economy
Ocean Conference commitments show world on track to protect over 10% of globe’s #MarineAreas by 2020. #SaveOurOcean oceanconference.un.org/prjune9
The Cayman Islands must join this initiative as we are a maritime nation More
#caymancentreofexcellence
NEW YORK – I have been helping countries to overcome financial crises for 30 years, and have studied the economic crises of the twentieth century as background to my advisory work. In all crises, there is an inherent imbalance of power between creditor and debtor. Successful crisis management therefore depends on the creditor’s wisdom. In this regard, I strongly urge Germany to rethink its approach to Greece.
Jeffery Sachs
A financial crisis is caused by a country’s excessive indebtedness, which generally reflects a combination of mismanagement by the debtor country, over-optimism, corruption, and the poor judgment and weak incentives of creditor banks. Greece fits that bill.
Greece was heavily indebted when it joined the eurozone in 2001, with government debt at around 99% of GDP. As a new member, however, Greece was able to borrow easily from 2000 to 2008, and the debt-to-GDP ratio rose to 109%.
When a country’s prosperity depends on the continued inflow of capital, a sudden stop or reversal of financial flows triggers a sharp contraction. In Greece, the easy lending stopped with the 2008 global financial crisis. The economy shrunk by 18% from 2008 to 2011, and unemployment soared from 8% to 18%.
The most obvious cause was lower government spending, which reduced aggregate demand. Public-sector workers lost their jobs, and construction projects ground to a halt. As incomes declined, other domestic sectors collapsed.
Another factor in Greece’s economic collapse is less obvious: the contraction of bank credit. As banks lost their access to interbank credit lines from abroad, they restricted lending and called in outstanding loans. Domestic savers also withdrew their deposits, fearing for the banks’ solvency and – thanks largely to German Finance Minister Wolfgang Schäuble – for their country’s continued eurozone membership. Like shrinking aggregate demand, the contraction of bank loans had a multiplier effect, with growing financial fragility inducing depositors and overseas financial institutions also to withdraw credits and deposits from Greek banks.
In normal circumstances, economies overcome a debt crisis by cutting government deficits, shifting production from domestic sales to exports, and recapitalizing banks. The budget surplus and export revenues allow the economy to service its foreign debt, while bank recapitalization permits renewed credit expansion.
If the export boost is large enough and rapid enough, the earnings it brings largely offset the decline in domestic demand, and overall output is stabilized or even returned to growth. Spain, Ireland, and Portugal were all able to cushion their post-2008 slumps with a surge in export earnings. Remarkably, Greece could not. In fact, Greek export earnings in 2013, at €53 billion, were actually €3 billion lower than in 2008, even after domestic demand collapsed.
That is not surprising, for three reasons. First, because the European rescue packages did not recapitalize the Greek banking sector (the focus was on bailing out German and French banks), potential exporters could not obtain the operating credit required to support their retooling needs. Second, Greece’s economic base is too narrow to support a significant short-term increase in exports. Third, administrative, regulatory, and tax obstacles hindered the export response, especially as the tax increases in the rescue packages made it even harder for small and medium-size enterprises to grow and establish new markets abroad.
In my view, the policy response by Greece’s partners, led by Germany, has been unwise and highly unprofessional. Their approach has been to extend new loans so that Greece can service its existing debts, without restoring Greece’s banking system or promoting its export competitiveness. Greece’s initial €110 billion bailout package, in 2010, went to pay government debts to German and French banks. As a result, Greece owes an ever-larger share of its debt to official creditors: the International Monetary Fund, the European Financial Stability Fund, and, increasingly, the European Central Bank. While Greece’s debts to private creditors have been partly cut, this was too little too late, because it cannot even service its debts to official creditors.
Year after year, Greece’s creditors have promised that the bailout packages would bring about a meaningful rebound in output, employment, and exports. Instead, the country has experienced a depression comparable to the decline in output and employment that Germany suffered from 1930 to 1932, the years that preceded Hitler’s rise. Many Germans may despise Greece’s current Syriza government, which pledged to end the policy of creditor-imposed austerity; but four consecutive governments – center-left, technocratic, center-right, and left – have implemented it.
All of these governments have failed. Perhaps Antonis Samaras’s center-right government from 2012 to 2015 came closest to succeeding, but it could not survive, politically, the severe austerity that it was being forced to impose. Nor did Greece’s creditors do anything to help Samaras’s government out of its political bind, even though it was a government they liked.
