Earth provides enough to satisfy every man's need, but not every man's greed.” - Mahatma Gandhi

Martin Wolf’s recent article commenting BP’s latest World Energy Outlook 2035 is both very informative and scary. Through 2035, BP expects that:

  1. Consumption will grow by 37%, driven by developing economies (96% of growth coming from non-OECD countries, and more than half from China and India);
  2. Renewable energy will only account for 8% of total energy consumption (up from 3% in 2014);
  3. The US will become energy dependent while China becomes the world’s largest oil importer;
  4. China will become the largest nuclear producer with 30% share (up from 4% in 2014);
  5. China and India will account for 66% of world’s coal demand.

Mr. Wolf refuses to qualify the projections as ‘business as usual’ given the tremendous technological and geopolitical changes related to energy. Indeed, the forecasts are suggesting a displacement of world demand from the West to the East, as well as important technological and fuel use changes.

However, we could argue that the continuous growth in energy use and CO2 emissions through 2050 doesn’t change much from an environmental point of view. Indeed, energy consumption and Co2 emissions are still growing, even though energy efficiency gains decrease markedly CO2 emissions’ growth.

Mr. Wolf highlights that rising living standards around the world are driving energy consumption. Over the last decades Asia has been the main driver of growth, led by China. Yet the elephant in the room is India, whose massive (and growing) share of the world population is far from being reflected in energy consumption statistics. Mr. Wolf is right to indicate that massive shifts are happening in the world, yet if we aggregate the data and look at it from a world point of view, we are indeed in a business as usual scenario in terms of global warming.

To help accelerate the shift away from global catastrophe, government support will be essential: it will help market forces gather enough momentum and ‘jump start’ a transition towards sustainability. Yet these actions may only be directed at the shadow of a much deeper issue, namely the politico-economic organization of our societies. ‘Capitalism’ and ‘democracy’ may have helped us to overcome the previous agrarian structure, but their current versions may have exhausted their usefulness. It would thus be also interesting to start thinking about other politico-economic models that could help the world stir away from the climate catastrophe we are into.

2011 Energy Conso by region2011 Conso and Popu

Science, General Knowledge & Environment

Creative genius driven by distraction – “In the study, divergent thinking correlated with academic test scores and selective sensory gating — an increased ability to filter compared to lower divergent thinkers. In direct contrast, real-world creative achievement was associated with leaky sensory processing — or a reduced ability to screen or inhibit stimuli from conscious awareness. This shows that these creativity measures are sensitive to different forms of sensory gating.

The riches and perils of the fossil-fuel age – (Hat tip Lao Ho) – “It would be wrong to describe these forecasts as simply “business as usual”. They actually imply a faster rise in energy efficiency than between 2000 and 2013. But they are not radical. The world would continue to rely overwhelmingly on fossil fuels and it would emit ever greater quantities of greenhouse gases.

History & Geopolitics

Yellen’s problem with US felons – (Hat tip Lao Ho) – “At 2.3m, the US prison population is the highest in the world — close to the combined numbers of people locked up by China and Russia, and more than 10 times those of France, Germany and the UK combined. Think of it as a democratic gulag. It is almost double where it was in 1991.

Netanyahu, Obama and the Geopolitics of Speeches – “It is about the reconfiguration of a region the United States cannot subdue and cannot leave. It is the essence of great power strategy: creating a balance of power in which the balancers are trapped into playing a role they don’t want. It is not a perfect strategy, but it is the only one the United States has.

To fight homegrown jihadis, Germany takes lesson from battle with neo-Nazis – “But advocates like Mücke say that just like that fascist ideology, fighting Islamic extremism among the young has less to do with religion than with young people’s vulnerability to the ideology. When dealing with extremists, be they neo-Nazis or jihadis, it is crucial to work with each person individually.

The Coming Chinese Crackup – (Hat tip Lao Ho) – “Communist rule in China is unlikely to end quietly. A single event is unlikely to trigger a peaceful implosion of the regime. Its demise is likely to be protracted, messy and violent. I wouldn’t rule out the possibility that Mr. Xi will be deposed in a power struggle or coup d’état.

Japan’s Intelligence Reform Inches Forward – “Japan, however, is moving slowly and inexorably toward intelligence reform, just as it is moving forward with its military normalization. Since the end of the Cold War, the Japanese have added capabilities when absolutely necessary.

Finance & Economics

Is the whole world a bubble? – “In short, the global drivers of balance sheet repair and low productivity growth are in our mind holding equilibrium asset yields/IRRs low, and keep us with the view that global assets are not that expensive. Uncertainty, in contrast, could easily rise this year, but probably not enough to create a dramatic repricing of assets.

How addiction to debt came even to China – (Hat tip Lao Ho) – “The more immediate question is what happens if the world has at last run out of big economies able or willing to run large asset-price fuelled credit booms. A plausible consequence might be that global economic growth will be substantially slower than many now hope.

Wealth inequality on rise in Japan – “Herein lies the unique twist that Piketty’s theory takes on in Japan: the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.

False hope – “Most of the empirical research in finance, whether published in academic journals or put into production as an active trading strategy by an investment manager, is likely false. This implies that half the financial products (promising outperformance) that companies are selling to clients are false.

Picture of the day: Globe photos of the month, February 2015


About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi