On environmental issues, businesses need government leadership

I've been wanting to write something about the Durban Climate Talks that was something more than the morbid curiosity with which I watch humanity choosing to cease to exist à la Easter Islanders by destroying all of the earth's natural systems on which we rely for survival. I like a lot the personal perspectives of my friend, Jo, who is attending the meetings. In the end, of course, countries decided to push our survival to the limit by agreeing to do something after 2020. Scientists say it will not avert catastrophic climate change and somewhat surprisingly for a country that already suffers extremely badly from the effects of climate change, India, were villains (who needs to drink water from the mountains anyway? and why should we care about monsoon patterns anyway?). All this is rather bad economics.

Thankfully, some companies are doing their best to go green despite a lack of Government leadership. But they are doing less than they otherwise would. One of the reasons is that they don't know what the standards will be and there are costs associated with setting standards only to have to change them. For this reason:

Of 300 bosses of big global firms recently quizzed by Ernst & Young, 83% said they wanted to see a legally binding multilateral deal struck in Durban to update the ailing Kyoto protocol and help to put a price on carbon emissions. But only 18% expect this to happen. The absence of a clear climate policy helps explain why, for example, investment in British clean technology fell from around $11 billion in 2009 to $3 billion last year. It would also suggest that any firm factoring a steep carbon price into its plans—as Shell does, assuming a notional price of $40 a tonne—should quietly lower it.

(see FULL ARTICLE in The Economist)

This applies in particular to new technologies such as that associated with electric cars. Israel is reportedly doing very well because the Government has already defined standards. Why invest in a system of recharging or changing batteries when the country may change standards? This partly explains why other countries are doing less well in this field.

A few companies fight against change. For example BA announced that an air duty rise will cost jobs. They are correct. But only in the short run and the alternative is far worse or, at least, far more expensive.

So there are two reasons why Government leadership is necessary: setting standards which are predictable and, applicable to everyone (fair competition) and forcing companies to adjust to the changes rather than fight them.

I recently read a book about the impact that humans have had on the environment and what the planetary limits are in different areas now and what can realistically be done. I recommend as essential reading The God Species: Saving the Planet in the Age of Humans by Mark Lynas. There is also an excellent interview with him on The Guardian's Science Weekly. (I had pre-ordered this book in fact, and I plan to write a full review of it when I get time.)

He talks in great detail about the CFC (ozone layer) crisis. It is somehow seen today as if this was an easy one to fix but in reality it was far from easy. Governments needed to be strong armed into agreeing. Industry tried to resist saying that there was no alternatives.

Of course, any argument suggesting we could no longer have fridges or deodorants make people think twice. Indeed, I believe that all arguments saying that people's lives would be significantly worse following action to prevent climate change are doomed to failure. But this didn't happen. The industry developed new technologies and I am happy to report I as I write, I am sipping on a beer kept chilled in my fridge and smelling very nice, thank you very much.

The point is that clear legislation and leadership by Government gives industry an incentive to innovate. It gets around the short term profit motive. It gets around the risk of losing business if you go green but your competitor does not. It gets around the standards problem. Governments need to lead to avoid collective action failure (tragedy of the commons) and to create a level playing field.

And we need to have faith in human nature and the dynamism of the private sector to find solutions without lowering living standards. But this will only happen with Government leadership in the right areas (and, obviously, not interfering in business in the wrong areas).

One of the major justifications for having Governments at all is the ability to correct a collective action problem. In Durban they have failed and they all lose some legitimacy for this.

Apps for Climate

The World Bank has launched a competition: Apps for Climate

"This competition challenges participants to develop software applications related to climate change. The applications should serve to raise awareness, measure progress, or to help in some other way to address the development challenges of climate change. Submissions may be any kind of software application, be it for the web, a personal computer, a mobile handheld device, console, SMS, or any software platform broadly available to the public. The only other requirement is that the proposed application use one or more datasets from the World Bank Data Catalog available at data.worldbank.org or the Climate Change Knowledge Portal at climateknowledgeportal.worldbank.org." 