To overcome an economic crisis, the creditor must be smart and measured. It is right to demand strong reforms of a mismanaged debtor government; but if the debtor is pushed too hard, it is the society that breaks, leading to instability, violence, coups, and pervasive human suffering. While the debtor loses the most, the creditors also lose, as they are not repaid.
The formula for success is to match reforms with debt relief, in line with the real needs of the economy. A smart creditor of Greece would ask some serious and probing questions. How can we help Greece to get credit moving again within the banking system? How can we help Greece to spur exports? What is needed to promote the rapid growth of small and medium-size Greek enterprises?
For five years now, Germany has not asked these questions. Indeed, over time, questions have been replaced by German frustration at Greeks’ alleged indolence, corruption, and incorrigibility. It has become ugly and personal on both sides. And the creditors have failed to propose a realistic approach to Greece’s debts, perhaps out of Germany’s fear that Italy, Portugal, and Spain might ask for relief down the line.
Whatever the reason, Germany has treated Greece badly, failing to offer the empathy, analysis, and debt relief that are required. And if it did so to scare Italy and Spain, it should be reminded of Kant’s categorical imperative: Countries, like individuals, should be treated as ends, not means.
Creditors are sometimes wise and sometimes incredibly stupid. America, Britain, and France were incredibly stupid in the 1920s to impose excessive reparations payments on Germany after World War I. In the 1940s and 1950s, the United States was a wise creditor, giving Germany new funds under the Marshall Plan, followed by debt relief in 1953.
In the 1980s, the US was a bad creditor when it demanded excessive debt payments from Latin America and Africa; in the 1990s and later, it smartened up, putting debt relief on the table. In 1989, the US was smart to give Poland debt relief (and Germany went along, albeit grudgingly). In 1992, its stupid insistence on strict Russian debt servicing of Soviet-era debts sowed the seeds for today’s bitter relations.
Germany’s demands have brought Greece to the point of near-collapse, with potentially disastrous consequences for Greece, Europe, and Germany’s global reputation. This is a time for wisdom, not rigidity. And wisdom is not softness. Maintaining a peaceful and prosperous Europe is Germany’s most vital responsibility; but it is surely its most vital national interest as well. More
Last year, Chinese millionaires maxed out the quota for EB-5 visas under the U.S.’s Immigrant Investor Program, and recently it was reported that 90% of Australia’s Significant Investor visas were given to Chinese nationals. All over the world, immigrant investor programs are being flooded with applicants from China.
Since 1990, China has gone from being the 7th largest exporter of immigrants to the 4th largest, an increase of more than 125%. Chinese people are emigrating in ever greater numbers, particularly the wealthy. Meanwhile, a recent survey from Barclays shows that 47% of wealthy Chinese would like to emigrate. The response rate for the survey was 29% worldwide.
As more Chinese become wealthy, the number of people who want to emigrate is increasing. So where do wealthy Chinese want to go? Rich Chinese Want to Go to North America
According to the Hurun Report’s “2014 Immigrant Investor White Paper,” the U.S. and Canada are the first choices for wealthy Chinese looking to emigrate.
Top Destinations for Wealthy Chinese Emigrants
Since most high-net-worth Chinese accumulate their wealth in China, from a business perspective it is advantageous for them to remain close to China. So what is involved in getting an immigrant visa to a foreign country?
Requirements for Getting an Immigrant Investor Visa
Types of immigration include immigrant investor programs, skilled worker programs, study abroad, and irregular immigration. Most wealthy Chinese immigrate through investment.
Minimum Investment Required to Immigrate, by Country
Should the Cayman Islands be activly be trying to attract this type of investor tot he Cayman Islands? See http://www.scmp.com/business/companies/article/1677989/li-ka-shing-restructures-group?page=all>
Li Ka-shing yesterday added fresh grist to rumours about his waning interest in Hong Kong as he unveiled a sweeping restructuring of his business empire, switching its base of incorporation to the Cayman Islands from Hong Kong.
Li – the chairman of Cheung Kong (Holdings) and its subsidiary Hutchison Whampoa, which together have a total market capitalisation of HK$661.68 billion – said all of his two flagship companies’ non-property assets, including ports, telecommunications, retail, infrastructure and energy, would be injected into a newly formed company, CK Hutchison Holdings (CKH Holdings), incorporated in the Cayman Islands.
