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February 26
The financial crisis is having an interesting effect on perceptions of policy makers to limit the risk of shifting developed economies to a less carbon intensive track. In the US for example the financial crisis has elevated the renewable industry to new heights with key business and government leaders touting the industry as the next IT industry. However, in Australia the opposite seems to be happening with labour government stalling and flip flopping on the issue.
The Australian government has recently called for yet another inquiry on shifting the economy to a less carbon intensive footing. This has occurred partly in response to whinging from big mining companies here that have really missed the point about this completely. The change would have little or no effect on them, if anything providing new business opportunities or is it just policy paranoia creeping in.
Government intervention is happening whether they like it or not and it will just be a question of what form the intervention takes. Surely, business would benefit from the policy mechanism that provides greater choice ie. an emissions trading framework. Multinational companies have already limited their risk exposure to carbon policy changes here in Australia by being involved with the emissions trading scheme in Europe.
There is only really an upside to increasing the competiveness of the economy and business. What is stopping Rio or BHP offsetting any exposure which quite frankly is very small by investing in making their head offices more environmentally friendly. It could almost offset any potential carbon exposure or travelling carbon neutral. The BHP office in Melbourne has a lot of glass you could just turn half the building into a solar panel. Surely there are potential sources of generating income and cost cutting measures if emissions trading were implemented. Which would only be of benefit to big business in Australia and emissions trading would provide business with choice.
The emissions trading market will be linked to the Renewable Energy Certificates scheme and there will be substantial trading between the two markets to limit the risk exposure of business to any proposed carbon constraint. The emissions trading scheme and REC’s will be legislated secondary markets to the national electricity market, which currently does not include Western Australia.
The global economic crisis resulting from credit squeeze in the United States has had a four-fold effect on the energy sector.
· The first has been the additional public sector funding of large infrastructure projects due to the drying up of private sector liquidity.
· The second has been the fall in revenues of energy companies due to the price decrease in the fourth quarter of last year.
· The third has been the economy wide ramifications, particularly exchange rate depreciation due to the decline in revenues for oil producing countries.
· The fourth has been the delaying of private sector energy projects.
There has been a fundamental shift in capital markets with market risk diverging even more so over the last 6 months than from the risk free rate. The debt premium wedge is expanding as lenders and borrowers become more risk adverse as well as monetary cycle of most developed economies start heading south.
The decline in oil prices has resulted from a number industry and macro events this has included the traditional lag in capital investment, the deteriorating value of the US$, a slight decrease in demand, and the decrease in speculation in the market.
The speculative aspect of the market was limited for a short time by a ban on short selling when commodity prices hit their peak. The ability of markets to adjust in a period of instability has been awkward. A limited amount of information regarding production decisions by OPEC and non OPEC members and the increase in awareness of the limitations of OPEC decisions on the market has also led to a downward momentum on the price.
The cyclical aspect of oil prices has also come into play, particularly in the US and Europe. The relatively mild winter in US and the debacle in European energy markets resulting from a state incentivised system in Russia have also led to further pressure on prices.
The higher oil prices in the US earlier in 2008 resulted in consumers downsizing to more fuel efficient vehicles at the same time heating oil prices haven’t seen any upward pressure at all.
Ukraine's geographic location makes it an ideal corridor for oil and natural gas to transit from Russia and the Caspian Sea region to European markets (see EU Ukraine Oil Map).
According to Ukrainian oil ministry data, Ukrainian oil pipelines transported an average of about 900,000 bbl/d in 2006, a decrease of 4 percent from 2005. Approximately 22 percent of Russia’s 4.1 million bbl/d crude oil exports either transited Ukraine to reach European markets or were consumed domestically.
The exports flow via the Druzhba and the Pridnieper pipelines to Slovakia, Hungary the Czech Republic, and the Black Sea. Transit tariffs are discussed in great detail at the Energy Charter Treaty website.
Gas prices in Europe are always renegotiated at the coldest time of the year Christmas when everyone is freezing. No other company keeps Europe, and increasingly Asia, on tenterhooks more than Gazprom. January 09 The economics of the Keating government have been replaced by the bogan economics of the new Rudd Labour era instead of the Banana Republic Australia is now the Bogan republic. The transatlantic financial crisis is putting considerable pressure on governments' to increase regulation, corporate governance and in some extreme cases renationalise companies. The nationalistic fervour of Boganites lends itself to policies that increase interferrence in markets. With the Olympics over the sport crazy nation is turning its attention to building the Ruddites in parliament. The European Commission the bastion of regulation is also under increasing pressure to place limits on financial institutions and bail out ailing businesses.
