Wednesday, August 20, 2014

If you do not want the earth to be toast, do not put it in the hands of a Basel Committee against Global Warming Supervision.

I just know that if what we are to do against the risk of global warming, is captured by a similar group of self-appointed experts, members of a small exclusive mutual admiration club, not accountable to anyone, like those in the Basel Committee for Banking Supervision and in the Financial Stability Board, and who made such a mess of the way how banks allocate bank credit to the real economy… well, then, pardon the pun, the earth is toast!

Saturday, April 12, 2014

Without green preachers, green besserwissers and green rent capturers, we might stand a chance of doing things right.

Any way you fight climate change I can fight better
I can fight climate change better than you
No, you can’t
Yes, I can,
No, you can’t
Yes, I can,
No, you can’t
Yes, I can, Yes, I can!!!!!

Tuesday, October 15, 2013

If regulators absolutely must distort the credit allocation of banks, let it at least be for a good purpose

The risk-weighted capital requirements, the pillar of bank current bank regulations, Basel II and Basel III, more-risk-more-capital and less-risk-less-capital, are incredibly stupid and serve absolutely no purpose.

Incredibly stupid since just some little empirical research would evidence that all major bank crises, no exceptions, have resulted from excessive exposures to what was ex-ante perceived as “absolutely safe”, but which ex post turned out to be risky; and none ever has resulted from excessive exposures to what ex ante was perceived as “risky”. In fact more-risk-less-capital and less-risk-more-capital, totally the opposite, would have been more correct.

And they serve absolutely no purpose because, allowing banks to earn much much higher risk adjusted returns on their equity when financing “The Infallible”, than when financing “The Risky”, causes banks not to finance the “risky” future, and mostly dedicate themselves to refinance the “safer” past.

In my opinion, nothing can help to enable so much the financing of our two most urgent needs, the creation of sturdy jobs for the young, and the investment needed for the sustainability of our planet than more correctly aligned capital requirements for banks. First these should be set equal for all bank assets, for instance 8 percent, but then allowed to be lowered, gradually, down to 4 percent, depending on the potential-of –job-creation-ratings and/or sustainability ratings, like the SRI or ESG ratings mentioned, whether of the project or of the issuer, and the length of the contract.

That, as you can all understand, would allow the banks to earn the highest-risk adjusted returns where they can be the most helpful to the society.

PS. I carefully reviewed the whole EUROWEEK issue on Sustainable and Responsible Capital Markets, September 2013, and, unfortunately, though it includes many good discussions, I did not found a single word about the perceived risk weighted capital requirements.

Tuesday, October 1, 2013

Jim Yong Kim, President of World Bank, and Christine Lagarde, Managing Director of IMF, here is a question on Climate Action:

On Tuesday, October 8, 2013 there will be an opening discussion by Jim Yong Kim, President, World Bank Group and Christine Lagarde, Managing Director, International Monetary Fund; on the the topic of “The economic case for Climate Action”; moderated by Zanny Minton Beddoes, Economics Editor, The Economist.

And below the question I would like to make to them all:

Current capital requirements for banks are weighted for the ex ante perceived risk of the asset; more-risk-more-capital, less-risk-less-capital. 

That does not make any sense, since the ex ante perceived risks are already cleared for by banks and markets, by means of interest rates, size of exposures and other terms. 

Besides, since all major bank crises have resulted from excessive exposures to what was perceived, ex ante, as “absolutely safe”, and none ever from excessive exposures to what was perceived, ex ante, as “risky” these capital requirements do not make sense in the quest of looking for the stability of the banks. 

And so, if bank regulators cannot refrain from playing risk managers for the world, and interfering with the markets, why does not the World Bank and the IMF at least beg them to design capital requirements based on the potential for helping the sustainability of our planet ratings, (and also on the potential for creating jobs, especially for the young, ratings).

That way the distortions which different capital requirements for different bank assets cause, and which hinders the effective allocation of bank credit in the real economy, would at least serve a social purpose.

In concrete terms that would mean changing from allowing banks to obtain better risk-adjusted returns on their equity when lending to “The Infallible” than when lending to “The Risky”; to allowing the banks instead to earn those higher risk adjusted returns on their equity when helping the sustainability of our planet (and when creating jobs for our youth).