As part of the reorganisation, all property businesses including those overseas in the two companies will be injected into another new entity, Cheung Kong Property Holdings, which will seek a separate listing on the Hong Kong stock exchange by introduction.
CK Property will be one of the largest property companies listed in Hong Kong.
Speaking at a press conference yesterday, Li, the richest man in Hong Kong, said the restructuring would be good for all shareholders.
According to a 70-page announcement filed with the Hong Kong stock exchange, the move is aimed at creating shareholder value as it will enable all the group’s assets to be fully reflected and remove the “layered holding structure” between Cheung Kong and Hutchison.
That would allow shareholders to directly invest in the two separate listed vehicles.
Li, however, rejected suggestions that the proposed reorganisation is a sign of his withdrawal from the city.
“More than 75 per cent of companies that have listed in Hong Kong in the past 10 years or so are incorporated in Cayman Islands, including state-owned enterprises. Have they also lost confidence in Hong Kong?” said Li, adding that the company was just “following the trend”. More
Should the Cayman Islands be trying to fast-track investors like Li Ka-shing in order to spur inward investment and the economy of the Cayman Islands? Editor
NAROBI, Kenya, Monday November 3, 2014, CMC – A top United Nations official has warned that the small islands of the Caribbean will be the first territories in the region to suffer the effects of rising sea levels due to climate change.
Executive Director of the United Nations Environment Program, Achim Steiner, said here on Saturday that the effects of climate change threaten the Caribbean’s tourism industries and, eventually, their “very existence”.
Speaking ahead of Sunday’s release of the Fifth Assessment Report from the Intergovernmental Panel on Climate Change, Steiner said sea-level rise will have an “immediate impact in economic terms” on the Caribbean Small Island Developing States (SIDS), stating that the Caribbean’s tourism infrastructure is 99 per cent along the coastline.
“Many small island nations are in a far more exposed situation simply because their territory is sometimes only two, three, four meters (6.5-13 ft.) above sea level,” he said, adding “therefore their very existence is being threatened.
“The changes also in, for instance, coral reefs and mangroves that are natural barriers and help strengthen the resilience of these countries, if coral reefs are dying then clearly countries become more vulnerable,” he added.
Steiner also cited the impact of more intense hurricanes and other extreme weather events on countries whose economies cannot bear the cost of reconstruction.
On a more hopeful note, he praised proactive efforts by some Caribbean countries, such as Barbados, where “energy efficiency efforts and renewable deployment are now on the agenda of investment and national development planning”.
The efforts of the Barbados government were one reason the United Nations decided to mark 2014 World Environment Day in Barbados, Steiner said. More
Ruth Spencer is a pioneer in the field of solar energy. She promotes renewable technologies to communities throughout her homeland of Antigua and Barbuda, playing a small but important part in helping the country achieve its goal of a 20-percent reduction in the use of fossil fuels by 2020.
She also believes that small non-governmental organisations (NGOs) have a crucial role to play in the bigger projects aimed at tackling the problems caused by the burning of fossil fuels, such as coal, oil and gas.
Spencer, who serves as National Focal Point for the Global Environment Facility (GEF)-Small Grants Programme (SGP) in Antigua and Barbuda, has been at the forefront of an initiative to bring representatives of civil society, business owners and NGOs together to educate them about the dangers posed by climate change.
“The GEF/SGP is going to be the delivery mechanism to get to the communities, preparing them well in advance for what is to come,” she told IPS.
The GEF Small Grants Programme in the Eastern Caribbean is administered by the United Nations office in Barbados.
“Since climate change is heavily impacting the twin islands of Antigua and Barbuda, it is important that we bring all the stakeholders together,” said Spencer, a Yale development economist who also coordinates the East Caribbean Marine Managed Areas Network funded by the German government.
“The coastal developments are very much at risk and we wanted to share the findings of the IPCC report with them to let them see for themselves what all these scientists are saying,” Spencer told IPS.
“We are in a small island so we have to build synergies, we have to network, we have to partner to assist each other. By providing the information, they can be aware and we are going to continue doing follow up….so together we can tackle the problem in a holistic manner,” she added.
