WHAT MATTERS WEBLOG

Tokyo Tower, (C) Maximilian Staedtler, WHAT MATTERS WEBLOG

The Tokyo Tower - one of the many landmarks of the Japanese capital - is the bright highlight of Tokyo’s breathtaking night skyline. When I took this photo from the Tokyo World Trade Center in June of 2009, I was inspired by the amazing atmosphere of the city. The endless concrete jungle with over 35 million inhabitants becomes all the more appealing when the gray concrete facades vanish and leave a sea of millions of little flashing red dots. I have seen many skylines during the last year, but Tokyo’s was the most mind-boggling of all. Even Manhattan appears tiny compared to Tokyo. 

The Tokyo Tower itself has been the tallest building in Japan ever since its construction was completed in 1958. As the Japanese use to say, it looks like the Eiffel Tower in Paris, only more beautiful and more impressive. And needless to say, it is slightly taller than the original from France.

Now the Tokyo Tower is set to lose its title as Japan’s tallest artificial structure to the new Tokyo Sky Tree which is currently under construction and expected to open for the public in 2011.

The new tower - which will be a broadcasting tower just as the Tokyo Tower - will stand 2,080 feet (634 m) high, almost twice the height of the Tokyo Tower. The site of the new one is in the outskirts of Tokyo, on the shore of the river Sumida, just behind the famous Asahi Brewery in Asakusa.

Here’s the view on the Asahi building from the top of the hotel I stayed at. The Tokyo Sky Tree is being erected just half a mile behind the Asahi building.

Asahi Brewery Building on the shore of the Sumida River, Tokyo, Japan

The boat you can see on the river is the so-called Asakusa-Odaiba water bus which links the artificial island of Odaiba in the Bay of Tokyo with the cultural hotspot of Tokyo, Asakusa. I can only recommend taking a ride on this futuristic boat. The view from the boat is fantastic and one gets a good idea of the cityscape of modern Tokyo.

More information on the water bus: http://www.sunnypages.jp/travel_guide/tokyo_leisure/water_busses/Asakusa-Odaiba+Direct+Line/1875

For more information about my trip to Japan, check out Category Japan:

http://www.whatmattersweblog.com/category/japan/

For further reading:

Japan in Deflation - don’t underestimate the Japanese consumer!

Check my Bookstore on the Menu column.

The recent surge of the U.S. dollar against other major currencies - most notably the euro due to Greece’s financial woes - could potentially be severely damaging to the American economy.

The strengthening of the dollar is obviously not accompanied by a strenghtening of the overall economy. Unemployment is still at 9.7%, President Obama just recently proposed his $ 3.8 trillion budget resulting in the largest budget deficit in U.S. history and there are still several unsolved problems out there like the weak housing market, out-of-hand private debt and rising credit card defaults. In addition, the next financial time bomb (ranging from Dubai times 10 to Dubai times 1000 (if the Chinese housing bubble were to burst)) might just be around the corner.

While America is indeed gradually recovering, it still has no concept of how to find a new foundation for growth in the post-depression world. Financial services can’t be expected to contribute as much to growth as they had done before the crisis. The U.S. industrial base won’t be able to fill the gap. The necessity for grand-scale structural reforms are hard to deny. In my opinion, the best bet for the future would be the clean power technology sector. But in order to get the energy technology revolution going, it will take significant investments by private companies and venture capitalists, rising oil prices or a set of government incentives and disincentives that would support the creation of a new powerful industry in the U.S. and make these new technologies competitive by forcing up prices for conventional dirty fuels which are jeopardizing both, national security and climate stability.

In this difficult economic environment, a strong dollar is anything but a blessing. The European export-oriented companies in the automobile industry, the energy sector or the health care sector managed to be competitive with their American counterparts when it took more than $1.5 to buy one euro. Now with one euro only costing around $1.36, many European businesses find it pretty easy to steal market share from their U.S. competitors.

Exports are crucial to the picking-up growth of the U.S. economy; exporters are major job creators. As American domestic demand will take years to recover, American corporations are seeking to meet foreign consumers’ demand. President Obama is determined to double exports over the next 5 years and thereby create 2 million additional jobs. But with a strong dollar making American products and services more expensive abroad and imports cheaper for American consumers, the foreign trade deficit is more likely to grow than to shrink.

