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Over the last several decades, the financial sector has grown relentlessly. It has doubled in size over the last 14 years. During the period 1973 to 1985 the financial sector never earned more than 16% of domestic profits. This decade, it has averaged 41% of all the profits earned by businesses in the U.S. In 1947 the financial sector represented only 2.5% of our gross domestic product. In 2006 it had risen to 8%. In other words, of every 12.5 dollars earned in the United States, one goes to the financial sector, much of which, let us recall, produces nothing.

That growth has not been among community or regional banks -- or credit unions. I'm talking about Wall Street.

Wall Street's growth is one big reason that most of America's economic growth during the last decade has flowed into the hands of investment bankers, stock traders and partners in firms like Goldman Sachs. The Center on Budget and Policy Priorities reports that fully two-thirds of all income gains during the last economic expansion (2002 to 2007) flowed to the top 1% of the population. And that, in turn, is one of the chief reasons why the median income for ordinary Americans actually dropped by $2,197 per year since 2000.

No surprise then that disproportionate numbers of the "best and brightest" graduates of our finest universities headed off to Wall Street. After all, that's where if you are very clever you can make tens of millions of dollars before you are thirty -- mostly producing nothing.

By 2007 the top 50 hedge and private equity fund managers averaged $588 million in annual compensation each -- more than 19,000 times as much as the average U.S. worker. And by the way, the hedge fund managers paid a tax rate on their incomes of only 15% -- far lower than the rates paid by their secretaries.

This huge wealth transfer from the "real" economy to the world of finance has also created a vicious cycle of increased credit dependency. If your family's real income isn't going up, but costs are, you try to borrow to stay afloat. That is one reason why private debt now equals 350% of the Gross Domestic Product -- the highest ever. The more debt that consumers owe to the shrinking number of big financial institutions, the greater the share of their shrinking or stagnant incomes that is siphoned off to the finance sector -- and the cycle just gets worse. And when the disposable income of ordinary Americans shrinks, they don't have the money to buy the new products and services that will fuel long term economic growth in the real economy.

Something is very wrong in this picture.

In fact, as last year's financial collapse made ever so clear, the increasing dominance of the financial sector - and its deregulation -- has become a mortal danger to our economic security. The financial sector - including the big insurance companies -- has morphed into a cancer growing on our economy -- a cancer that could easily strangle our prospects for our long-term economic security.

Later this week, Congress begins consideration of a package of measures that would serve as a first step in re-regulating and hopefully shrinking the American financial industry. This battle has not attracted as much attention as the critical fight over health care, but it is just as important for the well-being of everyday Americans.

The "best and brightest" from Wall Street would like to make the issues involved in this debate look complex and technical -- beyond the understanding of ordinary mortals. But there are a couple of clear principles to remember as the debate unfolds:

1) History has shown that financial markets cannot accomplish their ostensible goal of allocating risk and directing capital to their highest and best uses unless they function within the context of very strict rules. That is so because speculators have a natural tendency to create products and systems that allow them to engage in reckless excesses that cause the entire system to lurch from bubble to bubble, collapse to collapse. This is not a theoretical argument. History proves the case beyond a reasonable doubt.

In 1792 the newly-minted United States suffered its first credit crisis. Another credit crisis followed about once every fifteen years until 1932. Then, the mother of all credit crises caused the Great Depression that in turn spawned the Securities and Exchange Commission (SEC) to regulate the stock market, the Federal Deposit Insurance Corporation (FDIC) to guarantee deposits in banks, and the Glass-Steagall Act that prevented banks from engaging in other forms of more risky financial activity.

For the next 50 years, those regulation -- coupled with a wise use of Keynesian economic policies -- prevented another financial crisis. That is one of the reasons why America's experienced an unprecedented era of economic growth for every sector of the population - and a massive reduction in the inequality of income distribution.

But in the 1980's the Reagan "revolution" worked its de-regulatory magic on the Savings and Loan industry. It didn't take long for many of these once-stable institutions to collapse and cause the first credit crisis in a half-century. That should have given the country fair warning, but a few years later Wall Street convinced Congress to repeal the Glass-Steagall Act, and it prevented the regulation of newly-exploding "financial products" like "derivatives" that were basically bets on the movement of underlying investments like stock and bonds. Wouldn't want to "discourage financial innovation," they said. The growing predominance of private equity financing also took more and more financial transactions from the light of transparent regulated public markets into the de-regulated shadows.

Then there was the securitization of debt. Banks and other lenders bundled mortgages and other loans into packages and then chopped the packages into units that could be sold on secondary financial markets. These new markets made a lot more money available for loans, but there was no provision made for the inherent dangers. For years previous, bankers made loans with the realization that they were on the hook if they went bad. The new secondary markets allowed them to make the loans, and sell off the risk to a diffuse "market" that left them free of any risk.

All the while, the size of the financial sector was fed by the growing use of credit cards that could legally siphon off huge streams of revenue from ordinary Americans into the hands of bankers. And the elimination of usury laws encouraged the development of the "payday loan" industry that allowed someone to borrow $500 and pay $2,000 of interest on the loan over the next two years.

The result of all of these trends has been massive consolidation of power by a few major financial institutions that have ranged far afield from banking into highly speculative activities of all sorts. Brokerage firms like Goldman Sachs and banks like Citibank have become indistinguishable. Massive portions of the credit market now exist outside of the oversight of any regulator.

Today, 45% of the banking market in the U.S. is dominated by Bank of America and Citibank.

Finally, of course, huge remuneration packages were paid to clever Ivy League graduates who could make billions in speculative profit, even if they did so by taking Godzilla-sized risks. Remuneration systems paid them on the basis of short-term gain and they suffered no financial penalty for long-term pain. So they were "off to the races."

2) Much of the financial sector does not produce anything. The principal missions of the financial sector are to take on risk and allocate captial effectively. Some of the industry - especially community and regional banks -- do just that. But in the last year the financial sector as a whole didn't "take on risk," it shifted risk to ordinary Americans through gigantic taxpayer bailouts. And often the Wall Streeters themselves escaped the recent economic debacle, having salted away hundreds of billions of dollars.

Fundamentally the financial sector is made up of middlemen, who spend their time creating schemes that allow them to funnel society's money through their bank accounts so they can take a sliver of every dollar off of the top.

Right now, the private health insurance industry is busy trying to defend its turf against a public health insurance option. It wants to maintain its "right" to take that tribute off the top of as many health care dollars as possible. Remember, the private health insurance industry doesn't deliver any actual health care.

The same is true of most of the financial sector. It is the farmers, manufacturing firms, the health care providers, the transportation companies, the guys who sweep up buildings, the cops and firefighters, the people who teach our kids -- those are the people who produce the goods and services that we consume in our economy.

Most "innovative financial products" like derivatives are nothing more than schemes that allow speculators to build up paper wealth that will fuel the next credit bubble. Creating mechanisms to allow speculators to bet on the direction of stock prices or other actual investments doesn't do any more for the underlying economy than allowing the same people to bet on horse races.

Most Wall Street speculators don't contribute any more to our common well being than professional gamblers - which is pretty much what they are. Gaming in Las Vegas has fine entertainment value, but providing a gigantic worldwide casino for the rich is not an economically vital core function for the world's financial markets.

I'm not arguing against using financial markets to allocate capital and risk. Banks, stock markets and other financial institutions can be -- and have historically been -- important and efficient means of accomplishing these goals. But not when the tail begins to wag the dog. Not when the financial sector, which can be useful at serving the needs of the productive sectors of the economy, comes to dominate the economy.

After all, if so much wealth flows from the productive sectors of the economy into the fundamentally unproductive financial sector, ordinary people don't have enough money to buy the products that drive economic growth in the real economy.

3) Left to their own devices, financial speculators often kill off productive enterprises through leveraged buyouts and private equity plays. A case in point was highlighted last week by the New York Times. Simmons Bedding has been in business producing high quality mattresses for almost 133 years. Now it's about to file for bankruptcy protection -- but not because it isn't a viable successful business.

Simmons has been milked dry by a succession of buyers and Wall Street investment banks that have made millions through leveraged buyouts that made good financial sense for Wall Street, but left the manufacturing firm deeper and deeper in debt. The Times reports that "the financiers borrowed more and more money to pay ever-higher prices for the company, enabling each previous owner to cash out profitably."

