Understanding Emissions Trading and Global Warming

It goes without saying that there is often an inherent conflict between science and economies. Emission trading is an interesting effort in the global warming arena.

Understanding Emissions Trading and Global Warming

It is a mild understatement to say that global warming is both a controversial and misunderstood field. As the decay of the ice packs and slowing of the ocean conveyer become more apparent, the controversy is starting to evolve into an acceptance of global warming as a fact. Given this great acceptance, the question is now what to do about it.

Every society is based upon some form of economy. Although globalization is the much touted economic subject of the day, the industrial revolution is still really the heart of most economies. Economies, particularly first world economies, are based on the production of goods and materials through manufacturing. These same processes contribute heavily to greenhouse gases and the global warming debate. With such an inherent conflict between production and reduction of pollutants, find a solution to greenhouse gases has often been a dubious prospect. The concept of emissions trading, however, may be a solution.

Emission caps are a method for dealing with economies on a nationwide scale. Essentially, countries agree to cap their total output of pollutants and greenhouse gases at a certain level. Each government then converts this total amount into individual caps for industries or business. The caps essentially tell the businesses the amount they are allowed to emit and assign penalties and incentives for coming in below or above said amounts. In practical terms, a business is penalized for polluting or given a benefit for cutting pollutants.

The interesting thing about emissions caps is that they can be traded. Ostensibly, a country or business that falls under the cap amounts can trade their excess emissions allotment for money. In turn, other parties that fail to meet their caps must buy these allotments. By taking this approach, reduction of pollutants become not only a moral choice, but a potential profit center. For example, Brazil has done an amazing job of converting automobiles to ethanol. It has now evolved from an oil importer to an exporter and is selling emission credits on the open market.

Emission trading systems do not represent a new approach to dealing with the pollution problem. On smaller scales, such approaches have been used within the United States as part of the Clean Air Act to force municipalities and states to act. With the implementation of the Kyoto Treaty, this process will become full blown on the international scene. Alas, India, China and the United States are not signatories to the Treaty, which is unfortunate given their economic growth and production of greenhouse gases and pollutants.

Saab Withdraws International Trade Deal with Venezuela on Arms

Early this month, Saab Group, which is the largest producer of defence in Sweden, announced its withdrawal from an international trade deal with Venezuela concerning weapons. It must be noted that the Swedish company used to be one of the major providers of weapons to the South American nation. However, Saab said that it could no longer continue with such an international trade deal.

According to Saab Group, it could not sell anti-tank and anti-aircraft devices to the Latin nation due to an arms ban imposed by the US on Venezuela. Under the embargo, defence makers could not sell to Venezuela any weapon, which is made in the US or which has one or more US-made parts. Prior to the arms policy, Bofors, which is a subsidiary of Saab Group, had supplied the South American country with weapons during the past twenty years. The recent embargo though has ended the international trade deal on arms between the Swedish firm and Venezuela.

Bofors will officially stop trading weapons with Venezuela on October 1 in compliance with the policy implemented by the US government last May. It must be noted that during the past years, Sweden had supplied anti-tank rifles, rocket launchers, and anti-aircraft missiles to Venezuela that amounted to about $150 million. Currently, Venezuela is not involved in a new International Trade deal on weapons. However, experts said that President Hugo Chavez would soon find the need to replace its old weapons and increase its missile supply.

The embassy of the United States in Sweden praised the compliance of the Saab Group to the embargo that barred the trade of weapons to nations that did not fully cooperate with the fight against terrorism headed by the US government. Venezuelan officials were taken by surprise after the new had been released. Defence Minister Raul Isaias Baduel told to reporters that the government was not officially informed by Bofors regarding its withdrawal from the international trade deal on arms. But he said that he would be discussing the matter with Mr. Chavez in order to come up with an official response to the news.

After the news came out, a military official stated that Venezuela is also considering to negotiate an international trade deal with Switzerland regarding weapons. He added that although the door of Sweden had already closed, other countries would soon open for Venezuela. Although trade between Sweden and Venezuela ended, the latter has found another partner, which is Russia. Recently, Mr. Chavez visited the country where he signed several important trade agreements including the purchase of weapons, military planes, and helicopters. Mr. Chavez was able to close the deal since the weapons manufactured in Russia do not contain US-made parts. Prior to the international trade deal between the two countries, the US had warned Russia not to sell arms to Venezuela. The visit of Mr. Chavez to Russia was part of a series of international trips, which were aimed at seeking trade opportunities and gaining the support of other nation regarding Venezuela's bid to join the UN Security council.

http://www.tbc-world.com/Saab_Withdraws_International_Trade_Deal_with_Venezuela_on_Arms.asp

The Great Depression: Causes and Effects

During high school I asked a naïve question to my economics teacher – which is the best phase for an economy and can we get rid of downturns. Her response was a measured one – the best economic phase is when the aggregate demand keeps exceeding aggregate supply slightly with little inflation. And on making depression a word of past – she responds, we still have to go a long way. It is not a matter of economic cycle but a matter of human greed. Regulatory bodies can only play a limited role in controlling the economy in capitalism, in the end it all boils down to the people. After burning our fingers in various downturns since The Great Depression, we can safely say that monetary steps contributed more to it than pure collapse in demand of goods.

Factors contributing to The Great Depression

The Stock Market Crash

Decade of strong performance after the first World War, the stock market was euphoric and rose to unprecedented heights. When the economy got overheated and speculation ran rampant, a crash was unavoidable. Under such circumstances the best government could do was to do nothing that might make a bad thing worse. But President Hoover had other ideas, together with Federal Reserve policy board head Miller he decided to clamp down the share prices and bring the market down by keeping away banks to extending loans that would be used buy stocks.

The situation was further worsened by firming of money rates to commercial interests. With it the bank is not within its reasonable claim for discount facilities at its federal reserve bank when it borrows either for the purpose of making speculative loans or for the purpose of maintaining speculative loans. It cut the money supply by one-third from 1929 to 1932. There was much less money to go around, businessmen could not get new loans--and could not even get their old loans renewed. They had to stop investing. Not because they did not want to but because banks could not lend them the money they needed. This interpretation blames the government and calls for a much more careful Federal Reserve policy. As the system collapsed it spreads panic. The first banking panic occurred in late 1930; the second in the spring of 1931, and the third in March 1933. When it was over, 10,000 banks had gone out of business, with well over $2 billion in deposits lost.

Deflation Effects

Misreading of deflation effects is also one of the major reasons, as the depression lasted longer than any before it. It is safely assumed that in deflationary conditions the interest rates will come down drastically and it will encourage people to borrow and invest money again in the economy. But as the market crashed and lots of people loosing the saving, unemployment sets in. The nominal interest rates increased steeply, leaving purchasing power of people drastically reduced. With this a sharp recession became a global depression.