Globalisation is reversible

The latest round of WTO negotiations, the Doha Trade Talks, have collapsed. This is no good thing, despite what green campaigners might think. As the Nobel Prize winning economist Joseph E. Stiglitz pointed out in his excellent book Making Globalization Work, globalisation can be a tremendous force for good if we can find a way to make it more equitable. In its current incarnation, it goes a long way towards perpetuating the massive inequalities in the world. The Doha were meant to try to redress the imbalance, but sadly they have failed.

Meanwhile, one of the fundamental prerequisites for globalisation, cheap global transportation of goods, is also under threat. In May, Jeff Rubin and Benjamin Tal’s paper Will Soaring Transport Costs Reverse Globalization? estimated that:

in tariff-equivalent terms, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades.

Where does that leave the theory of comparative advantage?

IMHO, the big economic trends of the next decade are going to be re-localisation, rebuilding of local capacity, increasing self-sufficiency, and most importantly of all, energy and food security.

Climate change or global warming? And who cares the most?

Who cares about climate change? And what should we call it?

I decided to answer these grand questions, using Google Trends, a tool which allows you to plot search frequency over time and compare different search terms and different countries. It’s a great little tool although it still lacks some important functionality and sometimes the results are a little… unexpected.

The first thing I wanted to know was what terms people are searching for on the topic of climate change. My impression was that the term greenhouse effect was used when the science first started floating around in the 70s and 80s, then global warming came to describe the overall problem, and more recently climate change took over as the dominant phrase. Google trends is the perfect tool to test this hypothesis (although unfortunately it doesn’t go back earlier than 2004). This graph shows the search volume of the three terms over time:

global warming

climate change

greenhouse effect

So, searches for greenhouse effect are small and declining, searches for global warming are large, erratic and increasing, and searches for climate change are somewhere in between. Not quite what I was expecting. The News volume graph (the second graph above) is a bit closer to what I expected – although the scale is too squashed to see very clearly, the two main terms appear to be fairly close together, but climate change has overtaken since the end of 2007.

There are some interesting variations over time. It’s impossible not to notice the sudden dips at the end of each year, and the longer dips mid-year. No-one cares about these serious topics when they’re on holidays. The big spike in climate change in 2006 corresponds to the release of the Stern Review on 30 Oct, which marks the beginning of the turning point in world interest. This was followed by the release of the IPCC’s alarming Fourth Assessment Report on 2 Feb 2007, generating another spike, and then the Bali climate change conference in Nov 2007, when negotiations for a successor to the Kyoto treaty began.

Google Trends can also show which countries are the most prolific searchers for these terms. For global warming for example, the top country is, of course, Indonesia.

Huh? Let’s take a closer look at that. Here are the top ten countries for GW and CC:

Position	Global Warming	Climate Change
1	Indonesia	Australia
2	Philippines	New Zealand
3	South Africa	South Africa
4	India	United Kingdom
5	Australia	Canada
6	New Zealand	Ireland
7	Singapore	Singapore
8	United States	Philippines
9	Malaysia	India
10	Canada	United States

It’s difficult to decode what’s happening here, but I’ll do my best. Indonesia, when plotted on its own, had basically no interest at all in global warming until mid-2006, presumably when preparations and press coverage for the Bali conference began. There is of course a huge spike in November of that year. Indonesia actually has a great deal to loose – and gain – from the current international negotiations. As a vast archipelago of islands it is more vulnerable than many other countries to rising sea levels; on the other hand, if they are able to claim carbon credits for their vast forests, it would bring substantial economic benefits to the country.

The swell of interest in the Philippines is even more of a mystery. Like Indonesia they have thousands of tiny islands which will be threatened by rising seas… perhaps fear is driving them into a desperate search for information?

As for climate change, my chest puffs out in pride to see Australia at the top of that list. It’s good to see we care about something. The US comes a paltry and unsurprising tenth. Tsk tsk – time for some grass roots action, guys.

Of course these comparisons are not entirely fair for linguistic reasons. Most non-english speaking countries have their own translation of global warming – apparently Indonesia and the Philippines just use the english words. Google Trends doesn’t allow any kind of multi-lingual comparison.

