Investing in Virtual CO2

Fiona Harvey writes on an interesting new fund launch by French bank CDC Ixis in last Monday's FT fund management section. Turning commodities into securities is always interesting. Personally, I wouldn't buy into this, as I think that the returns would be just as cyclical as holding other industrial commodities. Neither am I pessimistic about the prospects for the private sector to cut CO2 emissions given the imperative to cut costs by husbanding increasingly expensive energy.

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One of the first carbon funds allowing investors to gain access to the European market in trading carbon dioxide has received regulatory approval.

The European Carbon Fund was approved by Luxembourg and will buy and manage carbon dioxide emission rights in the market that has grown out of the European Union's greenhouse gas emission trading scheme. This is designed to lower emissions from European industry in line with the UN-brokered Kyoto protocol on climate change.

Under the trading scheme, a mandatory limit is placed on the amount of carbon dioxide that companies in certain energy-intensive industries are allowed to emit. If they want to emit more than their allowance, they must buy emission rights in the market, or face heavy fines. Companies that produce less than their allowance can sell their excess rights.

The new eight-year fund comes from the French investment bank Ixis, part of the Groupe Caisse d'Epargne. Its target size is Euros 100m (Pounds 69.24m), of which Euros 40m has already come from Caisse des Depots and Fortis Bank, the two sponsors of the fund. Laurent Segalen, director of investment funds at Ixis, said a further Euros 20m had been pledged from other sources.

A variety of banks had been researching carbon trading, while hedge funds were beginning to show an interest. "But they still see carbon as exotic," he acknowledged.

The success of the EU's scheme, and the new fund, will depend on carbon scarcity in the market, which will encourage companies to reduce emissions. There have been concerns that some EU governments have been too generous in allocating allowances to their industries, in an attempt to gain a competitive advantage.

However, the European Commission is expected to demand tougher targets from 2008, when more industries will be brought under the scheme. Ixis calculates that in this second stage there will be a shortage of 60m to 100m tonnes of carbon dioxide per year, forcing many companies to buy extra emission rights.

Fund subscriptions will close on March 31. Ixis will hold a roadshow in London on February 9.

"I'm so ronery..."

Michael Sheridan in the Times lays out a grim prognosis for the survival of North Korean dictator Kim Jong-Il:

According to exiles, North Korean agents in Beijing and Ulan Bator are frantically selling assets to raise cash — an important sign, says one activist, because "the secret police can always smell the crisis coming before anybody else".

It's time for Tony to award himself another point for his foresight.

What will happen now? Like Saddam Hussein, who suffered three revolts between the end of the Iran-Iraq war, this pressure on the regime could result in external aggression so as to unite the leadership and people in a war scare. Although a second war on the scale of the Korean War could cost a million lives and a trillion dollars by most estimates, I wouldn't expect a full conflict. Provocation is more likely to come from a small-scale act that's hard to ignore, but finely-tuned to avoid fostering a consensus for action between China, Japan, South Korea and the US.

Iraq Policy from the Inside

Carne Ross, who worked on Iraq at the British mission to the UN, published a fascinating account of the process of persuasion and policy-making before the Gulf War in today's FT magazine.

There may be the biggest misperception of all, though not a lie, since it is hardly conscious. This is a misperception - a fiction, if you like - in which governments and governed collaborate alike, for to believe otherwise is too uncomfortable. And this is that governments, politicians and civil servants are able to observe the world without bias and disinterestedly interpret its myriad signs into facts and judgments (indeed, in the Foreign Office, telegrams are divided into these two very categories: “Detail” and “Comment”) with an objective, almost scientific rigour. The story of what these two governments observed, believed and then told their populations about Iraq suggests an altogether more imperfect reality.

One solution might be to institutionalise the process of the politicians and the intelligence apparatus failed miserably in interpreting Arab intentions, by including a special unit within military intelligence to act as Devil's Advocate and argue against the conclusions presented to the leadership.

Another, more idiosyncratic suggestion occurs to me - staff the relevant Foreign Office desks with either experts in ancient history, royal gossip correspondents or bond traders, who are equiped to make decisions based on conditional inferences supported by only limited evidence.

