#7 Daily Financial News Round Up - Nov 7,2021
What news caught my attention?
Elon Musk held a Twitter poll asking his followers if he should sell 10% of his Tesla stock. This moment will go down in corporate finance history. Why? A founder-CEO is relying on social media to make his stock ownership decision. This is the first time such a thing has happened. Would this be the only time? Or will this be a new trend? The poll results favoured Elon Musk selling his stocks. Will Elon Musk follow through with the poll result? Let's wait and watch.
After a week of the COP26 negotiations, government commitment pledges fell short. Western countries want the developing countries' governments to make the most significant commitments. Why? Because they are the biggest polluters. This sounds reasonable, right? Except that this it isn’t. is an unfair expectation. It does not take into account questions such as the following:
How did we get to such a dire situation in the first place?
Who were the past polluters?
When did they reduce their emissions?
Did they pay any costs for the pollution they caused?
What was the relationship between environmental pollution and a country's GDP?
The proposed rules don't test for any of the above questions. It doesn't place a more significant proportion of the responsibility on the Western countries as they contributed the highest pollution historically. Instead, it proposes to impose the costs on developing countries. Doesn't this expectation sound an awful lot like Imperialism? It does, and it's got a new name - 'Green Imperialism'. (Source: https://www.forbes.com/sites/tilakdoshi/2021/09/11/cop26-and-carbon-imperialism-a-showdown-looming/?sh=3a31aa5f5407).
A creative solution for this issue can come in the form of funds from rich countries to developing countries. Quantifying the historical costs of environmental pollution is imperative. There is immense scope for assuming that rich countries are saving emerging countries. This narrative is false. We can think of these funds as delayed payments from rich countries for their historical costs. They are balancing the chequebook only now. This solution will ensure that the expenses incurred by each country are fair. Prices will also be more commensurate with the level of pollution incurred by each country with the funding solution.
This ingenious solution turned out to be a point of contention at the Summit. The amount demanded by emerging economies far outpaces the Western countries' expected pledge amount. Actions speak louder than words. Rich countries showed scepticism if they would be able to meet the $1.3 trillion demand by the emerging countries. Western countries actions reveal that they don't intend to pay for the damage they caused in the past. It is unfair for the committee to expect developing countries to cut their emissions without making the rich countries pay for their past pollution, especially when these steps hurt the developing countries’ economies.
My Takeaways:
Climate trade tariffs are imperialism in modern form. It's well established that tariffs and war are substitutes in the contemporary world. Now, we find that tariffs can serve another potential role - a channel to promote imperialism. We need empirical evidence to confirm if this theory holds any water. As an economist, I do believe that tariffs are the best way to curb carbon emissions. I note a caveat - when levying tariffs, it is essential to include past and current emission history.