 The destabilizing consequences of America’s habit to spend more money on products it imports than it is making by selling products to foreign consumers are becoming more and more obvious. While the U.S. already ows mind-boggling sums to China and oil exporting countries, it also increases its reliance on these countries to finance its budget deficit.

On the one hand, a stronger dollar would help to prolong the willingness of the Chinese to continue buying U.S. treasury bonds, but on the other hand, a reduced reliance on foreign lenders through more fiscal discipline and more balanced foreign trade would undoubtedly be more sustainable in the medium and long term.

Another consequence of a stronger dollar usually are lower oil prices. What at first sight might be beneficial to consumers and businesses alike, lessens the pressure on the U.S. to reduce its dependence on foreign oil and instead, produce more energy domestically and create millions of local jobs by harnessing domestic energy sources such as the sun, wind and the tremendous energy saving potential.

Finally I want to share my view on the crisis in the eurozone. While it is true that several European economies such as Greece, Spain, Italy and Portugal have been living beyond their means since they were able to borrow in euros - and Greece even had to cook the books to be admitted to the eurozone - I don’t see the 16-nation bloc breaking up. Wealthier member states such as France and Germany do have a strong interest in the stability and  integrity of the eurozone because a significant share of their exports stays within the single currency market. Besides, inaction by the larger members in the event of a default of a fellow eurozone member state would likely trigger panic on financial markets, harm other eurozone members that otherwise were able to take care of themselves if credit markets stayed calm and the bottom line were that the refusal to support a single state would lead to the necessity to bail out half a dozen states to avert a meltdown. Last but not least, Greece could still turn to the IMF as a measure of last resort - even though France and Germany oppose outside interference, partly for political reasons (the IMF’s director Dominique Strauss-Kahn could be a competitor for France’s President Sarkozy in the next election).

Related Posts:

tax increases or inflation: please choose one

http://www.google.com/hostednews/ap/article/ALeqM5iZnfNIDibBZ2lgBu_KVRX_wauO2AD9DQNFFG1

http://www.finance-weblog.com/50226711/strong_dollar_good_weak_dollar_bad.php

http://www.buzzle.com/articles/obama-budget-sets-records-highest-ever-budget-deficit.html

Just recently it became public that Chinese officials refused to authorize Sichuan Tengzhong Heavy Industrial Machines of China to purchase Hummer from GM.

It is quite revealing to see how actively China is trying to become a leader in the green energy technology business. Tengzhong might have faced some difficulties and financial risks had the takeover been successful, even though there probably would have been enough newly rich Chinese willing to buy a Hummer at a price covering production costs and still leaving a huge profit margin.  Most likely, however, the deal was canceled because China is seeing the benefits of building a strong and innovative clean tech sector as compared to the disadvantages of investing in a declining industry that unnecessarily wastes scarce resources.

 As the Japanese government has been doing for decades, the Chinese leadership is directly (through regulation, decrees and state companies) and indirectly (through incentives and disincentives) steering its economy by withdrawing support from “sunset industries” and supporting “sunrise industries”.

The auto industry is in no way considered a sunset industry by the Chinese given they’re adding more than 11 million new cars a year to their car fleet, but especially since the number of cars in China is increasing so quickly, the country needs to limit the growth of emissions and fuel consumption. China belongs to those countries heavily subsidizing gasoline to make driving affordable for their citizens. Because of the prospect of rising oil prices, energy shortages and higher consumption, China is struggling to find an “exit strategy”. Furthermore, subsidized gasoline benefits those with the biggest gas-guzzlers disproportionately high.

Cars running solely on electricity combine several advantages for China.

First, they have no tailpipe emissions and therefore can reduce the smog Chinese cities are infamous for. During the 2008 Olympics in Beijing, the government banned millions of cars from the capital’s streets to reduce air pollution. The ban worked and most Beijing residents appreciated the step. Were two million of Beijing’s cars replaced with electric vehicles, the effect would be the same.

Second, electric cars reduce overall energy consumption as electric motors are manifold more efficient than conventional combustion engines. Even if all of the electricity needed to run an electric car fleet were generated from burning oil and coal, the environment would still benefit. In addition, China  could save billions by relying on domestic energy resources instead of imported oil.

