Global Climate Policy: An Agenda For Effective Action

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"Rules must be binding; Violations must be punished; Words must mean something."

(US President Barack Obama)

The negotiations currently taking place at Copenhagen at the fifteenth Conference of the Parties (COP-15) of the United Nations Framework Convention on Climate Change (UNFCCC) aim at the fundamental objective of the UNFCCC, namely to stabilize atmospheric greenhouse gas concentrations at non-dangerous levels. It is argued that the existing institutional tools at our disposal – international treaties and in particular the Kyoto protocol – are insufficient to achieve this goal. Furthermore, the framework put in place at Kyoto suffers multiple and fundamental flaws which fatally undermine its effectiveness; any new treaty must have a structure which mostly evades these flaws if it is to be effective. Treaties, legal structures, and other institutions more commensurate with the scale of the climate change challenge are suggested to inform discussions around the structure of any future climate agreement. An agenda for effective global action is outlined here:

  1. Strong global institutions – e.g. a world environmental agency – including an agreed framework (such as coordinated carbon taxes) for collective policy, to replace national commitments.
  2. A framework action plan to eliminate carbon emissions sector-by-sector, region-by-region, over the next two to three decades. In particular a plan to develop, transfer and deploy the safe, responsible, and very large-scale use of enhanced energy efficiency, renewable-electric, nuclear, and carbon capture and storage energy technologies; and to encourage responsible land use and agriculture, including the sustainable use of water1.
  3. A significant ($100-$200/tCO2e), sectorally complete, substantially geographically complete, agreed, and guaranteed minimum carbon price, levied upstream at the national level (including embodied carbon from any regions not otherwise carbon-constrained), with revenues used at national discretion. It is possible that a carbon tax may have net economic benefits at the national level if used to replace taxes with higher 'deadweight' costs. The removal of fossil fuel subsidies has already been agreed as part of the Kyoto protocol, but has not been fully implemented.
  4. A plan to protect forests and other natural carbon stores.
  5. A plan to keep high carbon fuels in the ground (following Hansen et al. 2008).
  6. An enabling framework for enforceable state-corporation climate contracts (e.g. guaranteeing the carbon price for investors) (Ismer & Neuhoff 2006).
  7. An enabling framework for the use of trade sanctions to enforce state-state climate commitments, such as border tax adjustments (Ismer & Neuhoff 2007).
  8. Unimpeachable monitoring and verification of all commitments.

Why The 'Kyoto' Approach Fails

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The structures for climate change mitigation agreed at Kyoto were flawed in a number of different ways. The most obvious flaw was the lack of effectiveness – it is not clear that the Kyoto treaty has reduced emissions at all. There are three main reasons for this lack of effectiveness:

Firstly, the treaty does not give binding commitments for all major emitters – in particular, the developing countries has no binding commitments and the United States signed but did not ratify the treaty.

Secondly, among the countries that implemented the agreement, many did not achieve the Kyoto targets. Little real action was noticeable – those who have achieved the targets (such as the UK and the former Soviet states) seemed to do so largely by accident rather than design.

Thirdly, the targets, although binding in international law, included no enforcement mechanism, beyond a threat that future targets would be more stringent for those countries that failed to achieve the target. There are also the following problems with international treaties in general:
  • Countries can in principle withdraw from treaties once signed, although this is rare.
  • Treaties face significant barriers in the US congress, with two thirds of United States senators required for ratification.

The Kyoto approach requires national emissions targets, negotiated country-by-country. It is possible that emissions reductions, whilst key to the end goal, are a politically and psychologically negative way of 'framing' commitments. (In other words, if commitments are expressed in different, but likely equivalent, terms, the balance of perceived national benefits may be different, for a given level of expected stringency). Countries may not know if they are able to reduce emissions by a large amount. Fast developing countries such as China or India may wish to play safe, avoiding emissions targets, whereas a more practical action plan (see below) may be perceived more positively by nations.

The Kyoto treaty and the actions since the treaty encourage downstream emissions trading. There are a few fundamental flaws to this approach:
  • Low coverage of sectors (the European Emissions Trading Scheme (EU-ETS) covers only 40% of the EU domestic emissions, and none of the net emissions embodied in its net imports);
  • An emissions trading scheme gives a volatile price for structural reasons related to the short-run price insensitivity (inelasticity) of fuel demand and the fact that carbon based fuels are ubiquitous in a modern economy (and so fuel demand is sensitive to the economic cycle and the weather). This volatility can lead to delayed investment and higher economic costs;
  • Emissions trading schemes encourage 'quota seeking' behaviour by nations in any original agreement and by companies in the political process of allocation rights to emit;
  • Perverse incentive to avoid stringent commitments – the structure of the agreement with national emissions caps fails to transform incentives of nation states;
  • The use of 'offsets', such as the Clean Development Mechanism (CDM) has multiple problems in addition to the lack of a developing country cap. Most fundamentally, it encourages 'double counting'. Offsets provide perverse incentives to developing countries to inflate expected emissions in order to demand payment to reduce them back to more reasonable levels.
  • No incentives to preserve existing forests and other natural carbon stores.

More fundamentally, none of the major powers (with the possible exception of the EU) have agreed to cede any sovereignty to a global institution. There also seems to be a fundamental difference in opinion between developed countries – which expect developing countries to accept binding commitments – and developing countries, who seek financial assistance from the developed world.

Finally, there is a lack of any necessary or direct connection between a treaty being agreed, and any real action to reduce emissions. We need a new treaty that has an 'action plan' to reduce emissions.

Make a deal or go home?
Given the multiple flaws in a possible Copenhagen agreement, there are two possible approaches. Firstly, the countries could avoid making a deal; Secondly, the countries could make a flawed deal that is ineffective. Both outcomes have major drawbacks. We might not get a better opportunity to reduce emissions, yet a flawed treaty would be little better than none at all. I think the best that could be expected would be a global agreed target and then leave implementation of those targets to a further treaty

Banks paying the cost of insuring against future bail outs

Returning to the other great issue of the day, namely "What to do with the banks?", I'd like to make the following, 'modest proposal'.
  1. Fractional-reserve banks require insurance to continue. (IMHO it's unlikely the banking system could survive de-growth or deflation for example.)
  2. That insurance is at present done by the state.
  3. The state should be paid a proper rate for that insurance.
  4. That insurance could, in part, be provided by ultra safe reinsurance companies such as Swiss Re and Munich Re, and/or the Lloyds names, who are mostly exposed to hurricane, and not credit risk. It's unlikely that they could shoulder all the risk of a bank. They would, one would think, negotiate a fair price for that risk.
So I propose the following.
  1. The insurance should be properly defined, and 'living wills' be created too (for the circumstances where the insurer is not prepared to insure the banks).
  2. Once the risks have been defined, some proportion (say 10%) of the whole insured amount should be insured by the reinsurance companies.
The government would then 'discover' the price needed to insure the banks if done in the private sector. The bank would then pay the same rate for the whole amount to the government as the rate paid to the reinsurance company for its part in the insurance.

Concentrated Interests Satisfying Distributed Needs

I've dipped into The Logic of Collective Action, recently. This is an absolute classic recommended to me originally by an ultra-intelligent Canadian lady that I know. Definitely worthwile reading. Thinking about the book, makes me come to the following draft conclusion. Here it is:

All successful* social changes ('memes') - by which I construe very broadly to include religions, technologies, political ideas, government policies, and behaviour traits - that I can think of, have two elements:
  1. the meme satisfies some need, desire or requirement felt by lots of people;
  2. they are invented, promoted or implemented by a single or small number of individuals/organizations with concentrated interests, who have a strong psychological or commercial interest in the meme.
Examples of the following can be found in religion (e.g. Christianity - human psychic needs/need for order in the Roman Empire & Jesus/his followers/the Roman Empire), technology (e.g. the telephone - public comminication & Bell), political ideology (e.g. communism - needs of the 'working class' & Marx/the Bolsheviks), and environmental protection (e.g. Ozone depletion - many people in high lattitude countries & the interests of Du Pont, which makes alternatives to CFCs).

(* by succesful I mean in this context simply that the changes happen.)

Cooperating by Competing Cooperation

Well what we should do to limit fossil fuel consumption??? What we should do is what humans usually do, namely 'cooperate by competing'. Cooperating by competing is the whole basis of Adam Smith's economics. I'm not suggesting the competition is individual capitalism. Rather the competition is over the rents associated with fossil fuels.

Let me explain. Fossil fuels are limited by how much is in the ground, but even more, they are limited by the desire to have a safe, non-hothouse Earth. If we want to preserve the natural world and the environment that we have grown used to, we need to limit the amount of fossil fuels that we dig up and burn. Any limitation has a 'scarcity rent' associated with it. Who charges the scarcity rent is up to us.

So the UNFCCC should give its official blessing to set up two cartels; a cartel of the fossil fuel producers, which would limit the amount of fossil fuels dug up, and a cartel of the fossil fuel consumers, which would limit the amount of fossil fuels burnt. Rental income from both cartels would be returned to the producers and consumers of the fossil fuels respectively.

What Would I Do? Thoughts on Copenhagen Negotiations

With 40 days to go and counting, it will not have escaped the readers of this blog's notice that are some climate change negotiations coming up, related to the end-of-year conference in Copenhagen. This blog post tries to ask what could be achieved in an 'ideal world' at Copenhagen. What are the objectives of global negotiations? What are we trying to achieve? What are the political constraints that we have to deal with?

In a separate blog post I discuss one possible ways of solving the climate change problem. Here I merely describe what I personally would think would be a good outcome of Copenhagen.

It seems likely that targets will be a major part of the outcome. What use are targets? Well they suggest what nations promise to do in the future. But unless they are enforced, they are pretty useless.

Institutions, Measurement and Enforcement
A better outcome than targets would be institution(s) with teeth.

What is an institution? Well the OED defines Institution (6th definition) thus:
An established law, custom, usage, practice, organization, or other element in the political or social life of a people; a regulative principle or convention subservient to the needs of an organized community or the general ends of civilization.
So we need some of those, at the global level!! At the moment we have some institutions already: the International Panel on Climate Change (IPCC) - which does the science - and the UN Framework Convention on Climate Change (UNFCCC) - which organizes these Conferences of the Parties (COPs). But it would be nice to get an institution with teeth.

What would an institution with teeth look like? Maybe like the World Trade Organization. The WTO appears to annoy a lot of people which perhaps means that it does something.

Why do we need institutions? Well, one reason is that we need enforcement. If people don't do what they said that they would do, then they need some sort of serious redress. Enforcement could take the form of financial penalties for example. Related to enforcement is the issue of measurement - we need to know what an outcome has been before we can enforce it.

Equal Rights or Nobody Worse Off?

When we constrain pollution using market instruments such as taxes, the revenue generated to the central authority can have many purposes. The changes in relative prices can also affect the value of assets - for example, houses or coal power stations, and change the relative costs of entrenched ways of behaving -e.g. entrenched commuting patterns.

There are a few possible principles that we might use to allocate the revenues, in the case that they do not go into general taxation. (We are only considering principles here):
  1. "Revenues are the equal right of all"
  2. "Make nobody worse off"
  3. Give revenues to the rich and powerful
  4. Give revenues to the poor
The first principle has been argued for extensively. The third and fourth principles have been used often. The second principle has not been used very often and is often neglected.

It should be noted that principles one and two are in conflict. If we give pollution rights equally, this will make some people better off and some people worse off. However, if we make sure that nobody is worse off, we may not make a change that respects 'equal rights'.

It is an interesting question which of these principles is best; and one which I will return to in future. I lay open the possibility that one of the reasons that many people resist environmental taxation is that principle two is not respected.

Evidence for Climate Change and Related Policy Issues

To get back to the purpose of this blog, I thought I'd do some work outlining some of the evidence for climate change and the policy issues.

Science Issues

Why do we think that the observed increased concentrations of CO2 and Methane will warm the earth?
1) Basic physics
2) Water vapour feedbacks from recent measurement of radiative outflow from satellites & Models integrating these observations
3) Observations of the climate warming up already (see below for detailed refs)
4) Observations CO2 of the ice ages (showing evidence for positive feedback as well as a very close link between temperature and CO2 and Methane)

Concentrations of CO2
Concentrations of CO2 went between 180 (ice age) and 280ppm (warm period between ice age). They are now at 388ppm: higher than the last few million years; the sun is also getting stronger over the very long term.

Science of Greenhouse Effect
  • Basic Physics: see this BBC site
  • Undergraduate level Physics: see Archer

  • Greenhouse gases increase the flow of energy into the Earth. It has been estimated that a concentration of CO2 of 550 parts per million (before industrialization the level was 275 parts per million) would leave to 3.7 Watts extra heat imput per square metre of the Earth's surface area.

    Water vapour
    The Stefan Boltzmann law would shows that the heat radiated from the earth's surface increases by about 3.2 Watts per square metre per degree Celsius rise in temperature. Therefore, the Earth's temperature would need to rise by about 1.2 degrees Celsius to balance out this rise in temperature.

    However, we know that warmer air has a higher absolute level of humidity (in otherwords it contains more water vapour). Water vapour is also a greenhouse gas, and so this traps heat too.

    We can estimate that water gives a positive feedack of -1.6 Watts per square metre per degree Celsius rise in temperature.

    This should be compared to 'StefanBoltzmann' extra heat flow of 3.2W/m2K, giving net effect of 1.6W/m2K

    When we include this effect (but assume no other feedbacks), that means that the earth would have to rise in temperature by 2.3 Celsius (not 1.2 Celsius) before the outflow of heat balanced the extra inflow.

    So CO2 drives temperature, that increases humidity, and that leads to the water vapour feedback, which can be observed. See this article.

    All the evidence is put together with computer models, but we don't really need computer models to estimate these issues, we can work it out ourselves from science and observations

    Evidence of warming
    Specific Fingerprints
    Observed Impacts

    Very many different observations around the world e.g. temperature measurements, rate of glacier melt, species shifts, Artic sea ice, sea surface temperatures, coral reef bleaching, heat waves:

    Most of these show some evidence of climate change. People will I'm sure, come to their own conclusions.


    There are some arguments about climate change by self-styled 'sceptics'. Here is an explanation of the more complex issues.

    Policy Issues

    Uncertainty & Risk?
    Of course, there is always discussion and debate, but the fact that there are big risks shouldn't blind us to doing something to secure ourselves against those risks.

    We know that the earth responds to a lag to our behaviours. We already have seen serious effects to climate change (see 'evidence of warming' elsewhere in this reply) and the rate of increase of greenhouse gas concentrations is itself accelerating (think of putting the foot down when you see a road traffic accident). Don't you think it might be good to be a little bit safe rather than sorry?

    Kyoto Ineffective??
    We need a much stronger treaty that doesn't only include global targets, but also coordinated taxes.

    It has been estimated that the investment required to decarbonize the UK is around £600bn (which would spent mostly on UK resources). The UK consumes 1.7million barrels of oil per day or 620 million barrels per year, with a value (at $80/bbl) of $50billion (£30billion).
    We use 91.1 billion cubic metres of gas per year present, worth £11billion (at 35p per therm or 13p/cu m). So we spend more than £40bn per year on fossil fuels; replacing this with renewable and nuclear infrastructure could get a return on our investment of 15 years. Not bad.

    Good, strong, climate policies could increase investment in real infrastructure, providing jobs, and making us less dependent on foreign oil! Hurrah!

