Thou shall not sell carbon emission indulgences

Sir you write: “Polluters can purchase “carbon credits” to mitigate the effects of their activities. This allows them to continue with their existing business while claiming that they are doing their bit to combat climate change” “The merits of a global carbon offset market” December 7.

For more than a decade I have argued that “carbon credits” are like the indulgences sold by the Catholic Church for the forgiveness of sins, and which Martin Luther protested. And carbon credits are currently much promoted by Germany.

In his 2015 Encyclical Letter LAUDATO SI’ Pope Francis wrote: "171. The strategy of buying and selling “carbon credits” can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors."

So, in a strange twist of history, it seems the Catholic Church is now telling the Lutheran Church “Thou shall not sell carbon emission indulgences”

Thou shall not sell environmental crimes indulgences

Sir, albeit a bit late, I refer to David Sheppard’s Big Read “Carbon trading: the ‘one-way’ bet for hedge funds” FT August 23.In his Encyclical Letter 'Laudato Si’ of 2015, Pope Francis wrote:

"171. The strategy of buying and selling “carbon credits” can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors."

With “permits” Pope Francis was here de facto referring to some type of “indulgences”, which help pardon environmental sins. 

It was Martin Luther’s attacks on the Catholic Church’s sale of indulgences for the remission of temporal punishment for forgiven sins, which caused the rift that led to the creation of the Protestant Church. Therefore, more than 500 years since Luther in 1517 (supposedly) nailed his “Ninety-five Thesis” on the door of Old Saints' Church in Wittenberg, I found it curious (and equally correct) to read a Catholic Pope accusing many protestants who favor carbon trading, for sort of a similar procedure.

As a protestant belonging to the Swedish church, ser wife and catholic children, I do not like carbon trading, as I previously explained in a letter you published, I much prefer high carbon taxes shared out equally to all, as that would align the incentives in the fight against climate change and the fight against poverty. 

http://ourpiedaterre.blogspot.com

@PerKurowski

We do not believe that the Venezuelan military can contemplate sending their compatriots to the starvation ovens.

My deceased father arrived on the first train to Auschwitz in 1940 as a Polish prisoner, and had number 245 tattooed on his arm. Freed in 1945 by the Americans, in 1947 he moved to Venezuela where he lived for over 30 years, worshipping that country all his life. And now I find Andres Schipani’s “Venezuela army tightens grip as food riots grow”, July 30, coincidentally published next to an AP brief “Silent pilgrim” and that reports on a visit of Pope Francis to Auschwitz.

And so I just must say the following Sir: My father would never ever have believed, as neither do I believe, that the Venezuelan military are capable of sending their compatriots to the starvation ovens. And, in this respect, we would both firmly believe that something has to happens to put a stop to the runaway craziness of the current Venezuelan realities, more sooner than later.

@PerKurowski ©

Bank regulators minimizing the social impact of banks more than neutralize the social impact maximizing investors.

Sir, Stephen Foley and Adam Samson quote write about the efforts of Pope Francis to champion ‘impact’ investments, “FT Big Read. Investment: Blessed returns” June 17.

And Pope Francis is quoted with: “It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs”. I believe that having a tête-à-tête with the Basel Committee for Banking Supervision, could serve the Pope better than speaking with social impact investors.

The pillar of current regulations, the risk weighted capital requirements for banks, allow banks to earn higher risk adjusted returns on equity, for no other purpose than that to avoid ex ante perceived credit risks. That’s a very a poor objective for those who have a prime responsibility of allocating bank credit efficiently to the economy.

As a result those perceived safe, those who because of that already have plenty and cheaper access to bank credit, now find even more generous terms, while those perceived as risky, like SMEs and entrepreneurs, those who already had less and more expensive access to bank credit, have to fight much harsher conditions.

Clearly that regulation only guarantees to diminish the social impact of bank lending. It is the direct consequence of regulators regulating banks, without defining the purpose of these. That is an unpardonable irresponsibility of them!

Social impact based capital requirements for banks, which would allow banks to earn higher risk adjusted returns on equity when producing a high social impact, could sound as an attractive possibility, but is not free from dangers. To base capital requirements for banks on for instance the GIIN list of 559 metrics, those ranging from ‘greenhouse gas emissions avoided due to products sold’ to the number of suppliers who were minority/female/low income” could be gamed and also distort credit allocation in many other ways.

But, just to require the Basel Committee to answer a question of whether bank credit should not have a social impact, could open up a much-needed discussion on the need of eliminating the current regulatory discrimination based on perceived credit risk.

@PerKurowski ©

Bank regulators are financially advising Europe as that “grandmother” Pope Francis considers Europe now is

Sir, Tony Barber in his essay “State of the Union” of May 28 writes: 

“Pope Francis pulled no punches in November 2014 when he addressed the European Parliament on the EU’s deepening malaise. “In many quarters we encounter a general impression of weariness and ageing, of a Europe which is now a ‘grandmother’, no longer fertile and vibrant. As a result, the great ideas which once inspired Europe seem to have lost their attraction, only to be replaced by the bureaucratic technicalities of its institutions,” the pope said.”