Besides, the World Bank, as the premier development bank of the world, should know that “risk-taking” is the oxygen of any development, and that there is nothing as risky for the economies and for the society as an excessive risk-aversion; which is why in our churches we at least used to pray “God make us daring!

PS. World Bank, you who fight for reducing poverty, and the inequality gap, should also know that the current capital requirements based on perceived risk, functions as a wedge increasing the differences, between those already benefited by banks and markets, like solvent developed countries and AAAristocracy, and those already discriminated against by banks and markets, “The Risky”, like medium and small businesses, entrepreneurs and start-ups, and poor developing countries.

Per Kurowski
A former Executive of the World Bank (2002-2004)

Saturday, May 4, 2013

Holier-and greener-than-thou Al Gore ticks me off again

In minute 42.55of this video Al Gore says “Are [the scientist] all lying to get grants? Please!!!” 

But, what if it is true that the majority of scientists are doing just that? Since when are scientist the super-correct-humans? What always surprises me is that those most worried about the environment and therefore should be those most concerned with that scarce resources are used effectively, often seem to be the most willing to throw money at the problem… of course at their own solutions.

Frankly, why is it that quite often when I hear Al Gore preaching, and I even agree with much of it, instead of feeling like planting a tree, I fell like chopping one down?

Saturday, September 10, 2011

Friday, April 22, 2011

My green wheels

I celebrated Earth Day, April 22, not by getting me a hybrid car (I am not at all convinced by these) but at least by getting me some green wheels… and fortunately for me, as that color would not match the car's, the green is on the inside.

Thursday, April 7, 2011

Yasuní-ITT

Ecuador has been marketing for about three years a truly revolutionary proposal, Yasuní-ITT, consisting in asking the world for some of the resources it could obtain exploiting some important oil reserves so as not to have to exploit these, as they lie in a forest reserve that contains an extremely rich and valuable biodiversity. The proposal does not seem to be receiving as favorable response as it merits and I think I suspect some of reasons for that, besides that of having perhaps unnecessarily complicated the proposal with some technicalities.

During the 2009 UN conference on environment in Copenhagen I got upset seeing environmentalists from rich countries announcing that because the rich countries were the ones most to blame, they should and would assume the responsibility and pay for protecting the environment… which sounded just like global leftwing politicking, and effectively negated the poor the right to participate as human and equals in confronting something which from all perspectives would be a challenge to the human race.

In that respect it seems to me that the Yasuní-ITT proposal, because of its immense importance, should never have been presented as a government to government proposal, or one extended only to groups with environmental concerns, but should have been tabled as a proposal from the Ecuadorian citizens to all other indigenous people of the earth, meaning us, 1all other citizens. If the possible ecological damages of exploiting the oil in Yasuní-ITT are as serious as we are told, we cannot afford that the fight against these gets sequestered by other interests, agendas, or green Taliban.

Also, because the world needs oil and if not extracted in Yasuní-ITT it will do so elsewhere it would be good to have a study of the marginal environmental costs of exploiting oil in many different places. This would also be extremely important information if we later would like to replicate Yasuní-ITT.

The proposal was presented as having to select between a ferociously irresponsible oil extraction and a marvelous conservation of a habitat, and the truth is never that clear. It would be very important to know the cost and the significance of exploiting the oil in Yasuní-ITT in the most environmentally friendly way possible, so to also give the world the chance of accepting something that might sound more reasonable, or at least of knowing that this possibility has been analyzed. Since in Europe, the European taxman, by means of the taxes on its consumption derives more income from it than the country that gives up that resource for ever, it would seem quite reasonable that the European citizen could ask that at least a part of those taxes should go to help extract the oil in the best way possible. (Where is the oil company that specializes in green oil exploitation?)

But, more than anything, since no one likes to pay taxes to its own government much less would they like to pay a sort of an environmental tax to other governments, much less if these are rich in oil resources… the proposal should include that all funds, up to the last cent, should be given directly to the citizens of Ecuador… or in equal parts in cash, o through conditional cash transfer programs… for instance to all Ecuadorian children that go to school.

