governance, political economy, institutional development and economic regulation

Posts tagged ‘climate change’

Avoid the global climate leader trap

Paris cops 1

What is it about the Indian elite, which makes them salivate at the thought of global leadership? Barely had President Trump pulled the US out of the Paris accord, that we were exulting at the thought of an “opening” for India at the high table of global climate leaders.

The tail can’t wag the dog of climate change

Can India, which contributes just 3 percent of world GDP, substitute for the US with 23 percent of world GDP? The key to mitigate climate change is to decarbonize GDP. Only those who have the GDP can contribute significantly.

Rich, developed countries contribute 68 percent of world GDP, each with a per capita income above US$12,476. Of this the European Union and North America each account for 25 percent. Not even China is part of this select group,

China figures as a newly emerged economy in the upper middle-income group, which contributes 24 percent of world GDP with per capita incomes starting at US$4036. China, with a per capita income of US$7380, has a share of one half of the GDP of this group.

To put this perspective, India, with a per capita income of just US$ 1590, will take 11 years of growth at 9 percent per year, to enter this group. We must remember that we are puny – with a per capita income just above the average for 34 fragile and conflict affected areas. Even heroic actions within a 3 percent share of world GDP does not count for much.

China is the key climate leader

Xi Merkel

President Trump is right in backing away from leadership in climate change. The US faces a fundamental, domestic, economic crisis; a fragmenting social compact and a deteriorating external account. This constrains its ability to influence global agendas. Ageing Europe and its ATM – Germany, will struggle to just hang in there and keep national welfare levels at current levels. Russia is similarly in relative decline and cannily, already a junior partner in the China bloc. It is China, to whom we must look for world leadership, in limiting climate change.

But there are things we can also do, which are aligned with national welfare.

Get the private investment cycle going

projects

First, “counting our pennies” carefully before splurging public funds is a fail-safe option for sustainable development, poverty reduction and managing corruption.  We have failed to do this over the last fifteen years. The results are the bad loans of the publicly owned banks, aggregating to around 5 percent of the GDP. The RBI, has been newly anointed to clean the clogged balance sheets of the banks and corporates. But the magnitude and complexity of the task will require that discretion be applied judiciously for a quick resolution. In the current environment of heightened distrust, this is possible only via an empowered committee of ministers; select representatives from the opposition in parliament; the RBI; the CAG and the higher judiciary to cut through the mess in a practical, fair and conclusive manner. Only then can we get the investment cycle restarted.

Use public funds to leverage private investment in “green” tech

go green

Second, mitigating climate change means allocating capital wisely to “green” technology – renewables, storage systems, efficient transport, eco-friendly habitats, carbon sinks, organic farms and bio-nutrients. Whilst using public funds, ensuring that private investment has sufficient “skin in the game” is necessary, to retain the “bottom line” compass in projects. This requires effective collaboration or tweaking the sarkari plumbing – new rules delegating financial and administrative powers; well-defined codes and processes and clear oversight to fix accountability. The existing system is overly centralized. A Secretary to the Government of India is seemingly “personally accountable” for all decisions within a department.

Manage local pollution to enhance well-being and global empathy

pollution

Third, managing local pollution is an immediate priority. Using solar power and gas for household energy needs is a welcome step. Ideally, the Solar Alliance should provide ready access to infrastructure and fiscal incentives to international research labs to set up shop in India. Facilitating Chinese companies to invest in India for manufacturing solar technology components and products can integrate India into global supply chains and encourage mutual learning and collaboration between Chinese and Indian entrepreneurs.

Remain within our carbon emission envelop

Fourth, coal fuels two thirds our power generation. This worries external observers, like President Trump, particularly when they visualize massive future emissions led by economic growth. But this is a false hypothesis. India’s carbon emissions at 1.7 tons per capita is just 10 percent of the per capita US emissions of 17.1 tons per capita. The ever so dreamily liberal and socially conscious Canada, emits 14 tons per capita. Even if our emissions increase by three times to 5.1 tons per capita, these would still be lower than emissions in the Euro zone of 7 tons per capita. The targeted increase in the share of renewable energy (other than large hydro and nuclear) to 40 percent of electricity generation, is further proof that India’s plans are aligned with sustainable growth targets.

Wash coal at mine mouth

air pollution

But we need to start washing all the coal we use. Indian coal is of poor quality. Fortunately, it is also low in Sulphur, so unlike Australian and American coal it does not contribute to acid rain. Washing capacity remains limited at around 10 percent of mined coal. Even this is under utilised. Power generators, say it is not financially rewarding to wash coal since they cannot pass through the cost under regulated tariffs. Coal India, the publicly owned coal monopoly, has no incentives to improve quality since they work on a regulated rate of return basis. Washing costs only around Rs 40 per Ton of coal. Coal India should only supply washed and sized coal to large customers. The additional cost can be met through a differential Clean Environment Cess (currently a uniform Rs 400 per Ton) for washed and raw coal.

Manage domestic and global expectations

Widespread poverty – affecting an estimated 40 percent of our 1.25 billion people – and low growth rates have constrained India’s carbon footprint. Delinking carbon from growth is far from easy in a desperately poor, decentralized, democratic country like India. True leadership, in this game, will be to remain below the global radar of carbon emission targets but substantially above the domestic radar of expectations on economic growth and jobs. Better monitoring of all three vectors – carbon emissions, growth and jobs, will be key in convincing the constituencies for each, that India is pulling far above her weight in all three. People who are the change also lead.

Modi Xi

Don’t demonise diesel

car jam

photo credit: indiatoday.com. How many 2000 cc plus private diesel cars can you spot in this randomly selected grid lock? Imposing a green cess on large diesel cars is populism at its worst. Less than 5% of private cars fall in this category and they have fairly competitive exhaust parameters because diesel engine technology has come a long way from the 1990s. The real culprit is the dirty fuel supplied in India. 

The practiced ease with which the Supreme Court settled the Uttarakhand political snafu and restored constitutional propriety and federalism there, with President’s Rule being lifted, compares unfavourably with its dilatory proceedings on the use of diesel for fuelling cars in Delhi.

