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Javier E

How Index Funds May Hurt the Economy - The Atlantic - 0 views

www.theatlantic.com/...618497

economics index funds efficiency concentration competition innovation risk economy

shared by Javier E on 07 Apr 21 - No Cached
  • Thanks to their ultralow fees and stellar long-term performance, these investment vehicles have soaked up more and more money since being developed by Vanguard’s Jack Bogle in the 1970s
  • as of 2016, investors worldwide were pulling more than $300 billion a year out of actively managed funds and pushing more than $500 billion a year into index funds. Some $11 trillion is now invested in index funds, up from $2 trillion a decade ago. And as of 2019, more money is invested in passive funds than in active funds in the United States.
  • Indexing has also gone small, very small. Although many financial institutions offer index funds to their clients, the Big Three control 80 or 90 percent of the market. The Harvard Law professor John Coates has argued that in the near future, just 12 management professionals—meaning a dozen people, not a dozen management committees or firms, mind you—will likely have “practical power over the majority of U.S. public companies.”
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  • Indexing has gone big, very big. For nine in 10 companies on the S&P 500, their largest single shareholder is one of the Big Three. For many, the big indexers control 20 percent or more of their shares. Index funds now control 20 to 30 percent of the American equities market, if not more.
  • The problem is that the public markets have been cornered by a group of investment managers small enough to fit at a lunch counter, dedicated to quiescence and inertia.
  • Passively managed investment options do not just outperform actively managed ones in terms of both better returns and lower fees. They eat their lunch.
  • Let’s imagine that a decade ago you invested $100 in an index fund charging a 0.04 percent fee and $100 in a traditional mutual fund charging a 1.5 percent fee. Let’s also imagine that the index fund tracked the S&P 500, and that the mutual fund ended up returning what the S&P 500 returned. Your passively invested $100 would have turned into $356.66 in 10 years. Your traditionally invested $100 would have turned into $313.37.
  • Actively managed investment options could make up for their higher fees with higher returns. And some do, some of the time. Yet scores of industry and academic studies stretching over decades show that trying to beat the market tends to result in lower returns than just buying the market. Only a quarter of actively managed mutual funds exceeded the returns of their passively managed cousins in the decade leading up to 2019,
  • What might be good for retail investors might not be good for the financial markets, public companies, or the American economy writ large, and the passive revolution’s scope has raised all sorts of hand-wringing and red-flagging. Analysts at Bernstein have called passive investing “worse than Marxism.” The investor Michael Burry, of The Big Short fame, has called it a “bubble,” and a co-head of Goldman Sachs’s investment-management division has warned about froth too. Shortly before his death in 2019, Bogle himself warned that index funds’ dominance might not “serve the national interest.”
  • One primary concern comes from the analysts at Bernstein: “A supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active, market-led capital management.”
  • Active managers direct investment dollars to companies on the basis of those companies’ research-and-development prospects, human capital, regulatory outlook, and so on. They take new information and price it into a company’s stock when buying and selling shares.
  • Passive investors, by contrast, ignore annual reports and market rumors. They do nothing with trading-floor gossip. They make no attempt to research what to invest in and what to skip. Whether holding international or domestic assets, holding stocks or bonds, or using a mutual-fund structure or an ETF structure, they just mirror the market. Big U.S.-stock index funds buy big U.S. stocks just because they’re big U.S. stocks.
  • At least in a Soviet-type centrally planned economy, apparatchiks would be making some attempt to allocate resources efficiently.
  • Passive management is merely a giant phenomenon, not an all-encompassing one. Hundreds of actively managed mutual funds are still out there, as are legions of day traders, hedge funds, and private offices buying and selling and buying and selling. Stock prices still move around, sometimes dramatically, on the basis of new data and new ideas.
  • Still, passive investing may well be degrading the informational content of the markets, messing up price signals and making business decisions harder as a result.
  • When one of these commodities ends up on an index, the firms that use that commodity in their business see a 6 percent increase in costs and a 40 percent decrease in operating profits, relative to firms without exposure to the commodity, the academics found
  • Their theory is that ETF trading shifts prices in subtle ways, making it harder for businesses to know when to buy their gold and copper. Corporate executives “are being influenced by what happens in the futures market, and what happens in the futures market is being influenced by ETF trading,”
  • More broadly, the Bernstein analysts, among others, worry that index-linked investing is increasing correlation, whereby the prices of stocks, bonds, and other assets move up or down or sideways together.
  • the price fluctuations of a newly indexed stock “magically and quickly” change. A firm’s shares begin to move “more closely with its 499 new neighbors and less closely with the rest of the market. It is as if it has joined a new school of fish.”
  • A far bigger concern is that the rise of the indexers might be making American firms less competitive, through “common ownership,” in which the mega-asset managers control large stakes in multiple competitors in the same industry. The passive firms control big chunks of the airlines American, Delta, JetBlue, Southwest, and United, for instance
  • The rise of common ownership might be perverting corporate behavior in weird ways, academics argue. Think about the incentives like this: Let’s imagine that you are a major shareholder in a public widget company. We’d expect you to desire—insist, even—that the company fight for market share and profits. But now imagine that you are a major shareholder in all the important widget companies. You would no longer really care which one succeeded, particularly not if one company doing better meant another company doing worse. You’d just care about the widget sector’s corporate profits, which would go up if the widget companies quit competing with one another and started raising prices to pad their bottom line.
  • one major paper showed that common ownership of airline stocks had the effect of raising ticket prices by 3 to 7 percent.
  • A separate study showed that consumers are paying higher prices for prescription medicines because generic-drug makers have less incentive to compete with the companies making name-brand drugs.
  • Yet another study showed that common ownership is leading retail banks to charge higher prices.
  • Across firms, executive compensation seems to be more closely linked to a company’s performance when its shareholders are not invested in the company’s rivals, the study found. In other words, firms stop paying managers for performance when owned by the same people who own their rivals.
  • The market clout of the indexers raises other questions too. The actual owners of the stocks—not the index-fund managers but the people putting money into index funds—have little say over the companies they own. Vanguard, Fidelity, and State Street, not Mom and Dad, vote in shareholder elections
  • In fact, the Big Three cast roughly 25 percent of the votes in S&P 500 companies.
  • In an interview with The Wall Street Journal, the chief executive officer of State Street said he thought it was “almost inevitable, when you see this kind of concentration, that it probably will make sense to do something about it.”
  • But figuring out what the appropriate restrictions are depends on determining just what the problem with the indexers is—are they distorting price signals, raising the cost of consumer goods, posing financial systemic risk, or do they just have the market cornered? Then, what to do about it? Common ownership is not a problem the government is used to handling.
  • , thanks to the passive revolution, a broad variety and huge number of firms might have less incentive to compete. The effect on the real economy might look a lot like that of rising corporate concentration. And the two phenomena might be catalyzing one another, as index investing increases the number of mergers and makes them more lucrative.
  • In recent decades, the whole economy has gone on autopilot. Index-fund investment is hyperconcentrated. So is online retail. So are pharmaceuticals. So is broadband. Name an industry, and it is likely dominated by a handful of giant players. That has led to all sorts of deleterious downstream effects: suppressing workers’ wages, raising consumer prices, stifling innovation, stoking inequality, and suffocating business creation
  • The problem is not just the indexers. It is the public markets they reflect, where more chaos, more speculation, more risk, more innovation, and more competition are desperately needed.
Javier E