Exporting pollution and jobs

George Osborne had a few Green Concessions in his Autumn Statement, although maybe not enough - more words than actions but it is a good start as it at least acknowledges the importance of climate change for the economy.

Here is a part I found interesting:

"We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers," Osborne said, announcing the expected rebate. "All we will be doing is exporting valuable jobs out of Britain."

From an economic perspective, I dislike it - it smacks of protectionism and subsidising some sectors when British society and developing societies would all be better off if British steel mills, aluminium smelters and paper manufacturers did indeed shut down and we imported these goods from other places.

But I do agree that from a climate change point of view, he is probably right. Brits will not stop consuming these goods - they will just be imported. The pollution will just be shifted elsewhere. Here is some excellent analysis from The Oil Drum blog which shows that carbon emissions can decline in, say, the UK, but it gets shifted to, say, China (HT: MM). The planet as a whole does not benefit. Indeed, due to transport and the fact that China is less energy-efficient there may be a short term negative impact (but perhaps longer term positive one thanks to learning to be more energy efficient).

This is not a sufficient argument for bad economics though. Instead it means that it is the consumers and not the producers of carbon who need to pay for it. Shifting dirty production abroad and importing the goods is just cheating. It should also imply that taxes in the West help to pay for industrialising countries to become more energy efficient.

Why I carbon offset my last personal flight and why it should not have been a choice

I took some personal flights over the last (Thanksgiving) weekend and I just got around to doing my carbon offsetting through MyClimate. 

I don't think I should have had to choose to do this or make additional effort to do so. Fuel taxes should be higher to ensure that the full cost to humanity is integrated into the price of the ticket. At the moment, when I fly, I pay for the ticket which includes the cost of the fuel. But the pollution has a cost for more people which I am not paying for. The pollution I am causing is resulting in floods, droughts, crop failure, lost work days, increased sickness and many other bad things for other people. They are paying for a part of my flight and most of them live far more difficult lives than I do. (So, thank you for subsidising my flight - I appreciate it.) 

Just as for driving, fuel prices should reflect the full cost to humanity. It is true that the price would be higher if I had to pay the full cost and I would not fly so often. But that is part of the point - pollution would go down as I choose to take only more essential flights that I think are really worth it. I would still have the option to fly but I would have to value it highly enough to justify some negative impacts on other people. In addition, the increased taxes should go towards footing the bill for climate change in the poorest countries which are most effected and towards schemes to reduce climate change - call it 'offsetting' if you will.


Here is a nice video of the full effects of fuel for cars:

I don't think doing this offsetting should be my choice - I think it should be integrated into the ticket prices for everyone. As this article says "the big problem with voluntary donations is that they do not encourage airlines to demand cleaner planes or fly cleaner routes" (article in French-HT: KG). But till then it would be nice if airline companies made it easy to do this. Unfortunately, BA did not seem to make it obviously easy for me whilst purchasing tickets or on board but at least they did not pretend to, unlike some awful competitors. I think that is a pity.

West should pay for climate change

A Malawi study reveal the cost of adaptation to climate change.

“The cost of adapting a integrated farming system in a village in Nepal could be US$20,000 per year, that of a rain-fed maize system in a district of Malawi’s US$55 million, and protecting the entire livestock sector of Tanzania could cost up to US$280 million — with all costs likely to treble by 2030."

Developing countries have to pay the price for western pollution but convincing people in the west that we have to pay for this is difficult. The Daily Mail for example, seems to feel that it is both a waste of taxpayer money and a way to manipulate African governments. I think that it is a good use of taxpayer money to pay developing country governments to be greener. The economic costs of climate change are high and it makes sense for wealthier countries to foot the bill. You can make your own personal contribution so that the Ecuadorian government does not rip up the rain forest to pump oil HERE.  As for manipulating African governments. Well, maybe. In the same way as I am manipulating potential smokers by taxing cigarettes. Or manipulating manufacturers by choosing what I buy. I think I can live with that.

Who will foot the bill for green development in poor countries?

"Amid the wreckage of the 2009 Copenhagen climate summit, an agreement that rich countries would, by 2020, furnish developing ones with $100 billion a year to help them mitigate and adapt to global warming looked like a rare achievement. This commitment will also be a big talking point at the next annual UN summit, due to start in Durban on November 28th. With almost no hope of a big new pact, many expect progress on the formation of a global Green Climate Fund to be one of its few successes. Yet there is huge uncertainty about how developed countries will deliver on their promise, including what role the fund will play."

Read the whole article HERE (The Economist)

This is a real and topical issue. The Ecuadorian Government is prepared not to extract oil from the rain forest if developed countries compensate it for a part of the losses. Some countries have pledged funds and others see it as blackmail. I think that it the rainforest is a global good - the positive externalities are felt by the whole world. It is only therefore right and proper that everyone should contribute towards it. 

Even more importantly, it is good economics to do so. The country would benefit greatly from exploiting the oil - significantly more than the USD 3.6bn they are asking for, in fact. Whereas it would lose little from destroying the rainforest. After all, there is plenty more of it in the world - they would still have plenty of oxygen from rainforest in other countries. Not only this, but with a purchasing power GDP of around USD 7,000 per capita, that money can go a long way. The opportunity cost of not exploiting the oil is high. 

The rest of the combined world though has something to lose and some countries can afford to pay for it. There is again a problem of collective action - individually, each country gains only a little from the Ecuadorian rainforest. Setting up of a fund to pay for green development can help to mitigate this.

You can also make your own individual contribution. How much is the oxygen that you breath from the Ecuadorian rainforest worth to you?


Watch a video about the area too:

Here is a view from The High Line:

And the end of it:

Urbanisation is good for the environment. If you like nature, keep away from it. In Africa it would allow for larger, more efficient farming to replace smallholders. People are increasingly choosing even difficult city life over rural life because it provides far greater opportunity. Some development workers find this difficult to accept, believing, I think, incorrectly, in some idealistic rural life. The fact is that we don't see the difficult part of rural life but we see very easily urban squalor. More efforts have to be made to make cities better places though. One's surroundings impact heavily on mental health, learning, behaviour, and more. Creating nice spaces in cities is important for mental health and therefore productivity. People need green spaces. Developing countries could probably not justify the resources used for The High Line but more effort to create green, clean spaces in urban Africa and elsewhere could prove beneficial for development and health. An article today reports that poor sanitation has negative effects on economic growth.

Adaptation to consequences of climate change in Kenya

The BBC has a short article on use of greenhouses in agriculture to help counteract the heavy drought in Kenya. Below is a short video, also in Kenya, on the impact of drought and climate change.

I find the below interview somewhat leading but it is still interesting.

Space-saving urban parking

I spotted this mini-multistorey parking in NYC. What a great little compact way to save some space on the street. More space can be made for people, bikes, and other things.

It is a good thing to reduce the amount of space cars take up in urban areas.

A complete waste of resources

Here is a photo of my lunch yesterday. Don't get me wrong; the burger was delicious. But did I really need a whole cardboard dish with a smiley face in ketchup? I don't even like ketchup.

Why petrol needs taxing more despite a lack of alternative transport

I had an interesting conversation last night about the necessity to tax petrol more. At least, partly conversation, partly me ranting, but that still counts. 

In the past, I have had conversations with a number of people who have expressed the opinion that petrol can only be taxed more when there are viable alternatives. American cities especially have been built based on petrol prices which do not represent its full marginal social cost. Therefore, there are sprawling suburbs and under-resourced and under-utilised public transport networks, which can be difficult to develop anyway in sprawling cities. People have to drive to get to work and to get to the shops because they live so far away and because they have few public transport options. You can't change this situation without a large change in the urban environment and in public transport alternatives. A sudden increase in petrol taxes would hurt dearly and hit productivity as it may prevent some people from being able to work in a place where they are most productive.

This is all true. Or mostly true. Here are a few counters:

1. A lot of journeys currently made by car can actually be made by other means and an increase in petrol prices should make people think twice about which journeys are most important to make and which to make in the car. 

2. I also wouldn't advocate a sudden sharp rise in petrol taxes but even a slower increase would have negative impacts allowing for behavioural and financial adjustments as well as giving time to develop useful public transport. 