Third, developing electric cars and bringing them to markets across the world is a golden opportunity for China. Chinese auto makers would hardly manage to catch up with their American and European competitors in regard to conventional propulsion technology. In this field, China clearly lags behind. But when it comes to electric cars, the race is still open. Battery technology is at the heart of an electric car which might even give Chinese companies an edge over their competition.

BYD (short for Build Your Dreams) is a leading battery manufacturer based in Shenzhen which began the development of production of all-electric cars in recent years. Warren Buffett’s investment of $230 million into the company is an encouraging sign that the company is on the right track. BYD is preparing to establish itself as a leading global electric car brand by launching the production of affordable, mass-produced electric cars. By the end of this year, BYD’s 205-mile range all-electric e6 which can reach a top speed of 87 mph is expected to hit the U.S. market. It can be charged at home or at a network of charging stations BYD intends to build at supermarkets, fast-food restaurants and office buildings.  The company further plans to become China’s largest automaker by 2015 and eventually, become the world’s number one.

China’s efforts could prove to be vital to the global breakthrough of electrically-powered personal mobility. As the Chinese car market is important to global auto industry heavyweights such as Toyota, GM and Volkswagen, these companies are definitely working on several electric car models. This week, BYD and German luxury car maker Daimler signed a memorandum of understanding to produce electric cars together in China. (New York Times: BYD Links Up With Daimler to Build Electric Cars in China)  If China one day decided to ban imports of foreign non-electric cars, e.g. for environmental reasons, global sales of electric cars could soon hit more than 10 million units per year. As battery technology moves down the learning curve and mass production brings down production costs, the electric car revolution might just be around the corner.

In May I will travel to China and tell you more about how this new global superpower is developing.

For further reading:

China: A developed, green economy by 2050?

 Sources: 

http://www.foxnews.com/leisure/2010/02/24/gm-kill-hummer-brand-sale-falls/

http://www.marketwatch.com/story/warren-buffett-looks-to-electric-car-in-byd-stake

http://www.byd.com/press.php?index=0

Huge budget deficits as we can see them in all major countries in the world these days appear to have become an issue that people worry about, but somehow have learnt to accept. Except for China whose deficit is only at 2.9% of its GDP according to The Business Times - a very moderate deficit given the difficult environment of the global financial crisis - most OECD countries have accumulated unprecedented deficits. Just recently, President Obama introduced his budget for Fiscal Year 2011 (October 2010 through September 2011) which forecasts a $1.56 trillion deficit for 2010.

While the Obama administration had no choice but to spend more than a trillion to avoid a sequel of the Great Depression, it is evident that the United States will have to drastically reduce its deficits in order to recover economically and politically.

During a BusinessWeek interview, Obama said:

 “our real problem” is neither the spike in stimulus spending of the last year — as many Republicans charge–or the sharply lower tax collections from hard-hit businesses and individual taxpayers. “The real problem,” he said, “has to do with the fact that there is a just a mismatch between the amount of money coming in and the amount of money going out. And that is going to require some big, tough choices that, so far, the political system has been unable to deal with.”

http://thecaucus.blogs.nytimes.com/2010/02/11/obama-may-consider-tax-increases/

Generally there are four ways of reducing public debt:

1. Strong long-term economic growth
2. Higher taxes
3. Spending cuts
4. Inflation

1.) DEBT REDUCTION THROUGH GROWTH

-> check out my post American Time Bomb

I hope that growth in the U.S. will pick up again soon and remain stable for a longer period of time as future downturns could severely affect the recovery from the financial crisis. Martin Feldstein, Professor of Economics at Harvard University, expects “that the [U.S.] economy will fully recover over the next decade” as he explained in his article America’s Growth in the Decade Ahead. Furthermore, he predicts the average annual growth rate for the coming ten years to be around 1.9 percent,  similar to the one of the previous decade. Professor Feldstein also expects unemployment to be halved during the next 10 years as the cyclical recovery progresses.

It is true that economic growth can reduce the relative public debt of a country. As can be seen on the chart below, the public debt’s share of GDP had been reduced from 94.1% in 1950 to 58% by 2000, even though the total debt had grown exponentially.

