a prolongation of the status quo, which ultimately will lead to scenario A, though with increased collateral damage. more>

Updates from Siemens

Digitalizing Energy
By John Lusty – Digitalization is transforming the global Energy & Utilities (E&U) industry, and the most exciting part is that it’s happening so differently in each industry sector depending on their unique plans and priorities. That’s because each organization has a slightly different digital legacy and is executing a different business model that is making them a leader in their respective sectors of the market. It’s also because E&U businesses are inherently non-uniform due to mergers and acquisitions, project mindsets, boom and bust business cycles, breakthroughs in technology, and sudden societal or geopolitical shifts that ripple through the global energy economy at the speed of light.

This blog is the first in a new series from Siemens Digital Industries Software, where we’ll discuss trends in digitalization that relate to the Energy & Utilities industry.  At Siemens, we have the privilege of working closely with industry leaders and people from an extensive range of manufacturing sectors with different degrees of digital maturity.  That lets us see what’s working great as well as some things that didn’t go quite as planned.

We’re also the software business unit within Siemens AG, a mega-enterprise of close to 400,000 colleagues that acts as a massive internal customer for our solutions. People usually look at us a little differently, knowing that as a global engineering and manufacturing organization that relies extensively on our software solutions, we truly have “skin in the game” as our supplier.

Much work has been done across the E&U industry to assemble and apply the “digital twin” of assets, projects and facilities to be more efficient, profitable, and operationally excellent. In this blog, we’ll review examples of excellence in these areas and speak with some of the people who made them happen. more>

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Another year of living dangerously

Twenty twenty will be another year of living dangerously if short-term policies continue to be pursued at the expense of long-term vision.
By Isabel Ortiz – The year 2019 ended with widespread demonstrations, rising inequality and a crisis of representation in many countries. The world is sleepwalking toward recession and a new crisis, while depleting the environment. Governments, and ultimately people, can reverse these alarming trends in 2020.

Sixty-one countries will have presidential or parliamentary elections in 2020. Many citizens are tired of conventional orthodox policies; they want change, and they will choose new parties as a way to achieve this.

This is an important opportunity to redress the current situation, but many of the new emerging leaders are far-right demagogues who blame today’s problems on social-welfare policies, migrants and the poor, while aiming to remove all remaining constraints on capital. As in the United Kingdom, many whom neoliberalism has harmed will vote for these politicians, making the world a more unequal and riskier place.

A lot will be decided in the United States, still the world’s hegemonic power. How US citizens (many without much knowledge of global affairs) vote in the 2020 presidential election will have profound consequences for the rest of the planet’s citizens.

The US president, Donald Trump, has already had a big impact on the world, eroding multilateral institutions, trade agreements and global initiatives as part of his ‘America First’ agenda. Despite the populist rhetoric, Americans in the main have benefited little. more>

Updates from Chicago Booth

The tax that could save the world
Most economists agree on how to tackle climate change. Can politicians make it happen?
By Michael Maiello & Natasha Gural – It was, perhaps, the closest that the economics profession has ever come to a consensus. In January, 43 of the world’s most eminent economists signed a statement published in the Wall Street Journal calling for a US carbon tax. The list included 27 Nobel laureates, four former chairs of the Federal Reserve, and nearly every former chair of the Council of Economic Advisers since the 1970s, both Republican and Democratic.

“By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future,” the economists noted. All revenue from the tax should be paid in equal lump-sum rebates directly to US citizens, they added.

Not all economists agree that the tax should be revenue neutral in this way, but the profession has been coalescing in recent years around the idea of a carbon tax. Most prefer such a tax to the most prominent alternative policy for tackling carbon emissions, cap and trade, according to a recent poll of expert economists.

But a carbon tax seems to be a political nonstarter in the United States. The bipartisan call for action from economists over the years has been echoed by a failure to act by presidents from both parties. President Donald Trump denies the need to confront man-made climate change. But although Barack Obama, his predecessor, in 2015 called a carbon tax “the most elegant way” to fight global warming, he didn’t push strongly for one to be introduced. “One of my very, very few disappointments in Obama when he was president is that he did not come out in favor of carbon tax,” Yale’s William D. Nordhaus told the New York Times last October, days after winning the 2018 Nobel Prize in Economic Sciences for his work on economic modeling and climate change.

US states have shown that they, too, can reject a carbon tax. more>

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