And I say this because as a Venezuelan I know very well that too much oil money in the hands of a government is bad… not only because it gets wasted, but mostly because, one way or another, involuntary or on purpose, that money ends up subjugating the citizens.

Translated from El Universal

Thursday, March 24, 2011

New-Klondike; a Green Five Star Resort

A Canadian Company, Greystar Resources Ltd, wishes to exploit some important gold reserves in the region of Angostura in the northeast of Colombia and to that effect has already invested some important resources. The initial project considered an open pit mine, but that proposal was withdrawn because of environmental considerations and now an underground mine is being considered.

Not that I know too much of these issues but over the last weeks I have received emails from environmentalist that wish to make sure the project is correctly executed.

One of them informed about an alternative project that included “supporting artisanal mining and local agriculture; payment for ecosystem services (from private businesses and public water users); and carefully developing ecotourism.”

When I heard the words “artisanal mining” it made my hair stand on end, as I remembered that when a couple of years ago I went to Tanzania I heard of a million of small artisanal miners doing their thing in that country and deforesting about 300.000 hectares per year. Of course to see the disasters of artisanal mining you do not have to travel that far… to our El Callao suffices (Venezuela)

Without doubt the larger mining organizations count, at least on paper, with more resources and organization to give us some more comfort about the environment being considered… of course always based on the spirit of trust but verify… and of course always with trustworthy and capable verifiers.

But the previous has not to block the opportunities entirely for the artisanal miners. Nonetheless thatr requires new ways or forms to capacitate and supervise the small independent miners. In this respect let me throw out some crazy ideas and that might very well have been raised before:

Though there are standards, type ISO, for large scale mining, it would be important to design some standards for artisan mining. But since it does not suffice with good standards if these are not complied with, perhaps we could start thinking in terms of an artisanal mining franchise, to which the independent miner should affiliate with and that should supervise the mining activities; and which could be held responsible by the world about that these activities were carried out in the best possible way considering the environment… and, why not, also considering their social impact.

One of the problems with mining, especially in the case of valuable mineral like diamonds and gold, is that the largest part of its value is frequently realized, and spent, far away from the area of extraction, which would make it important to find means of how to increase the possibilities of the local economies to capture a larger share of its formal and not illegal value. Ecotourism? Not a bad option but it does not on its own seem to carry sufficient punch so as to turn into a self-sustainable mining supervision tool.

Diamond cutting and minting might be somewhat extreme, not necessarily, but what could perhaps help the most is requiring from all concessions that five percent of all gold and diamond should be extracted directly by rich tourists from developed countries and who want to practice a sustainable artisan mining tourism… and that way see to that close to our mines “New-Klondike” 5 star Resorts are built.

Who knows, perhaps then our Colombian and Venezuela artisan mining even find it more profitable to serve refreshments to the tourists… while these sweat it out.

Sunday, May 16, 2010

What if capital requirements for banks had been based on jobs and sustainability?

Our bank regulators, the Basel Committee, imposed what I have always considered to be stupid purposeless and senseless capital requirements for banks based on the risk of default perceived by the credit rating agencies. Those capital requirements pushed the banks to drown themselves in private triple-A rated waters and some well rated sovereigns. Knowing the trillions of losses incurred because of that not a day goes by without wondering about what would have happened if those capital requirements had been based on sustainability and job creation potential? Surely we would have had a crisis from meddling that way with the banks, but, that meddling, would at least have served a better purpose than the current one.

Saturday, April 3, 2010

We need to stop the Amazon from smoking… now!

The climate change threat cannot be successfully fought with only governments and NGO’s and so there must be a connection with the ordinary citizens who, whether they know it or not, are all indigenous to this planet earth.

I went to the presentation of an environmental study at the World Bank, this time about the Amazon of Brazil. Again and though it certainly seemed a serious scientific effort to look into the future of climate change in economic terms, I failed to understand how it could connect with the citizens.

The study’s basic “connection” fault is that it looks into a too distant future, and therefore necessitates concepts like present value and discount rates. Though technically correct, it opens up discussions and creates doubts that are not much helpful when trying to create the urgent unity of purpose that is needed.