To recap, the Supreme Court banned the registration of diesel cars with engine capacity of and above 2000cc in December 2015 at the height of the smog scare in Delhi. Earlier this month, it tried to enforce its April 1 deadline for all taxis in Delhi to convert from diesel to CNG, but later backed down due to the economic dislocation it would cause.

The court’s association with the micro-management of fuel, technology and urban air pollution in Delhi dates back to 1993, when it acted on a PIL to clean Delhi’s polluted air. Thereafter, the government practically ceded ground to the Supreme Court as the prime mover for preserving clean air in the nation’s capital. Citizens still applaud its historic 1998 order making CNG mandatory for all public transport in Delhi.

The Supreme Court didn’t like diesel as a fuel then, and its views today remain the same, though the technology and circumstance have changed considerably. It is generally accepted that bringing Indian fuel standards on par with Europe is the best option to lower urban pollution from motorised transport. The government has plans to upgrade fuel standards to European levels (Bharat VI) by 2019. But the government lacks credibility in making such promises, given its past record. This implies the need to monitor how well the government is working towards that goal.

Why diesel?

diesel

photo credit: greencarreports.com

Globally, diesel has become the fuel of choice in the past two decades since the Kyoto Protocol on climate change imposed carbon emission targets on developed nations in the 1990s. Diesel cars produce considerably less carbon emissions than petrol cars, but have higher particulate and NO2 emissions. Improving the quality of diesel supplied — along the lines of city diesel, that is low-sulphur, clean diesel developed in Sweden — reduces the particulate and NO2 emissions to acceptable levels. This is what Europe has done. India can and should do the same.

Why ignore the low hanging fruits of rationalising fuel price incentives?

In the short term, the Union government should equalise customs and excise duty on diesel and petrol. The Delhi government should do the same for value added tax. This will remove the artificial retail price advantage of 20 per cent enjoyed by diesel.

The fatal preference for diesel versus petrol goes back to our ersatz socialist past, when the lazy rich drove petrol cars while others used tractors, agricultural pumps, buses and trucks running on diesel, which was thus subsidised.

Today, the rich use large diesel cars while the growing middle class uses petrol-based scooters, motorcycles and cars and small cars running on diesel.

All public transport has converted to CNG and there is negligible agricultural activity in Delhi. These are ideal conditions for scrapping the preferential tax structure on diesel.

Correcting a tax-based market distortion will not attract eyeballs, nor does it appear as high-minded as imposing a “green cess”. But this is the right thing to do. Expenditure on fuel comprises around 25 per cent of the life cycle cost of running a car. So getting the price of fuel right is a key step to change consumer preferences. If a litre of petrol comes at the same retail price as diesel, much of the demand for diesel cars — particularly in the sub 2000cc segment — will simply vanish.

Green cess on large cars- populism at its worst.

The wrong thing to do would be to put a “green cess” on the registration of large, private diesel cars in Delhi as the Supreme Court seems to prefer. First, if a “green cess” is to be imposed, then in the interest of equity, it should be imposed on all “polluting” passenger vehicles that are not fueled by CNG or electricity.

Second, prescribing engine capacity as a metric for punitive taxation encourages gaming. Manufacturers will go marginally under the radar by “cheating” on capacity calibration with no benefit in emissions.

Third, imposing a selective “green cess” on engine capacity rather than emissions, which is a better, albeit easy to cheat metric, can be misread as populism and just bleeding the rich. Large diesel cars are just around five per cent of the car stock in Delhi. The cheapest large diesel car comes at a price of `20 lakhs-plus on the road. Of this, 45 per cent is tax and other government levies collected by the Union and state governments. Budget 2016 imposed an additional cess on large cars on top of the existing high excise duty.

If the intention is to penalise the use of large cars per-se — defensible environmentally on multiple counts — then the green cess should be imposed on all large motorised vehicles and not just diesel cars. The excise duty structure does that already. Excise duty on large cars is three times higher as compared to the duty on small cars. The real question is why make large cars unaffordable? What are the economic consequences thereof on jobs and economic growth versus the environmental benefits?

Going back to ersatz socialism?

Prior to the 1990s, the government used to dictate to industry what to produce and thereby constrain consumer demand. The government abandoned its policy of invasive ersatz socialism for good reasons. Why revisit a model which penalises wealth creation that is rightly dead and buried?

Banning the registration of large diesel cars in Delhi is an avoidable knee-jerk administrative response with unfortunate economic consequences. It disrupts economic activity (car production and consumer choice); puts people (taxi owners, drivers and consumers) in financial jeopardy and creates uncertainty through a rule-by-fiat approach.

There was never much to be gained from this ban in terms of cleaning Delhi’s air even in the short term. The bulk of air pollution is from point sources other than diesel cars. Aggregate pollution from motorcycles and scooters that run on petrol far exceeds the pollution from cars. Dust, agricultural residue, industrial stack emissions and soot from coal comprise the bulk of particulate emissions.

Citizens welcome judicial activism in the supply of public goods like clean air as the government routinely failed to provide them in the past. But all governments are not the same. Should not the principle of “judicial forbearance” prevail till a government fails? Let the government do its job. But keep a sharp eye out for citizen rights. Economic policy is about experimenting with trade offs, across multiple objectives and options, for which the law provides no real answers.

Adapted from the authors article in Asian Age May 17, 2016 http://www.asianage.com/columnists/don-t-demonise-diesel-955

Let billionaires manage the global commons

Zukerberg

Photo credit: huffingtonpost.in

Facebook CEO Mark Zuckerberg’s pledge to give away 99 per cent of his shares in the company, assessed at $45 billion, is the most recent in a series of over 138 billionaires who have signed the “giving pledge” to donate 50 per cent of their fortunes to charity. The 500 top billionaires in the Forbes list have a net worth of $4.7 trillion. Donations to charity, in the US alone, amount to over $300 billion every year.

Compare this with the fate of the pledge to stop climate change, proposed at just $100 billion every year from 2020 onwards. The nations of the world are scrapping over who should pay how much. Nothing better illustrates the ascendancy of the “box wallahs” (big business) versus the public bankruptcy of nation states.

gatesbuffet

photo credit: http://www.cnbc.com

The leaders of 190 nations of the world and their extensive delegations could have more effectively sought an appoint-ment with the 1,826 billionaires in the Forbes list with a net worth of $7.5 trillion — equal to around 10 per cent of the world’s gross domestic product. With an estimated annual income of around $150 to $200 billion they could potentially make up for the international intransigence in funding the global commons.

Private wealth has always been a metric of success, especially if it is built up within one’s lifetime, if it is legitimate and if some of it is used to do good deeds. Could the talent, which has demonstrated private success, be institutionalised for achieving similar success in global public affairs?

This rhetorical question merits consideration because the governance record of multilateral institutions has been pretty lacklustre, particularly in matters related to promoting the global commons. And time is running out.

Cynics would assert that billionaires are created from unpaid taxes, which they are big enough to avoid paying, unlike common folk. Others may baulk at trusting rich folks with the world’s future — after all many have grown their private wealth at public expense — as is the case with oil, mining and tobacco companies.

Why trust those who don’t walk the talk?

But it sounds somewhat ridiculous that the heads of 196 nations should have more “voice” in managing our future than 138 billionaires who are willing to pledge more money to charity, than all these nations can collectively gather over the next two decades, to protect the global commons.

Big is not beautiful

Have we ballooned the functions of nation states way beyond what they can efficiently do? Is the nation state a “fit for purpose” entity for the new, integrated world order of this century and beyond?

It is conventional to think it necessary to limit the power of the state versus the human rights of citizens — a concept embedded in the principle of the rule of law. It is less conventional to think it necessary to limit the economic functions and fiscal powers of the state. The success of “developmental” states, like China, in sharply reducing poverty and spurring economic growth has bolstered the case for fiscally empowered, intrusive or “nanny” states. The world and India are rediscovering the virtues of public finance-led growth.

This is a sharp departure from the conventional wisdom, which prevailed from the latter half of the 1980s till the 2008 financial crisis, that private investment and management trump public finance options in effectiveness. The 12th Five Year Plan (2012-2017) — incidentally possibly the “last supper” for planning in India — reflected this earlier consensus by relying on private investment for around one half of the plan outlay. The definition of “private investment”, of course, was somewhat disingenuous. Loans taken by a private firm from a publ-ic sector bank were categorised as private investment. Today, such loans, particularly to private infrastructure developers, have turned sour and increase the non-performing assets (NPAs) of publicly owned banks.

Minimum government equals maximum governance

Fiscally muscular, democratic states, with expansive public ambitions, are wasteful and inefficient. Their instinct is to throw money at the problem. This is always the politically safest option though it may not be the most efficient “value for money” alternative. Examples abound. Why is it easier to construct a village school building than to staff it with teachers? Why are public buses in Delhi, bought just five years back during the Commonwealth Games in 2010, increasingly seen on the roads in a breakdown condition? In both cases, a fiscal windfall — a central scheme or a high-prestige project — makes available the capital investment, but there is no link with sustainable revenues for keeping the asset operational over its useful life.

India’s electricity supply industry is another case in point. In the First Five Year Plan, large-scale public investment was the planner’s choice for rapid electrification. More than six decades on, distribution utilities — primarily publicly-owned and managed — have an accumulated loss of $50 billion despite two previous bailouts in 2012 and 2002. Sadly, even on the most easily achieved efficiency metric of transmission and distribution loss, only the private utilities and some public utilities in Maharashtra, Gujarat and West Bengal perform well. In others, between a quarter to one half of the energy input into the grid, never gets billed to customers.

The core developmental function of the government is to regulate by setting standards of performance and by financing the delivery of public goods and services, which the private sector would otherwise have no incentive to supply. In India, unfortunately, our first response is to propose the direct delivery of public goods and services via state-owned enterprises. This in-house option is often preferred as being less time consuming and more controllable. There is also the implicit comfort that no one gets punished for the inefficiency of the public sector. But officers rooting for private sector service delivery face the challenge of having to stand ready to be hauled over the coals for the slightest mishap.

If our concern is jobs and better service delivery, it is only private investment and management which can generate results. Open the gates to the innovative genius of public-spirited billionaires. Why look a gift horse in the mouth?

Adapted from the authors article in the Asian Age December 10, 2015 http://wwv.asianage.com/columnists/let-billionaires-save-world-605

Climate “warriors” head for the December 2015 Paris joust

Paris in December is not quite what it is in springtime. But who cares if someone else is footing the bill! Paris is the venue of the next Conference of Parties (COP), from November 30 to December 11. An annual jamboree that has been trying, since 1992, to limit carbon emissions and save the planet from what scientists predict will be the drastic impact of global warming and associated climate change. They have not succeeded thus far in taming emissions.

The plain truth on climate change

How much carbon space is left before disaster strikes is somewhat iffy and mired in science, negotiating stances and the “precautionary principle” which advocates that if danger lurks it is best to run rather than hang around assessing the extent to which you personally are at risk. Except that there is no place to run to.

Who’s to blame?

The problem is that whilst Americans and others in the rich countries are reducing emissions slowly, China, India and the rest of the developing world are eager to do exactly what the rich did earlier — use energy to grow their economies. This is fair, just and inevitable.

Can climate change be stopped?

The only way this can stop is if money is spent to junk the existing technology for producing and using energy and less carbon intensive and more efficient options are developed.

europe energy

photo credit: http://www.wikipedia.com

But no one has a commercial incentive to do so. Most technology is developed in the rich world, which uses the most energy per capita and is the most heavily invested in traditional inefficient, carbon intensive energy chains.

They — Australia, Russia and the US are good examples — have preferred to milk their past investments in fossil fuel-based technologies rather than switch over rapidly to clean energy technology even though they have been talking about the problem in annual COP meetings since 1992. Thus, 20 of the 100 years available since 1995, to act, have been wasted.

To be fair, the northern European economies, including France, have been more conscientious than the rest of the rich and have reduced carbon emissions significantly by bearing the additional cost of doing so. Singapore is a stellar Asian example. It reduced per capita emissions by 66 per cent of its 1990 level.

But the rest, particularly the poorer, developing countries, have no incentive to divert their meagre fiscal resources to clean energy other than efficiency and local environmental benefits. But with so many competing priorities: stopping mothers and infants from dying due to poor health care; educating the young; creating basic infrastructure for trade and industry, just keeping energy — the life blood of a modern economy — flowing is tough.

India energy

photo credit: http://www.dalberg.com

Existing agreements are insipid and ineffective

The Kyoto Protocol 1997, the framework guiding the interminable Conference of Parties meetings, lacks teeth. It fixed emission targets for rich countries till 2012 which were weak and inadequate because nothing more stringent was acceptable to the rich — a 6 per cent reduction over 1990 levels. But countries can opt out of the agreement. US, Russia and Canada did just that, making COP even more toothless and bureaucratic.

It’s now 2015 and the world has changed. Extremely wealthy people are to be found everywhere, not just in the earlier “rich” countries. Ruling political, industrial and commercial elites in developing countries have incomes and consumption levels which rival those in the “developed” countries. Poor countries often have very rich governments, though fiscal resources do not filter down to the poor. Traditional archetypes have transmuted. A billionaire from the Forbes List could be living on your street rather than in far off London or New York.

emelda

photo credit: www. blogs.artinfo.com

So the continual “fingering” of rich countries as evil carbon emitters is unlikely to resonate. We are all responsible collectively for the mess we have created. To cut through two decades of verbiage and accumulated legal baggage two things must change.

Two options for delinking development from carbon

First, Paris must agree a common aspirational emissions target which all countries buy into. The level of the target, whilst important, is less so than all countries agreeing to shoulder the burden according to their capacity.

Second, till now we have depended on charity — aid from the rich world — to fund the technology transformation. This is degrading for the poor who have a right to access the available carbon space and inefficient, because allocation and priorities get warped when dealing with “free” money.

Next steps

Agree a common emission target

The world per capita carbon emissions were 4.2 metric tons (Mt) in 1990. This increased to 5 Mt per capita by 2011. The 1990 level is an excellent aspirational level to target. Most developed countries are above the 8 Mt per capita level whilst most poor countries are below 2 Mt per capita. Halving emissions in the developed world and allowing space for carbon emissions to grow two to three times in the poor countries seems a fair deal and a realistic target till 2030.

Improve the science of climate change

We also need to establish with greater the nature of the relationship between carbon emissions; global warming; extreme climate events and the distributional impact thereof. This is sorely needed to establish a sustainable aggregate emissions level which is neither unnecessarily restrictive nor ineffective in stabilizing climate. The next 15 years on top of the 20 years which have passed should be sufficient to hone the science.

Find the money: tax international capital transactions

A transactions tax to fund climate mitigation and adaptation is best. In depressed economic times, such as the present, a new generalized tax is abhorrent. But if the incidence of tax is tiny per transaction, individuals and entities may not feel its pinch. If it has a massive tax base on which it is levied the tax collection could be huge despite the low incidence. Mumbai lunch places, serving a simple, low priced, thali are as profitable as an expensive niche restaurant. The miniscule profit earned per thali is more than made up by the massive turnover. Of course the tax must be progressive and tax only the rich, who enjoy a disproportionate share in wealth creating growth-the root cause of climate change.

A tax on outbound international capital transfers from all countries meets all these criteria. A 0.01 per cent tax can net close to $300 billion annually. This is three times the volume of the 2015 replenishment of the Green Climate Fund proposed at US$ 100 billion.

The bulk of capital-outflow happens from rich or newly rich countries (like China). The purpose is to mitigate risk and increase returns. To insulate poor countries from the tax it could be levied only on those countries which are non-compliant with the emissions target. Since all developing countries, but very few rich countries, will be compliant, this leaves the poor countries out but snags the non- compliant rich. The tax collected would be transferred to a fund manager and overseen by an inclusive and representative board.

A tax puts a tangible cost to not meeting emission targets and creates a reasonable financial incentive for the rich countries. For example, it would reward Singapore for its stellar performance, whilst penalizing newly rich countries, like China, for exceeding the agreed level of emission.

Shared benefits follow shared responsibilities

China tellingly, has already announced that it would reduce emissions going forward. By 2030 they would be 60 per cent below their 2005 level. This should reassure all developing countries that it is possible to grow in double digits every year and still beat the carbon ceiling in future.

Developing countries should consider adopting the carbon ceiling volunteered by China. By volunteering a carbon ceiling they would be emboldened to press for a tax on outbound capital from non-compliant countries-mostly the rich. Of course ultimately every tax is paid by the final consumer- which will be the capital deficit poor countries. But a differential tax on capital flows does have advantages- it levels the field for domestic capital providers and dampens the fluctuating flow of destabilizing hot money into emerging markets.

Climate “warriors” headed for Paris should consider this proposition as they savour the Crottin De Chavignol served to them. Sometimes, the cobwebs have to be swept aside to see the light. There is much cleaning to be done at Paris.

Adapted from the author’s article in the Asian Age, September 17, 2015 http://www.asianage.com/columnists/climate-warriors-head-paris-015

1415 words

Male bias: death by a thousand cuts

death

Photo credit: dangerFantastic.BlogSpot.com

To everyone’s relief, the Governing Council (GC) of TERI appointed a new Director General to replace Dr. R. K. Pachauri (RKP). Seemingly, it was moved to act in response to a lower court ruling staying the operation of the findings of the Internal Complaints Committee (ICC).

The law at work…and play

The Committee findings must have damned RKP, which is why he agitated the matter in court. The stay was based on the evidenced argument that principles of natural justice were not followed by the ICC, thereby disadvantaging the respondent (RKP). Hearings on the issue will continue. But the practical outcome was that RKP resumed work. He had voluntarily proceeded on leave, when the criminal complaint was lodged. There was no legal bar on his rejoining albeit, rather awkwardly, having to operate away from the Head Office and the Gwal Pahari campus, where the complainant works.

