Global Themes

On Globalization & Venture Capital

Smoke and Mirrors

In the latest issue of TIME, Bryan Walsh has written a fairly balanced piece on carbon emissions – which unfortunately is marred by a (deliberately?) provocative headline, “The Third World Smoke Alarm” (Interestingly, the European edition of the magazine has dropped the “Third World” prefix and has printed the article simply titled “Smoke Alarm”).

It was the sub-heading though that first caught my eye. It read:  

“To stop climate change, developing nations must wake up and smell the carbon”…I wish I could have added …”and developed nations must share the burden”.

I have written on this issue before  and it is interesting to observe how the blame surreptitiously gets shifted to the developing nations (e.g. the alarmist title – “Third World” Smoke Alarm….surely, if it is an alarm, it is probably a “Global” Smoke Alarm?).

*** Some excerpts below ***

“…Once home to some of the most extensive rain forests in the world, Indonesia is now losing trees at a faster rate than any other nation, to flames but also to rampant logging. …Indonesia’s rapid deforestation is the main reason why this country of 245 million is the third biggest carbon emitter in the world after the U.S. and China.

But as in other developing countries, the Indonesian government says it needs to focus on economic growth to raise its people out of poverty—and that likely means that trees will be cut, cars will be added and carbon emissions will only go up.

…Drawing on the work of thousands of scientists vetted by officials from over 100 countries, the IPCC reported that future carbon emissions could be controlled using current technology like nuclear or renewable energy—and that it could be done without bankrupting the global economy. “Measures to reduce emissions can, in the main, be achieved at starkly low costs, especially when compared with the costs of inaction,” said Achim Steiner, executive director of the United Nations Environment Programme (UNEP)

…As economic growth shifts to the developing world—especially Asia—so will future carbon emissions.

Whether the world can effectively combat climate change will be determined by countries like Indonesia and India—and particularly China, which could pass the U.S. as the world’s top carbon emitter any day.

…But if developing countries choose to ignore global warming, even the most radical actions out of the developed world could be rendered meaningless.

…Because developing nations have emphasized that they can’t afford to jeopardize the pace of economic growth for the sake of the environment, the only climate-change solutions they’re likely to accept will be ones that come cheap.

Fortunately the IPCC says that’s possible—the new report concludes that the cost of stabilizing global carbon emissions by 2030 could require as little as one-tenth of a percentage point per year of global growth through the end of the century.

Those costs will have to be borne by someone, and the developing nations will rightly push for North America and Europe to pick up the check.Expect that argument to be renewed at the next major U.N. climate-change meeting in Bali, Indonesia, at the end of the year.

Developing nations make the point that they’re not responsible for the vast majority of carbon dioxide hanging around in the atmosphere—which was put there by Western countries during their own development over the past 150 years.

They argue that their own per capita-emissions rates are still far lower than those of the West, and that, therefore, climate change isn’t their responsibility.

But future global warming will hinge on how we deal with future carbon emissions—most of which will come from developing Asia. The center of gravity of climate-change politics has moved to China, India and Indonesia. Their decisions will shape the world we live in.”

*** End of Excerpts *** 

Find the article in full here.

Finally, here’s a useful chart showing world carbon dioxide emissions by country between 1990 – 2035.

CO2 Emissions by Country

May 23rd, 2007 Posted by | Development Issues, Emerging Markets | 25 comments

25 Comments »

  1. “But future global warming will hinge on how we deal with future carbon emissions—most of which will come from developing Asia.”

    Shantanu, since your firm is in the business of innovation financing, I should think beginning-of-pipe solutions would probably have had a higher place than, or at least an equal place as, end-of-pipe solutions in your reckoning. Like many a public policy problems at present (my thesis topic of obesity inclusive), solutions, if any, lie in at least a combination of prevention and intervention. 🙂

    Comment by Shefaly | May 23, 2007

  2. Shefaly: The quote is actually part of the excerpt (my fault that it was not obvious – I have just made the change to make it clearer)…

    I have my own views on that (I mean the quote) but I am one with you in placing “beginning of the pipe” solutions higher on the agenda…and speaking of our firm (Amadeus), have a look at Pat’s profile who joined us last year and focuses on Cleantech.