3. I also think that increasing petrol prices would create demand for transport alternatives (including electric cars). It is far from obvious to me that creating transport systems first would work because it is not necessarily easy to predict how people or firms might relocate following a petrol price rise or, given this, what transport types would be most useful. Nor, is it obvious to me that we would ever reach this point of 'sufficient public transport infrastructure' to increase petrol taxes. It is a constantly moving target. Therefore, better to increase taxes and let a mixture of the public and private sector respond to the changes more organically.

But here is something stronger: even if people don't abandon their cars, even if there is no improvement in alternative transport, even if there is no shift to electric cars, even if there is no spacial reallocation of firms and households, petrol taxes still have to increase. And here is why:

The private cost of petrol does not equal the full cost to society; somebody, somewhere in the world is already paying. The suburban commuter might have to pay more for petrol but it is not enough to say that he has to have a good alternative right now because at the moment another person is subsidising his lifestyle. The farmer in Africa who loses his crop to flooding due to climate change really had no alternative. The small businesses that can't survive due to flooding or the child who drops out of school or the American state who has to issue debt to pay for water management to ensure people have enough to drink and water crops are already paying for the difference between the private and the public cost of petrol. These people are making a transfer to the suburban commuter now. 

In most of these cases, these are transfers from the poor to the rich. The poor are hit hardest by climate change and the effects of pollution. They have no choice about these transfers. In this respect, the current situation is comparable to plunder at the very least and potentially an act of war. It is a little as if the suburban American commuter is plundering a defenceless farmer's field and then complaining that his life would be difficult if he didn't do this and he cannot afford to do otherwise. And when we say that we need to provide him with better public transport (which might be true), we are validating his continued plunder. This is unacceptable and cowardly. 

Obviously, not all pollution should be banned and humans cannot exist without polluting but there needs to be a compensating mechanism. More money needs to flow from wealthy countries which do most polluting to poorer ones that suffer most. And individual people, including our suburban commuter, must think twice before infringing on others' rights. The best way to make sure that it is really worth it is to pay the full social cost. Taxes on petrol need to begin rising slowly starting now.

(HT: JM)

How biking can save cities billions of dollars in health expenses

Nearly 70 percent of Americans' car trips are less than two miles long. It's a no-brainer that biking instead of driving to take care of these trips is a great way to get exercise while cutting air pollution. While we've always assumed that the cumulative effect of many individuals making that choice would be longer, healthier lives and cleaner air in our cities, a recent scientific study put some rigor to our hypotheses and proved us right.

Read the full article HERE.

HT: MM

Question Time on Climate Change

"future economic growth requires us to tackle this issue successfully" (William Hague, Foreign Secretary)

"climate change undermines the basis for achieving the MDG" (Ambassador Mxakato-Diseko, South Africa)

"when means of income generation suddenly disappear because of flooding [people's] means to educate their children disappear before they eyes" (Ambassador Mxakato-Diseko)

Climate change offers new business opportunities - for example E-idea, Jakarta (Martin Davidson, Chief Executive of the British Council.

Need to reduce carbon emissions without compromising growth, poverty or job creation (Ambassador Mxakato-Diseko)

"[Climate change] is a reality that we experience every day" (Ambassador Mxakato-Diseko)

Watch it HERE.

HT: JT

More economic costs of climate change

Climate change is causing weather patterns to become more and more extreme and unpredictable. Rising sea levels and heavy rainfall will cause large-scale city flooding. Some countries - like Mauritius might disappear altogether. The economic costs are huge.

The Central Bank of Thailand has revised down it its growth rate from 4.1 to 2.6% because of the flooding in Bangkok which has destroyed businesses, homes and livelihoods. In Europe, heavy rainfall is blamed for car pile-ups in Genoa (photo below) and Britain's worst road accident in years.

The economic and human costs of high urban pollution

"For the past few days, Beijing has been covered by a thick blanket of smog, forcing the closure of several highways and the cancellation of hundreds of flights. The US embassy in the Chinese capital has warned that air quality has reached hazardous levels and, according to media reports, hospital admissions have risen by almost a third."