The article may not remain outside the subscription firewall for long, so please email me if you would like a copy.

Easterbrook Island

Greg Easterbrook reviews Jared Diamond's Collapse in the Sunday NY Times. I've skimmed the book and I think it deserves a lot of respect, given that Diamond is the first environmentalist I've read to examine supposed Malthusian catastrophes in more detail. He's also articulate in defending the green critique of modern economic and political practise against its detractors such as Bjorn Lomborg and Julian Simon. On the other hand, as Easterbrook points out, he's conservative in overlooking the power of conscious evolution and adaptation by humanity, although he doesn't ignore culture and politics as extensively as he does in his last book, Guns, Germs and Steel.

To Easterbrook's dissent, I would add my own discontent with his somewhat shallow examination of many of the issues he writes on, as he ignores many of the most relevant works on the problems of energy and China's environment and often leaves out, both from the main text and the footnotes the most useful information from those works he does cite.

Needless to say, the dismal science doesn't get much of a role in his proposals to save the world, although his discussion of consumer pressure on natural resource extractors is very interesting and original in making a hard business case for careful environmental stewardship.

The Third Point of the Triangle

Reading of the annual anti-capitalist jamboree at the World Social Forum, the question struck me: Why, when we have the guys in Davos trying to reform capitalism and the Porto Alegre compassion-fascists chainsaw it, is there not a World Capitalist Forum, dedicated to celebrating and proselytising the free-market economic system as it exists?

One of the think-tanks should try this. Perhaps, unlike dirty hippies and the superannuated German electric company chairmen taking their mistresses to Switzerland for a dirty weekend, maybe the creating Atlases are too busy holding up the world to take time out.

Why Films Don't Matter

"Sticking feathers up your ass does not make you a chicken!"

Computer games and TV have the creative juice and make the money that movies seem to be lacking. The Sopranos and Grand Theft Auto (especially Vice City) have the humour, visual style and dialogue that the nineties' boy-wonder Tarantino never, ever, even got near. Finally, somebody else, a real live "critic" is willing to broadcast the same rant.

Thus Peter spoke...

A Conspiracy Across Borders

Borders
Who is REALLY behind Borders, my favourite London bookshop? Have a look on the web - the similarity in the logos is truly striking!

Victor

Victor
Coffee, beer, entertainment and conversation - just the thing for a cold winter's night before Christmas.

German Paper

German Paper
Not everybody appreciates German humour. This example is visible in the Deutsche Borse (Germany's main stock exchange) in Frankfurt on a recent business trip.

Narrow Street

Narrow Street
This photo, taken with my mobile, shows the Limehouse end of Narrow Street, looking east towards Westferry

Tower Bridge

Tower Bridge
This is one of the rare portraits of me available, taken by Michael. Victor has my camera right now, so I haven't taken many new photos recently.

Five Are Brutally Kneecaped

A long overdue punishment beating...

The Tipping-Over Point?

Guns, Germs and Steel author Prof Jared Diamond is to speak at the Royal Society in London on Thursday. He's outlining his new book, Collapse: How societies choose to fail or survive, which tries to build more detailed pictures of how civilisations in the past have sucumed to environmental crises. For all the talk nowadays of Malthus, few people seem to have ever tried to test the historical validity of his theories in the pre-modern age. Diamond, who writes original but dull books, can be expected to open up this debate up for the reading public.

Those Capitalist Bastards!

Friday's FT reports on how the infrastructure for trading carbon dioxide emission rights both spot and forward, is now being put in place in Europe to coincide with the new EU regulations.

More than a dozen years since the trading of carbon emissions was first proposed, Europe's first exchanges are finally gearing up for business. At least six so far have stepped forward with emissions trading platforms, with possibly more to come, many of them potentially vying to lead a unified pan-European market.

Prices seem to be high enough to give an incentive to sell off a surplus, but not too extortionate:

A single allowance, permitting one tonne of CO emissions, was trading at €8.50 before Christmas on the over-the-counter market but this week has fallen to €6.85.