Debt reduction through growth is possible, depending on the government’s ability to create an environment that supports - and even more important, doesn’t stand in the way of - the creation of new industries which can create jobs, revenues and new export markets. For more on this, read my post things look pretty bad, don’t they? yet there’s reason to be optimistic from October 22nd.

However, given the longer lasting effects of the crisis, the enormous debt burden and structural problems of the U.S. economy that so badly need to be addressed but are apparently not big enough to push Congress to set aside foolish partisan politics, focusing solely on economic growth won’t be enough to bring down deficits and bring debt under control.

2. & 3.) TAX INCREASES & SPENDING CUTS

Now we come to what the government can directly do to effectively reduce deficits. Obviously, the “mismatch” between tax revenue and federal spending  Obama mentioned, is the core of the immediate problem. The simple truth is that most recent U.S. presidents were too quick at spending and too slow at working out ways of how to pay for it. Especially after the budget surpluses of the Clinton era, U.S. government spending got out of control.

Fiscal Year 2010 U.S. Government Spending

When taking a look at this Graphic from Wikipedia, I conclude that any meaningful short-term reductions in spending must come from major cuts in the following budgets since they make up almost three quarters of all spending: Social Security (accounting for 19.63% of the budget), Defense (18.74%), Unemployment/Welfare (16.13%), Medicare (12.79%), and Medicaid (8.19%). Obviously, there are no ways to save on Medicaid or Medicare. Reducing the Social Security budget would be another mission impossible. Unemployment and Welfare spending in the U.S. is already relatively low compared to other OECD countries, and given the record-high unemployment as an immediate effect of the financial crisis, reductions in this budget would be tough as well. So what’s left? - Defense!

Of course many argue that the United States needs to fund the Department of Defense properly to maintain peace in the world and security in America. Nevertheless, I don’t see any meaningful way of reducing the budget deficit without cutting the budget of the Pentagon. Wars are extremely expensive, and the U.S. is currently involved in two major wars. At the end of the day, America has to find new ways of protecting itself from outside attacks that require significantly less money. After all, America’s military budget of $ 663 billion (or $ 533 billion, depending on who does the math) is approximately one and a half times the federal budget of Germany ($ 442 billion), the largest economy in Europe. (http://www.bundesregierung.de/Content/DE/Artikel/2009/12/2009-12-16-bundeshaushalt-reg.html)

Besides, the U.S. has to force its partners and other military powers to take a more active role in the maintenance of global peace and security. Due to its military actions, the United States has faced harsh criticism over the past decade. America’s military offensives have strengthened anti-American groups throughout the Muslim world. By cutting its military expenditures by 40%, the U.S. could possibly achieve the same level of protection from terrorist and cyber attacks as today and in the process, push the European Union, Russia, China and India to assume more responsibility for the security of this planet we share. Avoiding armed conflicts is in the interest of these countries as well. And finally, ask yourself, where else could we save money if not on defense? Cutting budgets which account for between one and three percent of the total budget by as much as 40% does not get as anywhere close to the reductions we need.

Consequently, in my view, the United States government has to freeze spending on 4 of the 5 biggest posts of the budget and reduce the defense budget by as much as possible. Additionally, the remaining posts ranging from Interest payments to Agriculture to Energy to Commerce to Homeland Security to Veterans’ Affairs to  Treasury to Transport, etc…. will have to be examined one-by-one and either frozen or reduced if possible. Some posts will inevitably rise in the coming years such as Interest Payments due to the sky-rocketing debt burden of more than 12 trillion dollars.

Tax increases appear to be off the table for most American voters, Republican Congress members and even some economists. On the one hand I perfectly understand this sentiment and I absolutely agree that the least efficient way of using money is to hand it over to the government. On the other hand, the United States depends on a functioning government that funds education, infrastructure and vital public agencies sufficiently. What is important though is that the government needs to be extremely careful when it comes to increasing certain taxes. A few percentage points too much and the resulting effects on the economy could lead to further turmoil and a surge of anger from voters who are fed up with seeing their money being wasted across the board.

