The financial markets should be kept away from the climate crisis solution
(http://bilbo.economicoutlook.net/blog/?p=48650)
… I am commenting on the ridiculous notion, that even progressive greenies propagate that we need to harness the financial resources of the markets (Wall street types) to help governments decarbonise their societies. The narrative that has emerged – that the financial CEOs with “trillions1 in assets” (all at COP26 because they could smell lucre) are a key to solving the climate challenge – is as ridiculous as progressives saying we need to tax them to fund schools and hospitals. Both narratives reflect the dominance of mainstream macroeconomics which has convinced us that currency-issuing governments are like big households and can ‘run out of money’. That is fiction but is part of the reason we have a climate crisis. Read on.
(i) Robin Hood zergak eta zergapetu aberatsak
Don’t let the financial markets near this
A few years ago I was on a panel in Scotland with the leader of the Greens there. The topic was a Green Transition and when it was her turn to talk she spoke effusively about the need for ‘green bonds’ and to embrace the capacity of the financial markets to fund the decarbonisation.
That view is shared by many progressives.
Some years ago, they were also touting ‘Robin Hood’ taxes.
I wrote about that in these blog posts:
1. Robin Hood was a thief not a saviour (April 1, 2010).
2. Progressives should move on from a reliance on ‘Robin Hood’ taxes (September 4, 2017).
More recently, they are about ‘taxing the rich’ so we can have good schools and hospitals.
1. Governments do not need the savings of the rich, nor their taxes! (April 15, 2015).
2. The ‘tax the rich’ call bestows unwarranted importance on them (February 21, 2018).
3. Tax the rich to counter carbon emissions not to get their money (January 22, 2020).
Meanwhile, the financial markets – the casino which seeks massive profits irrespective of how it is gained and the short- and long-term fallout that results – are circling with their ambitious plans to save the world through so-called ‘green financing’.
The talk at COP26 was less about identifying and solving the problems of climate change and more about how the financial markets can get their claws into the picture and create even more speculative products upon which they can make profits from, and, basically, whiteant the whole effort.
And this is from a demographic (the beneficiaries of the profits) who in 2030 are estimated to have per capita emissions that are:
… 30 times higher than the global per capita level compatible with the 1.5⁰C goal of the Paris Agreement, while the footprints of the poorest half of the world population are set to remain several times below that level.
That conclusion came from a Briefing Note (November 5, 2021) – Carbon inequality in 2030: Per capita consumption emissions and the 1.5⁰C goal – which has been published by Oxfam in liaison with the Institute for European Environmental Policy.
The Report provides the link between income distribution (and inequality) and climate crisis.
The – English version of the Report – concludes that:
1. “between the first Intergovernmental Panel on Climate Change (IPCC) report in 1990 and the 2015 Paris Agreement, the consumption of the world’s richest 1% drove twice the carbon emissions of the poorest half of the global population combined.”
2. “around a third of the global carbon budget for limiting global heating to the Paris Agreement’s 1.50C goal was squandered just to expand the consumption of the richest 10% of the world population.”
3. “The share of total global emissions associated with the consumption of the richest 1% is set to continue to grow, from 13% in 1990, to 15% in 2015 and 16% in 2030.”
4. “By 2030, the richest 1% are on course for an even greater share of total global emissions than when the Paris Agreement was signed.”
5. “Carbon inequality is extreme, both globally and within most countries”.
The following graph is a reproduction of Figure 2 in the Report and is stunning in its starkness.
6. Even if the US cuts its per capital emissions by one half between 2015-2030, they will still be “5 times the global 1.5°C per capita level.”
The lesson from this research for the rest of us (not the top-end-of-town) is that:
Maintaining such high carbon footprints among the world’s richest people either requires far deeper emissions cuts by the rest of the world’s population, or it entails global heating in excess of 1.50C above pre-industrial levels. There is no other alternative.
For once I agree with the use of the TINA invocation.
It means that the “world’s richest, highest-emitting countries must finally commit to their fair share” – that includes Australia.
It means that reducing income and wealth inequality has to be a key part of this process.
It is not just about ‘technological’ solutions that the ‘market’ will come up with.
