Tag Archives: G20

Climate change offers no moral high ground

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Today, world leaders will be in Paris to mark the opening of the COP21 climate change summit. The world cannot afford another failure, as was witnessed in Copenhagen six years ago. This time, the USA and China seem ready to do a deal and to bring most of the current and future largest carbon emitting nations with them. Yes, it is true that Obama, now approaching his last year in office, cannot bind the US Congress on whatever target he agrees to, and also that China might also struggle to meet its own commitments in the cold light of day. However, the alignment between the stars is much more auspicious than was the case in 2009.

The joker in the pack, and on many environmental and social issues in the G20 these days, is India. It is clear from his opinion piece in the Financial Times (FT) today, that Prime Minister Modi will play the “justice” card over the coming two weeks. This is politically pragmatic for the world’s second largest nation in terms of population (and soon to become its largest). It is a core premise of the climate justice movement that the world’s poor – who are the least responsible for carbon in the atmosphere are also likely to be the most vulnerable when faced by the results of rapid increases in global temperature – from crop failure, unpredictable weather to forced migration. The Pope made a similar point when speaking to the US Congress and United Nations in September.

India has one of the dirtiest energy mixes and is still very reliant on coal for producing much of its electricity. Modi makes the case that even a four-fold increase in coal burning will still not bring the country anywhere near the per capita emissions of most richer countries and so there is plenty of carbon “headroom” before it too needs to converge with the reduction targets essential for other governments to make this week. “The lifestyles of a few must not crowd out opportunities for many still on the first steps of the development ladder”, Modi writes. It is undoubtedly true that two whole generations of global politicians have failed to inject the renewables agenda with the ambition required (a fact in which most voters are also complicit) and that we might indeed have had better options on the table in Paris now if they had. Mary Robinson, and other leaders of the climate justice movement, are right to demand a global agreement on climate change that is not just sound in scientific terms but also socially equitable.

The persuasiveness of this argument comes from its historical perspective. Some in the climate justice movement go further, demanding that the governments of the west, and their companies, have more than a moral duty to change course, they also have a historic debt to be repaid (particularly if evidence of the risks of fossils fuels was suppressed). In such an unequal world, why should the poor of India be denied their own industrial revolution? Most activists will fudge the issue of India’s coal-powered electricity and instead point to the need for much greater investment in renewable energy everywhere, as Bill Gates has also signalled over recent days and Modi himself backs the new “international solar alliance”. There is also much room for greater efficiency within the way power is transmitted within India – the country needs huge amounts of new electrical infrastructure. But Modi will push the question of justice in part to protect the status quo within this own country. Unlike Gandhi (who he likes to quote), he is no revolutionary.

A point not fully acknowledged by Modi in his FT opinion piece is that future generations also have a need for justice. He takes Gandhi’s idea of trusteeship as his moral steer and it is a good one to take – it is the essence of sustainability: making decisions today with future generations in mind. But to do so from the concept of justice, is perhaps the most radical proposition that world leaders must reflect on in Paris this week. If unlike human rights and most existing moral codes that deal only with the living, we must consider the survival of our species itself and the rights of countless generations yet to be born, then the inequalities of the past 300 years are not the only issue of justice at stake and should not be the overriding moral argument. In such a landscape, there is no moral high ground for Modi or anyone else to attempt to occupy and that all world leaders will share in the guilt if a comprehensive agreement is not reached over the next two weeks. True climate justice requires nothing less.

“Only real markets have social licence”

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Mark Carney’s speech at the Bank of England’s Open Forum 2015 today

This morning in London, Mark Carney reflected on the progress the Bank of England, and other Central Banks across the G20, have made in reforming financial markets. When using the term “social licence” he is clear that he means legitimacy in the eyes of society – NGOs, trade unions and the wider public. “Finance”, he claims. “must become a true profession… only a third of people believe that markets operate in the interests of society” Drawing on his Mansion House speech earlier in the year, Carney is robust in stating that we “must end this tide of ethical drift”. Misconduct must be met with real (and large) penalties and governments must uphold the highest standards of accountability. Fine words, but words which must be matched by action.

What has already been achieved?

Financial markets are growing. Within the G20, there are now $75 trillion assets under management. Banks must be more resilient because they can no longer rely on the state – in the future private financial institutions must be allowed to fail. Robust market infrastructure is a public good.

In the UK, for example, there has been progress since 2008. Liquid assets of banks increased four times in the UK, the system is more robust. George Osborne, UK Chancellor of the Exchequer, followed Carney in detailing how bad things were in 2008. “For too long too many financial benchmarks were rigged by insiders, banks claimed to be adequately capitalised when they were not, it is now – seven years after the financial crash – that we can be honest about its causes and effects.” Banking regulation is now back in the hands of the financial regulator and UK banks are “much safer”.

What more needs to be done?

It is clear that there is much more work ahead if the UK is indeed to become the financial technology (“FinTech”) centre of the world. London-based financial markets are already six times greater than UK GDP and this is set to grow to fifteen times. This disparity represents a power gradient. How does UK society really feel that it benefits from hosting such vast revenue flows? This question is also one that all Central Banks across the G20 must be prepared to answer.

What is stopping markets from being truly sustainable and benefitting society as a whole? This needs to be the real benchmark for our work ahead across the whole G20. Both Carney and Osborne claim that FinTech will enable greater transparency and accountability. This remains an open question, in particular because of concerns over privacy and encryption that the UK is currently dealing with in other legislation. Another unanswered question is the cultural change needed in the City of London for public trust to be restored. Most people joined the financial sector when the incentives were very different and most of them are still there – very few have been penalised. How will we know that the cultural shift has been achieved? I hope we will hear more from Messrs Carney and Osborne on this issue over the months ahead. Perhaps the creation of a global corporate human rights benchmark for the world’s 500 largest companies will be part of the solution.