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  • Investors play with global poor

    Jean Ziegler, UN Special Rapporteur on the Right to Food, has called the exploding food crisis “a silent mass murder.” In an interview in the French daily Liberation on April 14, he said, “We are heading for a very long period of rioting, conflicts [and] waves of uncontrollable regional instability marked by the despair of the most vulnerable populations.” He blamed globalization and multinationals for “monopolizing the riches of the earth,” and said that a mass uprising of starving people against their persecutors is “just as possible as the French Revolution was.” In some places, this is already happening. In Haiti, where the cost of rice has nearly doubled since December, the prime minister was fired this month by opposition senators after more than a week of riots over the cost of staple foods. Violent protests over food prices have also been set off in Bangladesh, where rice has also doubled; in the Ivory Coast, where food prices have soared by 30 to 60 percent from one week to the next; and in Egypt, Uzbekistan, Yemen, the Philippines, Thailand, Indonesia and Italy.

    In an April 21 Wall Street Journal article titled “Load Up the Pantry,” Brett Arends observed that the food riots now seen in the developing world could soon be affecting Americans as well. Rocketing food prices are not a passing phase but are actually accelerating. He recommends hoarding food – not because he is actually expecting a shortage but as an investment, because “food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund.” Arends goes on:

    The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people are joining the middle class each year, and that means they want to eat more and better food. A secondary reason has been the growing demand for ethanol as a fuel additive. That’s soaking up some of the corn supply.2

    That’s the rationale published in the Journal of Wall Street, the financial community that brought you the housing bubble, the derivatives bubble, and now the commodities bubble, producing the subprime crisis, the credit crisis, and the oil crisis. The main reason for the food crisis, says this author, is that the Chinese and Indian middle classes are eating better. Really? Rice has been the staple food of half the world for centuries, and it is hardly rich man’s fare. Moreover, according to an April 2008 analysis from the United Nations’ Food and Agriculture Organization, food consumption of grains has gone up by only one percent since 2006.3 That hardly explains the fact that the price of rice has spiked by 75 percent in just two months. The price of Thai 100 per cent B grade white rice, considered the world’s benchmark, has tripled since early 2007; and it jumped 10 percent in just one week. The fact that corn is being diverted to fuel, while no doubt a contributing factor, is also insufficient to explain these sudden jumps in price. World population growth rates have dropped dramatically since the 1980s, and grain availability has continued to outpace population.4 Biofuels have drained off some of this grain, but biofuels did not suddenly happen, and neither did the rise of the Asian middle class. If those were the chief factors, the rise in food prices would have been gradual and predictable to match.

    Another explanation for the sudden jump in grain prices is not mentioned by this Wall Street Journal writer but is suggested by other analysts. William Pfaff wrote in the April 16 International Herald Tribune:

    [M]ore fundamental is the effect of speculation in food as a commodity – like oil and precious metals. It has become a haven for financial investors fleeing from paper assets tainted by subprime mortgages and other toxic credit products. The influx of buyers drives prices and makes food unaffordable for the world’s poor. “Fund money flowing into agriculture has boosted prices,” Standard Chartered Bank food commodities analyst Abah Ofon told the media. “It’s fashionable. This is the year of agricultural commodities.”5

    The “hot money” that has fled the collapsed real estate bubble is now moving into the commodities bubble, and that includes food. “Hot money” is an influx of speculative capital in search of high rates of return, quickly moving from one market to another. It moves, however, not because the products are better (the traditional justification for price-setting according to “free market forces”) but because the speculative “spread” is better. Money is invested not in making real goods and services but simply in making more money. Food prices are being driven by speculators, and today that includes ordinary investors like you and me, who can now gamble in agricultural futures through ETFs that have opened up a lucrative market formerly available only to big investment players.

    Conventional economic theory says that prices are driven up when “demand” exceeds “supply.” But in this case “demand” does not mean the number of hands reaching out for food. It means the amount of money competing for existing supplies. The global food crisis has resulted from an increase, not in the number of mouths to be fed, but simply in the price. It is the money supply that has gone up, and it is investment money in search of quick profits that is largely driving food prices up. Much of this seems to be happening in the futures market, where fund managers seek to maximize their profits by using futures contracts. Balzli and Horning explain:

    The futures market is a traditional tool for farmers to sell their harvests ahead of time. In a futures contract, quantities, prices and delivery dates are fixed, sometimes even before crops have been planted. Futures contracts allow farmers and grain wholesalers a measure of protection against adverse weather conditions and excessive price fluctuations. . . . But now speculators are taking advantage of this mechanism. They can buy futures contracts for wheat, for example, at a low price, betting that the price will go up. If the price of the grain rises by the agreed delivery date, they profit. Some experts now believe these investors have taken over the market, buying futures at unprecedented levels and driving up short-term prices. Since last August, this mechanism has led to a doubling in the price of rice.

