Progress, Energy and Environment
The tensions between energy dependence and environmental action are simply not sustainable
UPDATE: Today’s edition of the Long Mekong Daily takes a quick look at a new Australian report on the circular economy and the IMF’s focus on global energy markets and their financial and developmental impacts.On the eve of President Xi Jinping’s state visit to Saudi Arabia the Long Mekong Daily asks the question: Is China’s growing influence in the Middle East pushing out the United States? Not to be left behind, Prime Minister Narendra Modi has written that India’s agenda during its G20 Presidency will be inclusive, ambitious, action-oriented, and decisive. The Long Mekong Daily also asks: Are policymakers tasked with addressing climate mitigation and adaptation facing major information gaps on incentives, emissions, regulations, physical risks, resilience and climate shocks? We end today’s edition of the Long Mekong Daily with a quick view of the countries with the highest inflation, in large part, due to US economic sanctions and political subversion or a high dependence on imported fossil-fuel energy exacerbated by the US policy to reverse dependence on cheap, clean pipelined Russian energy for expensive, seaborne and environmentally unfriendly US shale oil and gas.
State of Circularity in Australia
Despite critiques,4 the circular economy is gaining momentum at a time when there
is a strong sense of urgency to change the way we consume resources. The current trajectory of resource consumption projects the need for at least three Earth’s worth of resources by 2050.5 Furthermore, according to Accenture’s research: Unless current trends are reversed, resource supply disruptions coupled with rising and increasingly volatile prices will in the next two decades translate into trillion- dollar losses for companies and countries whose growth remains tied to the use of scarce and virgin natural resources. As climate change, resource depletion and environmental degradation continue to present some of the greatest global challenges of our times, we need a systems- wide redesign and transition to a carbon neutral circular economy.
After more than 50 years since the term ‘circular economy’ was first used,7 there
is not yet a globally agreed definition. What is generally agreed, however, is that a circular economy offers a “systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution”9. The focus is on the use of systems thinking when deciding on the introduction of products into the economy to ensure all-of-system resource efficiency. Three guiding principles expand the term, which are introduced below.
According to the Ellen Macarthur Foundation, there are three guiding principles in a circular economy.
DESIGN OUT WASTE AND POLLUTION
Designing for circularity focuses on designing out waste and pollution for the entire life cycle of the product – including product development, product use and post-use product management phases. Ideally, circular designs also enable biological materials to be returned to the land to refuel natural systems.
CIRCULATE PRODUCTS AND MATERIALS (AT THEIR HIGHEST VALUE)
Products or materials must be kept in use for the longest time and at their highest
value. This can be achieved by referring to “ what Professor Jacqueline Cramer calls the 10Rs of circularity. These ‘R-strategies’ are an expansion of the EU waste hierarchy
launched in the 1970s and place greater emphasis on keeping materials in use.
REGENERATE NATURE
In nature there is no such thing as waste. A circular economy mimics this waste-free natural system and shifts the focus from extraction to regeneration. For example, returning valuable nutrients to the soil and other ecosystems helps at least balance if not regenerate natural systems.
Download the report here.
From Abundance to Thirst
The world has gone from plentiful cheap energy to scarcity, amid low investment and war. The last decade seemed to herald an era of energy abundance, with fast growing hydrocarbon and renewable energy production. Now this seems a distant memory, especially in Europe.
European gas prices have reached unprecedented levels in the third quarter of 2022, increasing roughly 14-fold from the third quarter of 2019 (see Chart 1). At the same time, US gas prices have tripled and global oil prices have increased by about 40 percent.
Even though prices have moderated a bit since the third quarter of 2022, high energy prices are one of the major drivers of high inflation and a major drag on economic growth around the world.
How did the world go so swiftly from a period of cheap energy to today’s unfolding energy crisis? How vulnerable were energy markets before the war in Ukraine shook them up? And why was natural gas hit so much harder than oil?
Beginning around the turn of the century, the world saw a surge in oil and gas investment, peaking in 2014 (see Chart 2). The investment boom was driven by high prices (following buoyant demand from emerging markets) and the U.S. shale oil and gas revolution following technological innovation in fracking unconventional deposits. It was transformative. The United States became a net exporter of hydrocarbons, roughly doubling its oil and gas production within a decade. But booms sow the seeds of their busts. In this case, the boom in US oil production and OPEC’s decision to defend its market share by increasing production led to a collapse in energy prices in 2014. As a result, global oil and gas investment was cut drastically.
Download the article here.
Access IMF Finance and Development monthly here.
Is China’s growing influence in the Middle East pushing out the United States?
Over the last twenty years, China’s interactions with and influence in the Middle East have grown substantially. More than ten years ago, China’s trade with the Middle East surpassed the US, and it is increasingly a significant supplier of foreign direct investment (FDI) and technical cooperation. Today, China’s trade with the region far exceeds the United States. In 2021, China’s imports from the Middle East were $130 billion versus $34 billion for the US, and China’s exports to the region were $129 billion compared with the US at $48 billion. The United States continues to maintain a significant economic presence in the region through FDI stocks and the longevity of US company interactions. Still, that advantage is also eroding over time.
Leveraging a wide range of foreign policy tools, China has steadily built strong, multi-faceted political and economic relations with all countries throughout the Middle East. The Forum on China-Africa Cooperation (FOCAC), established in 2000, facilitates coordination with states across North Africa and the rest of the African continent on a wide range of political, economic, and security issues. Similarly, the China-Arab States Cooperation Forum (CASCF), started in 2004, provides a platform to interact with all the members of the League of Arab States. Also, increasingly, the Shanghai Cooperation Organization (SCO) includes Middle Eastern states. Iran joined as a formal member this year, while Turkey is a dialogue partner and has expressed interest in joining as a full member. Saudi Arabia, Egypt, and Qatar also became dialogue partners this year, and the United Arab Emirates, Kuwait, and Bahrain are on track to become dialogue partners next year.
To address hot spots in the region and contribute to peace and security, China established a Special Envoy for the Middle East (2004), primarily focussed on the Middle East peace process, and a Special Envoy for Syria (2016) to help contribute to the resolution of the Syrian civil war.
China’s increasing influence in the Middle East is not pushing out the United States, but states in the region may be seeking to pull in China.
China has established strategic partnerships with many states across the Middle East, including Egypt (1999), Algeria (2004), Turkey (2010), UAE (2012), Qatar (2014), Jordan (2015), Iraq (2015), Iran (2016), Morocco (2016), Saudi Arabia (2016), Oman (2018), and Kuwait (2018). It is also actively negotiating free trade agreements with the Gulf Cooperation Council (GCC), Israel, and Palestine.
Read the full article here.
India commences its G20 Presidency.
The previous 17 Presidencies of the G20 delivered significant results — for ensuring macro-economic stability, rationalising international taxation, relieving debt-burden on countries, among many other outcomes. We will benefit from these achievements, and build further upon them. However, as India assumes this important mantle, I ask myself — can the G20 go further still? Can we catalyse a fundamental mindset shift, to benefit humanity as a whole?
Our mindsets are shaped by our circumstances. Through all of history, humanity lived in scarcity. We fought for limited resources, because our survival depended on denying them to others. Confrontation and competition — between ideas, ideologies and identities — became the norm.
Unfortunately, we remain trapped in the same zero-sum mindset even today. We see it when countries fight over territory or resources. We see it when supplies of essential goods are weaponised. We see it when vaccines are hoarded by a few, even as billions remain vulnerable.
Some may argue that confrontation and greed are just human nature. I disagree. If humans were inherently selfish, what would explain the lasting appeal of so many spiritual traditions that advocate the fundamental one-ness of us all?
One such tradition, popular in India, sees all living beings, and even inanimate things, as composed of the same five basic elements — the panch tatva of earth, water, fire, air and space. Harmony among these elements — within us and between us — is essential for our physical, social and environmental well-being.
India’s G20 Presidency will work to promote this universal sense of one-ness. Hence our theme — “One Earth, One Family, One Future”.
Read Modi’s full article here.
Bridging Data Gaps Can Help Tackle the Climate Crisis
A new data gaps initiative will play an important role in addressing climate-related data deficits. A famous physicist once said: “When you can measure what you are speaking about, and express it in numbers, you know something about it”.
Nearly 140 years later, this maxim remains true and is particularly poignant for policymakers tasked with addressing climate mitigation and adaptation. That’s because they face major information gaps that impede their ability to understand the impact of policies—from measures to incentivize cuts in emissions, to regulations that reduce physical risks and boost resilience to climate shocks. And without comprehensive and internationally comparable data to monitor progress, it’s impossible to know what works, and where course corrections are needed.
This underscores the importance of the support of G20 leaders for a new Data Gaps Initiative to make official statistics more detailed, and timely. It calls for better data to understand climate change, together with indicators that cover income and wealth, financial innovation and inclusion, access to private and administrative data, and data sharing. In short, official statistics need to be broader, more detailed, and timely.
The sector where change is needed the most is energy, the largest contributor to greenhouse gas emissions, accounting for around three-quarters of the total.
Economies must expand their renewable energy sources and curb fossil fuel use, but while there’s been a gradual shift in that direction, the pace is still not sufficient. And not only is there a lack of policy ambition in many cases, there also is a lack of comprehensive and internationally comparable data to monitor progress.
Read the full IMF blog here.
Which Countries Have the Highest Inflation Rate?
Inflation is surging nearly everywhere in 2022 with the very notable exception of China.
Geopolitical tensions are triggering high energy costs, while supply-side disruptions are also distorting consumer prices. The end result is that almost half of countries worldwide are seeing double-digit inflation rates or higher.
With new macroeconomic forces shaping the global economy, the above infographic shows countries with the highest inflation rates, using data from Trading Economics.
Double-Digit Inflation in 2022
Many countries are navigating record-high levels of inflation. Some are even facing triple-digit inflation rates. However, it is no surprise that the US-sanctioned and politically subverted countries of Zimbabwe, Venezuela, Syria, Sudan, Iran and Lebanon are at the top of the list.
Read more at the Visual Capitalist.
The Wrong Way for the U.S. to Counter Russia’s Actions
No, more fracking is not what we need as Russia’s invasion of Ukraine continues. What does this conflict will mean for global energy security, reliability, and supply? High gas prices have been a significant contributor to global inflation, the value of oil has rebounded from its 2020 lows, and Russia is a major supplier of oil and natural gas to energy players in Asia and the Eurozone. Countries opposed to Russia’s invasion also realize that fossil fuels are a significant part of the federation’s economy, and are retaliating against Russia where they hope it will hurt: Germany halted certification of Nord Stream 2, the gas pipeline that connected it directly to Russia, and the United States has issued sanctions targeting the company overseeing the pipeline, a subsidiary of the Russian state-owned corporation Gazprom.
Given the chaos, the American right has begun to air out “drill, baby, drill” talking points, arguing that the Biden administration’s rhetoric around addressing climate change is directly responsible for Russia’s actions. Meanwhile, even liberal pundits have begun to stress the supposed need to expand fossil fuel developments and exports, and former oil industry insiders claim in major media outlets that fracking will be a “powerful weapon against Russia.”
Gregory Brew, a historian of the Cold War and oil markets who’s a fellow at Yale University, contested this inchoate set of ideas in a Twitter thread. Brew noted various aspects of global energy markets that resist these narratives: that Russian oil is far different from U.S. oil, that several countries have strategic reserves on hand, that new oil and gas development is far too slow to have short-term effect, that Russian energy is not so vulnerable to sanctions as many think, and that a better way for global energy to stabilize would be to wean off fossil fuels altogether.
I spoke with Brew to discuss his thread, and to ask what people are missing in the conversation around Ukraine’s invasion and hydrocarbons. Our conversation has been edited and condensed for clarity.
Read the full interview here.