Simmons now owes $1.3 billion compared with $164 million in 1991. According to the Times, "In many ways, what private equity firms did at Simmons, and scores of other companies like it, mimicked the sub-prime mortgage boom. Fueled by easy money... these private investors were able to buy companies like Simmons with borrowed money and put down relatively little of their own cash. Then not long after, they often borrowed even more money, using the company's assets as collateral."

"The result: THL (the private equity firm) was guaranteed a profit regardless of how Simmons performed. It did not matter that the company was left owing far more than it was worth." Too bad for Noble Rodgers, an employee of 22 years, who along with 1,000 others have been laid off. Too bad for the American manufacturing base. The investment bankers got theirs.

4) The bigger the financial sector gets, the more power it has to hold the entire economy ransom for huge bailouts when their speculative bubbles collapse. Firms that are allowed to grow as large as AIG, CitiBank and Bank of America create "systemic" risk that threatens the world financial system.

The bottom line is that if a financial institution is too big to fail, it's just too big, period.

The new regulatory proposals now pending before Congress are critical first steps in reining in the power of the financial sector. The proposed Consumer Financial Protection Agency is especially important. It would end the anything-goes "Dodge City" mentality that allows consumers to have their pockets picked by financial "products" like teaser-rate mortgages with prepayment penalties that guarantee the consumer pays more than meets the eye. It will require tight regulation of credit card interest rates and fees.

But equally critical are tough new regulations of the entire financial sector - including the "derivatives" and "credit-default-swap" markets - and private equity, as well as regulations to eliminate remuneration systems that incentivize recklessness, and requirements that mortgage originators maintain a stake in the loans they sell. The "resolution" authority proposed by the Obama Administration is also an important step to assure that there is an orderly way to close even the largest of financial institutions.

Serious regulation will inevitably cut back on the flow of income from normal people to the financial sector as a whole. But over time, our goal needs to be to restore dominance of the economy to the productive sectors of economic endeavor, and to break up the financial and insurance cartels that have a stranglehold on our future.

That will not happen without a monumental struggle. The Obama Administration's proposals for financial re-regulation are the first offensive on this critical front in the war for our long-term economic security.

Our mismanaged world economy today has many of the characteristics of a Ponzi scheme. A Ponzi scheme takes payments from a broad base of investors and uses these to pay off returns. It creates the illusion that it is providing a highly attractive rate of return on investment as a result of savvy investment decisions when in fact these irresistibly high earnings are in part the result of consuming the asset base itself. A Ponzi scheme investment fund can last only as long as the flow of new investments is sufficient to sustain the high rates of return paid out to previous investors. When this is no longer possible, the scheme collapses—just as Bernard Madoff’s $65 billion investment fund did in December 2008.

Although the functioning of the global economy and a Ponzi investment scheme are not entirely analogous, there are some disturbing parallels. As recently as 1950 or so, the world economy was living more or less within its means, consuming only the sustainable yield, the interest of the natural systems that support it. But then as the economy doubled, and doubled again, and yet again, multiplying eightfold, it began to outrun sustainable yields and to consume the asset base itself.

In a 2002 study published by the U.S. National Academy of Sciences, a team of scientists concluded that humanity’s collective demands first surpassed the earth’s regenerative capacity around 1980. As of 2009, global demands on natural systems exceed their sustainable yield capacity by nearly 30 percent. This means we are meeting current demands in part by consuming the earth’s natural assets, setting the stage for an eventual Ponzi-type collapse when these assets are depleted.

As of mid-2009, nearly all the world’s major aquifers were being overpumped. We have more irrigation water than before the overpumping began, in true Ponzi fashion. We get the feeling that we’re doing very well in agriculture—but the reality is that an estimated 400 million people are today being fed by overpumping, a process that is by definition short-term. With aquifers being depleted, this water-based food bubble is about to burst.

A similar situation exists with the melting of mountain glaciers. When glaciers first start to melt, flows in the rivers and the irrigation canals they feed are larger than before the melting started. But after a point, as smaller glaciers disappear and larger ones shrink, the amount of ice melt declines and the river flow diminishes. Thus we have two water-based Ponzi schemes running in parallel in agriculture.

And there are more such schemes. As human and livestock populations grow more or less apace, the rising demand for forage eventually exceeds the sustainable yield of grasslands. As a result, the grass deteriorates, leaving the land bare, allowing it to turn to desert. In this Ponzi scheme, herders are forced to rely on food aid or they migrate to cities.

Three-fourths of oceanic fisheries are now being fished at or beyond capacity or are recovering from overexploitation. If we continue with business as usual, many of these fisheries will collapse. Overfishing, simply defined, means we are taking fish from the oceans faster than they can reproduce. The cod fishery off the coast of Newfoundland in Canada is a prime example of what can happen. Long one of the world’s most productive fisheries, it collapsed in the early 1990s and may never recover.

Paul Hawken, author of Blessed Unrest, puts it well: “At present we are stealing the future, selling it in the present, and calling it gross domestic product. We can just as easily have an economy that is based on healing the future instead of stealing it. We can either create assets for the future or take the assets of the future. One is called restoration and the other exploitation.” The larger question is, if we continue with business as usual—with overpumping, overgrazing, overplowing, overfishing, and overloading the atmosphere with carbon dioxide—how long will it be before the Ponzi economy unravels and collapses? No one knows. Our industrial civilization has not been here before.

Unlike Bernard Madoff’s Ponzi scheme, which was set up with the knowledge that it would eventually fall apart, our global Ponzi economy was not intended to collapse. It is on a collision path because of market forces, perverse incentives, and poorly chosen measures of progress.

In addition to consuming our asset base, we have devised some clever techniques for leaving costs off the books—much like the disgraced and bankrupt Texas-based energy company Enron did some years ago. For example, when we use electricity from a coal-fired power plant we get a monthly bill from the local utility. It includes the cost of mining coal, transporting it to the power plant, burning it, generating the electricity, and delivering electricity to our homes. It does not, however, include any costs of the climate change caused by burning coal. That bill will come later—and it will likely be delivered to our children. Unfortunately for them, their bill for our coal use will be even larger than ours.

When Sir Nicholas Stern, former chief economist at the World Bank, released his groundbreaking 2006 study on the future costs of climate change, he talked about a massive market failure. He was referring to the failure of the market to incorporate the costs of climate change in the price of fossil fuels. According to Stern, the costs are measured in the trillions of dollars. The difference between the market prices for fossil fuels and an honest price that also incorporates their environmental costs to society is huge.

As economic decisionmakers, we all depend on the market for information to guide us, but the market is giving us incomplete information, and as a result we are making bad decisions. One of the best examples of this can be seen in the United States, where the gasoline pump price was around $3 per gallon in mid-2009. This reflects only the cost of finding the oil, pumping it to the surface, refining it into gasoline, and delivering the gas to service stations. It overlooks the costs of climate change as well as the costs of tax subsidies to the oil industry, the burgeoning military costs of protecting access to oil in the politically unstable Middle East, and the health care costs of treating respiratory illnesses caused by breathing polluted air. These indirect costs now total some $12 per gallon. In reality, burning gasoline is very costly, but the market tells us it is cheap.

The market also does not respect the carrying capacity of natural systems. For example, if a fishery is being continuously overfished, the catch eventually will begin to shrink and prices will rise, encouraging even more investment in fishing trawlers. The inevitable result is a precipitous decline in the catch and the collapse of the fishery.

Today we need a realistic view about the relationship between the economy and the environment. We also need, more than ever before, political leaders who can see the big picture. And since the principal advisors to government are economists, we need either economists who can think like ecologists or more ecological advisors. Otherwise, market behavior—including its failure to include the indirect costs of goods and services, to value nature’s services, and to respect sustainable-yield thresholds—will cause the destruction of the economy’s natural support systems, and our global Ponzi scheme will fall apart.

