Monday, September 10, 2012

Proposed UN climate fund of $100 billion per year: Are they living on the same planet as the rest of us?


            In the aftermath of the Kyoto fiasco one would think that our elites would have learned some very valuable lessons.  The most important lesson they should have learned is that there is no point relying on voluntary goodwill in order to solve global problems such as climate change.

            Yet here we are again with an even more flawed scheme set to be hammered out and due to be set in motion by 2020.  This agreement was signed, in Durban, South Africa in 2011, and it involves a pledge of annual aid adding up to $100 billion dollars from the “rich” nations, meant to help poor nations cope with climate change, as well as to help them implement green technologies meant to help them develop in a more green direction.  Sounds like a noble endeavor, worthy of the praise of anyone who cares about the environment and people.  The Green Climate Fund (GCF) is on paper the most ambitious attempt at managing a global problem ever attempted.  For this year, they will do the “hard” work of picking a place to headquarter the administration apparatus for this fund.  The “small” detail of finding the funds will be hammered out as we approach the date of implementation.

Joining our elites on their planet:

            I personally think that even from 2011, till now things have changed so much, that we should already write off this proposal.  I simply don’t see where we could come up with $100 billion in contributions per year.  In fact, I doubt, we will be able to maintain even the current $10 billion yearly contribution, which was originally agreed to in 2009, mainly to help poor countries cope with the effects of climate change.  But let us join our elites on the planet where they evidently live, and let us pretend we have the money.  Will it help?

            A hundred billion dollars sounds like a very large sum, and when it comes to having to come up with it, it seems like a colossal challenge.  People automatically assume that since we intend to throw so much money at this problem starting from 2020, the greenhouse gas emissions problem will surely be resolved. But let us analyze the true effect on a global scale.

            On one hand, we have the stagnated developed economies, which in the best case scenario will recover to a point where with investment in our own economies in green technologies, we could achieve zero growth in emissions levels.  We do have some challenges, including the increasing intensity of emissions coming from the extraction process of hydrocarbons, such as is the case with Canada’s oil sands.  Other than that, with our stagnated populations, and stagnated rate of capital accumulation, we can expect our economic activity to at the very least no longer contribute to the growth in emissions.

            The developing nations just recently surpassed the developed nations in greenhouse gas emissions, and despite our stagnation, in the absence of a worldwide financial and economic crisis, they will probably continue to increase their emissions at a very fast pace.  Between 1990 and 2009, global emissions rose by about 40%, and they would have risen by 42% if it wouldn’t have been for the heroic effort on the part of the Europeans and a few others around the world to keep their emissions levels at 1990 levels as agreed to by signing and ratifying the Kyoto protocol.  This $100 billion yearly investment is supposed to help poor countries continue to grow at their current pace, without repeating the rise in global emissions we saw in the previous decades, most of which is attributable to them.

            I take issue with the assumption that it would really have a big impact on emissions.  First of all we have to remember that a large part of the fund will be spent on combating the effects of climate change, not on preventing it.  Aside from that, we have to remember that this would be an investment infusion.  The effect of any investment infusion in an economy is that it makes it grow faster.  In other words, we are not looking at displacing fossil fuels from economies growing at a pace of maybe 6%, but perhaps 8% instead, as a result of the stimulative effect our investment infusion would have, which means that there will be an automatic increase in energy demand that otherwise would not have been there.  This will also ease the constraint on economic growth we currently have courtesy of conventional resource constraints, so it is hard to say what the overall effect will be on developing nation economic performance, but we should not ignore this fact.

            It is even possible that in the end, this will not have any effect on greenhouse gas emissions growth.  After all, Kyoto did not make much of a difference either, despite all the self sacrifice and self inflicted loss in economic competitiveness that those who did the heavy lifting incurred.  We are forgetting that this will in no shape or form address the problem of the still growing population in the poor regions.  As these people become more prosperous, they will demand to eat more meat, increasing methane emissions drastically.  They will also desire to drive cars.  Even if they will mainly choose small fuel efficient cars, the shear size of the population of the developing world is enough to offset gains made by introducing more solar and wind power to their economy.

Back to our world:

            Now for the big question; where will the money come from?  This has not been agreed to yet, and I see no way of coming up with even a fraction of it.  So let us take each relevant region one by one:

North America:

            The US is not suffering the same level of stagnation as the EU, but it is also further from actually addressing the $trillion+ yearly deficits it is running.  One might argue that given that deficits are already so big, adding maybe another $30-40 billion per year will not even be noticed.  Given that republicans are looking to cut funding for baby formula and food stamps for the growing numbers of the impoverished living in the land of the rich, I think it would be extremely difficult to commit to any funding of this scheme.  Furthermore, there is strong public opposition to doing anything on climate change locally or globally, courtesy of a very robust campaign to distort the facts and misinform the masses.  The only way we can see any money appear from the US for this fund is if the amount will be small enough to fly under the political radar, such as a billion dollars or so.  But then what is the point?  Reality is that the US will likely renege even on its current contribution to this fund, because there are cuts coming to their budget and funding international programs is never high on the list of spending preferences.