Hedge funds and mutual funds, as well as short selling are painted as the culprit for asset bubbles and the lack of liquidity of capital markets. Gordon Brown has been flying all over the world begging for money as well as attempting to reshape the Bretton Woods system and strenghthen corrporate governance structures more generally.
Afghanistan and Iraq have faded into media memory with headlines regarding struggling car manufacturers dominating government policy and the headspace of voters. What exactly is the world going to do with 3 billion new cars in 2009? Emerging markets have potential manufacture cars and other consumer products for the growing disposable income classes in China and India.
Smart Industry development is needed to increase the competiveness and productivity of developed economies and the financial crisis is the perfect opportunity to reshape the working lives of many Australians. People need to work smarter not harder. The clever country idea needs to be revived in a world that has been transformed through war and financial chaos. During times of increasing geo-political tensions, ethnic conflict, and economic deprivation of many of the worlds' population, Australian thought they could count on the market as a bastion of stability. That sense has certainly gone and the only way to deal with it is to work 'smart' and develop new industries.
December 28
From the perspective of the output, the traditional GDP is calculated
on the basis of the total volume of the products produced by the
traditional industrial sector, and the final products (output) equals
the total output minus the economic cost of inputs.
However, in the process of production and consumption of goods and
services, environmental and social costs maybe incurred and are
considered an externality in the traditional calculation of economic
growth and GDP.
The additional increase in value created by environmental
protection organizations (resources recovery and pollution
treatment organizations) should be regarded as newly additional part of
the output.
The formula of the Green GDP encapsulates the value added of
environmental protection and the associated costs of production and
consumption of goods:
Green GDP = Final total output of traditional industrial sectors -
damage to the resources and environment + total new value created by environmental
protection organizations / total cost (created by the
traditional industrial sector, environmental protection organizations
and the final using sectors)
The goal is to enter into a binding global climate agreement at the United Nations Climate Change Conference in Copenhagen. The agreement will apply to the period after 2012.The government’s ambition is for the agreement to include as many countries as possible, and that the agreement must contribute to a reduction in man-made greenhouse gases which have a negative effect on our climate system. Governments' will therefore put all its efforts into obtaining an agreement that combines respect for the environment, living standards and long-term security of energy supply in the best way possible.
The climate changes are considered one of the greatest challenges of the world. There is a need for everyone to limit the emission of CO2. With this overall goal and motivated by the hosting of the COP15, the Ministry of Foreign Affairs has started to look closer at the relationship between trade and climate. The question is if and how trade policy instruments can contribute to the fight against climate change. This initiative was launched at the informal meeting between the ministers of trade, which took place in the margin of COP13 on Bali, December 2007.
At the annual trade politicy conference on the 9th of May 2008 at the University of Copenhagen the focus was “WTO – trade and climate”. On the basis of presentations from minister of foreign affairs, Per Stig Møller, minister for trade and development from the UK, Gareth Thomas, and vice-secretary for WTO, H.V. Singh there were discussions on the latest developments in the Doha negotiations and on the question of how the international trade system could contribute to the fight against climate change. The conference was well attended with a wide variety of guests consisting of academics, politicians, business people and NGOs. November 19 A radical reconsideration of the meaning of freedom and morality in the modern world. Why is it so many of us lack contentment, despite all the wealth and freedoms we enjoy? The past two centuries delivered individual and political freedoms that promised unprecedented opportunities for personal fulfilment. Yet citizens of affluent countries are encouraged to pursue lives of consumerism, endless choice and the pleasures of the body. Clive Hamilton argues that the paradox of modern consumer life is that we are deprived of our inner freedom by our very pursuit of our own desires. He turns to metaphysics to find a source of transformation that lies beyond the cultural, political and social philosophies that form the bedrock of contemporary western thought. His search takes him to an unexpected conclusion: that we cannot be truly free unless we commit ourselves to a moral life. The implications of this conclusion are profound, and they challenge many deeply held beliefs in modern secular society. The Freedom Paradox is a bold and important work that goes to the heart of what it means to be human.