Corporate honchos call the shots

The GC which includes luminaries from the business word, academia and government had little choice but to end this Kafkaesque comedy by choosing a DG to take operational control of the institution. In doing so they wisely acted in compliance with the highest standards of corporate governance. No employee should even potentially be able to directly or indirectly use her position to compromise the due process of law.

A professional and a gentleman

Their choice of the new DG-Dr. Ajay Mathur, an ex-senior employee of TERI, is impeccable. A multi-talented engineer (like RKP) turned environmental and energy efficiency policy wonk, with a stellar track record- he has the advantage of straddling both the real world of green technology and the more rarified world of economics and global climate finance.

The ongoing case of sexual harassment against RKP will carry on. Given the convoluted judicial process we follow, the “truth” will likely emerge only in the mists of time, long after the media has lost interest. But four home truths bear attention in the meantime.

Shoddy, knee-jerk laws

First, even our most recent laws lack a comprehensive world view. The 2013 amendments to the Indian Penal Code and the new act extending protection from sexual harassment in the workplace, only protect women. As a first step this is unremarkable in a world dominated by men in powerful executive positions.

But powerful men sexually harassing male subordinates is not breaking news. Why a similar avenue for redress in the workplace should not be available for harassed men is unclear. It shows a tendency for legislators to react to populist vigilantism and not from deep conviction that sexual harassment is an infringement of the workplace rights of any employee.

Bad laws result in perverse incentives

Second, draconian laws do not a more caring or equal society make. On the contrary, draconian laws to protect human rights coupled with a judicial process which lacks the advantage of speed and suffers from an excess of procedural compliance, is a sure recipe for gaming.

In such institutional environments- like the US- the advantage is invariably with the unscrupulous; the rich and the wily. The outcome is a high incidence of miscarriage of justice. This is also the argument against irreparable damage imposed by the State, as in the case of the death penalty. India would do well to abolish such arrogant assumptions of judicial infallibility.

That we need to do much more to protect basic human rights, including the specific case of women, goes without saying. But nuance, granularity, comprehensiveness and proportionate disincentives are the corner stones of good law.

Pious intentions but perverse outcomes

Third, bad laws lead to perverse outcomes. Take for instance the outcome of the 2013 laws. Male Chief Executives now implicitly discriminate against hiring women to work in their personal office to guard against inadvertent transgressions of the law. This discrimination can be neutralized if there was similar protection for male subordinates from a harassing boss. The gender preference for male executive assistants would narrow once the risk of inadvertent sexual illegality is equalized. But a narrow legislative view on the sexual harassment of only women, never created the space for such balancing mechanisms.

Advancing gender parity in the real world

Fourth, is it time that India prescribes quotas for women in power? Moving to a more gender equal world should be a priority.

(A) All government quotas for jobs, promotion or education should have a gender component. This will address the incentive for discriminatory resource allocation to males per the traditional gender roles within the family.

(B) Political parties should be legally bound to field an equal number of women candidates for elections as men.

(C) Government budgets should be gender responsive.

(D) All state owned enterprises and banks; Public Private Partnerships and companies in which the government is a significant (26%) shareholder should be required to publish a gender breakdown of employees by levels/grades with the intention of reaching gender parity, unless special circumstances apply.

(E) The July 6, 2015 judgement of Supreme Court Justices Vikramjit Sen and Abhay Mohan Sapre amends Christian personal law to allow an unwed mother to be the guardian of her child and thereby “legalize” the child’s parentage. The SC Justices based their decision on the generalized principle that in a secular country, religious practices can be divorced from law if they transgress human rights.

Similar progressive changes must be made in the personal law of communities to erode the legal dis-advantages women face in exercising their right to family property, inheritance and maintenance.

The legislative approach to gender parity is no more than a flag, signifying that India is responsive to international trends. We need to detox formal and informal Institutions which perpetuate gender discrimination. Death by a thousand cuts is the way to go.

924 words

Get beyond the Lima “Lemon” to effective domestic climate governance

fossilfree

(photo credit: http://www.occup.now.com)

Climate change took the world by storm in 1995 –two decades ago in Berlin– with the 1997 Kyoto “club of doom” postulating devastation if carbon emissions- primarily from the use of fossil energy- were not reduced.

The previous such “natural resources” doomsday club of scientists was the “Club of Rome”, which famously predicted in 1972 that oil would run out in in their life time. Some of them may still be around to ponder the recent historic reduction in oil prices, courtesy new age shale-oil development in the US.

In between, as the global doomsday industry gained strength in 1994, it predicted the “next war” would be over water shortages. Peter Gliecks, Pacific Institute<www.worldwater.org> faithfully features a list of over 400 water related conflicts since 3000 BC of which 219 happened post 1992. But the list is underwhelming. It includes every conflict with a “water” hash tag in it, none of which are of grave significance.

Take the case of water hungry Egypt, which has not gone to war against the nine other Nile basin countries upstream. Instead it was torn apart by a war against its own despot, propped up by the army. A far more worthwhile endeavor but infinitely more difficult, especially since no one organizes meeting in glitzy South American capitals, over Pina Coladas, for people who are fighting their own tyrants. The brouhaha over water related conflicts seems oversold.

Climate change-science or voodoo

Some scientists, not too many though, hold that the Climate Change science and predictions of doom are similarly dodgy. To believe that a 2 degree Celsius temperature increase is a red line the world must not cross and that the way to do that is by reducing carbon emissions, is very much like an article of faith.

Lay persons, like me, unable to understand the science, are not inclined to pay for avoiding global warming. The average citizen reaches for her wallet only after triangulating dire scientific predictions with her own experience to validate the “scientific” view.