Speaking of linguistics, I’m tempted to return to the climate change / global warming distinction. Looking just at Australia (same colours as previously) we get the following graph:

This is pretty much as I expected. CC was virtually unknown before 2004, but has since grown to be just as, if not more important than GW. The UK gives a similar result, whereas the US lookes more like the first graph above. I’m not sure if there is much significance in this other than cultural preference.

Where did the term climate change come from? Here is the Wikipedia explanation:

The term “global warming” refers to the warming in recent decades and its projected continuation, and implies a human influence. The United Nations Framework Convention on Climate Change (UNFCCC) uses the term “climate change” for human-caused change, and “climate variability” for other changes. The term “climate change” recognizes that rising temperatures are not the only effect.

I seem to recall a conspiracy theory a while back that suggested that the term climate change was invented by spin doctors from [insert evil organisation of your choice here] because it sounded more benign than global warming. That’s almost certainly nonsense (Update: Or not. See comments). CC is a more scientifically accurate term, and it more accurately describes the probable negative effects. If the only consequence was the warming of the earth, then the worst we would have to put with would be rising sea levels, diminishing sources of fresh water in some regions and disease epidemics. But focusing on these events, utterly catastrophic though they will be, is only part of the story. The climate will also change in ways that we are only now beginning to be able to predict – floods, droughts, cyclones and hurricanes will become more frequent, and once-reliable rainfall patterns will change, threatening our food production. Climate change, for me, is a more all-encompassing term.

Nevertheless, the (mostly Indonesian?) people have spoken, and they chose global warming. For some reason, that doesn’t satisfy me. I’m going to settle this with a straight, no frills Google search:

Climate change – 55,600,000

Global warming – 52,200,000

CC wins it by a nose!

Peak oil – mark it in your diary

[Update - the executive summary has now been release - more here]

November 2008. Mark it down as a very important month in world affairs. The same month as American democracy reaches its orgasmic climax, we will see the publication of the most important document, in my view, since the Stern Climate Change Review. On 12 November the International Energy Agency will publish the World Energy Outlook 2008, their yearly analysis of world energy markets. The IEA’s analysis is hugely important, as it is used as the primary reference for governments and companies the world over in determining their energy policies and business strategies, and it has a strong influence on prices.

The publication of this document, in my view, will mark the point where world opinion shifts from optimism to pessimism about the availability of sufficient oil and gas production capacity to meet world demand. Peak oil theory will be widely accepted as an immanent reality (for the uninitiated, see the Energy Bulletin primer or the Wikipedia article).

The IEA releases an energy outlook every year, of course, but there are signs that this one will be different. In the past, they have simply assumed that thanks to market forces, the oil supply will simply keep pace with demand. This led to predictions of continued smooth growth in oil supply, and rather benign prices of around $US60/barrel into the foreseeable future. This year, for the first time, they will examine whether that assumption is true. As the WSJ article explains:

The decision to rigorously survey supply — instead of just demand, as in the past — reflects an increasing fear within the agency and elsewhere that oil-producing regions aren’t on track to meet future needs.

This is not an easy task. The biggest producers, who are part of the OPEC cartel, are notoriously secretive about their detailed field production data. Western agencies have had little choice but to take them at their word. But a growing number of voices are suggesting that they have been exaggerating their potential to ramp up production for many years, and the situation may be far starker than most analysts assumed.

If the IEA report shows that this is correct, then the world economy is in serious trouble. As the gap grows between the surging demand from China and India and the sluggish supply response, oil prices are just going to keep going up. As we have seen recently, when oil gets expensive, so does just about everything else, including food. All of the problems we have seen developing over the last year were just a taste of things to come. Deepening economic woes, growing geopolitical tensions, concerns about shortages and scarcity, and increasing hysteria may be just a few months away.

So the apocalyptic scenario portrayed in the BBC mini-series Burn Up is not totally out of this world. Of course it was exaggerated for dramatic effect, but there is still a disquieting little nugget of truth at its core.

Burn Up review – simplistic, apocalyptic, trashy, but I like it

Environmental thriller. There’s two words you don’t often see next to each other. But that’s exactly how the BBC is describing its new mini series Burn Up:

This topical thriller sees oil company executives, environmental activists and politicians collide in the battle between economic success and ecological responsibility.