    Comment by Shantanu | May 23, 2007

  3. There’s no point in carping about the third world loath (a great western pastime) duh, that’s how they make headlines in the west 🙂

    A good beginning could be when countries historically responsible for emissions stepped up their contribution to mitigate global warming by recognizing the common but differentiated responsibility – which also means developed nations like US and Australia become signatories to Kyoto Protocol to which 169 countries (representing 62% emission levels) have already signed up.

    Besides partially atoning for their sinful CO2 emissions in the past, developed nations also get an opportunity to compensate the `carbon sinks’ (like forests) of developing nations which sucked up those pernicious gases during all those years. (Now when it’s their turn to develop, some trees will be cut and it will invariably release those trapped gases – but they need to develop too).

    Play the fairgame and let the developing countries use the carbon credits to reach a respectable degree of development and then expect them to behave responsibly – by preventing deforestation and boosting the use of bio-energy.

    Otherwise risk the third world adopting a policy focused on economic growth, without taking into account the fact that no development will be possible on a torrid, half-dead planet.

    Global warming does not affect just me, it affects you too !

    Comment by Krishna | May 25, 2007

  4. @Shantanu: Could you please enable full feeds for this blog?

    Comment by Vivek Kumar | May 25, 2007

  5. Vivek: Thanks…your comment reminded me that someone else had made the same request. It is done now…Let me know if you have any problems.

    Comment by Shantanu | May 25, 2007

  6. The issue of global warming has been hotly debated for many years now, to the extent that now it’s a part of economic-politic rhetoric and is subject to dangerous facile arguments which undermine our understanding.

    One typical argument in the above mentioned excerpts is the East vs. West argument. Because the West ‘developed’ and ’emitted carbon’ in the last 150 years, so now it’s East’s turn to do the same! Cut trees, add those cars, emit carbon, turn the green areas into deserts and have fun. Dream about bringing people out of poverty! How many areas, once converted into deserts, have been turned back into green?

    Another typical ‘futile’ argument rests on comparing per capita emission rates. Does it make so much difference? Low per capita emission, when multiplied by huge populations, results in a high over-all volume emission. Few more years of ‘development’ of China, India and Indonesia will remove all disparities between the East and the West. Then we would celebrate!

    Yet another argument (as mentioned in Krishna’s comment) is that of respectable development. What is respectable? When we talk of developing, we are thinking of development of 800 million middle/lower middle class of India. Respectable development; in the context of comparing East and West, and as a justification of East’s approach to development; could do no good to solve the problem of global development.

    I can only write so much in this comment. However, my thoughts date back to the time when Third World countries didn’t mean just developing countries. There was more to the meaning in that the approach taken towards development was a little different. Right or wrong, I won’t comment. I only want to highlight ‘different’. India, China and Indonesia need a ‘different’ approach for development than simply adopting the means of the West and justifying emissions…

    Comment by Siddharth | May 25, 2007

  7. Siddharth: You say that the issue of global warming is now “subject to dangerous facile arguments” and yet, your second paragraph feels (to me) in danger of falling into that trap.

    The argument is *not* about whose turn it is to pollute but how can the costs and burden of “cleaner” alternatives be shared.

    Similarly the per capita comparison is instructive because it illustrates the potential for *reduction* of emissions in the developed economies.

    Finally, I am not sure that Third World countries have ever meant anything more than “developing countries” – although it was certainly an ideologically inspired term – perhaps that is what you are hinting at?

    As for a “different” model of development, I am all for it, but surely it cannot be at the cost of keeping millions in a forced state of under-development?

    Comment by Shantanu Bhagwat | May 25, 2007

  8. Siddarth,

    That’s a very good rant…I was looking for some perspective but there was little.

    You left saying “Indian, China and Indonesia need a *different* approach for development…etc.” without elaborating what do you mean by `different’…There lies the problem. Just as you don’t know, the whole world is groping for that `different’ model.