Our oceans have been the victims of a giant Ponzi scheme, waged with Bernie Madoff–like callousness by the world’s fisheries. Beginning in the 1950s, as their operations became increasingly industrialized--with onboard refrigeration, acoustic fish-finders, and, later, GPS--they first depleted stocks of cod, hake, flounder, sole, and halibut in the Northern Hemisphere. As those stocks disappeared, the fleets moved southward, to the coasts of developing nations and, ultimately, all the way to the shores of Antarctica, searching for icefishes and rockcods, and, more recently, for small, shrimplike krill. As the bounty of coastal waters dropped, fisheries moved further offshore, to deeper waters. And, finally, as the larger fish began to disappear, boats began to catch fish that were smaller and uglier--fish never before considered fit for human consumption. Many were renamed so that they could be marketed: The suspicious slimehead became the delicious orange roughy, while the worrisome Patagonian toothfish became the wholesome Chilean seabass. Others, like the homely hoki, were cut up so they could be sold sight-unseen as fish sticks and filets in fast-food restaurants and the frozen-food aisle.

The scheme was carried out by nothing less than a fishing-industrial complex--an alliance of corporate fishing fleets, lobbyists, parliamentary representatives, and fisheries economists. By hiding behind the romantic image of the small-scale, independent fisherman, they secured political influence and government subsidies far in excess of what would be expected, given their minuscule contribution to the GDP of advanced economies--in the United States, even less than that of the hair salon industry. In Japan, for example, huge, vertically integrated conglomerates, such as Taiyo or the better-known Mitsubishi, lobby their friends in the Japanese Fisheries Agency and the Ministry of Foreign Affairs to help them gain access to the few remaining plentiful stocks of tuna, like those in the waters surrounding South Pacific countries. Beginning in the early 1980s, the United States, which had not traditionally been much of a fishing country, began heavily subsidizing U.S. fleets, producing its own fishing-industrial complex, dominated by large processors and retail chains. Today, governments provide nearly $30 billion in subsidies each year--about one-third of the value of the global catch--that keep fisheries going, even when they have overexploited their resource base. As a result, there are between two and four times as many boats as the annual catch requires, and yet, the funds to “build capacity” keep coming.

The jig, however, is nearly up. In 1950, the newly constituted Food and Agriculture Organization (FAO) of the United Nations estimated that, globally, we were catching about 20 million metric tons of fish (cod, mackerel, tuna, etc.) and invertebrates (lobster, squid, clams, etc.). That catch peaked at 90 million tons per year in the late 1980s, and it has been declining ever since. Much like Madoff’s infamous operation, which required a constant influx of new investments to generate “revenue” for past investors, the global fishing-industrial complex has required a constant influx of new stocks to continue operation. Instead of restricting its catches so that fish can reproduce and maintain their populations, the industry has simply fished until a stock is depleted and then moved on to new or deeper waters, and to smaller and stranger fish. And, just as a Ponzi scheme will collapse once the pool of potential investors has been drained, so too will the fishing industry collapse as the oceans are drained of life.

Unfortunately, it is not just the future of the fishing industry that is at stake, but also the continued health of the world’s largest ecosystem. While the climate crisis gathers front-page attention on a regular basis, people--even those who profess great environmental consciousness--continue to eat fish as if it were a sustainable practice. But eating a tuna roll at a sushi restaurant should be considered no more environmentally benign than driving a Hummer or harpooning a manatee. In the past 50 years, we have reduced the populations of large commercial fish, such as bluefin tuna, cod, and other favorites, by a staggering 90 percent. One study, published in the prestigious journal Science, forecast that, by 2048, all commercial fish stocks will have “collapsed,” meaning that they will be generating 10 percent or less of their peak catches. Whether or not that particular year, or even decade, is correct, one thing is clear: Fish are in dire peril, and, if they are, then so are we.

The extent of the fisheries’ Ponzi scheme eluded government scientists for many years. They had long studied the health of fish populations, of course, but typically, laboratories would focus only on the species in their nation’s waters. And those studying a particular species in one country would communicate only with those studying that same species in another. Thus, they failed to notice an important pattern: Popular species were sequentially replacing each other in the catches that fisheries were reporting, and, when a species faded, scientific attention shifted to the replacement species. At any given moment, scientists might acknowledge that one-half or two-thirds of fisheries were being overfished, but, when the stock of a particular fish was used up, it was simply removed from the denominator of the fraction. For example, the Hudson River sturgeon wasn’t counted as an overfished stock once it disappeared from New York waters; it simply became an anecdote in the historical record. The baselines just kept shifting, allowing us to continue blithely damaging marine ecosystems.

It was not until the 1990s that a series of high-profile scientific papers demonstrated that we needed to study, and mitigate, fish depletions at the global level. They showed that phenomena previously observed at local levels--for example, the disappearance of large species from fisheries’ catches and their replacement by smaller species--were also occurring globally. It was a realization akin to understanding that the financial meltdown was due not to the failure of a single bank, but, rather, to the failure of the entire banking system--and it drew a lot of controversy.

The notion that fish are globally imperiled has been challenged in many ways--perhaps most notably by fisheries biologists, who have questioned the facts, the tone, and even the integrity of those making such allegations. Fisheries biologists are different than marine ecologists like myself. Marine ecologists are concerned mainly with threats to the diversity of the ecosystems that they study, and so, they frequently work in concert with environmental NGOs and are often funded by philanthropic foundations. By contrast, fisheries biologists traditionally work for government agencies, like the National Marine Fisheries Service at the Commerce Department, or as consultants to the fishing industry, and their chief goal is to protect fisheries and the fishermen they employ. I myself was trained as a fisheries biologist in Germany, and, while they would dispute this, the agencies for which many of my former classmates work clearly have been captured by the industry they are supposed to regulate. Thus, there are fisheries scientists who, for example, write that cod have “recovered” or even “doubled” their numbers when, in fact, they have increased merely from 1 percent to 2 percent of their original abundance in the 1950s.

Yet, despite their different interests and priorities--and despite their disagreements on the “end of fish”--marine ecologists and fisheries scientists both want there to be more fish in the oceans. Partly, this is because both are scientists, who are expected to concede when confronted with strong evidence. And, in the case of fisheries, as with global warming, the evidence is overwhelming: Stocks are declining in most parts of the world. And, ultimately, the important rift is not between these two groups of scientists, but between the public, which owns the sea’s resources, and the fishing-industrial complex, which needs fresh capital for its Ponzi scheme. The difficulty lies in forcing the fishing-industrial complex to catch fewer fish so that populations can rebuild.

It is essential that we do so as quickly as possible because the consequences of an end to fish are frightful. To some Western nations, an end to fish might simply seem like a culinary catastrophe, but for 400 million people in developing nations, particularly in poor African and South Asian countries, fish are the main source of animal protein. What’s more, fisheries are a major source of livelihood for hundreds of million of people. A recent World Bank report found that the income of the world’s 30 million small-scale fisheries is shrinking. The decrease in catch has also dealt a blow to a prime source of foreign-exchange earnings, on which impoverished countries, ranging from Senegal in West Africa to the Solomon Islands in the South Pacific, rely to support their imports of staples such as rice.

And, of course, the end of fish would disrupt marine ecosystems to an extent that we are only now beginning to appreciate. Thus, the removal of small fish in the Mediterranean to fatten bluefin tuna in pens is causing the “common” dolphin to become exceedingly rare in some areas, with local extinction probable. Other marine mammals and seabirds are similarly affected in various parts of the world. Moreover, the removal of top predators from marine ecosystems has effects that cascade down, leading to the increase of jellyfish and other gelatinous zooplankton and to the gradual erosion of the food web within which fish populations are embedded. This is what happened off the coast of southwestern Africa, where an upwelling ecosystem similar to that off California, previously dominated by fish such as hake and sardines, has become overrun by millions of tons of jellyfish.

Jellyfish population outbursts are also becoming more frequent in the northern Gulf of Mexico, where the fertilizer-laden runoff from the Mississippi River fuels uncontrolled algae blooms. The dead algae then fall to a sea bottom from which shrimp trawling has raked all animals capable of feeding on them, and so they rot, causing Massachusetts-sized “dead zones.” Similar phenomena--which only jellyfish seem to enjoy--are occurring throughout the world, from the Baltic Sea to the Chesapeake Bay, and from the Black Sea in southeastern Europe to the Bohai Sea in northeastern China. Our oceans, having nourished us since the beginning of the human species some 150,000 years ago, are now turning against us, becoming angry opponents.