Transcript: Ezra Klein Interviews Robinson Meyer - The New York Times - 0 views

www.nytimes.com/...transcript-robinson-meyer.html

transition energy policy history environmentalism us IRA implementation

shared by Javier E on 08 Jul 23 - No Cached
  • Implementation matters, but it’s harder to cover because it’s happening in all parts of the country simultaneously. There isn’t a huge Republican-Democratic fight over it, so there isn’t the conflict that draws the attention to it
  • we sort of implicitly treat policy like it’s this binary one-zero condition. One, you pass a bill, and the thing is going to happen. Zero, you didn’t, and it won’t.
  • ROBINSON MEYER: You can almost divide the law up into different kind of sectors, right? You have the renewable build-out. You have EVs. You have carbon capture. You have all these other decarbonizing technologies the law is trying to encourage
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  • that’s particularly true on the I.R.A., which has to build all these things in the real world.
  • we’re trying to do industrial physical transformation at a speed and scale unheralded in American history. This is bigger than anything we have done at this speed ever.
  • The money is beginning to move out the door now, but we’re on a clock. Climate change is not like some other issues where if you don’t solve it this year, it is exactly the same to solve it next year. This is an issue where every year you don’t solve it, the amount of greenhouse gases in the atmosphere builds, warming builds, the effects compound
  • Solve, frankly, isn’t the right word there because all we can do is abate, a lot of the problems now baked in. So how is it going, and who can actually walk us through that?
  • Robinson Meyer is the founding executive editor of heatmap.news
  • why do all these numbers differ so much? How big is this thing?
  • in electric vehicles and in the effort, kind of this dual effort in the law, to both encourage Americans to buy and use electric vehicles and then also to build a domestic manufacturing base for electric vehicles.
  • on both counts, the data’s really good on electric vehicles. And that’s where we’re getting the fastest response from industry and the clearest response from industry to the law.
  • ROBINSON MEYER: Factories are getting planned. Steel’s going in the ground. The financing for those factories is locked down. It seems like they’re definitely going to happen. They’re permitted. Companies are excited about them. Large Fortune 500 automakers are confidently and with certainty planning for an electric vehicle future, and they’re building the factories to do that in the United States. They’re also building the factories to do that not just in blue states. And so to some degree, we can see the political certainty for electric vehicles going forward.
  • in other parts of the law, partially due to just vagaries of how the law is being implemented, tax credits where the fine print hasn’t worked out yet, it’s too early to say whether the law is working and how it’s going and whether it’s going to accomplish its goal
  • EZRA KLEIN: I always find this very funny in a way. The Congressional Budget Office scored it. They thought it would make about $380 billion in climate investments over a decade. So then you have all these other analyses coming out.
  • But there’s actually this huge range of outcomes in between where the thing passes, and maybe what you wanted to have happen happens. Maybe it doesn’t. Implementation is where all this rubber meets the road
  • the Rhodium Group, which is a consulting firm, they think it could be as high as $522 billion, which is a big difference. Then there’s this Goldman Sachs estimate, which the administration loves, where they say they’re projecting $1.2 trillion in incentives —
  • ROBINSON MEYER: All the numbers differ because most of the important incentives, most of the important tax credits and subsidies in the I.R.A., are uncapped. There’s no limit to how much the government might spend on them. All that matters is that some private citizen or firm or organization come to the government and is like, hey, we did this. You said you’d give us money for it. Give us the money.
  • because of that, different banks have their own energy system models, their own models of the economy. Different research groups have their own models.
  • we know it’s going to be wrong because the Congressional Budget Office is actually quite constrained in how it can predict how these tax credits are taken up. And it’s constrained by the technology that’s out there in the country right now.
  • The C.B.O. can only look at the number of electrolyzers, kind of the existing hydrogen infrastructure in the country, and be like, well, they’re probably all going to use these tax credits. And so I think they said that there would be about $5 billion of take up for the hydrogen tax credits.
  • But sometimes money gets allocated, and then costs overrun, and there delays, and you can’t get the permits, and so on, and the thing never gets built
  • the fact that the estimates are going up is to them early evidence that this is going well. There is a lot of applications. People want the tax credits. They want to build these new factories, et cetera.
  • a huge fallacy that we make in policy all the time is assuming that once money is allocated for something, you get the thing you’re allocating the money for. Noah Smith, the economics writer, likes to call this checkism, that money equals stuff.
  • EZRA KLEIN: They do not want that, and not wanting that and putting every application through a level of scrutiny high enough to try and make sure you don’t have another one
  • I don’t think people think a lot about who is cutting these checks, but a lot of it is happening in this very obscure office of the Department of Energy, the Loan Program Office, which has gone from having $40 billion in lending authority, which is already a big boost over it not existing a couple decades ago, to $400 billion in loan authority,
  • the Loan Program Office as one of the best places we have data on how this is going right now and one of the offices that’s responded fastest to the I.R.A.
  • the Loan Program Office is basically the Department of Energy’s in-house bank, and it’s kind of the closest thing we have in the US to what exists in other countries, like Germany, which is a State development bank that funds projects that are eventually going to be profitable.
  • It has existed for some time. I mean, at first, it kind of was first to play after the Recovery Act of 2009. And in fact, early in its life, it gave a very important loan to Tesla. It gave this almost bridge loan to Tesla that helped Tesla build up manufacturing capacity, and it got Tesla to where it is today.
  • EZRA KLEIN: It’s because one of the questions I have about that office and that you see in some of the coverage of them is they’re very afraid of having another Solyndra.
  • Now, depending on other numbers, including the D.O.E., it’s potentially as high as $100 billion, but that’s because the whole thing about the I.R.A. is it’s meant to encourage the build-out of this hydrogen infrastructure.
  • EZRA KLEIN: I’m never that excited when I see a government loans program turning a profit because I think that tends to mean they’re not making risky enough loans. The point of the government should be to bear quite a bit of risk —
  • And to some degree, Ford now has to compete, and US automakers are trying to catch up with Chinese EV automakers. And its firms have EV battery technology especially, but just have kind of comprehensive understanding of the EV supply chain that no other countries’ companies have
  • ROBINSON MEYER: You’re absolutely right that this is the key question. They gave this $9.2 billion loan to Ford to build these EV battery plants in Kentucky and Tennessee. It’s the largest loan in the office’s history. It actually means that the investment in these factories is going to be entirely covered by the government, which is great for Ford and great for our build-out of EVs
  • And to some degree, I should say, one of the roles of L.P.O. and one of the roles of any kind of State development bank, right, is to loan to these big factory projects that, yes, may eventually be profitable, may, in fact, assuredly be profitable, but just aren’t there yet or need financing that the private market can’t provide. That being said, they have moved very slowly, I think.
  • And they feel like they’re moving quickly. They just got out new guidelines that are supposed to streamline a lot of this. Their core programs, they just redefined and streamlined in the name of speeding them up
  • However, so far, L.P.O. has been quite slow in getting out new loans
  • I want to say that the pressure they’re under is very real. Solyndra was a disaster for the Department of Energy. Whether that was fair or not fair, there’s a real fear that if you make a couple bad loans that go bad in a big way, you will destroy the political support for this program, and the money will be clawed back, a future Republican administration will wreck the office, whatever it might be. So this is not an easy call.
  • when you tell me they just made the biggest loan in their history to Ford, I’m not saying you shouldn’t lend any money to Ford, but when I think of what is the kind of company that cannot raise money on the capital markets, the one that comes to mind is not Ford
  • They have made loans to a number of more risky companies than Ford, but in addition to speed, do you think they are taking bets on the kinds of companies that need bets? It’s a little bit hard for me to believe that it would have been impossible for Ford to figure out how to finance factorie
  • ROBINSON MEYER: Now, I guess what I would say about that is that Ford is — let’s go back to why Solyndra failed, right? Solyndra failed because Chinese solar deluged the market. Now, why did Chinese solar deluge the market? Because there’s such support of Chinese financing from the state for massive solar factories and massive scale.
  • EZRA KLEIN: — the private market can’t. So that’s the meta question I’m asking here. In your view, because you’re tracking this much closer than I am, are they too much under the shadow of Solyndra? Are they being too cautious? Are they getting money out fast enough?
  • ROBINSON MEYER: I think that’s right; that basically, if we think the US should stay competitive and stay as close as it can and not even stay competitive, but catch up with Chinese companies, it is going to require large-scale state support of manufacturing.
  • EZRA KLEIN: OK, that’s fair. I will say, in general, there’s a constant thing you find reporting on government that people in government feel like they are moving very quickly
  • EZRA KLEIN: — given the procedural work they have to go through. And they often are moving very quickly compared to what has been done in that respect before, compared to what they have to get over. They are working weekends, they are working nights, and they are still not actually moving that quickly compared to what a VC firm can do or an investment bank or someone else who doesn’t have the weight of congressional oversight committees potentially calling you in and government procurement rules and all the rest of it.
  • ROBINSON MEYER: I think that’s a theme across the government’s implementation of the I.R.A. right now, is that generally the government feels like it’s moving as fast as it can. And if you look at the Department of Treasury, they feel like we are publishing — basically, the way that most of the I.R.A. subsidies work is that they will eventually be administered by the I.R.S., but first the Department of the Treasury has to write the guidebook for all these subsidies, right?
  • the law says there’s a very general kind of “here’s thousands of dollars for EVs under this circumstance.” Someone still has to go in and write all the fine print. The Department of Treasury is doing that right now for each tax credit, and they have to do that before anyone can claim that tax credit to the I.R.S. Treasury feels like it’s moving extremely quickly. It basically feels like it’s completely at capacity with these, and it’s sequenced these so it feels like it’s getting out the most important tax credits first.
  • Private industry feels like we need certainty. It’s almost a year since the law passed, and you haven’t gotten us the domestic content bonus. You haven’t gotten us the community solar bonus. You haven’t gotten us all these things yet.
  • a theme across the government right now is that the I.R.A. passed. Agencies have to write the regulations for all these tax credits. They feel like they’re moving very quickly, and yet companies feel like they’re not moving fast enough.
  • that’s how we get to this point where we’re 311 days out from the I.R.A. passing, and you’re like, well, has it made a big difference? And I’m like, well, frankly, wind and solar developers broadly don’t feel like they have the full understanding of all the subsidies they need yet to begin making the massive investments
  • I think it’s fair to say maybe the biggest bet on that is green hydrogen, if you’re looking in the bill.
  • We think it’s going to be an important tool in industry. It may be an important tool for storing energy in the power grid. It may be an important tool for anything that needs combustion.
  • ROBINSON MEYER: Yeah, absolutely. So green hydrogen — and let’s just actually talk about hydrogen broadly as this potential tool in the decarbonization tool kit.
  • It’s a molecule. It is a very light element, and you can burn it, but it’s not a fossil fuel. And a lot of the importance of hydrogen kind of comes back to that attribute of it.
  • So when we look at sectors of the economy that are going to be quite hard to decarbonize — and that’s because there is something about fossil fuels chemically that is essential to how that sector works either because they provide combustion heat and steelmaking or because fossil fuels are actually a chemical feedstock where the molecules in the fossil fuel are going into the product or because fossil fuels are so energy dense that you can carry a lot of energy while actually not carrying that much mass — any of those places, that’s where we look at hydrogen as going.
  • green hydrogen is something new, and the size of the bet is huge. So can you talk about first just what is green hydrogen? Because my understanding of it is spotty.
  • The I.R.A. is extremely generous — like extremely, extremely generous — in its hydrogen subsidies
  • The first is for what’s called blue hydrogen, which is hydrogen made from natural gas, where we then capture the carbon dioxide that was released from that process and pump it back into the ground. That’s one thing that’s subsidized. It’s basically subsidized as part of this broader set of packages targeted at carbon capture
  • green hydrogen, which is where we take water, use electrolyzers on it, basically zap it apart, take the hydrogen from the water, and then use that as a fue
  • The I.R.A. subsidies for green hydrogen specifically, which is the one with water and electricity, are so generous that relatively immediately, it’s going to have a negative cost to make green hydrogen. It will cost less than $0 to make green hydrogen. The government’s going to fully cover the cost of producing it.
  • That is intentional because what needs to happen now is that green hydrogen moves into places where we’re using natural gas, other places in the industrial economy, and it needs to be price competitive with those things, with natural gas, for instance. And so as it kind of is transported, it’s going to cost money
  • As you make the investment to replace the technology, it’s going to cost money. And so as the hydrogen moves through the system, it’s going to wind up being price competitive with natural gas, but the subsidies in the bill are so generous that hydrogen will cost less than $0 to make a kilogram of it
  • There seems to be a sense that hydrogen, green hydrogen, is something we sort of know how to make, but we don’t know how to make it cost competitive yet. We don’t know how to infuse it into all the processes that we need to be infused into. And so a place where the I.R.A. is trying to create a reality that does not yet exist is a reality where green hydrogen is widely used, we have to know how to use it, et cetera.
  • And they just seem to think we don’t. And so you need all these factories. You need all this innovation. Like, they have to create a whole innovation and supply chain almost from scratch. Is that right?
  • ROBINSON MEYER: That’s exactly right. There’s a great Department of Energy report that I would actually recommend anyone interested in this read called “The Liftoff Report for Clean Hydrogen.” They made it for a few other technologies. It’s a hundred-page book that’s basically how the D.O.E. believes we’re going to build out a clean hydrogen economy.
  • And, of course, that is policy in its own right because the D.O.E. is saying, here is the years we’re going to invest to have certain infrastructure come online. Here’s what we think we need. That’s kind of a signal to industry that everyone should plan around those years as well.
  • It’s a great book. It’s like the best piece of industrial policy I’ve actually seen from the government at all. But one of the points it makes is that you’re going to make green hydrogen. You’re then going to need to move it. You’re going to need to move it in a pipeline or maybe a truck or maybe in storage tanks that you then cart around.
  • Once it gets to a facility that uses green hydrogen, you’re going to need to store some green hydrogen there in storage tanks on site because you basically need kind of a backup supply in case your main supply fails. All of those things are going to add cost to hydrogen. And not only are they going to add cost, we don’t really know how to do them. We have very few pipelines that are hydrogen ready.
  • All of that investment needs to happen as a result to make the green hydrogen economy come alive. And why it’s so lavishly subsidized is to kind of fund all that downstream investment that’s eventually going to make the economy come true.
  • But a lot of what has to happen here, including once the money is given out, is that things we do know how to build get built, and they get built really fast, and they get built at this crazy scale.
  • So I’ve been reading this paper on what they call “The Greens’ Dilemma” by J.B. Ruhl and James Salzman, who also wrote this paper called “Old Green Laws, New Green Deal,” or something like that. And I think they get at the scale problem here really well.
  • “The largest solar facility currently online in the US is capable of generating 585 megawatts. To meet even a middle-road renewable energy scenario would require bringing online two new 400-megawatt solar power facilities, each taking up at least 2,000 acres of land every week for the next 30 years.”
  • And that’s just solar. We’re not talking wind there. We’re not talking any of the other stuff we’ve discussed here, transmission lines. Can we do that? Do we have that capacity?
  • ROBINSON MEYER: No, we do not. We absolutely do not. I think we’re going to build a ton of wind and solar. We do not right now have the system set up to use that much land to build that much new solar and wind by the time that we need to build it. I think it is partially because of permitting laws, and I think it’s also partially because right now there is no master plan
  • There’s no overarching strategic entity in the government that’s saying, how do we get from all these subsidies in the I.R.A. to net zero? What is our actual plan to get from where we are right now to where we’re emitting zero carbon as an economy? And without that function, no project is essential. No activity that we do absolutely needs to happen, and so therefore everything just kind of proceeds along at a convenient pace.
  • given the scale of what’s being attempted here, you might think that something the I.R.A. does is to have some entity in the government, as you’re saying, say, OK, we need this many solar farms. This is where we think we should put them. Let’s find some people to build them, or let’s build them ourselves.
  • what it actually does is there’s an office somewhere waiting for private companies to send in an application for a tax credit for solar that they say they’re going to build, and then we hope they build it
  • it’s an almost entirely passive process on the part of the government. Entirely would be going too far because I do think they talk to people, and they’re having conversations
  • the builder applies, not the government plans. Is that accurate?
  • ROBINSON MEYER: That’s correct. Yes.
  • ROBINSON MEYER: I think here’s what I would say, and this gets back to what do we want the I.R.A. to do and what are our expectations for the I.R.A
  • If the I.R.A. exists to build out a ton of green capacity and shift the political economy of the country toward being less dominated by fossil fuels and more dominated by the clean energy industry, frankly, then it is working
  • If the I.R.A. is meant to get us all the way to net zero, then it is not capable of that.
  • in 2022, right, we had no way to see how we were going to reduce emissions. We did not know if we were going to get a climate bill at all. Now, we have this really aggressive climate bill, and we’re like, oh, is this going to get us to net zero?
  • But getting to net zero was not even a possibility in 2022.
  • The issue is that the I.R.A. requires, ultimately, private actors to come forward and do these things. And as more and more renewables get onto the grid, almost mechanically, there’s going to be less interest in bringing the final pieces of decarbonized electricity infrastructure onto the grid as well.
  • EZRA KLEIN: Because the first things that get applied for are the ones that are more obviously profitable
  • The issue is when you talk to solar developers, they don’t see it like, “Am I going to make a ton of money, yes or no?” They see it like they have a capital stack, and they have certain incentives and certain ways to make money based off certain things they can do. And as more and more solar gets on the grid, building solar at all becomes less profitable
  • also, just generally, there’s less people willing to buy the solar.
  • as we get closer to a zero-carbon grid, there is this risk that basically less and less gets built because it will become less and less profitable
  • EZRA KLEIN: Let’s call that the last 20 percent risk
  • EZRA KLEIN: — or the last 40 percent. I mean, you can probably attach different numbers to that
  • ROBINSON MEYER: Permitting is the primary thing that is going to hold back any construction basically, especially out West,
  • right now permitting fights, the process under the National Environmental Policy Act just at the federal level, can take 4.5 years
  • let’s say every single project we need to do was applied for today, which is not true — those projects have not yet been applied for — they would be approved under the current permitting schedule in 2027.
  • ROBINSON MEYER: That’s before they get built.
  • Basically nobody on the left talked about permitting five years ago. I don’t want to say literally nobody, but you weren’t hearing it, including in the climate discussion.
  • people have moved to saying we do not have the laws, right, the permitting laws, the procurement laws to do this at the speed we’re promising, and we need to fix that. And then what you’re seeing them propose is kind of tweak oriented,
  • Permitting reform could mean a lot of different things, and Democrats and Republicans have different ideas about what it could mean. Environmental groups, within themselves, have different ideas about what it could mean.
  • for many environmental groups, the permitting process is their main tool. It is how they do the good that they see themselves doing in the world. They use the permitting process to slow down fossil fuel projects, to slow down projects that they see as harming local communities or the local environment.
  • ROBINSON MEYER: So we talk about the National Environmental Policy Act or NEPA. Let’s just start calling it NEPA. We talk about the NEPA process
  • NEPA requires the government basically study any environmental impact from a project or from a decision or from a big rule that could occur.
  • Any giant project in the United States goes through this NEPA process. The federal government studies what the environmental impact of the project will be. Then it makes a decision about whether to approve the project. That decision has nothing to do with the study. Now, notionally, the study is supposed to inform the project.
  • the decision the federal government makes, the actual “can you build this, yes or no,” legally has no connection to the study. But it must conduct the study in order to make that decision.
  • that permitting reform is so tough for the Democratic coalition specifically is that this process of forcing the government to amend its studies of the environmental impact of various decisions is the main tool that environmental litigation groups like Earthjustice use to slow down fossil fuel projects and use to slow down large-scale chemical or industrial projects that they don’t think should happen.
  • when we talk about making this program faster, and when we talk about making it more immune to litigation, they see it as we’re going to take away their main tools to fight fossil fuel infrastructure
  • why there’s this gap between rhetoric and what’s actually being proposed is that the same tool that is slowing down the green build-out is also what’s slowing down the fossil fuel build-out
  • ROBINSON MEYER: They’re the classic conflict here between the environmental movement classic, let’s call it, which was “think globally, act locally,” which said “we’re going to do everything we can to preserve the local environment,” and what the environmental movement and the climate movement, let’s say, needs to do today, which is think globally, act with an eye to what we need globally as well, which is, in some cases, maybe welcome projects that may slightly reduce local environmental quality or may seem to reduce local environmental quality in the name of a decarbonized world.
  • Because if we fill the atmosphere with carbon, nobody’s going to get a good environment.
  • Michael Gerrard, who is professor at Columbia Law School. He’s a founder of the Sabin Center for Climate Change Law there. It’s called “A Time for Triage,” and he has this sort of interesting argument that the environmental movement in general, in his view, is engaged in something he calls trade-off denial.
  • his view and the view of some people is that, look, the climate crisis is so bad that we just have to make those choices. We have to do things we would not have wanted to do to preserve something like the climate in which not just human civilization, but this sort of animal ecosystem, has emerged. But that’s hard, and who gets to decide which trade-offs to make?
  • what you’re not really seeing — not really, I would say, from the administration, even though they have some principles now; not really from California, though Gavin Newsom has a set of early things — is “this is what we think we need to make the I.R.A. happen on time, and this is how we’re going to decide what is a kind of project that gets this speedway through,” w
  • there’s a failure on the part of, let’s say, the environmental coalition writ large to have the courage to have this conversation and to sit down at a table and be like, “OK, we know that certain projects aren’t happening fast enough. We know that we need to build out faster. What could we actually do to the laws to be able to construct things faster and to meet our net-zero targets and to let the I.R.A. kind achieve what it could achieve?”
  • part of the issue is that we’re in this environment where Democrats control the Senate, Republicans control the House, and it feels very unlikely that you could just get “we are going to accelerate projects, but only those that are good for climate change,” into the law given that Republicans control the House.
  • part of the progressive fear here is that the right solutions must recognize climate change. Progressives are very skeptical that there are reforms that are neutral on the existence of climate change and whether we need to build faster to meet those demands that can pass through a Republican-controlled House.
  • one of the implications of that piece was it was maybe a huge mistake for progressives not to have figured out what they wanted here and could accept here, back when the negotiating partner was Joe Manchin.
  • Manchin’s bill is basically a set of moderate NEPA reforms and transmission reforms. Democrats, progressives refuse to move on it. Now, I do want to be fair here because I think Democrats absolutely should have seized on that opportunity, because it was the only moment when — we could tell already that Democrats — I mean, Democrats actually, by that moment, had lost the House.
  • I do want to be fair here that Manchin’s own account of what happened with this bill is that Senate Republicans killed it and that once McConnell failed to negotiate on the bill in December, Manchin’s bill was dead.
  • EZRA KLEIN: It died in both places.ROBINSON MEYER: It died in both places. I think that’s right.
  • Republicans already knew they were going to get the House, too, so they had less incentive to play along. Probably the time for this was October.
  • EZRA KLEIN: But it wasn’t like Democrats were trying to get this one done.
  • EZRA KLEIN: To your point about this was all coming down to the wire, Manchin could have let the I.R.A. pass many months before this, and they would have had more time to negotiate together, right? The fact that it was associated with Manchin in the way it was was also what made it toxic to progressives, who didn’t want to be held up by him anymore.
  • What becomes clear by the winter of this year, February, March of this year, is that as Democrats and Republicans begin to talk through this debt-ceiling process where, again, permitting was not the main focus. It was the federal budget. It was an entirely separate political process, basically.
  • EZRA KLEIN: I would say the core weirdness of the debt-ceiling fight was there was no main focus to it.
  • EZRA KLEIN: It wasn’t like past ones where it was about the debt. Republicans did some stuff to cut spending. They also wanted to cut spending on the I.R.S., which would increase the debt, right? It was a total mishmash of stuff happening in there.
  • That alchemy goes into the final debt-ceiling negotiations, which are between principals in Congress and the White House, and what we get is a set of basically the NEPA reforms in Joe Manchin’s bill from last year and the Mountain Valley pipeline, the thing that environmentalists were focused on blocking, and effectively no transmission reforms.
  • the set of NEPA reforms that were just enacted, that are now in the law, include — basically, the word reasonable has been inserted many times into NEPA. [LAUGHS] So the law, instead of saying the government has to study all environmental impacts, now it has to study reasonable environmental impacts.
  • this is a kind of climate win — has to study the environmental impacts that could result from not doing a project. The kind of average NEPA environmental impact study today is 500 pages and takes 4.5 years to produce. Under the law now, the government is supposed to hit a page limit of 150 to 300 pages.
  • there’s a study that’s very well cited by progressives from three professors in Utah who basically say, well, when you look at the National Forest Service, and you look at this 40,000 NEPA decisions, what mostly holds up these NEPA decisions is not like, oh, there’s too many requirements or they had to study too many things that don’t matter. It’s just there wasn’t enough staff and that staffing is primarily the big impediment. And so on the one hand, I think that’s probably accurate in that these are, in some cases — the beast has been starved, and these are very poorly staffed departments
  • The main progressive demand was just “we must staff it better.”
  • But if it’s taking you this much staffing and that much time to say something doesn’t apply to you, maybe you have a process problem —ROBINSON MEYER: Yes.EZRA KLEIN: — and you shouldn’t just throw endless resources at a broken process, which brings me — because, again, you can fall into this and never get out — I think, to the bigger critique her
  • these bills are almost symbolic because there’s so much else happening, and it’s really the way all this interlocks and the number of possible choke points, that if you touch one of them or even you streamline one of them, it doesn’t necessarily get you that f
  • “All told, over 60 federal permitting programs operate in the infrastructure approval regime, and that is just the federal system. State and local approvals and impact assessments could also apply to any project.”
  • their view is that under this system, it’s simply not possible to build the amount of decarbonization infrastructure we need at the pace we need it; that no amount of streamlining NEPA or streamlining, in California, CEQA will get you there; that we basically have been operating under what they call an environmental grand bargain dating back to the ’70s, where we built all of these processes to slow things down and to clean up the air and clean up the water.
  • we accepted this trade-off of slower building, quite a bit slower building, for a cleaner environment. And that was a good trade. It was addressing the problems of that era
  • now we have the problems of this era, which is we need to unbelievably, rapidly build out decarbonization infrastructure to keep the climate from warming more than we can handle and that we just don’t have a legal regime or anything.
  • You would need to do a whole new grand bargain for this era. And I’ve not seen that many people say that, but it seems true to me
  • the role that America had played in the global economy in the ’50s and ’60s where we had a ton of manufacturing, where we were kind of the factory to a world rebuilding from World War II, was no longer tenable and that, also, we wanted to focus on more of these kind of high-wage, what we would now call knowledge economy jobs.That was a large economic transition happening in the ’70s and ’80s, and it dovetailed really nicely with the environmental grand bargain.
  • At some point, the I.R.A. recognizes that that environmental grand bargain is no longer operative, right, because it says, we’re going to build all this big fiscal fixed infrastructure in the United States, we’re going to become a manufacturing giant again, but there has not been a recognition among either party of what exactly that will mean and what will be required to have it take hold.
  • It must require a form of on-the-ground, inside-the-fenceline, “at the site of the power plant” pollution control technology. The only way to do that, really, is by requiring carbon capture and requiring the large construction of major industrial infrastructure at many, many coal plants and natural gas plants around the country in order to capture carbon so it doesn’t enter the atmosphere, and so we don’t contribute to climate change. That is what the Supreme Court has ruled. Until that body changes, that is going to be the law.
  • So the E.P.A. has now, last month, proposed a new rule under the Clean Air Act that is going to require coal plants and some natural gas plants to install carbon capture technology to do basically what the Supreme Court has all but kind of required the E.P.A. to do
  • the E.P.A. has to demonstrate, in order to kind of make this rule the law and in order to make this rule pass muster with the Supreme Court, that this is tenable, that this is the best available and technologically feasible option
  • that means you actually have to allow carbon capture facilities to get built and you have to create a legal process that will allow carbon capture facilities to get built. And that means you need to be able to tell a power plant operator that if they capture carbon, there’s a way they can inject it back into the ground, the thing that they’re supposed to do with it.
  • Well, E.P.A. simultaneously has only approved the kind of well that you need to inject carbon that you’ve captured from a coal factory or a natural gas line back into the ground. It’s called a Class 6 well. The E.P.A. has only ever approved two Class 6 wells. It takes years for the E.P.A. to approve a Class 6 well.
  • And environmental justice groups really, really oppose these Class 6 wells because they see any carbon capture as an effort to extend the life of the fossil fuel infrastructure
  • The issue here is that it seems like C.C.S., carbon capture, is going to be essential to how the U.S. decarbonizes. Legally, we have no other choice because of the constraints the Supreme Court has placed on the E.P.A.. At the same time, environmental justice groups, and big green groups to some extent, oppose building out any C.C.S.
  • to be fair to them, right, they would say there are other ways to decarbonize. That may not be the way we’ve chosen because the politics weren’t there for it, but there are a lot of these groups that believe you could have 100 percent renewables, do not use all that much carbon capture, right? They would have liked to see a different decarbonization path taken too. I’m not sure that path is realistic.
  • what you do see are environmental groups opposing making it possible to build C.C.S. anywhere in the country at all.
  • EZRA KLEIN: The only point I’m making here is I think this is where you see a compromise a lot of them didn’t want to make —ROBINSON MEYER: Exactly, yeah.EZRA KLEIN: — which is a decarbonization strategy that actually does extend the life cycle of a lot of fossil fuel infrastructure using carbon capture. And because they never bought onto it, they’re still using the pathway they have to try to block it. The problem is that’s part of the path that’s now been chosen. So if you block it, you just don’t decarbonize. It’s not like you get the 100 percent renewable strategy.
  • ROBINSON MEYER: Exactly. The bargain that will emerge from that set of actions and that set of coalitional trade-offs is we will simply keep running this, and we will not cap it.
  • What could be possible is that progressives and Democrats and the E.P.A. turns around and says, “Oh, that’s fine. You can do C.C.S. You just have to cap every single stationary source in the country.” Like, “You want to do C.C.S.? We totally agree. Essential. You must put CSS infrastructure on every power plant, on every factory that burns fossil fuels, on everything.”
  • If progressives were to do that and were to get it into the law — and there’s nothing the Supreme Court has said, by the way, that would limit progressives from doing that — the upshot would be we shut down a ton more stationary sources and a ton more petrochemical refineries and these bad facilities that groups don’t want than we would under the current plan.
  • what is effectively going to happen is that way more factories and power plants stay open and uncapped than would be otherwise.
  • EZRA KLEIN: So Republican-controlled states are just on track to get a lot more of it. So the Rocky Mountain Institute estimates that red states will get $623 billion in investments by 2030 compared to $354 billion for blue states.
  • why are red states getting so much more of this money?
  • ROBINSON MEYER: I think there’s two reasons. I think, first of all, red states have been more enthusiastic about getting the money. They’re the ones giving away the tax credits. They have a business-friendly environment. And ultimately, the way many, many of these red-state governors see it is that these are just businesses.
  • I think the other thing is that these states, many of them, are right-to-work states. And so they might pay their workers less. They certainly face much less risk financially from a unionization campaign in their state.
  • regardless of the I.R.A., that’s where manufacturing and industrial investment goes in the first place. And that’s where it’s been going for 20 years because of the set of business-friendly and local subsidies and right-to-work policies.
  • I think the administration would say, we want this to be a big union-led effort. We want it to go to the Great Lakes states that are our political firewall.
  • and it would go to red states, because that’s where private industry has been locating since the ’70s and ’80s, and it would go to the Southeast, right, and the Sunbelt, and that that wouldn’t be so bad because then you would get a dynamic where red-state senators, red-state representatives, red-state governors would want to support the transition further and would certainly not support the repeal of the I.R.A. provisions and the repeal of climate provisions, and that you’d get this kind of nice vortex of the investment goes to red states, red states feel less antagonistic toward climate policies, more investment goes to red states. Red-state governors might even begin to support environmental regulation because that basically locks in benefits and advantages to the companies located in their states already.
  • I think what you see is that Republicans are increasingly warming to EV investment, and it’s actually building out renewables and actually building out clean electricity generation, where you see them fighting harder.
  • The other way that permitting matters — and this gets into the broader reason why private investment was generally going to red states and generally going to the Sunbelt — is that the Sunbelt states — Georgia, Texas — it’s easier to be there as a company because housing costs are lower and because the cost of living is lower in those states.
  • it’s also partially because the Sunbelt and the Southeast, it was like the last part of the country to develop, frankly, and there’s just a ton more land around all the cities, and so you can get away with the sprawling suburban growth model in those citie
  • It’s just cheaper to keep building suburbs there.
  • EZRA KLEIN: So how are you seeing the fights over these rare-earth metals and the effort to build a safe and, if not domestic, kind of friend-shored supply chain there?
  • Are we going to be able to source some of these minerals from the U.S.? That process seems to be proceeding but going slowly. There are some minerals we’re not going to be able to get from the United States at all and are going to have to get from our allies and partners across the world.
  • The kind of open question there is what exactly is the bargain we’re going to strike with countries that have these critical minerals, and will it be fair to those countries?
  • it isn’t to say that I think the I.R.A. on net is going to be bad for other countries. I just think we haven’t really figured out what deal and even what mechanisms we can use across the government to strike deals with other countries to mine the minerals in those countries while being fair and just and creating the kind of economic arrangement that those countries want.
  • , let’s say we get the minerals. Let’s say we learn how to refine them. There is many parts of the battery and many parts of EVs and many, many subcomponents in these green systems that there’s not as strong incentive to produce in the U.S.
  • at the same time, there’s a ton of technology. One answer to that might be to say, OK, well, what the federal government should do is just make it illegal for any of these battery makers or any of these EV companies to work with Chinese companies, so then we’ll definitely establish this parallel supply chain. We’ll learn how to make cathodes and anodes. We’ll figure it out
  • The issue is that there’s technology on the frontier that only Chinese companies have, and U.S. automakers need to work with those companies in order to be able to compete with them eventually.
  • EZRA KLEIN: How much easier would it be to achieve the I.R.A.’s goals if America’s relationship with China was more like its relationship with Germany?
  • ROBINSON MEYER: It would be significantly easier, and I think we’d view this entire challenge very differently, because China, as you said, not only is a leader in renewable energy. It actually made a lot of the important technological gains over the past 15 years to reducing the cost of solar and wind. It really did play a huge role on the supply side of reducing the cost of these technologies.
  • If we could approach that, if China were like Germany, if China were like Japan, and we could say, “Oh, this is great. China’s just going to make all these things. Our friend, China, is just going to make all these technologies, and we’re going to import them.
  • So it refines 75 percent of the polysilicon that you need for solar, but the machines that do the refining, 99 percent of them are made in China. I think it would be reckless for the U.S. to kind of rely on a single country and for the world to rely on a single country to produce the technologies that we need for decarbonization and unwise, regardless of our relationship with that country.
  • We want to geographically diversify the supply chain more, but it would be significantly easier if we did not have to also factor into this the possibility that the US is going to need to have an entirely separate supply chain to make use of for EVs, solar panels, wind turbines, batteries potentially in the near-term future.
  • , what are three other books they should read?
  • The first book is called “The End of the World” by Peter Brannen. It’s a book that’s a history of mass extinctions, the Earth’s five mass extinctions, and, actually, why he doesn’t think we’re currently in a mass extinction or why, at least, things would need to go just as bad as they are right now for thousands and thousands of years for us to be in basically the sixth extinction.
  • The book’s amazing for two reasons. The first is that it is the first that really got me to understand deep time.
  • he explains how one kind of triggered the next one. It is also an amazing book for understanding the centrality of carbon to Earth’s geological history going as far back as, basically, we can track.
  • “Climate Shock” by Gernot Wagner and Marty Weitzman. It’s about the economics of climate change
  • Marty Weitzman, who I think, until recently, was kind of the also-ran important economist of climate change. Nordhaus was the famous economist. He was the one who got all attention. He’s the one who won the Nobel.
  • He focuses on risk and that climate change is specifically bad because it will damage the environment, because it will make our lives worse, but it’s really specifically bad because we don’t know how bad it will be
  • it imposes all these huge, high end-tail risks and that blocking those tail risks is actually the main thing we want to do with climate policy.
  • That is I think, in some ways, what has become the U.S. approach to climate change and, to some degree, to the underlying economic thinking that drives even the I.R.A., where we want to just cut off these high-end mega warming scenarios. And this is a fantastic explanation of that particular way of thinking and of how to apply that way of thinking to climate change and also to geoengineerin
  • The third book, a little controversial, is called “Shorting the Grid” by Meredith Angwin
  • her argument is basically that electricity markets are not the right structure to organize our electricity system, and because we have chosen markets as a structured, organized electricity system in many states, we’re giving preferential treatment to natural gas and renewables, two fuels that I think climate activists may feel very different ways about, instead of coal, which she does think we should phase out, and, really, nuclear
  • By making it easier for renewables and natural gas to kind of accept these side payments, we made them much more profitable and therefore encouraged people to build more of them and therefore underinvested in the forms of generation, such as nuclear, that actually make most of their money by selling electrons to the grid, where they go to people’s homes.
Javier E