I have just finished watching the first part (see below for 2nd part update), and I was moderately impressed. Environmental problems, generally, are not fast, exciting and sexy; they’re slow, boring and technical. To make something like climate change fit into the “thriller” format you either have to exaggerate it ridiculously (like The Day After Tomorrow) or weave in the Big Bad Oil Company theme. Burn Up does a little of the first and a lot of the second.

Brad Whitford, who was my favourite character Josh in my favourite show The West Wing, takes care of much of the corporate skulduggery single-handedly, in a very insidious role. Apart from Whitford, the acting, plot, and dialogue are all fairly pedestrian, but what do you expect form a made-for-TV mini series? The love story sub-plot, in particular, made my eyes roll so far it hurt.

Overall, a moderately compelling and engaging show, and enjoyable enough. I just wish they had resisted the temptation to run the theme “the fate of civilisation is in your hands, you just have to have the courage to do the right thing”. Why do they have to boil everything down to such a simplistic good vs evil, utopia vs apocalypse theme? The complexities of reality are far more interesting. Or maybe that’s just me.

Update (Part 2): The second part built on the themes and style of the first. Whitford again shone through. Both the character he played and his acting showed real depth, and just kept growing as the show reached its climate. Not a masterpiece by any means, but ultimately it worked. It was gripping, and I cared.

The most interesting thing for me was the shift in themes in the second part of Burn Up. While the first part was all about global warming (or should I say “climate change”?) and tipping points, the second part left the science alone and moved on to the international politics of a climate change agreement (Kyoto 2) and peak oil.

The treatment of the climate change politics was (sadly but understandably) pretty woeful. Trying to dramatise something so complex and convoluted as a subplot within a mini-series was a big mistake. What we ended up with was a large number of paper cut-out stereotypes played by some fairly average actors giving laughably bad performances.

But then (ironically) along comes peak oil to save the show – and the world. This plot element lacked a full explanation, but at least it worked dramatically, helping to build some real tension. Our intrepid hero gets hold of some secret geological data that shows that oil is running out – will he release it, ending Big Oil’s terrible hegemony, whilst simultaneously throwing the world economy into ruins? It’s the first time the show moves away from the simplistic good vs evil dichotomy and starts giving us some dilemmas and shades of grey.

But surely that peak oil stuff is all guff, right? That couldn’t happen in real life… could it?

Well, I think it can. Specifically on 12 November 2008. I’ll explain why in the next post – click here to read it.

Responsible economic policy, political compromise, or a victory for big business?

The proposed introduction of an Emissions Trading System in Australia is generating a significant amount of attention. And quite rightly too, as it is the biggest reform of the Australian economy in decades, and will have a significant impact on our government’s ability to negotiate a new global framework on climate change.

Broadly, I think that the proposed system is satisfactory as a national cap-and-trade carbon reduction system. Most of the elements you would expect to see in an ETS are present. It is a genuine attempt at reducing Australia’s carbon emissions on a planned (though yet to be specified) trajectory at least cost to the economy. There were, however, three significant compromises, which I’ll describe below.

Petrol

Perhaps the least significant compromise was the pledge to effectively exempt petrol from the ETS in the short term by providing a cent-for-cent reduction in the petrol excise. As I have said before, this will make little difference as there is already a significant price signal from the current record prices for consumers to reduce their petrol consumption, and this situation is unlikely to change in the short or medium term.

Emissions Intensive Trade Exposed industries

The second compromise was to provide support for Emissions Intensive Trade Exposed industries, by issuing free permits. Around 20% of the carbon permits will be given to companies involved in trade-exposed activities for free, rather than being auctioned. At first glance this seems like a triumph for the big business lobby and a heavy loss for environmentalists. But I’m not so sure. The green paper justifies that:

“trade-exposed industries may not be able to pass on the costs as they face prices set in international markets, and compete against firms that do not at this stage have comparable carbon constraints.”

The assistance will remain in place at least until 2020, unless:

“broadly comparable carbon constraints are introduced in key competitor economies, in which case assistance be withdrawn.”

The concern here is about carbon leakage. If the costs we impose on companies that must compete in international markets are too high, they will simply move their operations off shore, to countries that do not impose carbon constraints. That is the reality of our globalised economy. For example if our aluminum producers move their production facilities to China as a result of our ETS, our national carbon emissions will reduce but the global emissions will stay the same or possibly increase. That’s not a win for the environment.