4.) INFLATION

If tax increases and spending cuts can’t be agreed on in Congress, the inevitable consequence will be high inflation. Throughout the decades, inflation was the tool countless governments used to increase the competitiveness of their economies in the short term, make up for failures of domestic economic policies and shrink the debt burden. Nonetheless, inflation is no good solution to the problem. As inflation goes up, so do interest rates which in turn accelerates the accumulation of public debt. Another downside of inflation is that those who’ll be hit the most are some of the hardest working and most vulnerable members of society. Low to middle income families will suffer enormously from picking up inflation rates.

Whether fiscal responsibility can be restored so that the necessary spending cuts and tax increases can be implemented is vital to the long-term health of the American economy. Above-average inflation rates are almost impossible to avoid, but if spending cuts and tax increases fail in Congress, the resulting massive inflation would eat up people’s few remaining savings and a growing share of their income. In this case, only an unexpected, powerful economic boom could avert an inflation-debt-crisis.

http://thecaucus.blogs.nytimes.com/2010/02/11/obama-may-consider-tax-increases/

http://www.reuters.com/article/idUSN3116401620100201

http://www.business-standard.com/india/news/martin-feldstein-america%5Cs-growth-indecade-ahead/383967/

As part of the research for my research paper “On the Threshold to a New Energy Age“, I conducted a survey in order to find out how “prepared” people are for the transition to a new age of energy generation and use as well as to gather opinions on current trends in energy issues.

This is the second post of the question-by-question analysis of the survey results:

Question 3: Will electric cars outnumber conventional cars within the next 25 years?

Even tough slightly more than half of the people I surveyed do not expect electric cars to outnumber conventional cars within the next quarter century, I have no doubt that there will be an enormous market for electrically powered vehicles as soon as they become available in large quantities, at an affordable price and with a sufficient driving range.

Question 4: Would you buy an electric car if it were sufficient for you daily use?

90 percent of respondents said they were willing to buy an electric car if it were sufficient for their daily use. As I’ve said before, electric cars have huge potential. In the course of the creation of my research paper “On the Threshold to a New Energy Age“, I came to the conclusion that next to the high initial purchase price, the limited driving range of all-electric vehicles was the main reason the majority of people still don’t consider electric cars a viable alternative to gasoline-powered cars. The good news is that both hindrances can be overcome as technology advances and the benefits of mass production bring down production costs. Range won’t be an issue anymore in the future, since advancing battery technology, other energy storage media and the construction of a recharging infrastructure (electricity sockets in the parking lots of shopping centers, fast food restaurants or office buildings, quick-charging stations in downtown areas and along major highways) will enable drivers to recharge their cars’ batteries cheaply and conveniently at many locations and at the same time, can drive further on a single charge.

As part of the research for my research paper “On the Threshold to a New Energy Age“, I conducted a survey in order to find out how “prepared” people are for the transition to a new age of energy generation and use as well as to gather opinions on current trends in energy issues.

This is the first post on the question-by-question analysis of the survey results:

Question 1: Do you own a car?

This was the first surprise for me when analyzing the outcome of  the survey. More than half the people I surveyed own a car.

Given that the vast majority of survey participants lived in or close to major cities in the United States and Asia, I did not expect many of them to actually own a car. Check out my post Survey Results for more information on the breakdown of survey participants by location.

Furthermore, I found out that most Singaporeans (except one) and Japanese I surveyed did not own a car. Many of them did not even have a driver’s license.

Question 2: Do you plan to buy a new car within the next 5 years?

About one third of respondents indicated they had plans to buy a new car in the next five years. Again, I was surprised by the higher-than-expected share of people planning to purchase a new car in the medium term. However, I have to add that a considerable number of those who indicated in the previous question they did not own a car were planning to buy their first car soon. This might have pushed the number up a bit.

In addition, I asked the third with plans for buying a new car whether they thought it would be a conventional car with a combustion engine or a car with a different propulsion technology. This is how they replied:

Although the overwhelming majority of almost 80 percent replied they were going to buy a car with a combustion engine, it is remarkable that more than 20 percent see themselves buying a car with either an electric motor or some other technology.

Whether combustion engine or not, there are many different power sources available next to gasoline or diesel. Bioethanol and hydrogen are two alternatives for the common combustion engine. Electricity generated from any energy source (nuclear, solar, wind, wave or geothermal energy; energy from burning oil, coal, gas and biological matter) can be stored in the batteries of electric cars to power the electric motor. Another option would be to replace the battery with a fuel cell that converts hydrogen into water and oxygen. The byproduct - electricity - could then be used to power the car.