The United Nations’ Intergovernmental Panel on Climate Change (IPCC) has sent governments a final draft of its synthesis report, which paints a harsh picture of what is causing global warming and what it will do to humans and the environment. It also describes what can be done about it.
Ruleta Camacho, project coordinator for the sustainable island resource management mechanism within Antigua and Barbuda’s Ministry of the Environment, told IPS there is documented observation of sea level rise which has resulted in coastal erosion and infrastructure destruction on the coastline.
She said there is also evidence of ocean acidification and coral bleaching, an increase in the prevalence of extreme weather events – extreme drought conditions and extreme rainfall events – all of which affect the country’s vital tourism industry.
“The drought and the rainfall events have impacts on the tourism sector because it impacts the ancillary services – the drought affects your productivity of local food products as well as your supply of water to the hotel industry,” she said.
“And then you have the rainfall events impacting the flooding so you have days where you cannot access certain sites and you have flood conditions which affect not only the hotels in terms of the guests but it also affects the staff that work at the hotels. If we get a direct hit from a storm we have significant instant dropoff in the productivity levels in the hotel sector.”
Antigua and Barbuda, which is known for its sandy beaches and luxurious resorts, draws nearly one million visitors each year. Tourism accounts for 60 to 75 percent of the country’s gross domestic product, and employs nearly 90 percent of the population.
Like Camacho, Ediniz Norde, an environment officer, believes sea level rise is likely to worsen existing environmental stresses such as a scarcity of freshwater for drinking and other uses.
“Many years ago in St. John’s we had seawater intrusion all the way up to Tanner Street. It cut the street in half. It used to be a whole street and now there is a big gutter running through it, a ship was lodged in Tanner Street,” she recalled.
“Now it only shows if we have these levels of sea water rising that this is going to be a reality here in Antigua and Barbuda,” Norde told IPS. “This is how far the water can get and this is how much of our environment, of our earth space that we can lose in St. John’s. It’s a reality that we won’t be able to shy away from if we don’t act now.”
As the earth’s climate continues to warm, rainfall in Antigua and Barbuda is projected to decrease, and winds and rainfall associated with episodic hurricanes are projected to become more intense. Scientists say these changes would likely amplify the impact of sea level rise on the islands.
But Camacho said climate change presents opportunities for Antigua and Barbuda and the country must do its part to implement mitigation measures.
She explained that early moves towards mitigation and building renewable energy infrastructure can bring long-term economic benefits.
“If we retrain our population early enough in terms of our technical expertise and getting into the renewable market, we can actually lead the way in the Caribbean and we can offer services to other Caribbean countries and that’s a positive economic step,” she said.
“Additionally, the quicker we get into the renewable market, the lower our energy cost will be and if we can get our energy costs down, it opens us for economic productivity in other sectors, not just tourism.
“If we can get our electricity costs down we can have financial resources that would have gone toward your electricity bills freed up for improvement of the [tourism] industry and you can have a better product being offered,” she added. More
The UK has been at the forefront of integrating climate change action into economic decision-making
The link between economic growth and action to reduce the risks of climate change is the focus of the New Climate Economy report issued on Tuesday.
Its credentials are impressive and its findings emphatic.
Released by a global commission of 24 global economic leaders from government, business, finance and academia, led by former president of Mexico Felipe Calderón, the year-long study has involved individuals from over 100 organisations across every continent and advised by a panel of world-leading economists chaired by Lord Nicholas Stern.
It has come to a clear conclusion – action on climate change can improve economic performance.
This report provides compelling further evidence that firmly supports the UK’s vision for a global climate deal in Paris 2015 that I launched last week in the city of London – which was clear that prosperity and climate action can go hand in hand.
The reason, the New Climate Economy report concluded, is that raising resource efficiency, stimulating innovation and new investment in infrastructure are making it possible to tackle climate change at the same time as improving economic performance.
That means new opportunities to improve growth, create jobs, boost company profits and spur innovation for all countries that take action now.
The report finds that over the next 15 years, trillions of pounds could be saved by building low-carbon into the key sectors of the global economy that include our cities, agriculture and energy. This could include better connected and more compact cities, through to restoring degraded lands and focusing on a transition to clean energy to improve economic performance and quality of life with lower emissions.
And we are putting this into action. The UK has been at the forefront of developing the climate change policy architecture that can ensure climate action is integrated into economic decision making.
