Government and regulators need to focus on the systemic risk engendered by excessive compensation. As calendar year 2009 draws to a close, it is bonus season for the financial sector in the West. In the last several months, the need to cap bonuses and compensation packages has been extensively discussed in the context of limiting the future impact of the next financial sector breakdown. On December 9, 2009, the UK was...
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Built on illusion by Jayati Ghosh
The collapse of the Dubai dream is not without any implications; it may be an indication that the travails of finance capitalism are not over. GLOBAL capitalism is in a phase in which it must deal with the fruits of the overextension during the previous boom, and there is no doubt that this is going to be painful. The financial crisis in the United States and some other developed countries...
More »Carbon cuts: Penalty or insurance? by Swaminathan S Anklesaria Aiyar
There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced. The pop version claims that science has proved that global warming that will devastate the earth, that carbon dioxide is a pollutant no less than sewage or...
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There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced.
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The pop version claims that science has proved that global warming that will devastate the earth, that carbon dioxide is a pollutant no less than sewage or radioactive waste, that the west — and, above all, the US — has created most of the carbon in the atmosphere and that on the ‘polluter pays’ principle, the rich polluters — and not than innocents in the Third World — should pay for cleaning up the pollution.
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The scientific version says that our knowledge of the climate suffers from many uncertainties. Nevertheless, we can definitely say that certain gases — notably carbon dioxide and methane — trap the sun’s heat as in a greenhouse, causing warming. This greenhouse effect may be offset or exacerbated by other factors that we do not know enough about and, hence, refer to as natural variations. If our scientific knowledge of climate was at all adequate — as in the case of the movement of planets — we could say exactly what the temperature in 2100 would be, just as we can say what the exact position of the sun and moon will be on January 1, 2100. But since our climate knowledge is so limited, we can only make educated guesses.
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The International Panel on Climate Change (IPCC) has produced a string of guesstimates based on computer models. These guesstimates suggest warming in the range 1.1-6.4° C. The lower end of this range implies warming so minimal that we would scarcely notice it. But warming of 6.4° C could produce catastrophic changes in the climate, sea levels and agriculture. All IPCC reports list key uncertainties affecting the models. So, actual warming could be less than 1.1° C or more than 6.4° C.
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This uncertainty does not mean that humans should ignore global warming. Despite uncertainties, we know that greenhouse gases create a significant chance of a climate catastrophe. Prudent people will take out insurance against a catastrophe that may never happen. The cost of limiting carbon emissions can be viewed as a worthwhile insurance premium.
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The scientific version of the global warming story (we need an insurance policy) is less dramatic than the pop version (we must penalise the sinners). Both versions lead to the conclusion that emissions should be reduced, but have quite different implications for who should pay how much.
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If we knew for certain that carbon was a catastrophic culprit, we could apply the polluter pays principle. There would still be questions on whether to use absolute emission, per-capita emissions, historical accumulation of emissions or some mix of the three in prescribing penalties. Nevertheless, the polluter pays principle could help Copenhagen reach a unanimous conclusion.
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However, if we view carbon reduction as insurance against a disaster that may never happen, it becomes more difficult to decide who should pay what premium. The insurance version regards carbon as a possible pollutant but not a proven one, and this makes it difficult to apply polluter pays rule.
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Moreover, you cannot be a beneficiary of an insurance policy if you pay no premium at all. Insurance companies can ask some beneficiaries to pay more than others, especially those with a bad track record, and so, historically, heavy emitters could be asked to pay more. But all countries would be beneficiaries of global mitigation, and so all would need to pay a basic premium. In the pop version (sin and penalty), the entire cost burden could legitimately be placed on rich polluters. But not in the insurance version.
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India and other developing countries have stressed the per-capita approach to emissions that has the advantage of letting them off the hook completely in the sin-and-penalty version. Of course, developing countries also cite the per-capita principle as a high moral one, saying every human being is entitled to an equal share of the global commons. This argument certainly has some force.
