It suffices for one single nation to set a high tax on carbon emissions and share out its revenues among all its citizens, to really begin saving our pied-a-terre.

Sir, Martin Wolf, whether it is true or not, is absolutely correct calling out: “It is five minutes to midnight on climate change”. We have no right to ignore that threat, even if its possibilities were low. “Inaction over climate change is shameful” October 23.

Wolf asks and answers: “So what needs to change? Net global CO2, methane and nitrous oxide emissions would need to fall to zero” though he also observes. “This is very unlikely to happen. That is no longer because it is technically impossible. It is because it is politically painful.”

It should not be! If only one nation went ahead and placed a big tax on carbon emissions, and shared out all resulting tax revenues equally, unconditionally, among all its citizens that would be a game changer… many would be politically pressured to jump aboard saving the planet that way.

Why does it not happen? Quite simply, the redistribution profiteers, those who profit from negotiating conditions, won’t touch with a ten feet pole an unconditional pay like this, less it spreads to other areas of their franchise, for instance by means of a Universal Basic Income.

Do I know? I come from Venezuela where nothing similar to its current tragedy would have happened had its oil revenues been shared out equally to all Venezuelans, and yet that possibility is rarely mentioned by the opposition, because there’s always an infinite pool of aspirants to be the next redistributors on turn.

Paris Accord? To me it was just a great photo-op for redistribution and fight against climate change profiteers that would do little to improve the chances for my grandchildren to live better.

More than a year ago the Climate Leadership Council proposed a carbon tax along the lines of what I describe here… seemingly they were silenced!

PS. For Mexico City, to combat pollution, I proposed just that..

@PerKurowski

Keep bank regulators like FSB’s Mark Carney out of global warming or we’re all toast

Sir I refer to Pilita Clark’s “Carney urges ‘net zero’ company strategies” December 5.

In Basel II a corporate asset that is rated AAA to AA carries a 20% risk weight, while a similar asset rated below BB- is risk weighted 150%. That means that the capital a bank has to hold against a corporate asset rated AAA to AA is 1.6% (8%x20%), while against an asset rated below BB- it needs to hold 12% in capital… 7.5 times more.

Anyone who believes that assets rated below BB- are more dangerous to the banks than assets rated AAA to AA, even a mind-blowing 7.5 times more dangerous, has not the foggiest idea about risk-management.

The safer an asset is perceived, the larger is its potential to deliver unexpected losses, those losses that bank capital is to help cover.

And that is why Mark Carney, the chair of the Financial Stability Board, instead of appointing “Michael Bloomberg, media billionaire… to head a task force aimed at helping investors judge how companies are managing the risks that global warming poses to business”, should better see that himself and all his colleagues take a Risk Management 101 course.

Sir, as I have said many times before... if climate change/global warming regulations is to be handled by a task force in any way similar to how the Basel Committee and the Financial Stability Board handle banks… then we're all toast.

PS. If bank regulators want to help out then they should scrap the capital requirements based on credit risks that are anyhow cleared for, and make these based on sustainability (and job creation) ratings

@PerKurowski ©

Berlin, are there no more urgent sustainability needs to serve in Europe than having Volkswagen recall 8.5m diesel cars?

Sir, Jeevan Vasagar and Chris Bryant report “Berlin forces VW into mandatory recall of up to 8.5m diesel cars across Europe” October 16. Why on earth would Berlin do a dumb thing like that?

What will that cost? Are there no more urgent needs to serve in Europe than recalling diesel cars?

Is it because the hurt inept emissions controllers who were cheated now want revenge? A lover’s spat?

How does the world benefit from forcing VW into mandatory recall of up to 8.5m diesel cars across Europe?

What will that cost? Is Europe really so buoyant that it can pay for an 8.5m diesel cars recall across Europe?

Is recalling these cars the most effective way to cut emissions that pollute, and to help the earth’s sustainability?

How much useful research could not be funded with what is to be wasted on the recall of 8.5m diesel cars?

Frankly if you want to punish Volkswagen without punishing other don’t recall cars give the diesel car owners, or other, some Volkswagen shares instead.

Sir, as a reminder, here is a previous letter on that.

@PerKurowski ©

Perhaps Paris should have a little tête-à-tête with Volkswagen about what to do about embarrassing pollution ratings.

Sir, Adam Thomson discusses the embarrassment to Paris its lousy environmental readings could cause when, for a UN conference in November, “some 40,000 politicians, delegates, scientists and environment experts will descend on Paris to discuss what is billed by many as humanity’s last hope of saving the planet from irreversible climate change”. “Dark and dirty days in the city of light” September 23.

Perhaps Paris should have a little tête-à-tête with Volkswagen to see if it has any ideas about what could be done.