Chartbook-Unhedged Exchange: China under pressure, a debate - 0 views

adamtooze.substack.com/...rtbook-unhedged-exchange-china

china crisis policy politics economics history analysis options strategy

shared by Javier E on 24 Mar 22 - No Cached
  • China’s investment-driven, debt-heavy development model needs replacement. Its geopolitical and economic position will become more precarious if the globe’s authoritarian and liberal democratic blocs decouple, a threat made vivid by the war in Ukraine. Its demographics will be a drag on growth
  • Adam sees reasons for hope:
  • Similarly, the Chinese state’s recent intervention in the tech sector, while it has led to market volatility, is aimed at doing exactly what western regulators want to do, but can’t seem to do: stop huge companies from extracting monopoly rents from the economy. 
  • ...26 more annotations...
  • China’s technocrats have, to date, demonstrated competence in managing the economy’s imbalances.
  • Mainland China has delivered significant extra returns -- 87 basis points a year more than the mighty S&P -- for anyone willing to hack the wild volatility
  • “On balance,” Adam sums up, “If you want to be part of history-making economic transformation, China is still the place to be.”
  • The third point is where we disagree. We just don’t see China as having any good options for maintaining strong growth. 
  • we think China’s underlying growth story is coming to an end as the country’s economic imbalances become unsustainable and global decoupling picks up steam. The volatility and low valuations, on the other hand, are likely here to stay. 
  • Replace bad investment with domestic consumption. 
  • What imbalances are we talking about? In crude summary, China’s growth has been driven by debt-funded investment, especially in property and infrastructure. The problem is that the returns on these investments are in fast decline, even as debt continues to build up.
  • This can’t go on forever. Eventually, you have all the bridges, trains, airports and apartment blocks you need, and the return on new ones falls below zero (How do you know that you have arrived at that point? When you have a financial crisis).
  • The problem is that without a healthy consumer, China’s only real options to create growth are investment and exports -- and at the same time as return on internal investments are declining, the rest of the world, led by the US, are increasingly wary of dependence on Chinese exports. 
  • What are China’s policy options? Broadly, there are five, as Micheal Pettis explained to us:
  • Stay with the current model.
  • Replace bad investment in things like infrastructure and real estate with good investment in things like tech and healthcare.
  • Beijing has policy options.
  • Replace bad investment with (even) move exports and a wider current account surplus.
  • Just quit it with the bad investment. 
  • we think that options 1 and 5 are not really options at all. The current model will lead to a financial crisis as return on investment falls further and further behind the costs of debt. Simply ceasing to overinvest in infrastructure and real estate, without changing anything else, will simply kill growth. 
  • Option 2 might be summed up -- as Jason Hsu of Ralient Global Advisors summed it up to us -- as China becoming more like Germany.
  • The idea is that China would steer more and more money away from real estate and towards high value-add sectors from biotech to chip manufacturing. 
  • The problem with option 2 is that investment is such a huge part of the Chinese economy that it is difficult to see how that the capital could be efficiently allocated to the country's tech-heavy, high value-add sectors, which are comparatively small
  • The most promising Chinese firms are swimming in capital as it is. And developing productive capacity isn't just about capital. It takes things the state can't rapidly deploy, like knowhow and intellectual property.
  • Option 3 is more promising. China could start, as Adam suggests, by building up a proper welfare safety net. But it is reasonable to expect pretty serious social and institutional resistance to this sort of mass redistribution.
  • why hasn’t China increased its welfare state until now? Longtime China watcher and friend of Unhedged George Magnus suggests it is because of a deep bias in the Chinese policy establishment. “It’s how Leninist systems operate: they think production and supply are everything … if you see a demand problem as a supply problem, you get the wrong answers.”
  • Option 4, increasing exports’ share of China’s economy even further, may be in the abstract the most appealing. But it runs directly into the fact that both China and the US and its allies have reasons to reduce mutual dependence on their economies.
  • The emergence of geopolitical divisions between the west, on the one hand, and Russia and China, on the other, will put globalisation at risk. The autocracies will try to reduce their dependence on western currencies and financial markets. Both they and the west will try to reduce their reliance on trade with adversaries. Supply chains will shorten and regionalise… 
  • Russia must remain a pariah so long as this vile regime survives. But we will also have to devise a new relationship with China. We must still co-operate. Yet we can no longer rely upon this rising giant for essential goods. We are in a new world. Economic decoupling will now surely become deep and irreversible.
  • In all, the most likely scenario is that China’s growth just keeps slowing. That does not mean that investors in China will necessarily lose money. But it does suggest that generic China exposure -- simply owning Chinese equity or credit indices -- is going to be a losing proposition in the long-term
mariedhorne

Foreign Investment Plummets During Pandemic, Except in China - WSJ - 0 views

www.wsj.com/...ic-except-in-china-11603785873

china covid crisis economy

shared by mariedhorne on 02 Nov 20 - No Cached
  • Foreign direct investment in China largely held steady during the first half of this year, even as investment inflows into the U.S. and European Union plummeted, in a fresh sign that the world’s second-largest economy has suffered less damage from the pandemic.
  • the monthly average for new investments for the first half of the year was down almost half on the monthly average for the whole of 2019, the largest decline on record, the United Nations’s Conference on Trade and Development said Tuesday. But while foreign investment in the U.S. and European Union fell by 61% and 29% respectively, inflows to China were down by just 4%. China attracted foreign investment totaling $76 billion during the period, while the U.S. attracted $51 billion.
  • Unctad forecast that it would be the big loser, and expected global flows of investment to fall by 15% across 2020.
  • ...4 more annotations...
  • Across all developed economies, inflows of foreign investment were down 75% in the first half from the 2019 monthly average to total just $98 billion, a level last seen in 1994
  • Foreign investment in developing economies proved more resilient, falling by just 16% to $296 billion.
  • But it warned that the second wave of rising infections hitting a number of developed economies could see flows down 50% for the year.
  • One was Germany, which saw inflows rise 15% to $21 billion, largely due to a small number of foreign acquisitions of existing businesses.
Javier E

Opinion | Readers Have Questions About Stocks. An Economist Replies. - The New York Times - 0 views

www.nytimes.com/...vesting-stocks-retirement.html

investments strategy stock market

shared by Javier E on 23 Jan 22 - No Cached
  • the more times you drive, the greater the risk of at least one accident. Let’s say tossing heads is bad. The probability of completely avoiding heads is 50 percent on the first toss, but only 1 in 1,000 over 10 tosses.
  • True, the probability of ending up with more money after X years goes up the higher the share of stocks in your portfolio. But so does the probability of ending up with less than the purely safe investment. This is the dirty little secret of Wall Street.
  • I introduce “upside investing” in my new book as a safe and simple way for risk-averse investors to play the market. The idea is to treat all your money now in stocks and all the money you’ll add to your stock holdings as if you will lose every penny of it
  • ...12 more annotations...
  • Then invest your remaining money in safe assets, i.e., TIPS — Treasury Inflation Protected Securities. This sets a floor to your living standard. Until you withdraw money from the stock market, you spend only the floor amount
  • As you withdraw from the market, invest the proceeds in TIPS, which gives you more safe assets, justifying a higher living-standard floor.
  • Taking dividends and safely investing them is an example of “upside investing.” The key thing is never spending out of a pool of funds that isn’t fully safe. This way your living-standard floor will only rise
  • ersions of “upside investing” are considered in “Risk Less and Prosper: Your Guide to Safer Investing” by Zvi Bodie and Rachelle Taqqu.
  • people who said owning a house is a good way to protect yourself from the vicissitudes of the markets. Is that true, and if so, why?
  • Absolutely. When you own your home you’re protected from rent increases. The shelter that the house provides is like an inflation-protected annuity you might buy from an insurance company.
  • The one big advantage, though, even if you must move, is that homes are real assets. As such, they should maintain their real value during periods, like now, of high inflation.
  • Wall Street’s focus is on probability, whereas economists focus on outcomes. Losing everything, not matter how low the probability, is not something an economist would ever entertain as part of a reasonable financial plan.
  • if you do lose, it can be disastrous. Suppose you are blindfolded and have two options — stay where you are (hold safe bonds) or toss a die (hold risky stock).
  • many readers said that there’s no reason for a long-term investor to shy away from stocks because they always go up in the long run, say, over 20 or 30 years. Your response?
  • Unfortunately, the history is far too short to provide statistical reliability about cumulative returns over independent 30-year holding periods.
  • This statement is wrong. There are several 30-year periods over which stocks barely rose in inflation-adjusted terms, and many 20-year periods in which they outright declined. Plus, we don’t have enough independent observations to go on.
Javier E

Large Insurers Are Hatching a Plan to Take Down Coal - The New York Times - 0 views

www.nytimes.com/...insurance-companies-coal.html

insurance investment coal fossil fuel

shared by Javier E on 26 Nov 21 - No Cached
  • You were perhaps the first to embrace insurers’ role in climate change. What drove your decision?
  • We saw this whole question around climate transition very early on because as an insurer, you basically have two perspectives: You have the investment perspective, and you’ve got the underwriting perspective. And from the underwriting perspective, you also see, later on, the claims
  • what we’ve seen from very early on was: Yes, investment in coal, and so on, seems to be quite an isolated and attractive investment — but then when you blend in the claims side, what happens to natural catastrophes and companies that we insure in terms of flooding, fires and so on? What happens to the patients that we have with their health? The equation doesn’t work.
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  • Why do you believe that underwriting is the key to driving out the coal industry?
  • You’ve met personally with executives of major insurers to encourage them to sign the pledge. When you talk to them, what is their biggest concern?
  • Whereas on the insurance side, if you don’t have the insurance, you will have no financing — whether it’s private, public, from an insurer, from an asset manager, whatever.
  • And so we said, “Look, by bringing the majority of this market together, because [there’s] only let’s say 12, 15 actors globally who do this business — if we get together and if we agree on principles of what to do we still insure and what do we not insure anymore — without violating any antitrust rules — we will create a very powerful coalition to really drive this market out.
  • Even if all the insurers say, “We don’t invest in coal anymore,” even if all the banks say, “We don’t invest in coal anymore,” there is still private individuals who say, “I’ll give you the money for coal.”
  • It’s a question of, if I exclude customers, what does it mean for my relationships, what does it mean for my business. Because it is true, all those industries in question on the insurance side, the underwriting side, are very large customers.
  • When we went out of coal investment — I had a whole speech from my investment team. “Are you crazy? You will never find investments that have the same yield.” When I look now, five years later, we have allocated over $20 billion — our aim is now to go even further to $24, $25 billion — we have allocated that money into green investments. The yield is not so different to what we would have seen in the coal sector. The same was true on the underwriting side. We had to let go of a significant amount of business by not ensuring corporate use anymore. But have you seen any dip in our gross numbers? No, you haven’t.
  • In 20 years, will major insurance companies be underwriting coal?
  • No, but if you take us: We are completely out of coal in O.E.C.D [Organization for Economic Cooperation and Development] by 2030 and non-O.E.C.D. by 2040. I do believe that also, in non-O.E.C.D. countries, the pressure is rising every day. So those dates will probably be brought forward. I would say in 10 years from now, you will be mostly out.
Javier E

David Stockman: Mitt Romney and the Bain Drain - Newsweek and The Daily Beast - 1 views

www.thedailybeast.com/...romney-and-the-bain-drain.html

finance ROmney private equity LBO investment

shared by Javier E on 16 Oct 12 - No Cached
  • Is Romney really a job creator? Ronald Reagan’s budget director, David Stockman, takes a scalpel to the claims.
  • Bain Capital is a product of the Great Deformation. It has garnered fabulous winnings through leveraged speculation in financial markets that have been perverted and deformed by decades of money printing and Wall Street coddling by the Fed. So Bain’s billions of profits were not rewards for capitalist creation; they were mainly windfalls collected from gambling in markets that were rigged to rise.
  • Mitt Romney claims that his essential qualification to be president is grounded in his 15 years as head of Bain Capital, from 1984 through early 1999. According to the campaign’s narrative, it was then that he became immersed in the toils of business enterprise, learning along the way the true secrets of how to grow the economy and create jobs. The fact that Bain’s returns reputedly averaged more than 50 percent annually during this period is purportedly proof of the case
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  • Except Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.
  • That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.
  • So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise. I know this from 17 years of experience doing leveraged buyouts at one of the pioneering private-equity houses, Blackstone, and then my own firm. I know the pitfalls of private equity. The whole business was about maximizing debt, extracting cash, cutting head counts, skimping on capital spending, outsourcing production, and dressing up the deal for the earliest, highest-profit exit possible. Occasionally, we did invest in genuine growth companies, but without cheap debt and deep tax subsidies, most deals would not make economic sense.
  • In truth, LBOs are capitalism’s natural undertakers—vulture investors who feed on failing businesses. Due to bad policy, however, they have now become monsters of the financial midway that strip-mine cash from healthy businesses and recycle it mostly to the top 1 percent.
  • Accordingly, Bain’s returns on the overwhelming bulk of the deals—67 out of 77—were actually lower than what a passive S&P 500 indexer would have earned even without the risk of leverage or paying all the private-equity fees. Investor profits amounted to a prosaic 0.7X the original investment on these deals and, based on its average five-year holding period, the annual return would have computed to about 12 percent—well below the 17 percent average return on the S&P in this period.
  • having a trader’s facility for knowing when to hold ’em and when to fold ’em has virtually nothing to do with rectifying the massive fiscal hemorrhage and debt-burdened private economy that are the real issues before the American electorate
  • Indeed, the next president’s overriding task is restoring national solvency—an undertaking that will involve immense societywide pain, sacrifice, and denial and that will therefore require “fairness” as a defining principle. And that’s why heralding Romney’s record at Bain is so completely perverse. The record is actually all about the utter unfairness of windfall riches obtained under our anti-free market regime of bubble finance.
  • When Romney opened the doors to Bain Capital in 1984, the S&P 500 stood at 160. By the time he answered the call to duty in Salt Lake City in early 1999, it had gone parabolic and reached 1270. This meant that had a modern Rip Van Winkle bought the S&P 500 index and held it through the 15 years in question, the annual return (with dividends) would have been a spectacular 17 percent. Bain did considerably better, of course, but the reason wasn’t business acumen.
  • The secret was leverage, luck, inside baseball, and the peculiar asymmetrical dynamics of the leveraged gambling carried on by private-equity shops. LBO funds are invested as equity at the bottom of a company’s capital structure, which means that the lenders who provide 80 to 90 percent of the capital have no recourse to the private-equity sponsor if deals go bust. Accordingly, LBO funds can lose 1X (one times) their money on failed deals, but make 10X or even 50X on the occasional “home run.” During a period of rising markets, expanding valuation multiples, and abundant credit, the opportunity to “average up” the home runs with the 1X losses is considerable; it can generate a spectacular portfolio outcome.
  • The Wall Street Journal examined 77 significant deals completed during that period based on fundraising documents from Bain, and the results are a perfect illustration of bull-market asymmetry. Overall, Bain generated an impressive $2.5 billion in investor gains on $1.1 billion in investments. But 10 of Bain’s deals accounted for 75 percent of the investor profits.
  • The credentials that Romney proffers as evidence of his business acumen, in fact, mainly show that he hung around the basket during the greatest bull market in recorded history.
  • By contrast, the 10 home runs generated profits of $1.8 billion on investments of only $250 million, yielding a spectacular return of 7X investment. Yet it is this handful of home runs that both make the Romney investment legend and also seal the indictment: they show that Bain Capital was a vehicle for leveraged speculation that was gifted immeasurably by the Greenspan bubble. It was a fortunate place where leverage got lucky, not a higher form of capitalist endeavor or training school for presidential aspirants.
  • The startling fact is that four of the 10 Bain Capital home runs ended up in bankruptcy, and for an obvious reason: Bain got its money out at the top of the Greenspan boom in the late 1990s and then these companies hit the wall during the 2000-02 downturn, weighed down by the massive load of debt Bain had bequeathed them. In fact, nearly $600 million, or one third of the profits earned by the home-run companies, had been extracted from the hide of these four eventual debt zombies.
  • The bankruptcy forced the closure of about 250—or 40 percent—of the company’s stores and the loss of about 5,000 jobs. Yet the moral of the Stage Stores saga is not simply that in this instance Bain Capital was a jobs destroyer, not a jobs creator. The larger point is that it is actually a tale of Wall Street speculators toying with Main Street properties in defiance of sound finance—an anti-Schumpeterian project that used state-subsidized debt to milk cash from stores that would not have otherwise survived on the free market.
  • Ironically, the businesses and jobs that Staples eliminated were the office-supply counterparts of the cracker-box stores selling shoes, shirts, and dresses that Bain kept on artificial life-support at Stage Stores Inc. At length, Wal-Mart eliminated these jobs and replaced them with back-of–the-store automation and front-end part-timers, as did Staples, which now has 40,000 part-time employees out of its approximate 90,000 total head count. The pointless exercise of counting jobs won and lost owing to these epochal shifts on the free market is obviously irrelevant to the job of being president, but the fact that Bain made $15 million from the winner and $175 million from the loser is evidence that it did not make a fortune all on its own. It had considerable help from the Easy Button at the Fed.
  • The lesson is that LBOs are just another legal (and risky) way for speculators to make money, but they are dangerous because when they fail, they leave needless economic disruption and job losses in their wake. That’s why LBOs would be rare in an honest free market—it’s only cheap debt, interest deductions, and ludicrously low capital-gains taxes that artifically fuel them.
  • The larger point is that Romney’s personal experience in the nation’s financial casinos is no mark against his character or competence. I’ve made money and lost it and know what it is like to be judged. But that experience doesn’t translate into answers on the great public issues before the nation, either. The Romney campaign’s feckless narrative that private equity generates real economic efficiency and societal wealth is dead wrong.
  • The Bain Capital investments here reviewed accounted for $1.4 billion or 60 percent of the fund’s profits over 15 years, by my calculations. Four of them ended in bankruptcy; one was an inside job and fast flip; one was essentially a massive M&A brokerage fee; and the seventh and largest gain—the Italian Job—amounted to a veritable freak of financial nature.
  • In short, this is a record about a dangerous form of leveraged gambling that has been enabled by the failed central banking and taxing policies of the state. That it should be offered as evidence that Mitt Romney is a deeply experienced capitalist entrepreneur and job creator is surely a testament to the financial deformations of our times.
Javier E

Americans Aren't Saving Enough for Retirement, but One Change Could Help - NYTimes.com - 0 views

www.nytimes.com/...but-one-change-could-help.html

retirement conflict of interest wall street saving

shared by Javier E on 05 Mar 15 - No Cached
  • On average, a typical working family in the anteroom of retirement — headed by somebody 55 to 64 years old — has only about $104,000 in retirement savings
  • more than half of all American households will not have enough retirement income to maintain the living standards they were accustomed to before retirement,
  • 83 percent of baby boomers and Generation Xers in the bottom fourth of the income distribution will eventually run short of money.
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  • More than a quarter of those with incomes between the middle of the income distribution and the 75th percentile will probably run short.
  • The standard prescription is that Americans should put more money aside in investments. The recommendation, however, glosses over a critical driver of unpreparedness: Wall Street is bleeding savers dry.
  • “A greater part of the problem is the failure of investors to earn their fair share of market returns.”
  • His observation suggests a different policy prescription: shoring up Americans’ retirement requires, first of all, aligning the interests of investment advisers and their clients.
  • Actively managed mutual funds, in which many workers invest their retirement savings, are enormously costly.
  • Altogether, costs add up to 2.27 percent per year, Mr. Bogle estimates.
  • By contrast, a passive index fund, like Vanguard’s Total Stock Market Index Fund, costs merely 0.06 percent a year in all.
  • Assuming an annual market return of 7 percent, he says, a 30-year-old worker who made $30,000 a year and received a 3 percent annual raise could retire at age 70 with $927,000 in the pot by saving 10 percent of her wages every year in a passive index fund. (Such a nest egg, at the standard withdrawal rate of 4 percent, would generate an inflation-adjusted $37,000 a year more or less indefinitely.) If she put it in a typical actively managed fund, she would end up with only $561,000.
  • In 1979, almost two in five private sector workers had a defined-benefit pension that would pay out a check until they died. Today only 14 percent do. Almost one in three, by contrast, must make do with a retirement savings account alone to supplement their Social Security check.
  • nobody was paying attention to the safeguards that might be needed when corporate retirement funds managed by sophisticated professionals were replaced by individual 401(k)s and Individual Retirement Accounts.
  • “Wall Street makes no money on low-cost index funds,” said David F. Swensen, who runs the investment portfolio for Yale. “That is the problem.”
  • Harvard and colleagues from M.I.T. and the University of Hamburg sent “mystery shoppers” to visit financial advisers. They found that advisers mostly recommended investment strategies that fit their own financial interests. They reinforced their clients’ misguided biases, encouraging them to chase returns and advising against low-cost options like low-fee index funds.
  • For all their flaws, 401(k) plans have a fiduciary responsibility to act in participants’ best interest. Managers of I.R.A.s, by contrast, are not legally bound to put their clients’ interests first. They must offer “suitable” products — a much squishier standard.
  • The White House’s Council of Economic Advisers argues that “conflicted advice” by advisers who get payments from the funds they recommend reduces the annual returns to investment by 1 percentage point, a more modest penalty than Mr. Bogle’s analysis
  • In 2010, the Labor Department proposed imposing fiduciary responsibility on I.R.A. advisers. The resistance from Wall Street was so fierce that the Obama administration was forced to back down. Last month, the administration tried again.
  • Unlike regulations in Canada and some Western European countries, which have essentially banned kickbacks from funds to investment advisers, the Obama administration’s proposed rule does not directly attack conflicts of interest.
malonema1

