Do current debates on climate change consider sufficiently demographic projections?

Sir, I refer to the different opinions expressed in FT on the UN Climate Change Conference in Paris.

IMF, in a Staff Discussion Note of October 2015, “The Fiscal Consequences of Shrinking Populations” writes: “Declining fertility and increasing longevity will lead to a slower-growing, older world population... This, in turn, contributes to a more sustainable pattern of development and reduced pressures on the environment.”

And the World Bank, in its advance of the “Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change” mentions: “Demographic trends and related policies will have implications for the global environment and for the effectiveness of adaptation and mitigation strategies. Family planning and reproductive health policies may help mitigate the negative effects of climate change by reducing population growth, especially in pre- and early-dividend countries. Education is not only likely to lower fertility, it can also have a major impact on the effectiveness of measures aimed at tackling the negative effects of climate change…”

And so Sir, it looks clear that if we have an aging world with falling population our economical challenges will increase but our climate change challenges might lessen. And vive versa if we have a world with growing population it might be easier on the economy but climate change challenges might worsen.

Is the current debate on climate change considering sufficiently this relation?

What if in 40 years the world has to explain to its pensioners that there is no money for them, because it was quite unnecessarily spent on problems derived from a climate change scenario that did not include demographic projections? 

@PerKurowski ©

Bank regulations should be a prime issue discussed during UN’s Paris conference on climate change. Will it be?

Sir, I refer to FT’s Special Report “Managing Climate Change” November 27.

If a bank is allowed to hold less capital against Good assets than against Bad assets, then the bank will be able to earn a higher risk adjusted return on equity on The Good than on The Bad. And then banks will lend more, and on better terms, to The Good than to The Bad.

Currently bank regulators have defined The Good to be those whose perceived credit risks are lower than that of the Bad. That is dumb, serves no purpose and is unjust.

Dumb because banks, by mean of interest rates and size of exposures already clear for credit risks, and so perceived credit risk gets to be considered excessively, which is something that seriously distorts the allocation of bank credit.

Purposeless because perceived credit risk has nothing to do with the usefulness for the economy and the society of a bank credit being awarded.

Unjust, because by favoring more than ordinary the access to bank credit of those perceived as safe, impede those perceived as risky to have fair access to the opportunities that bank credit provides.

If I had the opportunity in Paris I would suggest that we urgently redefine The Good bank assets. The Good should be those that help us to achieve the two things we would most love for our banks to help us out with, namely the creation of the many new jobs we need, and to make our planet more sustainable.

Could that happen? I am not sure. That requires many to understand what the credit-risk capital requirements for banks have done to our real economies, and that is not a pretty sight bank regulators likes the world to see.

Sir, would it not be nice if suddenly banks earned higher risk adjusted returns on equity doing something we like them very much to do? Of course it would. Hey, we could perhaps even see some huge bank bonuses paid in a quite very different light.

@PerKurowski ©

http://ourpiedaterre.blogspot.com

In Paris Conference we will hear many echoing Neville Chamberlain: There will be splendid planet earth for our time

Pilita Clark and Stefan Wagstyl report on “G7 in historic accord to phase out fossil fuel emissions this century”, June 9. Hurrah!

But when Stephen Harper, the Canadian premier, brings it down to reality mentioning that: “doing so would require “serious technological transformation…I don’t think we should fool ourselves, nobody’s going to start to shut down their industries or turn off the lights” it makes it all look much more that a historic hullaballoo… in preparation for all to come out of the Paris conference in December declaring, like any Neville Chamberlain: There will be splendid planet earth for our time.

As I have held for many years, any planet earth environmental agreement, if disconnected from the people will not work… and in that respect Governments, NGOs and Greens are not the people.

Also for me, to read about phasing out fossil fuel without phasing in nuclear power, which for the time being is the only available bridge between now and that “serious technological transformation”, shows this is not a real serious effort.

What do little me currently propose we do for our pied-a-terre?

For a starter… instead of allowing banks to earn especially high risk adjusted returns on equity on anything perceived as safe from a credit risk point of view, something which has no purpose and is dumb, we should give banks the incentives to earn those extra high returns on everything that seems to help sustainability (and job creation).

Put one and the same capital (equity) requirements for banks on all assets, for instance 8 percent, and then reduce these with up to 50 percent depending on planet earth sustainability ratings (or job creation ratings).

And please, please, please… stop talking about differences between rich and poor with respect to their responsibility to planet earth… we are all indigenous to our planet, and we all have the same human right to feel responsible for it. The “I am rich so I can take care of it better” has to stop.

PS. And forget about selling carbon emission indulgences for some fairly undefined sins in order to use the proceeds for some even less defined good deeds.

@PerKurowski