Or, in these days when Volkswagen has so utterly destroyed the credibility of emission controllers, Paris could perhaps just discreetly let out something like: “Our emission readings are sincere”

Oops… should those who have responsibility for supporting tourism in big cities also need to have tête-à-têtes with App developers like Plume?

http://ourpiedaterre.blogspot.com/2015/09/the-vw-volkswagen-emission-control.html

@PerKurowski

FT, can you help me understand the practical significance of different internal carbon prices?

Sir, Pilita Clark reports that Spain’s Inditex fashion group, owner of the Zara brand, says it has a US$30 a ton internal carbon price even though EU benchmark carbon process are around $US9. “Companies accelerate carbon pricing” September 21.

I have no idea whether those prices are high or low so it would be interesting reading what Zara will not be doing with a price of US$30 compared to what it would be doing if the price was $US9.

I ask, because when I announced to my family we will from now on be using an internal carbon price of $US60, twice that of Zara’s, my kids were properly impressed, “Way to go dad!" But then they came back and asked me what that meant for them… and I don’t have a clue… and I hope I don’t have to scrap my outdoor grill now either. 

@PerKurowski

Bank regulators got it so wrong; that we owe our children a full independent autopsy of how that could have happened.

Sir I refer to Nouriel Roubini’s “Rating agencies still matter — and that is inexcusable”, August 11.

Of course it is inexcusable: In January 2003, then as an Executive Director at the World Bank, FT published a letter in which I wrote “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic error to be propagated at modern speeds. Friends, please consider that the world is tough enough as it is.” And, of course I was referring to the intention of the Basel Committee of using credit risk ratings to set the capital requirements for banks.

And of course we need to get rid of those capital requirements that distort completely the allocation of bank credit to the real economy. That these are based on the same perceived credit risks that are already cleared for by banks with risk premiums and size of exposure, is sort of something mindboggling dumb.

But more than that, much more than that, we need a full detailed autopsy of how it came that basically the whole world’s banks ended up governed by such nonsense. And more than that, much more than that, we must also figure out how we have allowed so much time to go by without correcting what clearly needs to be corrected.

As I have said before, the world faces many problems, but since the solutions to those problems are becoming more and more globalized, their possible unexpected consequences can be so much more serious.

If for instance we allow helping our planet to be more sustainable avoiding global warming to go through the same type of flawed decision processes, we might only make more certain we’ll be toast.

@PerKurowski

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

The environmental problems of our planet are too serious to be allowed being sequestered by unethical vulgar politics

Sir, Martin Wolf’s “An unethical bet in the climate casino” of November 12, exemplifies exactly the main obstacle for the world to start tackling in real problems related to climate change, or, if you wish, problems related with just bad handling of our environment. And that is that the to do or not to do so, is always politicized.

Just read: “The Republican victory in the midterm elections was a triumph for its strategy of sustained vilification of the president and obstruction of his policies. The most important consequence of this election may therefore be to bury what little hope remained of getting to grips with the risk of dangerous climate change.”

I know that when my grandchildren would ask me “Grandfather why did you not do anything” this article of Wolf will, with much sorrow, come in handy.

“Many Republicans seem to have concluded man-made climate change is a hoax.” Does Wolf really think they have concluded that… and not just concluded something political?

“Yet, fascinatingly, the very same people who consider the costs of mitigation excessive wish to lighten financial regulation and so increase the risk of a repetition of the recent calamity… It is no accident that believers in laisser faire are the fiercest climate sceptics. The wish is father to the denial.”

Hold it there! I just know that if the tackling of climate change was to fall into the hands of something like the Basel Committee for Banking Supervision, and the Financial Stability Board, which with their portfolio invariant credit risk weighted capital/equity requirements for banks caused the current crisis… then our planet would be definitely toast L

An unethical tinkering with the casino

My Voice and Noise on the environment

Mr. Martin Wolf, would not having a climate fix ruin investors even more?

Sir, I do not understand Martin Wolf’s “A climate fix would ruin investors” June 18. If climate change warnings are for real, as Wolf says he believes … would not having a climate fix ruin investors even more?

And what about diversification? If, while fixing the climate, governments go wrong and mess it all up by for instance financing Solyndras and then go broke… would not a little coal mine left in the portfolio perhaps come in handy for those days we might have to mitigate the disaster?

Global warming and bank regulations

Sir, Philip Stephens in “Spasm or spiral? The west´s choice”, July 22, analyzes the current problems of the west. His analysis would have benefitted from a better understanding of global warming, because anyone looking for evidence of it, would have noticed that, for instance in terms of bank regulations, the parallel that used to define a banana-republic has move northward and has now reached Basel. 

I say this because it is evident that only banana-republic styled regulators could have concocted regulations that allow banks to hold extremely little capital when lending to what is perceived as not-risky, as measured by the officially outsourced risk-Kommissars, the credit rating agencies, when compared to the capital required when lending to the “risky”. 

