From landgrab to coup d’etat

by | Mar 24, 2009 | Climate and resource scarcity, Conflict and security

Back in November last year, I blogged on the land lease deal agreed between Daewoo, the South Korean company, and the government of Madagascar, under which the former would lease fully one half of Madagascar’s arable land for a hundred years.  Soon afterwards, the news emerged that Madagascar would receive no payment at all for the lease – the only upside would instead be the prospect of some job creation.

Since then, of course, Madagascar’s government has fallen in a coup d’etat.  But what I hadn’t spotted until a US Department of Agriculture official mentioned it to me last week is the fact that the land deal was front and centre in what made the coup happen.  Here’s Tom Burgis in the FT on Saturday:

“Everything was a monopoly with [President] Ravalomanana,” says Naina, a 41-year-old wood chopper in one of the capital’s poorest neighbourhoods. “The country could not develop.”

The bombshell that turned the discontent into outright anger and so brought an end to Mr Ravalomanana’s rule was news of a deal between the government and Daewoo Logistics. This envisioned leasing vast tracts of Madagascar’s arable land to the South Korean conglomerate to grow crops that would be exported from a country where aid agencies were battling rural starvation. “It was the news that said Daewoo expected to pay nothing for the land that accelerated the trouble,” says one well-connected Malagasy banker who asks not to be named.

At a stroke, alienated members of the Malagasy elite found the banner to which they could rally an urban poor already struggling to cope with rice prices driven higher by the global commodity boom. They also found a figurehead in Andry Rajoelina, a 34-year-old former DJ who had married into Malagasy aristocracy and built the capital’s foremost billboard advertising operation …

Thousands took to the streets, whipped up by the Daewoo deal as the symbol of all that was ill. Protests turned to looting. Scores died as buildings burned. Then, in early February, Mr Rajoelina lead a boiling crowd from the main square to the gates of the state palace. Amid the confusion, the presidential guard opened fire.

By now we’re all well used to the idea that oil, diamonds, coltan, poppies and other high-value commodities can lead to a ‘resource curse’ in fragile states – for instance when the resource endowment ‘crowds out’ other sectors of the economy (e.g. through exchange rate rises), or props up poor governance.  Hitherto, though, only a few food crops – like coffee and cocoa – have been on the list of potential resource curse drivers.

I found myself wondering a couple of weeks ago whether the prospect of long term food price inflation and proliferating security of supply concerns  in places like China, South Korea and a raft of Gulf countries, might lead to growth in the pool of potential resource curse drivers.  Having seen the first government fall as the result of a landgrab deal, I think we now know the answer…

What kind of carbon trading system for the US?

by | Mar 23, 2009 | Climate and resource scarcity, Economics and development

There looks likely to be another acrimonious debate in the US over President Obama’s plan to auction 100% of the carbon permits generated if the US signs up to a cap on its emissions at the Copenhagen summit.

Big US utilities, particularly coal-powered ones, say they want the permits to be given them for free, otherwise, they say, the cost will be handed on to consumers:

Some cap-and-trade corporate allies and lawmakers from both parties say the plan would amount to a tax increase falling most heavily on consumers whose power comes from coal, the most polluting power source.

“It was wrong-headed thinking,” said Michael Morris, chief executive officer of  American Electric Power Co, the biggest U.S. electricity producer from coal. “Don’t call it cap-and-trade when it’s really a tax,” he said in an interview.

The Columbus, Ohio-based utility wants no-cost permits at the outset. Congress faces “an awfully long debate” if a bill imposes all those costs on companies, he said.

Speaking last week with a group of CEOs in Washington, Obama indicated he may budge from his 100 percent auction stance. He said he will work with companies to “find a structure that arrives at that right balance” between giving permits away and selling them. “We are not going to be able to move this in an effective way without partnership with the business community.”

Come again?

Phase One of the EU carbon trading system handed out free permits to European utilities, who still passed on the cost to their consumers, and pocketed the record profits. It was punishing consumers, and rewarding pollutors with a multi-billion-euro windfall.

That’s why the EU has moved to an auction system in Phase 2 – indeed, it’s holding an auction tomorrow.

Obama should stick to his guns.

Meanwhile, the EU is debating whether to set a reserve price for carbon permits, after the price of carbon collapsed from Eu30 per tonne in the middle of last year, to Eu10 now.

PWC is the latest to call for governments to set a floor price below which they won’t sell.

More opposition from Barclays Capital, which is by far the biggest trader in the carbon market, and a good reply from John Hawksworth, the author of PWC’s report:

Trevor Sikorski, a director in Barclays Capital’s carbon trading division, said that any attempt to impose a floor price would represent “a market distortion that is unneeded”. He added that even a floor price would not guarantee investment in low-carbon technologies, arguing that the role of prices was not to assign capital expenditure but instead “equilibrate markets by putting a price on the scarcity of the commodity… if the market needs investment to equilibrate, then it will signal this.”

However, Hawksworth said that while imposing price floors and ceilings would serve to distort conventional markets, the artificial nature of the carbon market meant that it represents an exception to the rule.

“Normally you would say that if a price is low, it is low for a reason,” he admitted. “But in this instance the market has been created for the specific reason of bringing down emissions and that is difficult to achieve if the price gets too low, so governments need the flexibility to address excessive price volatility.”

CONTEST 2: Content is fine – communication is key

by | Mar 22, 2009 | Conflict and security, UK

I am watching a video clip of Jacqui Smith, the Home Secretary on the Politics Show . It is one of the worst interviews the Home Secretary has ever done. I am hoping that if the Home Secretary is on Radio 4 tomorrow it is 110 per cent better. The BBC’s Jon Sopel asked basic questions which left the Home Secretary floundering. None of her answers were articulated in a way that allowed her to get her key messages across.

One of the most simple (but important) lines I would suggest the Home Secretary begins with is to contrast the first CONTEST strategy with the new one. Specifically,  the Home Secretary should point out that in the past the Government had had to focus resources on the Pursue and Protect strands (because it needed to) while the new CONTEST strategy focuses on the Prevent and Prepare strands (obviously explaining the 4Ps in the process) – by tackling the causes of violent extremism by working together with communities across the UK.

I am assuming that the ‘60,000 people being trained to deal with an incident’  that the Home Secretary and the Prime Minister refer to, are the fruits of Project ARGUS:

Project ARGUS is a National Counter Terrorism Security Office initiative, exploring ways to aid you in preventing, handling and recovering from a terrorist attack. It achieves this by taking businesses through a simulated terrorist attack. The simulation (on a DVD) identifies the measures to take for preventing, handling and recovering from a terrorist attack. This simulation provides you with a unique opportunity to both learn from and contribute to valuable lessons helping to protect you, your business and your community, whether you are a national chain or a small business.

The second CONTEST strategy has taken months of hard work and reflects input from Government departments, the police, communities, and organisations across the UK. Let’s hope the Home Office and No.10 communicate it in such a way that the new strategy neither alerts or alarms but instead describes the Government’s approach and direction of travel. At least the Home Office is without Tony (three 9/11s) McNulty – this is a good thing.