ABC Radio National's Big Ideas
http://www.abc.net.au/rn/bigideas/stories/2008/2340913.htm
or read the text under Speeches on this site.
What people are saying
"... an audacious attempt to build a metaphysics of morals ... it is one of Hamilton's gifts that he writes as if he genuinely seeks to engage the reader in conversation ... the book works like a collection of well-connected, educative essays as well as a treatise -- something which non-philosophers should appreciate." Brenton Holmes, The Canberra Times
"... an interesting, open-minded reflection mercifully free from fashionable opinion, dogma or ideology." John Carroll, Australian Literary Review
"Path-breaking." Justice Michael Kirby at the launch
"Hamilton is remarkably Rennaissance in his intellectual range, and now he has written an ambitious and peculiarly vulnerable book of philosophical abstraction and application ..." Pete Haye, The Monthly
The Asian Century Institute view is that Clive Hamilton's assessment of not only society, politics, and energy neglects the fact that markets fail. We don't live in rational economic world, asset bubbles, information asymmetry (the lemon principle), cartels, and monopoly markets natural or legislated. Government is driven by values and intervention in markets is driven by values. What is his take on the Baby Bonus, the rising cost of child care?
The other part that is lacking from his analysis, generally, is that the national electricity market and oil companies do not operate in a perfect market. There are only six electricity generators in the state of NSW who until recently were government owned. Regulating emissions means that this needs to be accounted for, as the least cost option of the regulation is not optimal -- read Hahn. His little social critique is that he is bald, is he in a minority? He is part of the economic establishment. Vision, no -- he should just join Shane Warne on those hair replacement ads. Is his social tirade a product of compensation for a lack of hair and a reaction the body beautiful culture.
One more thing is that politics in Australia are determined by one paternalistic conservatives who in reality increase regulatory red tape and the labour party who only exist as a result of the market failure or power asymmetry in the labour market. MIlton Friedman: marriage a social contract; maybe he doesn't like the division of property rights in this manner; or the the fact that the marriage contract can be a perfect example of the lemon priciple or information assymetry; you don't know what you are getting -- a bit like buying a used car.
Comment written by the only realist on the face of planet.................................!
G-20 meet to discuss financial crisis
The Group of 20 may clarify one thing: how completely the crisis is reshaping the economic map — rendering obsolete the old club of Western powers that fashioned the financial pillars of the post-World War II era at a conference in Bretton Woods, N.H., in 1944.
While President Nicolas Sarkozy of France proposed this meeting, and President Bush agreed to play host, the most sought-after country at a gathering some have called Bretton Woods II may prove to be China.
With close to $2 trillion in foreign exchange reserves and an economy that is still growing, albeit more slowly than before the crisis erupted, China is one of the few participants with the financial wherewithal to come to the aid of countries in distress. Either directly or by swelling the coffers of the International Monetary Fund, so that it can make more emergency loans. The same is true of Saudi Arabia, the sole Persian Gulf oil producer to attend the meeting.
Prime Minister Gordon Brown of Britain has already solicited the wealthy Arab kingdom for money to bolster the I.M.F. “The G-7 was basically the leading 20th-century industrial countries,” Zbigniew Brzezinski, a former national security adviser to President Jimmy Carter, said. “But we need something more than a few key players at these meetings. You have to engage other participants.” Some of these other participants — ranging from Argentina to Australia — have been hit hard by the crisis that began in the United States and spread to Europe. Many have suffered a cash squeeze as Western investors have pulled capital out of emerging markets to cover losses at home. For some countries, like South Korea, it is a nasty replay of the Asian financial crisis a decade ago — except that this time, their governments have pursued generally responsible economic policies and open financial markets. October 03
In an article by the International Rivers Network in September
2006 located at Berkeley, 'THE MEKONG POWER GRID - TRADING AWAY THE FUTURE' it
is argued that the benefits of interconnection are far outweighed by the costs
due social and environmental costs not properly being stated. The group of
interconnection projects tend be thought of subsections of a larger regional
development program that highlights the benefits of regional interconnection
but downplays the costs to ecological system. As these costs need to be stated
in the model on a regional basis. There is no doubting there will be
substantial benefits to the population of Southeast Asia. The cost or the tax
on certain sectors of the economy, particularly agriculture, may be higher than
estimated given the substantial changes to farming practices that may arise in the Mekong Delta.
