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Global Commission Describes New Geopolitical Power Dynamics Created by Renewables

MD Staff

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Political and business leaders from around the world have outlined the far-reaching geopolitical implications of an energy transformation driven by the rapid growth of renewable energy. In a new report launched today at the Assembly of the International Renewable Energy Agency (IRENA), the Global Commission on the Geopolitics of Energy Transformation says the geopolitical and socio-economic consequences of a new energy age may be as profound as those which accompanied the shift from biomass to fossil fuels two centuries ago. These include changes in the relative position of states, the emergence of new energy leaders, more diverse energy actors, changed trade relationships and the emergence of new alliances.

The Commission’s report ‘A New World’ suggests that the energy transformation will change energy statecraft as we know it. Unlike fossil fuels, renewable energy sources are available in one form or another in most geographic locations. This abundance will strengthen energy security and promote greater energy independence for most states. At the same time, as countries develop renewables and increasingly integrate their electricity grids with neighbouring countries, new interdependencies and trade patterns will emerge. The analysis finds oil and gas-related conflict may decline, as will the strategic importance of some maritime chokepoints.

The energy transformation will also create new energy leaders, the Commission points out, with large investments in renewable energy technologies strengthening the influence of some countries. China, for instance, has enhanced its geopolitical standing by taking the lead in the clean energy race to become the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles. Fossil-fuel exporters may see a decline in their global reach and influence unless they adapt their economies for the new energy age.

“This report represents the first comprehensive analysis of the geopolitical consequences of the energy transition driven by renewables, and a key milestone in improving our understanding of this issue,” said Commission Chair Olafur Grimsson, the former President of Iceland. “The renewables revolution enhances the global leadership of China, reduces the influence of fossil fuel exporters and brings energy independence to countries around the world. A fascinating geopolitical future is in store for countries in Asia, Africa, Europe and the Americas. The transformation of energy brings big power shifts.”

“The global energy transformation driven by renewables can reduce energy-related geopolitical tensions as we know them and will foster greater cooperation between states. This transformation can also mitigate social, economic and environmental challenges that are often among the root causes of geopolitical instability and conflict,” said Adnan Z. Amin, Director-General of IRENA.

“Overall, the global energy transformation presents both opportunities and challenges,” continued Mr. Amin. “The benefits will outweigh the challenges, but only if the right policies and strategies are in place. It is imperative for leaders and policy makers to anticipate these changes, and be able to manage and navigate the new geopolitical environment.”

The Commission says countries that are heavily reliant on fossil fuel imports can significantly improve their trade balance and reduce the risks associated with vulnerable energy supply lines and volatile fuel prices by developing a greater share of energy domestically. With energy at the heart of human development, renewables can help to deliver universal energy access, create jobs, power sustainable economic growth, improve food and water security, and enhance sustainability, climate resilience and equity.   The report was launched by the Commission at IRENA’s ninth Assembly in the presence of ministers and senior policy makers from more than 150 countries.

IRENA

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People Can Prosper and Thrive If Pakistan Reforms Faster

MD Staff

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Pakistan urgently needs to invest more and better in its people if they are to be richer, better educated, and healthier when the country turns 100 years old in 2047, says a new report by the World Bank.

Launched today at the Human Capital Summit, the report, Pakistan@100: Shaping the Future, urges Pakistan to overcome its boom-bust cycles through a deep-rooted economic transformation. It recommends the essential reforms Pakistan needs now to accelerate and sustain growth. This means increasing and improving human capital investment, boosting productivity, promoting social and environmental sustainability, ensuring good governance, and leveraging its location to connect more with neighbors and the world beyond says the report. 

“There are steps Pakistan can take today to boost its economic performance and thereby ensure a better future for its people,” says Hartwig Schafer, World Bank Vice President for South Asia. “These steps are ones that other countries have taken to open up their business sectors to competition and innovation and laying the foundations for growth, investment, and good jobs.”

The forward-looking report argues that Pakistan’s greatest asset is its people – a young population of 208 million. This large population can transform into a demographic dividend that drives economic growth. To achieve that, Pakistan must act fast and strategically to: i) manage population growth and improve maternal health, ii) improve early childhood development, focusing on nutrition and health, and iii) boost spending on education and skills for all, according to the report.

“Because the next generation is meeting only 40 percent of its potential it means that Pakistan is foregoing much of its economic growth, but this can change if women’s potential is unlocked,” says Annette Dixon, World Bank Vice President for Human Development. “When women and girls are empowered to make their own decisions, they stay in school longer, they start families a little later, have fewer children, contribute more to the economy, and invest more in their children. It’s a virtuous circle that’s good for families and good for the whole country.”

In addition to human capital, Pakistan@100: Shaping the Future calls for reforms in other key areas.

To increase investment levels, the report recommends ways to make it easier to do business in Pakistan, as well as reforms to tax policy and administration to increase fiscal space and public investment in the country’s top priorities. Strong governance will be crucial to implement a difficult set of reforms. The report discusses the key elements of a strong governance environment, including the need for a stronger civil service.

“Accelerating and sustaining Pakistan’s growth over a 30-year period is ambitious, but possible,” says Illango Patchamuthu, World Bank Country Director for Pakistan. “Many other countries have achieved economic transformations within a generation with the right set of policies. The World Bank is committed to working with the government of Pakistan and other stakeholders in the country to advance the necessary reforms, so that Pakistan can significantly increase growth and sustain it, so it is an upper middle-income country by the time it celebrates its centenary.”