The Report says that:
… it is time for governments to raise major taxes on or to outright ban highly carbon-intensive luxury consumption, from SUVs to mega yachts, private jets and space tourism, that represent a morally unjustified depletion of the world’s scarce remaining carbon budget.
But … the emissions of the world’s richest people linked to their capital investments are likely even greater than those associated with their direct consumption …
… coordinated and substantial taxation of wealth is urgently required to reduce inequality and at the same time curb the emissions of the richest. It is time to use regulation and taxation to end extreme wealth altogether, to protect people and the planet.
So this sounds like a ‘tax the rich’ argument.
Which it is.
But it is not the same construction that the progressives usually think is appropriate.
In proposing these taxes, the government doesn’t want their funds.
The objective is to deprive them of funds – to reduce their command on goods and services.
And, it is clear that the ‘market’ will not deliver what we need, so there is a role for ‘rules-based’ policy – outright bans on things – like, for example, Amazon boss having an enlightenment above the Earth in his ridiculous rocket trip.
But this feeds into the point about allowing the financial markets to be the main drivers of our response through their ‘funding’ vehicles.
The last thing the World needs is more financial products. There are more than enough gambling vehicles out there already and the challenge, as part of the process which will involve taxes and regulations, is to reduce those vehicles through legislative bans.
Eliminating most of the speculative products that feed the wealth accumulation in the financial markets has to be the goal.
Those transactions do nothing to advance the well-being of the majority of us.
They should be banned.
And the first place to start is to ban all derivative products associated with food and energy.
It is beyond criminal to buy up staple agricultural products like maize, to store them while the market is manipulated to create artificial shortages and price rises (and profits upon sale), while there is food poverty around the world.
Ban the lot of it.
But the embrace of the ‘green bonds’ narrative also reflects the ignorance about the capacities of our governments, which goes to the heart of the core Modern Monetary Theory (MMT) agenda.
And this ignorance is deliberately promoted by those in the top echelons of economic policy making in government because they know it will favour solutions that generate work and profits for the financial markets.
Why would they do that?
Well, because they gain benefits themselves from the financial markets.
Consider, for example, Janet Yellen, the current Secretary of the Treasury under the Biden Administration and formerly the Chair of the Federal Reserve (2014-2018).
As Federal Reserve boss she was paid around $US200,000 (2019 the amount was $US203,500).
As of January 2021, the Treasury boss gets $US221,400.
On top of that, her financial disclosures indicate that she made $US7.2 million in ‘corporate speeches’ in the last two years alone.
Citigroup paid her around $US1 million for nine speeches.
A hedge fund (Citadel) paid her $US800,000 for a speech.
And so on.
Her disclosed list is staggering.
You can see it HERE
Speeches to various groups that are lining up and tripping over each other to get their claws into the Green Transition along with lucrative government payouts.
At COP26, she made a speech – Keynote Remarks by Secretary of the Treasury Janet L. Yellen at COP26 in Glasgow, Scotland at the Finance Day Opening Event (November 3, 2021) – and said among other things:
… the United States also intends to fully support the Climate Investment Funds Capital Markets Mechanism. Through an innovative leveraging structure, this initiative will help attract significant new private climate finance and provide $500 million per year for the Clean Technology Funds’ programming, including the new Accelerating Coal Transition investment program.
And:
The gap between what governments have and what the world needs is large, and the private sector needs to play a bigger role … The private sector is ready to supply the financing to set us on a course to avoid the worst effects of climate change. CEOs representing trillions in assets are here to show their commitment.
At which time, you know the World is in trouble.
The point is that:
1. The aspirations of the financial markets are to make profits from speculative ventures and only coincidentally will that ever be consistent with advancing the well-being of the rest of us.
2. History tells us that they are short of ethics and long on chicanery and incompetence.
3. The growth of such speculative activity has worsened income and wealth inequality – as per the Oxfam Report.
4. The US government has all the financial resources it needs to make the transition away from carbon.
5. It also has the legislative clout to regulate anything that moves.
6. As to most governments.
The narrative that has emerged – that the financial CEOs with “trillions in assets” (all at COP26 because they could smell lucre) are a key to solving the climate challenge – is as ridiculous as progressives saying we need to tax them to fund schools and hospitals.
