Who will win the competition for the Greenest Economy?

Joseph Stiglitz and Nicholas Stern write in the FT that "The US, in particular, has a window of opportunityto act on the financial crisis and at the same time, lay the foundations for a new wave of growth based on technologies for a low carbon economy."

Four months ago I put it like this: "Yes we can create a new energy revolution. While we are still in the midst of the financial crisis, global leaders are already turning to the fast approaching recession in the real economy. After major bailout packages for the banks, major economic stimulus packages are now in preparation. This is the right approach. But these packages should be targeted and used to stimulate the new, renewable-energy growth sector and help to initiate an energy revolution which creates sustainable growth now and in the future. The trillions of euros which will likely be spent on fighting the global recession should be spent on fighting climate change at the same time. It's a question of efficiency and forward thinking. And it combines the urgent with the important. The European Union's structural-funds model, based on EU co-funding of up to 80%, can be used to disburse the EU's new energy-stimulation package, making it attractive also for east-central European member-states to join the new energy revolution." http://www.opendemocracy.net/article/the-global-financial-crisis-opportunities-for-change

While I fully agree with the Stiglitz/Stern opinion, as a European I hope that Europe grabs this green growth opportunity. After all climate policy has been Europe's most successful foreign policy in the last 5 years.

Will now the US take the lead from Europe, or will it be China (see previous article on Wilkens Observer)? And does it matter? Whoever is the leader, it is good that there is competition for the Greenest Economy. Just a year ago the competition was rather for who can avoid expensive cuts in CO2 emmissions the longest.

In the end we may find that we needed a global recession and good old capitalist competition to deal effectivly with the challenge of climate change. And the Copenhagen conference will then only be a buraucratic confirmation on what is happening anyway in the real economy.

Wishful thinking? I think the current global recession is a reminder that everything is possible.

Why China could run the 21st Century

Out of the many reasons for and against such statement, let's just look at two, both of which are now amplified by the global recession - China as the world's biggest creditor and China's serious green investments.

Firstly, China has the biggest cash reserves in the world, and more importantly it is the biggest creditor of the USA. Now, every American already owes China around 4000 $.

Yes, this is an interdependent relationship where the US depends on China for credit while China depends on the US for consumption. This relationship suited both sides well in the good times. Now we are in a global recession and China is sitting on the longer lever of this interdependent relationship. US state secretary Clinton's visit to China last week already gave a glimpse of how the relationship is changing towards Realpolitik. But this time it seems that it is Realpolitik more on Chinese than US terms. I would expect that the Chinese administration has studied carefully the old Western manuscript of using its softpower. With its amplified economic and financial leverage the manuscript should work again under the new masters.

Secondly, China has allocated around one third of its 581 billion economic stimulus package to green investment. This is more than double the US green investment percentage of 16% and the EU's of 14%. Only South Korea does better with 69% of its stimulus going towards green investment (Source: HSBC Centre for Climate Change).

And while the West is banging on about China joining the post Kyoto targets, China is actually seizing the economic opportunity of green investment now. They have understood that green is where the growth opportunities are right now and especially after the recession. The west is talking, China is doing.

Put the two things together and China has the potential to run the 21st Century. And is that a problem? After all China's rise so far has been much smoother than the rocky decline of the US during the last eight years.

Interests vs. values? (still a draft)

Interest policy has a bad name. Most European countries would claim that their foreign policy is value policy. But is EU foreign policy really value policy? Does a pure foreign value policy really exist? And is there, and should there be, a distinction between values and interests at all?

I believe foreign policy is and should be primarily interest policy. And interests are and should be defined through a certain value set. This results in a value driven interest policy, a foreign policy where interests and values are in equilibrium.

What gives interest policy its bad name is that interests and values are defined separately, usually by different people, who then try to find a compromise between interests and values. In reality this leads to inconsistencies, bad compromises and double standards. And it appears as interest policy masked as value policy. This is the worst foreign policy as it is unpredictable, inconsistent and compromises European values.

Let’s start with a definition of interests and values.

Interests: Because the EU is not a single nation state, the European interest is not always clear and others either get confused and/or exploit the ambiguity.