    The authors quote grain wholesaler Greg Warner, who says what is happening now in the grain futures market is unprecedented. “What we normally have is a predictable group of sellers and buyers — mainly farmers and silo operators.” But the landscape has changed since the influx of large index funds into the futures market. “Prices keep climbing up and up.” Warner calculates that financial investors now hold the rights to two complete annual harvests of a type of grain traded in Chicago called “soft red winter wheat.” He calls these developments “stunning” and points to them as “evidence that capitalism is literally consuming itself.”6

    What about investing in agribusinesses such as Monsanto, which have promoted the “Green Revolution” through the bioengineering of foods and the production of GMO (genetically modified) seeds, synthetic fertilizers, and herbicide and pesticide sprays? Won’t these corporations, at least, help to alleviate the global food crisis?

    To the contrary, say critics, these businesses too are just driving food prices up. Monsanto’s patented GMO seeds have been genetically engineered so that they cannot reproduce but must be purchased every year from the company. Small farmers who have fallen for the hype of greater productivity and subjected their land to these seeds and chemicals have found that not only have their yields been reduced but that the land will no longer bear anything except GMO seeds.7 Farmers who can no longer afford the seeds are priced out of the market, handing monopoly control over to the agribusiness giants that can then raise prices to whatever the market will bear; and in the case of food, it will bear a lot, right up to the point of slavery. As Henry Kissinger once famously said, “Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.”

    What can you invest in, then, that actually would help relieve the global food crisis? One possibility is local organic farming. “Community-supported agriculture” (CSA) is a model of food production, sales, and distribution aimed at increasing the quality of food and the care given to land, plants and animals, while reducing losses and risks for producers. A variety of CSA systems are now in use worldwide, allowing small-scale commercial farmers and gardeners to have a successful, small-scale closed market while providing their customer-members with a regular delivery or pick-up of healthy local produce. The USDA provides a list of CSA addresses and websites.8

    That still leaves the problem of speculation in food futures. How can parasitic profits to non-producing middlemen be eliminated while still protecting farmers? The futures market was first created for farmers, who needed to be able to lock in a price today that would cover their costs and return a reasonable profit later. One interesting proposal is to return to the policy of “farm parity pricing” enacted during the 1930s. It ensured that the prices received by farmers covered the prices they paid for input plus a reasonable profit. If the farmers could not get the parity price, the government would buy their output, put it into storage, and sell it later. The government actually made a small profit on these transactions; food prices were kept stable; and the family farm system was preserved as the safeguard of the national food supply. With the push for “globalization” in later decades, farm parity was replaced with farm “subsidies” that favored foods for export over local markets, and large corporate farms engaged in chemical farming over sustainable farming, forcing thousands of family farmers out of business.

    Farm parity pricing could help, but a complete solution to the problem of global inflation would require an overhaul of the private central banking system that has created one bubble after another for the last century. (See E. Brown, “Market Meltdown: The End of a 300 Year Ponzi Scheme,” webofdebt.com/articles, September 3, 2007.)

    And if you want to invest in the commodities boom without guilt? You can buy gold, which is no one’s staple food or fuel.

  • Carbon emissions to double twenty years early

     

    The paper predicts the world reaching a level of emissions 20 years earlier than that predicted by the groundbreaking Stern Review by British economist Nicholas Stern.

    It says the global effort to cut greenhouse gases will need to be much larger to avoid the projected scenario.

    “Larger and earlier cuts in developed country emissions will be required than previously thought, and major deviations from baselines will be required in developing countries by 2020,” the paper says.

    “It is hard to see how the required cuts could be achieved without all major developing, as well as developed, countries adopting economy-wide policies to reduce emissions.”

    Prof Garnaut, an economist who heads the Government’s Garnaut Review, is preparing the research with three other Australian academics for the Oxford Review of Economic Policy.

    The Garnaut Review’s interim report, released in February, described a dire outlook for global warming and recommended developed nations pursue emissions cuts of 70-90 per cent by 2050.

