Tuesday, 28 September 2010
Colombian tribe on a mission to warn the west of creeping ecological disaster
"You give precedence to the use of a thing rather than its source. That's the intellectual error. Ultimately, it's all nature."
Monday, 20 September 2010
Wednesday, 8 September 2010
Enviro Businesses press new Oz Govt to issue Climate Bonds
Environment Business Australia (EBA) has put forward six key climate change recommendations to the new Australian Government, including climate bonds and a Green Investment Bank. EBA’s Fiona Wain was first briefed on the Climate Bonds Initiative at the Copenhagen Conference last December.
The climate bonds and Green Investment Bank proposals have also been presented to MPs in the new Australian Government and, in particular, to the Treasurer’s office, by policy group Labor Environmental Action Network. The proposals, part of a basket of proposals, have apparently been well-received. Watch this space for further news.
UK Govt Capital Markets forum tackles need for trillions of climate investment
The UK Government yesterday held an investor and financier forum to launch it's new Capital Markets Climate Initiative to unlock new investment in low-carbon technologies - as well as make London a global hub for green finance. There was a special emphasis on financing climate change mitigation activities in developing nations.
The invitation-only event, hosted by Minister for Climate Change Greg Barker, involved a day of round-table discussions for some 50 people representing various national governments, major asset owners from around the EU, banks, ratings agencies and other bodies, as well as a small group of issue experts. Six Climate Bonds Advisory Panel members were among the forum participants, including yours truly.
Three UK Government Ministers attended, two for the whole day (including the Treasury Economic Secretary), an indication of the importance given to the initiative.
The UK Government is expected to publish a report of the forum, but we can tell you that:
- There was general agreement about the huge scale of investment flows required to avoid the high risks of dangerous levels of greenhouse gas emissions.
- Discussion focused on policies and approaches that would deliver the necessary risk-adjusted returns to attract private capital. That included issues such as supporting liquidity in markets for green equity and green debt, options for reducing political risk (real or perceived) for investors, and the urgent need to remove perverse fossil fuel subsidies that undercut the profitability of clean energy investments.
- The UK Government was urged to continue to facilitate an international dialogue between governments and investors so as to further develop concrete proposals that will deliver the climate change mitigation investment the world needs.
UK Secretary of State for Energy and Climate Change Chris Huhne wrapped up the forum by saying the world "... faces the most exciting, enormous challenge in mobilizing capital than any generation has faced in decades. (Globally) we are looking at a third industrial revolution."
The invitation-only event, hosted by Minister for Climate Change Greg Barker, involved a day of round-table discussions for some 50 people representing various national governments, major asset owners from around the EU, banks, ratings agencies and other bodies, as well as a small group of issue experts. Six Climate Bonds Advisory Panel members were among the forum participants, including yours truly.
Three UK Government Ministers attended, two for the whole day (including the Treasury Economic Secretary), an indication of the importance given to the initiative.
The UK Government is expected to publish a report of the forum, but we can tell you that:
- There was general agreement about the huge scale of investment flows required to avoid the high risks of dangerous levels of greenhouse gas emissions.
- Discussion focused on policies and approaches that would deliver the necessary risk-adjusted returns to attract private capital. That included issues such as supporting liquidity in markets for green equity and green debt, options for reducing political risk (real or perceived) for investors, and the urgent need to remove perverse fossil fuel subsidies that undercut the profitability of clean energy investments.
- The UK Government was urged to continue to facilitate an international dialogue between governments and investors so as to further develop concrete proposals that will deliver the climate change mitigation investment the world needs.
UK Secretary of State for Energy and Climate Change Chris Huhne wrapped up the forum by saying the world "... faces the most exciting, enormous challenge in mobilizing capital than any generation has faced in decades. (Globally) we are looking at a third industrial revolution."
Thursday, 22 July 2010
Calls for "grassroots" campaigns - energy without strategy?
There's been a lot of talk in climate change activist circles of the need to revitalize the grassroots lately. On some of the group email lists I'm on people say it's the only way forward, etc. But I'm not so sure.
One example given of recent grassroots success, 350.org, was actually a spectacular international "grassroots" failure - looked fabulous, zero impact on Copenhagen (the objective of the movement). Ditto TckTckTck. This is a painful thing to say; I've been part of some of these efforts, and many of my friends have invested huge effort and money in them. But such efforts are patently not succeeding.
I now see these campaigns as energy without a real strategy. We need the two together.
In Obama we had a kind of triumph of a grassroots movement with a simple objective (elect him); yet, once in WDC, as usual, incumbent interests are able to deploy funds and Fox to neutralise what turns out, also as usual, to actually be an ephemeral movement.
Eventually community sensibility will, of course, shift and the changes we need will seem obvious solutions - but we need some tougher minded and more immediate strategies than vague and directionless calls to "build the grassroots" (a.k.a. "empower the people") or "tell
the politicians what we want".
(We see the same thing reflected in investor circles, with IIGCC and INCR and the like drawing up lists of demands and presenting them, almost naively, to politicians being arm-wrestled by business lobbyists.)
We have a corporatist society, especially in the US, where democratic participation is in practice highly restricted to issues that don't impact on corporatist agendas. (Worried about a climate bill? Stoke a "grassroots" anti-gay marriage campaign. Etc.)
I'd like to see that system changed; but it's probably not going to be in my lifetime, and that's partly because in most places we have so little experience of what a participatory democracy of informed citizens looks like that it's going to take a long time to develop new modes. (I look at the EU's laborious and inclusive standards setting and think perhaps that's how it might have to work; and China may yet give us some new models of inclusive community participation that avoid polarising elections entirely).
Strategy in the next 5-10 years, our "fix-it or miss the boat" period for climate change, will come down to how we convert rather than fight the corporatist world, so they then do as they always do, and find a way to give governments their marching orders.
There is a chance we can use all that "grassroots" energy on the specific strategy of peeling off the juvenile (only just coming of age) part of the corporatist world - institutional investors - and get them to flex their muscles and start telling the more selfish bullies on the block (e.g. fossil fuel companies) to get in line. Or at least quietly back those parties that do that dirty work for them. It looks to me to be one of our few chances ... but then maybe I'm being hopelessly naive myself ...
One example given of recent grassroots success, 350.org, was actually a spectacular international "grassroots" failure - looked fabulous, zero impact on Copenhagen (the objective of the movement). Ditto TckTckTck. This is a painful thing to say; I've been part of some of these efforts, and many of my friends have invested huge effort and money in them. But such efforts are patently not succeeding.
I now see these campaigns as energy without a real strategy. We need the two together.
In Obama we had a kind of triumph of a grassroots movement with a simple objective (elect him); yet, once in WDC, as usual, incumbent interests are able to deploy funds and Fox to neutralise what turns out, also as usual, to actually be an ephemeral movement.
Eventually community sensibility will, of course, shift and the changes we need will seem obvious solutions - but we need some tougher minded and more immediate strategies than vague and directionless calls to "build the grassroots" (a.k.a. "empower the people") or "tell
the politicians what we want".
(We see the same thing reflected in investor circles, with IIGCC and INCR and the like drawing up lists of demands and presenting them, almost naively, to politicians being arm-wrestled by business lobbyists.)
We have a corporatist society, especially in the US, where democratic participation is in practice highly restricted to issues that don't impact on corporatist agendas. (Worried about a climate bill? Stoke a "grassroots" anti-gay marriage campaign. Etc.)
I'd like to see that system changed; but it's probably not going to be in my lifetime, and that's partly because in most places we have so little experience of what a participatory democracy of informed citizens looks like that it's going to take a long time to develop new modes. (I look at the EU's laborious and inclusive standards setting and think perhaps that's how it might have to work; and China may yet give us some new models of inclusive community participation that avoid polarising elections entirely).
Strategy in the next 5-10 years, our "fix-it or miss the boat" period for climate change, will come down to how we convert rather than fight the corporatist world, so they then do as they always do, and find a way to give governments their marching orders.
There is a chance we can use all that "grassroots" energy on the specific strategy of peeling off the juvenile (only just coming of age) part of the corporatist world - institutional investors - and get them to flex their muscles and start telling the more selfish bullies on the block (e.g. fossil fuel companies) to get in line. Or at least quietly back those parties that do that dirty work for them. It looks to me to be one of our few chances ... but then maybe I'm being hopelessly naive myself ...