What interests define EU foreign policy? This is not clear either. EU interests are often just the lowest common denominator of member states foreign policy. It is an unclear combination of interest and values, often in competition between geopolitical/economic interest and human rights and democratic values (in many cases just pretended). It is also a feeble mask for competition between member states national interests.

Cynics claim that member states define themselves through national interest and ‘outsource’ the difficult value policy, e.g. human rights, rule of law, democratic standards) to the EU. A division of tasks which cannot work and is exploited easily by counter parts of the EU, e.g. China and Russia.

Values: What do we mean by promoting our values? This is increasingly empty talk which has no resonance. In addition, the EU is inconsistent in applying its own values and standards. Our foreign policy is full of double standards juggling interests and values.

We should rethink our approach based on consistency between interests and values.

The starting point for developing this approach should be the question ‘What kind of world do we want to see? What kind of global order? Answering this question will help to define our foreign policy interests and objectives (e.g. a world order which offers security, stability, prosperity for all and is based on the respect of fundamental human rights).

When the objectives are clear we should define how to get there and in doing so should be as open and creative as possible. This is more difficult.

In this process we should consider direct and indirect ways. Sometimes the direct way may be the best, but more often then not the indirect way may be better.

Indirect approaches usually require creativity. Creativity is a rare commodity in foreign policy. But we need it because the world is too complicated.

An example for finding creative solutions to complex issues was the creation of the European Union 50 years ago. After two devastating wars in Europe the objective was peace, stability and prosperity. The way was through pulling the coal and steel industries. This must have been the oddest and creative proposal to end decades of atrocious wars in Europe. But it worked and works and has developed into the most successful model of a regional bloc based on pulled sovereignty.

So, what can be the coal and steel of reaching EU foreign policy objectives? Energy? Climate? Financial regulation?

A good example of a European value driven interest policy is on climate change. Here Europe has set the agenda, and (through ups and downs) leads by example based on clear and transparent interests which were defined through the EU value set. Here Europe is both principled and rational.

Think different, Shop anticyclical

Think different, shop anti-cyclical. This is not a government call for shopping us out of the recession, this is simply a recommendation from the home economics school.

We are at the beginning of a recession. Things are getting cheaper, interest rates are low and governments launch one stimulus after the other. Also, unemployment is still relatively low.

Now is the time to buy those things which are sustainable and which have long term value. The Banking Crisis is an example for how money can become worthless overnight. This is not a good time to safe. Germans seem to understand as they storm into car dealerships all over the country to take advantage of various government schemes to revive the German automobile industry.

But start saving when we get out of the recession and prices are up again. And safe until the next recession so that you can splash out then again.

This is macro bargain shoping.

And, keep your job.

New Energy for Europe and its godfathers II

This is an article I wrote in November 2007 and which seems very relevant again in the current context of the Russian-Ukrainian Gas dispute.

Al Gore and Vladimir Putin are the godfathers of the EU’s fast emerging common energy and climate policy.
We must be thankful to them, although their godfatherly means of persuasion have been quite different.
Al Gore uncovered the inconvenient truth on climate change and created a global sense of urgency to fighting climate change. He did this through the means of personal persuasion, convening power, the use of media and public engagement which created pressure on policy makers. This message had a particularly strong resonance in Europe.
Vladimir Putin uncovered the inconvenient truth on Europe’s growing energy dependency and vulnerability of Russian supply, and he created a sense of urgency for the EU to diversity supply. He did this by cutting energy supply to Ukraine, Georgia and Belarus during the cold winter months and for political and economic reasons. This message also had a very strong resonance in Europe as supply to the EU was also affected.
It is very fortunate that these two godfathers made their case at roughly the same time and therefore helping the EU to connect previously separate discussions on energy security and climate change.
Thanks to these two godfathers Europe has moved at tremendous speed towards a Common European Energy Policy (which is actually also a climate policy) with specific targets on cutting CO2 by 20% by 2020, increasing energy efficiency by 20% and increasing the share of renewable energy to 20% by 2020. By the end of 2007 the EU will agree also specific ways of reaching these targets.
In the next two years the EU will reform its 100 billion annual budget and it is very likely that energy and climate issues will take a much higher share in the new EU budget, in terms of supporting the emerging policy framework through financial market incentives to move to a carbon low energy model.
But in the light of the accelerating effects of climate change and energy power games, Europe has a long way to go to meet these challenges both at European level and in order to play a global role in fighting climate change.
So, Europe will need Al Gore and Vladimir Putin to continue to use their godfatherly means of persuasion and help Europe to implement a more and more ambitious Common Energy and Climate Policy.
Concretely about the policy:

Europe should make energy and climate policy the key policy area for the years to come, both as an internal and external policy
This would be essentially a clearly self interest driven policy, but which will benefit both Europe and the world.

+Incite and support a technology and knowledge driven clean energy revolution. This should be the basis for a new European economic model to position Europe successfully in the times of globalisation, so that Europe can continue to provide peace, prosperity and security to its citizens. These were the founding principles of the EU and the reasons for its success.
By doing so, inciting a global race for a new, sustainable and profitable energy and economic model. As a European I wish that Europe will reap the benefits of the first mover. But in the interest of meeting the challenges of climate change, the best and fastest should make the race, and why not China.

+Europe as a global player. Pushing for global agreements on climate change suits Europe soft power mentality, based on the principle of leading by example.

+Assist affected areas in the developing world, particularly Africa, to deal with the affects of climate change and share the benefits of the technological revolution in Europe with the developing world.

+ Mitigate the negative effects of climate migration both regionally and to Europe

+Reduce dependency on carbon energy sources and their producers, therefore creating room for policy making without double standards both in the economic field and international politics

I played the Wii, and I liked it ...

Thanks to my friends Maya and Dominic I had my first Wii experience yesterday and, despite low expectations, I liked it a lot. In fact it was fun, communicative and quite athletic.

I have to admit that so far I considered computer games something for pale nerds with face2face communication problems living out their unrealized fantasies in front of a PC screen. I know this is (probably) unjust.

Of course I know that things have moved on, especially since my son Max, now 11, plays computer games with total ease and he is certainly not a shy boy in the real world. Still I thought this is not for me, I am a real world person.

But with the Wii the lines between the real and the virtual world are becoming more blurred. Now both can involve real sweat and Muskelkater (muscle strain). Add a solarium lamp to the Wii and you will even get a tan while playing Wii tennis.

This is now and this is fun. But I was already thinking ahead. Will we be moving towards a hybrid world of real and virtual, where the virtual kicks in when the real runs out or when it does not deliver anymore? For example, you can start of your skiing holiday in Switzerland in real life and switch to the virtual when the snow melts. And in the latter case, we may have to go virtual anyway as the climate changes.

But why travel at all? Everything can be done from home, not just ordering food and books but also playing tennis, flying, driving, swimming and fighting the baddies with James Bond.

Could this even be a way of dealing with inequalities? If you can’t afford skiing, golfing, sailing, flying in real life, you can get it in virtual life.

As technology develops the difference between real and virtual world may even become difficult to distinguish and one will need a disclaimer on what is real and what is not, along the lines ‘Please be aware that you now enter the real world and your service provider will not be liable for any damages encountered.’

But before I get carried away let me put in a few more Wii sessions and then report back.

Growth through retrofitting and reclaiming

This global financial and economic crisis may also be the beginning of the end of the Western throw away society. But can our high end capitalism survive and keep people in jobs unless we endlessless produce, consume and throw away?

One direction for future growth is retrofitting and reclaiming.

Why throw away a whole car full of steel, plastics and electronics when much of it can be continously repaired and updated. This concept works with houses. People appreciate old houses with history but retrofit them continously with the latest modcons: lights, central heating, double glazing, roof insulation etc. This model should be possible to adapt for all sorts of other products, from big to small. Retrofitting and reclaiming is both labour and technology intensive and requires local craftsmenship.

In sum, retrofitting will waste less raw materials, use less energy, use more local labour and channel creative energy from always inventing new things to making old things better.

This still seems to be a big niche. I tried to retrofit an old bicycle with new gears and lights which was not possible. At least my physical condition benefits as it is pretty hard work to ride.