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91. Energy investment in a time of inflation

Author:
Charles Lichfield and Joseph Webster
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
High rates of inflation across the world are forcing central banks to reluctantly tighten monetary policy despite accompanying recession risks. Moreover, restricted credit access could jeopardize energy investments, particularly for capital-intensive clean energy projects, potentially rendering the world more vulnera­ble energy to price shocks, which are a significant contributor to the current crisis. This paper briefly considers the macroeconomic drivers of inflation in late 2022, including Russia’s war in Ukraine and uncertainties around energy supply, supply-chain resets, and lingering COVID-19 disruptions, before examining the persistent energy underinvestment of the past decade and how this has left markets exposed to varying degrees. As such, this paper also considers how private capital can accelerate cleaner energy adoption, suited to different markets’ unique conditions and needs. Bor­rowing costs will rise, but this doesn’t have to bring the transition to a standstill. With the Great Moderation of low volatility, interest rates, and inflation perhaps a relic of the past, assets offering inflation protection, such as infrastructure, may become increas­ingly attractive to investors. There is a fear that global inflation will sharply curtail energy investment into emerging markets. The fear is justified. Higher interest rates in developed markets mean higher rates of return which will lure emerging markets investors back to the US and Europe. Still, it’s not all bad news for emerging markets. Quasi-state actors like Pension and Sovereign Welfare funds are interested in very long term, high-yield projects—two criteria to which emerging market energy infrastructure correspond. Disruptions to interest rates and inflation, triggered in part by energy underinvestment, will cause disparate impacts in different markets. Inflation is not, perhaps, everywhere and always a mone­tary phenomenon. Energy investment faltered from 2014 to 2020, despite low interest rates. Meanwhile, aggre­gate supply shocks—first due to COVID, then from Putin’s invasion of Ukraine—have pressured energy production and prices, raising inflation and necessitating interest rate hikes. The consequences of persistent energy underinvest­ment are now becoming apparent. The need for new energy infrastructure cannot be met without private investment. This was the case when infla­tion was lower; it is even more important now.
Topic:
Environment, Markets, Oil, Governance, Gas, Economy, Investment, Inflation, and Energy
Political Geography:
Global Focus

92. China and the new globalization

Author:
Franklin D. Kramer
Publication Date:
01-2023
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
The unitary globalized economy no longer exists. Driven in significant part by security considerations, a new and more diverse globalization is both required and being built. The transition is ongoing, and its final form is yet to be determined. Many of the causal factors for this very significant change revolve around China and the consequent responses to its actions by the United States, other democracies of the transatlantic alliance, and the advanced democratic economies of the Indo-Pacific. There are other important factors generating this new globalization including the impact of the Russia-Ukraine war both on energy markets and on trade and investment with Russia generally, as well as the global requirements for mitigating and adapting to climate change. However, China has been a critical element in what might be described as the “maximum trade-centered globalization,” which has dominated trade and investment policy in the three decades since the end of the Cold War. This issue brief describes the still-developing new globalization focusing on the issues surrounding China. A fundamental challenge that China presents arises because its actions have generated significant security and economic challenges, yet it nonetheless is a massive trade and investment partner for the “advanced democratic economies” (ADEs),1 which for purposes of this analysis include the Group of Seven (G7) countries,2 plus Australia, Norway, the Republic of Korea, and the European Union. Adapting to a new globalization requires establishing a strategic approach that resolves the inherent contradictions between those conflicting considerations.
Topic:
Security, Defense Policy, Diplomacy, Environment, Politics, Science and Technology, Economy, Business, and Energy
Political Geography:
China, Europe, Eurasia, Canada, Asia, United States of America, and Indo-Pacific

93. Environmental Protection and Climate Change Budgets of Metropolitan Municipalities

Author:
Nurhan Yentürk, Berkay Hacımustafa, Yakup Kadri Karabacak, Ezgi Ediboğlu Sakowsky, and Işık Baştuğ
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Turkish Economic and Social Studies Foundation (TESEV)
Abstract:
This study firstly aims to classify the environmental protection and climate change (EPCC) goals stated in the 2022 performance programs of the 14 metropolitan municipalities (MM) with the highest expenditures in Turkey and their affiliated institutions (AF) (water and sewerage departments and transportation administrations) according to mitigation, adaptation, waste, and other environmental goals and to examine the budget allocated to these targets. The study, also, evaluates the pros and cons of the budgets allocated by the 14 metropolitan municipalities to mitigation, adaptation, waste, and other goals and develops concrete policy recommendations for areas in which budgets should be increased/decreased.
Topic:
Climate Change, Environment, Governance, Crisis Management, Sustainability, Public Spending, and Municipalities
Political Geography:
Turkey, Middle East, and Mediterranean

94. Environmental Inequality in Industrial Brownfields: Evidence from French Municipalities

Author:
Charlotte Bez, Michael Ash, and James K. Boyce
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Recent research on environmental inequality has extended its focus from ongoing pollution to legacy pollution by examining the geography of industrial brownfields, defined as nonproductive, contaminated land. This article is the first extensive brownfield analysis for a European country from an environmental inequality perspective, exploiting the political momentum in France where brownfield restoration has become a national priority. In doing so, we combine data on over 7,200 industrial brownfields from the 2022 geodatabase ‘Cartofriches’ with socio-economic variables at the municipality level. We demonstrate communities with higher percentages of foreign-born and unemployed persons are disproportionately more likely to be located near brownfields. The social gradient increases significantly in communities that host many brownfields, the so-called hotspots. There is an inverted U-shaped relationship with income, with a positive correlation until the 75th percentile (C23,700 annually). These findings are robust to different controls, including across urban and rural areas, though with regional differences. Further, we also account for the location of noxious industrial facilities sourced from the E-PRTR database to show the existence of cumulative impacts of environmental risks. Our analysis provides crucial entry points for restorative environmental justice considerations and has important implications for Europe’s just transition and cohesion policies.
Topic:
Environment, Inequality, Pollution, Industry, and Municipalities
Political Geography:
Europe and France

95. Bridging the Gap: A "Sustainable Food Seal"

Author:
Paul E. III Schickler, Francesca Debiase, Sally Rockey, Jennifer Goldston, Peggy Tsai Yih, and Natalie Burdsall
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Chicago Council on Global Affairs
Abstract:
Climate change is wrecking havoc on the global food supply chain, drawing attention to the benefits of sustainable practices for preserving the food system. As a result, consumers are starting to shift their purchasing behaviors, opting for more sustainable food options that might have a smaller carbon footprint or use fewer resources. To help inform their purchasing decisions, consumers are demanding more information on how and where their food is produced, but they are largely unable to find a labeling system with clear and comprehensive standards; existing "green" and "eco" labels are often private certification schemes that focus on only one aspect of sustainability. A "sustainable food seal" is a potential solution. A label that would standardize a food product’s eco-score to reduce consumer confusion, sustainable food seals take an inclusive approach to food labeling that use comparable metrics that involve all parts of the food value chain—from farm to fork—and offer the opportunity to validate practices and empower stakeholders to support a more sustainable food supply chain. Based on a November 2022 roundtable, the first in a series of regular convenings, the white paper “Bridging the Gap: A ‘Sustainable Food Seal’ Needed to Improve Transparency between Farmers and Consumers about Sustainable Food Production” explores current food labeling practices, identifies challenges to label standardization and voluntary adoption, and proposes potential actions and strategies to provide insight into the role a “sustainable food seal” can play in enhancing sustainability through food.
Topic:
Agriculture, Climate Change, Environment, Food, Food Security, Sustainability, Farming, and Supply Chains
Political Geography:
Global Focus

96. Aligning ESG and SDGs at the Urban Level

Author:
Kris Hartley
Publication Date:
08-2023
Content Type:
Special Report
Institution:
Chicago Council on Global Affairs
Abstract:
This report outlines how cities and the private sector can collaborate on and magnify sustainability efforts that enable broad systemic change. Sustainability efforts require not only public policy interventions and resources but also the initiative and innovation of the private sector. These are systematized through the UN Sustainable Development Goals (SDGs) for governments, including at the city level, and through environmental, social, and governance (ESG) principles for companies. Bringing these two approaches into alignment is a crucial step for fostering multi-sectoral sustainability effort, but this alignment is largely unrealized. Among the local-government sustainability documents examined for this report, mentions of corporate activity are minimal and often superficial, primarily addressing the participation of companies in multi-stakeholder discussions about policy issues. In turn, ESG reports center on the decisions and actions of corporations, with public governance referenced largely in the context of regulatory limitations and policy objectives that affect business operations. Local governments and companies are undertaking sustainability efforts in their own ways. Merging the two through shared focus and strategy can magnify sustainability efforts in ways that enable the broad systemic change needed to avert climate crisis and societal disruption. This report outlines how a more collaborative approach can proceed, first by providing an overview of policy and corporate sustainability efforts and second by detailing examples of both. The report concludes with a discussion about how sustainability narratives can be harmonized between the two sectors.
Topic:
Environment, United Nations, Governance, Sustainable Development Goals, Private Sector, Cities, Society, and Public-Private Partnership
Political Geography:
Global Focus

97. Encouraging Farmer Adoption of Regenerative Agriculture Practices in the United States

Author:
Kelly Wilson, Stephanie Mercier, and Rob Myers
Publication Date:
08-2023
Content Type:
Special Report
Institution:
Chicago Council on Global Affairs
Abstract:
Regenerative agriculture can help our food and agricultural systems become more resilient. Farmers and ranchers are facing escalating challenges from climate change as they confront the consistent need to maintain high levels of productivity. Modern farming practices have enabled farmers to increase per acre production substantially over the last several decades, but these practices can also contribute to the depletion of the quantity and quality of natural resources (such as soil and water). There is a potential solution: regenerative agriculture. Regenerative agriculture is an emerging approach to farming that aims to increase farm resiliency by improving soil health, restoring natural resources, and increasing biodiversity through integrated farming practices. It can play a key role in helping farmers develop more resilient production systems and mitigate the challenges they face, all while contributing to the goals of companies supporting these practices, including goals of achieving carbon neutrality and sustainable supply chains. Regenerative agriculture does, however, face barriers that impede its adoption, namely financial concerns, access to necessary materials, equipment, and infrastructure, knowledge and education, time, and land tenure. Through public and private programs aimed at supporting farmers' adoption of regenerative agricultural practices, it is possible to reduce barriers to implementation and build farmer capacities, ultimately championing a regenerative future for agriculture.
Topic:
Agriculture, Climate Change, Environment, Food, Sustainability, Resilience, and Farming
Political Geography:
North America, Global Focus, and United States of America