Any non-banana-republic bank regulator would have known that the perceived risks of default were already cleared for by the markets, and that these capital requirements would only exaggerate the reliance on some ex-ante perceptions, which would of course have calamitous consequences, sooner or later. 

And, of course, the politics in the west, are also of course acquiring the standard characteristics of the banana-republics.

Note in 1999: We have recently witnessed public spectacles such as the fight the United States has sustained with Europe about bananas. Perhaps the effect of global warming has been much greater than we suspect as it seems to have moved the parallels normally identified with Banana Republics northward.

 

PS. The scandaliciously dumb bank regulations in an apolitical red and blue!

No one likes being told they are laggards

Sir Joshua Chaffin reported on January 15 that Günther Oettinger, Germany’s nominee for the European Commission concluded from what happened in Copenhagen during the discussion on climate change that the European Union isn’t big enough for ‘world authority’. Nonsense, even a butterfly has influence if it knows how where and when to flap its wings.

In order for Europe to gain more influence in environmental matters it needs to get rid of that we are greener than thou and besserwisser attitude because the rest of the world, when trying to open up a space for the environment in the midst of so many other urgent main-street problems, surely must find it quite fastidious always being told by the Europeans that they are irresponsible laggards in being green.

When Oettinger is then quoted saying “We need a paradigm shift and to explore solar, wind, ‘smart grids’ and other alternative sources of energy” in my mind he is just proving my point. Climate change needs to be fought with more sturdy global tools and not only with European toys.

Let all citizens of all countries in on the climate change human race challenge!

Sir Jeffrey Sachs “Hold the rich nations to their world” December 16 clearly views fighting against climate change as a government issue. But, if the threat of climate change is as serious as told and which from what I at least have been able to see with my own unscientific eyes I have few reasons to doubt, then clearly the only way to have a chance to succeed in that battle is by making it a citizens issue.

In this respect when Jeffrey Sachs now rightly complains in respect to climate change that “rich-country leaders want to sneak by on minimalist commitments… not consistent with global needs or international commitments” similar to what has happened to “rich-country pledges on development aid”, he would do well reflecting on whether the citizen of rich countries were sufficiently involved when making those commitments… or does the need of participation and ownership that is so much preached on by the development community only apply to poor countries.

Also these days we heard comments from the US with respect to the difficulty of monitoring Chinese commitments on containing carbon emissions, but if in this case we can’t understand that the only real effective climate change monitoring that can be done in China or in any country is that which is performed by their own citizens, then I believe we have already lost the battle.

Let’s hurry back to the drawing board and start talking with the people of the world and not the Jeffrey Sach’s or the governments of the world… pas la même chose.

Who is guilty of having seeded expectations of climate change reparations?

Sir Christopher Caldwell is right in denouncing that “many of the developing world’s representatives have come to Copenhagen seeking reparations” Climate change, the great leveler”, December 12. What we must realize though is that these representatives did not develop these expectations on their own but that these were certainly seeded there by some reparation intermediaries or vultures. There is no doubt that we should try to eliminate poverty in the world but we must have clarity in what are the prime objectives with respect to our earth-environment.

It would be an interesting challenge for any journalist to investigate the origin of the idea to open up the flank of wealth redistribution in the environmental battle. It should be possible to do so and it would also be very valuable for all to do so, especially for those now bearing groundless expectations and who now are bound to be disappointed.

Do the poor not have the human right to share the obligations of the human race?

Sir Jeffrey Sachs in his letter “Poor pay for the sins of the rich” December 8, writes about “Pushing the developing countries into a climate accord based on tiny sums today and vague financial promises for the future”. It makes one wonder about what is wrong with the developing countries doing what they feel they should and can do in fighting climate change without being paid anything. Do they not have the human right to help out when the human race and the world is faced with a challenge?

It is all part of the same preaching that has it that the poor should not have to pay for the water when having a water meter installed is perhaps the best chance the poor can start feeling that he is becoming a citizen.

Instead of offering the poorest of the poor in a developing country a payoff I rather see them shaming the rich and poor in developed countries into taking on their full share of responsibilities.

Also much more honest is to tell the poor in the developing countries that they are “on their own” instead of giving them some illusions about that some champions will convince the world to help them out. Or is Jeffrey Sachs willing to give the poor his word that he will be successful?

And frankly I cannot think about something less constructive to get us working together as the indigenous to the earth all we humans are, than phrasing the funding of the efforts needed to combat the climate change threat in terms of it being “a compensation for damages caused mainly by the rich world”.

Does this mean that I object to Mr Sachs motives and that I disagree with all he does? Of course not!

To solve climate change, concentrate on that and shy away from green pork and fighting injustice, those are other battles.