THIS short BBC report shows a scientist taking his child out of school because he judges pollution levels too dangerous for the child to be outside. There are increases in hospital admissions as a result of the smog and presumably many work and education days lost to illness. The lost human capital and work effort will directly contribute to lower economic growth this year and for many years to come. A nice illustration of the economic of high pollution.

Bike-sharing in Brașov, Romania

You have to leave some form of ID though and return the bike to the same place. A start though.

Environmentally-friendly hot water in Bucharest, Romania

Below is a cityscape photo I took of Bucharest. The building in the foreground has black pipes which absorb the sun and heat the water inside them. Cool :)

Water in yoghurt pots

I keep going places in Turkey where water is given to you in these little plastic containers, like yoghurt pots. It probably uses less plastic than a small bottle of water, so that must be 'a good thing' if that is the right comparison. Only, I think that the alternative should be either filtered tap water or else a large bottle of water. Unfortunately, I've been in a few restaurants where the water is poured into your glass from a really small bottle of maybe just 200ml. I grit my teeth when I see it...

Istanbul bike lane Fail

A good effort though:

 

(the bus is parked - it seems you should cycle straight into the doors)

It reminds me of this NYC video:

Air pollution in Ankara, Turkey

Here is a photo of Ankara taken from my temporary office window. Notice the thick layer of smog over the city. 

I found an article from a Turkish newspaper taking about Ankara's air pollution:

"The large increase in natural gas prices and the distribution of free coal by municipalities prior to local elections has led to an enormous jump in pollution levels in Ankara, reaching 9,350 micrograms per cubic meter in the Sıhhiye district. According to the World Health Organization, or WHO, the acceptable level of pollution is a maximum of 300 micrograms. "This is one of the highest levels in the world’s history. When pollution rose over 4,000 micrograms per cubic meter in London in 1952, approximately 4,000 people died," Dr. Recep Akdur, an expert in public health, said yesterday." (December, 2008)

Air pollution seems to be an issue for Ankara and elsewhere and can have significant negative health impacts - in cities more than elsewhere. A research paper recommends switching away from coal (rather than distributing it free, as has happened in the past in Ankara-before elections, I am told). Given transport is also partly responsible, efforts to switch to electric cars can also have a beneficial impact on urban pollution and hence public health.

Good economics is about wellbeing or happiness (utility), not only about getting rich, although this is obviously an important component. Pollution on these levels reduces life quality, life expectancy and the negative impact on health likely causes lost work days and school, reducing human capital, economic output and wealth. This youtube video shows the true cost of fuel which takes into account these negative side-effects:



High-pollution development models are reaching their limit.

Living with limits: growth, resources and climate change

"The affluent economy enjoyed until recently by just a small proportion of the world's human population is now becoming global. Billions of hitherto poor people not only aspire to the standards of living of the advanced countries, but expect to achieve them within their lifetimes. But such a leap will, on anything like current trends, impose vastly greater demands on the planet's resources and threaten profound changes in the global environment. Is this tension between human aspirations and natural limits manageable technologically, economically, socially and politically? A way must be found to combine economic dynamism with respect for natural limits. This, in turn, will demand profound changes not just in the economy, but in governance at all levels. Of all these challenges, climate change is the most intractable. This is the most difficult collective action problem in all of human history - inherently global, extremely long term, technologically demanding and replete with deep distributional questions. The lecture will ask whether humanity has any hope of addressing these challenges successfully."

The Grantham Institute for Climate Change Annual Lecture 2011 by Martin Wolf of the FT on the 3rd November in London.

Full information HERE.

(HT: JT)

Green car sharing

I was wandering around the streets of our fine European capital the other day and I snapped a photo of these great zencars:

It's a carsharing scheme like zipcar but the cars are all electric. How great is that?! You can see that the cars are plugged in and charging in the photo*. Electric carsharing is coming soon to Paris through Autolib (see also THIS interesting article in the Economist about the man responsible). 

These are all a bit like the bike-sharing schemes like Capital Bikeshare (in DC), Vélib (in Paris), Boris bikes (in London - yes not the official site, but I like this better), and, happily, Mejor en Bici in Buenos Aires.