98. U.S. Diplomacy Can Prevent Canadian Transboundary Mining Pollution on the Northern Border

Author:
Michael Freeman
Publication Date:
04-2023
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
The Biden administration’s America the Beautiful initiative1 has recently bolstered conservation and economic activity in southeast Alaska.2 Yet only a few miles away, Canada is allowing dangerous gold mines in British Columbia to put Alaskans, Alaska Native communities, and the ecosystems they rely on at risk. The United States must exercise its rights under the 1909 Boundary Waters Treaty3 to address these mining and diplomatic malpractices. The United States’ ability to clean up mining activity at home and abroad will soon be put to the test as the world moves to secure new supplies of the critical minerals needed to build a clean energy economy. New mining developments are moving forward in the transboundary region of British Columbia along the Alaskan border without the consent of Tribes and Alaskan communities downstream. Despite U.S. complaints under the Boundary Waters Treaty, both the Canadian federal government and the provincial government of British Columbia are pushing ahead. Much of this new mining activity is focused within the watersheds of the Taku, Stikine, and Unuk-Nass rivers. These rivers flow from Canada’s boreal forest into Alaska’s Tongass National Forest, the site of one of President Joe Biden’s largest 4 conservation achievements5 and a bastion of ecosystem resilience for the state’s salmon fisheries.6 The dams used to capture and retain the toxic mine tailings—or waste—associated with gold-copper mining are prone to leakage and collapse, putting southeast Alaska communities, Tribes, and ecosystems at serious risk. Provincial mining activity in this region is recklessly underregulated, and efforts to introduce safeguards have faced diplomatic stonewalling from both the Canadian government and the provincial government of British Columbia. Low British Columbian bonding requirements, lax environmental protections, and no requirement to consult with the United States on new projects have attracted large gold mining operations to the region without consent or sufficient protections for downstream communities in Alaska. The International Joint Commission (IJC), a forum created to help the United States and Canada work out cross-border waterway issues and governed by the Boundary Waters Treaty,7 has been receiving increased attention as communities and Tribes call on both governments to find protective resolutions.8 The Biden administration should exercise its authority under the Boundary Waters Treaty—which Canada may already be violating by allowing British Columbian pollution to enter U.S. waters—to engage the government of Canada on these important transboundary environmental concerns: The United States should press Canada to join IJC proceedings to work out the mining pollution issues along the British Columbia-Alaska border. Through this process, the IJC should consider setting up watershed boards co-led by local Indigenous and non-Indigenous communities. Similarly, the IJC should follow Indigenous nations’ recommendation to pause all mine permitting in the transboundary British Columbia region until watershed protections are implemented. Both Canada and the United States should also strengthen bonding requirements for mine liabilities so communities are not left holding the bag for tailings dam breaches.
Topic:
Climate Change, Diplomacy, Environment, Mining, Renewable Energy, Pollution, and Public Lands
Political Geography:
Canada, North America, and United States of America

99. It’s not a Sprint, it’s a Marathon: Reviewing Governmental R&D Support for Environmental Innovation

Author:
Leonie Meißner, Sonja Peterson, and Finn Ole Semrau
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In a race against excessive global warming, the world must accelerate the development and adoption of environmental innovations (EIs). EIs are crucial in decarbonizing the economy and meeting the net-zero targets. In this literature review, we delve into the role of governments in promoting EIs across stages of maturity and the likeliness of such support to reduce emissions and mitigation costs. Various theoretical justifications, such as knowledge externalities, dynamic increasing returns, path dependency and incomplete information, highlight the necessity to promote EI through governmental Research and Development (R&D) support. While emission pricing remains the most cost-efficient climate policy, it fails as a stand-alone instrument to sufficiently encourage EI. Accordingly, the optimal approach is a policy mix complementing emission pricing with governmental R&D support. The theoretical finding is backed by empirical studies on the development and deployment of renewable energies, which also show that investment in R&D can effectively reduce emissions and mitigation costs. By combining theoretical and empirical research, the review concludes by examining two pivotal policy actions aimed at accelerating the take-off of EIs: The US Inflation Reduction Act and the European Green New Deal Industrial Plan. We evaluate their specific aspects and limitations to effectively and efficiently contribute to decarbonization.
Topic:
Climate Change, Environment, Innovation, and Research and Development
Political Geography:
Global Focus

100. Time to say goodbye? The impact of environmental regulation on foreign divestment

Author:
Haiou Mao, Holger Görg, and Guopei Fang
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We look at divestments by foreign firms – a topic that has received comparatively little attention in the literature – and investigate how changes in the regulatory environment in the host country may impact on such divestment decisions. We use the implementation of China’s Two Control Zone (TCZ) policy as a “quasi-natural experiment”, using detailed firm level combined with city level data for the empirical analysis. Our results show that the implementation of TCZ policy has led to higher probabilities of divestments by foreign firms in targeted TCZ cities and industries. The mechanism behind this seems to be a TCZ-induced increase in discharge fees and efforts to reduce SO2 emissions. Allowing for heterogeneity of effects, we find that the effect is particularly strong for firms from source countries with less stringent environmental regulation, and those using less advanced technology. We furthermore show that firms using intermediates from polluting industries also experience a higher probability of divestment.
Topic:
Climate Change, Environment, Foreign Direct Investment, Regulation, Business, and Divestment
Political Geography:
China and Asia