Friday, 16 July 2010
WWF says the record of CDM project evaluators is so bad they might be helping increase emissions!
The WWF reports that most of them are failing to make the grade. In this year’s audit only one scored a D with the rest receiving the bottom F rating. It seems many projects are being passed when they should not ... which “might lead to a boosting of global emissions, quite contrary to the intended reductions for which the system was put in place.”
Thursday, 17 June 2010
Wednesday, 16 June 2010
Frank Fenner sees no hope for humans
By Cheryl Jones, 16 June 2010, The Australian
FRANK Fenner doesn't engage in the skirmishes of the climate wars. To him, the evidence of global warming is in. Our fate is sealed
"We're going to become extinct," the eminent scientist says. "Whatever we do now is too late."
Fenner is an authority on extinction. The emeritus professor in microbiology at the Australian National University played a leading role in sending one species into oblivion: the variola virus that causes smallpox.
And his work on the myxoma virus suppressed wild rabbit populations on farming land in southeastern Australia in the early 1950s.
He made the comments in an interview at his home in a leafy Canberra suburb. Now 95, he rarely gives interviews. But until recently he went into work each day at the ANU's John Curtin School of Medical Research, of which he was director from 1967 to 1973.
Decades after his official retirement from the Centre for Resource and Environmental Studies, which he set up in 1973, he continued a routine established when he was running world-class facilities while conducting research.
He'd get to work at 6.30am to spend a couple of hours writing textbooks before the rest of the staff arrived.
Fenner, a fellow of the Australian Academy of Science and of the Royal Society, has received many awards and honours. He has published hundreds of scientific papers and written or co-written 22 books.
He retrieves some of the books from his library. One of them, on smallpox, has physical as well as intellectual gravitas: it weighs 3.5kg. Another, on myxomatosis, was reprinted by Cambridge University Press last year, 44 years after the first edition came out.
Fenner is chuffed, but disappointed that he could not update it with research confirming wild rabbits have developed resistance to the biological control agent.
The study showed that myxo now had a much lower kill rate in the wild than in laboratory rabbits that had never been exposed to the virus.
"The [wild] rabbits themselves had mutated," Fenner says.
"It was an evolutionary change in the rabbits."
His deep understanding of evolution has never diminished his fascination with observing it in the field. That understanding was shaped by studies of every scale, from the molecular level to the ecosystem and planetary levels.
Fenner originally wanted to become a geologist but, on the advice of his father, studied medicine instead, graduating from the University of Adelaide in 1938.
He spent his spare time studying skulls with prehistorian Norman Tindale.
Soon after graduating, he joined the Royal Australian Army Medical Corps, serving in Egypt and Papua New Guinea. He is credited in part with Australia's victory in New Guinea because of his work to control malaria among the troops.
"That quite changed my interest from looking at skulls to microbiology and virology," he says. But his later research in virology, focusing on pox viruses, took him also into epidemiology and population dynamics, and he would soon zoom out to view species, including our own, in their ecological context.
His biological perspective is also geological.
He wrote his first papers on the environment in the early 1970s, when human impact was emerging as a big problem.
He says the Earth has entered the Anthropocene. Although it is not an official epoch on the geological timescale, the Anthropocene is entering scientific terminology. It spans the time since industrialisation, when our species started to rival ice ages and comet impacts in driving the climate on a planetary scale.
Fenner says the real trouble is the population explosion and "unbridled consumption".
The number of Homo sapiens is projected to exceed 6.9 billion this year, according to the UN. With delays in firm action on cutting greenhouse gas emissions, Fenner is pessimistic.
"We'll undergo the same fate as the people on Easter Island," he says. "Climate change is just at the very beginning. But we're seeing remarkable changes in the weather already.
"The Aborigines showed that without science and the production of carbon dioxide and global warming, they could survive for 40,000 or 50,000 years. But the world can't. The human species is likely to go the same way as many of the species that we've seen disappear.
"Homo sapiens will become extinct, perhaps within 100 years," he says. "A lot of other animals will, too. It's an irreversible situation. I think it's too late. I try not to express that because people are trying to do something, but they keep putting it off.