Assistance for coal-fired power stations

The third compromise is the one that has worried left-leaning commentators and environmentalists the most. The Green Paper is foreshadowing assistance for “strongly-affected” industries, in particular for coal-fired power generators. This is a one-off injection of an as yet unspecified amount of cash. The justification is that investors in power stations, who have significant sunk capital costs, were not aware of this government policy when they made their investment. Therefore, to “ameliorate the risk of adversely affecting the investment environment”, the government will compensate those who stand to lose the most.

I won’t go as far as to call this gutless, but it is a difficult argument to make, given that coal generators must have seen the writing on the wall long ago.

Moreover, we must accept that there will be winners and losers from the introduction of an ETS. Moving to a low-carbon society involves radical innovation in many respects – in the way we use energy, in the technologies we use to produce energy, in our behaviours and attitudes. Radical innovation has another important aspect, described by Joseph Shrumpter as creative destruction. This is the process by which incumbents, trapped in the paradigm of the old, are pushed aside by new entrants. It is a painful, but necessary process, and to deny it is to deny the need for change.

One important point to make, though, is that compensating the “strongly affected” industries does not influence the overall effectiveness of the scheme, which will still be driven by the total carbon that is permitted to be released per year. The big polluters (at least the ones that aren’t trade exposed) will still have to purchase their permits in the auctions, same as everyone else, and the are still incentivised to reduce their emissions over time.

Questions

However, given that we are not about to scrap our coal-fired power stations and replace them with wind farms overnight, a la Al Gore’s challenge for America, the more important question for me is the effect this will have on the implementation of carbon capture and storage (CCS) technology. Currently, while the government is keen to wave a big carrot in the form of the $500 million Clean Coal Fund, it is reluctant to wield the regulatory stick. They are continuing with their softly, softly approach with this decision to compensate our heaviest polluters prior to the introduction of the ETS. Overall, this sends a mixed message – “we want you to do the right thing, but we’ll protect you if you don’t”.

Another interesting question is whether the compromises I have described here were made in the interests of pursuing “responsible economic policies”, as claimed by the Green Paper, or in the interests of getting the legislation through the senate. We might never know the answer to that. For me, these are much more likely explanations than claiming that the government is in the thrall of the big bad lobbyists who are directing things from behind the scenes.

While I’m asking questions, here’s another thorny one. The ETS covers emissions from fossil fuels burnt within our borders. What about the carbon emissions produced from the coal and gas that we export? Are we responsible for them? And while we’re at it, what about the carbon released from the manufacture of the products that we import? I’ll try to address these in future posts.

A convenient solution to an inconvenient truth

Al Gore’s call for America to develop 100% of its electricity from renewables within 10 years has a quintessentially American character. It’s bold, grand, inspiring and arrogant. It contains no half measures or compromises. It’s an epic, all-in-one solution. It is not for America to bend meekly to the will of world opinion – that is not the American way. They will show strong and courageous leadership, outperforming all other countries and saving the world at the same time. It is the Hollywood ending to Climate Change: The Movie.

Gore compares this challenge to landing a man on the moon, and concludes:

“We must now lift our nation to reach another goal that will change history. Our entire civilization depends upon us now embarking on a new journey of exploration and discovery. Our success depends on our willingness as a people to undertake this journey and to complete it within 10 years. Once again, we have an opportunity to take a giant leap for humankind.”

Unfortunately, space exploration and the complete transformation of a nation’s electricity generation and distribution network are two very different challenges. The Apollo Project was an impressive triumph of science and engineering backed by a big injection of money. But it was effectively a demonstration project, a showcase of American ingenuity in the midst of the Cold War. It did not, however, attempt to shift the economy or transform people’s lives in any meaningful way. A grand project for the world’s biggest energy consumer to change the way it produces electricity is on a scale several orders of magnitude bigger.

Apart from the size of the problem, there is a more fundamental distinction. Creating something new is relatively easy. Transforming something old is far more difficult. To expect a country to produce a huge number of new wind turbines, well beyond the current world manufacturing capacity, is one thing. To ask it to scrap 1493 coal plants, along with the jobs and companies that keep them running, is much harder. The term “vested interests” comes to mind.

The implication of Gore’s challenge is essentially that scientists and entrepreneurs can save us, all we need is to have sufficient political will. This is a dangerously simplistic claim. It is easily lampooned by opponents, and creates unrealistic expectations for the supporters of climate action.

