Tuesday, May 7, 2013

Green economics—getting things done

One of the easiest ways to know that you are in the presence of folks who are technologically literate is to observe their attention to details.  Many a project has faltered on some detail so small as to barely noticeable.  I learned that lesson building flying model airplanes, but the point was really driven home during the Indianapolis 500 of 1967.  A charming mouse-milk salesman by the name of Andy Granatelli had decided to invest the money necessary to make a competitive turbine-powered car.  It was by FAR the fastest car in the race but on lap 197 of 200, a $6 transmission bearing failed.  Details!  You have to have all the parts endure to the end.

The same thing holds true for public policy.  For example, any meaningful response to the problems of climate change will require a LOT of superb elements working together.  And Monday, the DW site provided a perfect example of some meaningful developments in the ongoing project to build a green society.  We read about an executive from Siemens who is trying to explain that the green economy could solve many of Europe's big economic problems.  Then we read about a speech given by Frau Merkel explaining that "waiting is not an option" on solving climate change.

If those two events happened here in USA, I would be both shocked and delighted.  But even though this so very German approach to environmental issues seems like it comes from a land of the super-enlightened, it isn't going to change much.  Why?  Because it does not address the problem of how to pay for these projects.  And this folks, is not a small detail.  When you let crooks and short-sighted fools control the economy, the good stuff will not be built.  Frau Merkel has thrown in with the creditor classes who want to extract their pounds of flesh.  Because this is true, her exhortations about the urgency of climate change are nothing but some more hot air.


The 'green economy' as an engine for growth

DW.DE  06.05.2013

The EU has some 19 million unemployed and the trend is pointing upwards. But, new jobs will only come once the economy picks up. Could a new 'green economy' help create those jobs and halt Europe's decline?

The political demands are clear: More renewable energies, more energy efficiency, lower CO2 emissions and more environmentally friendly technologies.

For years, European governments have had climate protection high on their agenda. It's a mammoth challenge, but also promises enormous potential for growth and investment.

But the 'green revolution' somehow doesn't seem to be getting off the ground; in part, probably because Europe just has too many crises to deal with at the moment and too many fires to put out, says Jörg Zeuner, chief economist of Germany's KfW bank. "There's a lack of demand and there is too much saving going on in Europe. We have problems with financing because the financial sector is in turmoil and we don't have enough planning security because many countries are restructuring their tax and regulatory systems."

Staying competitive

These are all bad conditions for grand investments, even though the technologies for more climate protection are mostly already there and simply waiting to be used and implemented, explains Kersten-Karl Barth, head of sustainability at Siemens. "The technology we need in order to reach our CO2 targets for 2030 are up to 70 percent already there, " she says, adding, however, that there was still a massive need for investment and research in order to remain competitive. "The so called 'Green Economy' is a race and we simply have to be among the winners here, otherwise we'll have a problem," Barth said.

Siemens has substantially expanded its 'green portfolio' since 2008. The areas of renewable energy, energy efficiency and environmental technologies now make up some 42 percent of the company's entire business spectrum. But, particularly in Europe, there is room for a lot more investment, Barth believes. A glance at the capital market shows that private investors are desperately looking for lucrative business models to invest in. "The money is there; it's just waiting to be invested," noted Barth.

Safe forward planning

One big stumbling block is the long-term security of those investments. "We are talking about sustainable investment, investments in infrastructure, in cities, trains, transport, investments in the energy sector and other industrial sectors. Those are sustainable, long-term investments where security has be guaranteed through a framework of regulations," Barth emphasizes.
Those regulations are still significantly lacking in Europe, says Barth. One example is European emissions trading. The prices have dropped so low that it's not profitable for companies to invest in environmentally friendly technology. Still, the EU parliament has voted against temporarily revoking CO2 certificates, hoping the price of those certificates could be boosted that way.

Financial incentives

Another key issue is subsidies. An investor, for instance, would have to be able to rely on information as to how much and for how long a government would continue subsidizing renewable energies, explains Matthias Zöllner of the European Investment bank EIB. Subsidies "have been partly cut in dramatic fashion, in cases in Spain even with retroactive effect and that has gotten a lot of projects into trouble."

The EIB supports a number of green economy projects. In light of the current crisis, it was very important, Zöllner pointed out, to also invest in an anti-cyclic fashion. After a boost in capital, the EIB will be able to grant loans of a total 60 billion euros ($79 billion) in the next three years. As the bank normally pays for one third of the projects it supports, it amounts to investments of around 180 billion euros.

More general reforms

"When you talk about the green economy, it is important that you really approach it long-term, in terms of research and innovation," says Zöllner. It is not enough to simply replace coal-fired power plants with windmills. "What's needed is a real transformation of the economy, which will have an impact on other sectors as well and lead to more investment across the board."

Political leaders need to set up the legal parameters and financial incentives in a way that creates opportunities for investment and a green economy, Zöllner urged. It was also important to deal with general stumbling blocks to investment, regardless of whether they are linked to environmental issues or not, he added. Simply investing in green economy projects will not settle problems, like labor market reform, aging infrastructure, or bureaucratic hurdles. more


German climate talks: 'Waiting not an option,' says Merkel


At Germany's annual Petersberg climate talks, German Chancellor Merkel has called for a binding pact by 2015 to reduce carbon emissions. She said inactivity only increased the cost of combating climate change later on.

At Monday's Petersberg Climate Dialogue, as the meeting is officially called, Chancellor Angela Merkel called for an internationally binding climate pact to be completed by 2015.

"Doing nothing means that is will be much, much more costly for us all," Merkel said at the start of the conference in Berlin, adding that she was under no illusions about the amount of work involved in such a pact but that "waiting is not an option."

Merkel also called for a complete restructuring of economic measures that were designed as an incentive for companies to take upon climate-friendly changes themselves. The price of carbon trading certificates has fallen drastically in recent years, and an attempt to limit the amount of certificates in an effort to stimulate prices failed last month in the European Parliament.

Ministers and representatives from 35 countries are taking part in the Petersberg Dialogue, which is named for the location in Bonn where the first edition was held in 2010. The German-hosted event serves as a preview for the United Nations' annual climate conference, which is scheduled for Warsaw in December.

German Environment Minister Peter Altmaier, who hosted the talks in Berlin along with his Polish counterpart, Marcin Korolec, said that 2015 will be an important year in climate negotiations.

"The international awareness that we need to reach a milestone by 2015 is growing," he said, adding that progress "in many areas is still too slow and not enough."

The general goal of the international community is to come up with a pact to cut emissions that can be put into effect by 2020. The aim of capping a rise in global temperature at 2 degrees Celsius is becoming increasingly unattainable due to a lack of an international agreement. more

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