Over a relative short period millions of people around the world were able to quit smoking, something that is addictive and that gives many much short term pleasure but that also poses serious health risks… mostly in the days after tomorrow. If we could recreate those conditions with respect to climate change we stand a better chance to achieve the results we need.


Having thought about these issues for a long time, with respect to the Amazon of Brazil, and on whose survival the world depends so much for its breathing, I would like to see the following happen.

* The government of Brazil presents a project of what it would cost to keep the Amazon intact or even better off in an environmental sense, for the next five years, “Keep the Amazon smoke-free for 5 years”. The project should include not only the direct costs but also the opportunity costs of not going forward with any exploitation of the Amazon that could have been envisioned for the next five year period.

* Of that project the Brazilian government would state how much it is willing to shoulder and how much it expects the rest of the world to help out with.

* Brazil would then submit the proposal to the World Bank for an analysis of reasonability and an opinion of how the rest-of-the-world costs could be distributed. When sharing out the burdens we need to remember that the poorest of the poor possess equally the human right of being allowed to share the human-race responsibilities.

* The World Bank should also present a proposal on how the project could be monitored so as to ascertain that if the resources are given it will live up to its promises.

* After that Governments, NGOs and hopefully also the individual citizens could dedicate themselves to market a concrete “Keep the Amazon smoke-free for 5 years” with a clearly identified cost, and which hopefully at the end of year 4 would lead to the preparation of the “Keep the Amazon smoke-free the next 5 years”.

Friends, if we are not able to keep the Amazon from smoking during just the next 5 years with the aid of will, nicotine patches, chewing-gum or whatever it takes, how can we argument that we will be able to help it quit its addiction altogether?

The Amazon's smoking...talk about the mother of all dangerous second hand smokes!


Photo: Michael T Coe, The Woods Hole Research Center.

Thursday, April 1, 2010

What is your HEER?

At last someone else is calling the attention to the fact that the climate change could be extremely serious precisely because it is so difficult to analyze that problem scientifically. The Economist

For years I have been arguing that I do not need some scientist to confirm to me what I have so often seen with my own eyes, namely that there is something awfully bad happening out there as a likely result of the way we treat our little pied-à-terre to which we are all indigenous.

I have a 157 HEER (human energy efficiency ratio)… what´s yours?

Monday, December 28, 2009

The wonderful fiasco in Copenhagen

The fiasco in Copenhagen could not have been more wonderful! Now we citizens know that if there is a real serious environmental threat to our planet, be that global warming, global cooling or whatever, we cannot really trust our governments or our currently self appointed civil society representatives to take care of it. The governments because the politician’s primary wish is to be reelected and that is a short term goal that overrides any long term consideration, and the civil society organizations because it would seem that more often than not they carry a different political agenda

And so what are we citizens to do. As I see we need first to treat the climate change threat as being a challenge to the whole human race and which means that all humans beings, all indigenous to this our planet, have the right and the obligation to share in its solution. In other words, climate change must become a global citizen’s issue.

This above has implications, the first having to recognize that even though the average carbon emission varies dramatically between humans in rich and developed countries from those in poor and developing ones, the marginal damage per each new emission is the same whoever produces it.

One of the worst things we saw happening in Copenhagen was how the climate change threat was utilized to argue for global social justice, not that there is anything wrong with global social justice, but that certainly obscures the urgent objective at hand. Any transfer of climate change fighting resources from the rich to the poor, which of course must occur, should be strictly based on these resources have a greater green impact there. It is not a question of having the poor and developing countries to be able to consume their fair share of cars, but more that of creating alternatives to cars, like extensive railroad systems.

Thursday, December 17, 2009

Registering my complaint!

In Christmas red and green usually works, but, in Copenhagen, the party crashing red sure spoiled what the green wanted and needed to achieve. Shame on them! Future climate change victims will be informed.

Wednesday, December 16, 2009

Can’t we just ship out all our nuclear waste into outer space?

Just thought that nuclear energy could provide sufficient energy to launch its own excrements to outer space, never to return.

But, hold it there… before you get too enthusiastic about it, let me inform you that I am absolutely no expert on it.

What has NASA to say?

Tuesday, December 15, 2009

Sabotaged Copenhagen!

