Tag Archives: Market Society

Value(s) by Mark Carney: Chapter 14: Values in Companies: Key Takeaways / Analysis / Citations

Chapter 14: Values in Companies

Key Takeaways

Carney starts out with the history of companies as a concept and what asks what is the purpose companies? It is not simply to make a profit, but rather to create value which is only partly quantified in the form of profit. For Carney, purpose requires balancing dynamism, fairness(?), solidarity (with employees and community), sustainability (across generations) and responsibility.

As John Kay put it…“Profit is no more the purpose of business than breathing is the purpose of living.” And so you need to make a profit to operate just as you need to breath. But it is not the purpose of business. Who owns the company? Shareholders do not own the companies to which they hold stock

Wedgwood as the Model of a Modern Major Capitalist:

  • What is the company for? Carney suggests it’s more than profits. Josiah Wedgwood is the example of a capitalist that made life better for customers by democratizing.
  • He was born as the industrial revolution was taking off.
  • He tracked 5,000 changes in experimentation to understand how to make the perfect pottery.
  • He was an abolitionist icon.
  • He built a town with amenities to support his growing factory.
  • He was an ardent economic nationalist, admits Ricardian Carney.

Five things that change us in a crisis;

1)      Triggers a revaluation of what we value…

2)      Triggers a shift in what we value…

3)      Triggers an improvement in reporting…

4) Triggers cause resilience…

5) Triggers embed responsibility…

1st for Carney, a crisis triggers a reevaluation of what we value. In prior chapters, showed that the crisis was caused partly by:

·         the underpricing in risk and the lack of supervising and off-loading responsibility to the wisdom of the market in Chapter 7’s breakdown of the Financial Crisis;

·         the years of undervaluing resilience, with states failing to protect citizens despite ample warnings in Chapter 9’s breakdown during Covid;

·         the tragedy of the commons where we aren’t pricing pollution as the producers problem (externality)

2nd for Carney, a crisis changes our appraisal of value and values. Who benefits from these shifts? Shareholder, stakeholders are disrupted through change….

The Covid crisis caused:

·         a reappraisal of value and values

·         a reset by companies

·         a social resets by countries

·         accelerated move to e-commerce,

·         accelerated shift to e-learning

·         accelerated shift to e-health

·         a reorientation of supply chains from ‘just-in-time’ to ‘just-in-case’

·         greater consumer caution

·         widespread financial restructuring (sees a stretched)

3rd for Carney, crises are a catalyst for new reporting of systematic risk.

·         1929 Wall Street Crash (crazy speculation by everyday people using loan money) + Roosevelt’s New Deal = creation of the Securities and Exchange Commission to protect the investors and  efficient markets. The SEC then also triggered the creation in 1936 of GAAP (generally accepted accounting principles) which became the global standard to ensure financial data could be reliably counted on.

·         2008 Financial Crisis = reporting for OTC derivatives, reduce the influence of shadown banking, new rules for securitization, accounting standards such as IFRS 9 was developed. IRFS includes what the expected losses are which provides more clarity.

·         The Climate Crisis, Carney is (hoping?) to bring about TCFD for consistent, standardized disclosures on climate-related financial risk.

4th for Carney, crises increased resilience, they make us tougher. Global banks have a buffer 10x the size prior. Trading has been reduced 1/2 , interbank leading is declined 1/3rd and cloistering of divisions within banks, with deep separation aims to prevent a systematic collapse.

Again, Carney argues the Climate Crisis has a valid target of net-zero. ¾ of the world’s coal reserves…

5th for Carney, embedding responsibility. Having purpose, Carney suggests might have prevented the financial crisis. In the aftermath, regulations, rules and compensation provide the teeth for a better future.

The Firm A Series of Contracts versus Purpose-Driven Companies at the Heart of an Ecosystem:

Carney goes through the history of company formation. The coordination of employees, investors, suppliers, buyers. He notes that corporations are indeed people both legally and in reality. For Carney, the company is not the sum of a bunch of contracts, however.

Shareholder & Purpose:

East India Company (the 1st publicly traded company in the UK) was incorporated with the purpose of protecting a monopoly on in Asia. The concept of the shareholder was buy shares of a company with the agreement that that capital would be used to advance the purpose of the firm, a larger goal. But during the industrial revolution, in 1844, the UK government passed a law that allowed incorporate without an express purpose and it made registration much easier. By the 19th century the focus on public purpose shifted to private purpose.