The Question-by-Question Analysis continues tomorrow. In the meantime, you can take a look at the “Energy Survey” page at http://www.whatmattersweblog.com/energy-survey/

As part of the research for my research paper “On the Threshold to a New Energy Age“, I conducted a survey in order to find out how “prepared” people are for the transition to a new age of energy generation and use as well as to gather opinions on current trends in energy issues.

In the coming days I will publish the results of the question-by-question analysis. The questionnaire contained 14 questions. 73 people took part in my survey. More than three quarters of participants came from the United States. I interviewed the remaining quarter in Japan, Singapore, Germany and Portugal.

All questionnaires had been distributed and returned between April 2009 and September 2009.

You can find the survey results on the Main Menu page “Energy Survey”:

http://www.whatmattersweblog.com/energy-survey/

Check out the  ‘RP: New Energy Age’ Category for the downloadable version of my 50-page research paper and further commentary on the survey results:

http://www.whatmattersweblog.com/category/rp-new-energy-age/

Click on the images for higher resolution.

Who can save us from climate disaster? Well, probably those whom you’d the least suspect to care about climate change.

Even if one in ten Americans turned into a tree-hugger, sold their car, moved downtown and commuted to work on a bicycle, that wouldn’t have any impressive, lasting impact on global emissions of greenhouse gases.

American oil consumption might fall a bit - which would be something positive for the country since less money would be shipped to OPEC and instead kept local - but the resulting downward pressure on oil prices would only encourage the rest of the world, most notably quickly developing nations such as China and India to increase energy productivity at a slower pace and consume even more energy in the short term.

Moreover, the entire transportation sector’s contribution to climate change is lower than that of deforestation as New York Times columnist and author Thomas L. Friedman explained in his article Trucks, Trains and Trees:

Imagine if you took all the cars, trucks, planes, trains and ships in the world and added up their exhaust every year. The amount of carbon dioxide, or CO2, all those cars, trucks, planes, trains and ships collectively emit into the atmosphere is actually less than the carbon emissions every year that result from the chopping down and clearing of tropical forests in places like Brazil, Indonesia and the Congo.

http://www.nytimes.com/2009/11/11/opinion/11friedman.html

Apparently, there  are no easy ways of fighting climate change. And trying to talk hundreds of millions of Americans, Europeans, Chinese and Indians into driving less, eating less meat and switching to energy-saving lamps won’t help a lot either.

But there are ways of effectively bringing down global emissions without having to preach green. As soon as ordinary people are offered a possibility to save money by heating, cooling, driving more efficiently, a huge market will take shape. Businesses will be making money, jobs will be created, the economy will grow as more money is kept local instead of being shipped abroad to pay for energy bills, and the byproduct will be a reduction in carbon dioxide emissions.

Many people don’t care a lot about their contribution to CO2 emissions. A gas that nobody can see or smell. Neither were many willing to switch to a more expensive energy-efficient hybrid in an attempt to preserve the habitat of polar bears. Nevertheless, people would change their habits if they could clearly see the economic benefits for themselves. Most drivers care more about how much they pay at the pump than about their cars’ CO2 emissions. But gasoline consumption and CO2 emissions go hand-in-hand.

Therefore it is important to support companies developing technologies which can help people make little changes to their everyday lives and thereby save dollars and emissions.

Introducing electric cars to the market in large numbers would be a major step forward as the immediate benefits on the economy and the environment were obvious. With zero tailpipe emissions, electric cars would be greatly appreciated by city dwellers.

It is true that it will take several years until efficient vehicles running on alternatives to gasoline become competitive with conventional cars. A way to accelerate the process would be to force up the prices of fossil fuels through taxes and other disincentives. We’re not paying an honest price for oil since the costs of the economic and environmental consequences of our oil consumption are not included in the price. However, oil prices will inevitably shoot up again and make alternatives competitive as growing demand meets tight supply.