, compared to the $55 per tonne carbon tax in Norway, which seems to be driving the search for CO2 sequestration solutions.

A Dubious Honour

I got this email last night from someone refering to himself as Political Junkie. I don't like getting spam at the best of times, so I wrote back to him telling him to go forth and multiply. Did anyone else get mail from this eejit?

Trust me, you don't want to bother going to his site; it's just about the only thing I've ever seen on the web that seemed better suited to another, cheaper, medium - like the back of a toilet door.

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Fellow Bloggers:

Below is a list of 25 “Differences Between the Left and Right.” This list, culled from more than a 100 found in my bipartisan book “The Political Junkie Handbook” should entertain and provoke passionate response from your readers. I hope you can use it.

I am also interested in advertising on the many political blogs found on the internet. You may have seen my ads in such diverse range of publications as Mother Jones, The American Spectator , The Hill and many others. Please email me your monthly charge, specifications and any other information you believe pertinent to advertising on your site. Please note that I do not deal with PayPal.

Cordially,

Michael Crane
Editor
The Political Junkie Handbook
mrcrane@politicaljunkie.org
www.politicaljunkie.org


THE ISSUE: LEFT/RIGHT
Abortion: My Body, My Choice / It's a Child, Not a Choice
Animal Rights: "A Rat is a Pig is a Dog is a Boy" / Man is the Pinnacle of Creation
Child Raising: It Takes a Village / It Takes a Loving Mother and a Devoted Father
Crime: Crime is an Economic Problem / Crime is a Moral Problem
Education Policy: Outcome-Based Education / Back to the Basics
Favorite Celebrity Spokesman: Alec Baldwin / Charlton Heston
Favorite Motivating Factor: Power / Liberty
Favorite President: Franklin Delano Roosevelt / Ronald Reagan
Favorite Term for People Who Illegally Enter Our Country: Undocumented Workers / Illegal Aliens
Central Goal: Pursuit of Equality / Pursuit of Excellence
How They View Each Other: Believe Conservatives Reactionary / Think Liberals Utopian
Individual Modality: Self-Expression / Self-Control
Achieving Peace: Visualize Peace / Peace Through Strength
Politics: The Personal is Political / The Political is Personal
Popular Saying: Do Your Own Thing / Do Good and Avoid Evil
Public Policy: All Social Problems Have Solutions / All Policy Involves Trade-Offs
Rights: Group Rights / Individual Rights
Societal Motivator: Cooperation / Competition
Human Nature: Human Nature Can be Modified by Public Policy / Human Nature is Unchangeable
The Constitution is: A Living Document / An Inviolable Pact of and for the People
The Military: The Military is a Vehicle for Social Change / The Military Objective is Simply to Defend and Protect this Country
The Three R's: Racism, Reproduction and Recycling / Reading, Writing and 'rithmatic
Wages: Government Should Assure a Fair and Living Wage / Wages Must be Based on Productivity
Wealth: Wealth Must be Redistributed / Wealth Must be Created
Which Side on the Reading War?: Whole Language / Phonics

The New Empire of Energy

FT Berlin correspondent Bertrand Benoit writes in yesterday's paper on the increasingly visible influence of Russian energy supplies on European foreign policy.

Schröder never speaks out on Putin's human rights abuses in Chechnya or his interference in Ukraine's affairs," says Friedbert Pflüger, member of parliament for the opposition Christian Democratic Union. "And there is a suspicion that this has to do with oil and gas."

Mr Putin's increased authoritarian style at home and with neighbours has raised concern and prompted a re-examination of Europe's links with Russia.

The French and British governments are particularly worried that Moscow's rising prominence as an energy supplier, not just to Germany but to Europe, is turning into an economic and political hazard for the entire continent.

This was exactly the worry highlighted by a report on Energy Security produced by Dutch academics for the European Commission last year (available here). Without the military means to influence or even in extremis to reshape producing areas, as the US continues to do in the Persian Gulf, Europe might find itself subject to the ruthless gas diplomacy of the Kremlin. Press reports noted that gas shipments to Ukraine through Russia were cut off after the recent change of government by Russia's oil and gas national champion OAO Gazprom.