Trump to Reportedly Keep Iran Nuclear Alive for Now - The Atlantic - 0 views

www.theatlantic.com/...550205

US Iran policy politics

shared by malonema1 on 15 Jan 18 - No Cached
  • The “worst deal ever” will most likely live to see another 120 days.The Associated Press reported Wednesday that President Trump will this week extend relief from nuclear-related economic sanctions on Iran. If it seems like a procedural matter, it is, but it also means in practice that it keeps alive the Joint Comprehensive Plan of Action, as the Iran deal is known. Reinstating the sanctions would have put the United States in violation of the agreement. The president must decide every 120 days whether to waive the sanctions.  
  • Trump faced two separate choices. One was whether to certify or decertify the JCPOA under the Iran Nuclear Agreement Review Act, which Congress passed in 2015 to give it the right to review the accord and require the president to verify Iran’s compliance with the agreement every 90 days. In October, Trump declined to certify compliance, but did not tear up the deal—in decertifying the deal, he left to Congress the decision of what to do about it. Congress has been focused on other things, however. The other and more consequential choice was whether to waive or reimpose sanctions related to Iran’s nuclear activities, and it is on this decision that U.S. participation in the deal lives or dies. If AP’s report is correct, Trump has passed up this opportunity to withdraw.  
  • The new sanctions will almost certainly anger Iranian officials, but are likely to be cautiously welcomed by the other parties to the JCPOA: the European Union, China, France, Germany, Russia, and the U.K., all of which wanted the deal to be preserved because, they said, it had succeeded in freezing the Islamic Republic’s nuclear program and its uranium-enrichment activity.The Trump administration’s withdrawal from the Paris climate deal and the Trans-Pacific Partnership trade deal, both signature foreign-policy initiatives of President Obama, bolster fears that the JCPOA could go the same way. Trump’s remarks on the presidential campaign trail, where he called the agreement the “worst deal ever,” further cast its future into doubt. But the JCPOA’s other signatories, especially the EU and the U.K., have been vocal in their support of the agreement and have made their case to the White House and lawmakers. China and Russia, who are also parties to the deal, have also signaled they will stay in it.
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  • Part of the problem has been that, beyond the headlines trumpeting sales of aircraft to Iran by Boeing and Airbus, and energy investments by European and Chinese companies, there has actually been little real foreign direct investment in Iran since the JCPOA was signed. Last April, Iran’s finance minister said memorandums of understanding worth $50 billion were signed after the JCPOA went into effect in January 2016. But a government spokesman said that from March 2016 to March 2017, the Iranian fiscal year, Iran received $13 billion in foreign investment. It turned out that the memorandums were for the most part only that—the investments have yet to materialize.
  • “It is excessive to expect a radical change in the field [of foreign investment] as long as the concept is controversial for the top influential elites,” Majid Tehrani, an organization development adviser in trade, transport and finance industries, told Al-Monitor.Existing U.S. sanctions on Iran are broad enough to hinder any potential economic activity. The fact that Iran’s Revolutionary Guard Corps, the target of U.S. sanctions, has significant stakes in Iranian companies makes investing in the country a legal minefield. Had the U.S. reimposed sanctions, multinational companies would have hesitated to invest in Iran. Now that it looks like the JCPOA is alive for another 120 days, the uncertainty over the agreement’s future hasn’t gone away.
Javier E

Opinion | The Age of Decadence - The New York Times - 0 views

www.nytimes.com/...western-society-decadence.html

decadence growth decline dystopia culture crisis history

shared by Javier E on 09 Feb 20 - No Cached
  • Following in the footsteps of the great cultural critic Jacques Barzun, we can say that decadence refers to economic stagnation, institutional decay and cultural and intellectual exhaustion at a high level of material prosperity and technological development
  • Under decadence, Barzun wrote, “The forms of art as of life seem exhausted, the stages of development have been run through. Institutions function painfully. Repetition and frustration are the intolerable result.” He added, “When people accept futility and the absurd as normal, the culture is decadent.” And crucially, the stagnation is often a consequence of previous development: The decadent society is, by definition, a victim of its own success.
  • “What fascinates and terrifies us about the Roman Empire is not that it finally went smash,” wrote W.H. Auden of that endless autumn, but rather that “it managed to last for four centuries without creativity, warmth, or hope.”
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  • what happens when an extraordinarily rich society can’t find enough new ideas that justify investing all its stockpiled wealth. We inflate bubbles and then pop them, invest in Theranos and then repent, and the supposed cutting edge of capitalism is increasingly defined by technologies that have almost arrived, business models that are on their way to profitability, by runways that go on and on without the plane achieving takeoff.
  • what this tells us, unfortunately, is that 21st-century growth and innovation are not at all that we were promised they would be.
  • slowly compounding growth is not the same as dynamism. American entrepreneurship has been declining since the 1970s: Early in the Jimmy Carter presidency, 17 percent of all United States businesses had been founded in the previous year; by the start of Barack Obama’s second term, that rate was about 10 percent. In the late 1980s, almost half of United States companies were “young,” meaning less than five years old; by the Great Recession, that share was down to only 39 percent, and the share of “old” firms (founded more than 15 years ago) rose from 22 percent to 34 percent over a similar period
  • From World War II through the 1980s, according to a recent report from Senator Marco Rubio’s office, private domestic investment often approached 10 percent of G.D.P.; in 2019, despite a corporate tax cut intended to get money off the sidelines, the investment-to-G.D.P. ratio was less than half of that.
  • This suggests that the people with the most experience starting businesses look around at their investment opportunities and see many more start-ups that resemble Theranos than resemble Amazon, let alone the behemoths of the old economy.
  • the dearth of corporate investment also means that the steady climb of the stock market has boosted the wealth of a rentier class — basically, already-rich investors getting richer off dividends — rather than reflecting surging prosperity in general.
  • In 2017 a group of economists published a paper asking, “Are Ideas Getting Harder to Find?” The answer was a clear yes: “We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply.”
  • In his 2011 book “The Great Stagnation,” Tyler Cowen cited an analysis from the Pentagon physicist Jonathan Huebner, who modeled an innovations-to-population ratio for the last 600 years: It shows a slowly ascending arc through the late 19th century, when major inventions were rather easy to conceive and adopt, and a steepening decline ever since, as rich countries spend more and more on research to diminishing returns.
  • the trends reveal a slowdown, a mounting difficulty in achieving breakthroughs — a bottleneck if you’re optimistic, a ceiling if you aren’t
  • the relative exception, the internet and all its wonders, highlights the general pattern.
  • The Northwestern University economist Robert Gordon, one of the most persuasive theorists of stagnation, points out that the period from 1840 to 1970 featured dramatic growth and innovation across multiple arenas — energy and transportation and medicine and agriculture and communication and the built environment.
  • in the last two generations, progress has become increasingly monodimensional — all tech and nothing else.
  • Take a single one of the great breakthroughs of the industrial age — planes and trains and automobiles, antibiotics and indoor plumbing — and it still looms larger in our everyday existence than all of the contributions of the tech revolution combined.
  • We used to travel faster, build bigger, live longer; now we communicate faster, chatter more, snap more selfies.
  • With this stagnation comes social torpor. America is a more peaceable country than it was in 1970 or 1990, with lower crime rates and safer streets and better-behaved kids
  • it’s also a country where that supposedly most American of qualities, wanderlust, has markedly declined: Americans no longer “go west” (or east or north or south) in search of opportunity the way they did 50 years ago; the rate at which people move between states has fallen from 3.5 percent in the early 1970s to 1.4 percent in 2010. Nor do Americans change jobs as often as they once did.
  • Meanwhile, those well-behaved young people are more depressed than prior cohorts, less likely to drive drunk or get pregnant but more tempted toward self-harm
  • For adults, the increasingly legal drug of choice is marijuana, whose prototypical user is a relaxed and harmless figure — comfortably numb, experiencing stagnation as a chill good time.
  • then there is the opioid epidemic, whose spread across the unhappiest parts of white America passed almost unnoticed in elite circles for a while because the drug itself quiets rather than inflames, supplying a gentle euphoria that lets its users simply slip away, day by day and bit by bit, without causing anyone any trouble
  • In the land of the lotus eaters, people are also less likely to invest in the future in the most literal of ways. The United States birthrate was once an outlier among developed countries, but since the Great Recession, it has descended rapidly, converging with the wealthy world’s general below-replacement norm.
  • This demographic decline worsens economic stagnation; economists reckoning with its impact keep finding stark effects. A 2016 analysis found that a 10 percent increase in the fraction of the population over 60 decreased the growth rate of states’ per capita G.D.P. by 5.5 percent.
  • This doesn’t excuse the grifting or the rage stoking, especially presidential grifting and rage stoking, and it doesn’t make the mass shootings, when they come, any less horrific. But it’s important context for thinking about whether online politics is really carrying our society downward into civil strife
  • This feedback loop — in which sterility feeds stagnation, which further discourages childbearing, which sinks society ever-deeper into old age — makes demographic decline a clear example of how decadence overtakes a civilization
  • Both populism and socialism, Trump and Bernie Sanders, represent expressions of discontent with decadence, rebellions against the technocratic management of stagnation that defined the Obama era.
  • in practical terms the populist era has mostly delivered a new and deeper stalemate. From Trump’s Washington to the capitals of Europe, Western politics is now polarized between anti-establishment forces that are unprepared to competently govern and an establishment that’s too disliked to effectively rule.
  • The hysteria with which we’re experiencing them may represent nothing more than the way that a decadent society manages its political passions, by encouraging people to playact extremism, to re-enact the 1930s or 1968 on social media, to approach radical politics as a sport, a hobby, a kick to the body chemistry, that doesn’t put anything in their relatively comfortable late-modern lives at risk.
  • The terrorist in 21st-century America isn’t the guy who sees more deeply than the rest; he’s the guy who doesn’t get it, who takes the stuff he reads on the internet literally in a way that most of the people posting don’t
  • once we crossed over into permanent below-replacement territory, the birth dearth began undercutting the very forces (youth, risk -taking, dynamism) necessary for continued growth, meaning that any further gains to individual welfare are coming at the future’s expense.
  • It suggests that the virtual realm might make our battles more ferocious but also more performative and empty; and that online rage is a steam-venting technology for a society that is misgoverned, stagnant and yet, ultimately, far more stable than it looks on Twitter
  • in the real world, it’s possible that Western society is leaning back in an easy chair, hooked up to a drip of something soothing, playing and replaying an ideological greatest-hits tape from its wild and crazy youth.
  • Human beings can still live vigorously amid a general stagnation, be fruitful amid sterility, be creative amid repetition. And the decadent society, unlike the full dystopia, allows those signs of contradictions to exist
  • The last hundred-odd years of Western history offer plenty of examples of how the attempt to throw off decadence can bring in far worse evils, from the craving for Meaning and Action that piled corpses at Verdun and Passchendaele, to the nostalgic yearning for the Cold War that inspired post-9/11 crusading and led to a military quagmire in the Middle East.
  • So you can even build a case for decadence, not as a falling-off or disappointing end, but as a healthy balance between the misery of poverty and the dangers of growth for growth’s sake
  • A sustainable decadence, if you will, in which the crucial task for 21st-century humanity would be making the most of a prosperous stagnation: learning to temper our expectations and live within limits; making sure existing resources are distributed more justly; using education to lift people into the sunlit uplands of the creative class; and doing everything we can to help poorer countries transition successfully into our current position
  • this argument carries you only so far. Even if the dystopia never quite arrives, the longer a period of stagnation continues, the narrower the space for fecundity and piety, memory and invention, creativity and daring.
  • So decadence must be critiqued and resisted
  • by the hope that where there’s stability, there also might eventually be renewal,
  • The next renaissance will be necessarily different, but realism about our own situation should make us more inclined, not less, to look and hope for one — for the day when our culture feels more fruitful, our politics less futile and the frontiers that seem closed today are opened once again.
Javier E

China has built a global network of ports critical to trade - Washington Post - 0 views

www.washingtonpost.com/...hina-ports-trade-military-navy

china network ports trade control sea routes

shared by Javier E on 07 Nov 23 - No Cached
  • A decade ago, Chinese President Xi Jinping launched the Maritime Silk Road, the oceanic component of his flagship Belt and Road Initiative aimed at improving China’s access to world markets by investing in transportation infrastructure
  • China has already secured a significant stake in a network of global ports that are central to world trade and freedom of navigation. Although the stated goal of the investments was commercial, the United States and its allies have grown increasingly concerned about the potential military implications.
  • Xi has frequently talked of his ambition to turn China into a “maritime superpower.” The port network offers a glimpse into the reach of those ambitions.
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  • A decade later, China owns or operates ports and terminals at nearly 100 locations in over 50 countries, spanning every ocean and every continent. Many are located along some of the world’s most strategic waterways.
  • The majority of the investments have been made by companies owned by the Chinese government, effectively making Beijing and the Chinese Communist Party the biggest operator of the ports that lie at the heart of global supply chains.
  • But the investments go beyond that. They give Beijing a window into the business dealings of competitors and could be used to help China defend its supply routes, spy on U.S. military movements and potentially engage U.S. shipping, according to analysts
  • Strait of HormuzLeaked U.S. intelligence documents earlier this year suggested that China has revived an effort to establish military facilities at the United Arab Emirates port of Khalifa in the Persian Gulf, by the crucial Strait of Hormuz and just 50 miles away from an important U.S. military base.
  • Beijing is decades away from matching the U.S. military presence worldwide, but China has the biggest and fastest-growing navy in the world, and increasingly it is venturing beyond the shores of eastern Asia.
  • From having no naval presence in the Indian Ocean two decades ago, for instance, China now maintains six to eight warships in the region at any given time
  • A route for some major shipping lanes and global ports, the Indian Ocean was an early priority for China. About 80 percent of China’s trade crosses the ocean, including almost all of its oil. China’s port investments seem designed to protect the route. Beijing, for instance, has secured a 99-year lease at the port of Hambantota in Sri Lanka, giving it an important foothold on the busy shipping lane between Asia and the West.
  • Persian Gulf and Red SeaChina’s interest in these port locations goes beyond purely commercial concerns, U.S. officials say. Many are located at strategic chokepoints with high shipping traffic. At these locations, sea routes are narrow and ships are potentially vulnerable.
  • In late 2015, China acknowledged it was building a military base adjacent to the Chinese-operated port of Djibouti. The African base was officially opened in 2017, only six miles away from a U.S. military base in the country. Located at the narrow entrance to the Red Sea, Djibouti is on one of the busiest shipping lanes in the world, where about 10 percent of global oil exports and 20 percent of commercial goods pass through the narrow strait to and from the Suez Canal.
  • DjiboutiChina has already established one military facility adjoining a commercial port operation, in Djibouti, at the mouth of the Red Sea. U.S. officials say there are indications that it is scouting for more.
  • Suez CanalBeijing has also been growing its influence in ports on Egypt’s Suez Canal, a vital human-built waterway that provides a shortcut from Asia to Europe. Earlier this year, Chinese shipping companies announced investments in terminals at the ports of Ain Sokhna and Alexandria
  • EuropeChina already controls or has major investments in more than 20 European ports, giving it significant sway over the continent’s supply routes. Many serve as vital logistics and transshipment points for NATO and the U.S. Navy. “It’s a significant national and economic security concern,”
  • Logink portsOne way in which China has secured a commanding position is through a little-known software system called Logink, a digital logistics platform owned by the Chinese government. So far, at least 24 ports worldwide, including Rotterdam and Hamburg, have adopted the Logink system.
  • Logink potentially gives China access to vast quantities of normally proprietary information on the movements, management and pricing of goods moving around the world. The U.S. Transportation Department issued an advisory in August warning U.S. companies and agencies to avoid interacting with the system because of the risk of espionage and cyberattack.
  • The AmericasThe original Maritime Silk Road, as laid out in Chinese documents, focused on three main routes. The plan has expanded to include the Atlantic and the Americas. Latin America is one of the fastest-growing destinations for Chinese port investments. China manages ports at both ends of the Panama Canal. It is building from scratch a $3 billion megaport at Chancay in Peru that will transform trade between China and Latin America, enabling the world’s largest shipping containers to dock on the continent for the first time.
  • The United States is still the world’s biggest military power, with about 750 bases overseas. China, with only one, is a long way from matching U.S. naval power, said Stephen Watts of the Rand Corp. “The implications of these far-flung bases have been overblown,” he said. “China would be easily overcome in these small outposts if it came to a shooting match.”
  • But China’s port network presents a different kind of challenge to U.S. security interests, separate from the threat of war, said Isaac Kardon of the Carnegie Endowment for International Peace. China is now the world’s premier commercial maritime power, and its strategic hold over the world’s supply routes could be used to interdict or restrict U.S. trade, troop movements and freedom of navigation in a range of different ways. “It’s an asymmetrical threat,”
Javier E

Jack Bogle: The Undisputed Champion of the Long Run - WSJ - 0 views

www.wsj.com/...ion-of-the-long-run-1472855372

investment savings retirement financial economic

shared by Javier E on 03 Sep 16 - No Cached
  • Jack Bogle is ready to declare victory. Four decades ago, a mutual-fund industry graybeard warned him that he would “destroy the industry.” Mr. Bogle’s plan was to create a new mutual-fund company owned not by the founding entrepreneur and his partners but by the shareholders of the funds themselves. This would keep overhead low for investors, as would a second part of his plan: an index fund that would mimic the performance of the overall stock market rather than pay genius managers to guess which stocks might go up or down.
  • Not even Warren Buffett has minted more millionaires than Jack Bogle has—and he did so not by helping them get lucky, but by teaching them how to earn the market’s long-run, average return without paying big fees to Wall Street.
  • The mutual-fund industry is slowly liquidating itself—except for Vanguard. Mr. Bogle happily supplies the numbers: During the 12 months that ended May 31, “the fund industry took in $87 billion . . . of which $224 billion came into Vanguard.” In other words, “in the aggregate, our competitors experienced capital outflows of $137 billion.”
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  • Mr. Bogle has some hard news for investors. The basic appeal of index funds—their ability to deliver the market return without shifting an arm and leg to Wall Street’s army of helpers—will only become more important given the decade of depressed returns he sees ahead.
  • Don’t imagine a revisitation of the ’80s or ’90s, when stocks returned 18% a year and investors, after the industry’s rake-off, imagined they “had the greatest manager in the world” because they got 14%. Those planning on a comfy retirement or putting a kid through college will have to save more, work to keep costs low, and—above all—stick to the plan.
  • “When the climate really gets bad, I’m not some statue out there. But when I get knots in my stomach, I say to myself, ‘Reread your books,’ ” he says. Mr. Bogle has written numerous advice books on investing, including 2007’s “The Little Book of Common Sense Investing,” which remains a perennial Amazon best seller—and all of them emphasize not trying to outguess the markets.
  • That said, Mr. Bogle finds today’s stock scene puzzling. Shares are highly priced in historical terms; earnings and economic growth he expects to disappoint for at least the next decade (he sees no point in trying to forecast further). And yet he advises investors to stay invested and weather the storm: “If we’re going to have lower returns, well, the worst thing you can do is reach for more yield. You just have to save more.”
  • Mr. Bogle relies on a forecasting model he published 25 years ago, which tells him that investors over the next decade, thanks largely to a reversion to the mean in valuations, will be lucky to clear 2% annually after costs. Yuck.
  • Then why invest at all? Maybe it would be better to sell and stick the cash in a bank or a mattress. “I know of no better way to guarantee you’ll have nothing at the end of the trail,” he responds. “So we know we have to invest. And there’s no better way to invest than a diversified list of stocks and bonds at very low cost.”
  • Mr. Bogle’s own portfolio consists of 50% stocks and 50% bonds, the latter tilted toward short- and medium-term. Keep an eagle eye on costs, he says, in a world where pre-cost returns may be as low as 3% or 4%. Inattentive investors can expect to lose as much as 70% of their profits to “hidden” fund management costs in addition to the “expense ratios” touted in mutual-fund prospectuses. (These hidden costs include things like sales load, transaction costs, idle cash and inefficient taxes.)
  • He also knows the heartache of having just about everything he has saved tied up in volatile, sometimes irrational markets, especially now. “We’re in a difficult place,” he says. “We live in an extremely risky world—probably more risky than I can recall.”
  • Investing, he says, always is “an act of trust—in the ability of civilization and the U.S. to continue to flourish; in the ability of corporations to continue, through efficiency and entrepreneurship and innovation, to provide substantial returns.” But nothing, not even American greatness, is guaranteed, he adds
  • what he calls the financial buccaneer type, an entrepreneur more interested in milking what’s left of the active-management-fee gravy train than in providing low-cost competition for Vanguard—which means Vanguard’s best days as guardian of America’s nest egg may still lie ahead.
  • the growth of indexing is obviously unwelcome writing on the wall for Wall Street professionals and Vanguard’s profit-making competitors like Fidelity, which have never been able to give heart and soul to low-churn indexing because indexing doesn’t generate large fees for executives and shareholders of management companies.
Javier E