    It’s proven now that Agriculture does not deliver the same rate of growth as Industry. First constraint is limited availability of land and the % that is cultivable. Hence we end up with a clear demand supply mismatch to feed all our people and there’s no option but to industrialize so that we’ll have some resources to import. Industrial production means pollution, emission, effluents because industry needs energy and it produces waste – even non polluting industries such as software factories leaves behind unused computers that chokes the landfills! Till now technology has not delivered a viable alternative to fossil fuels that is cheap and widely available. May be someday there could be a breakthrough and I’d love to live that day.

    Then you ask “what is respectable” – in relation to my comment.

    On a very basic sense, it just means I don’t want to beg. If I forsake development and nobody tells me *how to* develop `differently’ tell me how do I survive ? I don’t know to produce goods other than by using conventional energy (that lets GHG into the air) because nobody tells me “how to”. They may say “you don’t produce” even as they continue to rape and ravage the environment. So is Kyoto Protocol not justified in asking for the rapists to compensate the victims – from which US and Australia still shirk !

    Comment by Krishna | May 26, 2007

  9. Thanks Shantanu and Krishna for your counter-comments.

    Like Krishna’s explanation of the word ‘respectable’, I do need to clarify what I mean by ‘different’. I have some vague idea on which I would elaborate as I get a little more time to write.

    Shantanu, I intended the second paragraph in my comments to be more as sarcasm… Perhaps I didn’t succeed 🙂 in expressing clearly.

    Krishna, I wasn’t critical of your comments. However, I was just curious what did you mean by ‘respectable’. Observing human behavior, I feel it’s just so tough to define the limits of ‘respectable’ development. If the challenge is so big at an individual level, imagine at the level of 800 million individuals… I completely agree with your definition though: ‘I don’t want to beg’. I’ll try and bring substance to my rant :).

    Good weekend!

    Comment by Siddharth | May 26, 2007

  10. @Shantanu: I tried subscribing to http://feeds.feedburner.com/ShantanuBhagwat but it is still partial posts only.

    “May wish to see”, as we say 🙂

    Comment by Vivek Kumar | May 26, 2007

  11. I agree with Vivek. Even email subscription is partial.

    Comment by abc | May 26, 2007

  12. Shantanu

    I find two problems with this whole thing of developing countries shifting the costs to the developed countries using the arguments you used. My first problem: Placing the demand on Europe and the US to pay for cleaner indutry in the developing countries smells of holding the West hostage by posing to have no environmental scruples or preferring the immediate gratification of their own population over its long term livelihood. The second problem: Seems to me that the Western consumer will be happy to pay for such cleanup through increased prices of exports from the developing countries but it is competition between the developing countries themselves that prevents such “tax” top be levied. Does it not look like rather than using economic forces in a natural way, the developing governments prefer to present themselves as victims?

    Again I find that victimzation is not helpful. Every country must do its share and find moral ways to fund it.

    See you Monday

    Barak

    Comment by Barak | May 26, 2007

  13. “Placing the demand on Europe and the US to pay for cleaner indutry in the developing countries smells of holding the West hostage by posing to have no environmental scruples or preferring the immediate gratification of their own population over its long term livelihood.”

    @Barak: The history of industrial development in the now soi-disant developed world/ first world/ North, whichever label one uses, is one of protectionism. The model just can not be applied now in a time of continued pressure from the developed nations on developing nations to open up their markets.

    Likewise the ‘hole’ in the blame game in emissions/ global warming/ developing-developed world divide is that old models – polluting in the name of growth – just do not apply, given the changed situation of the world we are all playing in, now.

    Nobody yet knows definitively however what models *do* and can apply, and will gain universal purchase. All the conversation therefore seemingly aims to find if any or more of the ideas proposed can stand up to scrutiny..

    Comment by Shefaly | May 26, 2007

  14. Barak,

    Carry on deluding that Developing Nations (DN) need *victimization* flag (V flag) to exist. That’s the most convenient way to cover Developed World (DW) ass. It’s not so difficult to realize if we draw parallels from the recent past.

    Allow me to digress a little here so that you get the picture.

    America armed Saddam (to stop marauding Russians) and who suffered? The people of Iraq. Are they not victims of an American desire ?