    In the “platinum age” – a term coined by Prof Garnaut for the current period of exceptionally fast economic growth led by China and India – fossil-fuel emissions are spiralling.

    “CO2 emissions from fossil-fuel burning increased by only one per cent a year on average in the 1990s, but grew by three per cent a year from 2000 to 2005,” the draft paper says.

    “Since 2000, non-OECD emissions have been growing almost six times as fast as OECD emissions, accounting for 85 per cent of the growth in emissions.”

    Under platinum age projections, the academics say China will be responsible for 37 per cent of global emissions by 2030.

    The projections suggest emissions will grow by 2.5 per cent a year in the 2005-2030 period to a level of 83 billion tonnes, almost double their current level.

    The authors say in light of this scenario, developed countries would have to make emissions cuts by 2020 at or above the top end of the range being discussed in global talks.

    Major developing countries would also have to commit themselves to demanding and binding targets instead of undertaking voluntary efforts, a key sticking point in post-Kyoto talks.

    “Without all major emitters binding themselves to economy-wide targets or policies, given rapid emissions growth, the prospects for the global climate change mitigation effort are bleak.”

  • Stern backs equity in per capita emissions

    Climate change economist Nicholas Stern has urged that the world move to equal per capita emissions by 2050, a move that would require developed countries as a whole to cut their emissions by about 80%.

    Stern makes the call in a paper co-written with director of the Institute of Sustainable Development and International Relations Laurence Tubiana for a progressive governance summit hosted by UK Prime Minister Gordon Brown.

    “From the point of view of equity the numbers are stark,” Stern says.

    “The currently rich countries are responsible for around 70% of the existing stock [of global greenhouse gases], and are continuing to contribute substantially more to stock increases than developing countries. The United States, Canada and Australia each emit over 20 tonnes of CO2e (i.e. from all GHGs) per capita, Europe and Japan over 10 tonnes, China more than 5 tonnes, India around 2 tonnes, and most of sub-Saharan Africa much less than 1 tonne.”

    Stern says reforming the Clean Development Mechanism must be a key element of building an equitable, efficient and effective global climate deal.

    The current Clean Development Mechanism is “slow, cumbersome and very ‘micro’”, he says.
    “Trading on the scale required to reach the type of targets discussed requires a much simpler, ‘wholesale’ system.”

    “Wholesale measures can include technological benchmarks such as employing carbon capture and storage (currently excluded from CDM), or sectoral benchmarks such as getting below a certain amount of CO2 per tonne of cement. Programmatic CDM would allow whole programs of investment – for example in urban transport – to qualify.”

    Other “key elements” of an effective and fair global deal nominated by Stern are:

    • defining a global target for 2050, with intermediate targets to keep countries on track and provide certainty to the private sector;
    • building a genuinely global carbon market, by linking regional schemes;
    • establishing sectoral agreements to provide for partial commitments in emerging countries and address concerns over trade competition and ‘carbon leakage’ (“ideally … through common participation in carbon pricing schemes”);
    • funding the development, demonstration and transfer of low-carbon technology;
    • financing reduced emissions from deforestation (“for $10 billion to $15 billion per year, a program could be constructed that could stop up to half of deforestation – the cost of abatement can be roughly estimated at around $5 per tonne of CO2“); and
    • funding adaptation, particularly given climate change’s disproportionate impact on the poorest and most vulnerable.

    “For progressive leaders engaged in reforming world politics along the lines of justice and social and economic inclusion, climate change offers powerful leverage,” Stern and Tubiana write.

    “Climate change is par excellence an inspiring cause for internationalism: it involves not only states but requires the solidarity and perception of a common destiny by all the world’s citizens.”

    The paper cites the 2007 Australian federal election as an example of a government being “thrown out of office” due to a perceived lack of action on climate change.

  • Climate critics pushing narrow agenda

    Critics of programs such as the federal Energy Efficiency Opportunities program and Victoria’s EREP scheme are really just asking to be “left alone” to pursue their “own narrow interests”, says energy efficiency expert Alan Pears.

    Pears also outlined a strategy to allow the government to act more quickly on energy efficient appliances and criticised energy market rules for hampering the deployment of cogeneration.

    No perfect solution

    Critics such as ExxonMobil who claim government energy efficiency schemes are simply crude interventions in business processes “are really asking to be allowed to be left alone acting in their own narrow interests as a global business, rather than acting in Asutralia’s or the environment’s,” Pears told CE Daily.

    Pears, adjunct professor at Melbourne’s RMIT University and co-director of consultancy Sustainable Solutions, said emissions trading and carbon taxes could also be described as crude interventions.

