The Challenges of Climate Change and Global Growth

In addition to the Alliance of Liberals and Democrats (ALDE) and the associate to them party of Emmanuel Macron-President of France, the recent EU elections have also highlighted other winners. These were the Green parties that won significant percentages in member countries such as Germany, Finland, Ireland, France and Britain. In Finland and Ireland, the Green parties recorded percentages that brought them to the second place of the electoral reckoning.

by Thanos S. Chonthrogiannis-https://www.liberalglobe.com

The Green Group in the new European Parliament has 69 MEPs. The high percentages of the European Greens in relation to the previous EU elections indicating the will of the European citizens to be coordinated and politicized in a joint fight based on their ecological concerns in order to tackle climate change.

Of course, the movement of Swedish student Greta Tunberg (Fridays for Future) where tens of thousands of people descend protesting the streets of European cities every Friday protesting for measures against global warming and climate change, videos filmed by famous and non-famous YouTubers and presented on YouTube for the disastrous policies of the major European parties for the climate, have profoundly influenced the new generation of voters and have acted as a support to the vote in favor of the Green parties.  

If the European Greens work with the Liberals in the European Parliament, the pressures exerted on both the European Parliament and the new EU Commission will be great in order to adopt even stricter measures to reverse the phenomenon of global warming.

At a time when US President Donald Trump has so far annulled regulations to protect the environment, while withdrawing the US from the Paris Agreement on climate change (2015 United Nations Climate Change Conference, COP21 or CMP11) and refusing to sign the agreement on the protection of the Arctic by laying down conditions to sign it, there should be a strong “counterweight” that can bridge the gap.

In addition to the USA, China does not want to reduce its emissions, thereby reducing its productivity and growth rates, given that the growth of its economy is energy-based on the huge reserves that has its subsoil in lignite.  

 The appropriate policies to tackle climate change without affecting global growth

The most important measure that should be implemented to help cope with the phenomenon of overheating, but without reducing the growth rates of the countries at the same time, but also forcing industries and agriculture into all the countries to adopt more economical ways of energy consumption, it is that the central banks of all countries should agree that all banking institutions under their supervision that granting loans of all kinds should be an inviolable condition for lending to include the adoption of strict green growth conditions-rules and low-emission energy consumption so that all borrowing companies are forced to adopt such a type of policies in their corporate development.

In addition, the financial markets and capital markets of the whole world should adopt such strict conditions-rules for those companies that want to raise capital from their markets.

The formulation of corresponding financial instruments by all kinds of financial institutions, such that they force industries and agricultural production to adopt technological solutions that have proven their use to lead to the reduction energy consumption, will seal this policy.

In this way and gradually all the industries on the planet will be forced, and if they want to be loaned and use financial leverage for their corporate growth, to adopt and adjust in their corporate governance and development respectively to the above proposed strict conditions-rules which will lead to a drastic reduction in gas emissions.

However, in order to achieve this global objective, the whole of the central banks of the developed countries should agree on a homogeneous and mutually acceptable framework of rules and regulations, which will apply everywhere and when businesses they want to receive all kinds of funding (either from banks or capital/financial markets, etc.).

In addition, companies should be obliged and listed in their products and services respectively if they use technologies to reduce their energy production and should reduce gas emissions (carbon dioxide, methane, nitric oxide, etc.). In the same way that the country of origin of the products is indicated on the products.

In this case consumers should be aware of this and choose whether to buy the offered products and services of enterprises, while rewarding those companies that make use of the specific emissions reduction technologies.

In this way, competition is not altered, as the framework of rules and regulations will be acceptable and enforceable by all, both on the individual market-country level and globally.

The central banks and the respective Parliaments of their countries do not need to take account of all those politicians who are in one way or another in the face of policies and agreements to reduce gas emissions.

The regulatory framework is being turned on by the central banks and the political parties in the respective Parliaments are bringing it to the vote.

The oil extraction companies and their adaptation to this framework

On the other hand, there are the extracting, refining, transporting and trading companies of hydrocarbons and all their derivative products that are affected by such a regulatory framework as we have proposed above.

We need to be realistic that is why the whole world must understand that on the wealth generated by all these companies that belongs in these oil industries, millions of people have invested their economies (in stocks of these companies and not only) through investments that make mutual funds, pension funds, banks, building societies, hedge funds etc., without ignoring the hundreds of thousands of workers working in these companies.

For this reason, any type of “correction” in the prices of the shares of these companies will cause a great loss of wealth and can even reach the point of causing a financial crisis. Therefore, the shift towards clean energy should be done in a gradual manner with the minimum possible loss to the existing wealth of these companies.

That is why the governments of all countries should help all these companies by providing them with specific bundles of equivalent value measures, e.g. brave tax exemptions over a long horizon, providing loans with low borrowing interest rates or with zero borrowing interest rates where this possibility exists, in order for these companies to have the incentive to invest in the production of clean energy and always in such a way that it becomes unchanged in the company’s revenue portfolio the amount of net revenue cash-flow which will come from the production and trading of clean energy and always in comparison to the amount of net revenue cash-flow from an existing particular unit or oil extraction units for the purpose of cessation of operations e.g. oil rig, replacing it with equivalent value of net revenue cash-flow which will be generated from a clean energy plant or units.

More specifically, since there is the possibility of investment in the production of clean energy, e.g. in a park of light-voltaic or wind turbines, which will be able to supply clean energy a city of a certain size, then the investment study that should be done should be it includes and whether the net revenue cash-flow streams from this investment are equitable size with the corresponding net revenue cash-flow streams received by specific oil extraction companies from their specific extraction/production units and always measured these investments for the same time horizon.

Subsequently the estimated net cash-flow revenues from specific oil extraction units are of identical size to the net revenue proceeds from the production and marketing of clean energy due to the above investment in question, then the company should undertake this investment on clean energy and at the same time will be able to cease the operation of the corresponding oil extraction unit or units with no damage to its financial profile.

In this way, every oil extraction company will be able to make smooth adjustment in the new era by adopting clean energy into its business without affecting its profile. In these cases, therefore, priority should be given to all these companies in terms of their investments in the conversion of the way of producing energy.  

An example to avoid where the government of a country, due to the pressure of the majority of the electorate who is highly sensitized to the consequences of climate change, directly adopts clean energy by completely eliminating the production of nuclear energy, while being energy dependent and importing energy, is Germany.

Germany decided to close all its nuclear power plants by 2022 and all its factories producing energy using lignite until 2038. The result of this political decision is that it is increasingly dependent on Russian gas, even deciding to construct a second gas pipeline from Russia.

Only by gradually replacing the energy from lignite, oil and uranium from clean energy and always with the strategy we mentioned above that does not affect the financial profile of companies active in specific industries can achieve this global goal.

Thanos S. Chonthrogiannis

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