That dynamic will only grow more antagonistic as the oceans become warmer and more acidic because of climate change. Fish are expected to suffer mightily from global warming, making it essential that we preserve as great a number of fish and of fish species as possible, so that those which are able to adapt are around to evolve and propagate the next incarnations of marine life. In fact, new evidence tentatively suggests that large quantities of fish biomass could actually help attenuate ocean acidification. In other words, fish could help save us from the worst consequences of our own folly--yet we are killing them off. The jellyfish-ridden waters we’re seeing now may be only the first scene in a watery horror show.

 

To halt this slide toward a marine dystopia, government intervention is required. Regulatory agencies must impose quotas on the amount of fish caught in any given year, and the way they structure such quotas is very important. For example, simply permitting all fisheries to catch a given aggregate number of fish annually results in a wasteful build-up of fleets and vessels as fisheries race to grab as large a share of the quota as possible before their competitors do. Such a system may protect the fish, but it is economically disastrous: The entire annual quota is usually landed in a short period, leading to temporary oversupply, which, in turn, leads to low prices. The alternative is to limit the number of fishermen, with those retaining “access privileges” being able to catch their assigned fraction of the overall quota whenever they want, without competing against other fishermen. Such individual quotas lead to less overall fishing effort and, hence, bigger profit in the fishery.

Unfortunately, most fisheries economists, fixated solely on corporate short-term profits, argue that, for such a system to work, access privileges must (a) be handed out for free, (b) be held in perpetuity, and (c) be transferrable (i.e., sellable and buyable like any other commodity). They call this construct “fishing rights” or “individual transferable quotas.” However, there is no reason why a government should not auction off quotas with access privileges. The highest bidder would secure the right to a certain percentage of the quota, with society as a whole benefiting from providing private access to a public resource. This would be similar to ranchers paying--as they do--for the privilege to graze their cattle on federal lands. Grazing “rights” on the other hand, would simply give ownership of public land to ranchers, which is something few would consider.

Some Pollyannas believe that aquaculture, or fish farming, can ensure the health of stocks without government action--a notion supposedly buttressed by FAO statistics showing such rapid growth in aquaculture that more than 40 percent of all “seafood” consumed now comes from farms. The problem with this argument is that China reports about 68 percent of the world’s aquaculture production, and the FAO, which has been burned by inflated Chinese statistics before, expresses doubt about its stated production and growth rates. Outside of China--where most farmed fish are freshwater vegetarians, such as carp--aquaculture produces predominately carnivorous marine fish, like salmon, which are fed not only vegetal ingredients, but also fishmeal and fish oil, which are obtained by grinding up herring, mackerel, and sardines caught by “reduction fisheries.” Carnivore farming, which requires three to four pounds of smaller fish to produce one pound of a larger one, thus robs Peter to pay Paul. Aquaculture in the West produces a luxury product in global terms. To expect aquaculture to ensure that fish remain available--or, at least, to expect carnivore farming to solve the problem posed by diminishing catches from fisheries--would be akin to expecting that Enzo Ferrari’s cars can solve gridlock in Los Angeles.

Others believe that fish populations can be rebuilt through consumer awareness campaigns that encourage buyers to make prudent choices. One such approach is to label seafood from fisheries deemed sustainable. In Europe, for example, consumers can look for the logo of the Marine Stewardship Council (MSC), a nonprofit started by the World Wildlife Fund and Unilever, which has a large fish-trading division. At first, the MSC certified only small-scale fisheries, but lately, it has given its seal of approval to large, controversial companies. Indeed, it has begun to measure its success by the percentage of the world catch that it certifies. Encouraged by a Walton Foundation grant and Wal-Mart’s goal of selling only certified fish, the MSC is actually considering certifying reduction fisheries, with the consequence that Wal-Mart, for example, will be able to sell farmed salmon shining with the ersatz glow of sustainability. (Given the devastating pollution, diseases, and parasite infestations that have plagued salmon farms in Chile, Canada, and other countries, this “Wal-Mart strategy” will, in the long term, make the MSC complicit to a giant scam.)

The other market-based initiative, prevalent in the United States, distributes wallet-size cards designed to steer consumers toward fish that the group issuing the cards deems to have been caught sustainably. Their success is considerable if measured by the millions of cards given away, for example, by the Monterey Bay Aquarium, but assessing the impact on the fisheries is difficult. For one thing, the multitude of such cards leads to contradictions and confusion, as the same fish are assessed differently by different organizations. For example, ahi tuna is rated as “safe,” “questionable,” and “avoid” on the wallet cards issued by three U.S. nonprofits. A bigger issue, however, is that these cards generate only “horizontal” pressure--that is, a group of restaurant-goers might chide each other for ordering the cod filet or might ask the overworked student who served them where the fish came from, but this pressure does not reach wholesalers, fleet operators, or supermarket chains. “Vertical” pressure exerted by environmental NGOs on such decision-makers is far more effective. But, if that’s true, why not directly pressure the government and legislators, since they are the ones who regulate the fisheries?

The truth is that governments are the only entities that can prevent the end of fish. For one thing, once freed from their allegiance to the fishing-industrial complex, they are the ones with the research infrastructure capable of prudently managing fisheries. For another, it is they who provide the billions of dollars in annual subsidies that allow the fisheries to persist despite the lousy economics of the industry. Reducing these subsidies would allow fish populations to rebuild, and nearly all fisheries scientists agree that the billions of dollars in harmful, capacityenhancing subsidies must be phased out. Finally, only governments can zone the marine environment, identifying certain areas where fishing will be tolerated and others where it will not. In fact, all maritime countries will have to regulate their exclusive economic zones (the 200-mile boundary areas established by the U.N. Law of the Sea Treaty within which a nation has the sole right to fish). The United States has the largest exclusive economic zone in the world, and it has taken important first steps in protecting its resources, notably in the northwest Hawaiian islands. Creating, or re-creating, un-fished areas within which fish populations can regenerate is the only opportunity we have to repair the damage done to them.

There is no need for an end to fish, or to fishing for that matter. But there is an urgent need for governments to free themselves from the fishing-industrial complex and its Ponzi scheme, to stop subsidizing the fishing-industrial complex and awarding it fishing rights, when it should in fact pay for the privilege to fish. If we can do this, then we will have fish forever.

 

Daniel Pauly is a professor at the Fisheries Centre of the University of British Columbia and the principal investigator of its Sea Around Us Project.

The world’s insatiable appetite for fish, with its disastrous effects on populations of favorites like red snapper, monkfish and tuna, has driven commercial fleets to deeper waters in search of creatures unlikely to star on the Food Network.

(Click to enlarge image) The hoki, found in deep water and in that Filet-O-Fish.

One of the most popular is the hoki, or whiptail, a bug-eyed specimen found far down in the waters around New Zealand and transformed into a major export. McDonald’s alone at one time used roughly 15 million pounds of it each year.

The hoki may be exceedingly unattractive, but when its flesh reaches the consumer it’s just fish — cut into filets and sticks or rolled into sushi — moist, slightly sweet and very tasty. Better yet, the hoki fishery was thought to be sustainable, providing New Zealand with a reliable major export for years to come.

But arguments over managing this resource are flaring not only between commercial interests and conservationists, but also among the environmental agencies most directly involved in monitoring and regulating the catch.

A lot of money is at stake, as well as questions about the effectiveness of global guidelines meant to limit the effects of industrial fishing.

Without formally acknowledging that hoki are being overfished, New Zealand has slashed the allowable catch in steps, from about 275,000 tons in 2000 and 2001 to about 100,000 tons in 2007 and 2008 — a decline of nearly two-thirds.

The scientific jury is still out, but critics warn that the hoki fishery is losing its image as a showpiece of oceanic sustainability.

“We have major concerns,” said Peter Trott, the fisheries program manager in Australia for the World Wildlife Fund, which closely monitors the New Zealand fishery.

The problems, he said, include population declines, ecosystem damage and the accidental killing of skates and sharks. He added that New Zealand hoki managers let industry “get as much as it can from the resource without alarm bells ringing.”

The hoki lives in inky darkness about a half-mile down and grows to more than four feet long, its body ending in a sinuous tail of great length. Large eyes give the fish a startled look.

(Click to enlarge image) An Ugly but Valuable Fish

Scientists say its fate represents a cautionary tale much like that of its heavily harvested forerunner, orange roughy. That deepwater fish reproduces slowly and lives more than 100 years. Around New Zealand, catches fell steeply in the early 1990s under the pressures of industrial fishing, in which factory trawlers work around the clock hauling in huge nets with big winches.

Hoki rose commercially as orange roughy fell. Its shorter life span (up to 25 years) and quicker pace of reproduction seemed to promise sustainable harvests. And its dense spawning aggregations, from June to September, made colossal hauls relatively easy.

As a result, the New Zealand Ministry of Fisheries set very high quotas — roughly 275,000 tons a year from 1996 to 2001. Dozens of factory trawlers plied the deep waters, and dealers shipped frozen blocks and fillets of the fish around the globe.

Moreover, the fishery won certification in March 2001 from the Marine Stewardship Council, a private fisheries assessment group in London, which called it sustainable and well managed. The group’s blue label became a draw for restaurant fish buyers.

“Most Americans have no clue that hoki is often what they’re eating in fried-fish sandwiches,” SeaFood Business, an industry magazine, reported in April 2001. It said chain restaurants using hoki included McDonald’s, Denny’s and Long John Silver’s.

Ominous signs of overfishing — mainly drops in hoki spawns — came soon thereafter. Criticism from ecological groups soared. The stewardship council promotes hoki as sustainable “in spite of falling fish stocks and the annual killing of hundreds of protected seals, albatross and petrels,” the Royal Forest and Bird Protection Society of New Zealand said in May 2004.

When the stewardship council had to decide whether to recertify the hoki fishery as sustainable and well managed, the World Wildlife Fund, a Washington-based group that helped found the council, was strongly opposed. “The impacts of bottom trawling by the hoki fishery must be reduced,” the fund said.

The wildlife fund was overruled, and the council recertified the fishery in October 2007. At the same time, the New Zealand ministry cut the quota still further, reducing the allowable commercial catch from roughly 110,000 tons to about 100,000 tons.

Some restaurants cut back on hoki amid the declines and the controversy.

Last year, Yum Brands, which owns Long John Silver’s, issued a corporate responsibility report that cited its purchases of New Zealand hoki as praiseworthy because the fishery was “certified as sustainable.”

Now, Ben Golden, a Yum Brands spokesman, said hoki was “not on the menu.”

Denny’s said it served hoki only in its New Zealand restaurants.

Gary Johnson, McDonald’s senior director of global purchasing, said hoki use was down recently to about 11 million pounds annually from roughly 15 million pounds — a drop of about 25 percent. “It could go up if the quota goes up,” he said in an interview. He noted that McDonald’s also used other whitefish for its Filet-O-Fish sandwiches.

Mr. Johnson called the diminishing quotas a sign not of strain on fish stocks but of good management. “Everything we’ve seen and heard,” he said, “suggests the fishery is starting to come back.”

The Ministry of Fisheries agreed. “If you look at the current state of the fishery, it’s apparent that the string of management actions that we’ve taken, which came at severe economic impact, have been effective,” said Aoife Martin, manager of deepwater fisheries.

But the Blue Ocean Institute, a conservation group in East Norwich, N.Y., that scores seafood for ecological impact on a scale from green to red, still gives New Zealand hoki an unfavorable orange rating. The fish is less abundant over all, the group says, and the fishery “takes significant quantities of seabirds and fur seals.”

Mr. Trott of the wildlife fund was more pointed. He called the fishery’s management “driven by short-term gains at the expense of long-term rewards” — a characterization the ministry strongly rejects.

But he, too, held out the prospect of a turnaround that would raise the hoki’s abundance off New Zealand and significantly reduce levels of ecological damage and accidental killing.

“We are currently working with both industry and government to rectify all these issues,” he said. “Our hope is that we will see great change and willingness by industry and, importantly, government to improve the situation dramatically.”

NOAA’s National Weather Service Climate Prediction Center released its monthly El Niño/Southern oscillation (ENSO) Diagnostic Discussion:

Synopsis: El Niño is expected to strengthen and last through the Northern Hemisphere Winter 2009-2010.

A weak El Niño was present during July 2009, as monthly sea surface temperatures (SST) departures ranged from +0.5°C to +1.5°C across the equatorial Pacific Ocean, with the largest anomalies in the eastern half of the basin. Consistent with this warmth, all of the Niño-region SST indices were between +0.6°C to +1.0°C throughout the month. Subsurface oceanic heat content (average temperatures in the upper 300m of the ocean) anomalies continued to reflect a deep layer of anomalous warmth between the ocean surface and thermocline.

A majority of the model forecasts for the Niño-3.4 SST index [Fig. 6, at the bottom] suggest El Niño will continue to strengthen. While there is disagreement on the eventual strength of El Niño, nearly all of the dynamical models predict a moderate-to-strong El Niño during the Northern Hemisphere Winter 2009-10.

This announcement is not surprising news — it mainly means the ENSO models are on track (see NOAA says “El Niño arrives; Expected to Persist through Winter 2009-10″ — and that means record temperatures are coming and this will be the hottest decade on record).

But this evolving story remains a big deal from the perspective of heating up global temperatures and cooling off denier talking points.  After all, the La Niña conditions over the past 18 months helped temporarily mute the strong human-caused warming signal, allowing the global warming deniers to push their nonsensical global cooling meme with the help of the status quo media (see “Media enable denier spin 1: A (sort of) cold January [2008] doesn’t mean climate stopped warming“).

Remember, back in January, NASA had predicted:  “Given our expectation of the next El Niño beginning in 2009 or 2010, it still seems likely that a new global temperature record will be set within the next 1-2 years, despite the moderate negative effect of the reduced solar irradiance.“

So I will continue posting at least monthly updates.  Regular readers can skip the rest of this post (though it does have some new figues).

It is the warming in the Nino 3.4 region of the Pacific that is typically used to define an El Niño.  The region can be seen in this figure:

How are El Niño and La Niña defined?

El Niño and La Niña are officially defined as sustained sea surface temperature anomalies of magnitude greater than 0.5°C across the central tropical Pacific Ocean. When the condition is met for a period of less than five months, it is classified as El Niño or La Niña conditions; if the anomaly persists for five months or longer.

You can read the basics about ENSO here.  The following historical data are from NOAA’s weekly ENSO update

As the planet warms decade by decade thanks to human emissions of greenhouse gases, global temperature records tend to be set in El Niño years, like 2005, 1998, and 2007, whereas sustained La Niñas tend to cause relatively cooler years.

Human-caused global warming is so strong, however, that as NASA explained, it took a serious La Niña, plus unusually sustained low levels of solar irradiance, to make 2008 as cool as it was.  Yet, notwithstanding the global warming deniers and the status quo media, 2008 wasn’t actually cool.  Indeed, 2008 was almost 0.1°C warmer than the decade of the 1990s averaged as a whole. And not that there was any realistic chance global temperatures would collapse this year, but now it is quite safe to say that “this will be the hottest decade in recorded history by far.“  The 2000s are on track to be nearly 0.2°C warmer than the 1990s.  And that temperature jump is especially worrisome since the 1990s were only 0.14°C warmer than the 1980s.

If we have a moderate to strong El Niño, then, as NASA says, record global temperatures are all but inevitable.  The NCDC already reported June was the second hottest on record with ocean temperatures the warmest on record — a full 0.11°F warmer than the 2005 record.  It typically takes several months for ENSO to impact global temps.

And this brings us back to NOAA’s updated prediction.  Here were the model forecasts from June:

Figure 5. Forecasts of sea surface temperature (SST) anomalies for the Niño 3.4 region (5°N-5°S, 120°W-170°W). Figure courtesy of the International Research Institute (IRI) for Climate and Society.  Figure updated 15 June 2009.

Now here is the update as of July 16 [don't ask me why these are always 3 weeks old, ask NOAA]:

Note that the June models that predicted a strengthening were correct.  Also, Nino 3.4 in July averaged more than +0.8°C, so again, we see the July models that had predicted strengthening seem to be more accurate.

A hot summer and fall — how timely that would be for debating a climate bill?

This headline may come as a bit of a surprise, so too might that fact that the warmest year recorded globally was not in 2008 or 2007, but in 1998.

But it is true. For the last 11 years we have not observed any increase in global temperatures.

And our climate models did not forecast it, even though man-made carbon dioxide, the gas thought to be responsible for warming our planet, has continued to rise.

So what on Earth is going on?

Climate change sceptics, who passionately and consistently argue that man's influence on our climate is overstated, say they saw it coming.

They argue that there are natural cycles, over which we have no control, that dictate how warm the planet is. But what is the evidence for this?

During the last few decades of the 20th Century, our planet did warm quickly.

Recent research has ruled out solar influences on temperature increases

Sceptics argue that the warming we observed was down to the energy from the Sun increasing. After all 98% of the Earth's warmth comes from the Sun.

But research conducted two years ago, and published by the Royal Society, seemed to rule out solar influences.

The scientists' main approach was simple: to look at solar output and cosmic ray intensity over the last 30-40 years, and compare those trends with the graph for global average surface temperature.

And the results were clear. "Warming in the last 20 to 40 years can't have been caused by solar activity," said Dr Piers Forster from Leeds University, a leading contributor to this year's Intergovernmental Panel on Climate Change (IPCC).

But one solar scientist Piers Corbyn from Weatheraction, a company specialising in long range weather forecasting, disagrees.

He claims that solar charged particles impact us far more than is currently accepted, so much so he says that they are almost entirely responsible for what happens to global temperatures.

He is so excited by what he has discovered that he plans to tell the international scientific community at a conference in London at the end of the month.

If proved correct, this could revolutionise the whole subject.

Ocean cycles

What is really interesting at the moment is what is happening to our oceans. They are the Earth's great heat stores.

In the last few years [the Pacific Ocean] has been losing its warmth and has recently started to cool down

According to research conducted by Professor Don Easterbrook from Western Washington University last November, the oceans and global temperatures are correlated.

The oceans, he says, have a cycle in which they warm and cool cyclically. The most important one is the Pacific decadal oscillation (PDO).

For much of the 1980s and 1990s, it was in a positive cycle, that means warmer than average. And observations have revealed that global temperatures were warm too.

But in the last few years it has been losing its warmth and has recently started to cool down.

These cycles in the past have lasted for nearly 30 years.

So could global temperatures follow? The global cooling from 1945 to 1977 coincided with one of these cold Pacific cycles.

Professor Easterbrook says: "The PDO cool mode has replaced the warm mode in the Pacific Ocean, virtually assuring us of about 30 years of global cooling."

So what does it all mean? Climate change sceptics argue that this is evidence that they have been right all along.

They say there are so many other natural causes for warming and cooling, that even if man is warming the planet, it is a small part compared with nature.

But those scientists who are equally passionate about man's influence on global warming argue that their science is solid.

The UK Met Office's Hadley Centre, responsible for future climate predictions, says it incorporates solar variation and ocean cycles into its climate models, and that they are nothing new.

In fact, the centre says they are just two of the whole host of known factors that influence global temperatures - all of which are accounted for by its models.

In addition, say Met Office scientists, temperatures have never increased in a straight line, and there will always be periods of slower warming, or even temporary cooling.

What is crucial, they say, is the long-term trend in global temperatures. And that, according to the Met office data, is clearly up.

To confuse the issue even further, last month Mojib Latif, a member of the IPCC (Intergovernmental Panel on Climate Change) says that we may indeed be in a period of cooling worldwide temperatures that could last another 10-20 years.

Professor Latif is based at the Leibniz Institute of Marine Sciences at Kiel University in Germany and is one of the world's top climate modellers.

But he makes it clear that he has not become a sceptic; he believes that this cooling will be temporary, before the overwhelming force of man-made global warming reasserts itself.

So what can we expect in the next few years?

Both sides have very different forecasts. The Met Office says that warming is set to resume quickly and strongly.

It predicts that from 2010 to 2015 at least half the years will be hotter than the current hottest year on record (1998).

Sceptics disagree. They insist it is unlikely that temperatures will reach the dizzy heights of 1998 until 2030 at the earliest. It is possible, they say, that because of ocean and solar cycles a period of global cooling is more likely.

One thing is for sure. It seems the debate about what is causing global warming is far from over. Indeed some would say it is hotting up.

"I am stunned—absolutely stunned," says Jim Hoggan, author of the new book Climate Cover-Up: The Crusade to Deny Global Warming (Greystone Books) and a chair of the David Suzuki Foundation.

He's not shocked by how climate change deniers managed to stall global awareness and action on global warming—though many people are. He's shocked that the people who deny the very existence of climate change are actually still around, and amazed that there is even the need for his book, which outlines their lies and the PR machine that drives them.

If anybody is in a position to understand how the art of public relations has furthered the cause of global warming denialists, he should: As president of the PR firm Hoggan & Associates in Vancouver, he has worked in the field for decades. “Public relations is about fostering relationships and helping people communicate—not about spreading misinformation,” he says.

Offended and incensed by the way oil and coal companies hired PR firms from the 1980s onwards to manufacture doubt about the reality of global warming (just as they did to spread uncertainty about the hazards of second-hand smoke and a litany of other scientifically solid issues), he founded an online resource, DeSmogBlog.com, five years ago.

“When we started it, a small blog run out of a closet in Vancouver, I never thought we would have 1.3 million visitors by now,” he says—nor did he think the blog would still be in existence.

Denialist boom

In fact, Hoggan says, not only are the deniers still around, “they seem to be on the increase.” As the public grows more aware of the unshakeable strength of the scientific consensus and the urgency of the problem, so does the desperation and the stubbornness of those determined to deny its importance for the sake of big money. “This isn't a conspiracy—it's an industry,” he says.

In the late 1980s, Hoggan writes in the Climate Cover-Up, the recognition of climate change and of man-made greenhouse gases as the primary cause was so accepted that even George Bush Sr., said “Those who think we are powerless to do anything about the greenhouse effect forget about the 'White House effect': as president I intend to do something about it.”

But 20 years of oil companies (plus their hired PR guns) manufacturing doubt with “phony scientists, phony scientific reports, phony grassroots organizations and phony think tanks putting out press releases and press kits with the objective of undermining any effort by political bodies to put legislation in place to reduce greenhouse gases” means that we really, haven't done anything about the problem.

Greenhouse gases continue to rise (Canada is now roughly 30 percent above its 1990 levels, when it should have made cuts), public awareness continues to stagnate (a recent Gallup poll estimated that 48 percent of Americans think the threat of global warming is exaggerated), political movements are slowed (the B.C. carbon tax was notoriously rejected, “when people should have been crying out for a carbon tax,” Hoggan says; it has since been implemented) and the media continues to quote global warming skeptics in the same space as bona fide climate change scientists. Most notoriously, he writes, The Calgary Herald.

Changing tactics

With the Intergovernmental Panel on Climate Change (along with Al Gore) winning the Nobel Prize and the upcoming UN meeting in Copenhagen on everybody's radar, outright denial of the existence of climate change is becoming less and less commonplace. But in that place, he says, we are now seeing more and more “energy” and “environmental”

experts saying that it is indeed a problem and it is indeed our fault, but that it would be too costly to prevent. Other problems, such as AIDS or poverty, rank higher on our priority list, and we can't possibly deal with climate change at the same time, they argue.

“They give people the sense that it's not something they can do anything about—it's a very clever strategy,” Hoggan says.

Media-friendly figures like Britain's Christopher Monckton (featured on CBC's The Hour) and Bjorn Lomborg (graced with a TED talk) continue to find megaphones for their views that climate change is just too big a problem for us to fix, “without ever being asked where they get their money from,” he says.

Reason to hope

But, he adds, “The number of people who understand the problem and who are concerned grows by the day.”

“I really feel my job is to help improve the way that we talk about [climate change] to people so that they can understand it better—to help shed light on those people who are just trying to confuse the public,” says Hoggan. “I think that is something that I will spend the rest of my life on.”