    Why didn’t they choose to nuke Germany in 1941 when the first *experimental* set of 850 malnourished prisoner Jews were gassed ? Auschwitz and Holocaust would have been avoided ! Was it because the impact of radiation would have crippled several of their allies in the neighborhood Europe? Even as Hitler was talking at length about his evil designs, the DW was listening in. Yet they chose to nuke faraway Japan, all for an attack on a few ships moored on some Harbor – overkill? Were Japanese more dispensable than Europeans? And now, look who’s preaching non proliferation the world over ?

    1…5…0 long years history of wreaking incalculable environmental damage by the DW is no different – what goes around, comes around. Truth is bitter. Yet when it is presented, it looks nasty because what DW `did’ was nasty. Yet the DN are blamed for hoisting the V flag…perceptions can’t be more wrong. Tell the DN something new, something that’s constructive or at least find another subject for headlines.

    I repeat, DN can and will, deal with its problems by itself, like Japan did – if DW minds its own business. It’s the turn of the DN at the wheel now and that’s something DW can’t digest easily because they are used to shifting gears at will. Letting go does not come easy for them.

    The revived interest in admonishing the DN is because North America and Europe—where the science is strongest—exhibit the highest density of GW indicators. Scientists have made a great effort in recent years to document the early impacts of global warming on other continents and they fear that the glaciers would drift and Alpine slopes will soon be history. They predict such problems will increase if emissions of heat-trapping gases are not brought under control – the reason why 169 countries signed up for Kyoto. It’s a matter of survival for them in the DW (can’t bear the heat anymore, want the ski slopes to be in tact), not DN – so it’s those others that need a change of game and perception.

    The rest act up because they just don’t want to own up !

    Comment by Krishna | May 27, 2007

  15. All: Thanks for contributing to the discussion (particularly Krishna, Barak, Shefaly)…

    Vivek, abc: I have made the change in settings but the problem maybe in feedburner which has a limit of 512k on feed size (- something may be causing this limit to exceed – could it be the two presentations under “must watch*? – I dont know). If anyone else has faced this problem before, pl. drop me a line here/ or on email.

    Barak: Shefaly and Krishna have responded to some of the points that you have made.
    I will restrict myself to one point: I dont think anyone is “placing the demand on US and Europe to pay” (either implicitly or by portraying themselves as “victims”) – the argument is more about is it not right that the polluters share the costs/burden that switching to cleaner technologies or approaches will inevitably entail. Just to make myself absolutely clear, I am *not* proposing a quid pro quo.

    Comment by Shantanu Bhagwat | May 27, 2007

  16. A joint response to Shefaly, Krishna and Shantanu:

    Needless to say, you all express points that I agree with and some that I don’t. Krishna’s note in particular seems to be more about resenting the DW and not about the actual topic. Nevertheless, I tried my best to address what I thought is most important in each of your three comments:

    First, I do not belong to the camp that blames developing nations of being the worst polluting societies. The truth of the matter is that still the DW is causing more Carbon and other related pollution in the aggregate.

    Second, I also do not belong to the camp that blames the West for all the world’s agony. Not nuking Germany was a wise thing although not bombing (TNT) the killing camps was deplorable. Let’s face it, bombing Pearl Harbour was not “attacking a few ships moored in some harbour”. Come on – who are you kidding? If the Japanese had won the war, the fate of America and most likely India would have been no better than that of China and Korea. Much suffering by the hands of the Japanese war-mongers.

    Oh, and by the way, Japan did not deal with its problems by itself. Democracy was instituted under mandate of the US and 45 European allies post WW2 and massive financial aid from the US was largely responsible for the economic revival of the nation. Not to say that DN needs it today, but let’s stick to the truth, bitter or sweet.

    Third, the DW is gathering momentum in dealing with global warming and Carbon emission. That includes Japan, the EU and lately, the USofA as a whole or in states/regions (Arnold the Governator is just one example).

    A special question to Krishna: Can you please elaborate on the “incalculable environmental damage” the DW perpetrated during those 1..5..0 long years? Share with us that bitter truth please because I am not sure what you are talking about. Or was it just a way to express some incalculable resentment towards the DW?

