WEO 2009 out today

It’s that time of the year again. The International Energy Agency has just released the World Energy Outlook 2009 (WEO 2009), and we’ll all be pouring through it in the next few days and arguing what does it mean. Here’s the Executive Summary and, new for 2009, a piece on Climate Change, Energy and the Copenhagen COP15 summit.

I haven’t got round to reading any of it (and the Exec Summary is pontless anyway, condensing the policy recommendations, but not the assumptions behind the results), but there’s a couple of bits in the media that caught my eye: the need to put a price on carbon, and the estimated cost of inaction. Let’s see the first now, and leave the second for later.

 

The need to put a price on CO2 emissions or demand will go through the roof as soon as the world economy picks up (which it sort of is anyway):

The main driver of demand for coal and gas would be inexorable growth in energy needs for power generation

The developing world will see some of the fastest rates of growth with the 10 countries of the Association of Southeast Asian Nations (ASEAN) seeing an average annual increase of 2.5 percent in their primary energy demand until 2030.

In other words, developing countries. It’ll be interesting to see what the IEA says about where the cuts should be deeper (or, if you prefer, who is to pay for the cuts) – if indeed they say anything about it at all. That is, after all, the issue holding COP15 back.

 

Punchline: climate policy that discriminates against developing countries is pointless, unacceptable and won’t get through anyway.

Pandering to populism

Buy American: Bad for America | Marc Gunther.

Got this non-economic, good common sense analysis of anecdotes surrounding the “Buy American” provision in the US stimulus package from Knowledge Problem. It seems that pandering to protectionism, populism and assorted -isms is hurting American companies, more than helping them.

“The Buy American provision is centered very much on where you do manufacturing and assemble products,” Dulaney told me. Many state and local governments, he said, “view the Buy American act as meaning the products must be 100% made in the United States.”

That’s unrealistic. “We all have global supply chains,” he said.

It would seem the provisions of the Buy American rules are there specifically to protect (boost?) a very special kind of blue-collar, relatively low pay job – the kind of economic activity that gives little or no added value. After all, as the article points out,

Since more than 90% of the world’s consumers live outside of the United States, which remains one of the world’s three largest exporter — Germany and China are the others — we stand to be harmed more than anyone by a trade war.

I suppose US is the world’s third largest exported in value, not volume. Value is, at the end of the day, the important measure: export expensive stuff, after buying in the cheap components from other countries. Does America want to become the new China? Buy American certainly paves the way for that.

Punchline: bad economics is when you stand to lose the gains from trade because of populist protectionism.

 

Fairy dust and happy thoughts

Because some times all you can do is wish for it.

Stupid titles make a difference

Environment Agency to propose individual carbon ration cards – 09 Nov 2009 – BusinessGreen.com.

Someone screaming “socialism” around the corner in 3, 2, 1…

The Environment Agency will argue today that carbon rationing is the fairest and most effective way for the UK to meet its legally binding targets to cut greenhouse gas emissions.

The Agency’s chairman, Lord Smith, will propose at the organisation’s annual conference in London that every citizen be provided with a “carbon account” and unique number that they submit when buying carbon-intensive items such as petrol, electricity or airline tickets.

Individuals would then periodically receive statements that show the carbon impact of each purchase and how much of their annual ration has been used up. If they exceeded this ration, they would need to buy extra credits from those people that have not used their full allowance, in a similar fashion to existing emission cap-and-trade schemes.

It’s not rationing. Rationing means you are given an allowance and that’s it. If you want more you have to queue or, more to the point, make do without. What the EA is proposing it a market mechanism, akin to others in life, where you buy something to enjoy the utility of it. It’s a good idea, if probably complicated right now (they say it as well in the article). It is not rationing.

I’d like to know who came up with the term “rationing” there: the EA or the journalist? Whoever did it needs to have a pint, relax and think stuff through before committing words to paper.

Punchline: bad communication can spoil good ideas; just check what is going on in the US.

James – Laid

Can’t be bothered to work, was listening to the radio. This was on:

I had never seen the video. Had a few chuckles.