The change in water usage will depend
on the number and the type of hydro generation projects that will be used to
supply power to the grid. Network interconnection puts a fundamental cost bias
in the electricity supply system to big efficient sources of power generally
eliminating the economic viability of distributed generation. The cost
efficiency of generation is determined in part by the efficiency and use of the
transmission and distribution networks. In
the case of distributed power generation projects the costs are decreased if
the geographically the source of supply remains relatively near where the
electricity is consumed eliminating the need for big infrastructure.
The Mekong River is the dominant
geo-hydrological structure in mainland Southeast Asia, originating in China and
flowing through or bordering Myanmar, Laos, Thailand, Cambodia, and Vietnam.
Whereas water resources in the wet season are more than adequate tofulfill
basin needs, there are regional water shortages during the dry season, when
only 1- 2% of the annual flow reaches the Delta. Recent rapid agricultural and
economic development in the basin has led to increasing competition among the
riparian countries for Mekong waters.
This development calls for a
structured approach to the management of the basin, including efficient,
equitable, and environmentally sustainable water allocation mechanisms that
support the socioeconomic development in the region. Institutional mechanisms
for Mekong cooperation among the riparians in the lower basin have been in
place since 1957, and were revived in 1995.
e7 UNDESA Seminar on
Electricity Interconnection The Interconnection of Power Systems in the Greater
Mekong Subregion
http://www.un.org/esa/sustdev/sdissues/energy/op/interconnection_gms.pdf
Mekong Factsheet International Rivers Network,
Berkeley
(http://internationalrivers.org/files/MekongPowerGrid092506.pdf
Optimal water allocation in
the Mekong River Basin, Ringler,C, May 2000, http://www.zef.de/index.php?id=publications
September 22
The difference between risk and uncertainity is that risk is the variability in a state of nature and uncertainity is the probability of shifts between multiple states of nature.
Speech by Governor Liikanen: "Globalization: Declining Risks but Increasing Uncertainty?", Buenos Aires
Governor Erkki Liikanen Buenos Aires, 4 June 2007
Bank of Finland
2007 Money and Banking Conference hosted by the Central Bank of Argentina
"Monetary Policy Under Uncertainty"
Session on Underlying Forces in the Global Economy
Speech by Governor Liikanen: "Globalization: Declining Risks but Increasing Uncertainty?"
Introduction
Globalization is the big story of our times. Forces of globalization change the domestic inflation process and the way in which monetary policy measures are transmitted in the domestic economy.
The uncertain nature and magnitude of these changes makes the job of the central bankers more demanding. But at the same time, globalization has helped central bankers by exerting some dampening effect on prices.
On balance, the low and stable inflation we have witnessed in recent years gives confidence that central bankers can cope with this uncertain and changing operating environment as long as the process of globalization remains orderly. Therefore, I will not today talk much about how globalization is changing the domestic inflation process and the transmission mechanism of monetary policy.
Instead, in my remarks today, I will mainly talk about how globalization is changing the landscape of risks and what this implies for central banks and other policymakers. In particular, I will discuss the somewhat paradoxical phenomenon of a broad-based decline in risk premia at the time when uncertainty, i.e., those risks that cannot be readily quantified, may in fact be increasing.
Globalization: the big picture
It is often claimed that there is nothing new about globalization. While this may be true in some sense, it seems to me that the current phase of globalization differs markedly from the previous ones in its extent, speed, intensity and impact.
It is not possible to pinpoint the exact start of the current phase of globalization. But still, we can say that the demise of centrally-planned economies – most notably the internal transformation of China and the dissolution of the Soviet Union – unleashed the forces of globalization which had been building up during the 1980's.
The obvious result of this was that the former communist block countries opened up and became integrated into the world economy. The failure of the centrally-planned economic models profoundly changed the political landscape in already democratic countries. Specifically, it enabled and prompted them to adopt increasingly market-oriented policies conducive to competition and improvements in productivity.
The point which I want to stress here is that, although globalization is nowadays often seen as an inevitable and irreversible "force of nature", its present phase was triggered by political events and needs some global institutions and international political support to be sustained.