"Mitigation would slow things down a bit, but there are too many people here already."
It's an opinion shared by some scientists but drowned out by the row between climate change sceptics and believers.
Fenner's colleague and long-time friend Stephen Boyden, a retired professor at the ANU, says there is deep pessimism among some ecologists, but others are more optimistic.
"Frank may be right, but some of us still harbour the hope that there will come about an awareness of the situation and, as a result, the revolutionary changes necessary to achieve ecological sustainability," says Boyden, an immunologist who turned to human ecology later in his career.
"That's where Frank and I differ. We're both aware of the seriousness of the situation, but I don't accept that it's necessarily too late. While there's a glimmer of hope, it's worth working to solve the problem. We have the scientific knowledge to do it but we don't have the political will."
Fenner will open the Healthy Climate, Planet and People symposium at the Australian Academy of Science next week, as part of the AAS Fenner conference series, which is designed to bridge the gap between environmental science and policy.
In 1980, Fenner had the honour of announcing the global eradication of smallpox to the UN's World Health Assembly. The disease is the only one to have been eradicated.
Thirty years after that occasion, his outlook is vastly different as he contemplates the chaos of a species on the brink of mass extinction.
"As the population keeps growing to seven, eight or nine billion, there will be a lot more wars over food," he says.
"The grandchildren of today's generations will face a much more difficult world."
FRANK Fenner doesn't engage in the skirmishes of the climate wars. To him, the evidence of global warming is in. Our fate is sealed
"We're going to become extinct," the eminent scientist says. "Whatever we do now is too late."
Fenner is an authority on extinction. The emeritus professor in microbiology at the Australian National University played a leading role in sending one species into oblivion: the variola virus that causes smallpox.
And his work on the myxoma virus suppressed wild rabbit populations on farming land in southeastern Australia in the early 1950s.
He made the comments in an interview at his home in a leafy Canberra suburb. Now 95, he rarely gives interviews. But until recently he went into work each day at the ANU's John Curtin School of Medical Research, of which he was director from 1967 to 1973.
Decades after his official retirement from the Centre for Resource and Environmental Studies, which he set up in 1973, he continued a routine established when he was running world-class facilities while conducting research.
He'd get to work at 6.30am to spend a couple of hours writing textbooks before the rest of the staff arrived.
Fenner, a fellow of the Australian Academy of Science and of the Royal Society, has received many awards and honours. He has published hundreds of scientific papers and written or co-written 22 books.
He retrieves some of the books from his library. One of them, on smallpox, has physical as well as intellectual gravitas: it weighs 3.5kg. Another, on myxomatosis, was reprinted by Cambridge University Press last year, 44 years after the first edition came out.
Fenner is chuffed, but disappointed that he could not update it with research confirming wild rabbits have developed resistance to the biological control agent.
The study showed that myxo now had a much lower kill rate in the wild than in laboratory rabbits that had never been exposed to the virus.
"The [wild] rabbits themselves had mutated," Fenner says.
"It was an evolutionary change in the rabbits."
His deep understanding of evolution has never diminished his fascination with observing it in the field. That understanding was shaped by studies of every scale, from the molecular level to the ecosystem and planetary levels.
Fenner originally wanted to become a geologist but, on the advice of his father, studied medicine instead, graduating from the University of Adelaide in 1938.
He spent his spare time studying skulls with prehistorian Norman Tindale.
Soon after graduating, he joined the Royal Australian Army Medical Corps, serving in Egypt and Papua New Guinea. He is credited in part with Australia's victory in New Guinea because of his work to control malaria among the troops.
"That quite changed my interest from looking at skulls to microbiology and virology," he says. But his later research in virology, focusing on pox viruses, took him also into epidemiology and population dynamics, and he would soon zoom out to view species, including our own, in their ecological context.
His biological perspective is also geological.
He wrote his first papers on the environment in the early 1970s, when human impact was emerging as a big problem.
He says the Earth has entered the Anthropocene. Although it is not an official epoch on the geological timescale, the Anthropocene is entering scientific terminology. It spans the time since industrialisation, when our species started to rival ice ages and comet impacts in driving the climate on a planetary scale.
Fenner says the real trouble is the population explosion and "unbridled consumption".
The number of Homo sapiens is projected to exceed 6.9 billion this year, according to the UN. With delays in firm action on cutting greenhouse gas emissions, Fenner is pessimistic.
"We'll undergo the same fate as the people on Easter Island," he says. "Climate change is just at the very beginning. But we're seeing remarkable changes in the weather already.
"The Aborigines showed that without science and the production of carbon dioxide and global warming, they could survive for 40,000 or 50,000 years. But the world can't. The human species is likely to go the same way as many of the species that we've seen disappear.
"Homo sapiens will become extinct, perhaps within 100 years," he says. "A lot of other animals will, too. It's an irreversible situation. I think it's too late. I try not to express that because people are trying to do something, but they keep putting it off.
"Mitigation would slow things down a bit, but there are too many people here already."
It's an opinion shared by some scientists but drowned out by the row between climate change sceptics and believers.
Fenner's colleague and long-time friend Stephen Boyden, a retired professor at the ANU, says there is deep pessimism among some ecologists, but others are more optimistic.
"Frank may be right, but some of us still harbour the hope that there will come about an awareness of the situation and, as a result, the revolutionary changes necessary to achieve ecological sustainability," says Boyden, an immunologist who turned to human ecology later in his career.
"That's where Frank and I differ. We're both aware of the seriousness of the situation, but I don't accept that it's necessarily too late. While there's a glimmer of hope, it's worth working to solve the problem. We have the scientific knowledge to do it but we don't have the political will."
Fenner will open the Healthy Climate, Planet and People symposium at the Australian Academy of Science next week, as part of the AAS Fenner conference series, which is designed to bridge the gap between environmental science and policy.
In 1980, Fenner had the honour of announcing the global eradication of smallpox to the UN's World Health Assembly. The disease is the only one to have been eradicated.
Thirty years after that occasion, his outlook is vastly different as he contemplates the chaos of a species on the brink of mass extinction.
"As the population keeps growing to seven, eight or nine billion, there will be a lot more wars over food," he says.
"The grandchildren of today's generations will face a much more difficult world."
Wednesday, 31 March 2010
Eight climate change policy ideas for the EU
1. Provide minimum carbon price guarantees for investors.
2. Hunt and down and kill all fossil fuel subsidies in the EU
3. Shift EIB and EBRD mandates to exclude carbon sector investments (i.e. no coal)
4. Set up pooled re-insurance funds to reduce political risk for investors in climate change mitigation.
5. Remove competition policy constraints on governments seeding investment funds for energy efficiency and renewable energy for a period, e.g. 5 years
6. Engineer a massive shift of funding to energy efficiency investment in Eastern Europe in the next budget (2014-2018)
7. Develop a carbon sequestration policy for the Common Agricultural Policy
8. Set up more govt consortia (there's already one for the North Sea grid) to develop inter-country DC connections to better support a common electricity market.
Saturday, 27 March 2010
The reported rise in US climate scepticism has been exaggerated
Analysis suggests that US commentators have been confusing the public's priority on dealing quickly with jobs and the economy with a drop-off in belief about climate change happening.
In fact:
- 75% of Americans believe that the world’s temperatures have probably been going up;
- Public confidence in what scientists say about the environment has remained constant over the last few years with 70% of respondents trusting scientists a lot or moderate amount;
- More people believe that weather has been relatively cooler and more stable in 2008 and 2009 compared to previous years.
Saturday, 6 March 2010
Feedback cuts in: The vast East Siberian Arctic Shelf methane stores are destabilizing and venting
The US National Science Foundation (NSF) has issued a disturbing research report on increases in methane leakage in the Arctic. Methane leakage is most immediate climate change feedback loop threat we face - increased leakage means we have less time to shift to a zero-carbon world than previously thought.
NSF issues world a wake-up call: "Release of even a fraction of the methane stored in the shelf could trigger abrupt climate warming."
The research was undertaken jointly by scientists at the Russian Academy of Sciences and the University of Alaska.
The Climate Progress blog coverage of the report is the best thing to read. Check out the well-informed blog comments as well.
