Climate change has slipped off the radar of both Democrats and Republicans as they enter the Primaries and election year 2008. Al Gore’s tirade against Bush may have delighted delegates at last December’s Climate Conference in Bali, Indonesia, but had little concrete impact on the politics of the US elections.
How we treat Mother Earth, on whose health all of us depend for survival and progress, seems to mean little to Presidential hopefuls. They continue to fight for votes mainly on other platforms such as jobs, the economy, immigration and health care.
This is like burying the head in sand. The issues are not moral but strictly business. The costs of health and absenteeism, which are already very high, will explode uncontrollably through ill-health caused by the unclean use of hydrocarbon fuels and reckless environmental pollution by industrial manufacturing, energy, transport and mining companies.
These cost-raising impacts for American business come against a backdrop of competition from low cost giants like China and India, not to mention the emerging economies of Russia, Central and Eastern Europe and Latin America.
Although environmental pollution and climate change are directly linked to the costs of business, companies have made few improvements in cleaner technologies. Most use environment audits as public relations tools to impress the world through declarations posted on web sites.
This shows willful carelessness for which both business leaders and politicians will have to pay heavily in future shareholder assemblies and elections. It is self-serving to blame China and India, where half the people do not get nutritious diets and many suffer from poor health because of pollution. Neither of those countries is a leader in clean technologies and both together contribute far less pollution to the earth than the profligate citizens of America and Europe.
Being rich enough to buy natural resources will not be sufficient. Prices may be so high that trade wars break out. Demand has already pushed oil prices to over $100 a barrel from less than $50 just 18 months ago. Perhaps 30% of the oil trade is in the hands of speculators managing large commodity investment funds, so prices may stabilize at $75 to $80 after the dust settles. But the rising demand from India, China, the US and Europe is real. So prices may never return to the $30 level that prevailed before the Iraq invasion.
This spells disaster in coming years for 95% of Indians and 40% of Chinese who live on $1 to $6 a day,. This is just one example. The price of every other resource, including copper, iron (and steel), aluminum, phosphates and cash crops, is on a medium to long term rising trend. Speculation worsens the situation by causing market instability. Conservation of all resources is the only real solution and each of us must change behaviour to be more Nature friendly.
But the incentives are not powerful although there is very big money to be made from environment and climate friendliness. One example is the new trade in carbon credits, which is currently estimated at nearly $60 billion. It is operated by fund managers speculating about commitments undertaken by a few countries under the 1992 UN Framework Convention on Climate Change, the 1997 addendum called the Kyoto Protocol and the further talks agreed at the Bali Conference.
After the Kyoto Protocol a handful of European and other countries, excluding the US, China, Brazil and India, starting making a 5% cut over seven years in greenhouse gases caused mostly by burning fossil fuels and forests. Protocol countries receive quotas called carbon credits limiting the amount of carbon-based green house gases they may emit into the atmosphere. None has met targets prompting the need for carbon credit trading.
This is a complex trade but in simple words polluters are buying rights to pollute from non polluters in a zero sum game that bids up the price of credits. Most of the trade is among Western companies but a part involves buying unused quotas from developing countries, which have too little industry to need all their allocation.
Currently, about 55% of polluters refuse to submit to the Protocol. Carbon credits trading will expand considerably if this proportion falls and the cuts are deepened beyond 5%. Some see a multi-trillion dollar market within 20 years. On the other hand, the market will collapse and the current traders will lose billions if Americans and others prevent the emissions control system from expanding.
However, the precedents for new financial instruments are not good. One instance is the weakness of financial instruments built from bundles of bank loans made to insufficiently qualified or “sub-prime” buyers of real estate in the US. Their collapse could cost the US economy nearly half a trillion dollars and the losses are spreading to European banks and institutional lenders. A similar crisis in carbon credits trading could cause some European economies to slide into recession.
Still, the trends are clear enough. Unrestrained pollution combined with financial speculation will strongly push back global prosperity and peace if we do not quickly become more efficient in our use of energy and other natural resources. (Ends)