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However, the per-capita approach becomes quite inconvenient for India in the insurance version. Every human benefits from carbon reduction, so every human should pay a premium. The vast majority of humans and, hence, the vast majority of beneficiaries of the insurance policy, are in the Third World. The Chinese and Indians number more than a billion beneficiaries each. It is not logical for 300 million Americans to pay an insurance premium that benefits two billion non-paying Indians and Chinese. The US rejects the sin-and-penalty thesis, and so refuses to accept that China and India should pay nothing while the US shoulders the entire financial burden.
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Current negotiations focus almost entirely on carbon dioxide, although other gases (notably methane) account for half the greenhouse effect. Methane comes from many sources, including rice paddies, sheep and cattle. So, countries growing rice and rearing sheep and cattle contribute to warming too. Methane emissions are tiny compared with carbon emissions. But rice growers have been putting methane into the atmosphere for thousands of years, whereas the western countries have been putting carbon dioxide into the air for barely 250 years.
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Hence, the situation is complicated. The pop version divides the world into good and bad guys, rather like the George W Bush’s version of history, and calls for waterboarding the bad guys. The scientific version has no clear-cut good and bad guys.
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Countries at Copenhagen cannot possibly agree unanimously either on the sin-and-penalty version or the insurance version. Different countries will draw to different degrees on the two versions, mainly with a view to limiting their commitment. Unanimous agreement on a single set of principles looks impossible. What seem likely are different non-binding commitments from different countries. These will add up to far less than what sin-and-penalty NGOs demand. But many Americans will believe that Obama’s limited commitment constitutes a reasonable insurance premium. The debate may continue unresolved for decades.
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There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced.
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<p>
The pop version claims that science has proved that global warming that will devastate the earth, that carbon dioxide is a pollutant no less than sewage or radioactive waste, that the west — and, above all, the US — has created most of the carbon in the atmosphere and that on the ‘polluter pays’ principle, the rich polluters — and not than innocents in the Third World — should pay for cleaning up the pollution.
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The scientific version says that our knowledge of the climate suffers from many uncertainties. Nevertheless, we can definitely say that certain gases — notably carbon dioxide and methane — trap the sun’s heat as in a greenhouse, causing warming. This greenhouse effect may be offset or exacerbated by other factors that we do not know enough about and, hence, refer to as natural variations. If our scientific knowledge of climate was at all adequate — as in the case of the movement of planets — we could say exactly what the temperature in 2100 would be, just as we can say what the exact position of the sun and moon will be on January 1, 2100. But since our climate knowledge is so limited, we can only make educated guesses.
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<p>
The International Panel on Climate Change (IPCC) has produced a string of guesstimates based on computer models. These guesstimates suggest warming in the range 1.1-6.4° C. The lower end of this range implies warming so minimal that we would scarcely notice it. But warming of 6.4° C could produce catastrophic changes in the climate, sea levels and agriculture. All IPCC reports list key uncertainties affecting the models. So, actual warming could be less than 1.1° C or more than 6.4° C.
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<p>
This uncertainty does not mean that humans should ignore global warming. Despite uncertainties, we know that greenhouse gases create a significant chance of a climate catastrophe. Prudent people will take out insurance against a catastrophe that may never happen. The cost of limiting carbon emissions can be viewed as a worthwhile insurance premium.
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<p>
The scientific version of the global warming story (we need an insurance policy) is less dramatic than the pop version (we must penalise the sinners). Both versions lead to the conclusion that emissions should be reduced, but have quite different implications for who should pay how much.
</p>
<p>
If we knew for certain that carbon was a catastrophic culprit, we could apply the polluter pays principle. There would still be questions on whether to use absolute emission, per-capita emissions, historical accumulation of emissions or some mix of the three in prescribing penalties. Nevertheless, the polluter pays principle could help Copenhagen reach a unanimous conclusion.