NSF issues world a wake-up call: "Release of even a fraction of the methane stored in the shelf could trigger abrupt climate warming."
The research was undertaken jointly by scientists at the Russian Academy of Sciences and the University of Alaska.
The Climate Progress blog coverage of the report is the best thing to read. Check out the well-informed blog comments as well.
Did Lincoln just print money to fund the American Civil War/ If he did, shouldn't we just do that to fund climate change mitigation?
On one of the lists I'm on there's been a bit of excitement about an article published by Californian Ms Ellen Brown on Civil War monetary policy. The argument argues that Lincoln simply printed money to get around the usurious banks of the time and fund the vast expense of the Civil War - and we should do that now to fund climate change mitigation. A lot of people welcomed the article, which I found worrying, because simply printing money without backing is a highly risky and doubtful policy idea.
I'm not an expert on the impact of monetary supply or on leveraging deposits (which is the essence of the argument Ms Brown is making), and I appreciate that there are some potentially interesting arguments in this area, but I do know that Ellen's description of how Lincoln printed money to finance the Civil War is not correct.
Yes, there was an increase in monetary supply in the North, but the big distinction between the North and the Confederacy was that the latter ended up having to rely largely on printing money - contributing to to 9,000% p.a. inflation (vs 80% inflation in the North), a collapse in resources for their armies and, arguably, the loss of the war despite initial successes.
The North relied much more on increases in income and customs taxation (laying the foundation for tax-funded federal government services). One of the curiosities of wartime taxation policy was that it was the Republicans who first introduced progressive income taxes, based on "ability to pay", to the US, to ameliorate the impact of the large number of regressive tariffs and sales taxes they introduced. New taxes were an important revenue source.
But by far the biggest source of Northern war financing - 65% - was from the issuing of bonds. Yep, bonds. I.e. they actually got the money in before they spent it.
This is a precedent for the effort to address climate change - long-term climate bonds are the best financing vehicle for the transformation we need to bring about.
It's interesting to also note that the US marketed war bonds widely - some 25% of the population owned them by the war's end - but most of the money was actually raised from the richest 10%. Wide marketing served to get more of the population behind the war (having a stake in the outcome) as well as serving as a general propaganda vehicle. In the Climate Bonds Initiative we are proposing a similar mix of retail bonds to give as many people as possible a chance to participate in and thus support the transformation of energy supply, while actually relying on institutional investors to stump up the bulk of the money.
The Civil War government's takeover of monetary supply and re-introduction of government-issued paper money was more to provide currency liquidity within the economy - paper money had been tied to specific banks and was not necessarily interchangeable. This was the equivalent of radios being sold that only worked on one station (which was the case in the 1920s!). The government legislated to ensure that money could be used everywhere, much to the annoyance of the banks who quite liked having proprietal bank notes. This is what is meant by "the government printing paper money".
Monetary supply did increase, and so did inflation (to a problematic 80%), but nothing compared to the South's crippling reliance on it.
Monetary-policy-induced inflation is essentially a kind of wealth tax, using inflation to redistribute wealth from private savings to the government. In an emergency situation this is not necessarily a bad thing, except that in our financially porous world richer people have all sorts of opportunities to shift money to inflation-resistant vehicles, including taking it offshore; the people that tend to get hit by inflation now are welfare beneficiaries continually waiting for the urgently needed inflation-responsive increase in benefits, or pensioners living off savings. High inflation has become a regressive form of taxation.
Monetary supply was also increased by Britain and the US in WW1 and WW2, and quickly led to significant levels of inflation with all sorts of consequent problems. Governments then relied more on war bonds instead, which helped stabilise their economies.
Ellen Brown's article conflates many developments and ascribes them, willy-nilly, to one policy action. It's especially misleading to suggest that the US economic boom was as a result of printing money. While monetary liquidity was important to a unified economy, even that was less important than:
- disease (plus a few genocidal massacres, especially after the Civil War) that depopulated (by 95%) local Indian populations and allowed rapid and massive land grabs that sucked in millions of European immigrants between 1830 and 1900. The rapid application of large-scale human resources to this vast and fertile (seized) resource allowed the US to make all sorts of mistakes and still thrive economically. It's worth noting that part of the dispute between the North and South was about differing conceptions of human resources management - the North thrived economically on free settler immigration (on depopulated Indian land) while the South was built on old-fashioned slavery.