Well if Europe is now a grandmother, then the credit risk adverse bank regulations could be perfectly appropriate; in fact any financial advisor, advising a grandmother should advice her something similar... or he would be disqualified.

But I know, for a fact, that Europe is now no longer fertile and vibrant, was turned into a grandmother, partly because regulators, with bureaucratic technicalities, do not allow banks to take those risks the young need to be taken, in order to keep the economy fertile and vibrant, and so that they could also have a better future.

Europe, if a good grandmother, should not permit the Basel Committee to regulate banks hurting its grandchildren. Let us all pray for that Europe has not turned into a bad and egoistical grandmother.

@PerKurowski ©

Is the Catholic Church now telling the Lutheran Church: “Thou shall not sell carbon indulgences”?

Sir I refer to James Politi’ and Giulia Segreti’s “Pope says multinationals and greed threaten environment” June 19.

Pope Francis’ encyclical Laudato Si states: “171. The strategy of buying and selling “carbon credits” can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.”

I have for years I argued that the “carbon credits” so much promoted by Germany among others, are like the indulgences sold by the Catholic Church for the forgiveness of sins, and which Martin Luther protested. And so now, in a strange twist of history, it seems it is the Catholic Church that is telling the Lutheran Church “Thou shall not sell indulgencies”

@PerKurowski

Do liberal values include risk-aversion? If so, bye-bye Europe

Sir, Richard Vinen in his “The Pope is wrong – old Europe is a new world” of November 29 extols Europe’s liberal values. And I have a question for him, and for you.

During the last decades regulators have imposed on the European banks credit risk weighted equity requirements. With these they allow banks to earn much higher risk adjusted returns on equity when lending to what is perceived as “absolutely safe” than when lending to what is perceived as “risky”. And so of course return on equity maximizing banks, respond to these incentives and do not lend more to the “risky”, like to small businesses and entrepreneurs. And, given that risk taking is the oxygen of any economy moving forward, Europe is now stalling and falling.

And so my question is: do liberal values include such risk-aversion?

And I ask that because in my opinion little has turned Europe in that old granny Pope Francis refers to, that these risk-adverse regulations.

Risk-taking is for the young, for the optimists, for the believers in a bright future. Risk aversion is for the old, the pessimists, for the ones who do not dare to bet what they have today in order to get a better future.

What a pity Pope Francis did not in his speech to the European Parliament remind Europe of The Parable of the Talents.

“My deflation is horrible, yours, oil, not so bad”

Sir, inflation seems to be have been identified as the number one tool to smack grandmother Europe back into fertility and force her to vibrate on the dance floor again. And though that must sound quite eerie to the poor of Europe, those who always end up being most taxed by inflation, most of you in FT clearly agree with that approach.

And that is why I was slightly surprised when I now read you categorically stating: “Weaker oil prices are a restorative that the flagging world economy needs”, “Opec members flounder in a flood of cheap oil.” November 28.

I say that because it would seem that lower oil prices are more likely to fuel deflation than inflation. But, I guess the beauty of inflation, like so much other, is also in the eye of the beholder, “my inflation is splendid, your inflation not so good”.

Sir, for the record, let me remind that though some inflation could help to put some kick back into granny again, that can only happen as long as she really wants, dares, and is allowed to do a comeback.

Unfortunately, while Europe insists on credit risk adverse regulations that effectively stop banks from lending to small businesses and entrepreneurs, that does not seem to be what the family wants for her. Currently Granny Europe is kept more into a “let me just die as painlessly as possible” mood.

PS. By the way, Opec should have invited the USA shale oil producers (extractors)

There are productive and there are destructive inequalities, and we must know which are which.

Sir I refer to John Gapper’s “In search of balance: Capitalism”, December 24.

I have no problems with most of the “productive” inequalities which result from courageously moving forward – when financing the “risky” future, when increasing the cake. But I do have problems with many of the “destructive” inequalities, which occur when just trampling in the water, when extracting the last ounce of juice from any past risk taking – when refinancing the “safer” past, when only wanting to distribute the cake.

In this respect, when Pope Francis says “I exhort you to a generous solidarity and a return of economics and finance to an ethical approach that favors human beings”, I most emphatically have to state that the current capital requirements for banks based on perceived risks, risks already cleared for elsewhere, is definitely not an ethical approach to economic and finance.

And since Gapper makes a reference to Branko Milanovic of the World Bank, the author of “The Haves and the Have-Nots”, I must also comment that it is truly surprising to see how few realize how these regulations, which favor the Haves and discriminate against the Have-Nots, constitute one of the foremost drivers of “destructive” inequalities.

And that the World Bank, the world’s premier development bank, and who should be the first to know that risk-taking is the oxygen of development, keeps quiet on this whole issue, just makes me very sad for the future generations.

FT, please try to reflect on where we in the Western World would have been, had those risk-weighted capital requirements introduced over the last three decades by the Basel Accord, always applied.