Vermont Resort Pulls in Big Foreign Investments - NYTimes.com - 0 views

www.nytimes.com/...31vermont.html

citizen US program investment foreign

shared by Javier E on 01 Jan 13 - No Cached
  • even more unusual than the size of the undertaking is the method by which Mr. Stenger and his business partner, Ariel Quiros, are financing it. They have tapped into a federal program that gives green cards, or permanent residency, to foreigners who invest at least $500,000 in an American business — the reward for the investment is a chance at United States citizenship.
  • Mr. Stenger and Mr. Quiros are putting up $90 million themselves. But even at $785 million, this is one of the single biggest projects in the country financed under the investor program.
  • Congress created the visa program in 1990 to help stimulate the economy. Because of a cumbersome process and complaints of fraud and corruption, it was long underused. But a confluence of events in recent years has led to its rather sudden revival: the program was improved; the financial crisis of 2008 made it hard for developers to get loans from commercial banks; and foreign nationals, especially in China, were accumulating vast wealth and were eager for their children to study and live in the United States.
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  • In 2006, the government issued just 802 of these EB-5 visas to investors and their families; this year, it granted 7,818. The program is now growing so rapidly that in the next year or two the number issued will probably reach the annual limit of 10,000. For the first time in the program’s history, applicants may be turned away.
  • Investors must put up $1 million for a visa, but if they invest in a rural area or one with high unemployment, that is reduced to $500,000.
  • Mr. Stenger dismissed criticism that the visa program simply allowed rich people to jump ahead of others in line for citizenship. “Yes, it’s true that the investment is getting them their green card,” Mr. Stenger said. “But to say they’re buying their way into the country — well, they’re investing in products and programs that are having a tremendously positive impact on the community.”
Javier E

In Yahoo, Another Example of the Buyback Mirage - The New York Times - 0 views

www.nytimes.com/...ple-of-the-buyback-mirage.html

stock market repurchase shareholder company EPS valuation

shared by Javier E on 26 Mar 16 - No Cached
  • It is one of the great investment conundrums of our time: Why do so many stockholders cheer when a company announces that it’s buying back shares?
  • Stated simply, repurchase programs can be hazardous to a company’s long-term financial health and often signal a management that has run out of better ways to invest in the business.
  • given the enormous popularity of buybacks nowadays, those that are harmful probably outnumber the beneficial.
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  • Consider Yahoo. The company bought back shares worth $6.6 billion from 2008 to 2014, according to Robert L. Colby, a retired investment professional and developer of Corequity, an equity valuation service used by institutional investors. These purchases helped increase Yahoo’s earnings per share about 16 percent annually, on average.
  • a company’s overall profit growth is unaffected by share buybacks. And comparing increases in earnings per share with real profit growth reveals the impact that buybacks have on that particular measure. Call it the buyback mirage.
  • Those who run companies like buybacks because they make their earnings look better on a per-share basis. When fewer shares are outstanding, each one technically earns more.
  • But a good bit of that performance was the buyback mirage. Growth in Yahoo’s overall net profits came in at about 11 percent annually
  • Given these figures, Mr. Colby reckoned that Yahoo, if it had invested that same amount of money in its operations, would have had to generate only a 3.2 percent after-tax return to produce overall net profit growth of 16 percent annually over those years.
  • But Mr. Colby pointed out that buybacks provide only a one-time benefit, while smart investments in a company’s operations can generate years of gains.
  • Mr. Colby said his research “confirms my suspicion that while buybacks are not universally bad, they are being practiced far more broadly and without as much analysis as there should be.”
  • Perhaps the crucial flaw in buybacks is that they reward sellers of a company’s stock over its long-term holders. That’s because a company announcing a repurchase program usually sees its stock price pop in the short term. But passive investors, such as index funds, and other long-term holders gain little from the programs.
  • Another hazard: companies that spend billions to repurchase stock without substantially shrinking the number of shares outstanding. That’s because in these circumstances, prized corporate cash is used to buy back shares that offset stock grants bestowed on company executives in rich compensation plans.
  • And there are plenty of companies whose buybacks have simply left them with less money to invest in more promising opportunities. Advertisement Continue reading the main story “By throwing away money on buybacks, companies are giving up on the ability to grow in the future,”
  • proposals ask the companies to adopt a policy of excluding the effect of stock buybacks from any performance metrics they use to determine executive pay packages.
  • At 3M, for example, research and development expenditures plus strategic acquisitions have totaled $22 billion over the last five years, Mr. Kanzer said. In the meantime, the company’s buyback program has cost $21 billion.
  • “You really have to ask why a company’s board decides to return a big chunk of capital instead of replacing managers with ones who can figure out how to develop the operations,”
  • “If the board doesn’t think it’s worth investing in the company’s future,” Mr. Lutin added, “how can a shareholder justify continuing to hold the stock, or voting for directors who’ve given up?”
Javier E

Romney's Former Bain Partner Makes a Case for Inequality - NYTimes.com - 0 views

www.nytimes.com/...kes-a-case-for-inequality.html

economics wealth innovation incentives inequality

shared by Javier E on 09 May 12 - Cached
  • He has spent the last four years writing a book that he hopes will forever change the way we view the superrich’s role in our society. “Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,” to be published in hardcover next month by Portfolio, aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conard writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off.
  • most Americans don’t know how the economy really works — that the superrich spend only a small portion of their wealth on personal comforts; most of their money is invested in productive businesses that make life better for everyone. “Most citizens are consumers, not investors,” he told me during one of our long, occasionally contentious conversations. “They don’t recognize the benefits to consumers that come from investment.”
  • Dean Baker, a prominent progressive economist with the Center for Economic and Policy Research, says that most economists believe society often benefits from investments by the wealthy. Baker estimates the ratio is 5 to 1, meaning that for every dollar an investor earns, the public receives the equivalent of $5 of value
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  • Conard said Baker was undercounting the social benefits of investment. He looks, in particular, at agriculture, where, since the 1940s, the cost of food has steadily fallen because of a constant stream of innovations. While the businesses that profit from that innovation — like seed companies and fast-food restaurants — have made their owners rich, the average U.S. consumer has benefited far more. Conard concludes that for every dollar an investor gets, the public reaps up to $20 in value. This is crucial to his argument: he thinks it proves that we should all appreciate the vast wealth of others more, because we’re benefiting, proportionally, from it.
  • What about investment banks, with their complicated financial derivatives and overleveraged balance sheets? Conard argues that they make the economy more efficient, too. The financial crisis, he writes, was not the result of corrupt bankers selling dodgy financial products. It was a simple, old-fashioned run on the banks, which, he says, were just doing their job
  • He argues that collateralized-debt obligations, credit-default swaps, mortgage-backed securities and other (now deemed toxic) financial products were fundamentally sound. They were new tools that served a market need for the world’s most sophisticated investors,
  • “A lot of people don’t realize that what happened in 2008 was nearly identical to what happened in 1929,” he says. “Depositors ran to the bank to withdraw their money only to discover, like the citizens of Bedford Falls” — referring to the movie “It’s a Wonderful Life” — “that there was no money in the vault. All that money had been lent.”
  • In 2008 it was large pension funds, insurance companies and other huge institutional investors that withdrew in panic. Conard argues in retrospect that it was these withdrawals that led to the crisis — not, as so many others have argued, an orgy of irresponsible lending
  • Conard concedes that the banks made some mistakes, but the important thing now, he says, is to provide them even stronger government support. He advocates creating a new government program that guarantees to bail out the banks if they ever face another run.
  • the central role of banks, Conard says, is to turn the short-term assets of nervous savers into risky long-term loans that help the economy grow.
  • we live longer, healthier and richer lives because of countless microimprovements like that one. The people looking for them, Conard likes to point out, are not only computer programmers, engineers and scientists. They are also wealthy investors like him
  • As Conard told me, one of the crucial lessons he learned at Bain is that it makes no sense to look for easy solutions. In a competitive market, all that’s left are the truly hard puzzles. And they require extraordinary resources. While we often hear about the greatest successes — penicillin, the iPhone — we rarely hear about the countless failures and the people and companies who financed them.
  • A central problem with the U.S. economy, he told me, is finding a way to get more people to look for solutions despite these terrible odds of success. Conard’s solution is simple. Society benefits if the successful risk takers get a lot of money
  • He said the only way to persuade these “art-history majors” to join the fiercely competitive economic mechanism is to tempt them with extraordinary payoffs.
  • When I look around, I see a world of unrealized opportunities for improvements, an abundance of talented people able to take the risks necessary to make improvements but a shortage of people and investors willing to take those risks. That doesn’t indicate to me that risk takers, as a whole, are overpaid. Quite the opposite.” The wealth concentrated at the top should be twice as large, he said. That way, the art-history majors would feel compelled to try to join them.
  • he expressed anger over the praise that Warren Buffett has received for pledging billions of his fortune to charity. It was no sacrifice, Conard argued; Buffett still has plenty left over to lead his normal quality of life. By taking billions out of productive investment, he was depriving the middle class of the potential of its 20-to-1 benefits. If anyone was sacrificing, it was those people. “Quit taking a victory lap,” he said, referring to Buffett. “That money was for the middle class.”
  • Unlike Romney, Conard rejects the notion that America has “some monopoly on hard work or entrepreneurship.” “I think it’s simple economics,” he said. “If the payoff for risk-taking is better, people will take more risks
  • Conard sees the success of the U.S. economy as, in part, the result of a series of historic accidents. Most recently, the coincidence of Roe v. Wade and the late 1970s economic malaise allowed Ronald Reagan to unify social conservatives and free-market advocates and set the country on a pro-investment path for decades. Europeans, he says, made all the wrong decisions. Concern about promoting equality and protecting favored industries have led to onerous work rules, higher taxes and all sorts of social programs that keep them poorer than Americans.
  • Now we’re at a particularly crucial moment, he writes. Technology and global competition have made it more important than ever that the United States remain the world’s most productive, risk-taking, success-rewarding society. Obama, Conard says, is “going to dampen the incentives.” Even worse, Conard says, “he’s slowing the accumulation of equity” by fighting income inequality.
  • Conard’s book addresses what is perhaps the most important question in economics, the one Adam Smith set out to answer in “The Wealth of Nations”: Why do some countries grow so rich and others stay poor? Where you come down on the answer has as much to do with your politics as your economic worldview (two things that can often be the same)
  • Nearly every economist I spoke with said that Conard has too much faith in the market’s ability to reward only those who create real value. Conard, for instance, insists that even the dodgiest financial products must have been beneficial or else nobody would have bought them in the first place. If a Wall Street trader or a corporate chief executive is filthy rich, Conard says that the merciless process of economic selection has assured that they have somehow benefited society. Even pro-market Romney supporters take issue with this. “Ed ought to be more concerned about crony capitalism,” Hubbard told me.
  • “Unintended Consequences” ignores some of the most important economic work of the past few decades, about how power and politics influence economic growth. In technical language, this field is the study of “rent seeking,” in which people or companies get rich because of their power, not because of their ideas.
  • wealthy individuals and corporations are able to influence politicians and regulators to make seemingly insignificant changes to regulations that benefit themselves. In other words, to rig the game
  • Conard’s version of the financial crisis ignores much reporting and analysis — including work I’ve done with NPR’s “Planet Money” team — that shows that some of the nation’s largest banks actively manipulated customers and regulators and, sometimes, their own stockholders to profit from dangerous risk
  • Rather than simply serving as an invitation for everybody to engage in potentially beneficial risk-taking, inequality can allow those with wealth to crush new ideas.
  • Perhaps concentrated wealth will inspire a nation of innovative problem-solvers. But if the view of many economists is right — that it sometimes discourages innovation — then we should worry
  • on this one he resorted to anecdotes and gut feelings. During his work at Bain, he said, he saw that successful companies had to battle against one another. Nobody was just given a free ride because of their power. “Was a person, like me, excluded from opportunity?” he asked rhetorically. “If so, I wasn’t aware!”
  • both could be true. The rich could earn a great deal of wealth through their own hard work, skill and luck. They could also use their subsequent influence to make themselves even richer
  • One of the great political and economic challenges of our time is figuring out the balance between wealth that benefits society and wealth that distorts.
  • Glenn Hubbard said only that at a broad level, Romney and Conard share “beliefs about innovation and growth and responsible risk-taking.”
  • Conard and Romney certainly share views on numerous policy matters. Like many Republicans, they promote lower taxes and less regulation for those who achieve financial succes
Javier E

Start-Ups Hoping to Fight Climate Change Struggle as Other Tech Firms Cash In - The New... - 0 views

www.nytimes.com/...oval-technology-start-ups.html

climate change investment vc financing

shared by Javier E on 08 May 19 - No Cached
  • The last time venture capitalists invested heavily in environmentally focused technology during the so-called clean-tech boom of the 2000s, they lost a lot of money. Getting one of these companies off the ground can be expensive
  • “Sitting on your pile of money while the oceans are rising may not help you stay dry,”
  • It is common wisdom in the tech industry that it is much easier to raise money for a software company than it is for a start-up that wants to work in biotechnology or energy
  • ...22 more annotations...
  • Total funding for clean-tech start-ups fell during most of the past decade
  • But there are dozens, if not hundreds, of start-ups developing new technologies that address the issue.
  • Two major scientific organizations said last fall that even if greenhouse-gas emissions were reduced significantly, stopping drastic global warming would require technological breakthroughs that allowed for the removal of billions of tons of carbon dioxide already in the atmosphere.
  • Some promising methods for accomplishing that involve old-fashioned technologies, like planting trees and changing the ways farmers till their fields
  • In 2018, $6.6 billion was invested in clean tech, about 15 percent of what went to software start-ups. Carbon-removal start-ups got a tiny sliver of that.
  • “It is tackling big markets and big challenges, but that doesn’t necessarily mean that those are going to be big businesses,”
  • Noah Deich, the founder of Carbon180, a nonprofit that sponsored the event, said it was encouraging to see investors there. But he said he had not seen the commitment to investing that he believed was necessary to get the technologies working.
  • “For an internet company, even if you don’t have a real product, you can get money to develop one,” he said. “Here, it’s the opposite.
  • So far, no one has found an obvious way to turn capturing carbon dioxide into a profitable business.
  • Ocean-Based Climate Solutions, has created a device that stirs up water in the ocean to promote the growth of phytoplankton, which are algae that can take carbon dioxide out of the air and deliver it to the bottom of the sea in solid form.
  • Mr. Oros said that his fund had not made an investment in the sector and that he did not see a way for the industry to take off without government policy encouraging it
  • for these businesses to succeed it would probably be necessary for governments to create a carbon tax or other subsidies as incentives for new businesses.
  • Mr. Lackner said investors should assume that governments would be willing at some point to pay for what these companies were doing.
  • “In the end, there is no way for the market to not exist,” he said. “This will be a brand-new industry at a huge scale.”
  • In the time it took Carbon Engineering to raise one round of $68 million, Slack, a messaging company founded the same year, has raised more than 10 times as much and is now preparing for an initial public offering that could value it at nearly $20 billion.
  • Everyone who discusses the difficulties these start-ups face points back to the clean-tech boom, when several venture capital firms put billions of dollars into solar energy and other technologies. While solar power has gained traction, most of the clean-tech funds were viewed as failures.
  • venture capitalists needed their investments to show returns within a few years
  • “There is a fundamental mismatch in time lines,”
  • One of the biggest investors in climate-focused start-ups is Breakthrough Energy Ventures, a $1 billion fund that seeks to support the development of world-saving technology that might not have a quick turnaround. The fund has received money from Bill Gates and several other billionaires.
  • money from major philanthropists would not be enough to get even one start-up up to speed, much less the dozens needed to meet the carbon-reduction goals set by international bodies like the Intergovernmental Panel on Climate Change
  • a broad array of investors, including venture capitalists, will need to get involved. And they will need to wait more than three or four years to cash out
  • “We don’t need another photo-sharing app or another blockchain start-up,” said Mr. Rogers, who is investing his money through Incite Ventures, a fund he created with his wife, Swati Mylavarapu. “We need to solve the carbon crisis. But a lot of folks are chasing the easy money rather than taking responsibility for what needs to be done.”
saberal

Here's what Biden can do on his own about racial inequality -- and where he'll need Con... - 0 views

www.cnn.com/...index.html

politics US

shared by saberal on 02 Jun 21 - No Cached
  • (CNN)President Joe Biden on Tuesday laid out his most comprehensive plan yet for shrinking the nation's longstanding racial wealth gap, the latest step in his promise to infuse more equity in government policies and in the rebuilding of the economy after the coronavirus pandemic.
  • The White House is currently negotiating with a group of Republicans in hopes of finding agreement on a smaller package -- with the latest GOP proposal coming in at $928 billion.
  • There are many reasons for the gap, including a big difference in home ownership -- a key vehicle to building wealth. About 74% of Whites owned homes in the first quarter of 2021 versus 45% of Blacks, according to the US Census Bureau.
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  • The moves are a "welcome step" and go part of the way to addressing structural divides in the housing market that have developed over decades, said Michael Neal, senior research associate at the Urban Institute. He would also like to see downpayment assistance, particularly for the historically disadvantaged.
  • though it could take years to have an impact. His goal is to increase the share of contracts going to them by 50% by 2026.
  • Create a $10 billion Community Revitalization Fund: The fund would target economically under-served areas and support community-led civic infrastructure projects that develop neighborhood amenities, revitalize vacant land and buildings, spark new local economic activity, provide services, promote civic engagement and build community wealth.
  • Invest in transportation infrastructure: The President wants to establish grants totaling $15 billion that would target neighborhoods where people have been cut off from jobs, schools and businesses because of previous transportation investments. The funding would support planning, removing or retrofitting infrastructure that creates barriers to communities.
  • Increase affordable housing: Biden is calling for the creation of a Neighborhood Homes Tax Credit to attract private investment in the development and rehabilitation of affordable housing for low- and moderate-income buyers and owners.
  • Expand housing choices: The President is asking lawmakers to establish a $5 billion grant program for jurisdictions that take concrete steps to eliminate land-use and zoning barriers to producing affordable housing and that expand housing choices for people with low or moderate incomes.
  • Invest $31 billion to support minority-owned small businesses: Biden wants to provide $30 billion to the Small Business Administration to increase access to capital for the smallest companies, develop new loan products to support small manufacturers and businesses that invest in clean energy and launch a Small Business Investment Corporation to make early stage equity investments, placing a priority on small firms owned by socially and economically disadvantaged individuals. It would also establish a $1 billion grant program through the Minority Business Development Agency aimed at helping minority-owned manufacturers access private capital.
Javier E

The Better Letter: Randomness Rules - by Bob Seawright - The Better Letter - 0 views

betterletter.substack.com/...better-letter-randomness-rules

randomness probabilistic thinking success skill luck contingent history

shared by Javier E on 25 Jul 21 - No Cached
  • We readily – routinely – underestimate the power and impact of randomness in and on our lives
  • In his book, The Drunkard’s Walk, Caltech physicist Leonard Mlodinow employs the idea of the “drunkard’s [random] walk” to compare “the paths molecules follow as they fly through space, incessantly bumping, and being bumped by, their sister molecules,” with “our lives, our paths from college to career, from single life to family life, from first hole of golf to eighteenth.” 
  • Although countless random interactions seem to cancel each another out within large data sets, sometimes, “when pure luck occasionally leads to a lopsided preponderance of hits from some particular direction...a noticeable jiggle occurs.” When that happens, we notice the unlikely directional jiggle and build a carefully concocted story around it while ignoring the many, many random, counteracting collisions.
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  • As Tversky and Kahneman have explained, “Chance is commonly viewed as a self-correcting process in which a deviation in one direction induces a deviation in the opposite direction to restore the equilibrium. In fact, deviations are not ‘corrected’ as a chance process unfolds, they are merely diluted.” 
  • Such contingency explains why sports provide the world’s best reality show. The better team does not win every game.
  • Its power, its meaning, and its joy are wrapped in its improbability. In retrospect, it seems destined. That the U.S. team was “born for this.” The truth is, despite the power and greatness of Brooks’ speech, it was anything but. 
  • As Stephen Jay Gould famously argued, were we able to recreate the experiment of life on Earth a million different times, nothing would ever be the same, because evolution relies upon randomness. Indeed, the essence of history is contingency.
  • Mauboussin describes the “paradox of skill” as follows: “As skill improves, performance becomes more consistent, and therefore luck becomes more important.” In investing, therefore (and for example), as the population of skilled investors has increased, the variation in skill has narrowed, making luck increasingly important to outcomes.
  • All-time great teams still lose about one out of every three games, all to inferior teams, demonstrating that winning baseball games involves a lot of luck.
  • Since mean reversion establishes that the expected value of the whole season is roughly 50:50 (or slightly above or below that level), a 60 percent winning percentage being really good means that there is a lot of randomness built into baseball outcomes.
  • Luck matters. A lot. Yet, we tend dramatically to underestimate the role of randomness in the world. 
  • The self-serving bias is our tendency to see the good stuff that happens as our doing (“we worked really hard and executed the game plan well”) while the bad stuff isn’t our fault (“It just wasn’t our night” or “we simply couldn’t catch a break” or “we would have won if the umpiring hadn’t been so awful”). Thus, desirable results are typically due to our skill and hard work — not luck — while lousy results are outside of our control and the offspring of being unlucky.
  • Michael Mauboussin’s The Success Equation seeks to untangle elements of luck and skill in sports, investing, and business
  • Randomness rules.
  • the ever-increasing aggregate skill (supplemented by massive computing power) of the investment world has come largely to cancel itself out.
  • Meanwhile, Smith argues that effort and repetition mean a great deal to athletic success, but that innate talent, which cannot be taught, means even more. Thus practice — even perfect practice — does not make perfect.
  •  randomness explains why the best team or player doesn’t always win, even though the best will tend to win more often. Being very good merely improves the odds of success. It doesn’t guarantee it. 
  • we should all recognize that the outcomes in many activities in life combine elements of both skill and luck. Like baseball, investing is one of these. Understanding the relative contributions of luck and skill can help us assess past results and, more importantly, anticipate future results, a point to which Mauboussin pays particular attention.
  • Lady Luck is crucial to investment outcomes. There is no getting around it. Managing one’s portfolio so as to benefit the most from good luck and (even more importantly) to get hurt the least by bad luck are the keys to investment management. Doing so well is a remarkable skill, but not the sort of skill that’s commonly assumed, even (especially!) by professionals.
  • In the markets, the average investor underperforms due to costs alone. Poker is similar on account of the house’s rake. Yet most investors — like most poker players and most people generally, due to optimism bias — think they are better (and often much better) than the norm
  • In a “quasi-experimental” study, researchers set out to examine these questions in poker. They got together a group of both expert and novice poker players to play fixed games, meaning that the players received hands that the researchers had set up – without the knowledge of the players – to test how things would go under various scenarios. The results revealed that while the cards dealt (luck) largely predicted the winner, skill was crucial to reducing losses when players were dealt a bad hand. That’s a true if unsurprising result as far as it goes. But the conclusion of the study (“that poker should be regarded as a game of chance”) is clearly overstated.
  • It’s surely true that over the short term, luck dominates skill in poker. However, over longer and longer periods of time – a much larger database of hands – a slight skill advantage will result in a positive win rate because no player will have better cards in the aggregate. In other words, given enough time, luck cancels itself out.
  • As Silver argues in The Signal and the Noise, especially when the skill differential is not great, the interesting question is how long it will take for skill to win out.
  • consistent with the study – the primary reason is that the expert player makes fewer mistakes. Science seeks the truth by uncovering and discarding what is false. What’s left is likely to be true.
  • As noted above, we all like to think that our successes are earned and that only our failures are due to luck – bad luck. But the old expression – it’s better to be lucky than good – is at least partly true. That said, it’s best to be lucky *and* good. As a consequence, in all probabilistic fields (which is nearly all of them), the best performers dwell on process and diversify their bets. You should do the same.
  • what we should already know – market success (however defined), especially over the relatively short run, is more a matter of luck than of skill.
  • nvestment performance data support this idea unequivocally. As Charley Ellis has shown, “research on the performance of institutional portfolios shows that after risk adjustment, 24% of funds fall significantly short of their chosen market benchmark and have negative alpha, 75% of funds roughly match the market and have zero alpha, and well under 1% achieve superior results after costs — a number not statistically significantly different from zero.” 
  • As Silver emphasizes in The Signal and the Noise, we readily overestimate the degree of predictability in complex systems [and t]he experts we see in the media are much too sure of themselves (I wrote about this problem in our industry from a slightly different angle…). Much of what we attribute to skill is actually luck.
  • Plan accordingly.
woodlu