    Fourth, I am suggesting that similar to the way the DW handled Acid Rain (through simple economical measures such as placing a price on a kg of pollutant and seeing the problem go away by technology that was cheaper to implement than paying the per kg price) I now suggest that all nations can do the same with regards to Carbon and other pollutants.

    Fifth – I have not yet received a response from anyone regarding my assertion that it is competition between DN that is behind the issue of continued pollution in those regions. Most of this competition is about exports to the DW. If all the DN came together and decided to place a “tax” on pollution, this tax would naturally be passed on to the DW consumers and justice will prevail. Any comments?

    Barak

    Comment by Barak | May 27, 2007

  17. Barak,

    Thanks for seeking those clarifications, let me take it point by point –

    [ You said – “ Krishna’s comments reflect resentment against the DW not being on the actual topic”]

    The topic as I understand is – is this assertion “To stop climate change, developing nations must wake up and smell the carbon” right ?

    If that indeed is the topic, my comments highlighting – why DN should not be blamed by DW for warming up the planet – were bang on !

    And I never wanted Japanese to win the war…rather I just wanted Hitler vanquished earlier and I just questioned the wisdom behind the hurry to nuke Japan – the disproportionate retaliation – that of a relative misdemeanor (pearl harbor attack) taking priority over felony (Holocaust). Who won’t be judgmental against such a miscarriage ?

    Again, I’ve no resentment against the DW…I’m rather happy for whatever they’ve accomplished…we’ve got someone to look up to for some wonderful things… I just hate it when DW blames DN…

    You’ve asked for elaboration on incalculable Global damage by DW – we all know who has the most number of gas guzzling cars / factories, per capita consumption of gasoline for heating / refregeration, who uses more fossil fuels – that magnitude of dependence on CFC evidenced by whose stock market tanks relatively the most when Nymex Crude futures go up by a cent or who frets the most while OPEC raises oil prices or imposes a production cut !

    On your point –competition amongst DN to export to DW and imposition of a self regulatory tax on emissions to be passed on to DW – Barak, your intention is noble, but is highly impractical. You can see what’s happening at WTO talks where rounds after rounds fail on the differential farm subsidies and tariff variants amongst nations. Competition cannot be wished away because global commerce hinges on it. Competition presupposes existence of un-equals and tendency to converge to an imaginary equilibrium, that is a moving target. While local competition thrives on sourcing / production / pricing and logistical efficiencies, global competition is supported by tax arbitrage. Any attempt to bring about tax harmony would only lead to creation of hidden subsidies or artificial devices like undervaluation of currencies like China does now.

    My point again is – holding down gaseous emissions, for example, which are a cause of global warming, will require restrictions on industrial development, particularly in the Third World. Small wonder that DN are protesting when the DW is crudely trying to shackle them. It is also leading to the fast-track development of biofuels for vehicles and industry. But this heavy demand for corn-based ethanol and other biofuels will so greatly kick up their price that the world’s poor people could be starved out. Brazil is a standout example.

    Please do not mistake the arguments as my personal philosophy. These arguments are based on (not just Third) world opinion, which led to the Kyoto Protocol which Bill Clinton signed first and George W Bush withdrew later. I am fully aware and a personal beneficiary (like all of us) of the contributions by the DW and I advocate with equal vehemence all that’s wrong with DN and how they need follow the DW in some things if not all – on some of my own blog posts.

    My style is a bit direct as is my personality. So please don’t get it wrong. I’m just as sensitive and soft-hearted as the next guy, but I hide my vulnerability beneath a crust of misanthropy. I can’t compromise my standards and can’t manage the suspension of disbelief necessary for feigned cheerfulness. My awareness as I suspect, at times is a curse. I do get an occasional bad rap in the same way that the messenger is blamed for the message. That said, I have the temerity to comment on the human condition without apology. I not only refuse to applaud mediocrity, I howl it down with morose glee. My versions of the truth unsettle many but that’s something that I’ve grown up to insulate myself against. So I let others rip into me and so would I.

    Comment by Krishna | May 28, 2007

  18. Krishna

    In the context of Shantanu’s blog, seems like we have exhausted the subject. Much obliged for your openness and patience.

    In general though, I have to say that your comments often do send a message of resentment towards the West and in particular, US and UK. Being supportive of freedom of expression and legitimacy of all opinions I would not have commented, if it weren’t all too often coupled with historical inaccuracies that always (lo and behold) work in favour of your argument. You also have ways to describe historical events in a less than factual manner (Pearl Harbour as a small misdemeanour…) which I expect are not helpful to your argument.

    In any case, as I said before, ignoring the irritating bits, your arguments carry weight and thanks for sharing.

    Best regards

    Barak

    Comment by Barak | May 28, 2007

  19. Barak,

    Agreeing to disagree is perfectly alright since you feel so.

    Observations like `resentment against DW’, `historical inaccuracies’, `less than factual manner of description’ etc…though are grossly presumptuous and incorrect, but I would credit it anyway as a matter of YOUR personal opinion and move on.

    All the very best.

    Krishna

    Comment by Krishna | May 28, 2007

  20. Barak,

    To address your point head-on (#16):

    It is not competition between DNs that is behind increased carbon emissions from these countries…or behind “continued pollution” in these regions..It is simply yearning for a better lifestyle and a higher standard of living…which – whether we like it or not – comes most immediately from rapid industrialisation and “developed world comforts” such as automobiles and electricity powered appliances.

    You suggest that if the DNs were to come together and place a tax on pollution – in turn passing it on to developed world consumers – justice will prevail. I am not so sure…Even if the DNs somehow managed to come together (which is difficult in itself) will consumers in DW really buy the higher-priced products or will they revert to home-grown/manufactured alternatives?

    Rather than letting “natural” economic forces run their course (which is likely to lead to unpredictable consequences), what is needed is some “balance” in the lifestyle of DW consumers (particularly in the US – which by far is the most disproportionate consumer of resources and polluter of the environment).

    I’m now going to exercise my “right” as the author of this blog to make this the last word on this subject.

    Just kidding 🙂

    Comment by Shantanu Bhagwat | May 28, 2007

  21. “If all the DN came together and decided to place a “tax” on pollution, this tax would naturally be passed on to the DW consumers and justice will prevail. Any comments?”

    Such as tax may not be tenable on two grounds in my view. One key reason why importers get products from the developing nations is their low cost. Adding such a tax will bump up prices and I do not believe they will be accepted with open arms by consumers, notwithstanding the noise surrounding climate change and pollution etc. Further such a tax can potentially be called out either as collusion or as a non-technical barrier to trade, and it may be challengeable in the WTO.

    Sorry Shantanu. I think nobody had yet addressed the tax bit in Barak’s question so now you have to post another comment to make it the last word 🙂

    Comment by Shefaly | May 29, 2007

  22. Ha-Joon Chang’s “Kicking Away the Ladder” is required reading.

    Given the unequal state of development which, for developed nations, was undoubtedly built on the historical engery consumption (that component attributable to industrialization, at any rate), it does seem grossly unfair to impose a “development tax” which would maintain (or possibly even widen) the gap between the haves and have-nots.

    Maybe taxes should be calculated on the cumulative energy consumption related to industrial usage to date (or at least that portion which contributed to CO2 emissions. We could add to that some factor to take account of nations’ contribution to the depletion of carbon sinks as well). That would certainly be more equitable, but try getting developed nations to agree to that…..

    Comment by shin | May 30, 2007

  23. “…industrial usage to date…”

    Shin, that is an interesting idea. Normally the difference of opinion will arise not on the ‘to’ bit of the to-date but the ‘from’ bit. What do you think?

    Comment by Shefaly | May 31, 2007

  24. When John Doerr spoke at the Ted conference in March, he broke into tears at the end of a 20-minute talk about global warming.

    Some participants said that the speech was moving.

    The talk is on YouTube (link : http://www.youtube.com/watch?v=nuXJFbJNltg) and is worth watching.

    Note: I am not sure if any body else has already seen it or provided link to it.

    Comment by Loken | June 4, 2007

  25. Thanks Loken….I will have a look.

    Comment by Shantanu Bhagwat | June 4, 2007

Leave a comment