    How To Avoid Getting Distracted

    Distraction is the bane of modern life. There are main two sources of distraction - internet and email - plus you can simply forget what you are supposed to be doing. Here are some technological suggestions to avoid getting distracted:

    • Pull out the cable / disconnect the Wifi.
    • Block certain websites (i.e. facebook) during work hours. If you use Firefox, an addin called "self control" may do the trick.
    • Work offline.
    • Disable notifications.
    • Clear emails only once a day.
    • For the time when you need to send an email: create a 'sending mail' link, with a shortcut referring to "mailto:" (the bit inside the quotes). This will open your email sending application without checking for new mail. You can put this shortcut on the desktop, start menu and/or 'quick launch' bar.
    • For the time when you need to find an email, use google desktop to index your gmail or outlook emails (I don't usually use the rest of the desktop search functionality, so I just search my gmail; this also works for outlook).
    • Avoid difficult, intellectual, or contraversial discussions that use email - at all times, and especially during work hours. There is a role for such discussions - mostly to construct something of value - i.e. they should aim for publication in a peer reviewed journal, newspaper, or website. Face-to-face discussions may also be useful.
    • is a website that prevents multitasking/distraction by telling you exactly what to do next. It can be integrated into your desktop using the 'active desktop' functionality; or it can be added as a sidebar to your (e.g. firefox) browser.

    Can we measure energy prices and taxes?

    It seems pretty clear that the long term agreement at Copenhagen will focus on some long term greenhouse gas emissions targets: a reduction of 80% by 2050 for the UK or 50% by 2050 for the world, for example. Such targets, if they are credible, set out long term direction, and have some value. However, there is also a need for immediate action. One such action that could make a big difference is a 'price on carbon', or, equivalently, higher energy taxes. In order to make such changes subject to an international agreement, we will need to measure these prices. if we can measure prices, we can write contracts (often known as 'derivatives') based on these prices. Measuring pre- and post-tax energy prices is a non-trivial task, but is being done by the International Energy Agency. Here I consider how such a task might be accomplished.

    On Assertiveness

    I've been looking for resources on assertiveness. Assertiveness is about communicating positive and negative ideas and feelings "openly, honestly and directly". What I particularly liked about this article was the emphasis of choice that we have between four modes of communication which were outlined:

    • direct aggression: bossy, arrogant, bulldozing, intolerant, opinionated, and overbearing

    • indirect aggression: sarcastic, deceiving, ambiguous, insinuating, manipulative, and guilt-inducing

    • submissive: wailing, moaning, helpless, passive, indecisive, and apologetic

    • assertive: direct, honest, accepting, responsible, and spontaneous

    Among these four identifiable modes of communication, the assertive is clearly the most effective.

    The article also gives a few tips to improve our assertiveness. Quite a lot of it is about body language: having good body posture, even tone. Interestingly, it seems it is necessary to talk about oneself; to start statements with 'I'. I clearly have ownership over statements I make about myself. Factual statements are also secure.
    This University of Iowa information sheet lays out three parts of an assertive communication:
    1. empathy/validation: Try to say something that shows your understanding of the other person's feelings. This shows them that you're not trying to pick a fight, and it takes the wind out of their sails. From the above example, "I know that you get anxious when you're all ready to go and I'm not … ."
    2. statement of problem: This piece describes your difficulty/dissatisfaction, tells why you need something to change. For example, "… but when you do that, I get all flustered and take even more time. By the time we get in the car, we're mad at each other and not much in the mood to have a good time."

    3. statement of what you want: This is a specific request for a specific change in the other person's behavior. For example, "From now on, let's be sure we know what time we want to leave, and if you're ready before I am, will you please just go to another room and read the paper or watch TV?
    Summarization is a key part of being assertive. We will often need to repeat what we say as well. Assertiveness appears also to be fundamentally about being specific. Rather than asking for general thing; we pick a time and date and place for an important meeting, for example.
    Interestingly, compromise appears to be an important part of assertiveness, although not over things that are a matter of one's self worth or self respect.

    Further Reading
    1. Essortment: Ten tips for being a more assertive person
    2. Ezine: Assertive Communication - Twenty helpful tips
    3. University of Iowa: Assertive Communication

    What am I called? Preliminary thoughts

    OK, so I have to decide on what I am called. "But surely your parents decide that?" I hear you say?
    But the thing is; they only give you a suggestion. It's one's own choice what to tell people, and how to sign off. The decision arises because of the collision of two worlds: the 'friend' world of "Steve" and the 'family and work' world of "Stephen"... The two worlds move closer together with an "activist" world having elements of both.

    The decision becomes necessary for consistency purposes and consistency is of course a large part of professionalism. The specific decision needed is what to sign off at the end of emails.
    There are two options:
    • Steve; or
    • Stephen
    I need to be consistent. A person with ideas about global problems should at least be able to decide on what he is called.

    The problem is, that 'Steve' is not really a shortening of 'Stephen'. The correct shortening would be 'Stephe', pronounced 'Steve', as one or two of my friends have noted... Except that Steph is not pronounced 'Steve' at all but 'Stef'. So I can't really consistently be both Stephen and Steve; I can only be one or the other for official purposes.

    Now, it's easier to go for the more informal of the two. There are more friends around than family and easy informality is a part of business as well as friendliness. For a while, my housemate was called 'Stephen' and so 'Steve' was easier.

    But there are considerations for 'Stephen' too. I generally prefer it; it seems a more beautiful and generally higher class name than 'Steve', and 'Stephen' is actually slightly easier to say that 'Steve'. When combined with my surname, 'Stephen' has a better ring to it than 'Steve'.

    Of course people can call me what they like. If people know me as 'Steve' then the definition of my name 'Stephen' is not going to change anything between us. It will just be how I sign emails and introduce myself.

    So that is where I am. If people have any comments, please say so in the next few days. I will then post my final decision.

    Difficult Issues

    In the next few posts, I'll try to cover some of the most difficult questions. These are:
    • What am I called? Stephen or Steve?
    • What energy sources should we use? Is nuclear in or out?
    • What are appropriate design principles for economic systems or policy changes?
    • What theories of ethics and politics should we use?
    • What is 'realism' when applied to politics?
    I'm going to try to 'tie off' a few things.

    A Minimalist, Shared, Personal Morality

    "...tis a cause that hath no mean dependance
    Upon our joint and several dignities."
    (William Shakespeare, 'Troilus and Cressida', Act II, Scene 2)

    A friend of mine wishes me to comment on moral matters. I'm extremely reluctant to do so, partly because, at least until recently, I have been a young man "...whom Aristotle thought / Unfit to hear moral philosophy" (ibid.). I have flaws, and think those more skilled at the art of life may have more to say. Perhaps also, there is some truth to Lao Tzu's aphorism, "Those who know, do not speak. Those who speak, do not know". However, time waits for no man. Those who devote much time to theoretical thought and words may lack balance, unless they set aside some thoughts and words to moral matters, difficult and hard to demonstrate as these subjects may be.

    The scientific method, our best guide to the how the world is; needs at the very least some care if applied to questions of value and of action. For example, I am conscious personal experimentation may be a poor guide to living well. Experimentation always delays the point of choice to some future time when we have 'found ourselves'; and the act of experimentation itself has moral implications. It is too late once we have experimented to know in advance what one should experiment on. In the case of the atmospheric experiment that humanity is carrying out at present, decisions over what to do now cannot wait until we have a full physical demonstration what the true consequences of our possible paths of action could be.

    Given that a young man knows nothing about morality except that which he has instinctively or been taught, but that some sort of guidance seems to be essential when living in society - and given that at least those who think long and hard about life can be influenced by those thoughts -it seems necessary to adopt some sort of 'defensive' theory of morality - one that is not novel or new, but is guided by those who have come before. A theory of morality may require at least some experience of living; and since the young have not had much such experience; a mid sympathetic to empirical demonstration may argue in favour of granting the experienced at least some authority over such matters.