This includes the 2008 Climate Change Act, which was the world’s first long-term, legally-binding national framework for reducing emissions, through our innovative carbon budgets regime. This means that our five year carbon budgets – that will eventually reach out to 2050 – are now being looked at as a potential model in other countries and we have already delivered on our first budget, which has seen a reduction in UK emissions by 24% between 1990 and 2012.
The 2013 Energy Act, for example, is creating the world’s first low-carbon electricity market and we are attracting record amounts of investment in renewables and our low carbon business sector is booming. In renewables, almost £29bn of investment delivered since 2010 and 2013, was a record year – with £8bn invested across the range of renewables technologies.
Electricity generation from renewable sources has doubled since 2010 and now supplies over 15% of the UK’s electricity.
We’re now a world leader in offshore wind – with more installed offshore wind capacity than the rest of the world combined, and supporting 18,300 jobs in the UK.
It has required UK business and international investors to recognise the costs of failure and the benefits of change and it has been sustained by a strong, vocal and committed network of NGOs, pressure groups and activists who have been instrumental in sustaining political will and public acceptance.
Last year, the world’s leading climate scientists, under the IPCC, reaffirmed that the Earth’s climate is indisputably changing, that human activity is the dominant cause – and the longer we leave action, the more difficult and costly it will be to avoid the worst effects. We now have the economics confirming that not only is climate action required to reduce climate risks, but that it is vital to building long-term, sustainable economic growth.
In the run up to the UN climate meeting in Paris next year I am determined that we continue to build on our success at home and expend every effort, and work with determination across government, across the parties, in partnership with business and civil society to reach a global, comprehensive, legally binding climate change deal. More
An Economic Hit Man Speaks Out: John Perkins on How Greece Has Fallen Victim to “Economic Hit Men”
John Perkins
“My sin was ripping off people around the world,” said John Perkins, author of “Confessions of an Economic Hit Man,” at Transitions Bookplace in Chicago, on February 3, 2006. (Photo: Peter Thompson / The New York Times)John Perkins, author of Confessions of an Economic Hit Man, discusses how Greece and other eurozone countries have become the new victims of “economic hit men.”
John Perkins is no stranger to making confessions. His well-known book, Confessions of an Economic Hit Man, revealed how international organizations such as the International Monetary Fund (IMF) and the World Bank, while publicly professing to “save” suffering countries and economies, instead pull a bait-and-switch on their governments: promising startling growth, gleaming new infrastructure projects and a future of economic prosperity – all of which would occur if those countries borrow huge loans from those organizations. Far from achieving runaway economic growth and success, however, these countries instead fall victim to a crippling and unsustainable debt burden.
“That's part of the game: convince people that they're wrong, that they're inferior. The corporatocracy is incredibly good at that.”
That's where the “economic hit men” come in: seemingly ordinary men, with ordinary backgrounds, who travel to these countries and impose the harsh austerity policies prescribed by the IMF and World Bank as “solutions” to the economic hardship they are now experiencing. Men like Perkins were trained to squeeze every last drop of wealth and resources from these sputtering economies, and continue to do so to this day. In this interview, which aired on Dialogos Radio, Perkins talks about how Greece and the eurozone have become the new victims of such “economic hit men.”
Michael Nevradakis: In your book, you write about how you were, for many years, a so-called “economic hit man.” Who are these economic hit men, and what do they do?
John Perkins: Essentially, my job was to identify countries that had resources that our corporations want, and that could be things like oil – or it could be markets – it could be transportation systems. There're so many different things. Once we identified these countries, we arranged huge loans to them, but the money would never actually go to the countries; instead it would go to our own corporations to build infrastructure projects in those countries, things like power plants and highways that benefitted a few wealthy people as well as our own corporations, but not the majority of people who couldn't afford to buy into these things, and yet they were left holding a huge debt, very much like what Greece has today, a phenomenal debt.
And once [they were] bound by that debt, we would go back, usually in the form of the IMF – and in the case of Greece today, it's the IMF and the EU [European Union] – and make tremendous demands on the country: increase taxes, cut back on spending, sell public sector utilities to private companies, things like power companies and water systems, transportation systems, privatize those, and basically become a slave to us, to the corporations, to the IMF, in your case to the EU, and basically, organizations like the World Bank, the IMF, the EU, are tools of the big corporations, what I call the “corporatocracy.”