Whoa!, they would get my vote now

Cameron throws weight behind “bio-banking” scheme – 20 Apr 2009 – BusinessGreen.com.

Really? I’m beginning to respect Dave the Chameleon:

Conservative Leader David Cameron has thrown his weight behind proposals for a new “bio-banking” scheme that could see firms make financial contributions towards biodiversity projects whenever they undertake new developments. The proposals, which were originally outlined by shadow environment secretary Nick Herbert in February, are modelled on similar schemes in Australia and the US, and would see developers provide compensation for any resulting biodiversity loss by investing in conservation credits that would help fund projects to protect wildlife at another location.

Yes, it makes me a bit of a one-issue, normative, just-like-in-the-textbooks voter. Plus, I can’t vote in the UK General Elections, what with me being a foreigner and all that. But it does show awareness – kudos to Mr Cameron for that.

What’s more, according to the latest IUCN report,

More than a third of the 47,677 species of plant and animal surveyed this year by the International Union for Conservation of Nature were found to be at risk. The IUCN’s latest “Red List” includes 17,291 species in some degree of danger. This is an increase from 2008, although since more species are examined each year, more are found to be endangered.

With conservation banking being limited to endangered species (I’d like to see the whole issue of Ecosystem Services provision tackled, but still), this means banks could be constituted dedicated to the conservation of 17291 species. A big, big market – how long until these mechanisms take off?

Punchline: good common sense. coming soon to a voting station near you. And badly needed.

Like an old sweater

Went to a Mew gig tonight. This was on:

Felt incredibly comfortable to listen to. Each song that started – you knew exactly where they were taking it. And surprisingly, they proved they can make some noise as well.

Big-ag Strikes Again

A few months ago, as Waxman-Markey was being dragged across the US House of Representatives’ floor, the agricultural lobby demonstrated how powerful they were, flexing their muscle and extracting concessions from the lawmakers. Now that the debate is raging in the US Senate, they’re at it again.

Ricardo Bayon is probably one of the people that’s written the most about ecosystem services markets (including carbon), and he certainly knows his away around. Although this post is about a month old, he got a lot of things right, such as the fact that trouble would come not from Republicans, but from within the Democrat party – he was dead right there. So here’s his prediction about what is the make-or-break in passing Boxer-Kerry:

As it was in the House, so it is likely to be again in the Senate. Expect agriculture to once again have a big say in the ultimate fate of this or any other climate legislation.

How about offsets, can’t that help?

One argument to counter this fear is, of course, that by selling offsets, farmers will be able to minimize their pain. The problem is that virtually every farmer in the US has seen what damage increased input costs can cause… and they have the scars to prove it.

…

By contrast, virtually NO farmers in the US have seen remarkable benefits from the sale of carbon offsets. Sure, there have been some (courtesy largely of the Chicago Climate Exchange), but they are few and far between (not to mention that prices of a ton of carbon on the CCX have fallen to below the $1 mark).

Carbon offsets are essentially worthless in the Chicago Carbon Exchange, then. It’d be suicidal to bank on them at this stage. The wrangling will go on. And no Boxer-Kerry lowers the prospects for Copenhagen by a considerable amount…

 

Punchline: get carbon markets to work properly. We need to put a price on the thing.

Good mood Friday

BB King, Lucille.

Because you can listen to the Blues and be in a good mood at the same time.

A job to look forward to?

Changing Climate: RiskMetrics Grabs KLD, Beefs Up Analysis of Environmental Risks – Environmental Capital – WSJ.

RiskMetrics Group, the big risk-analysis firm, just snapped up KLD Research, which specializes in environmental, social, and governance issues for investors. That basically means that RiskMetrics’ traditional approach to figuring out what risks hang over companies—from exchange rates to commodity prices–will now include plenty of emphasis on environmental issues, including climate change.

…

Peter Kinder, the president of KLD, sees the deal as confirmation of the trend for big companies to increasingly watch their environmental back, as it were.

This is somewhat new, and further proof of where we’re going. The world is changing, at breakneck speed.

 

Punchline: some of the world’s toughest questions these days fall under that “environmental risk” bracket. And insurance companies are pouncing in as well.