    Such a defensive theory should not be over theoretical; it should deal with the common sense wisdom over how to live one's life, and with perhaps justified agnosticism over the sources of such wisdom.

    Such a theory should not over extend itself by asking too much; we have justified skepticism over those who invent new laws to bind others in society. We are well aware that some people are powerful that lack certain virtues and some people with many virtues are not powerful. Our minimalist conception will focus on those virtues that are common to both parties.
    The ancient concept of virtue (Arete in Ancient Greek; there is a possibly similar concept De in Chinese philosophy) tend to have the connotation of 'excellence' and 'power' in addition to our modern sense of personal goodness. Living a good life is good for the individual and is good for society; and we will focus on those principles that are in the intersection of the individual and the society good, leaving it to judgment where there may be a conflict.

    Ancient Greek philosophers distinguished between moral laws specific to certain societies, and those that tend to be shared by all. In our minimalism we deal with only those that are shared by most successful civilizations.

    I think such a defensive, minimalist, common-sense, practical, theory exists, and has been outlined by C.S.Lewis, for example. This outline is from Lewis and the notes in brackets are from here:
    I. The Law of General Beneficence: (Golden Rule, help the community)
    • A. Negative (Do no harm, Golden Rule)
    • B. Positive (Preserve society, make people happy)
    II. The Law of Special Beneficence (Put own family and friends first)

    III. Duties to Parents, Elders, Ancestors (Respect and care for elders)

    IV. Duties to Children and Posterity (Protect and care for children)

    V. The Law of Justice:

    • A. Sexual Justice (No adultery)
    • B. Honesty (Re property, money)
    • C. Justice in Court (No bribes, no favoritism)
    VI. The Law of Good Faith and Veracity (Tell truth, keep promises)

    VII. The Law of Mercy (Be tender-hearted)

    VIII. The Law of Magnanimity: (Soul should rule the body)

    • A. (Courage, defense against attacks)
    • B. (Death before dishonor)
    • C. ("Is not the love of Wisdom a practice of death? [Ancient Greek]")

    The point of this post is not to outline anything new, of course, but the opposite. These are laws shared by many societies and successful civilizations around the world.

    In order to slim down our obligations a little more (so as to preserve the core), we could examine the consistency of modern norms with these. The main way that modern Western man differs is in the concept of adultery (we have different norms below that of marriage) maybe a pragmatic response would be that conduct in such fields should be governed by 'good judgment' rather than moral stricture. But even we replace a moral stricture with 'good judgment' in that case, the spirit of the law and its justice still applies. Keeping promises is also sometimes difficult for our politicians; perhaps it is good to promise less in order to deliver more. It's helpful not to make inconsistent promises and to deliver upon them mechanically. We don't need to think about everything.

    Our obligations in regard to climate change seem to be a case both of "Positive General Beneficence" and "Duties to Children and Posterity". So, even though we were careful to not over extend our idea of morality, we still have obligations to the future. Let us then proceed; strengthened by moral vigour of the principles of all successful and well-respected individuals and societies.

    An Unsustainable Concept

    sustainable, adj.

    1. Capable of being borne or endured; supportable, bearable. Obs. rare.

    2. Capable of being upheld or defended; maintainable.

    3. Capable of being maintained at a certain rate or level.

    4. Ecol. Of, relating to, or designating forms of human economic activity and culture that do not lead to environmental degradation, esp. avoiding the long-term depletion of natural resources.

    (Oxford English Dictionary)

    There are two problems with burning fossil fuels. The first problem is that fossil fuels are running out; the second is that fossil fuels are not running out. The first problem is often called 'peak oil' and the second is known as 'climate change'. If either the first problem or the second is accurate, then we can say that burning fossil fuels is 'not sustainable'. This amounts to arguing that if either A or not-A is true, burning fossil fuels is unsustainable. It seems to be that we can determine sustainability from pure logic. But to get such important results from a tautology, appears to be suspicious at the very least.

    Perhaps the problem with our line of reasoning is that we have failed to distinguish between positive and negative effects of an activity. A natural resource running out would not be problem if the use of the resource only imposed costs on society; nor would inexhaustibility be a problem when an activity only provides benefits. So we can rephrase our criterion. If an activity provides benefits and the capability to continue the activity is limited, or if the activity imposes costs and the capability to continue it is not limited, then the activity is not sustainable. From this it can be shown by simple logic that any activity that has both positive and negative effects is not sustainable.

    Well at best it seems that sustainability is a pretty hard thing to achieve; and at worst the whole concept looks a little incoherent. Sustainability is, however, an idea to which we often are encouraged to pay homage, despite (or perhaps because of) these problems of definition and coherence.

    I think the widespread use of this notion of sustainability explains quite a lot of the religious claptrap surrounding environmental issues. When I say 'religious'; what I mean, broadly, is the tendency of some environmentalists to think about environmental issues in somewhat 'moralistic' terms - 'wind turbines are good', 'cooling towers bad' etc. But such black and white terms may be misleading. The primary concept of value here, "sustainability", is one that, strictly speaking, almost no activities satisfy. This leads, inevitably to a sense of guilt at having to engage in so many activities that seem immoral, and the psychological need for at least some redeeming activities that can make us feel virtuous again. When some such positive activities turn up, there is a great temptation to cover up any negative features (remember any activity with both negative and positive features is unsustainable), even if such downsides actually do exist. So wind turbines may be lovely despite them having some quite serious downsides both in terms of the opinions of those nearby and the reliability of the output they produce. For others nuclear power stations are lovely and wind turbines unlovely. Such distinctions, unless they can be justified by some more fundamental principle, appear somewhat arbitrary.

    As an aside, actions with purely negative consequences could be included as 'sustainable' too, if they are exhausted quickly. Perhaps one example is the extra expense in buying a more expensive product (say shampoo) which differs from the standard one by the eco-friendly blurb on the side (say the shampoo is kind to hedgehogs for example). Presumably, your wallet is finite and so limits the damage that your efforts to do the right thing can do.

    Some activities fail to be sustainable on both levels. Presumably they both have positive effects and are limited and negative effects and are unlimited. How bad can you get? It's in these cases that the concept of sustainability appear to have serious self-consistency problems. To assert A and not-A is inconsistent; to assert A and B at the same time as not-A and not-B is doubly so. Either fossil fuels are running out or they are not. What should we do? Are wind turbines actually sustainable? What about burning fossil fuels?

    A related problem with the categorical notion of sustainability is to do with the idea of criticality. Put bluntly, some aspects of sustainability matter more than others. If my sofa is on fire, then this constitutes a sustainability issue to living in a house. Imagine too that my wooden walls are, over decades, rotting, due to damp and occasional flooding. If I use a fire extinguisher it may well be an unsustainable act, because it causes flooding in the house, and makes my rotting problem worse. But if I don't put out my fire, my house would burn to the ground anyhow. Some may argue that I should instead use a sustainable method to put out the fire; such as finding a blanket in my loft. Rather than use the 'unsustainable' fire-extinguisher; I should use the 'sustainable' fire blanket in my loft. But what if the problem has grown so big by the time I get my fire blanket that the fire is then unmanageable? Failure to focus on our critical problems may lead to undesirable outcomes.

    I therefore propose that rather as looking at sustainability as some sort of idol in which we invest all of our scarce hopes, we recognize that all of the activities of humanity are unsustainable. We need to be more precise about things. Instead we need to focus on critical unsustainability of activities that are akin to our house burning down.