    “There is no perfect intervention,” he said.

    If companies were fully on top of energy efficiency they would have comprehensive energy management and monitoring systems in place, he said.

    “Many of them do not.”

    Pears said energy efficiency programs need to be retained and accompanied by government measures to help risks of lost production associated with implementing innovative technologies.

    “For many businesses, because energy is 1% to 3% of costs, to innovate to save energy leaves them open to much larger risks if something goes wrong.”

    Industry needs support to test new equipment to minimise these risks, he said.

    ‘Overhaul needed of appliance energy efficiency regime’

    Pears said current government efforts to ensure appliances sold in Australia are energy efficient are woefully inadequate.

    It takes “several years” for it to dawn that products such as digital televisions or set-top boxes are a problem, and then several more years before Minimum Energy Performance Standards (MEPS) are implemented, he said.

    By that time a whole generation of energy-inefficient products are in Australian homes, he said.

    Pears called for a system along the lines of safety approvals procedures which would require those wanting to import or manufacture appliances for sale in Australia to provide a statement indicating what they have done to ensure the appliance is energy efficient.

    If international benchmarks exist for the product, the statement could reference these.

    If there are no standards, the importer or manufacturer could set out how they have attempted to make the appliance efficient and provide data on matters such as its standby power consumption.

    This would provide feedback to the companies that energy efficiency is a key concern and would also provide the government with useful data on appliance energy consumption, Pears said.

    Cogeneration setback

    Pears added that the deployment of cogeneration in Australia, which produces useful power and heat and consequently far lower emissions of greenhouse gases than conventional generation, had been massively stymied by existing energy market rules.

    “If you don’t have the right mix of heat and electricity requirements to match what an on-site cogeneration plant could generate you have to start selling across the boundary,” Pears said.

    “And as soon as you do, you start to hit problems” under current energy market rules, he said.

    “I think energy market structures are one of the biggest barriers to energy efficiency and emissions reduction that we have,” Pears said.

    Pears also called for an overhaul of the first homebuyers scheme to favour purchasers of energy efficient, smaller homes.

    Trading not yet ‘well-proven’

    In a submission to the Garnaut Review, not yet on the review website, Pears cautions that emissions trading is not yet “well-proven” as a policy response to climate change.

    “On this basis, it should not be treated as a replacement for a comprehensive range of policy tools, but as one element of a suite of responses. As we learn more over time, we will gain confidence and competence and its actual role will become clearer. A premature shift away from existing policy tools and measures is a very high risk strategy.”

    “Closure of existing [energy efficiency] programs bsed on the hope or belief that emissions trading will replace them would involve a serious loss of momentum in response,” Pears says in the submission.

    The submission says businesses are “typically far from optimal in their use of energy and resources”, partly because of information barriers “within and between organisations”.

  • Government flags measures to complement trading

    Federal climate change department chief Martin Parkinson yesterday named three areas which he thought would require ‘complementary measures’ in addition to emissions trading.

    And, as the Wilkins review of existing climate programs calls for public submissions, Parkinson said he hopes state governments will undertake similar assessments of what programs should stay and go.

    Energy efficiency an ‘obvious’ candidate

    Energy efficiency measures and support for research and development are two “obvious” areas where emissions trading alone will not achieve what is required, federal Department of Climate Change chief Martin Parkinson told yesterday’s Climate Action Network Australia conference in Sydney.

    Parkinson added that energy transmission networks were another potential candidate for so-called “complementary measures”.

    “What is complementary to the emissions trading scheme?,” Parkinson put to the conference.

    “It has to be policies that go to the heart of delivering solutions that the price mechanism alone isn’t fixing because there are other public policy or externality problems.”

    Parkinson said energy efficiency was an obvious candidate, “but I think we need to be careful about just how much we think energy efficiency is not subject to some resolution through price”.

    So too is research and development, Parkinson said. “Clearly it is just a given in economics that a price signal alone won’t drive enough research and development. Now then there is a real question is energy somehow an even more extreme version of this phenomenon or is it just the same as everything else?”

    Parkinson said a third possible area, “which is I think a little bit more open to debate but I sort of tend to lean towards … is around the issue of some network externalities, it goes to things like transmission lines and the like”.

    Avoiding perverse consequences from a renewables target

    A renewable energy target and feed-in tariffs are “clearly … going to be an important contributor to the long-term emissions reductions required by the Australian economy,” Parkinson added.