            Canada is in much better fiscal shape than the US, but it is also a much smaller country, and its population is emotionally attached to the concept of prudent government that led them to the current solid fiscal position in the first place.  Canada had a balanced budget and a declining debt to GDP ratio for over a decade before the 2008 financial crisis hit.  All mainstream political parties have to declare their allegiance to working towards having a balanced budget again in order to maintain public support.  So once again, as is the case with the United States, we should not expect large sums being committed from this country.

Europe (The champions of voluntary goodwill)

            Europeans kept their greenhouse gas emissions at 1990 levels at the cost of losing economic competitiveness, and growth momentum as a result.  Now, they are caught in a life or death struggle to save themselves from complete economic collapse.  Some countries are still solid economically and fiscally, as is the case with Germany and a few other members of the union.  Half of Europe is struggling to compete in the global economic village however, and as a result, they are now experiencing economic and fiscal difficulties.  The healthy half is on the hook for having to bail out the weaker members of the union in order to save themselves from being dragged down with them.  If the US were to allocate a generous sum of money to the fund, I could see the embattled Europeans doing the same.  We should not expect them however to once again unilaterally shoulder the burden.  The political will and the much needed public support are not there.

The rest:

            Australia is in good fiscal shape and it could certainly contribute some funds, but it is also a small country compared to the EU collective, or the US.  Japan has been known for supporting goodwill initiatives in the past, but let us not forget its difficult fiscal as well as economic situation.  This is the country that just suffered one of the worst environmental disasters in human history.  The fiscal and economic costs will likely be significant.  Other than that, I doubt we can rely on any other goodwill crusaders from within our “global village”.  Some Arab states could certainly afford to pay into this fund.  Their potential contribution however cannot be great, because we are living in the new era of the aftermath of the Arab Spring, and their number one priority is to invest in keeping their masses docile.

Conclusion:

            As is the case with many other problems humanity faces locally or globally, the situation with the UN climate fund once again proves the unfortunate reality of humanity’s impotence when it comes to dealing with the challenges ahead of us.  We have known about the possibility that humans are causing our climate to change for many decades now.

From the left, the response was the Kyoto fiasco, and now this even bigger fiasco, as well as many calls for individual goodwill and self sacrifice, which so far made no difference, nor will they make a difference in the future.  Two decades and much economic viability and goodwill were wasted on Kyoto.  This current decade will be wasted on yet another plan, which does not even have a chance of being implemented, nor is it clear that it can deliver if it was ever to be funded.  No doubt, after 2020 when the left will once again be left disappointed by the lack of voluntary self sacrifice on the part of the “rich nations”, which are not so rich anymore, will come up with yet another proposal, just as dependent on voluntary goodwill as the last two failed initiatives.  In other words, they see the problem, but ideological indoctrination will prevent them from ever accepting anything but voluntary goodwill as the mechanism to deal with this or any other challenge.

            On the right, things are far simpler.  There is a general tendency for ideological indoctrination which leads to high levels of skepticism when it comes to scientific findings.  When it comes to climate change, which is by no means an easy scientific topic, easy to prove beyond any doubt, it is a no brainer to attack the credibility of the science used to support the call to action on this issue.  The argument against the validity of the call to action on climate change is further reinforced by the flawed and ultimately harmful proposals for action coming from the left.  Given the prospect of further losing economic competitiveness and ultimately their jobs, western workers often prefer to close their eyes to scientific proof, which many cannot fully understand anyway, and chose to believe the right instead.

            There is another way.  The way forward needs to offer a mechanism that does not entirely depend on voluntary goodwill and self sacrifice.  In fact when it comes to the western middle class the opposite is true, when we consider my proposal for sustainable development as outlined in my book.  There is a definite advantage that is to be gained, because we will no longer have to pay for more stringent environmental and worker protection rules, with resulting job losses, in favor of countries which do not bother to protect humans or the environment.  The unfortunate thing is that the sustainability trade tariff does not fit in well with the ideological agenda of either side, thus neither side will ever embrace and throw their support behind this initiative or any other, which might not fully support their ideologically driven point of view.  So instead, we are stuck with $100 billion per year UN funds, which will never materialize, nor would it make such a great difference even if it was to materialize.  We will continue on, year after year, decade after decade with flawed solutions, until there will no longer be a point to urging action on climate change, or any other global sustainability issue, because nature will take the same good care of us as we do for it now.  At that point, individual survival through securing the most basic needs will become the most pressing need.

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