    I suggest two principles: first, an overall civilization-focus on tackling critical issues and risks, particularly climate change; Secondly the principle that we should do activities only if they add to overall (natural and human) wealth [n759hv]. The notion of wealth may be as difficult to define operationally as sustainability, since it requires some method of valuation over and above that of the market, when dealing with environmental concerns. But it least may well be internally consistent and able to sanely direct those with inflammable furniture.

    Hard and Soft Constraints: Why Malthus is usually wrong but sometimes right

    A free market economic system is efficient at meeting human desires with limited resources; although the equity or justice of the situation will depend on government policy, such the tax system. Limited resources are a 'hard' constraint – we can't use what doesn't exist. For environmental problems, however, the problems are much more severe, because nature cannot enforce the limitations that may be necessary. The constraints are 'soft' – we can violate them, but at high future cost. Nature can in a sense 'punish' the future inhabitants of the globe, but those who are punished are not necessarily the same as those that have made the violations. Humanity must therefore impose restrictions on its own behaviour, including legal or financial incentives such as taxes or caps, or face severe damage to nature.

    Full article here: [lf6e24]

    Ends and Motivation

    I've been thinking about various bits of folk wisdom about how to motivate other people to understand and act regarding climate change.

    One such piece of wisdom is the following [Antoine de Saint-Exupery, 'The Wisdom of the Sands", University of Chicago Press, June 1984]
    "If you want to build a ship, don't drum up the men to gather wood, divide the work and give orders. Instead teach them to yearn for the vast and open sea."
    So, desire must come first in these things, it seems.

    After desire, we then see things in terms of Goals and Objectives. I found the following information useful [ny95bl]
    • A goal is a broad statement of what the program hopes to accomplish. (e.g. "To motivate food stamp participants to eat foods that are consistent with the Dietary Guidelines for Americans and the Food Guide Pyramid".)
    • An objective is a specific, measurable condition that must be attained in order to accomplish a particular program goal. There are many different ways to specify objectives; the program and evaluator should choose the method that works best for each situation. (e.g. "50% of learners will be able to report making knowledgeable decisions about food purchases after completion of the eight week course.")
    Another interesting quote is the following:
    "Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime".

    (According to Wikiquote [awcblc] this has origin unknown.)

    * * *

    When discussing motivations it's good to note that some or all of our motivations seem to have some relation to our biological functions and/or goals.

    Aristotle's ethical thought [2gyf85] attempts to find the good to which activities aim:
    Every art and every inquiry, and similarly every action and pursuit, is thought to aim at some good; and for this reason the good has rightly been declared to be that at which all things aim. But a certain difference is found among ends; some are activities, others are products apart from the activities that produce them. Where there are ends apart from the actions, it is the nature of the products to be better than the activities. Now, as there are many actions, arts, and sciences, their ends also are many; the end of the medical art is health, that of shipbuilding a vessel, that of strategy victory, that of economics wealth. But where such arts fall under a single capacity- as bridle-making and the other arts concerned with the equipment of horses fall under the art of riding, and this and every military action under strategy, in the same way other arts fall under yet others- in all of these the ends of the master arts are to be preferred to all the subordinate ends; for it is for the sake of the former that the latter are pursued. It makes no difference whether the activities themselves are the ends of the actions, or something else apart from the activities, as in the case of the sciences just mentioned.

    He does so "by ascertaining the specific function of man" [nobpxj], and in particular that which makes us specifically human, the rational part.

    Certainly we can ascertain a lot by assessing function and biological function; but that is the end to man qua piece of life, rather than the end to man qua man. It seems that the end to man qua man is subordinated in evolution and in the sense of Aristotle to the end of man qua lifeform and the end of man qua life form to the ends of our genes. However, for Aristotle it is not our overall ends that matter, but rather the ends of the specific features that make us human.

    Aristotle argues that all reality can be classified metaphysically, with distinctions being made when there are differences. So if we can define man, this way; by his distinctions from other animals then we can deduce certain things from this definition. If 'man' can be defined like 'can opener' there's a chance that just like a can opener has a good function, so can man. I'm not necessarily asserting this mode of argument, merely exploring it.

    Deciding Upon Change

    I've just come across the Beckhard-Harris change model
    For change of an organization to take place, the following must be true:

    Dissatisfaction x Vision x First Steps > Resistance to Change

    It strikes me that this may be relevant to climate change. Resistance to change in the may be high (depending on the steps and vision proposed); furthermore, dissatisfaction, vision and first steps may be lacking.

    In the case of climate change, a further aspect is possibly lacking. In organization theory, the existence of an organization capable of choosing is usually not in doubt. In the case of climate change, on the other hand, it is not clear that we have the global organization to tackle this problem. So I propose the following adjustment to the model for cases where the existence and/or functioning (which may amount to the same thing) of an organization is in doubt:

    'Agency' x Dissatisfaction x Vision x First Steps > Resistance to Change

    'Agency' here is an a quantifying noun, meant in the philosophical sense as the 'capacity to make choices'.

    Communicating Effectively

    I'm always searching for ways to communicate more effectively, especially in the written form, so I asked 4CMR's communications officer. Here are her five tips:
    • Each sentence should have less than fifteen words!
    • Each paragraph should have only one idea - smaller is better!
    • Use the Active not the Passive!
    • Who? why? what? when? & how?
    • Cut out any word that is not necessary!

    Biofuels - the rundown

    Have I forgotten anything?

    Life Cycle Analysis
    - Direct Energy Use (tractors etc)
    - Energy Use in fertilisers
    - N2O emitted from fertilisers
    - Methane emitted from land and cattle

    Land Use
    - Direct and Indirect
    - Direct carbon loss

    Opportunity cost
    - Food
    - Carbon Reduction
    - Water

    Systemic Effects
    - Uses current transport system
    - Avoids better futures

    - Doesn't Displace Fossil Fuels.

    The Earth is like a saucepan

    If you measure transient temperature, don't expect it to tell you the final response. The earth takes time to warm up like a saucepan of water does.

    I wrote this in response to comment-11843 of this blog post.

    This graph purports to show that reality is on a different trajectory to the climate models. What in fact it shows is rather different. It compares a transient response of temperature to greenhouse gases to the final response ('equilibrium') response to that same forcing.

    (It's a bit like if you say to me 'if you put a saucepan of water on the hob I predict it will boil eventually'; and I put it on the hob and then measure the temperature after 30 seconds which is only just above room temperature, and then I say to you 'you were wrong'. I would not comparing like with like; I should wait if I want my water to boil.)

    This graph is COMPLETELY CONSISTENT with the IPCC models. The post could be confusing between transient response and equilibrium, and this post tries to clarify this.


    IPCC TAR IS92a predicts that in 2060 there will be 550ppm CO2 only, forcing at 4.3W/m2, temperature change of 1.5C above the pre-industrial.
    IPCC TAR (2001) IS92a scenario best guess:

    This model result is consistent with the 'bottom graph' here

    The IPCC also predicts climate sensitivity of 3C (best guess) - which would be the result if the CO2 level stabilised at 550ppmCO2(e), which is consistent with the 'top graph' from the same link.

    In other words the bottom graph actually shows best guess 'transient response' and the top one best guess 'equilibrium response'. To compare the two graphs on the same basis (making the top one the 'model' and the bottom 'reality') is extremely misleading.


    2060 - CO2 at 550ppm

    Forcing at 4.3W/m2

    Temperature change at 1.5C above preind

    Climate sensitivity at 3C +/- 1.5C

    Plotting on our graph

    I'm afraid to say that I find this graph completely typical of all the 'sceptical' posts that I've seen - completely correct except for a 'minor' flaw in comprehension. This is usually the flaw in almost-experts - the 'minor' structural assumptions make a big difference!
    Investigating this has taken me two hours in total; or about £40 in lost other work.

    Let me say that I am completely open to scientific arguments and I find it very helpful in getting to the bottom of things to attack a problem sceptically (as long as there is no bias in that scepticism). But every time I feel that there may be a good argument, I feel disappointed and
    that I have wasted my time, or that my points are viewed as marginal when they are actually structurally extremely important.