In praise of insulation and thermostats

A DELUGE of information, computer modelling, policy suggestions and rhetoric is swamping the mind—and desk—of your correspondent in the run-up to the climate-change talks taking place in Copenhagen in December. But the simple message contained in one report is so stark that it caught his attention. On October 7th the International Energy Agency released an excerpt of its “World Energy Outlook 2009” that highlights the difference individuals can make.

The excerpt addresses the agency’s “450 scenario”—its view on the stable atmospheric concentration of carbon dioxide (450 parts per million) that will halt climate change—and looks at a range of potential contributions to cuts in emissions that could be made by producing power differently and using energy more efficiently. The effects of these different technologies and strategies are popularly called “wedges”, because a graph showing how they effect carbon emissions over time is invariably wedge-shaped.

Stack up a lot of these wedges and out comes a chart showing the best- and worst-case scenarios: a stack of different coloured wedges showing where emissions would end up if people did nothing, sitting on a mountain shape at the bottom that shows what would happen if the potential cuts in emissions— currently figments of the hopeful imaginations of renewable-energy engineers and climate-change-policy campaigners—actually materialised. The new report provides just such a chart, and it presents a striking finding.

The top wedge, comprising more than half of the difference between the best and worst cases, is due to “end-use efficiency”—that is, the efficiency of energy use by the people and the things that consume power once it has been produced and delivered. It means that using energy more efficiently could have a greater impact than all of the billion-dollar, decades-long solutions such as developing genuinely sustainable biofuels, building enormous next-generation nuclear power-stations and engineering vast swathes of photovoltaics.

This is an oversimplification, of course. The International Energy Agency’s definition of “end-use efficiency” includes the effects of a number of things that the humble individual cannot control, such as the efficiency of an automobile engine when the car is snarled in traffic. Also, the relative contribution of end-use efficiency to overall carbon abatement varies from country to country: in America, the fraction of total abatement due to end-use efficiency is about a third; in China, it is nearer two-thirds.

Nevertheless, the report is a stark reminder of the potentially profound effects of individual efforts to insulate attics, maintain tyre pressures, buy more efficient washing machines and turn off the lights when leaving the room. That is important because people sometimes imagine that tackling climate change is something done by of delegates at international conferences, and that the effects of individual actions can go either unnoticed or derided.

The Isles of Scilly, off England’s southwestern tip, ran an experiment on October 6th to measure the effect of its residents’ reducing their electricity use for a day. (Because the islands’ power comes through a single undersea cable, it is easy to measure the net change in energy use.) For two consecutive years, the experiment has failed to give positive results because the inclement weather on the day has resulted in the islands using more energy than normal. Newspapers had fun pointing out that much of the day’s energy went into baking scones at a local school.

It is unfortunate that so much attention was paid to the failure of the experiment rather than applauding what it was trying to achieve. Green-minded folk have been reminding this correspondent to switch the lights off when leaving a room for years, but it has taken a detailed report on the matter from an international organisation to persuade him of the case.

GLOBE-Net (October 5, 2009) - Typically, investors need to know that their investment will hold and hopefully will increase in value over time. When it comes to the question of green building, without an understanding of how green design attributes will contribute to a building’s value, it can be difficult to reassure investors that their investments will yield viable returns.

Studies are now suggesting that commercial green buildings are more valuable than their conventional counterparts. Accordingly, eco-certification tools such as LEED, Energy Star, Green Globes, and BOMA BESt (Go Green) have become important standardization tools for informing the market that a building truly has green design features. Yet the growing number of these tools has also created variability in measurement and definition, and led to some confusion amongst stakeholders. 

Barriers

One of the first barriers to going green in the first place was the perception that building green requires a high additional capital investment.

This "first cost" or "green premium" ranged from 0-20% in formal and informal reports. A related barrier to the valuation of green building involves what is sometimes referred to as the split incentive problem: who gets the return on investment from money-saving green design features?

For example, developers or clients who do not proceed to operate the building have little incentive to invest in expensive energy efficiency design features that only show future lifecycle-based payback. Client-owned buildings, on the other hand do not present this problem, which is one large factor in the success of certification in the institutional sector. 

Five years ago, eco-certified commercial green buildings started to gain attention. This was due in part to a growing popular interest in sustainability, and the expanding use of labelling and certification systems. However, even within the green building industry there were many assumptions and much speculation about the higher value of certified green buildings as compared to conventional buildings. 

What is needed is a shift from the mere labelling of buildings, towards demonstrating actual performance backed by real numbers. This implies re-certification over time: value not only needs to be demonstrated but also held. 

While green building technology and practice evolved quickly, the valuation of those buildings lagged behind for a number of reasons. The valuation field was ill-equipped to deal with green buildings, which were a fairly new commodity. Conventional approaches to appraising green building had difficulty incorporating, for example, the savings from energy efficiency over the building’s lifecycle. How long is the life cycle of a particular green building, anyway? Some stakeholders hesitated to make operational data available for appraisal, amidst concerns that the building might not perform as designed (and therefore might not be as valuable as expected).

Taking a sales approach to appraisal means having other comparable, local green buildings, significantly lacking in the early days. Finally, cost doesn’t always equal "value". What value does something intangible like a positive environmental image give the asset? These are just some of the questions that are only slowly finding solutions. 

More Time, More Data 

The 2005 Green Value [pdf] report produced by the Royal Institute of Chartered Surveyors (RICS) and collaborators brought the notion that green buildings might be more valuable into the limelight. It also offered encouragement that the market for green building was beginning to change.

The report claimed that there was a link between a building’s green features and its asset value, but acknowledged that more data, and therefore more time, was required in order to confirm the relationship. Drawing on the existing literature and its own case studies, the report attempted to show that green design features could enhance productivity and other "soft" benefits, and offer more savings than the building’s worth itself. 

Progress 

Since the Green Value report was released, studies on the topic have proliferated, along with other indications that green building valuation is a hotly debated topic, including green building education for realtors, sustainable real estate and law journals, and an active Green Building Finance Consortium (GBFC). 

Among several others, three recent studies assert that eco-certified buildings do, indeed, command higher rent and sales premiums. In 2006, the GBFC teamed up with the US Green Building Council and started tagging green buildings in the CoStar database of US commercial real estate assets. This allowed a larger sample of green buildings to be used as market comparables.

One study, conducted by a research group out of the UK’s University of Reading, analysed a large number of LEED- and EnergyStar-certified buildings drawn from CoStar. Authors Fuerst and McAllister found that these certified buildings commanded an average rental premium of 4-5%. Further, sale prices for LEED and Energy Star buildings showed about a 25-26% price premium, with higher levels of certification allowing higher premiums. 

A study by Eichholtz and co-authors [pdf] out of the University of California, Berkeley, also found positive correlations: rental rates were 3% higher per square foot than conventional, and premiums in effective rents were above 6%. Sale prices of the green certified buildings were higher by about 16%.  Further, every dollar savings in energy costs of an Energy Star-certified building, equated to about $18 in increased valuation. 

On the one hand, performance-based standards can help to justify investments in green building, with hard-backed evidence collected from many buildings over long periods of time.  On the other hand, the emphasis on performance may overshadow other aspects of valuation that do not equate to costs. As green building certification tools evolve to meet market demand, those that are moving towards performance-based re-certification will allow for more accurate valuation, for better or worse. 

Illuminating and Changing Practices

In recognition of the need for a close look at sustainability valuation, the Vancouver Valuation Summit was held in March 2007, and led to the signing of the Valuation Accord. This constituted a commitment by valuation standards organisations to determining how to embed sustainability into valuation practices and guidelines.

In May of this year, Cushman-Wakefield and partners including the Vancouver Valuation Accord released a study of three certified buildings [pdf], detailing green building methodology and its problems. The authors analysed operational and tenant data and determined that although the results are complex, the building’s green attributes have varying but positive impact on all three properties. 

Still More Time, More Data 

Despite significant progress, as Fuerst and McAllister point out, the area of green building valuation is still "a niche market with relatively small sample sizes". The merging of performance-based standards with the valuation field and real estate industry is still in its infancy: it’s too early to tell what the implications will be.

In a presentation this past September to Central Texas’ Green Building Council, green building consultant Jerry Yudelson asked, "What part of a 30 percent increase in value from LEED certification is hard to communicate?" Yudelson suggested that architects and engineers not using LEED certification were in "dereliction of duty".