- the importation from the UK and Europe, and the refinement and cost reduction (thanks to volume deployment!) of a wide range of industrial technologies, and subsequent labour productivity improvements. (This same phenomena was mirrored in the Asian Tigers in 1960-1990, as Paul Krugman has eloquently shown). With the benefit of late-mover advantage (a bit like China today), by the 1900s this had become by far the most important factor in economic growth.
- Declining energy costs as a result of the exploitation of coal and then oil.
It is true that Lincoln used monetary policy to subdue the usurious banks in the middle of the war, effectively establishing a dominance of State over finance and introducing a unifying and more liquid national currency. But monetary policy was a minor gambit in financing the war, and one that was demonstrably disastrous when applied in much larger proportion in their opposing entity, the Confederacy.
Some commentators on recent US monetary policy, like Chris Martinson, continue to make the same sorts of errors in their analysis. Martinson for example equates deficits in the last 10 years to printing money without backing (e.g. of gold). But actually the US borrowed the money first from the Chinese, who effectively funded both Bush's war effort and his tax cuts for the super-wealthy (one of the stupidest tax policies in modern history).
I'm worried that talk of simply printing money is a potentially dangerous distraction, when, as in wars, we have the straightforward means to finance mitigation with good, old-fashioned, long-term debt. Climate Bonds.
Yes, there was an increase in monetary supply in the North, but the big distinction between the North and the Confederacy was that the latter ended up having to rely largely on printing money - contributing to to 9,000% p.a. inflation (vs 80% inflation in the North), a collapse in resources for their armies and, arguably, the loss of the war despite initial successes.
The North relied much more on increases in income and customs taxation (laying the foundation for tax-funded federal government services). One of the curiosities of wartime taxation policy was that it was the Republicans who first introduced progressive income taxes, based on "ability to pay", to the US, to ameliorate the impact of the large number of regressive tariffs and sales taxes they introduced. New taxes were an important revenue source.
But by far the biggest source of Northern war financing - 65% - was from the issuing of bonds. Yep, bonds. I.e. they actually got the money in before they spent it.
This is a precedent for the effort to address climate change - long-term climate bonds are the best financing vehicle for the transformation we need to bring about.
It's interesting to also note that the US marketed war bonds widely - some 25% of the population owned them by the war's end - but most of the money was actually raised from the richest 10%. Wide marketing served to get more of the population behind the war (having a stake in the outcome) as well as serving as a general propaganda vehicle. In the Climate Bonds Initiative we are proposing a similar mix of retail bonds to give as many people as possible a chance to participate in and thus support the transformation of energy supply, while actually relying on institutional investors to stump up the bulk of the money.
The Civil War government's takeover of monetary supply and re-introduction of government-issued paper money was more to provide currency liquidity within the economy - paper money had been tied to specific banks and was not necessarily interchangeable. This was the equivalent of radios being sold that only worked on one station (which was the case in the 1920s!). The government legislated to ensure that money could be used everywhere, much to the annoyance of the banks who quite liked having proprietal bank notes. This is what is meant by "the government printing paper money".
Monetary supply did increase, and so did inflation (to a problematic 80%), but nothing compared to the South's crippling reliance on it.
Monetary-policy-induced inflation is essentially a kind of wealth tax, using inflation to redistribute wealth from private savings to the government. In an emergency situation this is not necessarily a bad thing, except that in our financially porous world richer people have all sorts of opportunities to shift money to inflation-resistant vehicles, including taking it offshore; the people that tend to get hit by inflation now are welfare beneficiaries continually waiting for the urgently needed inflation-responsive increase in benefits, or pensioners living off savings. High inflation has become a regressive form of taxation.
Monetary supply was also increased by Britain and the US in WW1 and WW2, and quickly led to significant levels of inflation with all sorts of consequent problems. Governments then relied more on war bonds instead, which helped stabilise their economies.