It would be great if ways to encourage urbanites in polluted developing country cities to use electric cars as an alternative to petrol ones could be found. 

*As an aside, note the bits of Berlin Wall in the background on Place du Luxembourg.

Bike transport in the developed and developing world

Bike sharing around the world

Rent an electronic bike in London

Bikes made from bamboo in Zambia (HT: MM)  


Speaking of Zambia - a free and fair election in which the incumbent loses and goes peacefully. Could Banda be a candidate for the Mo Ibrahim Prize?

Extreme weather patterns impacting on developing countries

Extreme weather patterns are likely to become the norm. They wreck havoc in the developed work causing floods, droughts and fires. Here is a beautiful slide show of the 2011 Texas drought. Unpredictable weather patterns can be deadly in developing countries though. The desertification of Mali has deprived villages of their food sources and livelihoods. Food security is threatened and makes it difficult for subsistence farmers to plan ahead. New forms of crop can help and weather insurance is slowly becoming more widespread. The developing world, ultimately, will be hardest hit by climate change.

What do hot summer days in Beijing and heavy rains in rural Colombia have in common?

"Both are climate events that can trigger a host of public health calamities. The climate and public health fields would seem to be a match made in heaven. However, practitioners in those fields often have a hard time connecting." Read the full article HERE.

How can water bottles create cheap lighting?

How to make cheap, energy-efficient lighting using a used water bottle

Watch on youtube HERE.

Firms with climate change strategies perform better

"For the first time in its ten year history, the Carbon Disclosure Project (CDP) Global 500 survey report reveals the majority of the world's largest public corporations have climate change actions embedded as part of their business strategies. The survey also finds that companies with a strategic focus on climate change provided investors with approximately double the average total return on their investments."

This is what you would expect if the majority of consumers favour companies which care about the environment. Or caring about climate change could be a luxury good for firms - only the more profitable ones can afford to care.

Green opportunities for profit exist in developing markets too.

Read the whole article HERE. 

The high-pollution development model

Tehran is sometimes effectively shut down due to the pollution levels and some estimates put the number of deaths caused by pollution there at 3,600 per month.

Iran is heavily energy intensive but with fuel subsidies amounting to a staggering 20% of GDP, it is no surprise that Iranians over-consume it. Unsurprisingly, analyses show that fuel subsidies are bad for the environment and are unsustainable from a development perspective. Thankfully, there have been large recent reductions in Iran.

Nonetheless, Abbas Milani thinks that one of the toughest questions journalists could as President Ahmadinejad is on his government's neglect of some environmental issues:

"Your government has been oblivious to the grave ecological dangers faced by your country. The Zayandeh Rude River in Isfahan has dried up; the drying up of Lake Orumiye will affect the lives of hundreds of thousands of Iranians living in the area. Why have you, in spite of your much-touted trips around every province, ignored these grave problems?"

Taken from the Wikipedia article on Lake Orumiye, here are satellite images of the rapid shrinking of the lake between 2003 and 2010:

Emerging-world companies combining growth and greenery

"A new study by the World Economic Forum (WEF) and the Boston Consulting Group (BCG) identifies 16 emerging-market firms that they say are turning eco-consciousness into a source of competitive advantage. These highly profitable companies (which the study dubs “the new sustainability champions”) are using greenery to reduce costs, motivate workers and forge relationships. Their home-grown ideas will probably be easier for their peers to copy than anything cooked up in the West.

The most salient quality of these companies is that they turn limitations (of resources, labour and infrastructure) into opportunities.

The central message of the WEF-BCG study—that some of the best emerging-world companies are combining profits with greenery—is thought-provoking. Many critics of environmentalism argue that it is a rich-world luxury: that the poor need adequate food before they need super-clean air. Some even see greenery as a rich-world conspiracy: the West grew rich by industrialising (and polluting), but now wants to stop the rest of the world from following suit. The WEF-BCG report demonstrates that such fears are overblown. Emerging-world companies can be just as green as their Western rivals. Many have found that, when natural resources are scarce and consumers are cash-strapped, greenery can be a lucrative business strategy."

Read the whole article HERE.

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