Both narratives reflect the dominance of mainstream macroeconomics which has convinced us that currency-issuing governments are like big households and can ‘run out of money’.
It is time we learned.
Natural climate solutions – code for financialisation of nature and profits for capital
(http://bilbo.economicoutlook.net/blog/?p=49104)
I re-read a consulting report from May 2021 – Nature and Net Zero – which was commissioned by the World Economic Forum and prepared by a management consulting company. One of those consulting companies that exemplifies the neoliberal era where everything and anything is classified in terms of its financial value or corporate value and the company’s grand visions for nations amount to little more than transferring massive amounts of public money into their coffers for blueprints about privatising public wealth and skating over local citizens’ rights in their haste to financialise the world. The report is no different really and represents everything that is wrong with the way the elites in the world are taking over the ‘green transition’ agenda and reconfiguring it to suit their own ends – profits and control.
The ‘Nature and Net Zero’ Report is full of words and phrases that are intended to present the agenda in a way that covers the true meaning and impact of what is going.
We start by reading dire warnings of the world facing “converging environmental crises that are inextricably linked and compounding: the accelerating destruction of nature and climate change”.
But don’t worry – we have “Natural climate solutions (NCS)” which “offer an opportunity to address both and generate significant additional environmental, social and economic benefits.”
Win-win-win it seems.
Not!
They tell us that with the “net-zero” goal being increasing adopted by private companies:
NCS are gaining attention and carbon markets are growing fast. Corporate strategies that aim to use NCS to help deliver a net-zero pathway are on the verge of becoming mainstream.
Code!
Corporations are trying to take control of the ‘green transition’ agenda as fast as they can because then they can control to pursue their own ends, which is to make mega profit, and if that requires they financialise the natural environment then they are as green as can be.
What are NCS?
We read that they are:
… typically low-cost sources of carbon abatement. In most cases, costs are between $10 and $40 per ton of CO2 with variations between geographies and project types.
That means they are projects that “generate private capital flows to countries that offer the highest potential for NCS projects, typically forest-rich countries in the Global South.”
Are you still unsure about what is going on here?
The consulting report says that efforts are full-speed ahead and that the “Market architecture, infrastructure and financing need to be developed to support the growth of NCS producing tradable credits”.
They note, almost as an aside, the “Continuing public concerns” about NCS.
Ok.
This is all part of the ‘net-zero’ ruse, where companies are “expected to reduce their emissions where possible, and neutralize by retiring an equivalent amount of carbon credits or investing directly in carbon removals.”
What is happening is that the elites in the world and their consulting company mates are hunting around the globe for regions where they can create projects which are then offset against their on-going environmentally destructive activities elsewhere.
The consulting company has appraised regions in terms of the cost involved to launch these NCS projects.
They attempt to “draw … boundaries lands that are practical or not” and claim that the demarcation depends on the “agricultural rent” that the land commands – which is the “economic return from agricultural land” (as defined in the “academic literature” written by mainstream economists and the like).
The ‘Nature and Net-Zero’ report is full of analysis of these rents and calculations about “abatement potential” and classifications of “low-cost NCS potential” regions with a nice map – where the highest potential are in the poorest regions (typically of the world).
They briefly mention the “sustainable development opportunities for local communities” which is code for helping export-led farming practices, which have already devastated localaties.
This article (January 25, 2022) – Green gaslighting: Another face of climate denialism – says that the ‘low-cost NCS potential regions’ are in the eyes of “small-scale farmers, pastoralists and Indigenous communities”:
… ancestral lands that often have significant cultural, religious and communal value.
No consideration in these exercises is given to those ‘values’.
There is a long evidence trail of first-world companies moving into indigenous areas to create new abatement projects (reafforestation etc), which displace local citizens and worsen the food shortage that poorer regions face.
The shift to export-led agriculture has been prominent in that regard – destroying sustainable land practices and food security.
The point about NCS as the consulting report makes clear is that the object is to create ‘carbon credits’ that can be sold to polluting companies as an accounting exercise in their ‘net-zero’ goals.