    I do not want to have a political position on this, only listen to evidence and arguments. I do not have a closed mind but I won't be easily convinced on any structural point by anyone who has a 'position', because the mental effort in taking out the scientific 'signal' from the
    political 'noise' is too great.

    This particular case and the general question of climate change is emphatically is NOT closed. I am emphatically open to understanding the climate system more just in
    non-political way (how does this system work; how can we represent feedbacks etc etc.) But I just won't be spending any more time considering this case in detail, or really other general points where people's motivation for scientific statements are political hobby horses (where people know in advance what result they want). I think I have to draw some sort of line under what you might call CSPNs 'Climate Science Political Movements' and 'Climate Sceptic Political Movements' (as opposed to the usual highly detailed structural scientific scepticism, which has no political bias).

    Note that these criticisms can be applied to both 'sides'.

    Knowing what you are aiming for

    Here is a quote from Goethe:

    "I respect the man who knows distinctly what he wishes. The greater part of all mischief in the world arises from the fact that men do not sufficiently understand their own aims. They have undertaken to build a tower, and spend no more labor on the foundation than would be necessary to erect a hut"
    - Johann Wolfgang von Goethe

    Oxymorons and Effective Argument

    Don't disagree; but do raise precise objections

    I recently looked up the definition of 'oxymoron'.
    1. (Rhetoric). A figure of speech in which a pair of opposed or markedly contradictory terms are placed in conjunction for emphasis.
    2. More generally: a contradiction in terms.
    (Source: Oxford English Dictionary)
    I had previously thought that the definition of an oxymorons was (2.) a self-contradiction. However, in fact an oxymoron, in the older sense (1.) is the concatenation of two concepts which are almost opposite. The intersection of two opposed concepts is considerably more precise a concept than the intersection of two similar concepts.

    On a similar track I've been struggling for some time on how to effectively disagree. Disagreeing when best done may be a bit like an oxymoron; it allows the common ground to be specified more exactly.

    Disagreeing effectively is pretty important, especially in the case of complex issues where a degree of consensus is important. People may want to disagree effectively, because they want to
    • understand each other better;
    • get to the bottom of things;
    • come to a collective or consensual decision is order to take collective action.
    Quite often these factors are combined.

    Disagreeing is difficult to pull off for a number of reasons. Mostly this is because people feel threatened if you disagree. That is because individuals' identity or self-worth is often wrapped up with what you agree or disagree about. If you attack their arguments, you are often felt as if you are attacking the person themselves.

    A second and related argument is that broad, imprecise, concepts are often understood differently by different people. So what you are attacking might be quite different from what is being defended. (Tongue in cheek...) ...I'm often struck by how rubbish other people's arguments are, and how I have much superior arguments. But if people were to look at my own expressed work, they might similarly criticize it. We are comparing our own mental representation of our ideas to our understanding of someone else's expression of their ideas. Both the saying and the listening are opportunities for misunderstanding however good the original idea.

    Agreeing is perhaps a way of being simple. The content of political agreement e.g. in the case of voting for a particular party might be broadly 'forget about the details the key point is X': where X might be 'we want broadly more/less government/social support'.

    Disagreeing is perhaps a way of being precise. So if you are 'being more precise' then say so: you are not attacking them, but rather providing an alternative view that can give a more exact crossover.

    Disagreeing is also sometimes a way of generating a useful alternative representation of a problem. If your representation of a problem is alternative, then just say so. In this case, it behooves you to express yourself well. The easiest way is to appeal to more general thoughts

    For these reasons and more the best way to disagree according to 'how to win friends and influence people' is not to do it at all. But there remains some benefit to argument and critique; it makes our arguments more precise and more solid.

    How to argue and critique given time constraints is another important question. Perhaps, then express the argument that is being made and make a single comment to it. This is positive and win/win for both parties.

    Getting out alive

    In general, there are two elements to a successful resolution of a serious crisis:
    • Firstly, 'get out of it alive'.
    • Secondly, 'make sure it doesn't happen again'.
    In regard to the current financial crisis, we need to address both elements. Satisfying the first criterion is both urgent and important, whereas the second is important, but slightly less urgent. It would be good if policy could address both elements. However, the policies needed may in principle be different, or even opposite for the two elements. A policy should not be rejected on the grounds that it only addresses one of the two, so long as it is understood that it is not the whole short/long term solution.

    Arguments such as "we shouldn't do those things that got us into this mess in the first place" or "we need a sustainable solutions not a sticking plaster" sound good but are actually fallacious. When your financial life is in danger, just when your environmental or personal life is in danger, the solutions differ. If your house is on fire 'sustainable' or 'ethical' solutions might be nice to have, but are completely secondary considerations to getting out of your house alive.

    Solutions however must work. In other words they must be effective - i.e. do what they intend to do, and be broadly sound and robust. Being 'sound and robust' sounds a bit like being 'sustainable', but there are important differences. 'Sustainability' is sort of a council to perfection, avoiding rapid use of non-renewable resources sometimes adding extra 'ethical' criteria to decision making- whereas 'sound and robust' just means a solution which basically works under a variety of different circumstances. What we need is to tackle unsustainability, and particularly critical unsustainability; not expect our solutions to be perfectly sustainable according to every criterion.

    It's quite clear what 'getting out alive' means in personal context, and in the case of global warming it is fairly straightforward. In the case of financial crisis it is less clear, but avoiding systemic meltdown and a great depression is usually the underlying motivation for government action. More on this some other time.

    Capital and Money

    Just a quick note of clarification. What is (financial) capital? And what is money? And which part of money is cash?

    in this context means net worth - i.e. the difference between the assets of a bank and the liabilities of the bank. I appreciate this might be confusing since it is an entirely different definition than physical capital - factories and such like.

    'Cash': more precisely, 'Monetary Base' or M0. Cash or deposits of the Bank of England that can be freely convertible into cash. I refer to 'monetary base' colloquially as 'cash', because that is what it is!

    'Broad money' or M3. This definition contains bank deposits as well as 'monetary base'. Bank deposits are liabilities on the banks to pay the depositor cash on demand. I refer to 'broad money' colloquially as 'money'. Tim Joslin calls deposits 'electronic money' as far as I am aware.

    N.B. Banks have two requirements governing their operation: they must have enough cash and they must have enough capital in order to lend.


    I have come to the following draft conclusions:
    a) The banking system is short of capital and it can't get it from joe public when the future outlook (and government involvement) is so uncertain
    b) The non-banking system is short of cash, and can't get that cash from the banks without getting into more debt.

    The banking system can be recapitalized by creating New Banks (see earlier posts), not recapitalising the old banks.

    The non-banking system can get more cash but how? Printing money and some non-house inflation might be a good option.

    What does a carbon price mean??

    What is a good carbon tax? Well a good start would be $100/tonne of CO2.
    What does a carbon tax of $100/tonne CO2 (10c/kgCO2) actually mean??

    Let's relate it to some other quantities:
    Petrol has a 2.3kg of CO2/litre or 10.47kg CO2/gallon
    So the tax adds 23c to a litre of petrol or $1.05 to a gallon of 'gas'

    Crude oil has a carbon content of 0.43 metric tons CO2/barrel []. So the tax adds $43 per barrel of oil.

    In electricity, the average carbon footprint is around 0.5kg CO2/kWh (0.4kg for gas 1.0kg for coal). So this tax adds 4c/kWh to gas electricity and about 10c/kWh to coal electricity.

    How much revenue would this tax gather? If we each emit 20tonnes CO2 (US data) then this would make $2000 per person per year. This money could be spent by the government, used to reduce other taxes or used to reduce the government deficit. If that falls to 10tonnes, there would be $1000 per person per year.

