Graph kindly borrowed from The Economist article this week: The only good news about the Earth's record greenhouse gas levels is that they have been well measured.
Hurricane Sandy: 72 American deaths and 1.2% of GDP of the affected states.
Ecuador has a lot of oil sitting beneath its beautiful and bio-diverse Yasuni National Park. If the Economist is right, it will soon need to tap that wealth. But the government has cultivated a 'green' image and doesn't want to touch the oil (although it expoits it elsewhere and even has loans from China that will be repaid in future oil production). It has proposed that it would be prepared to leave at least this oil in the ground, and maintain the Yasuni if the international community compensate half of the oil value that it would forego. The idea is that the trees an environment have both an intrinsic value by existing and provide a valuable service for the whole world; absorbing CO2. I have already contributed to the environment bonds.
This week, one of my favourite podcasts, Planet Money, have an excellent episode on the Yasuni Park and the difficulties in how to compensate countries for maintaining their environments when it would be more profitable for them to destroy them. We need to find a better way to price nature and decide who should pay for it.
Unfortunately, that is nowhere near enough. I went to an interesting presentation last week on the 'Economic Implications of Moving Toward Global Convergence in Carbon Emissions'. I learned that taking into consideration population growth, the sustainable level per person per year is around 2 tonnes. That is around the India's level today.
A carbon tax imposed only in the developed world can help. But even a tax of around $250 per tonne would not be sufficient to achieve convergence at sustainable levels. A tax around this level would increase the price of petrol by around $4 per gallon. That sounds like a lot but it really isn't. Americans are still drastically under-paying for petrol compared with Europe and even compared with plenty of developing countries, which can least afford it. Unfortunately, carbon is currently trading at around $10 per tonne in the EU. Still some way to go.
This story from Agerpres appeared in my in-box today but I can't find the internet link:
"As many as 36,9000 green certificates namely 15,200 in the first session and 21,700 in the second session, were traded on the Centralized Green Certificates Market (PCCV), in July 2012, read data OPCOM energy market operator made public.
Five purchase and 32 sale bids were launched and the closure price amounted to 241.05 lei per certificate in the first July session. Eight purchase and 26 sale bids were launched in the second session, when the closure price was 240.98 lei per certificate.
As many as 388,003 green certificates have been traded on PCCV, since early this year. The green certificate is a document attesting 1MWh electricity generated from renewable energy sources. The renewable energy sources eligible to participate in the Green Certificate negotiation system are the water energy made use of in the power plants having an installed power of utmost 10MW, the wind energy, the sun energy and the geothermal energy and the associated fuel gases, biomass, biogas, waste and mud fermentation gas from the wastewater treatment plants.
The mandatory annual quota for 2012 amounts to 8.3 percent of the electricity supplied by each supplier to the end users.
The national targets for the electricity consumption amount to 35 percent and to 38 percent in the perspective of the year 2015 and 2020 respectively."
Ecuador has lots of oil sitting beneath its rainforest. It could chop down the forest and become richer almost overnight. But you and your children would have less nice clean air to breath, and the world would lose one of its most diverse ecosystems - and who knows what medications might be found there in the future if it is left unharmed. This poor country would lose about USD 7bn if it does not tap this oil. But if the world contributes just half of these losses then it will be prepared to forego the lost resources. Effectively, a relatively poor country is prepared to subsidise your clean air. Pretty generous, I'd say.
I bought a 'green bond' some time ago. You can contribute just $5 if you like and, if ever the decision is taken to pump the oil, the government has to give you the money back. The scheme is administered by the United Nations Development Programme (UNDP). The returns are in-kind. You and those around you get cleaner air; you keep the opportunity to visit this part of the world any time in your life; you get to feel good that you are doing something for the world and that you are helping to compensate a poor country for part of its losses (you like to give a little something back :) ) and occasionally you receive emails giving you updates and reminding you what a fantastic human being you are. And it's one of those emails that prompted me to write this entry.
You can read about the scheme and buy your green bonds HERE. The Yasuni National Park website about the scheme is HERE (in Spanish) and an analysis of the scheme by the World Resources Institute is HERE.
I am really happy the EU resisted pressure from airlines and other countries not to introduce the tax. See, for example, this stupid article from the Washington Examiner which thinks that the EU is trying to get foreigners to bail out the failing European economy - um... Europeans have to pay the tax too; increasing transport costs hurt not benefit the economy in the short run; and, quite frankly, we will all destroy all of our lives if we done implement schemes such as this - in economic models, that results in a utility of minus infinity making this excellent long-run economics.
Just two weeks away and I got all of this, just from Comcast. It is already all on its way back to them with a request not to send any more of this junk unless it is actually important (as per the indication on the envelope). How many trees? How much transport? How much energy? ....
"Amid the wreckage of the 2009 Copenhagen climate summit, an agreement that rich countries would, by 2020, furnish developing ones with $100 billion a year to help them mitigate and adapt to global warming looked like a rare achievement. This commitment will also be a big talking point at the next annual UN summit, due to start in Durban on November 28th. With almost no hope of a big new pact, many expect progress on the formation of a global Green Climate Fund to be one of its few successes. Yet there is huge uncertainty about how developed countries will deliver on their promise, including what role the fund will play."
Even more importantly, it is good economics to do so. The country would benefit greatly from exploiting the oil - significantly more than the USD 3.6bn they are asking for, in fact. Whereas it would lose little from destroying the rainforest. After all, there is plenty more of it in the world - they would still have plenty of oxygen from rainforest in other countries. Not only this, but with a purchasing power GDP of around USD 7,000 per capita, that money can go a long way. The opportunity cost of not exploiting the oil is high.
The rest of the combined world though has something to lose and some countries can afford to pay for it. There is again a problem of collective action - individually, each country gains only a little from the Ecuadorian rainforest. Setting up of a fund to pay for green development can help to mitigate this.
You can also make your own individual contribution. How much is the oxygen that you breath from the Ecuadorian rainforest worth to you?
Below is a cityscape photo I took of Bucharest. The building in the foreground has black pipes which absorb the sun and heat the water inside them. Cool :)