And before turning specifically to the case of Greece, let's talk a little bit more about the manner in which these economic hit men and these organizations like the IMF operate. You mentioned, of course, how they go in and they work to get these countries into massive debt, that money goes in and then goes straight back out. You also mentioned in your book these overly optimistic growth forecasts that are sold to the politicians of these countries but which really have no resemblance to reality.
Exactly, we'd show that if these investments were made in things like electric energy systems that the economy would grow at phenomenally high rates. The fact of the matter is, when you invest in these big infrastructure projects, you do see economic growth, however, most of that growth reflects the wealthy getting wealthier and wealthier; it doesn't reflect the majority of the people, and we're seeing that in the United States today.
For example, where we can show economic growth, growth in the GDP, but at the same time unemployment may be going up or staying level, and foreclosures on houses may be going up or staying stable. These numbers tend to reflect the very wealthy, since they have a huge percentage of the economy, statistically speaking. Nevertheless, we would show that when you invest in these infrastructure projects, your economy does grow, and yet, we would even show it growing much faster than it ever conceivably would, and that was only used to justify these horrendous, incredibly debilitating loans.
Is there a common theme with respect to the countries typically targeted? Are they, for instance, rich in resources or do they typically possess some other strategic importance to the powers that be?
Yes, all of those. Resources can take many different forms: One is the material resources like minerals or oil; another resource is strategic location; another resource is a big marketplace or cheap labor. So, different countries make different requirements. I think what we're seeing in Europe today isn't any different, and that includes Greece.
What happens once these countries that are targeted are indebted? How do these major powers, these economic hit men, these international organizations come back and get their “pound of flesh,” if you will, from the countries that are heavily in debt?
By insisting that the countries adopt policies that will sell their publicly owned utility companies, water and sewage systems, maybe schools, transportation systems, even jails, to the big corporations. Privatize, privatize. Allow us to build military bases on their soil. Many things can be done, but basically, they become servants to what I call the corporatocracy. You have to remember that today we have a global empire, and it's not an American empire. It's not a national empire. It doesn't help the American people very much. It's a corporate empire, and the big corporations rule. They control the politics of the United States, and to a large degree they control a great deal of the policies of countries like China, around the world.
John, looking specifically now at the case of Greece, of course you mentioned your belief that the country has become the victim of economic hit men and these international organizations . . . what was your reaction when you first heard about the crisis in Greece and the measures that were to be implemented in the country?
I've been following Greece for a long time. I was on Greek television. A Greek film company did a documentary called “Apology of an Economic Hit Man,” and I also spent a lot of time in Iceland and in Ireland. I was invited to Iceland to help encourage the people there to vote on a referendum not to repay their debts, and I did that and encouraged them not to, and they did vote no, and as a result, Iceland is doing quite well now economically compared to the rest of Europe. Ireland, on the other hand: I tried to do the same thing there, but the Irish people apparently voted against the referendum, though there's been many reports that there was a lot of corruption.
In the case of Greece, my reaction was that “Greece is being hit.” There's no question about it. Sure, Greece made mistakes, your leaders made some mistakes, but the people didn't really make the mistakes, and now the people are being asked to pay for the mistakes made by their leaders, often in cahoots with the big banks. So, people make tremendous amounts of money off of these so-called “mistakes,” and now, the people who didn't make the mistakes are being asked to pay the price. That's consistent around the world: We've seen it in Latin America. We've seen it in Asia. We've seen it in so many places around the world. More
The Cayman Islands must be very discriminating as to what pieces of the public sector get sold off. Some sectors, such as water production and distribution, if sold, and without well thought policies, could well have a negative effect on certain sectors of our population, as recent events in Detroit have proved. Editor
Solar is here.
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That’s right. You know the solutions to the climate crisis are available today; we simply need the public (and political) will to implement them. Clean energy is urgently necessary, abundant, and becoming increasingly more affordable. That’s why on June 21, The Climate Reality Project is joining 12 other organizations in a day of action to support clean-energy solutions and show our commitment to bringing solar power to communities around the world.
If you don’t already have plans to take part on Saturday, don’t despair! Here are a few last minute ways to get involved:
The reality is this: solar is affordable. It’s clean. And it’s powerful. The cost of solar panels has plummeted 60 percent since early 2011, and the number of installations keeps growing. The United States now has enough installed solar capacity to power more than 2.2 million homes. In several states, solar power is now competitive with other sources of energy without emitting the dangerous greenhouse gases that cause climate change.
Climate Reality Leaders are the first responders to the climate crisis and lead action across the globe. We’re proud so many of you will be participating on Saturday by hosting presentations, organizing events, and informing others about the benefits of solar power.
The Climate Reality Leadership Corps Team
Solar Array at Caledonian Bank, George Town, Cayman Islands
Lord Stern, the world’s most authoritative climate economist, has issued a stark warning that the financial damage caused by global warming will be considerably greater than current models predict.
This makes it more important than ever to take urgent and drastic action to curb climate change by reducing carbon emissions, he argues.
Lord Stern, who wrote a hugely influential review on the financial implications of climate change in 2006, says the economic models that have been used to calculate the fiscal fallout from climate change are woefully inadequate and severely underestimate the scale of the threat.
As a result, even the recent and hugely authoritative series of reports from the UN Intergovernmental Panel on Climate Change (IPCC) are significantly flawed, he said.
“It is extremely important to understand the severe limitations of standard economic models, such as those cited in the IPCC report, which have made assumptions that simply do not reflect current knowledge about climate change and its … impacts on the economy,” said Lord Stern, a professor at the Grantham Institute, a research centre at the London School of Economics.
Professor Stern and his colleague Dr Simon Dietz will today publish the peer-reviewed findings of their research into climate change economic modelling in the The Economic Journal.
Their review is highly critical of established economic models which, among other things, fail to acknowledge the full breadth of climate change’s likely impact on the economy and are predicated on assumptions about global warming’s effect on output that are “without scientific foundation”.
Professor Stern, whose earlier research said it is far cheaper to tackle climate change now than in the future, added: “I hope our paper will prompt … economists to strive for much better models [and] … help policy-makers and the public recognise the immensity of the potential risks of unmanaged climate change.”
“Models that assume catastrophic damages are not possible fail to take account of the magnitude of the issues and the implications of the science,” he said.
Professor Stern and Dr Dietz say their findings strengthen the case for strong cuts in greenhouse gas emissions and imply that, unless this happens, living standards could even start to decline later this century.
For the study, they modified key features of the “dynamic integrated climate-economy” (Dice) model, initially devised by William Nordhaus in the 1990s. The changes take into account the latest scientific findings and some of the uncertainties about the major risks of climate change that are usually omitted.
The standard Dice model has been used in a wide range of economic studies of the potential impacts of climate change, some of which have been cited in the most recent IPCC report which has been released in three parts over the past nine months.
Dr Dietz said: “While this standard economic model has been useful for economists who estimate the potential impacts of climate change, our paper shows some major improvements are needed before it can reflect the extent of the risks indicated by the science.”
Dr Dietz said his aim was to show how a new version of the model could produce a range of results that are much more representative of the science and economics of climate change, taking into account the uncertainties.
“The new version of this standard economic model, for instance, suggests that the risks from climate change are bigger than portrayed by previous economic models and therefore strengthens the case for strong cuts in emissions of greenhouse gases,” he said.
The new model differs in that it considers a wider temperature range when estimating the impact of doubling the atmospheric concentration of greenhouse gases – a measure of “climate sensitivity”.
Whereas the standard model usually assumes a single temperature for climate sensitivity of about 3C, the new model uses a range of 1.5C to 6C, which the authors say more accurately reflects the scientific consensus.
The standard model also “implausibly” suggests a loss of global output of 50 per cent would only result after a rise in global average temperature of 18C, even though such warming would likely render the Earth uninhabitable for most species, including humans, Dr Dietz contends.
The new model includes the possibility that such damage could occur at much lower levels of global warming. Standard economic models rule out the possibility that global warming of 5-6C above pre-industrial levels could cause catastrophic damages, even though such temperatures have not occurred on Earth for tens of millions of years. Such an assertion, he says, is without scientific foundation and embodies a false assumption that the risks are known, with great confidence, to be small.
The new model also takes into account that climate change can damage not just economic output, but productivity. The standard model assumes that rising levels of greenhouse gases in the atmosphere only affect economic growth in a very limited way, according to Dr Dietz. More
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