I finished Michael Klare's book Blood and Oil recently, but I wasn't entirely convinced by his argument that war will be an inseperable part of the oil industry, as market logic would push towards substitues, even among other fossil fuels.

The Turning Tide

I'm in bed today, suffocating under a bad 'flu. I had thought that I had escaped this season, but all the worst symptoms - sleeplessness, breathing problems, headaches, bodily weakness, seem to have hit me all at once.

Sullivan goes soggy, as we'd expect. I may be the most but thinking about the situation, I've long past the point where the I'm certain that the US is in control or even adequately responding to the situation.

Predictably enough, Sullivan has gone soggy, this time over the issue of torture.

Brutality and torture were unofficial policy, as they also have been at Guantanamo. "Everyone knows about it," an intelligence officer told Herrington. And Herrington was no hand-wringer. Herrington also noticed counter-productive sweeps of the general Iraqi population, over-crowding in detainee centers, the "disappearing" of prisoners and taking female relatives hostage to get suspects turned in. Do the Bush people really expect us to believe, after all we now know, that Abu Ghraib was a one-off event caused by a handful of underlings? The terrible truth is that it was anything but.

I've a suspicion that this issue may start dominating the headlines again soon, as the official investigations that have been published are digested.

The Economist often tries to encourage all in the Middle East to "have tea and discuss" rather than grapple with the combination of Alice in Wonderland and The Lord of the Flies that marks the region's politics. Their embedded correspondent with the US forces writes:

American marines and GIs frequently display contempt for Iraqis, civilian or official. Thus the 18-year-old Texan soldier in Mosul who, confronted by jeering schoolchildren, shot canisters of buckshot at them from his grenade-launcher. “It's not good, dude, it could be fatal, but you gotta do it,” he explained. Or the marines in Ramadi who, on a search for insurgents, kicked in the doors of houses at random, in order to scream, in English, at trembling middle-aged women within: “Where's your black mask?” and “Bitch, where's the guns?” In one of these houses was a small plastic Christmas tree, decorated with silver tinsel. “That tells us the people here are OK,” said Corporal Robert Joyce.

According to army literature, American soldiers should deliver the following message before searching a house: “We are sorry for the inconvenience, but we must search your house to make sure you are safe from anti-Iraqi forces [AIF].” In fact, many Iraqis are probably more scared of American troops than of insurgents.

Whether or not the insurgency is fuelled by American clumsiness, it has deepened and spread almost every month since the occupation began. In mid-2003, Donald Rumsfeld, America's defence secretary, felt able to dismiss the insurgents as “a few dead-enders”. Shortly after, official estimates put their number at 5,000 men, including many foreign Islamic extremists. That figure has been revised to 20,000, including perhaps 2,000 foreigners, not counting the thousands of hostile fighters American and British troops have killed; these are the crudest of estimates.

With insurgents reported to be dispensing criminal justice and levying taxes, some American officers say they run a “parallel administration”. Last month in Mosul, insurgents are reported to have beheaded three professional kidnappers and to have manned road checkpoints dressed in stolen police uniforms. In Tal Afar, farther west, insurgents imposed a 25% cut in the price of meat.

Former National Security Advisors Brzezinski and Scowcroft talked over the state of American foreign policy recently at the New America Foundation, with the transcript available here. Neither man, is any kind of Susan Sarandon, Brzezinski in particular, who once sent back a nuclear war plan to the Pentagon complaining that he wanted to see tens of millions more dead among the ethnic Russians, whom he thought held the USSR together.

The National Interest, living up to their mission of providing foreign policy analysis complete with heavy-metal umlauts, also wrote recently on the various critiques of the Bush administration.

America, f**k yeah!

America, f**k yeah!

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Michael S Fuchs makes an understated expression of patriotism at the NFT preview of Team America: World Police, probably the most obscene movie I've ever watched. They certainly go down where no puppets have ever gone before.