</p>
<p>
However, if we view carbon reduction as insurance against a disaster that may never happen, it becomes more difficult to decide who should pay what premium. The insurance version regards carbon as a possible pollutant but not a proven one, and this makes it difficult to apply polluter pays rule.
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<p>
Moreover, you cannot be a beneficiary of an insurance policy if you pay no premium at all. Insurance companies can ask some beneficiaries to pay more than others, especially those with a bad track record, and so, historically, heavy emitters could be asked to pay more. But all countries would be beneficiaries of global mitigation, and so all would need to pay a basic premium. In the pop version (sin and penalty), the entire cost burden could legitimately be placed on rich polluters. But not in the insurance version.
</p>
<p>
India and other developing countries have stressed the per-capita approach to emissions that has the advantage of letting them off the hook completely in the sin-and-penalty version. Of course, developing countries also cite the per-capita principle as a high moral one, saying every human being is entitled to an equal share of the global commons. This argument certainly has some force.
</p>
<p>
However, the per-capita approach becomes quite inconvenient for India in the insurance version. Every human benefits from carbon reduction, so every human should pay a premium. The vast majority of humans and, hence, the vast majority of beneficiaries of the insurance policy, are in the Third World. The Chinese and Indians number more than a billion beneficiaries each. It is not logical for 300 million Americans to pay an insurance premium that benefits two billion non-paying Indians and Chinese. The US rejects the sin-and-penalty thesis, and so refuses to accept that China and India should pay nothing while the US shoulders the entire financial burden.
</p>
<p>
Current negotiations focus almost entirely on carbon dioxide, although other gases (notably methane) account for half the greenhouse effect. Methane comes from many sources, including rice paddies, sheep and cattle. So, countries growing rice and rearing sheep and cattle contribute to warming too. Methane emissions are tiny compared with carbon emissions. But rice growers have been putting methane into the atmosphere for thousands of years, whereas the western countries have been putting carbon dioxide into the air for barely 250 years.
</p>
<p>
Hence, the situation is complicated. The pop version divides the world into good and bad guys, rather like the George W Bush’s version of history, and calls for waterboarding the bad guys. The scientific version has no clear-cut good and bad guys.
</p>
<p>
Countries at Copenhagen cannot possibly agree unanimously either on the sin-and-penalty version or the insurance version. Different countries will draw to different degrees on the two versions, mainly with a view to limiting their commitment. Unanimous agreement on a single set of principles looks impossible. What seem likely are different non-binding commitments from different countries. These will add up to far less than what sin-and-penalty NGOs demand. But many Americans will believe that Obama’s limited commitment constitutes a reasonable insurance premium. The debate may continue unresolved for decades.
</p>
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There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced.
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There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced. The pop version claims that science has proved that global warming that will devastate the earth, that carbon dioxide is a pollutant no less than sewage or...
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There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced.
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The pop version claims that science has proved that global warming that will devastate the earth, that carbon dioxide is a pollutant no less than sewage or radioactive waste, that the west — and, above all, the US — has created most of the carbon in the atmosphere and that on the ‘polluter pays’ principle, the rich polluters — and not than innocents in the Third World — should pay for cleaning up the pollution.
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The scientific version says that our knowledge of the climate suffers from many uncertainties. Nevertheless, we can definitely say that certain gases — notably carbon dioxide and methane — trap the sun’s heat as in a greenhouse, causing warming. This greenhouse effect may be offset or exacerbated by other factors that we do not know enough about and, hence, refer to as natural variations. If our scientific knowledge of climate was at all adequate — as in the case of the movement of planets — we could say exactly what the temperature in 2100 would be, just as we can say what the exact position of the sun and moon will be on January 1, 2100. But since our climate knowledge is so limited, we can only make educated guesses.
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The International Panel on Climate Change (IPCC) has produced a string of guesstimates based on computer models. These guesstimates suggest warming in the range 1.1-6.4° C. The lower end of this range implies warming so minimal that we would scarcely notice it. But warming of 6.4° C could produce catastrophic changes in the climate, sea levels and agriculture. All IPCC reports list key uncertainties affecting the models. So, actual warming could be less than 1.1° C or more than 6.4° C.