And once the point at which alternativ energy sources and new enery-saving technologies are competitive with existing technologies and energy sources, the market will bring those new technologies  to scale and reduce production costs, eventually reducing emissions of carbon dioxide. Middle-class Chinese and Indians would soon follow and embrace new, more efficient technologies. Struggling to power their thriving economies, any means of reducing energy waste is welcome.

Therefore we need the capitalists to take on the challenge. Their job is to figure out the smartest and consequently most profitable way of doing something. When it comes to the energy challenges of the 21st century, only a market approach can effectively deliver the emissions reductions necessary to avoid the unmanageable consequences of climate change. The politicians’ job is to support companies working towards smart energy solutions by creating an environment that allows businesses - big and small - to invest huge sums in research, production and marketing.

You might also be interested in my post The True Cost of Oil

Can politicians lead a global transition to a low-carbon economy of the future? I have my doubts.

More than 12 years after the adoption of the Kyoto Protocol on December 11, 1997, no measures have been implemented to effectively reduce global emissions of greenhouse gases. Despite the perceptible surge of green enthusiasm among world leaders. It looks like all key players have recognized the importance of fighting rising average temperatures since everybody is talking about climate change, emissions, efficiency and renewable energy. The world community seems to have gotten serious about climate change since the Earth Summit in Rio in 1992 which led to the Kyoto Protocol and finally to the Copenhagen Summit last month. However, the sad truth is that while in the 1990s, global carbon dioxide emissions were increasing at about 1 percent per year, emissions were growing at around 3.4 percent per year between 2000 and 2008 - when the Kyoto Protocol was already in effect. Why? Well, the Kyoto Protocol did not demand any emissions reductions from developing nations, neither was it ratified by the United States, then the biggest emitter of carbon dioxide in the world.

Rio did not save the climate, neither did Kyoto nor Copenhagen. So how about the summit in Mexico later this year?

To be honest, I doubt that world leaders will be able to achieve much more in Mexico than they did in Copenhagen. And even if a binding treaty could be achieved, it is questionable whether that would have any measurable effects on global emissions of greenhouse gases.

Hardly any country can be expected to work towards major reductions in its emissions output “only” to help fighting climate change. Given difficult economic circumstances in many regions of the world, few governments will be able to convince their people to accept imposed limits on emissions of a gas that nobody can see or smell. Another issue is that even if a couple of major industrialized countries were able to bring down their emissions by 20 percent until 2020, the growing emissions of emerging economies would nullify these savings immediately.

Consequently, we need a new approach to come anywhere near the reductions necessary to avoid the unmanageable consquences of rising average temperatures.

People need to realize that climate change is not the only reason why a new strategy for energy generation and use is needed.

First, saving energy makes sense to whatever country, industry, party you belong. Saving energy means reducing costs, increasing profits and gaining competitiveness. There is enormous potential for efficiency increases throughout all sectors of the economy. Avoiding costly overcapacities by shrinking peak demand and increasing off-peak demand through real-time pricing mechanisms can help to stabilize the electricity grid, enable the integration of renewable energies and avoid the construction of unnecessary power plants.

Second, renewable energy  as well as increased efficiency can help net-oil-importing countries to ship less money abroad. Domestic energy generation is always superior to imported energy since money can be kept local. Money kept local translates into local jobs and local tax revenue.  

Third, new energy technologies will inevitably be the next great global industry. Given growing populations, rapidly expanding middle classes in emerging countries, increased living standards and growing resource demand in tandem with ever scarcer resources will make the 21st century an era of high energy prices. Any technology helping countries and companies to save expensive energy and produce more without having to import more energy will sell in huge quantities. Leading the development of new energy technologies will result in massive investments, job creation and  growth.

 Without doubt, the long-term trend in energy prices is up. This means we will spend more and more money on oil imports and we will lack this money elsewhere.

Understanding the numerous benefits of embracing new ways of producing and consuming energy apart from reducing emissions is important. The infrastructure decisions we make today will determine the energy use and emissions of tomorrow and the coming decades. Investing in smarter and more efficient technologies today will save money, energy and emissions tomorrow.

Promoting emissions reductions for the sake of trying to protect the polar bears and penguins does not work. Promoting selfish energy policy aimed at generating as much energy as possible at home and using it as efficiently as possible to gain a competitive advantage over foreign competition and the OPEC cartel is the right approach.