Who created expectations among the poorer countries of receiving climate change reparations and thereby derailed the urgent discussions from their prime-objectives? Again, someone not caring an iota about the real issue but only about pursuing a class-war? They should be labeled environmental traitors!

Thursday, December 10, 2009

Too many muddled ponds in Copenhagen

Local money for climate change mitigation should go where global climate change mitigation is most effectively produced; local money for climate change adaptation should go where local climate change adaptation is most needed; local money to assist the poor should go where globally it is the most needed; and money for job creations should not be expected to go anywhere else than where local sustainable job creation seems to be most possible.

To put all that money in one sack and then let all the agendas compete for it will not produce good, transparent and sustainable results, and unfortunately it would seem like that in Copenhagen there are too many interested in fishing and being fished in muddled ponds.

Friday, December 4, 2009

To share the responsibilities of the human race is a human right

In the how to respond to the threat of climate change and the global warming there is an ongoing debate on who is to be blamed and who has to pay for it all. I dislike it profoundly.

If climate change and global warming constitutes the real threat to humanity experts tell us they do, then absolutely all the humans have exactly the same obligation and exactly the same right to help out, and this includes the poorest and the weakest, since they do not belong anything less to the human race than the strong and wealthy.

That poorer and development countries might have less resources and might be confronting greater challenges than richer and developed countries and should therefore be helped that is correct, but to infer from that, as some do, that these countries have less responsibilities, is not only an insult to their citizens, but also carry perhaps the implicit message that the challenges posed from the threats are not really that great.

Thursday, September 3, 2009

21st Century Asocialism

The fact is that the pseudo democrat (oil-autocrat) that loves to be called Commander and that governs Venezuela for more than ten years now, sells the gasoline in Venezuela for less than 3 cents of dollar per liter (10 US$ cents per gallon) less than the price of water, without even covering the costs of distribution. With this public policy, our so called socialist continental champion, transfers, if the gas is valued at its real market value, from the poorest of the poor, to the owners of cars, a subsidy equivalent to about 10% of the Venezuelan GDP.

Also, as a direct consequence of these mindboggling low gas prices, plus the fact that preferential foreign exchange rates is given for the import of cars, a small country of 27 million of inhabitants and a yearly GDP per capita of only around US$5.000 in 2006, placed way over one million new cars on the roads during the last three years.

The new cars don’t find where to circulate in order to spew out their carbon emissions and therefore, from a transport, an environmental and a social justice perspective there cannot be any doubt that, in Venezuela , we are in the hands of a truly cruel 21st Century Asocial government.

http://theoilcurse.blogspot.com/
http://www.petropolitan.blogspot.com/

Thursday, August 27, 2009

Do not look to resolve the green paradox... try to manage it.

Hans-Werner Sinn in the Financial Times August 27, 2009 in “How to resolve the green paradox” August 27, holds that the “owners of oil and gas fields react by pulling forward production” as “green measures... exert a stronger pressure on future prices than on current ones”. Wow! Where can we find these forward looking persons perhaps we could put them in charge of our governments. Unfortunately, “owners of oil and gas fields” are just like all other humans and react in just the same stupid short term way as all of us do.

Does Professor Hans-Werner Sinn really want to know how to” induce resource owners to leave more carbon underground”? I´ll tell him. Use the oil-curse route. Pay them humongous prices for their barrels of oil and see that all those funds go to a petro-autocrat like hugo chávez, and that will mess it up so much that it renders them incapable of extracting it.

No, sadly, the horrible truth we need to face is that the world loves too much its carbon driven economy to abandon it and so our best chance of saving us from the suicidal path we are on lies in new discoveries.... discoveries of what? I have not the faintest idea but let´s try to buy us some time to discover it, perhaps with some carbon taxes, but meanwhile let us not waste very scarce resources on what can only be described as green placebos.

By the way (again) is it not ironic that those from the land of Martin Luther and which most fought against the indulgences offered by the catholic church are now the ones most eagerly promoting the emission indulgences sold by the green church.

Tuesday, July 7, 2009

The dangers of picking the second best solutions

With respect to the challenges to the humanity that the threat of climate change poses it is absolutely clear that if true we are going to face an extraordinary scarcity of resources and, as a consequence, anyone truly concerned with climate change must give first priority to ascertain that our limited resources are used as efficiently as possible.

If a subsidy is given to a second best solution then that subsidy is first not as efficient as it could be but worse still, it may by capturing some benefits impair on the viability of the best solution.

Let me try to explain it as easy as possible

Suppose we have an environmental project that carries with it a total of 10 green points of possible environmental improvement and that, one approach, the best, could catch 7 of these points for 7 dollars of investment while, the second approach, the second best, can only catch 5 points and requires a 6 dollar investment.

If then for any reason, such as undue lobbying, it is decided to go ahead with the second best approach then 6 dollars would have been invested in order to capture 5 points, not too bad.

But let us suppose both approaches were only able to capture the same type of seven points and three points could not technically be captured by any approach, then we are left with only 2 points to catch at a 7 dollar cost… meaning that these 2 green points will never be captured.

Should that be of concern to us? You bet! Besides the differences in environmental efficiency of what is out there is mindboggling. Solar voltaic panels and hybrid cars should perhaps even be prohibited as they represent truly expensive green placebos.

Sunday, May 3, 2009

What’s wrong with you!

If a share your concern that we are indeed confronting a severe climate change crisis, then why can’t I be allowed to be concern that we spend our scarce resources made so much scarcer with the recent crisis as careful as possible? … and why am I instead supposed to have to support you wholeheartedly throwing money at solar panels and wind energy long before their time is ripe?

Tuesday, March 3, 2009

Pushing for a green recovery requires also reducing the conflicting market signals.

Joseph Stiglitz and Nicholas Stern write “Providing a strong, stable carbon price is the single policy action that is likely to have the biggest effect in improving economic efficiency and tackling climate change”, The Financial Times “Obama’s chance to lead the green recovery”, March 3.

Although I come from an oil country, since it is always harder to bailout from a financial crisis than from a climate change crisis, I agree.

But these green market signals would be more effective were we capable of reducing some of the competing signals, for instance those present in one of the most important drivers of world capital namely the minimum capital requirements for the banks as defined by Basel.

Currently for a bank to make a 100 dollar loan to a corporation the banks currently need to have an equity that ranges from a minimum of 1.6 dollars to 12 dollars, a whooping 7.5 times the minimum, which depends on the risk assessments produced by the credit rating agencies.

Since bank equity is scarce, and expensive, especially now, this means that besides what the market would normally be charging for assuming a high perceived risk, the regulators have imposed an additional de-facto tax on risk. This would be great if “default risk of a corporation” was all that mattered. But what about the default risk of our planet? What if most investments in projects destined to fight the risk of climate change presented more risk than projects that increased the risk of climate change?

What if the securitized finance of car purchase financing gets an AAA rating while the project to install a solar panel only achieves a rate below BB-? Is it logical then that the financing of a solar panel needs 7.5 times more bank equity? I don’t think so!

Sunday, January 11, 2009

You the green NGO’s, you are all barking up the wrong tree.

The environmental groups are barking up the wrong tree when trying to influence institutions such as the World Bank to pursue investments that can counter the threat of climate change.

Not that the World Bank is not important, as a standard setter, but, out there, in the real world, if we are talking about mobilizing financial resources there are other institutions much more important, like the Basel Committee, the global bank regulator.

The Basel Committee decided that the one and only role for our banks was not to default and to such effect it set up a system of minimum capital requirements for banks based on credit risks, and empowered the credit rating agencies as the risk surveyors of the world.

Not a good idea! The credit rating agencies rated securities backed with lousily awarded mortgages as AAA, which signifies a zero risk, and then more than two trillions of world capitals, something like 20 World Banks, invested in those securities, only since 2004.

And here we are now facing a deep global financial crisis that is going to bring more misery to millions if not billions of people around the globe.

Can you imagine if those minimum capital requirements for banks had been based on the risk of climate change? Without any doubt we could still be immersed in a crisis, though surely not as severe, but our planet would surely have been placed on a more sustainable path.

And so I ask. What are you doing in Washington? Do you not know your way to Basel?

Sunday, October 12, 2008

Financial crisis vs climate change crisis

In the midst of this financial crisis with all its bail-outs let us not forget that, when push comes to shove, a climate change crisis is most likely to be a nonbailoutable crisis.

Thursday, September 13, 2007

Forest destruction is it a threat or is it a reality?

John Aglionby and Fiona Harvey reported in the Financial Times on September 13, 2007 that “Forest nations press for carbon credits to help cut greenhouse gas” mention “that many governments fear rainforest nations could use the threat of destruction of their forest as a bargaining chip in climate change negotiations”. What threat of destruction? They are destroying them now.

I recently told a prominent-save-the-Amazon person that they should, at 7 am each and every morning, put a matchstick to one hectare of pristine Amazon jungle and transmit this on the web and then perhaps the world could easier understand that it needs urgently to create some huge world forest reserves. These reserves could be managed and cared for by hundreds of thousand forest-guard families and who could all be helped to partially improve their lives receiving a small monthly salary from the whole world, financed perhaps through the levy of a special forestry tax of one cent per litre of petrol.

In 2004 while an Executive Director at the World Bank we were asked at the Board to approve a loan to Brazil for “Environmental Sustainability” and I told my colleagues that what we really should be approving was how much each one of all the world countries would have to chip in to help repay that loan, since obviously keeping our most important lung clean could not only be Brazil’s responsibility.

Does burning 365 hectares per year sound awful? Well the same report indicates that only in Indonesia 1.87m of hectares have been lost every year since 2000. Now having said that… please be careful with the matches though.

Thursday, April 26, 2007

Thanks Financial Times, that was much needed

Our problems on planet earth are just too serious to allow us from not spelling out some uncomfortable truths. In this respect, with the Financial Times’ “Carbon markets create a muddle”, April 26, and the investigations that preceded it, and hopefully those that will follow, it is performing a tremendous service to all of us who believe that the climate change threat is for real and therefore require that the actions to combat it should also be for real. The current carbon market where we sell indulgencies for some fairly undefined sins in order to use the proceeds for some even less defined good deeds (after paying the brokers) will just not cut it, much less so if we leave it in the hands of blind believers or of a hypocritical environmental clergy.

Saturday, February 17, 2007

If it is really is so serious should not then the proposals be more serious?

I assume that the scientist are 100% right in their warnings about global warming, among other because the risks of staying in bed and not doing anything about it seems to loom much larger than the risks of getting out of bed to do something.

It is about the what-to-do that I have more problems, as there seems to be a growing divergence between the seriousness of the warnings and the banality of some of the solutions offered. If it really is so serious then should that not warrant more serious responses than aspirins? If it really is so serious then sure we must beware more of those who are peddling green magical potions, just to make a buck.

A carbon-solution neutral agency is what we lack the most because, if it really is so serious then presumably we cannot afford to waste even one dollar on solutions that are not effective.

In the Financial Times, January 19, Philip Stephens, in “Business must bend with the winds of climate change” wrote about how a reputable company such as Marks and Spencer, surely run by capable and creative professionals are now doing their part against global warning… recycling unsold food into energy! The world is coming to an end… unless you drive a hybrid!

I am not that much against it but, if it really is so serious, should we then be going down that route of selling climate-change indulgences trading carbon emission rights?

I am not that much against it but, if it really is so serious, can we afford to excuse the developing world from doing its part just because it cannot afford it? Are we not better off enlisting the help of the developing world, now, in an early phase? If some should have the right to make a buck on protecting the environment perhaps it is the poor developing countries and so that they can then afford to pay a part of the costs, since the responsibilities for the environment should and needs always belong to all humanity, not only to the rich part of it.
Getting hold of some more serious and convincing what-to-do tasks would also help to get our many millions of pure lazybodies to get out of their beds for the environment’s sake.

Wednesday, February 14, 2007

The Amazon

An informal letter I sent to my colleagues at the World Bank in 2004

Dear Friends and Colleagues

Today we approved a US$505 million Programmatic Reform Loan for Environmental Sustainability to Brazil. Frankly, how could it be otherwise, when in fact we should be on our knees thanking a country like Brazil that with so many other problems commits to repaying 100% of principal plus interest of an environmental-sustainability loan that will benefit the whole world and all of us.