Finally, some reward for my blogging

I've complained in the past about the lack of compensation to be found in blogging. With about 52,000 words written so far, I now calculate that I'm owed around twelve grand from all you tight bastards.

Anyway, I got an email recently, which seems to indicate that somebody out there loves me. My responses are linked below:

Hi folks,

Just to let you guys all know, you've been nominated for one or more of the categories in the Irish Free-Market Blog Awards, which the Freedom Institute is organising (as the only policy organisation with a blog in Ireland).

We will be announcing the winners in January.
The categories are:
Best Blog
Best Political Analysis
Best Economic Analysis
Best Looking Blog
Funniest Blog
The judging panel will be disclosed with the announcement of the
results.
There is a further category, Best International Blog.

Just so there's no misunderstanding, I'm fully open to any offers of cash or goods to influence any nomiations that I might make.

Late Christmas Presents

I've been handing out more logins for gmail (the Google internet mail service that gives 1000mb of storage space, or forty times as much as hotmail) to family and friends. If anybody wants one, I have one or possibly two left over, so email me if you would like one.

Get in Line!

The Los Angeles Times reports that the American government has created not just a single cloned sheep, but an entire new race of beings.

To be honest, I find this slightly absurd, as lumping together Spanish aristocrats from Cuba together with all the other "Latino" immigrants mainly the Mestizos and Indios from Mexico and Central America, many of whom don't speak any Spanish seems too broad a categorisation, whether it's by the supposedly representative minority activists or alarmists like Huntington.

I've just finished reading Eric Schlosser's book Reefer Madness, surveying the lunacies of the American government's war on cannabis, pornography and illegal immigration, which reinforced both my suspicion that regulation of these areas is disastrously misguided. Bad as life is for illegals, it seems by his account* that they at least don't have to worry about getting beaten and robbed by the US authorities as they can expect from their own government.

*I'm not sure if this link works for those who don't subsribe to the Atlantic Monthly. Email me if you would like to read the article but cannot get in.

North, South, East and West Brits

I was amazed to discover that the latest incarnation of Magill magazine, which was founded and periodically revived by Vincent Browne, is an interesting departure from the norm of Irish media opinion. With Eamon Delaney, novelist and Accidental Diplomat in the editor's chair. It has some right-wingers I've heard of, such as economist Marc Coleman, who made a run for SU president when I was at Trinity, and Rory Miller, a middle east scholar at King's College London. I fear that it's likely to be short-lived, as in its previous lives, but it will be fun to see who appears.

Dr Miller writes on the Anglosphere, the theory, popularised by management consultant James Bennett, that the English-speaking nations should build institutions to underpin closer links, based on a common culture of economics, politics and international relations. I came across Bennett's Angosphere primer via Mark Humphrys' pages, which are always worth a browse.

I'd very much agree that America, Australia and Britain are taking the right approach in fighting against global terrorism and that they had strong interests and altruistic reasons for invading Iraq. However, I think that the Anglosphere concept isn't much use in understanding what makes this alliance work, as it ignores the important factors in its oversimple analysis.

Bennett gets history comprehensively wrong; even for the big events, he just doesn't know what every schoolboy knows. In the most important example, the similarities and cultural links between the three countries were much stronger in the past, but somehow this wasn't sufficient to prevent America systematically dismantled the British Empire, epitimised by Ike's humiliating coercion of Britain and France during the Suez crisis.

Second, he's guilty of what I'll call the big Bermuda fallacy. All these nations are isolated by water in different regions of the globe, meaning that the geopolitical factors that dictate their national security interests will be different, and not identical, as they might be if both Britain and Australia were located near Bermuda. I find the realist analysis of foreign policy put forward by Mearsheimer or Brzezinski than others and this would predict, as we observe, that the US will act to maintain its dominance and the others seek outside help to balance their weaker position vis a vis their neighbours. Since 1941, Australia has rejected Britain's meager capabilities for an alliance with the US, which has seen them fight together in Korea and Vietnam and now Iraq. Given the prospect of turmoil among Muslims in Indonesia, Malaysia, Thailand and the Phillippines, Australia has little choice but to actively hunt down terrorists in the region. Rather than an Anglosphere, it's an Americasphere, with other medium-rank powers benefiting from the US military umbrella such as Japan, Poland and South Korea, joining the fight.

