The Christmas Bonus is Not What You Expect: 2011 Outlook After Financial Crisis

Mark Blyth

One of the downsides of being a triple-crisis blogger is that you are always on the lookout for crises. It’s not a role I particularly enjoy, but it is what it is. So as the markets wind down for the year and the illusion of calm falls over us like a blanket of denial (yes, keep positive folks), I thought I’d write a piece about what I see as, perhaps, the emerging story of 2011. Its one that comes from reading the New York Times and the Financial Times yesterday morning, while thinking about two pieces I have read this year: one by Andy Haldane back in July and one by John Cassidy in late November.

The story in both papers, in case you missed it, was about how for many Wall Street and City of London bankers, the traditional Christmas bonus dished out this year would, for some, contain lots of zeros, and not much else. Its not so much that profits are down (they are), so the story went, but because the perception of ‘the bonus culture’ as creating excessive risk taking has led to higher base salaries and escrow-type arrangements at many US banks, while in the UK and Europe many mid-tier bankers are about to be eliminated from the bonus pool altogether, with talented juniors and senior executives being protected.

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The Kingston coal ash spill: two years later, EPA still can’t do the math

Frank Ackerman

Two years ago, on December 22, 2008, a dike broke at an ash pond near the Tennessee Valley Authority’s Kingston (Tennessee) coal plant, releasing a billion gallons of coal ash slurry. Some 300 acres were inundated, twelve houses were flooded, and local rivers were contaminated with high levels of lead and other toxic heavy metals.

Each year, U.S. power plants produce more than 100 million tons of coal combustion residues. Much of that waste is mixed with water and kept in clay-lined ponds, like the one that failed at Kingston. You’d think that ash disposal was carefully regulated, wouldn’t you? That is, unless you remembered that coal ash is produced by a very powerful industry.

Since 1980, coal ash has been excluded from regulation as a hazardous waste – although EPA is mandated to study the risks associated with coal ash. EPA found that coal ash wasn’t hazardous in 1993, and again in 2000. But the Kingston spill occurred just as the Obama administration was starting up, and EPA Administrator Lisa Jackson decided to try again.

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Spotlight Cancún: The new Climate Technology Mechanism: an opportunity to seize

Ahmed Abdel Latif, Guest Blogger
Another in a series from the Triple Crisis Blog and the Real Climate Economics Blog on the Cancún Climate Summit.

The agreement to establish a new Climate Technology Mechanism is one of the concrete outcomes of the Cancun climate change conference which has gone relatively unnoticed, in contrast to other important decisions such as the creation of a Green Climate Fund and reducing emissions from deforestation and forest degradation (REDD).

The main goal of the Mechanism is to accelerate the development and transfer of climate friendly technologies, in particular to developing countries, to support action on climate mitigation and adaptation. It is premised on the wide recognition that the large scale diffusion of these technologies is pivotal to global efforts to reduce green house gas emissions.

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Ethics and Credibility at the American Economics Association

Gerald Epstein

In a few weeks, Economists will gather in Denver at the annual meeting of the American Economics Association (AEA) in a ritualized search for truth, jobs, fame and even romance. Economists have never been held in the highest regard but, recently, they have come under increased scrutiny and some scorn for their failure to predict the financial crisis or to shape an adequate response to the worst economic crisis since the Great Depression.

Still, Economists can take heart. There is something fairly simple they can do at their annual meeting to enhance the credibility and status of the economics profession: adopt a code of ethics to reduce economists’ conflicts of interest. Indeed, I am among some economists who are proposing that the AEA do just that.

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Spotlight Cancun: Climate Defeats Come from Washington, not Cancun

Frank Ackerman

Triple Crisis blogger Frank Ackerman published the a short post-mortem on the climate negotiations on Grist:

What should we learn from the dual disappointment of Copenhagen and Cancun? The climate policy war isn’t over, but those who are fighting to cut global emissions haven’t won the last few rounds. The decisive defeat in this latest battle, however, did not occur at an international conference. Rather, it took place in Washington, D.C. …

…read the rest of the post on Grist

Capital Controls to Deter Hot Money Can Help the World Economy

Stephany Griffith-Jones and Kevin P. Gallagher

The following letter from Triple Crisis bloggers Griffith-Jones and Gallagher, drawing on their earlier Guardian article, appeared in the Financial Times today.