    If we say have a £50/tCO2 tax, this would at present make £500 per person, £500x60m=£30,000m=£30bn in total.

    By comparison, here are the tax takes in 2006/7 (From )
    Income tax: £147.8bn NIC: £87.3bn VAT: £77.4bn Corporation tax £44.8bn

    So a carbon tax at this level could replace approximately 40% of VAT.

    A profitable supermarket versus a profitable bank

    This post just follows up from the last where I compared a bank to a supermarket which retains it's earnings. There is an important difference between the two, which helps to clarify the point that has been made.

    As far as I can see, the difference between an earnings retained Sainsburys (if excess profit-as-cash isn't given back to shareholders but retained, say in a vault) and the desert-island bank - is that Sainsburys sucks in cash; whereas the desert island bank has an outstanding /obligation to receive cash/ which may or not be covered by any 'real' cash existing in the system (it is conceivable that there is not enough cash & deposits in the system to substitute for cash). Bank deposits /can /substitute for cash (until all the deposits are used up) but in this thought-experiment world, there can be a retained obligation for the guy to supply something (cash) which he can't get from anywhere since it does not exist outside the banks and the central banks. In that case there will be large amount of unrequited demand for cash (the debt obligation).

    There appears to be only a few ways that cash can be got into the non-bank system, to supply the outstanding obligation. The main options are if the cash in the bank or central bank is used to buy up real assets. Presumably if the bank(-owners) have market power then they would be able to enforce as low cash-price for the assets in exchange for the outstanding debts (in other words there will be a fall in asset prices). In other words, the removal of the outstanding debt obligation /does not have to be /in the form of a default; it could be that the bank invests in property directly; or that the earnings are distributed to shareholders, who themselves invest in property. However, the bankruptcy choice is /more likely/ if asset values fall (and if the decision rest primarily with the debtor) because bankruptcy transforms the obligation to hand over the now-low-value asset rather than a costly cash-obligation.

    Thus deleveraging will cause a fall in asset values and either
    a) a settlement of the outstanding debt due to the banks or the shareholders of the bank physically buying real assets in exchange for cash
    b) default and the exact same process taking place, except that the banks get less for their money

    in the same way that in an upturn the reverse is true (leveraging is accompanied by increasing asset prices and low default rates).

    I'm not sure of the real world relevance of this primordial example but it does perhaps emphasize that giving banks cash in exchange for assets will not solve the problem, because the key is the cash shortage in the real economy and not within the banks.

    Is Banking A Ponzi Scheme?

    A common argument* (to the effect that banking is a Ponzi scheme) is considered below**

    [* Note: The argument considered is the one (imperfectly expressed) below. There may be other arguments claiming that banking in general, or in certain circumstances, is a Ponzi scheme, which may be true, but are not considered here.]

    [** Second Note: I'm no longer sure that the argument is false. Although 'Ponzi scheme' is pretty imprecise word. The aspect I'm not sure about is that banks may have a monopoly over 'created' money and there may be the potential for a sort of 'short squeeze' on bank deposits/cash.]

    When the rate of interest charged by banks on loans is greater than that charged on deposits, does banking constitute some sort of Ponzi scheme? Here is the argument:

    Imagine a desert island consisting of one guy and a bank.

    There is a certain amount of cash in a desert island economy (lets say £100) and it belongs to the bank. This is helpful because then the bank needs capital and liquidity to make loans and the guy wants some money. Let's say that banks need to have both capital (net assets) of £100 and liquidity (cash) of £100 in order to loan £1000 (both a liquidity requirement of 10% and a capital requirement of 10%).

    So the bank on a desert island has £100 in cash. Through the wonders of fractional reserve electronic banking it can lend someone £1000 as an electronic deposit at an interest rate of (say) 10% per year. So long the guy doesn't want to withdraw this money in cash (aha the bank has only £100 in cash, so that would be impossible!) then the bank can create a deposit of £1000 and a outstanding loan of £1000. Let's say the deposit pays 5% per year from the bank to the guy and the loan pays 10% per year from the guy to the bank.

    This guy is stupid and does nothing with his deposits. After a year, the deposit in the bank expands to £1050 and the loan outstanding amount expands to £1100.

    The bank wants the principal plus interest back (£1100). But the guy has only £1050 of 'money' (deposits). In fact, since in our thought-experiment world, outside the bank there is only £1050 of money in total in the economy! So when all the debts are canceled by the deposits the bank is still owed £50. Money conservation (so the argument goes) implies that there is not enough money to pay back the bank, because amounts outstanding on the loan increase faster than outstanding amounts on the deposits!

    Hence, banking requires an ever increasing amount of new money created to pay back the old.
    So someone has to default. More debt is required to keep the thing going!! A Ponzi scheme!!

    This is a very simple argument. However, is it true?

    Is it true for any profitable institution? Say a supermarket? A supermarket makes profit - more money comes in than goes out. What does it do with the profit? Is it recycled, or do all the bank notes always end up with the supermarket? Usually the profit is either distributed to shareholders or kept as assets on the supermarket vault. Does any profitable institution eventually suck the whole economy dry of money? Or is that money usually given back to shareholders or used to buy real assets?

    Is it the same with the bank? Can't the desert island bank just pay back it's shareholders, or buy some real estate. In this example, the profits from the rest of the economy are ploughed back to the bank, and the bank gets richer.

    So in the original situation, the bank uses it's £50 profit to buy the guy's garage (in the open market), paying off his debt. Then there are no outstanding debts. Of course, since the bank made some profit at the small guys expense, the garage ownership got transferred from the small guy to the bank. The bank has ended up one garage richer and the guy has ended up one garage poorer. The bank makes the new asset cancel the existing debt obligation.

    Now let's say that the man is poor, with no garages or other assets to sell. In that case he goes bankrupt and defaults because he does not have anything to pay back the bank. The bank has to write off the asset and the bank loses the excess asset that it thought it had.

    So what happens depends on whether there are assets to transfer in exchange for the debt. But there is no 'money conservation problem'. There is only a default problem if the poor guy has nothing to sell to the bank, in which case the poor chap is bust. Otherwise the bank gets more stuff (not money).


    Let's introduce growth into the economy.

    Let's now say that the guy is a builder; he started off with one house with garage; however this time he does not just sit on his electronic money. This builder instead transfers £1000 in electronic money (deposits) to a brick supplier who supplies bricks and the builder builds a second house plus two sheds. He sells the second house (plus shed) to the brick supplier for £1050, leaving him with a second shed worth £50.

    What is the financial situation?
    The brick supplier starts with zero, and then received £1000 of deposits (in exchange for the bricks). This grows into £1050 of deposits (in the bank), and then is paid back to the builder leaving £0.

    The builder starts with £0, gets a £1000 deposits from the bank in exchange for £1000 of debt. He pays £1000 of deposits to the brick supplier. After 1 year he receives £1050 of deposits back from the brick supplier. He then has £1050 of deposits and £1100 of debt. He uses the £1050 deposits to pay off £1050 of debt, leaving himself with £50 of debt (ie obligations to the bank). He then sells the second shed to the bank for £50 in cash. He deposits the £50 cash at the bank, paying off the deposit. The final situation is exactly the same as before, except that the bank now has a shed.

    This is productive economic growth and is not a problem, albeit one where the product of the growth goes to the bank in exchange for finance.

    There is no Ponzi scheme. There is a certain amount of financialization - transfer of assets to the financial sector, but no shortage of money.

    The mistake is to see the obligations to the bank - and in particular the remaining obligation £50 to the bank as being a bit of 'negative money'. It is not. It is an obligation to the bank. This obligation can be paid back with any sort of asset, not necessarily a bank deposit or cash. The bank creates a net obligation to itself of £50 through it's hard-nosed practice of charging more interest on its loans than it donates on its deposit (and - we might add - it has a lot of sometimes free implicit government support). But it does not induce a money shortage. It just achieves, at the end, more of the assets in the economy to itself in exchange for being profitable.