Sir, you end your editorial “Copenhagen: we can´t risk failure” December 7 saying “The forces of negativity and scepticism, whether self interested or naïve, must not prevail if we are to reduce the threat to the planet´s future without sacrificing future economic growth”. Do you mean that if reducing the threat to the planet´s future implies that we have to sacrifice future economic growth that then we should bother? Can´t you see that trying to achieve multiple objectives is one of the ways of risking failure?

One of the problems of finding a solution to the threat of climate change is that like many legislative process, many are interested in adding their own (green) pork to the bill; some by creating business opportunities, others by trying to foster global justice. When will we have a climate change congress that just concentrates on what it takes to insure solely against climate change?

In Copenhagen, let us hope they finally make up their minds, and, if it is serious, scrap the cap and trade and fully enlist the poor

Sir though I agree with much of Martin Wolf’s “Why Copenhagen must be the end of the beginning”, December 2, what I most would like to see happening there is for the world to finally make up its mind whether it is going to treat climate change as a real threat or not. A wishy-washy middle ground that creates the false impression that something is done is the worst place to be. For instance, if we decide that we are going to act as we were in any real danger, then probably the first thing to do would be to scrap the whole cap and trade divertissement, roll up our sleeves and go whole heartedly for the carbon taxes which Wolf so correctly prefers.

But, where I really disagree with Wolf is when he mentions that “the cost should fall on the wealthy. This is as much because they can afford it as because they produced the bulk of past emissions.” Of course the wealthy have larger shoulders but, if this is really serious, then every human has the duty, and the right as a human showing solidarity, to push as hard as he can, with whatever he has, without any consideration to other issues. The climate change threat shall not be taken as a threat against humanity similar to the one depicted in the movie “Independence Day” and in which an American president takes an active part saving the world… as a fighter-pilot. This is no matinee show. The poor are probably among those to be most affected by climate change and so please, whatever, do not tell them that the wealthy will take care of it, especially when you know this isn’t so.

What happens to the environment is indeed a risk that finance ministers should talk more about

Sir the finance ministers from the US the UK and Japan speak with one voice when in “Financial bridge from dirty to clean” February 8, they say that without a global investment framework built on market incentives the global deployment of clean energy technologies is going to be very difficult but they also note that not doing so will be very risky for us all.

Well this is exactly the sort of real societal risks that were ignored by financial regulators when they designed the minimum capital requirements for banks based on a very narrow definition of risk namely that of a default. If a default occurs because someone was trying to help the planet it would seem like something more acceptable to the society if there were no default but the bank was financing the purchase of a new car that will produce more carbon.

It is not that I am saying that banks should take stupid risks in environmental protection projects…but neither should finance ministers through their regulations create non-transparent subsidies for what just the credit rating agencies believe are low risk projects while ignoring all other risks faced by humanity.

If a bank lends a AAA corporate client a 100 dollars the bank need 1.6 dollars in capital if it lends to riskier below BB- reacted environmental project the bank needs 12 dollars in capital. Is this what the minister’s mean with market incentives?

The environment needs a freed Gore

Sir in “Drafting Gore” October 15, you are absolutely right about that politics still pull a lot of weight for the Gore camp probably especially so for his closest aids. Many of us cannot wait for Al Gore to make clean break with the politics that tie his hands and so that he will at least be able to utter the word petrol-tax. It is a bit strange to say the least to see a country like Norway, and that even though an oil country applies immense taxes on the domestic consumption of petrol, because of his efforts for a better environment, awards the Nobel prize to a man that does not even mumble about the need of taxing more the consumption of petrol in the USA.

If Gore is really right then Lomberg is really right

Sir Clive Crook when reviewing Bjorn Lomberg’s recent book “Cool It”, “An inconvenient Danish pasting” October 15, underlines the differences between the Gore camp and the much smaller group of Lomberg followers. This is somewhat unfortunate because the more the truth in Al Gore sermons the more the need for a truly sceptical attitude that considers carefully every opportunity costs, not only to help us to attack the problem wisely but more importantly to keep at distance all those peddlers of green magic potions that could sure tempt us into monumental waste. If on the other hand Gore is not right and climate change induced calamities are not waiting for us around the corner well then a little waste does not matter that much since it would just constitute another drop in that brimming bucket of wasteful spending and throwaway investing

About Banana Republics and the moments of reckoning

Sir in March 1999 I published and article where I held that the effects of the global warming might be more severe than we thought as it seemed to even have shifted the parallel of the tropical Banana Republics northward, since how could we otherwise explain the current enormous fiscal and commercial deficits in the United States.

Now, eight years later, when Kenneth Rogoff in “Americans will eventually learn that deficits do matter”, July 18, mentions that “continuing inflows are probably holding down interest rates by at least 1.5 per cent and possibly more” I cannot help but to think of those investors that quite recently thought they were doing splendidly, when valued by a model, but that now have to face some crude realities when marked to a market that sometimes does not even seem to exist.