Derivative NCS financial products will emerge.
Speculation will be rife.
And the goals of alleviating climate change will fall by the wayside in the pursuit of profit.
Our natural system just becomes another commodity.
The ‘net-zero’ ruse means that:
All of a sudden, proposed new real estate, airport, roadway, and shipping developments that increase the anthropogenic impacts on climate and ecological breakdown – are being spun as “green” investments – or climate “impact investments”.
Destroy one habitat for a golf course for the rich and offset it with a local regional project in a ‘low cost NCS’ region, which displaces local activities and walks all over culturally sensitive areas.
And what about the non-NCS methods that the consulting company claims will be part of the solution?
Last week, we learned that Shell’s carbon capture solution is a dud.
The report from – Global Witness (January 20, 2022) – Hydrogen’s Hidden Emissions – informs us that:
Shell’s fossil hydrogen plant in Canada found to be emitting more climate-wrecking gases than it is capturing.
That’s novel!
The report says that “Shell have boasted about the project as an example of how it is tackling global heating, claiming that the project demonstrates that carbon capture systems are ‘safe and effective’ and is a ‘thriving example’ of how this technology can significantly reduce carbon emissions.”
The evidence is that:
Despite having captured 5 million tonnes of carbon across a five-year period, it has emitted a further 7.5 million tonnes of climate polluting gases during the same time.
And back to the ‘Nature and Net-Zero’ report.
The same company that prepared the report for the World Economic Forum has become a big player in the Gulf countries and was involved in the part privatisation of the Saudi oil company Aramco. This article documents their involvement and the local tensions it has created – When Consultants Reign (September 5, 2016).
Aramco is one of the largest oil companies and has the “largest carbon footprint in the world” and “is not trying to diversify at the rate of Shell or BP. In 2021, it “announced an investment to increase crude capacity from 12m barrels a day to 13m barrels by 2027 (Source).
The consulting company in question seems to make millions by telling polluters how to do their business better and make more money out of it.
Many of its “grand plans” for the Gulf countries (Bahrain, Eqypt, Libya, Yemen) have crumbled and been “convulsed by demonstrations, often animated by economic grievances”.
But it seems the company has “continued to secure lucrative contracts in the region”.
The ‘grand plans’ amount to little more than growing the economy away from “oil dependency … by transforming it into a financial, logistical, and tourist hub.”
Tourism is a heavy carbon-using industry.
The ‘grand plans’ are always:
… to success is always through the private sector.
The Saudi Aramco privatisation was followed by announcements from the princes that they were going to “privatize public infrastructure, education, and even health care.”
All strategies that allow the consulting company to rake millions off the top of the sell-offs.
The evidence is that the state-owned companies in the Gulf countries “tend to be more dynamic, productive and technologically savvy … have (relatively) better labor relations and hire more local workers” than their private sector counterparts in oil, logistics, travel etc
These ‘grand plans’ rarely involve the “participation by citizens” – they are cooked up between the consultants and the autocrats.
They see $ signs on everything and:
… seem to believe that selling this national asset in order to gamble in the global financial markets is a more effective strategy for economic prosperity.
Ondorioak
(1) In this blog post – The financial markets should be kept away from the climate crisis solution (November 10, 2021) – I outlined why the financial markets should be kept out of the green transition process.
I won’t repeat the argument but it is relevant to the talk of NCS.
(2) In general, I do not support ‘market-based’ solutions to the climate change challenge.
(3) There is no ‘safe’ price that can be placed on the pace of environmental destruction that anyone can accurately estimate.
(4$ The point is that natural systems, when pushed beyond limits, die!
(5) The idea that there can be a trade-off between pollution and environmental destruction and economic activity, which is the mainstream economics position, and the optimal trade-off will be mediated through the market is a fiction.
(6) We need to adopt rules-based approaches to this challenge, which means, in part, we just legislate bad practice out of existence.
(7) The ruse that a corporation can continue destructive practices in one nation, while creating abatement projects elsewhere, so they can record a net-zero should never be part of the solution.
1 Amerikar trilioi bat = europar bilioi bat.