Moreover, for the vast majority of Americans, whose current way of life is “non-negotiable” (as very accurately expressed by Dick Cheney), it is an excuse for complacency. No need to worry, we’ll just build some windmills and drive electric cars; problem solved. Gore does admit, very briefly, that some other things might have to change:

“At the same time, of course, we need to greatly improve our commitment to efficiency and conservation. That’s the best investment we can make.”

You would have missed it if you blinked. Nothing else in his 3259 word speech is so bold as to suggest that Americans may have to curb their insatiable demand for energy. That would be too inconvenient to contemplate…

An oily red herring

The government’s decision to effectively exempt petrol for 3 years from the Emissions Trading System was criticised from several angles – by the Greens as being anti-environment, and by the Liberals, who claim that the government copied their policy. Much of the ideologically pure left blogosphere condemned the decision as political opportunism. More sensibly, Tim has wisely pointed out that to have done otherwise would have condemned the policy to death in the senate.

Despite all the fuss, I agree with Tim that we are missing the point. The reason for establishing an ETS is to provide a price signal for consumers to reduce their carbon emissions. It is hard to imagine a bigger price signal than a seven-fold increase in the price of a barrel of oil since the 1990’s. Adding the price of carbon to the current record pump prices would have an almost laughably small effect of about 4.5c per litre (assuming the government’s reference case of $20/tonne). If the message that we have to reduce our fuel consumption is not getting through already, a few percent extra will make little difference.

Furthermore, the signs are growing that the current high prices are not a temporary situation. The CSIRO recently warned about the possibility of $8/litre petrol. Even the normally optimistic International Energy Agency has predicted that the oil market will remain tight until at least 2013.

That’s market fundamentals. But what about the fundamentalists? Threatening noises from Iran and Israel are also keeping traders wary and prices high. With the next US election looking tight, it must be tempting for Bush to pull a war out of his big Texan hat and save the day for his party. There’s nothing like a good war to scare people away from the Democrats. Nobody would want that totally inexperienced Muslim guy, Barak Osama, holding the reigns if the situation with Iran deteriorates. But surely a US president wouldn’t manufacture a war for political gain, would he?

But I digress. Our obsession with petrol is irrelevant for another reason. That reason is coal. James Hansen, head of the NASA Goddard Institute and one of the most prominent scientific voices for climate change mitigation, points out that coal is king when it comes to the transformation of our climate. He wrote an open letter to our PM in April that makes for some interesting reading. He points out that burning all of the world’s known reserves of oil and gas would take us close to the realm of dangerous climate effects; burning all of our known coal reserves, on the other hand would:

“produce a vastly different planet, a more dangerous and desolate planet, from the one on which civilization developed, a planet without Arctic sea ice, with crumbling ice sheets that ensure sea level catastrophes for our children and grandchildren, with shifting climate zones that cause great hardship for the world’s poor and drive countless species to extinction, and with intensified hydrologic extremes that cause increased drought and wildfires but also stronger rain, floods, and storms.”

This stark vision makes Garnaut’s supposedly alarmist views sound like utopia. Hansen’s main recommendation is for Australia to take a leadership role by phasing out coal use that does not capture and store CO₂. Green campaigners who oppose carbon capture and sequestration on the grounds that it “might not work” should take note. It simply must work, and fast.

The discussion about and ETS for petrol is a distraction. Petrol is already expensive, and coal is the main problem anyway. It’s great to see these issues being debated in the main stream, but we should be careful not to be distracted by those oily red herrings.

Innovation Nation – any comments?

Continuing with the theme of public policy innovation, the UK Department of Innovation, Universities and Skills recently released an interactive version of its Innovation Nation white paper. The interactive version is only a summary, but it is in a format that anyone can comment on, paragraph by paragraph. The comments that everyone else has made are very visible, and it really makes for a very different experience to reading the full paper in PDF format.

The Social Media Manager at DIUS, Steph Gray, comments on the release:

“we hope the bigger story will be the breaking down of the classic consult/deliver dichotomy which we’re challenging policy teams to overcome. We’d love this interactive document to become a place where policymakers, stakeholders and interested citizens come together to help move a policy forward, and we’ll be doing our best to act as a bridge between commenters and the civil servants who are working hard to change things. Don’t underestimate the scale of the cultural challenge here: we’re asking seasoned, busy public servants with a familiar way of working to take extra time and effort to make engagement a continuous process – and to do so in a whole new way.”