Shareholder Primacy:

Ford Motor Company challenged the idea further when in 1916, there was a $112 million surplus on their balance sheet. Shareholders wanted a dividend by Henry Ford wanted to direct those profits into creating more innovation and to democratize cars for more people. The Michigan Supreme Court sided with shareholders but the amount doled out was much smaller through managerial discretion. This case Dodge v. Ford is central to the idea that shareholders own the company they have shares in. The UK Companies Act in 2006 and the Delaware Supreme Court in 2015 re-asserted that the purpose of ‘directors must make stockholder welfare their sole end.’ So, in the UK and the US, it is to maximize shareholder value. But there is disagreement, Wachtell, Lipton, Rosen & Ktaz LLP says shareholder primacy is not exactly what is going on….

Carney shows through legal examples in Canada and France that shareholder aren’t even owners of the company and thus the maxim of maximizing shareholder value is flawed. It is ture that shareholders do get paid after everyone else: creditors, bond holders, employees, suppliers and governments via taxation both in the UK and the US. But employees cannot diversify their risk to a company as Martin Wolf has argued so shareholders may not really be taking the most risk, aren’t really owners and certainly a poor shareholder who put their life-savings in is taking more risk than Warren Buffett in the owning of a given share of any company. Shareholders do not have much downsize risk either. So, for Carney shareholder primacy is flawed.

The Agency Problem:

The separation of ownership of shareholders and control via the management which have their own self-interest (perks, pet projects, empire building) mixed in with meeting shareholder interests, triggered the Milton Friedman doctrine that:

a)    an executive is an employee of the owners of the business;

b)    the executive is responsible for maximizing shareholder value;

c)    shareholders (probably want) profits therefore that is the value in question;

d)    as long as the firm conforms to rules of society in terms of customs and law, they are good.

Carney sees Friedman’s ideas as useful but deeply flawed. Shareholder primacy is problematic and the proof is that Friedman gives himself an out in two ways:

1)    saying that money making should conform with customers and laws of their day. As Carney has shown, values are subject to their time therefore, Friedman has an out when there is disembodiment between the market and shareholders. Friedman claims any charity to employees is merely window-dressing. But Carney has shown in this book that there are times where there is deep corrosion in financial markets.

2)    saying that shareholders have primacy is flaws because shareholders merely have a ownership of the shares in a limited legal way. there is strain in how the wealthy treat the poor and how pay  

Companies have Command and Control Dynamics so Models of an Economic is a Matter of Degrees:

For Coase in The Nature of the Firm, the firm is defined by costs difference of providing goods and services through the market. Transactions in the market hold the costs of gathering information, bargaining, and enforcement. These transactions bear costs that the firm save but the expense is the span of control, complexity and diseconomies of scale. The activities performed more efficiently in a Command and Control system within the firm with the rest completed through the market.

Stakeholder Value:

Carney argues that instead of Shareholder Value there ought to be Stakeholder Value, which also happens to be the latest trend in business school literature. Profit is essential but it is not the only thing. Many CEOs reject the notion that there is a single purpose to a firm. For Carney, a successful firm must deliver a balance of competing interests amongst stakeholders (which Carney neglects to define), but this is analogue to the individual who pursues the good life. Competitive advantage, for Carney includes, having an attractive purpose as Chapter 15 will show.

Other Thoughts from Chapter 14:

·         For a better tomorrow, we need companies that are motivated by profit and empowered through purpose;

·         Profit and purpose are both necessary and re-enforce each other;

·         Firms should embed purpose is what they do;

·         Corporate purpose reduces risks, inspires employees, provides guidance in uncertainty and attracts and drives innovation;

·         Non-financial metrics should matter even if they are notoriously hard to measure;

·         The challenge falls with turning a purpose into practice (actions, outputs);

·         Maximizing shareholder value (short-term) is not the sole aim of corporations, full stop;

·         Environmental, Social and Governance (ESG) can contribute to profits and also purpose;

·         The make up of boards and their focus on purpose is critical;

·         Board-level reforms need to include purpose-oriented reform;

·         Patagonia, Unilever have institutionalized purpose;

·         B Corp certification reward companies that meet social and environmental metrics;

·         Danone is a company that embraces a entreprise a mission designation;

·         Executive level compensation needs to be connected to ESG factors and needs to be re-configured to align incentives that are longer term;

·         Companies need to consider future generations;

·         Companies should be engaged in improving communities;

·         Reporting is Key: two-way flow of information between stakeholders, shareholders and companies;

·         Good and bad ideas need to be tested and then good ideas scaled, and bad thrown away;

·         There is more and more evidence that suggest that companies that perform well on ESG also tend to have better financial performance, 63% report a positive co-variation, increased ESG leads to increased financial performance, Chapter 15 will address the counter-arguments.  

·         Employees who know their employers purpose also have better financial performance;

·         Patagonia give 1% of its revenue and they get 9000 applicants per post;

Introduction: Humanity Distilled Chapter 1 Objective Value
 Chapter 2 Subjective Value Chapter 3 Money & Gold
 Chapter 4 Magna Carta  Chapter 5 Future of Money
 Chapter 6 Market Society Chapter 7 Financial Crisis
 Chapter 8 Safer FinanceChapter 9 Covid Crisis
 Chapter 10 Covid Recovery Chapter 11 Climate Crisis
 Chapter 12 Climate Horizon Chapter 13 Your Values
 Chapter 14 Values in Companies Chapter 15 ESG
  

Analysis Part 3 Chapter 14

Ø  Chapter’s message in a nutshell: You get more with honey then you do with vinegar, be nice and have better outcomes in good and bad times.

Ø  The Covid crisis has accelerated a shift, but for how long? What is the reasonable band-width for which human’s recalibrate? Carney seems to be have a view that change is more permanent than might myself.

Ø  “During thee [Covid] crisis, we have acted as interdependent communities not independent individuals, with the values of economic dynamism and efficiency, joined by those of solidarity, fairness, responsibility and compassion.” (386, Value(s). This is not quite what is happening or happened or has it? How does Carney know from publications, statistical research or the people he hangs out with. People aren’t, pre-determined. There is speculation and sales in his statement that  

Ø  If Carney is so certain of the benefits of a crisis, then logically should triggering a crisis not be an aim of effecting change? From 9/11 to detonating a nuclear weapon in the Antarctic, causing a crisis is perhaps a logically implication of his breakdown of how the financial crisis has progressed finance forward. Carney seems to imply that all the Dodd-Frank legislation was a major success, whatever has been implemented deserves a thumbs up, however the process of providing new safe-guards was very contentious and as Obama points out in my blog post, it wasn’t always that great.

Ø  An inverted view might be that the financial crisis brought on regulations that are a mixed bag of efficacy and punishment. Instead of weeding out the incompetent, regulations have cause a retrenchment of those most passionate about financed which has the effect of

Ø  Perhaps this will be addressed in Chapter 15, but how do you really objectively measure ESG performance, if the measures are game-able, they will be gamed, just a fun fact of human nature. Humans are cunning. Get used to it.

Ø  Carney took the Patagonia “9,000” applications example in two funny ways. 1) that Patagonia didn’t plant this story as a PR stunt, 2) that Patagonia has those high number of applicants because of their purpose (single causation is flawed thinking or perhaps Carney is simply trying to persuade).

Ø  Senator Elizabeth Warren’s 2018 proposed Accountable Capitalism Act requires directors in firms making more than $1 billion to ‘consider’ stakeholders, not simply shareholders, when making choices.

Citations Worth Noting for Part 3: Chapter 14:

v  Andrea Sella, ‘Wedgwood’s Pyrometer’ Chemistry World, 19 December 2012.

v  Derek Lidow, ‘How Steve Jobs Scores on Wedgwood Innovation Scale’, Forbes, 3 June 2019.

v  US Securities and Exchange Commission, ‘What We Do’, 10 June 2013.

v  John Kay, ‘Shareholders Think They Own the Company – They Are Wrong’, Financial Times, 11 November 2015.

v  Martin Wolf, ‘Shareholders Alone Should Not Decide on AstraZeneca’, Financial Times, 9 May 2014.

v  Lynn A Stout, ‘The Shareholder Value Myth’, Cornell Law Faculty Publications, Paper 771 (2013).

v  John Kay, The Truth About markets: Their Genius, their Limits,  their Follies (London: Penguin, 2003).

v  https://bcorporation.net/

v  https://www.blackrock.com/corporate/investors-relations/2018-larry-fink-ceo-letter

v  Bank of England, HM Treasury and Financial Conduct Authority ‘Fiar and Effective Markets Review: Final Report’ (June 2015).

v  Nell Derick Debevoise, ‘Why Patagonia Gets 9,000 Applications for an Opportunity to Join their Team’, Fortune, 25 February 2020.

v  ‘The Business Case for Purpose’, Harvard Business Review Analytic Services Report (2015).v  Marc Andreesen, ‘It’s Time to Build’, Andreessen Horowitz, 18 April 2020, https://a16z.com/2020/04/18/its-time-to-build/

Value(s) by Mark Carney: Chapter 12 Breaking the Tragedy of the Horizon: Key Takeaways / Analysis / Citations

Chapter 12 Breaking the Tragedy of the Horizon

Key Takeaways

One of James Carville’s Clinton ‘92 campaign slogans was “It’s the economy, stupid”. For Carney is “it’s the transition, stupid!” If you can get private financial institutions to truly back the transition then you can contribute to being a good custodian for generations to come. Carney’s work for Glasgow COP26 centres on organizing the plumbing for these financial institutions. In chapter 15, “Investing for Values” Carney explored this further. In this chapter, Carney argues that there are three technologies: 1) engineering, 2) political and 3) financial that need to be marshalled to address climate change.

Engineering Technology

Driving Scale and Innovation: There will need to be major improvements to these hard to change sectors. Very hard to outlaw fossil fuels (ie. decarbonize) which are cheap and do not have a large upfront CAPEX:

  • Zero-carbon economy, electricity today is 20% green and is projected to be 60% by 2060;
  • Energy creation needs to be moved to a 90% market share with a mix of wind and solar. To what extent do we electrify everything and do it with green electricity depends on storage and loading challenges since solar and wind are intermittent. And we need to look at power efficiency in products we use;
  • Global electricity has to increase 5x by 2050 and needs to be generated by renewables according to Carney;
  • In the UK, off-shore wind farms were expected to generate £140/MWh by 2025 back in 2013 but then in 2014, they revised the number to £107/MWh, in 2016 they revised it down to £57/MWh; In the US, $59/MWh is the cost of coal and now onshore wind-farms are at $26/MWh and solar is $37/MWh….cheaper then coal!

Electric Vehicles (EV)

  • Hard to reduce dependency on fossil fuels (again, the euphemism is “decarbonize”);
  •  Use hydrogen for public transport;
  • Tax breaks for EV;
  • Build the infrastructure for electrical and hybrid vehicles;
  • Car companies build vehicles in 3 year cycles from planning to off the factory floor so planning for more EV now is critical, even if batteries and charging stations are a problem;
  • EV is not appropriate for long-haul trucks according to Carney;

Aviation and Shipping

  • Going to be very challenging to reduce dependence on fossil fuels (i.e. decarbonize);
  • Nothing is currently commercially viable according to Carney;
  • The cost of not using fossil fuels is $115 – $230 USD per ton in aviation and $150 – $350 USD per ton in shipping;

Industrial Sectors

Currently responsible for 32% or 17 GtCO2e annually, cement manufacturing, plastic, aluminum, chemical, fashion, furniture and home appliances. The consumption of energy is massive;

  • A lot of the green technology does not really exist yet;
  • There are four ways to reduce: use hydrogen (the product being H2O), electrifying processes, using biomass and carbon capture technology.
  • Carney places a lot of reliance on carbon capture and sequestration at the point of production which involved pumping CO2 emissions into a saline solution deep underground, which is theoretical since the cost of pumping CO2 under every factory around the world has not been fully explored or whether there would be a centralized CO2 pumping station for a given geography;
  • Carbon capture, use and storage (CCUS) are currently about 1% of renewable investments so this is not a hot market;
  • Direct air carbon capture and storage (DACCS) involves sucking CO2 out of the sky where CO2 is much more diffuse then at the point of production, and therefore the economics right now are between $40 – $400/ton if extrapolated from the small test plants currently testing this technology.
Illustration and Painting

Political Technology

Setting the Right Goals. Carney argues that we need to understand the consequences of our preferences. But he also wants to convince you that his preferences are the best and you should follow him:

  • SDGs He isn’t talking about new means of engagement with the polity but rather focuses on the fact that nations will fall short by the end of the century, hence the need for Sustainable Development Goals (SDGs) which are part of the UN’s collaborative framework. There are 17 goals with 169 targets as part of the SDGs.  
  • Nationally Determined Contributions (NDCs) are determined by each country and easily fall victim of the tragedy of the commons. At the Paris COP 15, the target that was agreed to was actually 2.8 degrees Celsius above pre-industrial levels by the end of the century.
  • Greta Thunberg and the societal response: Carney was impressed by her. He showed her the Bank of England’s gold reserves. At the UN Climate Action Summit in September 2019….
  • Thunberg said “You have stolen my dreams and my childhood with your empty words and yet I’m one of the lucky ones. People are suffering. People are dying. Entire ecosystems are collapsing. We are in the beginning of a mass extinction and all you can talk about is money and fairytales of eternal economic growth. How dare you!….We will not let you get away with this. Right here, right now is where we draw the line. The world is waking up and change is coming, whether you like it or not.
  • There was a Global Climate Strike in 2019 with 7.6 million people in attendance in 185 countries…the media struggled to tall a compelling narrative, but the 6th Mass Extinction is coming according to Carney.
  • Carney argues that revolutions happen abruptly as Cass Sunstein argues, when a tipping point is met, when it becomes socially acceptable (like wearing masks for example).
  • Values depend on consumer focuses. 

Financial Technology to Ensure That Every Financial Decision Takes Climate Change Into Account

Carney argues that companies must take the race to net-zero seriously. For Carney, the financial system needs to take climate change into account, because that’s where the smart money is headed already. Firms can report their own climate disclosures. COP 26 in Glasgow is going to focus on the financial approach. There is money to be made in the transition. And Mark Carney argues that the smart money is turning green.

  • Harnessing the power of economics to effect change is the most sensible force for good, in Carney’s eyes.
  • Carney points out that the amount of money needed for the low-carbon shift is about $3.5 trillion in the energy sector per year and twice the rate currently invested in the energy sector….
  • Climate-resilient systems are needed at a cost of $90 trillion;
  • Carney argues that the private sector is more then money, we need their innovative drive that is incentivized towards net-zero;

Carney’s 3Rs, these are the three areas needed to make this work: reporting, risk, returns

Reporting: TCFD network: a solution by the market for the market which Carney forcefully argued didn’t work in the 2008 financial crisis….at any rate, their total assets under management is over $170 trillion which includes the largest banks, pension funds asset managers and insurers. The largest AUMs are asking to disclose their carbon footprint in line with the TCFD.

The metrics used are

  • Disclosure of risk, governance and strategy for climate change;
  • Consistent metrics across sectors;
  • Scenario analysis typical in financial modelling and equity research.

The disclosures cannot be static! They should be dynamic such that they reveal financial risks/opportunities. Ask the company to explain how they will reach net zero….

Regulatory Reporting

financial regulators input climate-related financial reporting in their roles.

  1. At the Bank of England, Carney says the Prudential Supervisory Authority are a division of the bank with advice on how insurers should address climate change.
  2. Make the TCFD reporting mandatory at the Federal/National level! IFRS and IOSOCO (which regulate securities) have to agree to make reporting standardized.

 Risk Management

As mentioned in chapter 11, there are physical and transition risks. Climate change differs from most other risks in that:

  • Climate change is unprecedented as they have not fully happened yet;
  • Climate change is massively impactful in every country and globally;
  • Climate change is foreseeable right now using the scientific method;
  • Climate change requires action today for horizons in the future that we cannot be predict accurately.

The Bank of England has stress-tested the UK financial system for various climate pathways, scenarios. Climate stress tests about engaging the developers of the model in the contingencies and factors at play.

Returns

The creation of green and transition bonds is an important catalyst. Carney believes that helping companies moving from brown to green is a consultative practice. The typical best plans are as follows:

  1. Defining a net-zero objective based on scope 1 (all direct emissions: fuel combustion etc), scope 2 (indirect emissions: electricity purchases) and scope 3 emissions (all other indirect emissions: end products).
  2. Outlining clear milestones and metrics for senior management;
  3. Board of Directors level governance;
  4. Executive compensation based on meeting these metrics……

Green bonds will not be sufficient to pay for the green future. Value will be in identifying the transition. ESG are focused on the s and the g. Investor should be able to calculate the e net present value. “We need 50 shades of green.” (325, Value(s)). Needs to be able to get a sense of how serious a given company is at the senior management level. Embedding metrics in the motivation. The efficacy of transition plans. 

  • Mark Carney says the UK should lead the climate change strategy in Glasgow….hence he is advising Boris Johnson.
  • Decarbonization is going to be a financially viable source of investment; if you are pulling carbon out of the process then the investment will come to you as an additional value proposition.
  • Buying offsets is opaque and only 98 million tons of CO2 were traded at a total market value at $295 million, there is no central market. There are no uniform carbon credits and there is a lot of friction so Carney argues for standardization…
  • The cost of the green tech is high for developing countries but it makes sense to provide that do developing countries as a value added services….how to capture that value once the developing country firm has that technology is not so clear.
  • Climate policies suffer that same challenge that central banks deal with: the temptation to lower interest rates over long-term stability of inflation. We want to prevent short-termism in finance and now on climate.
  • Short term costs are hard for politicians, there is a lack of credibility. 
  • Political parties need to get broad support across the spectrum. 
  • Specific climate polities should be looking at the economics. More transparent tracking of climate policies.
  • Governments should have sustainable growth committees. Carney wants to provide tools for the Bank of Canada and England decision making and targets. The idea is that market will allocate capital and then break the tragedy of the horizon. 
  • Continued growth is not a fairy tale as Thunberg argued.
  • Policies should be focused on technological innovation.
  • Clear and consistent communications.
  • More likely that investment and returns will be made clear.
  • Policy makers and future costs of doing business need to be calculated and part of the solution. 
Introduction: Humanity Distilled Chapter 1 Objective Value
 Chapter 2 Subjective Value Chapter 3 Money & Gold
 Chapter 4 Magna Carta  Chapter 5 Future of Money
 Chapter 6 Market Society Chapter 7 Financial Crisis
 Chapter 8 Safer FinanceChapter 9 Covid Crisis
 Chapter 10 Covid Recovery Chapter 11 Climate Crisis
 Chapter 12 Climate Horizon Chapter 13 Your Values
 Chapter 14 Values in Companies Chapter 15 ESG
  

Analysis of Part 2 Chapter 12

  • Not clear that the private sector would want to take on the opportunity to meet net-zero BEFORE a large global catastrophe that is clearly caused by human-made climate change such that customers demand either the private sector have targets in place or the public sector enforces such practices. It will be a train-wreck to check every single companies manufacturing to ensure they have the carbon capture pipes operating properly. It is so easy to pollute. The fines must mark the cost of violating the rules far more prominent.
  • Ironically, what caused the financial crisis are the individual actors being disassociated with the system level. What Carney hopes is that this be flipped around with climate change. Suddenly, decisions should be made at the system level with a simple boiled down abstraction of 42 +/- 3 GigaTons of CO2 per year must be our pollution cap. However, there is another disassociation that must occur here; namely financial experts in urban centres, far away from the oil fields are talking about transition as if the oil companies are going to just love this whole ‘climate-change agenda’. The consequences of the model make short-term harm very real for the oil industry workers who enjoy their work. I don’t mean we’re wrong about climate change because oil workers might stand to lose economic opportunities due to an imposed legislative or imposed financial capital re-allocation away from fossil fuels, but slave owners in the US lost their economic future because of the threat of legislative decision-making, they were willing to go to war and die in the name of a moral wrong. So, we, including Carney, need to get serious about “Oil Country”. 

Ø  Carney doesn’t necessarily call out who the polluters are…he doesn’t put pen to paper to say that fossil fuel companies are the problem and could be part of the solution. And what to do about Alberta’s transition? Carney doesn’t talk about a way to help Albertans who have driven the Canadian economy forward in terms of GDP should be compensated…and or supported in retaining economic development locally against the back drop of the Rookie Mountains. Think about how Britain settled the slavery questions in 1834 by compensating the owners of slaves? Then think about how the US settled the slavery question between 1861 – 65? Oil is like slavery in some ways as I argued a decade ago.

“When Abraham Lincoln wanted to curb slavery, he was battling the entrenched interests of the Southern US states. Slavery was a moral wrong, but slavery was also central to the Southern US economy. ” – Professor Nerdster

  • Efforts to have a global corporate tax neglects to acknowledge that the best situation is where every other country is paying that tax but you have a loop hole.
  • Just because you can build something doesn’t mean you should. Do people want self-driving cars? Do people want to charge their cars? This is where regulation forces the issue.
  • Carney’s really skates on thin ice in this chapter because industrial processes rely mostly on energy to melt and shape the products that we enjoy, most items in your house have a carbon footprint that you never see but enjoy the fruits of, the cost to create that same product without generating CO2 is likely significant to day. Many companies would not exist if it was illegal to pollute….This issue is where the rubber hits the road, unless there is total control of the means of production but some over-arching legal body, there will be an incentive to use fuel…let me think about this further. This is manufacturing products on the moon becomes more attractive as CO2 there is additive….impractical in my life time but, you know….fun to think about.
  • With what power can Carney achieve having his preferences reflected in the world? What Carney and others are missing is the way to show the end user the consequence of their preferences. While people do tend to seek out like-minded people, and shun polarization, running for public office would be his best route….. What funding model do we have?
  • Carney seems to fail to acknowledge that what Greta Thunberg is ignoring is that the transition could be very painful and as such not materialize as she extrapolates it ought to. She is also a child, probably should be in school. The consequences of climate change are heavy in her mind, the consequences of transition aren’t thought out. Both are subjective, terribly difficult to predict and forecast…even with climate physics firmly in the corner of “2 degrees Celcius is a big deal…”
  • The global climate strike didn’t really move the needle, did it? Is that really how we measure sentiment on climate change being a mainstream concern?
  • Reporting has been tried before, startups were created to create a global standard but then failed; Amee.com. Companies do want to participate in green-washing but not so much on their own accord anything that undermines stakeholder value is a threat to the CEO’s job.
  • TCFD network: a solution by the market for the market….which Carney forcefully argued didn’t work in the 2008 financial crisis….
  • Self-interest trumps the interest of others. That’s what COVID illustrated. The self-interest of profit generation is so strong that you would wonder if Carney lives in a fantasy land…no, he just happens to be correct about the climate physics at play, may need more salesmanship. 
  • You start to wonder if Carney is a heavyweight with all the details, annotations and facts but a lightweight with bandwidth of human nature between self-interest and self-lessness . Maybe he’s got an overly focused vantage point on reality. For example, take a pan for your kitchen. How much did that pan cost? Is it anti stick? $25CAD pan. Now why is that pan so cheap? The material supplier doesn’t have a carbon pollution tax right now. If you impose a carbon pollution plan on that manufacturer because they are in your legislative geography then another kitchen pan producer who doesn’t have that constraint will. Game theory! Learn it a weep. And there are way to game the system further. The temptation to lie about emissions is massive as Volkswagen did it. OPEC oil producers do it. So let’s be serious about human nature too! We are cheeky monkeys!

Citations Worth Noting for Part 2: Chapter 12

  • Ezra Klein, ‘How to decarbonize America’, The Ezra Klein Show, 27 August 2020.
  • Department of Energy and Climate Change, ‘Electricity Generation Costs’ (July 2013).
  • Energy Transitions Roadmap report version 1.5 (2020)
  • Goldman Sachs, ‘Carbonomics: Innovation, Deflation and Affordable De-carbonization’, Equality Research (October 2020).
  • Climate Action Tracker, ‘Warming Projections Global Update’ (December 2019)
  • Cass Sunstein, ‘How Change Happens’ podcast. London School of Economics Public Lecturers and Events, 14 January 2020.
  • Cass Sunstein, How Change Happens (MIT Press: Cambridge, MA, 2019). 
  • UN Environment Programme, ‘Emissions Gap Report, 2019’ (26 November 2019).