After all we see a volte-face by “science” almost daily, diluting the credibility of science to change human behavior. Take the changing scientific view on (a) the usefulness of eggs as a food (b) Marijuana as an injurious relaxant (c) the amount of fat we should ingest (d) the virtues of jogging (e) data security levels in the cloud and social media apps to name just a few. Science, of the public goods kind, loses credibility every day because it can be secretly manipulated to set self- serving international agendas.

I spend a fair amount of time in the Ranikhet-Almora area of the Kumaon hills (in the State of Uttrakhand, India). Over the last two decades, the prevailing sentiment about the state of the local environment, was of doom and despair – all ascribed to the inevitable consequences of global-warming. Apples, a staple harvest two decades ago, had stopped growing as the volume of snowfall declined and ceased altogether below around 7000 feet.

Call it coincidence, a miracle, or an exception which proves the rule, but over the last three years snow has returned after a gap of 15 years to Dhamas-Khunt village, situated at a height of only 5600 feet and this year it is 4 inches deep already. No one there will attend a global warming seminar today, trudging through the snow underfoot, unless they are paid to do so.

The rich are tech savvy and green

Global problems and prescriptions have merit of course, as does a consistent process of trying to optimize solutions. But it is hard to disentangle global slogans from genuine problems and even harder to assess solutions.

PM Indira Gandhi famously said in the 1972 Stockholm Conference that “poverty” is the biggest polluter. She was not quite right, but made her point tellingly. The Planet has been degraded by the rich as the Climate Change science illustrates. In fact it is the patience and resilience of the poor that has enabled the rich to free ride on their environmental passivity.

If everyone on this Planet consumed at least as much energy as the minimum per capita energy consumption in the rich world, we could already be in the midst of an ecological disaster.

Access to technology, is at the heart of both becoming rich and being able to be environmentally correct. Had the rich world been willing to bear the pain caused by their environment degrading, industrial success they could have junked older, polluting technology; rapidly replaced it with “clean” energy technologies and started using them domestically to provide the scale effect to drive down costs internationally.

Risk averse and rich, Germany junked Nuclear Energy post the Fukushima Nuclear disaster. But not-as-well-off France, next door, continues to rely on Nuclear power.

More importantly it is utopian to expect rich, foreign governments to behave differently from the rich citizens in our own country.

Walk the talk

The way ahead for India is to stop the perpetual, sequential, sabre rattling, whimpering and whining we do in international fora and derive false pride in having thus “led” the developing country agenda. Let us implement, domestically, the environmental governance regime we want to see internationally. We can do this by stopping “environmental free riding”.

Why not have a national “Environmental Sin Cess (ESC)”. Those with a yen for acronyms will not miss that ESC is the button you press on your keyboard when you have got your computer into a mess.

The ESC could be in the nature of a “user charge”, levied on the electricity consumed by high-end domestic consumers only so as to insulate business and the poor from any inflationary impact. A similar tax could be levied on the supply of petroleum products to states and 1 million plus cities, which have higher than the national average per capita consumption of petro products. Building in progressivity could distinguish between states consuming marginally more than the national average and those at the very top end. State level regulators would be expected to pass through the tax to the targeted consumers.

This cost disincentive for committing “environmental sin” could drive behavior change in consumers. Cynics would say higher taxes never stopped smoking or drinking. The difference is that unlike cigarettes or alcohol there are substitutes available for fossil fuel based services, albeit not as cheap nor as convenient; energy efficient transportation, lighting and climate control services or applications or those powered by green energy: riding on a bus instead of driving; cycling or walking rather than riding or driving; LED bulbs for lighting; movement and heat sensitive switches; solar electric cars, scooters and pumps; solar heaters and air conditioners.

The tax collected should be corralled in a special account to avoid it from being drained by government expense. It could be managed by a new, independent “Sustainable Energy Innovation Authority” to develop a slew of fossil energy substituting; saving; efficiency enhancing options: human energy based transportation (walk and cycle paths); motorized public transportation; electrification of railways; solar street lights; operational cost subsidy for innovative renewable energy suppliers; energy efficiency initiatives and life-line energy access for the poor.

FM Jaitley should consider this SMART option for the FY 2015-16 budget. Growth is down and demand needs to kick started. But whilst presenting the usual array of “economic revival instruments” it would be good to also provide for incentives to delink fossil energy consumption from economic growth.

That such incentives would not be a “freebie” but would be financed by a cess on relatively rich users of fossil energy, is not only fitting but aligned with the principle of equity. The honeymoon is over. The immediate elections have been won. Time to talk “tough love” now and walk the talk in the budget.

“Tweak” the process transparently to deliver PM Modi’s “Big Things to Small People”

Obama Modi

(photo credit: article.wn.com)

Charismatic leaders can mould crowds like putty. Bill Clinton’s March, 2000 “US and India are natural allies” address to the Indian Parliament; Barrack Obama’s University of Cairo “New Beginnings” address to the Muslim world, June, 2009 unleashed a Tsunami of optimism and “feel good”. In much the same way, PM Modi-the man with an agenda of Big things for Small people- in his recent Madison Square address, won over the hearts and minds of a “massive” (by US standards) crowd of 18,000 Indian-Americans in New York and an even larger audience back home in India.

For many Indian expatriates, including us in India, it is a relief to have a Prime Minister who radiates strength, speaks extempore and from his heart. It also helps that he is a consummate performer, who draws energy from the crowd and returns it to them magnified many-fold.

Those looking for suave wit and a sophisticated exposition of geo-political gyan were sorely disappointed. Modi was deliberately folksy and simplistic. He capitalized on his strengths magnificently, just as Indira Gandhi, the last Indian PM with an international stature, used to do more than three decades ago.

Of course, it helps if one can live on water endlessly and still have the physical ability and mind space to go through a deliberately, whirl-wind program. By doing so Modi has become a live bill-board for the low carbon footprint potential of solar energy. His eschewing food altogether, through the trip, was akin to the Mahatma wandering through the London chill in his sparse loin cloth, protected only by the churning energy generator in his mind.

Till now the West has been wowed by India’s IT skills, thanks to our Silicon Valley diaspora. Next, we are likely to be branded as Yoga maestros all and expected to perform never-before feats of physical endurance.

But it was not all plain sailing.

Three areas where plain speaking-PM Modi’s forte, would have helped, are listed below.

First, what exactly is our stand on joining the fight against Islamic Terror and the linked approach to Afghanistan? The message coming through till now is fuzzy. It seems India is likely to carry on in much the same muddled way we have done till now; remaining visible in Afghanistan, but primarily as well wishers, bringing development to the people of Afghanistan. This is clearly dissatisfactory and unrealistic in the context of the impeding US withdrawal and the likely security turmoil courtesy the unresolved political contestation between the Ashraf Ghani and Abudullah Abdullah groups. National governments are prone to fail. Similar recent experiments in Nepal, Zimbabwe and South Sudan illustrate the illusive nature of such options for “externally enforced” stability in the face of unresolved local contestation.

Our interest lies in clearly establishing that we view the Taliban, the Pakistan Army and Militant Kashmiri jihadi groups as part of the same set of Islamic Terrorists, which are a direct and existential threat to us and our secular, plural democratic system. We must be willing and able to take the most effective action in our near abroad to crush Islamic Terror. But where Islamic Terror is not a direct threat to us (as for example the ISIL) whilst any UN endorsed initiative will have our support, we do not have the resources to join a plurilateral initiative against global terror. This is strictly for the big boys; the US, its NATO allies and China.

PM Modi has been at pains to explain that on this trip that whilst he has been trying for more than the last two decades to get the US to recognize the global consequences of Islamic terror, they took cognizance only after 9/11, when it hurt them directly. The fact is we must be similarly discriminating in unbundling Islamic Terror into immediate and distant threats and not be distracted by the enormity of global threats and ignore focusing on managing immediate threats, closer home.

Plain speaking about our threat perceptions, our limitations and our determination not to be cowed down by terror would have helped.

Second, the message on trade and investment needs to be distilled better. The economic opportunities in India are well known. The demographics; the steady economic growth and resultant demand and our democratic architecture.

Unfortunately most foreign investors live in the present. No international manager has a business perspective beyond a decade-even if they draw up beautiful thirty year perspectives. What big business looks for is leadership level facilitation to get their specific project up and running quickest with commercial and political risk minimized.

Tardy environmental clearances; tax opacity; poor infrastructure and most recently, the extended ambit of judicial review of contracts are big dampeners. Many of these constraints are institutional and require structural change, which is long term. What we need are near tern solutions, of the fire-fighting kind, to establish the enabling business environment. Selective but transparent tweaking of dilatory process is an obvious option but there are challenges even here.

At the leadership level, “successful tweaking of process” requires political credibility that the selective attention is in national interest and not another manifestation of crony capitalism. Consensus building between the executive and the judiciary of the acceptable envelop of “process tweaking”, in national interest, is key for retaining the credibility of the executive and the independence of the judiciary, whilst simultaneously ensuring that the judiciary does not get drawn into settling political scores.

PM Modi is best placed to manage the optics on this score. At the operational level, he will need the support of a highly skilled and empowered team of state government officials working with counterparts from the Union Government, to pilot the tweaking process towards accelerated launch of projects.

What should constitute the government’s decision matrix for determining the “hurdle rate” for projects to be eligible for tweaking the “way we do business”? In such circumstances it always helps to have narrow objectives. “Employment and poverty reduction”, both of which are urgent near term investment related goals, present themselves as excellent “filters” for evaluating and identifying proposals which merit the highest level of facilitation.

50 projects; 5 million jobs; US$15 billion investment can be the rolling target with automatic replenishment by new proposals as projects get launched. Unfortunately, we missed the opportunity to generate the frisson of excitement which the project based approach generates.

Third, plain speaking on our environmental and energy policy would have helped. It is clearly in India’s interest to clean its water bodies and rivers; reduce air pollution and reverse the denudation of forests and degradation of land. Degradation of these natural assets has immediate economic and social outcomes usually with adverse poverty consequences. It is the poor who are impacted negatively when water bodies and rivers become polluted because they use them directly for personal needs and business. The poor similarly suffer the most from atmospheric pollution because they are incapable of insulating themselves and their children, from such ambient pollution. Unregulated deforestation robs the poor of their eco-system and their livelihoods. Combating land degradation, like increased salinity often caused by unsustainable use of ground water and poorly managed large irrigation schemes, is a costly undertaking, which is often beyond the financial ability of the poor.

On energy our big concern is energy security. The use of coal is likely to remain a staple component of our energy profile. Similarly, more aggressive utilization of the hydro potential in India and in South Asia is an efficient option. Embedding passive energy efficiency building design is another significant option. Urbansiation levels are relatively low but there is a big stimulus in the offing under the PMs target of a house for all by 2022.

More generically, India is committed to technology choices which are congruent with our two, often conflicting, goals of reversing the degradation of natural resources whilst ensuring energy security. An increasing share of wind and solar energy is one such technology choice. Increasing the share of public transportation by railways relative to roads is another which the government is pursuing. But capping India’s carbon footprint at an unrealistic level is similar to capping food subsidy at historical prices which India has already rejected.

The mantra for plain speaking on the Indian strategy for managing terrorism; enlarging trade and safeguarding the environment is to rely on the simple rule of first reserving the fiscal and the physical space for the developing world to “catch up”, before providing breathing room for the developed world, who have abetted and often perpetrated all three global problems, by agreeing to hold them harmless.

Accidents happen

Image

Can accidents be completely avoided? Can our environment be monitored; analysed and controlled to make everything predictable? Astrologers will tell you they have been doing exactly this for ages. Not everyone believes them.

An astrologer has predicted that India’s next PM will be a bachelor. This had raised the hopes of Rahul, Bhenji, Amma, Didi and Naveen Patnaik. Modi has a wife and so clearly is not in this contest.

The BJP- India’s Hindu party, the one supported by “fundamentalist Hindus” and backward sadhus and sadhvis- oddly does not seem to believe in Astrology. They decided to go with Modi despite knowing that he was not strictly a bachelor. Possibly, the BJP has other in-house Astrologers who do not agree with the first prediction. But then that calls in question the science of Astrology itself, if practioners disagree on outcomes just two weeks away.

Medical “science” is no different. It junks homeopathy as being theoretically indefensible. But it has no explanation of why Buddhist lamas can die “clinically” and yet remain “alive” in the Lotus posture in which they died, with no decay of the body for years, till they decide to “leave” it. Modern science is far from the frontiers of certainty.

What about parenting? How long should you shield your growing children from risk and uncertainty? Indian parents go out of their way to protect their children as long as they are physically and financially able to do so. This is how they themselves were brought up. In a closely controlled and rigidly stratified environment this is possible. But in an “open” environment, where innovation is key, the past presents very few lessons for the future because the future bears no resemblance to what has happened. IBM did not know this and where are they today?

In the financial world, bankruptcies happen to the ”best” companies. They also result in better companies prospering against the inefficient ones. In India we still do not let companies die. We protect banks and large corporates from the risk of bankruptcy. “Industrial reconstruction” is the name of the game. It doesn’t work. Instead, such protection creates a culture of weak and fat companies like Air India and Kingfisher. These companies, which gorge on the tax payer’s money, the equity of minority investors, who are foolish enough to invest in them and our money saved in Banks, bur negligently lent to such companies as for example Bank of India. The lesson is that death, sometimes by accident, should not be averted beyond a point.

If there were no accidents and we had absolute certainty, there would be no progress, only the stillness of the grave. An apple accidentally fell on Newton’s head which lead to the theory that in the absence of balanced, countervailing natural forces the world would explode/implode.

Can there be reward without risk? The trick lies in drawing the line between the two sensibly. Merchant bankers, private equity managers, political pundits, businessmen, doctors, human resource managers and teachers and know how to balance risk and reward. For this core skill they are compensated handsomely except GP doctors, HR managers and Teachers. All three cater to the human mind more than to the dry dictates of their discipline. But science is increasingly making them redundant by progressively degrading the value of basic human skills. It is substituting human skills with more efficient machines at an alarming rate. Driverless cars and pilotless airplanes; robots on the production line; robots in shops and soon robots in the home; robots for ground level surveillance; drones in the air.

On the flip side science has also progressively reduced the risk from accidents for humans. People live longer and healthier lives but whether net productivity has increased as a result is debatable. A rigorous analysis of net economic growth after accounting from the environmental loss from negative externalities has never been done systematically in any country. It was tried in China in 2005 but quickly abandoned when the high economic growth rate got reduced to zero in some provinces.

The problem with not accounting for natural resource use is similar to a consumer overusing her credit card. For such feckless consumers a “debit card” which deducts the bank balance for every use is better. Green GDP accounting applies the “debit card” discipline to countries.

Seemingly “riskless” economic and “quality of life” benefits encourage wasteful use of resources because they appear “costless” in the near term. Climate change is an outcome of our successful endeavor to cocoon humans from want, disease and death. This has increased population to unsustainable levels. It has also made the rich across the world highly resource intensive. Delicate lives require air conditioning; motorized transport; communication networks and vast quantities and varieties of food, all of which degrade water sources, air quality and the biosphere in which we live. Bottled mineral water for drinking; gallons of water for endless showers; swimming and golf courses have made us water addicts. Our rivers and seas, air quality and land degradation can be directly related to the pressure of a growing population and an increasingly unsustainable lifestyle.

Upgrading all 7.2 billion of us to the average quality of life of the top quintile would either require a quantum leap in clean technology to outpace current population growth or very quickly degrade us to destruction. Paul Ehrlich (The population bomb. 1986) posed this question. Half a century on we still face the same conundrum.

More people live in degraded environments today than in 1965. Whilst the “environment hot spots” of 1965 in the industrialised countries have been cleaned up, the “hot spots” have shifted to more populous locations in developing countries. In 1955, air pollution was the biggest killer in Texas, US. Today smog from burgeoning automobiles and factories is the killer in Beijing. If rivers were fetid in the 1950s in the US, the Holy Ganga River is a cesspool today in India. Despite huge advances in technology since 1965, we still do not know how to give 7.2 million people the minimum acceptable standards of life within the available resources.

Economic theory tells us a young population is a demographic dividend. What it ignores is that barriers to international migration for the young into the rich world, severely limit the world demographic dividend. Meanwhile poor countries are unable to utilize the abundant volumes of young people available to them. They do not have the resources to push the young up the “skills ladder” faster than technology makes old skills redundant.

As a race we are increasingly unable to deal with nature. Modern armies have such a heavy supply chain to keep their soldiers healthy, well clad and alive that they lose out on tactical flexibility. They face the classic logistics problem Rommel faced in Africa with his tanks outpacing the supply chain. This is also why the US troops were no match for the Vietcong (1956-1975) and NATO troops have failed against the Taliban, in Afghanistan (2001-2014). Both the Vietcong earlier and now the Taliban, are comfortable living with nature and use nature to their advantage. The average GI from the streets of Kiryas Joel, New York (the poorest place in the US) does not have this advantage.

Accidents happen and they are a must if we are to keep growing. What we can do is to enhance our capacity to manage and deal with accidents.

As parents we have learn to deal with the inevitable misfortunes and misadventures of our children with fortitude.

As citizens we have to become resilient to destabilising political change by making government progressively less crucial for our welfare. We must take on the risks and responsibilities ourselves.

As humans, we need to drastically reduce our foot print on nature and learn to live with personal discomfort; the loss of loved ones and shifting fortunes with equanimity.

At the end of the day all anyone wants is to lie on the beach with a drink at hand; or get our lunch ourselves from the fruit trees, vegetable garden or the river next door. We must not fool ourselves into imagining that this idyllic life comes without the need to swat flies and mosquitoes; avoid snakes, rats and lizards or sans sweat, cold or fever.

The price of accidents is discomfort. The benefits are sustainable life. Choose wisely. How long can we observe nature through a protective plate glass?

 

Tag Cloud

%d bloggers like this: