By Jeff Swartz, Director of International Policy at the International Emissions Trading Association (IETA)
With carbon pricing policies emerging around the world and the recent show of public support for carbon pricing from 74 national governments and more than 1,000 businesses, one piece of the puzzle that needs to be solved is how to connect systems to create an international carbon pricing framework.
In the lead up to the Paris negotiations this December, governments from around the world – including China, South Africa and Russia – have signaled their willingness to apply a price on carbon, yet businesses and civil society know that we will not be able to move towards a fully functional low-carbon global economy by operating under a fragmented system of international carbon pricing policies. Furthermore, the IPCC’s verdict on the need to increase international cooperation on climate mitigation policies highlights the need for an international carbon pricing framework.
Secretary General of the United Nations Ban Ki Moon agreeed in 2012 suggesting, “We need to move beyond gross domestic product as our main measure of progress, and fashion a sustainable development index that puts people first,” and Nobel Prize-winning economist Joseph Stiglitz said in 2008, “GDP tells you nothing about sustainability.”
Even Simon Kuznets, who first coined the term GDP acknowledged in his original report to the US Congress 1934 that, "The welfare of a nation can scarcely be inferred from a measurement of national income."
Taking up the call for a better, more wholesome way to measure progress, the Social Progress Index, offers a framework for measuring the multiple aspects of social progress based on three dimensions: basic needs for survival, foundations of wellbeing, and opportunity. It does not measure how much money is spent on policies or services that support these dimensions, but rather the experiences of citizens.
Michael Green, CEO of the Social Progress Index, gives the following Ted Talk to explain how the index measures the welfare of societies and what its policy implications are. He reveals a dramatic reordering of nations according to social progress.
Inequality is of concern for at least three reasons. First, lower inequality per se is an objective for a decent society. Second, lower inequality improves the efficiency of economic growth in achieving poverty reduction. Third, high inequality impedes growth itself, through its impact on social cohesion and the investment climate.
"You need to have the ability to delay gratification. You have to focus and you have to have a clear mind.”
- Zhang Lei, Chairman and CEO of Hillhouse Capital Management, one of the largest equities investment firms in Asia, speaking on his longterm investment strategy. Hillhouse, based in Beijing, typically invests in consumer, internet and media, medical treatment and healthcare, advanced manufacturing and commodity related sectors and manages $10 billion for leading endowments, sovereign funds, pensions and family offices. Zhang also serves as a board member for several Asian companies, including Jingdong (formerly 360Buy), Blue Moon, Qunar and MNC/Global Mediacom.
These are some of the views and reports relevant to our readers that caught our attention this week.
Three reasons investors are beginning to take sustainability seriously
Most of the ingredients for a healthy, secure, and fulfilling existence come to us from nature. Food, clean water, pollination, and natural hazard protection are all essential goods and services that underpin our economy and secure our wellbeing. But business models that exploit these benefits unsustainably are intensifying pressure on our planet's natural resources, putting their future – and ours – in jeopardy. How can we relieve this pressure before it is too late? As a first step, we need to recognise that rapidly declining natural systems are bad news for business. There is a two-way street between the economy and the environment: businesses damage the environment, and the damaged environment then creates risks to the bottom lines of businesses. But why should members of the investment community care?
Does transparency improve governance? Reviewing evidence from 16 experimental evaluations
Journalist's Resource- Harvard Kennedy School
The idea that transparency can make institutions more effective and provide greater accountability and better results for the public seems uncontroversial on the surface. But scholars and bureaucrats who have been involved in the wave of transparency initiatives over the past decade continue to debate the particular merits of various approaches. Some commentators have been troubled that as a reaction to scrutiny, malfeasance and inefficiency could increasingly be kept hidden and transparency could erode public trust in institutions and personal privacy. The many types of transparency initiatives around the globe are often confused, making sharp distinctions all the more essential.
“The most calamitous failures of prediction usually have a lot in common. We focus on those signals that tell a story about the world as we would like it to be, not how it really is. We ignore the risks that are hardest to measure, even when they pose the greatest threats...We abhor uncertainty even when it is an irreducible part of the problem we are trying to solve.” (Silver 2012)
Each year governments invest billions of dollars towards long-term development. Yet their investment decisions are engulfed in deep uncertainty – about long-term demography, economic growth, technological developments, cost of energy, the impact of climate change, and a host of other factors. Deep uncertainties are difficult to acknowledge, understand, and manage. We are more comfortable facing risks we can quantify and solving problems for which we have familiar, well-honed tools. Compounding the problem, analysts and decision makers routinely face pressure to demonstrate that a decision is risk-free. Political and cultural expediency presses them to ignore rather than acknowledge uncertainty and present their decision as advantageous and certain. Such thinking can keep us in the dark about the real threats to our decision, and may lead us to make brittle decisions that fail when the future surprises us.
The variation in investment among developing countries is truly remarkable. Over the course of the 30-year period between 1980--2010---a period of relative calm in the global economy that is often referred to as the "Great Moderation"[*]---the investment rate in developing countries ranged from a whopping 90 percent (Armenia in 1990) to a dismal 1 percent (Liberia in 2003). This variability is more than twice that of variance in economic growth---a topic that has preoccupied many more generations of researchers---and much of this variability stems from the developing world.
International long-term private finance to developing countries has changed dramatically in the wake of the global financial crisis. Caught in “post-crisis blues”, as my World Bank colleagues Jeff Chelsky, Claire Morel and Mabruk Kabir called it in a recent Economic Premise, some traditional sources of long-term finance are strained, and alternatives have not been able to adequately compensate. Private financing of infrastructure has been particularly hurt.
The Chinese economy has changed dramatically over the last three decades. While its per-capita income was only a third of that of Sub-Saharan Africa in 1978, it has now reached an upper-middle income status, lifting more than half a billion people out of poverty. The numbers are dramatic: per capita income has doubled for more than a billion people in just 12 years. What was once a primarily rural, agricultural economy has been transformed into an increasingly urban and diversified economic structure, with decentralization and market-based relations rising relative to the traditional government driven command-based economy.