While a controversial statement, in an era of climate change, not building green amounts to unsustainable practice, economically, socially, and environmentally. The proof, whether eco-certified or not, lies in the performance of the building over time, just as value does.

Lifecycle costing and the real accounting of green building performance is of interest for valuation and other decision-making processes in green building, and will be featured in our next article.

Sylvia Coleman and Zosia Brown are PhD students, Institute for Resources Environment and Sustainability, UBC. This article is part of a special GLOBE-Net Series "Building Tomorrow." 

The Institute for Resources, Environment and Sustainability (IRES) is both an interdisciplinary research institute and a major interdisciplinary graduate education program at the University of British Columbia. It is the mission of IRES to work to foster sustainable futures through integrated research and learning about the linkages among human and natural systems, to support decision making for local to global scales.

Bad hair and shoulder pads are not the only things from the 1980s that we'd rather not see again. Nasty chemicals banned in that decade are also on the list. Unfortunately, melting Alpine glaciers are generating a revival of toxic organic pollutants.

Christian Bogdal and colleagues at the Swiss Federal Institute of Technology in Zurich studied levels of pollution in sediment at the bottom of the Oberaar lake in Bern, Switzerland.

The flow of pollutants into the lake peaked in the 1970s, mainly due to the production of plastics, electronics, pesticides and fragrances. The levels declined during the 1980s and 1990s when people realised that these compounds were toxic and they were banned.

However, they found that banned chemicals, such as pesticides that have been linked with Parkinson's disease, have been pouring into the lake at an increasing rate since the 1990s.

Powerless observers

Bogdal reckons that a glacier feeding the lake has been storing these chemicals for decades, and is releasing them as it melts. This process could be dramatically sped up by global warming, he warns.

The problem isn't limited to Alpine glaciers. Since these chemicals would have been transported great distances via the atmosphere before they were frozen into ice, many other glaciers around the world may be contaminated. Toxic chemicals have previously been found in polar regions - putting arctic wildlife at risk.

There is little we can do about it, however. "Stopping global warming could slow the melting of glaciers, but the chemicals will still be released eventually," says Bogdal.

Many toxic chemicals are still used in plastics and electronic equipment, such as brominated flame retardants. Bogdal warns that these could represent the next generation's problem: "They are deposited on glaciers today and will reappear in our lakes in a few decades."

Is it safe to throw vegetable and fruit peelings and leftovers into the compost? Could pesticides soak into the pile and cause problems when spread on the vegetable garden?

A well-run compost heap functions in much the same way as your liver. It breaks down the various materials passing through it, removing impurities and delivering a purified end product. But, like the liver, compost can suffer if too much is loaded on to it at any one time: cirrhosis of the compost heap might be the outcome.

So, in the same way that you might every so often give up alcohol, detox or flush out your liver, a compost heap needs careful nurturing. Ideally, its feedstock should contain a variety of materials — from lawn clippings to vacuum cleaner dust, from autumn leaves to used coffee filters.

Layering the mixture with a good activator, such as horse manure, is a smart move. Turn the whole lot over once in a while and cover with an old piece of carpet to cook quietly away. Within a few months you should have a lovely, soft, rich material to spread on the vegetable patch or allotment.

Regulations governing the use of pesticides on vegetables and fruit have been tightened over the years, but maintaining a living, breathing compost heap is crucial if various nasty residues are to be eliminated. Many fruits, vegetables and also commercially grown flowers contain the residues of what are called crop-protection compounds. These go by a whole football team of names — the fungicides thiabendazole and dodemorph and the insecticide endosulfan are among the most common.

A proper compost heap will contain all manner of active micro-organisms. This diversity helps to promote the breakdown of the various compounds — with every chance that one of those hundreds of thousands of microbes will be able to degrade residues of a particular pesticide or insecticide. As long as some sort of balance is maintained among the compost ingredients, the residues should quickly disappear.

The Pesticide Action Network (www.pan-uk.org/Projects/Food/index.htm) lists the worst pesticide offenders on the food shelf: potatoes, bread, apples, grapes, tomatoes and cucumbers all feature. The advice is to wash thoroughly, peel, buy organic or, best of all, grow your own. And don’t forget to

Sweden Turning Stray Rabbits Into Biofuel

Stray rabbits are getting a raw deal in Sweden. Thousands of them living in the center of Stockholm are being culled, deep frozen and converted into biofuel for heating homes. Wildlife campaigners have criticized the practice.

Thousands of rabbits, some of them pets abandoned by their owners, are being shot, deep-frozen and burned in a heating plant in Sweden, a professional hunter who works for the city of Stockholm said on Tuesday.

The center of the Swedish capital is being plagued by thousands of rabbits, some of them wild and some of them stray pets, and 3,000 have been culled this year, down from 6,000 in 2008, Tommy Tuvunger, who hunts rodents for the Stockholm city administration, told SPIEGEL ONLINE.

"We are shooting rabbits in Stockholm center, they are a very big problem," said Tuvunger. The rabbits are eating their way through the city's central parks. "Once culled, the rabbits are frozen and when we have enough; a contractor comes and takes them away. "

Tuvunger said it was normal for animal carcasses to be processed for fuel. "The contractor doesn't just pick up rabbits, he also picks up cats, deer, horses and cows," said Tuvunger.

Incinerated for Heating

The frozen bunnies are shipped to a heating plant in Karlskoga in central Sweden which uses them as biofuel and incinerates them to heat homes, media reports said. A spokeswoman for the plant declined to comment. The plant's supplier, Konvex, a company that produces biofuels from animals, could not immediately be reached for comment.

Konvex is a subsidiary of Danish group Daka Biodiesel, which says on its Web site that it produces and markets biodiesel and bio fuel oil using animal fat extracted from "by-products from slaughterhouses and primary agriculture."

The practice of killing rabbits and incinerating has been criticized by Sweden's Society for the Protection of Wild Rabbits.

"Those who support the culling of rabbits surely think it's good to use the bodies for a good cause. But it feels like they're trying to turn the animals into an industry rather than look at the main problem," Anna Johannesson of the society told Vårt Kungsholmen newspaper, news Web site The Local reported

Johannesson said there other methods of getting rid of rabbits besides killing them, such as spraying park plants with a chemical that makes them unappetizing to rabbits.

But Tuvunger says that doesn't work. "If you do that you only move the problem 100 meters away."

Karl Szmolinsky, one of Germany's best-known breeders who has won prizes for his giant rabbits, said he couldn't imagine using the animals for biofuel. "I would never have given mine away for that," he told SPIEGEL ONLINE. Szmolinsky, who gained fame for exporting several rabbits to North Korea, has given up breeding due to illness in the family.

Researchers have demonstrated a penny-sized "nuclear battery" that produces energy from the decay of radioisotopes.

As radioactive substances decay, they release charged particles that when properly harvested can create an electrical current.

Nuclear batteries have been in use for military and aerospace applications, but are typically far larger.

The University of Missouri team says that the batteries hold a million times as much charge as standard batteries.

They have developed it in an attempt to scale down power sources for the tiny devices that fall under the category of micro- and nano-electromechanical systems (Mems and Nems).

The means to power such devices has been a subject of study as vigorous as the development of the devices themselves.

Liquid solution

Nuclear batteries are an attractive proposition for many applications because the isotopes that power them can provide a useful amount of current for phenomenally long times - up to hundreds of years or more.

As a result, they have seen use in spacecraft that are fired far off into the cosmos. But for applications here on Earth, their size has limited their use.

The Missouri team, led by Jae Wan Kwon, employed a liquid semiconductor to capture and utilise the decay particles.

Most nuclear batteries use a solid semiconductor to harvest the particles, but the particles' extremely high energies means that the semiconductors suffer damage over time.

This means that to build a battery that can last as long as the isotope inside, they must be built larger.

The team's solution incorporates a liquid semiconductor, in which the particles can pass without causing damage. They are now working to further miniaturise the batteries.

And although the whole idea hinges on the use of radioactive materials, the devices are safe under normal operating conditions.

"People hear the word 'nuclear' and think of something very dangerous," Dr Jae said.

"However, nuclear power sources have already been safely powering a variety of devices, such as pacemakers, space satellites and underwater systems."