    Powering India from the Rajastan Desert

    How much solar could be got from the Indian desert?

    Well, the 'Great Indian Desert' is 200,000km2. [ ]
    Let's conservatively assume 10W/m2 (10MW/km2) That makes 2000GW or 1kW for 2billion people. So India can power it's existing energy consumption from the Thar desert, even with 2billion people ; but it can't power an american (10kW/person) level of consumption from this source.

    Powering China from the Gobi Desert

    Just thought I'd do some calculations specifically about the Gobi desert.

    [The tone of this post has changed slightly from "wow china has a lot of people" to "wow there's lots of space in the Gobi, we can power the world from up there"; to "wow it's bitingly cold up there".... :)]

    The Gobi is Northerly, high up and is dry in Summer. It's cold and snow-laden in winter however. It has an area of around 500,000 square miles (1,300,000 square km). [Source: ]

    [ ]
    Can we do Solar here? The temperature in winter seems to be cold. Around -15 to -25 Celsius. There might be a problem with water pipes involved in Concentrated Solar Power freezing. Even the mean annual temperature seems to be quite low - around zero e.g. at Sivantse (-2.5C) or Ulaanbaatar (3C).

    So it's not clear that we can do CSP on the Gobi plateau. Maybe we should ask a (Chinese) engineer? You could try using anti-freeze as a coolant but mirrors and pipes are probably going to be unpleasant and expensive to erect in biting -20C to -30C temperatures and strong Siberian winds.

    Using (hopefully cold-resistant) photovoltaics might be a better plan.
    [ ]
    Let's say (generously) they achieve 5W/m2 [Similar to Bavarian Solar Park]

    Let's say that 1million square km can be used. Then the Gobi can provide 5,000GW. That's about one third of total world energy consumption and 5kW for 1 billion people.

    But it's still a bit chilly up there. And PV is likely to be expensive, (remember you've got to pay for the systems integration, not just the panels).

    What about wind? 2W/m2, (assume only 0.5 million square km - if it's mountainous or even hilly then the valleys are less useful), 1000GW = 1kW per person for a billion people. Maybe not the whole story, but a significant input to China's energy consumption. It's high up in UlanBator and very windy.

    Surely therefore wind (cheap; can be done now) is the one to go for? Wind is notoriously intermittent but my guess is that the Gobi is big enough and continental wind currents reliable enough to give some assurity.

    My conclusion from this post is:

    a) If renewables are reasonably feasible on the Gobi then they could power a large fraction (wind) or all (solar) of China's energy consumption.
    b) However, the economic costs and engineering difficulties in the Gobi should not be underestimated, specifically the Siberian conditions (freezing temperatures, biting winds, windchill in the -40s permafrost?).
    c) Wind seems the best option (can deal with mountainous terrain without huge costs), and (by carpetting every hill and plateau in the Gobi) could make a contribution of about 1000GW to China's energy needs
    d) If Solar is possible up there, then Solar can power all of China, but I'm sceptical about the total systems costs of doing so at present,

    Is a 'Renewables Only' View US-Centric?

    It will be difficult for China and India to live off their own renewables

    David Mackay has written in detail about the question 'Can Britain live off its own renewables' in his new book (

    The broad answer to this question is that to make an impact renewable energy sources need to be 'country sized' and Britain does not really have 'country sized' areas to devote to energy generation, except perhaps offshore in the Atlantic or in foreign far-flung deserts (and even then there remain formidable technical, political and economic barriers).

    Renewable energy sources have a power density around 1-5Watts per square metre. To achieve 5000Watts per person requires1000-5000-square metres per person. To power the entire population requires 50,000-300,000km2 of land (between one fifth and all the land in Britain).

    Here are some interesting figures for other countries:

    Country__Population__Area (km2)_Density(km-2)_Land pp (m2)


    Broadly speaking, this suggests that it will be difficult for China and India to live off their own renewables. Asia is where the future of the global economy (and of future emissions growth) lies. Of course, we see that for US (and in the future for the world in total) this constraint is not as important; but this shouldn't distract us from the need to find a solution that can be adopted in Asia too.

    This the view that renewables are the whole answer may be somewhat US centric.
    For reasonably local alternatives to coal in USA, China and India it may be that 'renewables' may be only part of the answer. Achieving a cost of electricity lower than coal must be our number one objective, but fundamentally we need an energy source that will suit India and China too.

    The joys of Open Office and Zotero! (but save in MS Word .doc format using bookmarks for Zotero references)

    Just a quick update about my favorite formats to use!

    I've previously posted about the joys of (free, open source, easy to use) OpenOffice Writer over the dreaded (expensive, commercial, horrible) Microsoft Word; and the joys of (free, open source, easy to use) Zotero over the dreaded (expensive, commercial, horrible) Endnote.

    However, the .doc format is, however, ubiquitous and if you start passing round .odt people get upset. But you don't need to use Microsoft Word in order to save in Word format! Open Office can save in Microsoft Word format (and PDF, Latex and MediaWiki for that matter)! You can also still use Zotero.

    The particular referencing convention I tend to use is Author-Date (Harvard Reference Format 1) which stores the references as Endnotes, and I format using Bookmarks. Bookmarks are the format for use in word documents.

    Comments: Zotero has an annoying habit of going back to Reference Marks when you click the set document preferences button. You need to ensure you stay on bookmarks if you do this. Zotero is fairly stable, but occasionally there are problems. It's best to backup your work regularly anyway.

    What level of concern about climate change is justified? Part One.

    This post is about the motivation for this blog. So it's an important post. Perhaps this post should have come at the start. Anyway, diving in... what are the key facts of the matter about climate change?

    Firstly, we know there is an important natural greenhouse effect on Earth. The sun, which is hot (at an effective temperature of 5000C) emits electromagnetic radiation at a high energy (high frequency; low wavelength - mostly in the visible and ultra-violet spectra). The Earth, which is warm (about 14C) re-emits electromagnetic radiation mostly at low energies (in the infrared spectra). Some of this infra red radiation is absorbed by certain gases in the atmosphere (water vapour and carbon dioxide) and then re-radiated. Half of this re-radiating heat radiation goes back down to earth, leading to a higher equilibrium surface temperature. We can easily calculate what the temperature of the earth would be without greenhouse gases - about minus 15Celsius. So we know that the temperature of the Earth is about 30Celsius higher than it would otherwise be, due to the effect of these gases. It seems that water vapour and carbon dioxide are the two most important of these gases, although other gases such as methane are also important.

    Water vapour is the most important component of the greenhouse effect, but the concentration of water vapour in the atmosphere depends on temperature. The second most important gas carbon dioxide had an atmospheric concentration of about 280 parts per million by volume (ppmv) before human industrialisation (and after the ice ages where it dropped to 180 ppmv).

    The most basic climate model w0uld suggest that a 100% effective greenhouse would raise (absolute) temperatures by 2^(1/4) or about 20%*250K=50 Celsius. This can be compared to the observed temperature increase of about 30 Celsius.

    Simple models (similar to those of Arrhenius) suggest that the doubling of carbon dioxide concentrations from 280 to 560ppmv would raise global average temperatures by approximately 5C. Complex (General Circulation) models, and an analysis of the forcings in the ice ages (see previous post) suggest an average temperature rise of 3C for a doubling of CO2 concentrations, but with a probability range between about 1.2C - 6C (although there is non-zero chance of temperature rises above the maximum in this range).

    Whilst there are arguments why the temperature might be less than the 3C, there are also arguments why it might be higher than this. How do observations of the whole world compare?

    Next post I will discuss the observational record and what the estimates of climate sensitivity mean for us.