The age of fossil-fuel abundance is dead | The Economist - 0 views

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shared by woodlu on 05 Oct 21 - No Cached
  • FOR MUCH of the past half-decade, the operative word in the energy sector was “abundance”. An industry that had long sought to ration the production of fossil fuels to keep prices high suddenly found itself swamped with oversupply, as America’s shale boom lowered the price of oil around the world and clean-energy sources, such as wind and solar, competed with other fuels used for power generation, such as coal and natural gas.
  • In recent weeks, however, it is a shortage of energy, rather than an abundance of it, that has caught the world’s attention.
  • Britain’s miffed motorists are suffering from a shortage of lorry drivers to deliver petrol. Power cuts in parts of China partly stem from the country’s attempts to curb emissions. Dwindling coal stocks at power stations in India are linked to a surge in the price of imports of the commodity.
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  • a slump in investment in oil wells, natural-gas hubs and coal mines. This is partly a hangover from the period of abundance, with years of overinvestment giving rise to more capital discipline.
  • A rule of thumb is that oil companies are supposed to allocate about four-fifths of their capital expenditure each year just to stopping their level of reserves from being depleted. Yet annual industry capex has fallen from $750bn in 2014 (when oil prices exceeded $100 a barrel) to an estimated $350bn this year
  • Oil crossed $81 a barrel after the Organisation of the Petroleum Exporting Countries (OPEC), and allies such as Russia who are part of the OPEC+ alliance, resisted calls to increase output at a meeting on October 4th.
  • But it may at least accelerate the shift to greener—and cheaper—sources of energy.
  • result of growing pressures to decarbonise.
  • over the same period, the number of years’ worth of current production held in reserves in some of the world’s biggest projects has fallen from 50 to about 25
  • The industry would usually respond to robust demand and higher prices by investing to drill more oil. But that is harder in an era of decarbonisation.
  • big private-sector oil companies, such as ExxonMobil and Royal Dutch Shell, are being pressed by investors to treat oil and gas investments like week-old fish
  • shareholders reckon that demand for oil will eventually peak, making long-term projects uneconomic, or because they prefer to hold stakes in companies that support the transition to clean energy
  • Another factor inhibiting oil investment is the behaviour of OPEC+ countries. The half-decade of relatively low prices during the “age of abundance”, which reached its nadir with a price collapse at the start of the pandemic, g
  • utted state coffers. That cut funding for investment. As prices recover, governments’ priority is not to ex
  • pand oil-production capacity but to shore up national budgets.
  • Investment in thermal coal is weakest of all. Even in China and India, which have big pipelines of new coal-fired power plants, the mood has swung against the dirtiest fossil fuel.
  • All this places fossil-fuel producers in something of a bind. A slump in investment could enable some oil, gas and coal investors to make out like bandits. But the longer prices stay high, the more likely it becomes that the transition to clean energy ultimately buries the fossil-fuel industry. Consumers, in the meantime, must brace for more shortages.
Javier E

Losing Earth: The Decade We Almost Stopped Climate Change - The New York Times - 0 views

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global warming failure environment politics climate change history crisis