Sir, In your December 14 article “Capital inflows to Turkey spur plan to cut interest rates”, you point out that the Turkish central bank is considering cutting interest rates even though its economy is growing very fast, which would rather suggest the need to raise interest rates. This is the dilemma facing many emerging economies – and even poorer countries such as Uganda.

With low interest rates in the industrialised world, nations such as Turkey could get swamped with hot money via the carry trade in the event that they raise rates to cool their economies.

The influx of hot money may accentuate the very problem the nation is trying to alleviate by raising rates.

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The Emerging Financial Architecture: A New Take on Decoupling

Ilene Grabel

Think back to the good old days just before the world financial system exploded.  Remember all the talk then of “decoupling”?  What advocates of the decoupling thesis had in mind was very simple:  the world economy had changed in such a way that the growth trajectory (and business cycles) of developing countries had separated from the economic fortunes of the U.S. The strong performance of rapidly growing developing countries, not least the BRICs (Brazil, Russia, India and China), was seen as evidence that substantial parts of the global economy had broken free of the U.S. iceberg and were now floating in distinct economic currents.  Decoupling advocates cited much evidence to support their claims—most importantly, they focused on the fact that export and GDP growth in large developing countries was smartly outpacing that of the U.S.

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Stop Free Pollution: Going Beyond Cap and Trade

James K. Boyce

Some of the best things in life are free. Unfortunately, so are some of the worst.

When polluters dump poisons into our air and water, they do it for free. This means they have no incentive to curb emissions. It also means that our air and water effectively belong to them, not to those who breathe the air and drink the water.

Regulation

Environmental regulations limit what polluters can lawfully discharge into our air and water. The damage control they provide is of great value. The U.S. Environmental Protection Agency estimates that from 1970 to 1990 alone the Clean Air Act saved more than three million lives. Critics can argue about whether the regulations should be tighter or lighter, but no sensible person would advocate jettisoning them altogether.

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Spotlight Cancún: Cancún Success – Compared to What?

Tom Athanasiou, Guest Blogger
Another in a series from the Triple Crisis Blog and the Real Climate Economics Blog on the Cancún Climate Summit.

Cancun was not a surprise.   Nor was it a failure.  This much is easy to say.

But was it a success?  This is a more difficult question.  I used to have an irritating friend.  Every time you made a strong, implausibly simple claim – something like “Cancun was a success” – he would reply “Compared to what?”  It was a pedantic device, but it worked well enough.  It made you think, which, I suppose, is why it was irritating.

Compared to what the science demands, Cancun was obviously a failure.  The Climate Tracker crew made that clear in an evaluation filed before most people even got home – if the pledges in the Cancun Agreements are delivered upon, but only just barely, the result would be at least 3.2C of warming, and possibly far more – the CO2 concentration of the atmosphere would be about 650 ppm in 2100.

Why then wasn’t Cancun a failure?  Because, just maybe, it will put us onto a better road.

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Spotlight Cancún: The Road to Rio

Kelly Sims Gallagher, Guest Blogger
Another in a series from the Triple Crisis Blog and the Real Climate Economics Blog on the Cancún Climate Summit. This piece was previously posted by the Center for International Environment and Resource Policy (CIERP).

What to make of the new Cancun Agreements?  Those lauding the agreement seem to be relieved there was any agreement at all. UN Executive Secretary Christiana Figueres declared, “Faith in the multilateral climate process has been restored.” But, the agreement itself does little except make more concrete many of the provisions already agreed to in last year’s Copenhagen Accord by enshrining these agreements in a formal decision of the Conference of Parties.  In fact, the multilateral process seems hardly improved, and most of the difficult decisions were deferred to the future.

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