    “The question is how best to encourage the scale-up in use of renewable technologies, without any perverse consequences or perverse incentives.”

    “It will be important to recognise that the more work that the renewable energy target does the less work the trading scheme does. If the emissions trading scheme is doing less work, the permit price of the emissions trading scheme will be lower.”

    “That will mean there will be less incentive to seek out search out lowest cost abatement in Australia. So there is some quite complex interactions between the renewable energy target and the emissions trading scheme.”

    Wilkins calls for submissions

    Parkinson’s comments on complementary measures come just a few days after the review of climate programs headed by Roger Wilkins issued a call for public submissions.

    “Australia has a significant investment in programs that are designed to address climate change issues both domestically and internationally,” Wilkins said in a Department of Finance and Deregulation statement issued last week.

    “Now is an opportune time to review this activity in light of the proposed introduction of an emissions trading scheme and adopt a more strategic, principled and disciplined approach,” Wilkins said.

    Submissions close May 20 and should go to reviews@finance.gov.au.

    Meanwhile, Parkinson told the CANA conference the government hoped to see “similar reviews undertaken at the state level as we go forward”.

    Taking Australia ‘to the front of the pack’

    Parkinson said the government’s aim in designing the emissions trading scheme is “to propel Australia towards the front of the pack”.

    Parkinson said the department was working on the assumption that petrol and other fuels would be included in the scheme, “and I think that is a real breakthrough”.

    The form of measures to deal with concerns raised by groups such as the Brotherhood of St Laurence about the effects of policy measures on the poorest is still an open question, but “the development of them is not”, Parkinson added.

    Ways to address the equity implications “are central” to the thinking on scheme design, he said.

    Stopping coal exports not the answer’

    Parkinson defended Australia’s black coal export industry, saying it would make no difference if Australia ceased coal exports.

    “I see quite a lot of commentary that seems to imply that … Australia should stop exporting coal,” he said.

    “There are 70 countries in the world that have commercially viable coal deposits. The vast bulk of the developing countries are [particularly] concerned about energy security. Even if Australia were to stop exporting coal tomorrow we still need to find a solution to the clean coal problem. Because they are going to use it no matter what we do.”

    “So I think a key part of our challenge is to be how can we help find a solution to the coal issue and how can we then disseminate that in a way that gets the countries that are concerned about energy security concerned about the cost of energy that can actually get them to adopt the clean coal solutions.”

    “It has also the advantage for us that if we do that we can sell as a package the coal and the way to make sure it doesn’t pollute.”

    “I think this is a challenge for you as a group as to how you want to position yourselves in this debate.”

    Parkinson added that Australia’s efforts to adapt to continued climate change were “really underdone” and referred delegates to a speech he gave earlier this month to the Planning Institute of Australia.

    “I do think that adaptation is the elephant in the room. It’s mitigation that gets people’s attention, but it’s adaptation which we are really going to have to address.”

  • Lifeline radio benefits poor twice

    Research and development of the Lifeline radio has been fully funded thanks to the following donors generosity:

    Anglo American Corporation
    Ashden Awards for Renewable Energy
    Mr Bradley Feld
    Mr Leonard J Fassler
    NASDAQ Stock Exchange (Tech Museum of Innovation Awards)
    The Body Shop Foundation
    Donna Kabe-Stear and Davis Stear
    Vodafone Group Foundation UK

    Features and benefits

    The antenna is an ordinary piece of wire which can be easily replaced. As many antennas break easily, this one can be removed and replaced at will.

    The rainbow-shaped dial scale has large print for easy reading, even for the visually impaired. Each band is colour coded for everyone to understand.

    The dial scale and Lifeline radio can be custom produced in any combinations of colours and should not reflect political parties.

    Four-band coverage, AM/FM/SW1/SW2, ensures access to many channels and perspectives.

    Each knob is purposefully designed a different shape.

    The sound quality is excellent, enabling groups of up to 40 people to hear ?clearly.

    The winding handle (on the back) can be turned in either direction to charge the radio. Fully charged, the Lifeline can play for up to 24 hours.

    The solar panel is housed in a detachable waterproof casing on a 2.5-metre lead with magnetised clips on top to hold it in place. The Lifeline radio operates in extreme temperatures, rain, moisture, dust, sand and humidity.

    A child can grip the handle without difficulty. While the Lifeline radio is larger and lighter than the Freeplay radios used in other development projects, its unusual shape enables children to carry it easily.