shared by Javier E on 09 Mar 19 - No Cached
  • As Malcolm Forbes Baldwin, the acting chairman of the president’s Council for Environmental Quality, told industry executives in 1981, “There can be no more important or conservative concern than the protection of the globe itself.”
  • Among those who called for urgent, immediate and far-reaching climate policy were Senators John Chafee, Robert Stafford and David Durenberger; the E.P.A. administrator, William K. Reilly; and, during his campaign for president, George H.W. Bush.
  • It was understood that action would have to come immediately. At the start of the 1980s, scientists within the federal government predicted that conclusive evidence of warming would appear on the global temperature record by the end of the decade, at which point it would be too late to avoid disaster.
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  • If the world had adopted the proposal widely endorsed at the end of the ’80s — a freezing of carbon emissions, with a reduction of 20 percent by 2005 — warming could have been held to less than 1.5 degrees.
  • Action had to be taken, and the United States would need to lead. It didn’t.
  • There can be no understanding of our current and future predicament without understanding why we failed to solve this problem when we had the chance.
  • The first suggestion to Rafe Pomerance that humankind was destroying the conditions necessary for its own survival came on Page 66 of the government publication EPA-600/7-78-019. It was a technical report about coal
  • ‘This Is the Whole Banana’ Spring 1979
  • here was an urgent problem that demanded their attention, MacDonald believed, because human civilization faced an existential crisis. In “How to Wreck the Environment,” a 1968 essay published while he was a science adviser to Lyndon Johnson, MacDonald predicted a near future in which “nuclear weapons were effectively banned and the weapons of mass destruction were those of environmental catastrophe.” One of the most potentially devastating such weapons, he believed, was the gas that we exhaled with every breath: carbon dioxide. By vastly increasing carbon emissions, the world’s most advanced militaries could alter weather patterns and wreak famine, drought and economic collapse.
  • the Jasons. They were like one of those teams of superheroes with complementary powers that join forces in times of galactic crisis. They had been brought together by federal agencies, including the C.I.A, to devise scientific solutions to national-security problems: how to detect an incoming missile; how to predict fallout from a nuclear bomb; how to develop unconventional weapons, like plague-infested rats.
  • Agle pointed to an article about a prominent geophysicist named Gordon MacDonald, who was conducting a study on climate change with the Jasons, the mysterious coterie of elite scientists to which he belonged
  • During the spring of 1977 and the summer of 1978, the Jasons met to determine what would happen once the concentration of carbon dioxide in the atmosphere doubled from pre-Industrial Revolution levels. It was an arbitrary milestone, the doubling, but a useful one, as its inevitability was not in question; the threshold would most likely be breached by 2035.
  • The Jasons’ report to the Department of Energy, “The Long-Term Impact of Atmospheric Carbon Dioxide on Climate,” was written in an understated tone that only enhanced its nightmarish findings: Global temperatures would increase by an average of two to three degrees Celsius; Dust Bowl conditions would “threaten large areas of North America, Asia and Africa”; access to drinking water and agricultural production would fall, triggering mass migration on an unprecedented scale. “Perhaps the most ominous feature,” however, was the effect of a changing climate on the poles. Even a minimal warming “could lead to rapid melting” of the West Antarctic ice sheet. The ice sheet contained enough water to raise the level of the oceans 16 feet.
  • MacDonald explained that he first studied the carbon-dioxide issue when he was about Pomerance’s age — in 1961, when he served as an adviser to John F. Kennedy. Pomerance pieced together that MacDonald, in his youth, had been something of a prodigy: In his 20s, he advised Dwight D. Eisenhower on space exploration; at 32, he became a member of the National Academy of Sciences; at 40, he was appointed to the inaugural Council on Environmental Quality, where he advised Richard Nixon on the environmental dangers of burning coal. He monitored the carbon-dioxide problem the whole time, with increasing alarm.
  • They were surprised to learn how few senior officials were familiar with the Jasons’ findings, let alone understood the ramifications of global warming. At last, having worked their way up the federal hierarchy, the two went to see the president’s top scientist, Frank Press.
  • Thus began the Gordon and Rafe carbon-dioxide roadshow. Beginning in the spring of 1979, Pomerance arranged informal briefings with the E.P.A., the National Security Council, The New York Times, the Council on Environmental Quality and the Energy Department, which, Pomerance learned, had established an Office of Carbon Dioxide Effects two years earlier at MacDonald’s urging
  • . Out of respect for MacDonald, Press had summoned to their meeting what seemed to be the entire senior staff of the president’s Office of Science and Technology Policy — the officials consulted on every critical matter of energy and national security. What Pomerance had expected to be yet another casual briefing assumed the character of a high-level national-security meeting.
  • MacDonald would begin his presentation by going back more than a century to John Tyndall — an Irish physicist who was an early champion of Charles Darwin’s work and died after being accidentally poisoned by his wife. In 1859, Tyndall found that carbon dioxide absorbed heat and that variations in the composition of the atmosphere could create changes in climate. These findings inspired Svante Arrhenius, a Swedish chemist and future Nobel laureate, to deduce in 1896 that the combustion of coal and petroleum could raise global temperatures. This warming would become noticeable in a few centuries, Arrhenius calculated, or sooner if consumption of fossil fuels continued to increase.
  • Four decades later, a British steam engineer named Guy Stewart Callendar discovered that, at the weather stations he observed, the previous five years were the hottest in recorded history. Humankind, he wrote in a paper, had become “able to speed up the processes of Nature.” That was in 1939.
  • MacDonald’s history concluded with Roger Revelle, perhaps the most distinguished of the priestly caste of government scientists who, since the Manhattan Project, advised every president on major policy; he had been a close colleague of MacDonald and Press since they served together under Kennedy. In a 1957 paper written with Hans Suess, Revelle concluded that “human beings are now carrying out a large-scale geophysical experiment of a kind that could not have happened in the past nor be reproduced in the future.” Revelle helped the Weather Bureau establish a continuous measurement of atmospheric carbon dioxide at a site perched near the summit of Mauna Loa on the Big Island of Hawaii, 11,500 feet above the sea — a rare pristine natural laboratory on a planet blanketed by fossil-fuel emissions.
  • After nearly a decade of observation, Revelle had shared his concerns with Lyndon Johnson, who included them in a special message to Congress two weeks after his inauguration. Johnson explained that his generation had “altered the composition of the atmosphere on a global scale” through the burning of fossil fuels, and his administration commissioned a study of the subject by his Science Advisory Committee. Revelle was its chairman, and its 1965 executive report on carbon dioxide warned of the rapid melting of Antarctica, rising seas, increased acidity of fresh waters — changes that would require no less than a coordinated global effort to forestall.Yet emissions continued to rise, and at this rate, MacDonald warned, they could see a snowless New England, the swamping of major coastal cities, as much as a 40 percent decline in national wheat production, the forced migration of about one-quarter of the world’s population. Not within centuries — within their own lifetimes.
  • On May 22, Press wrote a letter to the president of the National Academy of Sciences requesting a full assessment of the carbon-dioxide issue. Jule Charney, the father of modern meteorology, would gather the nation’s top oceanographers, atmospheric scientists and climate modelers to judge whether MacDonald’s alarm was justified — whether the world was, in fact, headed to cataclysm.
  • If Charney’s group confirmed that the world was careering toward an existential crisis, the president would be forced to act.
  • Hansen turned from the moon to Venus. Why, he tried to determine, was its surface so hot? In 1967, a Soviet satellite beamed back the answer: The planet’s atmosphere was mainly carbon dioxide. Though once it may have had habitable temperatures, it was believed to have succumbed to a runaway greenhouse effect: As the sun grew brighter, Venus’s ocean began to evaporate, thickening the atmosphere, which forced yet greater evaporation — a self-perpetuating cycle that finally boiled off the ocean entirely and heated the planet’s surface to more than 800 degrees Fahrenheit
  • At the other extreme, Mars’s thin atmosphere had insufficient carbon dioxide to trap much heat at all, leaving it about 900 degrees colder. Earth lay in the middle, its Goldilocks greenhouse effect just strong enough to support life.
  • We want to learn more about Earth’s climate, Jim told Anniek — and how humanity can influence it. He would use giant new supercomputers to map the planet’s atmosphere. They would create Mirror Worlds: parallel realities that mimicked our own. These digital simulacra, technically called “general circulation models,” combined the mathematical formulas that governed the behavior of the sea, land and sky into a single computer model. Unlike the real world, they could be sped forward to reveal the future.
  • The government officials, many of them scientists themselves, tried to suppress their awe of the legends in their presence: Henry Stommel, the world’s leading oceanographer; his protégé, Carl Wunsch, a Jason; the Manhattan Project alumnus Cecil Leith; the Harvard planetary physicist Richard Goody. These were the men who, in the last three decades, had discovered foundational principles underlying the relationships among sun, atmosphere, land and ocean — which is to say, the climate.
  • When, at Charney’s request, Hansen programmed his model to consider a future of doubled carbon dioxide, it predicted a temperature increase of four degrees Celsius. That was twice as much warming as the prediction made by the most prominent climate modeler, Syukuro Manabe, whose government lab at Princeton was the first to model the greenhouse effect. The difference between the two predictions — between warming of two degrees Celsius and four degrees Celsius — was the difference between damaged coral reefs and no reefs whatsoever, between thinning forests and forests enveloped by desert, between catastrophe and chaos.
  • The discrepancy between the models, Arakawa concluded, came down to ice and snow. The whiteness of the world’s snowfields reflected light; if snow melted in a warmer climate, less radiation would escape the atmosphere, leading to even greater warming. Shortly before dawn, Arakawa concluded that Manabe had given too little weight to the influence of melting sea ice, while Hansen had overemphasized it. The best estimate lay in between. Which meant that the Jasons’ calculation was too optimistic. When carbon dioxide doubled in 2035 or thereabouts, global temperatures would increase between 1.5 and 4.5 degrees Celsius, with the most likely outcome a warming of three degrees.
  • within the highest levels of the federal government, the scientific community and the oil-and-gas industry — within the commonwealth of people who had begun to concern themselves with the future habitability of the planet — the Charney report would come to have the authority of settled fact. It was the summation of all the predictions that had come before, and it would withstand the scrutiny of the decades that followed it. Charney’s group had considered everything known about ocean, sun, sea, air and fossil fuels and had distilled it to a single number: three. When the doubling threshold was broached, as appeared inevitable, the world would warm three degrees Celsius
  • The last time the world was three degrees warmer was during the Pliocene, three million years ago, when beech trees grew in Antarctica, the seas were 80 feet higher and horses galloped across the Canadian coast of the Arctic Ocean.
  • After the publication of the Charney report, Exxon decided to create its own dedicated carbon-dioxide research program, with an annual budget of $600,000. Only Exxon was asking a slightly different question than Jule Charney. Exxon didn’t concern itself primarily with how much the world would warm. It wanted to know how much of the warming Exxon could be blamed for.
  • “It behooves us to start a very aggressive defensive program,” Shaw wrote in a memo to a manager, “because there is a good probability that legislation affecting our business will be passed.”
  • Shaw turned to Wallace Broecker, a Columbia University oceanographer who was the second author of Roger Revelle’s 1965 carbon-dioxide report for Lyndon Johnson. In 1977, in a presentation at the American Geophysical Union, Broecker predicted that fossil fuels would have to be restricted, whether by taxation or fiat. More recently, he had testified before Congress, calling carbon dioxide “the No.1 long-term environmental problem.” If presidents and senators trusted Broecker to tell them the bad news, he was good enough for Exxon.
  • The company had been studying the carbon-dioxide problem for decades, since before it changed its name to Exxon. In 1957, scientists from Humble Oil published a study tracking “the enormous quantity of carbon dioxide” contributed to the atmosphere since the Industrial Revolution “from the combustion of fossil fuels.” Even then, the observation that burning fossil fuels had increased the concentration of carbon in the atmosphere was well understood and accepted by Humble’s scientists.
  • The American Petroleum Institute, the industry’s largest trade association, asked the same question in 1958 through its air-pollution study group and replicated the findings made by Humble Oil. So did another A.P.I. study conducted by the Stanford Research Institute a decade later, in 1968, which concluded that the burning of fossil fuels would bring “significant temperature changes” by the year 2000 and ultimately “serious worldwide environmental changes,” including the melting of the Antarctic ice cap and rising seas.
  • The ritual repeated itself every few years. Industry scientists, at the behest of their corporate bosses, reviewed the problem and found good reasons for alarm and better excuses to do nothing. Why should they act when almost nobody within the United States government — nor, for that matter, within the environmental movement — seemed worried?
  • Why take on an intractable problem that would not be detected until this generation of employees was safely retired? Worse, the solutions seemed more punitive than the problem itself. Historically, energy use had correlated to economic growth — the more fossil fuels we burned, the better our lives became. Why mess with that?
  • That June, Jimmy Carter signed the Energy Security Act of 1980, which directed the National Academy of Sciences to start a multiyear, comprehensive study, to be called “Changing Climate,” that would analyze social and economic effects of climate change. More urgent, the National Commission on Air Quality, at the request of Congress, invited two dozen experts, including Henry Shaw himself, to a meeting in Florida to propose climate policy.
  • On April 3, 1980, Senator Paul Tsongas, a Massachusetts Democrat, held the first congressional hearing on carbon-dioxide buildup in the atmosphere. Gordon MacDonald testified that the United States should “take the initiative” and develop, through the United Nations, a way to coordinate every nation’s energy policies to address the problem.
  • During the expansion of the Clean Air Act, he pushed for the creation of the National Commission on Air Quality, charged with ensuring that the goals of the act were being met. One such goal was a stable global climate. The Charney report had made clear that goal was not being met, and now the commission wanted to hear proposals for legislation. It was a profound responsibility, and the two dozen experts invited to the Pink Palace — policy gurus, deep thinkers, an industry scientist and an environmental activist — had only three days to achieve it, but the utopian setting made everything seem possible
  • We have less time than we realize, said an M.I.T. nuclear engineer named David Rose, who studied how civilizations responded to large technological crises. “People leave their problems until the 11th hour, the 59th minute,” he said. “And then: ‘Eloi, Eloi, Lama Sabachthani?’ ” — “My God, my God, why hast thou forsaken me?”
  • The attendees seemed to share a sincere interest in finding solutions. They agreed that some kind of international treaty would ultimately be needed to keep atmospheric carbon dioxide at a safe level. But nobody could agree on what that level was.
  • William Elliott, a NOAA scientist, introduced some hard facts: If the United States stopped burning carbon that year, it would delay the arrival of the doubling threshold by only five years. If Western nations somehow managed to stabilize emissions, it would forestall the inevitable by only eight years. The only way to avoid the worst was to stop burning coal. Yet China, the Soviet Union and the United States, by far the world’s three largest coal producers, were frantically accelerating extraction.
  • “Do we have a problem?” asked Anthony Scoville, a congressional science consultant. “We do, but it is not the atmospheric problem. It is the political problem.” He doubted that any scientific report, no matter how ominous its predictions, would persuade politicians to act.
  • The talk of ending oil production stirred for the first time the gentleman from Exxon. “I think there is a transition period,” Henry Shaw said. “We are not going to stop burning fossil fuels and start looking toward solar or nuclear fusion and so on. We are going to have a very orderly transition from fossil fuels to renewable energy sources.”
  • What if the problem was that they were thinking of it as a problem? “What I am saying,” Scoville continued, “is that in a sense we are making a transition not only in energy but the economy as a whole.” Even if the coal and oil industries collapsed, renewable technologies like solar energy would take their place. Jimmy Carter was planning to invest $80 billion in synthetic fuel. “My God,” Scoville said, “with $80 billion, you could have a photovoltaics industry going that would obviate the need for synfuels forever!”
  • nobody could agree what to do. John Perry, a meteorologist who had worked as a staff member on the Charney report, suggested that American energy policy merely “take into account” the risks of global warming, though he acknowledged that a nonbinding measure might seem “intolerably stodgy.” “It is so weak,” Pomerance said, the air seeping out of him, “as to not get us anywhere.”
  • Scoville pointed out that the United States was responsible for the largest share of global carbon emissions. But not for long. “If we’re going to exercise leadership,” he said, “the opportunity is now.
  • One way to lead, he proposed, would be to classify carbon dioxide as a pollutant under the Clean Air Act and regulate it as such. This was received by the room like a belch. By Scoville’s logic, every sigh was an act of pollution. Did the science really support such an extreme measure? The Charney report did exactly that, Pomerance said.
  • Slade, the director of the Energy Department’s carbon-dioxide program, considered the lag a saving grace. If changes did not occur for a decade or more, he said, those in the room couldn’t be blamed for failing to prevent them. So what was the problem?
  • “Call it whatever.” Besides, Pomerance added, they didn’t have to ban coal tomorrow. A pair of modest steps could be taken immediately to show the world that the United States was serious: the implementation of a carbon tax and increased investment in renewable energy. Then the United States could organize an international summit meeting to address climate change
  • these two dozen experts, who agreed on the major points and had made a commitment to Congress, could not draft a single paragraph. Hours passed in a hell of fruitless negotiation, self-defeating proposals and impulsive speechifying. Pomerance and Scoville pushed to include a statement calling for the United States to “sharply accelerate international dialogue,” but they were sunk by objections and caveats.
  • They never got to policy proposals. They never got to the second paragraph. The final statement was signed by only the moderator, who phrased it more weakly than the declaration calling for the workshop in the first place. “The guide I would suggest,” Jorling wrote, “is whether we know enough not to recommend changes in existing policy.”
  • Pomerance had seen enough. A consensus-based strategy would not work — could not work — without American leadership. And the United States wouldn’t act unless a strong leader persuaded it to do so — someone who would speak with authority about the science, demand action from those in power and risk everything in pursuit of justice.
  • The meeting ended Friday morning. On Tuesday, four days later, Ronald Reagan was elected president.
  • ‘Otherwise, They’ll Gurgle’ November 1980-September 1981
  • In the midst of this carnage, the Council on Environmental Quality submitted a report to the White House warning that fossil fuels could “permanently and disastrously” alter Earth’s atmosphere, leading to “a warming of the Earth, possibly with very serious effects.” Reagan did not act on the council’s advice. Instead, his administration considered eliminating the council.
  • After the election, Reagan considered plans to close the Energy Department, increase coal production on federal land and deregulate surface coal mining. Once in office, he appointed James Watt, the president of a legal firm that fought to open public lands to mining and drilling, to run the Interior Department. “We’re deliriously happy,” the president of the National Coal Association was reported to have said. Reagan preserved the E.P.A. but named as its administrator Anne Gorsuch, an anti-regulation zealot who proceeded to cut the agency’s staff and budget by about a quarter
  • Reagan “has declared open war on solar energy,” the director of the nation’s lead solar-energy research agency said, after he was asked to resign). Reagan appeared determined to reverse the environmental achievements of Jimmy Carter, before undoing those of Richard Nixon, Lyndon Johnson, John F. Kennedy and, if he could get away with it, Theodore Roosevelt.
  • When Reagan considered closing the Council on Environmental Quality, its acting chairman, Malcolm Forbes Baldwin, wrote to the vice president and the White House chief of staff begging them to reconsider; in a major speech the same week, “A Conservative’s Program for the Environment,” Baldwin argued that it was “time for today’s conservatives explicitly to embrace environmentalism.” Environmental protection was not only good sense. It was good business. What could be more conservative than an efficient use of resources that led to fewer federal subsidies?
  • Meanwhile the Charney report continued to vibrate at the periphery of public consciousness. Its conclusions were confirmed by major studies from the Aspen Institute, the International Institute for Applied Systems Analysis near Vienna and the American Association for the Advancement of Science. Every month or so, nationally syndicated articles appeared summoning apocalypse: “Another Warning on ‘Greenhouse Effect,’ ” “Global Warming Trend ‘Beyond Human Experience,’ ” “Warming Trend Could ‘Pit Nation Against Nation.’
  • Pomerance read on the front page of The New York Times on Aug. 22, 1981, about a forthcoming paper in Science by a team of seven NASA scientists. They had found that the world had already warmed in the past century. Temperatures hadn’t increased beyond the range of historical averages, but the scientists predicted that the warming signal would emerge from the noise of routine weather fluctuations much sooner than previously expected. Most unusual of all, the paper ended with a policy recommendation: In the coming decades, the authors wrote, humankind should develop alternative sources of energy and use fossil fuels only “as necessary.” The lead author was James Hansen.
  • Pomerance listened and watched. He understood Hansen’s basic findings well enough: Earth had been warming since 1880, and the warming would reach “almost unprecedented magnitude” in the next century, leading to the familiar suite of terrors, including the flooding of a 10th of New Jersey and a quarter of Louisiana and Florida. But Pomerance was excited to find that Hansen could translate the complexities of atmospheric science into plain English.
  • 7. ‘We’re All Going to Be the Victims’ March 1982
  • Gore had learned about climate change a dozen years earlier as an undergraduate at Harvard, when he took a class taught by Roger Revelle. Humankind was on the brink of radically transforming the global atmosphere, Revelle explained, drawing Keeling’s rising zigzag on the blackboard, and risked bringing about the collapse of civilization. Gore was stunned: Why wasn’t anyone talking about this?
  • Most in Congress considered the science committee a legislative backwater, if they considered it at all; this made Gore’s subcommittee, which had no legislative authority, an afterthought to an afterthought. That, Gore vowed, would change. Environmental and health stories had all the elements of narrative drama: villains, victims and heroes. In a hearing, you could summon all three, with the chairman serving as narrator, chorus and moral authority. He told his staff director that he wanted to hold a hearing every week.
  • The Revelle hearing went as Grumbly had predicted. The urgency of the issue was lost on Gore’s older colleagues, who drifted in and out while the witnesses testified. There were few people left by the time the Brookings Institution economist Lester Lave warned that humankind’s profligate exploitation of fossil fuels posed an existential test to human nature. “Carbon dioxide stands as a symbol now of our willingness to confront the future,” he said. “It will be a sad day when we decide that we just don’t have the time or thoughtfulness to address those issues.”
  • That night, the news programs featured the resolution of the baseball strike, the ongoing budgetary debate and the national surplus of butter.
  • There emerged, despite the general comity, a partisan divide. Unlike the Democrats, the Republicans demanded action. “Today I have a sense of déjà vu,” said Robert Walker, a Republican from Pennsylvania. In each of the last five years, he said, “we have been told and told and told that there is a problem with the increasing carbon dioxide in the atmosphere. We all accept that fact, and we realize that the potential consequences are certainly major in their impact on mankind.” Yet they had failed to propose a single law. “Now is the time,” he said. “The research is clear. It is up to us now to summon the political will.”
  • Hansen flew to Washington to testify on March 25, 1982, performing before a gallery even more thinly populated than at Gore’s first hearing on the greenhouse effect. Gore began by attacking the Reagan administration for cutting funding for carbon-dioxide research despite the “broad consensus in the scientific community that the greenhouse effect is a reality.” William Carney, a Republican from New York, bemoaned the burning of fossil fuels and argued passionately that science should serve as the basis for legislative policy
  • the experts invited by Gore agreed with the Republicans: The science was certain enough. Melvin Calvin, a Berkeley chemist who won the Nobel Prize for his work on the carbon cycle, said that it was useless to wait for stronger evidence of warming. “You cannot do a thing about it when the signals are so big that they come out of the noise,” he said. “You have to look for early warning signs.”
  • Hansen’s job was to share the warning signs, to translate the data into plain English. He explained a few discoveries that his team had made — not with computer models but in libraries. By analyzing records from hundreds of weather stations, he found that the surface temperature of the planet had already increased four-tenths of a degree Celsius in the previous century. Data from several hundred tide-gauge stations showed that the oceans had risen four inches since the 1880s
  • It occurred to Hansen that this was the only political question that mattered: How long until the worst began? It was not a question on which geophysicists expended much effort; the difference between five years and 50 years in the future was meaningless in geologic time. Politicians were capable of thinking only in terms of electoral time: six years, four years, two years. But when it came to the carbon problem, the two time schemes were converging.
  • “Within 10 or 20 years,” Hansen said, “we will see climate changes which are clearly larger than the natural variability.” James Scheuer wanted to make sure he understood this correctly. No one else had predicted that the signal would emerge that quickly. “If it were one or two degrees per century,” he said, “that would be within the range of human adaptability. But we are pushing beyond the range of human adaptability.” “Yes,” Hansen said.
  • How soon, Scheuer asked, would they have to change the national model of energy production? Hansen hesitated — it wasn’t a scientific question. But he couldn’t help himself. He had been irritated, during the hearing, by all the ludicrous talk about the possibility of growing more trees to offset emissions. False hopes were worse than no hope at all: They undermined the prospect of developing real solutions. “That time is very soon,” Hansen said finally. “My opinion is that it is past,” Calvin said, but he was not heard because he spoke from his seat. He was told to speak into the microphone. “It is already later,” Calvin said, “than you think.”
  • From Gore’s perspective, the hearing was an unequivocal success. That night Dan Rather devoted three minutes of “CBS Evening News” to the greenhouse effect. A correspondent explained that temperatures had increased over the previous century, great sheets of pack ice in Antarctica were rapidly melting, the seas were rising; Calvin said that “the trend is all in the direction of an impending catastrophe”; and Gore mocked Reagan for his shortsightedness. Later, Gore could take credit for protecting the Energy Department’s carbon-dioxide program, which in the end was largely preserved.
  • 8. ‘The Direction of an Impending Catastrophe’ 1982
  • Following Henry Shaw’s recommendation to establish credibility ahead of any future legislative battles, Exxon had begun to spend conspicuously on global-warming research. It donated tens of thousands of dollars to some of the most prominent research efforts, including one at Woods Hole led by the ecologist George Woodwell, who had been calling for major climate policy as early as the mid-1970s, and an international effort coordinated by the United Nations. Now Shaw offered to fund the October 1982 symposium on climate change at Columbia’s Lamont-Doherty campus.
  • David boasted that Exxon would usher in a new global energy system to save the planet from the ravages of climate change. He went so far as to argue that capitalism’s blind faith in the wisdom of the free market was “less than satisfying” when it came to the greenhouse effect. Ethical considerations were necessary, too. He pledged that Exxon would revise its corporate strategy to account for climate change, even if it were not “fashionable” to do so. As Exxon had already made heavy investments in nuclear and solar technology, he was “generally upbeat” that Exxon would “invent” a future of renewable energy.
  • Hansen had reason to feel upbeat himself. If the world’s largest oil-and-gas company supported a new national energy model, the White House would not stand in its way. The Reagan administration was hostile to change from within its ranks. But it couldn’t be hostile to Exxon.
  • The carbon-dioxide issue was beginning to receive major national attention — Hansen’s own findings had become front-page news, after all. What started as a scientific story was turning into a political story.
  • The political realm was itself a kind of Mirror World, a parallel reality that crudely mimicked our own. It shared many of our most fundamental laws, like the laws of gravity and inertia and publicity. And if you applied enough pressure, the Mirror World of politics could be sped forward to reveal a new future. Hansen was beginning to understand that too.
  • 1. ‘Caution, Not Panic’ 1983-1984
  • in the fall of 1983, the climate issue entered an especially long, dark winter. And all because of a single report that had done nothing to change the state of climate science but transformed the state of climate politics.
  • After the publication of the Charney report in 1979, Jimmy Carter had directed the National Academy of Sciences to prepare a comprehensive, $1 million analysis of the carbon-dioxide problem: a Warren Commission for the greenhouse effect. A team of scientist-dignitaries — among them Revelle, the Princeton modeler Syukuro Manabe and the Harvard political economist Thomas Schelling, one of the intellectual architects of Cold War game theory — would review the literature, evaluate the consequences of global warming for the world order and propose remedies
  • Then Reagan won the White House.
  • the incipient report served as the Reagan administration’s answer to every question on the subject. There could be no climate policy, Fred Koomanoff and his associates said, until the academy ruled. In the Mirror World of the Reagan administration, the warming problem hadn’t been abandoned at all. A careful, comprehensive solution was being devised. Everyone just had to wait for the academy’s elders to explain what it was.
  • The committee’s chairman, William Nierenberg — a Jason, presidential adviser and director of Scripps, the nation’s pre-eminent oceanographic institution — argued that action had to be taken immediately, before all the details could be known with certainty, or else it would be too late.
  • Better to bet on American ingenuity to save the day. Major interventions in national energy policy, taken immediately, might end up being more expensive, and less effective, than actions taken decades in the future, after more was understood about the economic and social consequences of a warmer planet. Yes, the climate would change, mostly for the worst, but future generations would be better equipped to change with it.
  • Government officials who knew Nierenberg were not surprised by his conclusions: He was an optimist by training and experience, a devout believer in the doctrine of American exceptionalism, one of the elite class of scientists who had helped the nation win a global war, invent the most deadly weapon conceivable and create the booming aerospace and computer industries. America had solved every existential problem it had confronted over the previous generation; it would not be daunted by an excess of carbon dioxide. Nierenberg had also served on Reagan’s transition team. Nobody believed that he had been directly influenced by his political connections, but his views — optimistic about the saving graces of market forces, pessimistic about the value of government regulation — reflected all the ardor of his party.
  • That’s what Nierenberg wrote in “Changing Climate.” But it’s not what he said in the press interviews that followed. He argued the opposite: There was no urgent need for action. The public should not entertain the most “extreme negative speculations” about climate change (despite the fact that many of those speculations appeared in his report). Though “Changing Climate” urged an accelerated transition to renewable fuels, noting that it would take thousands of years for the atmosphere to recover from the damage of the last century, Nierenberg recommended “caution, not panic.” Better to wait and see