Honestly, I do believe the World Bank should occupy a stronger leadership in these matters from the very beginning, advocating for the cooperation of the rest of the world. If silly windmill projects can have access to carbon credits, the Brazilian environmental program should too.

For instance, if 20% of a loan like this were to be repaid by some international-support mechanism, this would not only motivate the Brazilian government to sell environmental protection locally, but it would also be a clear sign that in these matters, Brazil does not stand alone. Of course any external assistance would have to come with the clear understanding that it does not impose additional conditions on the country, as this is the best and perhaps only way to guarantee true sustainability and ownership of such programs.

This morning we had a two-hour discussion about the Development Committee agenda. Frankly, however, the issue of how the world can help in crucial global matters, as in the case of the Amazon—where the need of avoiding the very negative externalities of large deforestation have to compete with so many other urgent local needs, as well as with the rising opportunity costs of not exploiting the forests—should be a foremost issue. If it already is there—for instance hidden in a global taxation initiative—I very much welcome it but, if not, we should strive to put it there.

Last year at least 25,000 hectares were deforested in the Amazon. At a low carbon value of US$20 per hectare/year, this would indicate a value of about US$50 million a year if the program were successful at stopping deforestation. Add ten years of stopped deforestation, and the value of this would be—in approximate Kyoto terms—about US$500 million a year for the rest of the world. If this is so, how come we can spend so much time and money on expensive initiatives such as the Extractive Industry Review, and not come up with something more reasonable for the Amazon, than to have the Brazilians pay for it, 100%?

Per

Published in Voice and Noise, BookSurge 2006 and there is also an article that touches upon the same theme and that I published in Spanish in Venezuela early 2004

Earth, the cooperative

Even if there is still confusion over the path the world is taking on environmental pollution, there is consensus at least on the following. The developed countries are doing the most polluting, the developing countries are suffering the most from this contamination, and, in the world today, there does not seem to be enough environmental space to allow the undeveloped world to catch up to the developed world.

The above statements should be enough to fuel a spirit of cooperation within this cooperative we call the Earth, and of which, like it or not, we are all indigenous.

Unfortunately, little or nothing has been done as of this date to correct the imbalance.

Some years ago we saw (or we imagined) small points of light when a series of environmental limitations were imposed through the Kyoto Protocol. There was talk of a market of “compliance with environmental standards bonds” which contemplated the possibility of transferring environmental funds from the developed world to the rest of the world.

A tree captures carbon. And thus hypothetically, a polluter in New York should plant a tree in his/her city in order to avoid a fine. However, to plant a tree in New York would be very costly, so the polluter in New York could also utilize the option of asking a Venezuelan investor to plant this tree in Venezuela instead. The investor and the polluter would then share the net cost savings. This is the essence of the idea.

There are obvious difficulties with this proposal. The assurance that the tree is actually planted in Venezuela, and that it grows and captures carbon and does not later become burning firewood, are just some of the technical challenges that need to be resolved. However, we know that if the demand for these bonds is high enough, we can be certain that the creativity of technicians would be sufficiently stimulated.

There have been some initial successes with these bonds. But to tell the truth, the main buyers have been well-intentioned institutions, and today it is difficult to envision how this market could become self-sufficient in terms of volume, without assistance. Particularly when we see how there has been a relaxing of will or an increase of laziness in terms of applying Kyoto standards—unless …

Today we are conscious of the very high taxes on gasoline and other petroleum derivatives in many parts of the world. In Europe, at a price of 26 dollars per barrel of oil, these taxes amount to more than 400% of the oil’s value. In 1998, when oil was 10 dollars a barrel, taxes amounted to over 700%.

These taxes, categorized as “environmental” since they reduce the demand for oil, have a direct negative impact on an oil-producing country such as Venezuela. However, what really bugs us is that the majority of these taxes are not at all used for environmental purposes and even when they are, adding insult to injury, it is only as a subsidy for other energy sources, furthering the discrimination of oil.

I challenge all of our rich fellow cooperative members in the developed world to set aside at least 10% of taxes collected on oil for the purchase of true Environmental Bonds.

From Voice and Noise, BookSurge 2006, and El Universal, Caracas, December 2002