If the collapse of central planning was the main trigger, then rapid advances in technology have been the main driving force behind globalization. In particular, the explosive development of information and communication technologies has played a central role. By reducing dramatically the cost of transporting and sharing information and services, it has made the world more interconnected and interdependent than any reasonable observer could have thought possible just 20 years ago.
September 13
The link between poverty reduction and income distribution and an increase in secularism is tenuous, if not almost ridiculous if considered in isolation. There are a number of cultural and political factors that influence the organisation of societies in developing an understanding of diversity.
‘Diversity: the art of thinking independently together. ‘
Malcolm Forbes
South East Asia has experienced rapid social, political and economic change in the past two decades. It is home to the largest population of Muslims outside of middle east, with substantial proportion of the population of South East Asia also practicing Taoism, Hinduism, Buddhism, Judaism, and Christianity, as well as, combinations of religious teachings. Economic growth in South East Asia has not been hindered by the diversity of religion but enhanced by the acceptance of diversity.
In this way, the continent of disparate communities, nations and states that existed at different times in history has already had a profound influence on the world.
This process extended over several thousand years, and the religions of Asia in past millennia are still the great religions of Asia today; even if somewhat transformed.
The term 'Asian century' is used in the name of the Institute to capture the essence of widespread debate about shifting foundations of international order under the very powerful influence of events in Asia. It recalls the debates over 'Asian values' and it is certainly relevant to the manner in which the governments of Asia frame their policies.
Of course it is possible to see the idea of 'Asia' as an 'orientalism', an artificial, value-laden definition for a geographic space defined by somewhat arbitrary boundaries in a manner long since lost to history. The term is rightly criticised for concealing great diversity and lack of regional cohesion. But as noted above, 'Asia' is an idea that has survived and which retains considerable political relevance.
The concept of human safety is evolving and is being discussed as an alternative to the traditional security paradigm. This has occurred as new threats to global security and well being of people are challenged by new unforeseen events.
2008 marks the 60th anniversary of the Universal Declaration of Human Rights: 1948-2008. In 2004, the UN high-level Panel on Threats, Challenges and Change set out a bold, new vision of collective security for the 21st century.
‘We live in a world of new and evolving threats, threats that could not have been anticipated when the UN was founded in 1945 – threats like nuclear terrorism, and State collapse from the witch’s brew of poverty, disease and civil war.’
August 30
Markets and mayhem
http://www.nationalgeographic.com/traveler/images/galleries/tokyo0405/tokyo_gal1.jpg
The term 'Asian century', though challenged by some commentators, has been used quite often to refer to the economic weight of East Asia, particularly the rapid rise in its share of global GDP in the past twenty to thirty years.
According to the World Bank and the Asian Development Bank, Asia in real terms is projected to grow at 4.9 per cent from 2006 to 2020 compared to 3.5 per cent for the world as a whole. In Asia: China; India; Pakistan; and Vietnam are projected to grow at the most rapid pace.
India’s real GDP per head is expected to grow at an annual rate of 4-6 per cent from 2006 to 2020. This is exceeded by China where incomes are projected to rise by 5.4 per cent per annum, over the same period.
The pace of economic change is not only impacting Asia’s regional security ties, the increasing reliance on intra-regional supply is providing impetus for greater co-operation within the region itself.
An example of the increasing pressure on resources in region is the substantial rise in energy consumption growth which has fuelled the substantial economic expansion of the region over the past decade.
Continued economic development in countries like China and India will intensify competition for raw materials and push prices up, which could heighten geopolitical tensions. As European gas reserves become exhausted in a few decades time, the continent’s dependence on imports will increase from 30% in 2005 to more than 60% in 2050. The Middle East will assume an increasingly dominant role in oil production and Russia in gas production.
This growing dependence will make the energy system more vulnerable, and there is a fear that energy suppliers will use their power for economic or political gain. To the extent that the declining security of supply is reflected in higher prices, the effects on the industrialised countries will remain limited. The security of supply problem is therefore less urgent than the climate problem.
Sustainability policy implies that decisions need to be assessed inter generationally so as not unnecessarily contribute to economic and environmental problems in the future. The difficulty arises in striking a balance between improving global income distribution in the medium term and reducing ecological risks to human safety on a global scale for the remainder of the century. August 22 WELCOME TO THE ASIAN CENTURY INSTITUTE BLOGCAST 
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