IPCC report a call to action

Today the IPCC released its synthesis report bringing together the work of the past few years. It’s clearly worse than expected suggesting that at current levels warming could be up to 6 degrees by 2030 which is above the 1-4 degrees by 2100 as previously predicted.

As reported it paints a grimmer picture using recent data and stresses the need for immediate action. Coming just before the Bali Conference on 4th December it’s a clear statement as to the direction the UN will be looking to take.

At the same time there are those who continue to decry these types of reports as another installment of fiction along the lines of the Da Vinci code.

So where are we left?

The costs of inaction are difficult to summarise regardless of serious estimation like the Stern Report. After all economics is hardly a science well known for its predictive ability.

Ignoring those who say climate change and global warming are a sham (and they should always be part of the debate), what is the best way to approach this?

Adaptation or restraint? How about Both/And? Why does it have to be one or the other. We need to keep refining our energy systems and the one we have now is incredibly inefficient, controlled by cosy cartels and unreliable nation states.

Climate change provides an opportunity to address the environmental impacts off our consumption processes as well as the way in which we access and generate energy.

Why argue the toss? Just do both and somewhere the right equilibrium will be achieved.

Iron Chancellor weighs into climate change debate

Nigel Lawson, the beloved monetary enforcer of Margaret Thatcher and the unwitting engineer of the Lawson Boom, is in NZ this week to apply the intellectual blowtorch to eco-fundamentalists and climate change doomsayers.

Clearly he is a sceptic but I was struck by his analysis of the situation saying people were “hostile to capitalism and globalisation” and wanted to “put a spanner in the works of capitalism”.

This is a good point. Whilst climate change can be seen as an outcome of unrestrained economic growth fueled by a monetary system out of control, it is still an environmental issue where we have realised that the industrialisation process has created side effects which have only recently come to life.

Plenty of global activist types have jumped on this bandwagon and this creates a blocking effect where the real debate is squashed between two extremes which are insistent on their position leave little room for rational debate.

He calls into question emissions trading schemes as well as noting the uncertainty of the science of climate change. I’m not sure he is telling us anything new but his full speech given at the NZBR will be worth reading to see if he has anything other than general irritation to offer us.

Emission Trading Schemes

A couple of weeks ago I attended a PM forum in Christchurch. It was a chance to hear Helen Clark and her Ministers talk about the new Emissions Trading Scheme that they had just put out. I’ve tried to wean myself off climate change conferences because in the end they are all pretty boring and generally say the same thing: the world may end in a flood of seawater and we need to get cracking by x% right now.

What always surprises me is that no matter how many calls for action there are very little has been done to really restrain emissions. Why is this? Well quite simply this is a very tricky issue. Economic growth is not going to be sacrificed on the altar of environmentalism or, more to the point, an outcome where there is uncertainty. So it drags on. China continues to expand its economy at a fierce pace and shows little interest in reining in its emissions insisting that it’s full steam ahead.

So in come emissions trading schemes: carry on as normal but buy your way to heaven via a piece of paper saying “1 tonne of carbon”. If it sounds like a papal remission that’s because it’s pretty close.  It’s a piece of paper you get for money which blesses your wins away.

The problem is quantifying and packaging a tonne of carbon or equivalent. How can we be sure that people will get what they pay for. This is where certification comes in. We need an agreed international standard and a single market. After all there’s only one type of carbon just like there is one type of gold. Its not like crude oil where there are different prices for different types.

Another issue is the changing science. For example, if forests are used as credit generators because of their ability to sequestrate carbon, there is a possibility that the amount the sequestrate may change over time either due to ecological reasons or a change in the understanding of how and how much they actually lock up and over what time period.

As a business having to purchase carbon credits on paper I would be crossing my fingers and hoping it all works out otherwise i might be out of business.

There is also a concern about the over issuance of paper credits. As readers will know they fractional reserve money system we have started life in a similar fashion: an underlying quantity of a commodity on which paper bills were issued. We know the outcome of that, a money system with no control.

From what i have seen this issues haven’t been covered in enough detail. I can still envisage a scenario where the carbon credit market takes off but overall emissions are not reduced. The goal of all this is to reduce emissions not create a huge market in carbon. But for now its the easy way out and politically more acceptable. Trees can take the slack for now and maybe technology can takeover at a later date.

The first run on the Bank of England

No not today but back in 1696. But its useful to just retell the story as it has laid the foundation for the development of industrial societies all over the world but primarily the UK and the USA.

When the Bank of England was formed in 1694 it was not as a government agency but a joint stockholder company who then lent money to the government to wage war. Money and war go hand in hand really….sound familiar?

But the deal was interesting. Coin, in the form of gold and silver, had to be deposited and then was lent at a rate of interest which at the time was 8%. This is where the term “gilt edged” comes from.

So far so good. But at the same time new money in the form of paper bills was issued against the same deposit of coin. Therefore at a stroke the amount of money as measured by coin and paper was doubled. The paper money was exchangeable for coin so in fact there was only enough coin for half the supply of money.

I’ve seen more complicated magic tricks at a children’s birthday party!

Needless to say some bright spark decided to up the ante somewhat and the first run took place. Over time this settled down so that 4 to 6 times the gold on reserve could be lent out as paper money. This paper money became known as “good as gold”. Quite clearly it wasn’t but it became accepted.

This was taken to extreme by the Farmers Exchange Bank from Rhode Island which was found to have issued banknotes to the tune of $580m backed up by metal reserves of just $3m (note to Les Hunter for that information).

It never hurts to check the balance sheet of your bank to see exactly how much it does have in the way of equity but as we saw in the UK recently it doesn’t really matter since its all guaranteed by the authorities anyway!

The People vs The Banks

News comes of a huge class action suit brought in Canada by a litigator called John Dempsey. Following on from John Kutyn’s (a Canadian living in NZ) paper “the Nature of Money” it takes the next step of actually calling banks to account under the law.

It’s being held up in the courts but at some point the suit must be acknowledged and heard. Its a tough one for the judges as they are being asked to rule on one of the most accepted practices in society today, namely the equivalence of “digital money” and cash in the form of notes and coins.

With the relentless advance of Peer to Peer lending systems coming online and complimentary currencies in every country it is easy to see how a major change is underway. Sure the banks may not be too concerned now but we are seeing the beginnings of a major revolution in what we know as money.

Ethical Foreign Policy: Get Realpolitik

The recent visit of the Saudi Arabian King Abudullah has caused no end of consternation amongst activists of all hue. Let’s face it the Kingdom is not exactly progressive when it comes to human rights or gender equality.

The famous “ethical foreign policy” of the Blair years, a deception like most other announcements of that time, is clearly is misnomer. The real question is can there ever be ethics in foreign policy?

Foreign policy is all about making sure ones national interest is enhanced, or at least not set back, by international events. As Mick Hume notes realpolitik is still the name of the game. Yes we will be enraged at hideous regimes but we have to consider our trade interests blah blah blah.

New Zealand tends to take the higher moral ground where possible but of course people would argue NZ is too small for anyone to notice. The stance of our neighbours across the ditch is somewhat different and maybe its because they have more to worry about with Indonesia to the North and as a bigger economy they interact more competitively with other interests in the region.

It’s an interesting dilemma. The Great Game continues and its hard to see when its going to stop. Until then expect ethics and morals to be trotted out only around election time.