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Economic Crisis and Climate Change: Catalyst for Innovation?

February 4, 2010

Dr Dan Steinbock

Dr Dan Steinbock gave a public lecture today and it was titled “Economic Crisis and Climate Change: Catalyst for Innovation?”. It was organized by the EU Centre in Singapore.

The lecture began promptly at 5pm over at SMU Function Room 6.1 at the Administrative building. When I walked in, I was greeted by Deliang, who also happened to be attending the lecture. We managed to catch up on the happenings post-COP15 and also chatted about our individual dissertations (HT for me and MT for him). It was cool to hear about his dissertation on Campus Sustainability and I do applaud his efforts for embarking on ground-breaking efforts to make Singapore’s university campuses greener and more environmentally sound and friendly. But more on that another time…

Dr Dan Steinbock’s lecture was highly insightful, in that he outlined the key strategies to tackle not only climate change, but the economic recession as well. He started off the lecture by mentioning COP15 and the Copenhagen Accord, which he thought “optimistically” about. He also brought to the fore what he thought was a “great correlation” of oil prices and the global recession. He argued that the threats to society from climate change, coupled with the “synchronized global recession” are significant challenges that we face today.

Back to the “great correlation”, Dr Steinbock suggests that the increase in the price of oil during the time leading up to the economic crisis of 2008-2009 (and some would even argue up till today), was not just a crash in the financial sector but a reflection of, and a reaction to the adverse effects of climate change. I found this very intriguing. What he means is that there is a link between economic resources (oil) and the economy and we have failed to recognize that climate change is intricately linked to the economy (or perhaps we have focused too much on the economy.. whichever way you might take it).

“Being captive to resources is the reason for our downfall”, he said.

He also mentioned BRIC, as well as the G-77. He used the term “emerging” very often, while referring to BRICs nations and Asia in general. He suggested that there is a transition of global power and influence, especially when it comes to economic growth or decline. The recent economic recession saw advanced economies crashing, but Dr Steinbock highlighted that China was the only country which didn’t experience a negative figure during the recession.

BRIC

BRIC

Also, Dr Steinbock talked about “sustainability” in the context of the U.S. and BRICs. He argued that “sustainability is not the main priority in the U.S.” and BRIC’s priority lies in “development and growth over everything else”. He also mentioned the U.S. Climate Change Legislation clause which implied means to refuse/stop trade with countries “seen as not doing enough to reduce their greenhouse gas emissions”, effectively creating what he called a “Green Trade War”. I’m personally not too familiar with policies but I noted that cause it sounded rather important. Hmm.

Moving on… Dr Steinbock pointed out the 2 Degree trajectory that we are aiming for and re-iterated what was on everyone’s minds… “Business as usual is UNSUSTAINABLE”. We all know that, but what are we doing about it? Dr Steinbock was quick to say that decisions made today in the form of policies are going to make changes that will last for centuries. He suggested that this is a huge undertaking and burden of policy makers and leaders today… that is.. if they see it as a burden at all. Very true indeed.

He said policy affects every aspect of the innovation chain but the potential of innovation remains untapped. This is because of subsidies to petroleum resources, currently at approx. $150bn while R&D input is as low as $10bn. In addition, private spending towards R&D comes in at $40-60bn, far lower than subsidies to oil, coal and gas. Dr Steinbock said that this is a “problem with priorities, as to where the money should go to”.

Next, he said that the government should act as a catalyst for change, especially in RD&D. First, public RD&D should get allocated more funding and he highlighted that from 1947-2007, today public spending on RD&D is nearing their lowest point! Secondly, subsidies are counterproductive and serve as a disincentive to RD&D.

Dr Steinbock also pointed out that old rules will note work in Clean Tech. What he means by this is that expected demand drives the volume of production, as well as the cost of production. However, the “market will respond, only if it is given the right signals”.

“If you ask your consumers to pay for something that they already have, you’re just asking for trouble”, he said.

He gave the example of E-bikes (motorbikes) in China, where it became the ONLY alternative as the state put a ban on gasoline fuelled bikes but added that implementing this in a market driven society will be very very difficult!

Electronic Bike in China

So Dr Steinbock argued that innovation as a catalyst if NOT ENOUGH. We also need to ensure that there is technological transfer from advanced economies to the emerging ones. He also brought up reverse innovation and suggested that there needs to be a more global outlook and better cooperation between nations for innovation to really take off.

Later, he also brought back BRICs and other emerging economies, arguing that there wasn’t enough representation from these countries in the global economy and of climate change. He did however, trace the linear progression of G1 up till G7+BRICs+++, which I couldn’t quite follow but was interesting.

Dr Steinbock also said that during the Copenhagen negotiations, President Obama didn’t have power to make the decisions because he was told by some Republicans that he has no mandate to tie the U.S. into a legally binding deal. I thought that was really sad to hear.

He concluded by commenting on the Copenhagen Accord, saying that there was a long chain of evolutionary stages that led up to COP15. These include the Rio Earth Summit in 1992, the Kyoto Protocol in 1997 and of course the Copenhagen Accord in 2009. He was optimistic about the developments during these years. However, he pointed out one important aspect he felt was missing from the Accord. This was that it had “no reference to international competitiveness and potential use of border adjustments” (I think as mentioned in the U.S. Climate Change legislation clause that I brought up earlier). He also said that the “true green shoots” was that the global green stimulus spending is on the rise, as compared to economic “green shoots” I guess. But he warned that the risk appetite of investors are still there.

Green shoots

Thus he called for more cooperative action between G7 and BRICs (or advanced and emerging economies) and re-iterated the correlation between energy (oil) prices and the global economic recession. #

I do apologize if this summary is incoherent at times but they were from the notes I took. Given that I’m not very well-versed in economic policy, I did find it hard to keep up at times. Overall, I enjoyed Dr Steinbock’s presentation and agreed with him on many of his points. Deliang and Zheyu were present at the event as well, so I hope to be able to get some comments from them to share with you all. Till then, cheers!

Mel

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