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This uncertainty does not mean that humans should ignore global warming. Despite uncertainties, we know that greenhouse gases create a significant chance of a climate catastrophe. Prudent people will take out insurance against a catastrophe that may never happen. The cost of limiting carbon emissions can be viewed as a worthwhile insurance premium.
</p>
<p>
The scientific version of the global warming story (we need an insurance policy) is less dramatic than the pop version (we must penalise the sinners). Both versions lead to the conclusion that emissions should be reduced, but have quite different implications for who should pay how much.
</p>
<p>
If we knew for certain that carbon was a catastrophic culprit, we could apply the polluter pays principle. There would still be questions on whether to use absolute emission, per-capita emissions, historical accumulation of emissions or some mix of the three in prescribing penalties. Nevertheless, the polluter pays principle could help Copenhagen reach a unanimous conclusion.
</p>
<p>
However, if we view carbon reduction as insurance against a disaster that may never happen, it becomes more difficult to decide who should pay what premium. The insurance version regards carbon as a possible pollutant but not a proven one, and this makes it difficult to apply polluter pays rule.
</p>
<p>
Moreover, you cannot be a beneficiary of an insurance policy if you pay no premium at all. Insurance companies can ask some beneficiaries to pay more than others, especially those with a bad track record, and so, historically, heavy emitters could be asked to pay more. But all countries would be beneficiaries of global mitigation, and so all would need to pay a basic premium. In the pop version (sin and penalty), the entire cost burden could legitimately be placed on rich polluters. But not in the insurance version.
</p>
<p>
India and other developing countries have stressed the per-capita approach to emissions that has the advantage of letting them off the hook completely in the sin-and-penalty version. Of course, developing countries also cite the per-capita principle as a high moral one, saying every human being is entitled to an equal share of the global commons. This argument certainly has some force.
</p>
<p>
However, the per-capita approach becomes quite inconvenient for India in the insurance version. Every human benefits from carbon reduction, so every human should pay a premium. The vast majority of humans and, hence, the vast majority of beneficiaries of the insurance policy, are in the Third World. The Chinese and Indians number more than a billion beneficiaries each. It is not logical for 300 million Americans to pay an insurance premium that benefits two billion non-paying Indians and Chinese. The US rejects the sin-and-penalty thesis, and so refuses to accept that China and India should pay nothing while the US shoulders the entire financial burden.
</p>
<p>
Current negotiations focus almost entirely on carbon dioxide, although other gases (notably methane) account for half the greenhouse effect. Methane comes from many sources, including rice paddies, sheep and cattle. So, countries growing rice and rearing sheep and cattle contribute to warming too. Methane emissions are tiny compared with carbon emissions. But rice growers have been putting methane into the atmosphere for thousands of years, whereas the western countries have been putting carbon dioxide into the air for barely 250 years.
</p>
<p>
Hence, the situation is complicated. The pop version divides the world into good and bad guys, rather like the George W Bush’s version of history, and calls for waterboarding the bad guys. The scientific version has no clear-cut good and bad guys.
</p>
<p>
Countries at Copenhagen cannot possibly agree unanimously either on the sin-and-penalty version or the insurance version. Different countries will draw to different degrees on the two versions, mainly with a view to limiting their commitment. Unanimous agreement on a single set of principles looks impossible. What seem likely are different non-binding commitments from different countries. These will add up to far less than what sin-and-penalty NGOs demand. But many Americans will believe that Obama’s limited commitment constitutes a reasonable insurance premium. The debate may continue unresolved for decades.
</p>
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There are two versions of the global warming story playing out at the Copenhagen summit. What you usually hear is the pop version, pushed by many NGOs and politicians. Less popular but more cogent is the scientific version, which is altogether more nuanced.
The pop version claims that science has proved that global warming that will devastate the earth, that carbon dioxide is a pollutant no less than sewage or...'
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