It’s an innovative way of collecting innovative ideas about innovation. Innovation is in the process, content and subject. The implementation is simple but very powerful, and I love it.

Reading the full report was a struggle – scanning through dry platitudes to try to sift out the information. Reading this live document, knowing I had the opportunity to comment directly, I paid much more attention. And I was always interested to see what other people had said, even if I didn’t agree.

The real test, of course, is what happens next. I have posted some comments and will see what kind of response I get.

Who says government can’t innovate?

The issue of how to get the public engaged in the democratic process is as old as democracy itself. The problem starts with information. Most of the information we receive about public policy is filtered – by political spin-doctors, by the mass media, or by agenda-driven analysts and think-tanks. Getting hold of the raw public data is never simple or convenient, and sometimes costs money or has prohibitive licensing restrictions.

The UK government is attempting to address this problem through the Power of Information Taskforce, which is making some impressive noises about making public data more accessible and using it in interesting ways. They are currently running a £20,000 competition called Show Us A Better Way that is calling for “ideas for new products that could improve the way public information is communicated,” and are especially interested in “ideas that help make that leap from static information to action.”

I made a submission, called the Map-based Citizen’s Engagement Tool that emphasised that the data itself is only the beginning – it should be used as a starting point for citizen engagement, initially around local issues.

The system allows people to display on a map (probably using Google Maps) an array of public data, such as NHS providers, schools, police stations, recycling centres, bus stops, crime locations, and planning applications. But that is only the beginning. It then allows a person to define their geographic “area of interest”, and then to post proposals or commentary attached to locations or areas. People are notified of posts made within or overlapping their area of interest, and can vote or comment on other people’s posts. Ideas that receive significant support are brought to the attention of decision makers (probably local elected councilors or MPs). See the link above for a full description. It’s quite a preliminary idea, and I’m interested to see where it will develop from here, if at all

For a more intellectual take on this, Tree of Knowledge blogger Tim Watts pointed me towards Yochai Benkler, author of The Wealth of Networks. This quote from is from his Rebooting Democracy essay:

“New forms of engaged collaboration. The next phase in the integration of large-scale cooperation into democracy will come when we begin to use platforms for collecting, filtering, and refining proposals for action and active contributions. It is simplest to imagine this occurring at the level of local government. People living their day-to-day lives encounter a multitude of obstacles and overcome them using diverse solutions. Some problems cannot be solved systematically. Some can, but require attention and effort unavailable to local governments. Developing systems that allow people to report problems, offer solutions, vet them, compare solutions across municipalities, and propose action could overcome the limited resources at the local level. On the free-software model, everyone is a beta tester of their own physical environment, and all bugs can be fixed in that environment if enough people look at the problem. Taking this approach to the national level, there is no reason that federal agencies cannot implement similar systems.”

The work of Steven Clift is also very relevant (see also Tim’s summary):

“Because representative democracy is based on geography, content created by citizens must be identified by place instead of simply organized by issue. Content, from a news story to an online comment to a picture or video, needs to automatically be assigned (or “tagged”) with a geographic place. In addition, content bounded by a state or region or identified as global will be essential.”

Welcome to a world where everything is changing

I am interested in change – in our society, in our technologies, and in our environment. For me, 2008 is undeniably a year of dramatic change in all of these areas. My aim for this blog is to examine some of the forces that are driving these developments as well as the human processes – innovation and creativity – which enable them.

Here are some of the questions I will be pondering in this blog:

• How can innovation, sustainable development and peer production help to shape a future that will be dominated by climate change, energy scarcity and economic uncertainty?
• How do we reconcile the contradictions of growth and sustainability?
• How do we ensure that innovation works for the good of society?
• Can the wisdom of crowds overcome our collective stupidity?
• Can technology solve the problems that technology has created?
• Are we moving boldly towards a brighter future or hurtling towards calamity?

It is far beyond me to answer these questions definitively. Our world is full of paradoxes and they fascinate me, but I’m not a fan of simplistic answers. This blog is about exploring those paradoxes.

I hope you can join me.