  • The damage of “Changing Climate” was squared by the amount of attention it received. Nierenberg’s speech in the Great Hall, being one-500th the length of the actual assessment, received 500 times the press coverage. As The Wall Street Journal put it, in a line echoed by trade journals across the nation: “A panel of top scientists has some advice for people worried about the much-publicized warming of the Earth’s climate: You can cope.”
  • On “CBS Evening News,” Dan Rather said the academy had given “a cold shoulder” to a grim, 200-page E.P.A. assessment published earlier that week (titled “Can We Delay a Greenhouse Warming?”; the E.P.A.’s answer, reduced to a word, was no). The Washington Post described the two reports, taken together, as “clarion calls to inaction.
  • George Keyworth II, Reagan’s science adviser. Keyworth used Nierenberg’s optimism as reason to discount the E.P.A.’s “unwarranted and unnecessarily alarmist” report and warned against taking any “near-term corrective action” on global warming. Just in case it wasn’t clear, Keyworth added, “there are no actions recommended other than continued research.”
  • Edward David Jr., two years removed from boasting of Exxon’s commitment to transforming global energy policy, told Science that the corporation had reconsidered. “Exxon has reverted to being mainly a supplier of conventional hydrocarbon fuels — petroleum products, natural gas and steam coal,” David said. The American Petroleum Institute canceled its own carbon-dioxide research program, too.
  • Exxon soon revised its position on climate-change research. In a presentation at an industry conference, Henry Shaw cited “Changing Climate” as evidence that “the general consensus is that society has sufficient time to technologically adapt to a CO₂ greenhouse effect.” If the academy had concluded that regulations were not a serious option, why should Exxon protest
  • 2. ‘You Scientists Win’ 1985
  • 3. The Size of The Human Imagination Spring-Summer 1986
  • Curtis Moore’s proposal: Use ozone to revive climate. The ozone hole had a solution — an international treaty, already in negotiation. Why not hitch the milk wagon to the bullet train? Pomerance was skeptical. The problems were related, sure: Without a reduction in CFC emissions, you didn’t have a chance of averting cataclysmic global warming. But it had been difficult enough to explain the carbon issue to politicians and journalists; why complicate the sales pitch? Then again, he didn’t see what choice he had. The Republicans controlled the Senate, and Moore was his connection to the Senate’s environmental committee.
  • Pomerance met with Senator John Chafee, a Republican from Rhode Island, and helped persuade him to hold a double-barreled hearing on the twin problems of ozone and carbon dioxide on June 10 and 11, 1986
  • F.Sherwood Rowland, Robert Watson, a NASA scientist, and Richard Benedick, the administration’s lead representative in international ozone negotiations, would discuss ozone; James Hansen, Al Gore, the ecologist George Woodwell and Carl Wunsch, a veteran of the Charney group, would testify about climate change.
  • As Pomerance had hoped, fear about the ozone layer ensured a bounty of press coverage for the climate-change testimony. But as he had feared, it caused many people to conflate the two crises. One was Peter Jennings, who aired the video on ABC’s “World News Tonight,” warning that the ozone hole “could lead to flooding all over the world, also to drought and to famine.”
  • The confusion helped: For the first time since the “Changing Climate” report, global-warming headlines appeared by the dozen. William Nierenberg’s “caution, not panic” line was inverted. It was all panic without a hint of caution: “A Dire Forecast for ‘Greenhouse’ Earth” (the front page of The Washington Post); “Scientists Predict Catastrophes in Growing Global Heat Wave” (Chicago Tribune); “Swifter Warming of Globe Foreseen” (The New York Times).
  • After three years of backsliding and silence, Pomerance was exhilarated to see interest in the issue spike overnight. Not only that: A solution materialized, and a moral argument was passionately articulated — by Rhode Island’s Republican senator no less. “Ozone depletion and the greenhouse effect can no longer be treated solely as important scientific questions,” Chafee said. “They must be seen as critical problems facing the nations of the world, and they are problems that demand solutions.”
  • The old canard about the need for more research was roundly mocked — by Woodwell, by a W.R.I. colleague named Andrew Maguire, by Senator George Mitchell, a Democrat from Maine. “Scientists are never 100 percent certain,” the Princeton historian Theodore Rabb testified. “That notion of total certainty is something too elusive ever to be sought.” As Pomerance had been saying since 1979, it was past time to act. Only now the argument was so broadly accepted that nobody dared object.
  • The ozone hole, Pomerance realized, had moved the public because, though it was no more visible than global warming, people could be made to see it. They could watch it grow on video. Its metaphors were emotionally wrought: Instead of summoning a glass building that sheltered plants from chilly weather (“Everything seems to flourish in there”), the hole evoked a violent rending of the firmament, inviting deathly radiation. Americans felt that their lives were in danger. An abstract, atmospheric problem had been reduced to the size of the human imagination. It had been made just small enough, and just large enough, to break through.
  • Four years after “Changing Climate,” two years after a hole had torn open the firmament and a month after the United States and more than three dozen other nations signed a treaty to limit use of CFCs, the climate-change corps was ready to celebrate. It had become conventional wisdom that climate change would follow ozone’s trajectory. Reagan’s E.P.A. administrator, Lee M. Thomas, said as much the day he signed the Montreal Protocol on Substances That Deplete the Ozone Layer (the successor to the Vienna Convention), telling reporters that global warming was likely to be the subject of a future international agreement
  • Congress had already begun to consider policy — in 1987 alone, there were eight days of climate hearings, in three committees, across both chambers of Congress; Senator Joe Biden, a Delaware Democrat, had introduced legislation to establish a national climate-change strategy. And so it was that Jim Hansen found himself on Oct. 27 in the not especially distinguished ballroom of the Quality Inn on New Jersey Avenue, a block from the Capitol, at “Preparing for Climate Change,” which was technically a conference but felt more like a wedding.
  • John Topping was an old-line Rockefeller Republican, a Commerce Department lawyer under Nixon and an E.P.A. official under Reagan. He first heard about the climate problem in the halls of the E.P.A. in 1982 and sought out Hansen, who gave him a personal tutorial. Topping was amazed to discover that out of the E.P.A.’s 13,000-person staff, only seven people, by his count, were assigned to work on climate, though he figured it was more important to the long-term security of the nation than every other environmental issue combined.
  • Glancing around the room, Jim Hansen could chart, like an arborist counting rings on a stump, the growth of the climate issue over the decade. Veterans like Gordon MacDonald, George Woodwell and the environmental biologist Stephen Schneider stood at the center of things. Former and current staff members from the congressional science committees (Tom Grumbly, Curtis Moore, Anthony Scoville) made introductions to the congressmen they advised. Hansen’s owlish nemesis Fred Koomanoff was present, as were his counterparts from the Soviet Union and Western Europe. Rafe Pomerance’s cranium could be seen above the crowd, but unusually he was surrounded by colleagues from other environmental organizations that until now had shown little interest in a diffuse problem with no proven fund-raising record. The party’s most conspicuous newcomers, however, the outermost ring, were the oil-and-gas executives.
  • That evening, as a storm spat and coughed outside, Rafe Pomerance gave one of his exhortative speeches urging cooperation among the various factions, and John Chafee and Roger Revelle received awards; introductions were made and business cards earnestly exchanged. Not even a presentation by Hansen of his research could sour the mood. The next night, on Oct. 28, at a high-spirited dinner party in Topping’s townhouse on Capitol Hill, the oil-and-gas men joked with the environmentalists, the trade-group representatives chatted up the regulators and the academics got merrily drunk. Mikhail Budyko, the don of the Soviet climatologists, settled into an extended conversation about global warming with Topping’s 10-year-old son. It all seemed like the start of a grand bargain, a uniting of factions — a solution.
  • Hansen was accustomed to the bureaucratic nuisances that attended testifying before Congress; before a hearing, he had to send his formal statement to NASA headquarters, which forwarded it to the White House’s Office of Management and Budget for approval. “Major greenhouse climate changes are a certainty,” he had written. “By the 2010s [in every scenario], essentially the entire globe has very substantial warming.”
  • By all appearances, plans for major policy continued to advance rapidly. After the Johnston hearing, Timothy Wirth, a freshman Democratic senator from Colorado on the energy committee, began to plan a comprehensive package of climate-change legislation — a New Deal for global warming. Wirth asked a legislative assistant, David Harwood, to consult with experts on the issue, beginning with Rafe Pomerance, in the hope of converting the science of climate change into a new national energy policy.
  • In March 1988, Wirth joined 41 other senators, nearly half of them Republicans, to demand that Reagan call for an international treaty modeled after the ozone agreement. Because the United States and the Soviet Union were the world’s two largest contributors of carbon emissions, responsible for about one-third of the world total, they should lead the negotiations. Reagan agreed. In May, he signed a joint statement with Mikhail Gorbachev that included a pledge to cooperate on global warming.
  • Al Gore himself had, for the moment, withdrawn his political claim to the issue. In 1987, at the age of 39, Gore announced that he was running for president, in part to bring attention to global warming, but he stopped emphasizing it after the subject failed to captivate New Hampshire primary voters.
  • 5. ‘You Will See Things That You Shall Believe’ Summer 1988
  • It was the hottest and driest summer in history. Everywhere you looked, something was bursting into flames. Two million acres in Alaska incinerated, and dozens of major fires scored the West. Yellowstone National Park lost nearly one million acres. Smoke was visible from Chicago, 1,600 miles away.
  • In Nebraska, suffering its worst drought since the Dust Bowl, there were days when every weather station registered temperatures above 100 degrees. The director of the Kansas Department of Health and Environment warned that the drought might be the dawning of a climatic change that within a half century could turn the state into a desert.
  • On June 22 in Washington, where it hit 100 degrees, Rafe Pomerance received a call from Jim Hansen, who was scheduled to testify the following morning at a Senate hearing called by Timothy Wirth. “I hope we have good media coverage tomorrow,” Hansen said.
  • Hansen had just received the most recent global temperature data. Just over halfway into the year, 1988 was setting records. Already it had nearly clinched the hottest year in history. Ahead of schedule, the signal was emerging from the noise. “I’m going to make a pretty strong statement,” Hansen said.
  • Hansen returned to his testimony. He wrote: “The global warming is now large enough that we can ascribe with a high degree of confidence a cause-and-effect relationship to the greenhouse effect.” He wrote: “1988 so far is so much warmer than 1987, that barring a remarkable and improbable cooling, 1988 will be the warmest year on record.” He wrote: “The greenhouse effect has been detected, and it is changing our climate now.”
  • “We have only one planet,” Senator Bennett Johnston intoned. “If we screw it up, we have no place to go.” Senator Max Baucus, a Democrat from Montana, called for the United Nations Environment Program to begin preparing a global remedy to the carbon-dioxide problem. Senator Dale Bumpers, a Democrat of Arkansas, previewed Hansen’s testimony, saying that it “ought to be cause for headlines in every newspaper in America tomorrow morning.” The coverage, Bumpers emphasized, was a necessary precursor to policy. “Nobody wants to take on any of the industries that produce the things that we throw up into the atmosphere,” he said. “But what you have are all these competing interests pitted against our very survival.”
  • Hansen, wiping his brow, spoke without affect, his eyes rarely rising from his notes. The warming trend could be detected “with 99 percent confidence,” he said. “It is changing our climate now.” But he saved his strongest comment for after the hearing, when he was encircled in the hallway by reporters. “It is time to stop waffling so much,” he said, “and say that the evidence is pretty strong that the greenhouse effect is here.”
  • The press followed Bumpers’s advice. Hansen’s testimony prompted headlines in dozens of newspapers across the country, including The New York Times, which announced, across the top of its front page: “Global Warming Has Begun, Expert Tells Senate.”
  • Rafe Pomerance called his allies on Capitol Hill, the young staff members who advised politicians, organized hearings, wrote legislation. We need to finalize a number, he told them, a specific target, in order to move the issue — to turn all this publicity into policy. The Montreal Protocol had called for a 50 percent reduction in CFC emissions by 1998. What was the right target for carbon emissions? It wasn’t enough to exhort nations to do better. That kind of talk might sound noble, but it didn’t change investments or laws. They needed a hard goal — something ambitious but reasonable. And they needed it soon: Just four days after Hansen’s star turn, politicians from 46 nations and more than 300 scientists would convene in Toronto at the World Conference on the Changing Atmosphere, an event described by Philip Shabecoff of The New York Times as “Woodstock for climate change.”
  • Pomerance had a proposal: a 20 percent reduction in carbon emissions by 2000. Ambitious, Harwood said. In all his work planning climate policy, he had seen no assurance that such a steep drop in emissions was possible. Then again, 2000 was more than a decade off, so it allowed for some flexibility.
  • Mintzer pointed out that a 20 percent reduction was consistent with the academic literature on energy efficiency. Various studies over the years had shown that you could improve efficiency in most energy systems by roughly 20 percent if you adopted best practices.
  • Of course, with any target, you had to take into account the fact that the developing world would inevitably consume much larger quantities of fossil fuels by 2000. But those gains could be offset by a wider propagation of the renewable technologies already at hand — solar, wind, geothermal. It was not a rigorous scientific analysis, Mintzer granted, but 20 percent sounded plausible. We wouldn’t need to solve cold fusion or ask Congress to repeal the law of gravity. We could manage it with the knowledge and technology we already had.
  • Besides, Pomerance said, 20 by 2000 sounds good.
  • The conference’s final statement, signed by all 400 scientists and politicians in attendance, repeated the demand with a slight variation: a 20 percent reduction in carbon emissions by 2005. Just like that, Pomerance’s best guess became global diplomatic policy.
  • Hansen, emerging from Anniek’s successful cancer surgery, took it upon himself to start a one-man public information campaign. He gave news conferences and was quoted in seemingly every article about the issue; he even appeared on television with homemade props. Like an entrant at an elementary-school science fair, he made “loaded dice” out of sections of cardboard and colored paper to illustrate the increased likelihood of hotter weather in a warmer climate. Public awareness of the greenhouse effect reached a new high of 68 percent
  • global warming became a major subject of the presidential campaign. While Michael Dukakis proposed tax incentives to encourage domestic oil production and boasted that coal could satisfy the nation’s energy needs for the next three centuries, George Bush took advantage. “I am an environmentalist,” he declared on the shore of Lake Erie, the first stop on a five-state environmental tour that would take him to Boston Harbor, Dukakis’s home turf. “Those who think we are powerless to do anything about the greenhouse effect,” he said, “are forgetting about the White House effect.”
  • His running mate emphasized the ticket’s commitment to the issue at the vice-presidential debate. “The greenhouse effect is an important environmental issue,” Dan Quayle said. “We need to get on with it. And in a George Bush administration, you can bet that we will.”
  • This kind of talk roused the oil-and-gas men. “A lot of people on the Hill see the greenhouse effect as the issue of the 1990s,” a gas lobbyist told Oil & Gas Journal. Before a meeting of oil executives shortly after the “environmentalist” candidate won the election, Representative Dick Cheney, a Wyoming Republican, warned, “It’s going to be very difficult to fend off some kind of gasoline tax.” The coal industry, which had the most to lose from restrictions on carbon emissions, had moved beyond denial to resignation. A spokesman for the National Coal Association acknowledged that the greenhouse effect was no longer “an emerging issue. It is here already, and we’ll be hearing more and more about it.”
  • By the end of the year, 32 climate bills had been introduced in Congress, led by Wirth’s omnibus National Energy Policy Act of 1988. Co-sponsored by 13 Democrats and five Republicans, it established as a national goal an “International Global Agreement on the Atmosphere by 1992,” ordered the Energy Department to submit to Congress a plan to reduce energy use by at least 2 percent a year through 2005 and directed the Congressional Budget Office to calculate the feasibility of a carbon tax. A lawyer for the Senate energy committee told an industry journal that lawmakers were “frightened” by the issue and predicted that Congress would eventually pass significant legislation after Bush took office
  • The other great powers refused to wait. The German Parliament created a special commission on climate change, which concluded that action had to be taken immediately, “irrespective of any need for further research,” and that the Toronto goal was inadequate; it recommended a 30 percent reduction of carbon emissions
  • Margaret Thatcher, who had studied chemistry at Oxford, warned in a speech to the Royal Society that global warming could “greatly exceed the capacity of our natural habitat to cope” and that “the health of the economy and the health of our environment are totally dependent upon each other.”
  • The prime ministers of Canada and Norway called for a binding international treaty on the atmosphere; Sweden’s Parliament went further, announcing a national strategy to stabilize emissions at the 1988 level and eventually imposing a carbon tax
  • the United Nations unanimously endorsed the establishment, by the World Meteorological Organization and the United Nations Environment Program, of an Intergovernmental Panel on Climate Change, composed of scientists and policymakers, to conduct scientific assessments and develop global climate policy.
  • One of the I.P.C.C.’s first sessions to plan an international treaty was hosted by the State Department, 10 days after Bush’s inauguration. James Baker chose the occasion to make his first speech as secretary of state. “We can probably not afford to wait until all of the uncertainties about global climate change have been resolved,” he said. “Time will not make the problem go away.”
  • : On April 14, 1989, a bipartisan group of 24 senators, led by the majority leader, George Mitchell, requested that Bush cut emissions in the United States even before the I.P.C.C.’s working group made its recommendation. “We cannot afford the long lead times associated with a comprehensive global agreement,” the senators wrote. Bush had promised to combat the greenhouse effect with the White House effect. The self-proclaimed environmentalist was now seated in the Oval Office. It was time.
  • 8. ‘You Never Beat The White House’ April 1989
  • After Jim Baker gave his boisterous address to the I.P.C.C. working group at the State Department, he received a visit from John Sununu, Bush’s chief of staff. Leave the science to the scientists, Sununu told Baker. Stay clear of this greenhouse-effect nonsense. You don’t know what you’re talking about. Baker, who had served as Reagan’s chief of staff, didn’t speak about the subject again.
  • despite his reputation as a political wolf, he still thought of himself as a scientist — an “old engineer,” as he was fond of putting it, having earned a Ph.D. in mechanical engineering from M.I.T. decades earlier. He lacked the reflexive deference that so many of his political generation reserved for the class of elite government scientists.
  • Since World War II, he believed, conspiratorial forces had used the imprimatur of scientific knowledge to advance an “anti-growth” doctrine. He reserved particular disdain for Paul Ehrlich’s “The Population Bomb,” which prophesied that hundreds of millions of people would starve to death if the world took no step to curb population growth; the Club of Rome, an organization of European scientists, heads of state and economists, which similarly warned that the world would run out of natural resources; and as recently as the mid-’70s, the hypothesis advanced by some of the nation’s most celebrated scientists — including Carl Sagan, Stephen Schneider and Ichtiaque Rasool — that a new ice age was dawning, thanks to the proliferation of man-made aerosols. All were theories of questionable scientific merit, portending vast, authoritarian remedies to halt economic progress.
  • When Mead talked about “far-reaching” decisions and “long-term consequences,” Sununu heard the marching of jackboots.
  • Sununu had suspected that the greenhouse effect belonged to this nefarious cabal since 1975, when the anthropologist Margaret Mead convened a symposium on the subject at the National Institute of Environmental Health Sciences.
  • While Sununu and Darman reviewed Hansen’s statements, the E.P.A. administrator, William K. Reilly, took a new proposal to the White House. The next meeting of the I.P.C.C.’s working group was scheduled for Geneva the following month, in May; it was the perfect occasion, Reilly argued, to take a stronger stand on climate change. Bush should demand a global treaty to reduce carbon emissions.
  • Sununu wouldn’t budge. He ordered the American delegates not to make any commitment in Geneva. Very soon after that, someone leaked the exchange to the press.
  • A deputy of Jim Baker pulled Reilly aside. He said he had a message from Baker, who had observed Reilly’s infighting with Sununu. “In the long run,” the deputy warned Reilly, “you never beat the White House.”
  • 9. ‘A Form of Science Fraud’ May 1989
  • The cameras followed Hansen and Gore into the marbled hallway. Hansen insisted that he wanted to focus on the science. Gore focused on the politics. “I think they’re scared of the truth,” he said. “They’re scared that Hansen and the other scientists are right and that some dramatic policy changes are going to be needed, and they don’t want to face up to it.”
  • The censorship did more to publicize Hansen’s testimony and the dangers of global warming than anything he could have possibly said. At the White House briefing later that morning, Press Secretary Marlin Fitzwater admitted that Hansen’s statement had been changed. He blamed an official “five levels down from the top” and promised that there would be no retaliation. Hansen, he added, was “an outstanding and distinguished scientist” and was “doing a great job.”
  • 10. The White House Effect Fall 1989
  • The Los Angeles Times called the censorship “an outrageous assault.” The Chicago Tribune said it was the beginning of “a cold war on global warming,” and The New York Times warned that the White House’s “heavy-handed intervention sends the signal that Washington wants to go slow on addressing the greenhouse problem.”
  • Darman went to see Sununu. He didn’t like being accused of censoring scientists. They needed to issue some kind of response. Sununu called Reilly to ask if he had any ideas. We could start, Reilly said, by recommitting to a global climate treaty. The United States was the only Western nation on record as opposing negotiations.
  • Sununu sent a telegram to Geneva endorsing a plan “to develop full international consensus on necessary steps to prepare for a formal treaty-negotiating process. The scope and importance of this issue are so great that it is essential for the U.S. to exercise leadership.”
  • Sununu seethed at any mention of the subject. He had taken it upon himself to study more deeply the greenhouse effect; he would have a rudimentary, one-dimensional general circulation model installed on his personal desktop computer. He decided that the models promoted by Jim Hansen were a lot of bunk. They were horribly imprecise in scale and underestimated the ocean’s ability to mitigate warming. Sununu complained about Hansen to D. Allan Bromley, a nuclear physicist from Yale who, at Sununu’s recommendation, was named Bush’s science adviser. Hansen’s findings were “technical poppycock” that didn’t begin to justify such wild-eyed pronouncements that “the greenhouse effect is here” or that the 1988 heat waves could be attributed to global warming, let alone serve as the basis for national economic policy.
  • When a junior staff member in the Energy Department, in a meeting at the White House with Sununu and Reilly, mentioned an initiative to reduce fossil-fuel use, Sununu interrupted her. “Why in the world would you need to reduce fossil-fuel use?” he asked. “Because of climate change,” the young woman replied. “I don’t want anyone in this administration without a scientific background using ‘climate change’ or ‘global warming’ ever again,” he said. “If you don’t have a technical basis for policy, don’t run around making decisions on the basis of newspaper headlines.” After the meeting, Reilly caught up to the staff member in the hallway. She was shaken. Don’t take it personally, Reilly told her. Sununu might have been looking at you, but that was directed at me.
  • Reilly, for his part, didn’t entirely blame Sununu for Bush’s indecision on the prospect of a climate treaty. The president had never taken a vigorous interest in global warming and was mainly briefed about it by nonscientists. Bush had brought up the subject on the campaign trail, in his speech about the White House effect, after leafing through a briefing booklet for a new issue that might generate some positive press. When Reilly tried in person to persuade him to take action, Bush deferred to Sununu and Baker. Why don’t the three of you work it out, he said. Let me know when you decide
  • Relations between Sununu and Reilly became openly adversarial. Reilly, Sununu thought, was a creature of the environmental lobby. He was trying to impress his friends at the E.P.A. without having a basic grasp of the science himself.
  • Pomerance had the sinking feeling that the momentum of the previous year was beginning to flag. The censoring of Hansen’s testimony and the inexplicably strident opposition from John Sununu were ominous signs. So were the findings of a report Pomerance had commissioned, published in September by the World Resources Institute, tracking global greenhouse-gas emissions. The United States was the largest contributor by far, producing nearly a quarter of the world’s carbon emissions, and its contribution was growing faster than that of every other country. Bush’s indecision, or perhaps inattention, had already managed to delay the negotiation of a global climate treaty until 1990 at the earliest, perhaps even 1991. By then, Pomerance worried, it would be too late.
  • Pomerance tried to be more diplomatic. “The president made a commitment to the American people to deal with global warming,” he told The Washington Post, “and he hasn’t followed it up.” He didn’t want to sound defeated. “There are some good building blocks here,” Pomerance said, and he meant it. The Montreal Protocol on CFCs wasn’t perfect at first, either — it had huge loopholes and weak restrictions. Once in place, however, the restrictions could be tightened. Perhaps the same could happen with climate change. Perhaps. Pomerance was not one for pessimism. As William Reilly told reporters, dutifully defending the official position forced upon him, it was the first time that the United States had formally endorsed the concept of an emissions limit. Pomerance wanted to believe that this was progress.
  • All week in Noordwijk, Becker couldn’t stop talking about what he had seen in Zeeland. After a flood in 1953, when the sea swallowed much of the region, killing more than 2,000 people, the Dutch began to build the Delta Works, a vast concrete-and-steel fortress of movable barriers, dams and sluice gates — a masterpiece of human engineering. The whole system could be locked into place within 90 minutes, defending the land against storm surge. It reduced the country’s exposure to the sea by 700 kilometers, Becker explained. The United States coastline was about 153,000 kilometers long. How long, he asked, was the entire terrestrial coastline? Because the whole world was going to need this. In Zeeland, he said, he had seen the future.
  • Ken Caldeira, a climate scientist at the Carnegie Institution for Science in Stanford, Calif., has a habit of asking new graduate students to name the largest fundamental breakthrough in climate physics since 1979. It’s a trick question. There has been no breakthrough. As with any mature scientific discipline, there is only refinement. The computer models grow more precise; the regional analyses sharpen; estimates solidify into observational data. Where there have been inaccuracies, they have tended to be in the direction of understatement.
  • More carbon has been released into the atmosphere since the final day of the Noordwijk conference, Nov. 7, 1989, than in the entire history of civilization preceding it
  • Despite every action taken since the Charney report — the billions of dollars invested in research, the nonbinding treaties, the investments in renewable energy — the only number that counts, the total quantity of global greenhouse gas emitted per year, has continued its inexorable rise.
  • When it comes to our own nation, which has failed to make any binding commitments whatsoever, the dominant narrative for the last quarter century has concerned the efforts of the fossil-fuel industries to suppress science, confuse public knowledge and bribe politicians.
  • The mustache-twirling depravity of these campaigns has left the impression that the oil-and-gas industry always operated thus; while the Exxon scientists and American Petroleum Institute clerics of the ’70s and ’80s were hardly good Samaritans, they did not start multimillion-dollar disinformation campaigns, pay scientists to distort the truth or try to brainwash children in elementary schools, as their successors would.
  • It was James Hansen’s testimony before Congress in 1988 that, for the first time since the “Changing Climate” report, made oil-and-gas executives begin to consider the issue’s potential to hurt their profits. Exxon, as ever, led the field. Six weeks after Hansen’s testimony, Exxon’s manager of science and strategy development, Duane LeVine, prepared an internal strategy paper urging the company to “emphasize the uncertainty in scientific conclusions.” This shortly became the default position of the entire sector. LeVine, it so happened, served as chairman of the global petroleum industry’s Working Group on Global Climate Change, created the same year, which adopted Exxon’s position as its own
  • The American Petroleum Institute, after holding a series of internal briefings on the subject in the fall and winter of 1988, including one for the chief executives of the dozen or so largest oil companies, took a similar, if slightly more diplomatic, line. It set aside money for carbon-dioxide policy — about $100,000, a fraction of the millions it was spending on the health effects of benzene, but enough to establish a lobbying organization called, in an admirable flourish of newspeak, the Global Climate Coalition.
  • The G.C.C. was conceived as a reactive body, to share news of any proposed regulations, but on a whim, it added a press campaign, to be coordinated mainly by the A.P.I. It gave briefings to politicians known to be friendly to the industry and approached scientists who professed skepticism about global warming. The A.P.I.’s payment for an original op-ed was $2,000.
  • It was joined by the U.S. Chamber of Commerce and 14 other trade associations, including those representing the coal, electric-grid and automobile industries
  • In October 1989, scientists allied with the G.C.C. began to be quoted in national publications, giving an issue that lacked controversy a convenient fulcrum. “Many respected scientists say the available evidence doesn’t warrant the doomsday warnings,” was the caveat that began to appear in articles on climate change.
  • The following year, when President Bill Clinton proposed an energy tax in the hope of meeting the goals of the Rio treaty, the A.P.I. invested $1.8 million in a G.C.C. disinformation campaign. Senate Democrats from oil-and-coal states joined Republicans to defeat the tax proposal, which later contributed to the Republicans’ rout of Democrats in the midterm congressional elections in 1994 — the first time the Republican Party had won control of both houses in 40 years
  • The G.C.C. spent $13 million on a single ad campaign intended to weaken support for the 1997 Kyoto Protocol, which committed its parties to reducing greenhouse-gas emissions by 5 percent relative to 1990 levels. The Senate, which would have had to ratify the agreement, took a pre-emptive vote declaring its opposition; the resolution passed 95-0. There has never been another serious effort to negotiate a binding global climate treaty.
  • . This has made the corporation an especially vulnerable target for the wave of compensatory litigation that began in earnest in the last three years and may last a generation. Tort lawsuits have become possible only in recent years, as scientists have begun more precisely to attribute regional effects to global emission levels. This is one subfield of climate science that has advanced significantly sin
  • Pomerance had not been among the 400 delegates invited to Noordwijk. But together with three young activists — Daniel Becker of the Sierra Club, Alden Meyer of the Union of Concerned Scientists and Stewart Boyle from Friends of the Earth — he had formed his own impromptu delegation. Their constituency, they liked to say, was the climate itself. Their mission was to pressure the delegates to include in the final conference statement, which would be used as the basis for a global treaty, the target proposed in Toronto: a 20 percent reduction of greenhouse-gas combustion by 2005. It was the only measure that mattered, the amount of emissions reductions, and the Toronto number was the strongest global target yet proposed.
  • The delegations would review the progress made by the I.P.C.C. and decide whether to endorse a framework for a global treaty. There was a general sense among the delegates that they would, at minimum, agree to the target proposed by the host, the Dutch environmental minister, more modest than the Toronto number: a freezing of greenhouse-gas emissions at 1990 levels by 2000. Some believed that if the meeting was a success, it would encourage the I.P.C.C. to accelerate its negotiations and reach a decision about a treaty sooner. But at the very least, the world’s environmental ministers should sign a statement endorsing a hard, binding target of emissions reductions. The mood among the delegates was electric, nearly giddy — after more than a decade of fruitless international meetings, they could finally sign an agreement that meant something.
  • 11. ‘The Skunks at The Garden Party’ November 1989
  • It was nearly freezing — Nov. 6, 1989, on the coast of the North Sea in the Dutch resort town of Noordwijk
  • Losing Earth: The Decade WeAlmost Stopped Climate Change We knew everything we needed to know, and nothing stood in our way. Nothing, that is, except ourselves. A tragedy in two acts. By Nathaniel RichPhotographs and Videos by George Steinmetz AUG. 1, 2018
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