Third, Bennett's cultural assumptions are weak. If Anglophone culture explains domestic and international politics, law and economics, then the other strongly Anglophone countries - Canada, New Zealand and Ireland should share the same attitudes. All the later three - the Anglosphere theory's problem children, have a foreign policy that's distinct from, if not hostile too, America's, especially under the Bush administration.

The fourth, and crucial failure for Ireland, lies in failing to understand the exact nature of the Anglo heritage of each country making up the supposed Anglosphere. To put it simply, there ain't no green in the Union Jack.

As Huntington, and David Hackett Fisher before him have argued, the Anglophone cultures of America were either from England, Scotland or the settlements of Scottish Ulster, all defined by powerful animus towards Catholics and general and the Irish variety in particular.

In turn, the overseas Irish communities tend to reciprocate with a powerful Anglophobia; House Speaker Tip O'Neill spoke of playing at fighting the Redcoats when growing up in south Boston; Paul Keating, the working-class Irish bruiser, tried to redefine Australia as an Asian power and sever constitutional links to Britain.

So, overall, I don't rate the concept very highly, even ignoring Bennett's writing style, which makes comprehending his articles akin to making a close reading of a roll of toilet paper. What would you expect from a management consultant? If someone charges a thousand bucks an hour, one can hardly expect deep contemplation and brilliant expression. Perhaps it's a good thing that academic salaries are so uneconomic....

I've never before given the National Interest magazine much respect, but I've changed my mind after reading the Summer 2004 edition from cover to cover. Apart from the luminaries on the board - Brzezinski, Kissinger, Huntington, Eliot Cohen - it has a broad and detailed scope rivaling the best policy journals in the field, while mixing realist, neo-conservative and a pinch of nationalist themes. In an issue from four years ago, its founding editor, Australian diplomat and analyst Owen Harries casts a critical eye on Bennett.

If only I ever read any novels...

The problem with bourgeois societies is a lack of imagination. A person raised in a middle or upper-middle class suburban environment, a place ruled by rationalism in the service of material progress, has difficulty imagining the psychological state of affairs in a society where there is little or no memory of hard work achieving its just reward, and where life inside a gang or a drafty army barracks constitutes an improvement in material and emotional security. Even to encounter first-hand such a society - whose instincts have yet to be refined by several generations of middle class existence - is not enough in the way of an education, since the visitor tends to see it as a laboratory for his or her middle class ideals, and thus immediately begins to find "evidence" for "pragmatic" solutions.

The problem is further compounded by the separation of literature from history and of both from political science in this age of academic specialization, creating policymakers ignorant of the very books that explain places like Haiti and Somalia far better than any social science "methodology." While the usefulness of history is accepted and needs no elaboration, the usefulness of literature is less so among the policy elite, even as Marco Diani, a senior researcher at the Centre National de la Recherche Scientifique in Paris, writes that, "The anguish of any society can be found in its literature, often earlier and more clearly revealed than in its social sciences."(1) That is because the future lies inside the silences, inside the very uncomfortably sensitive issues that people are afraid to discuss at dinner parties for fear of what others might think of them. And yet it is a principle function of social science to accumulate information precisely on what people are not afraid to talk about in front of a researcher's tape recorder (which is also why conventional journalism is often the most deceptive form of reporting on a society).

Who could stand back and analyse how we understand other societies like Robert Kaplan can? Where else would something like this appear than the National Interest, the intellectual home of foreign policy realism in America? The pronounced right-wing slant makes it different from Foreign Affairs or Foreign Policy and the quality of the articles can be uneven, but at its best, this quarterly journal produces some of the sharpest debate available in its field and a cockpit for the contending visions of nationalists, cosmopolitans, neoconservatives and realists.

Its archives, along with those of the New Statesman and other magazines, are available free through www.findarticles.com