Ellen Brown's article conflates many developments and ascribes them, willy-nilly, to one policy action. It's especially misleading to suggest that the US economic boom was as a result of printing money. While monetary liquidity was important to a unified economy, even that was less important than:
- disease (plus a few genocidal massacres, especially after the Civil War) that depopulated (by 95%) local Indian populations and allowed rapid and massive land grabs that sucked in millions of European immigrants between 1830 and 1900. The rapid application of large-scale human resources to this vast and fertile (seized) resource allowed the US to make all sorts of mistakes and still thrive economically. It's worth noting that part of the dispute between the North and South was about differing conceptions of human resources management - the North thrived economically on free settler immigration (on depopulated Indian land) while the South was built on old-fashioned slavery.
- the importation from the UK and Europe, and the refinement and cost reduction (thanks to volume deployment!) of a wide range of industrial technologies, and subsequent labour productivity improvements. (This same phenomena was mirrored in the Asian Tigers in 1960-1990, as Paul Krugman has eloquently shown). With the benefit of late-mover advantage (a bit like China today), by the 1900s this had become by far the most important factor in economic growth.
- Declining energy costs as a result of the exploitation of coal and then oil.
It is true that Lincoln used monetary policy to subdue the usurious banks in the middle of the war, effectively establishing a dominance of State over finance and introducing a unifying and more liquid national currency. But monetary policy was a minor gambit in financing the war, and one that was demonstrably disastrous when applied in much larger proportion in their opposing entity, the Confederacy.
Some commentators on recent US monetary policy, like Chris Martinson, continue to make the same sorts of errors in their analysis. Martinson for example equates deficits in the last 10 years to printing money without backing (e.g. of gold). But actually the US borrowed the money first from the Chinese, who effectively funded both Bush's war effort and his tax cuts for the super-wealthy (one of the stupidest tax policies in modern history).
I'm worried that talk of simply printing money is a potentially dangerous distraction, when, as in wars, we have the straightforward means to finance mitigation with good, old-fashioned, long-term debt. Climate Bonds.
Are carbon taxes fairer than using bonds for climate change mitigation costs?
A friend of mine asked:
"Aren't taxes fairer because bonds reward those who have spare cash they don't need much right now?"
In fact this isn't the case - taxes are not fairer because they ask current taxpayers to pay for developments that will deliver much cheaper energy costs to future consumers.
"Aren't taxes fairer because bonds reward those who have spare cash they don't need much right now?"
In fact this isn't the case - taxes are not fairer because they ask current taxpayers to pay for developments that will deliver much cheaper energy costs to future consumers.
Bonds are a mechanism for averaging out over time the charges to pay for stuff that requires mostly up front cost and has minimal operating costs. Like most renewable energy.
Bonds will largely NOT be bought by mums and dads with savings (well, maybe some will), they'll mainly be bought by pension, insurance and sovereign wealth funds who have the money now but are spending it on carbon-era projects. It's about switching capital, not asking for more. The idea is to squeeze the carbon-era projects of all their capital by giving investors good reasons to switch it all over to low-carbon investments.
Long-term investors like pension funds actually need more long-term debt to ensure they'll be able to pay out pensions when required. In the US many pension funds are moving their portfolios from about 20% bonds to 80%+ bonds, because the crash has shown that equities are just too volatile when you have to ensure payouts. That's why the Greek Government's EUR10 billion bond this week sold out despite jitters about the government's finance. There is a very big demand for bonds that will go on for some years.
Bonds will largely NOT be bought by mums and dads with savings (well, maybe some will), they'll mainly be bought by pension, insurance and sovereign wealth funds who have the money now but are spending it on carbon-era projects. It's about switching capital, not asking for more. The idea is to squeeze the carbon-era projects of all their capital by giving investors good reasons to switch it all over to low-carbon investments.
Long-term investors like pension funds actually need more long-term debt to ensure they'll be able to pay out pensions when required. In the US many pension funds are moving their portfolios from about 20% bonds to 80%+ bonds, because the crash has shown that equities are just too volatile when you have to ensure payouts. That's why the Greek Government's EUR10 billion bond this week sold out despite jitters about the government's finance. There is a very big demand for bonds that will go on for some years.
Monday, 22 February 2010
Friday, 19 February 2010
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