Wednesday, September 28, 2005
Global Warming: Who pay the cost?
The recent climatic events in such a different countries as USA, China, Germany and Chile, with massive flooding and devastation, means a clear signal that something definitely goes wrong with the global climate. But is it?. There is no conclusive opinion about the real basis of global warming. Recently, some researcher have said that most of the actual models to evaluate global climate, and measuring global temperatures changes, are based on an isolated phenomenon of freezing temperatures which took place thousand years ago. As a result, the scientific community is split in two views concerning global warming, one which consider it like a normal cyclical long term pattern, the other one which consider it like a “recent” trend. So, it is hard to build up consensus on the role of mankind on global warming, to what does not look like a single cause to focus on. Anyway, nature can be either gentle or tough. .-
To make matters worst ,the Kyoto Protocol is expecting to have effects no sooner than 2012. Moreover, some countries who signed it up, increased its emissions between 2002 and 2003. In the mean time the effects of global warming is stressing fiscal budget, economy expectations, fuel costs, and the whole fundamentals of economic growth .
So far, macroeconomics has been orientated to equilibrium analysis on the basis of constant natural resources (climate, and technology progress included) endowment ,such that there is no need of environment policy to match the economic growth with the preservation of ecological equilibrium. Most of economic progress is measure considering only the value added on goods and services, but ignoring the value substracted on environment. The impact of Katrine and Rita hurricanes, and other natural disaster are measure only at present time value, but what about future value?.
Markets adapts to the reaction of nature with a pessimistic mood. Guy Sorman said in a recent article, Government is no longer the only way to get through. It is the time for non profit organizations, private initiative, and local community organization to take an active role. An example? CGI (Clinton Global Initiative).-
From the economic point of view, two issues arises on this topics :
a.-Who pay the cost of global warming?. At first glance, it seems that the cost is evenly distributed between the rich(higher prices of oil ,and losses of real states value) and the poor (losses of hopes).The implications is to support those in a more vulnerable position .However ,in the long run less sustainable growth will increase poverty, natural disaster , and shortage of key resources like water.-
b.- How the markets internalize the new restriction on growth?. Green bond markets. Keep an eye on it !.This type of bond is expecting to be more profitable as long as firms is getting more conscious on environment. The prices of these bonds, will increase in the near future as long as it will value the “right” to contaminate. The implications, although not a perfect solution, anyone who buy such bonds today is next to get the benefit of its higher prices. -