Pakistan@100: Shaping the Future has also benefited from funding by the UK Department for International Development and Australian Department for Foreign Affairs and Trade.

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Trade in fake goods is now 3.3% of world trade and rising

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Trade in counterfeit and pirated goods has risen steadily in the last few years – even as overall trade volumes stagnated – and now stands at 3.3% of global trade, according to a new report by the OECD and the EU’s Intellectual Property Office.

Trends in Trade in Counterfeit and Pirated Goods puts the value of imported fake goods worldwide based on 2016 customs seizure data at USD 509 billion, up from USD 461 billion in 2013 (2.5% of world trade). For the European Union, counterfeit trade represented 6.8% of imports from non-EU countries, up from 5% in 2013. These figures do not include domestically produced and consumed fake goods, or pirated products being distributed via the Internet.

Trade in fake goods, which infringe on trademarks and copyright, creates profits for organised crime gangs at the expense of companies and governments. Fakes of items like medical supplies, car parts, toys, food and cosmetics brands and electrical goods carry a range of health and safety risks. Examples include ineffective prescription drugs, unsafe dental filling materials, fire hazards from poorly wired electronic goods and sub-standard chemicals in lipsticks and baby formula.

“Counterfeit trade takes away revenues from firms and governments and feed other criminal activities. It can also jeopardise consumers’ health and safety,” said OECD Public Governance Director Marcos Bonturi, launching the report with the Director of the EU Observatory on IPR infringements at the EUIPO, Paul Maier, and the EU Ambassador to the OECD Rupert Schlegelmilch. “Counterfeiters thrive where there is poor governance. It is vital that we do more to protect intellectual property and address corruption.”

The goods making up the biggest share of 2016 seizures in dollar terms were footwear, clothing, leather goods, electrical equipment, watches, medical equipment, perfumes, toys, jewellery and pharmaceuticals. Customs officials also noted an increase in counterfeits of goods less commonly seen in the past such as branded guitars and construction materials.  

The majority of fake goods picked up in customs checks originate in mainland China and Hong Kong. Other major points of origin include the United Arab Emirates, Turkey, Singapore, Thailand and India.

The countries most affected by counterfeiting in 2016 were the United States, whose brands or patents were concerned by 24% of the fake products seized, followed by France at 17%, Italy (15%), Switzerland (11%) and Germany (9%). A growing number of businesses in Singapore, Hong Kong and emerging economies like Brazil and China are also becoming targets.

Small parcels sent by post or express courier are a prime and growing conduit for counterfeit goods. Small parcels accounted for 69% of total customs seizures by volume over 2014-2016 (57% via post and 12% via courier), up from 63% over the 2011-2013 period.

Along with insufficient screening of small parcels, other areas where policy gaps are facilitating counterfeit trade are inconsistent penalties on traffickers and the special rules governing free trade zones. Past OECD-EUIPO analysis has shown that free trade zones – where economic activity is driven by reduced taxes, customs controls and lighter regulation – can unintentionally facilitate counterfeit trade. The OECD is working with its member countries on formal guidelines to help authorities stem the problem.

Trends in Trade in Counterfeit and Pirated Goods covers all physical fake goods which infringe trademarks, design rights or patents, and tangible pirated products, which breach copyright. It does not include online piracy, which is a further drain on economies.

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Oil Market Report: Supply cushion insures against losses

MD Staff

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The electricity crisis in Venezuela has paralysed most of the country for significant periods of time. Although there are signs that the situation is improving, the degradation of the power system is such that we cannot be sure if the fixes are durable. Until recently, Venezuela’s oil production had stabilised at around 1.2 mb/d. During the past week, industry operations were seriously disrupted and ongoing losses on a significant scale could present a challenge to the market. As it happens, 1.2 mb/d is also the size of the output cuts agreed by OPEC countries and some non-OPEC producers. The cuts were implemented in January and compliance by OPEC reached 94% in February, with Saudi Arabia cutting back by about 170 kb/d more than required. The non-OPEC countries are complying more slowly at a rate of 51%, with Russia reducing its output very gradually. Due to the cuts, OPEC members are sitting on about 2.8 mb/d of effective spare production capacity (Iran and Venezuela are excluded from the calculation), with Saudi Arabia holding two-thirds of it. Much of this spare capacity is composed of crude oil similar in quality to Venezuela’s exports. Therefore, in the event of a major loss of supply from Venezuela, the potential means of avoiding serious disruption to the oil market is theoretically at hand.

Before the seriousness of the situation in Venezuela became apparent, our oil balances for the first half of 2019, which have not changed significantly since our last Report, suggested that the market is tightening. On the basis of solid oil demand growth, modest declines in OPEC production due to Iran and Venezuela, and rising US output, the market could show a modest surplus in 1Q19, before flipping into deficit in 2Q19 by about 0.5 mb/d. This does not take into account Saudi Arabia’s announced plans to reduce its exports further in April.

Although we must await developments in Venezuela, if there were to be a collapse in production, it could provide an opportunity for other producers who can supply comparable barrels. Venezuela currently ships about 400 kb/d to both China and India. Elsewhere, other producers have already taken advantage of Venezuela’s problems: as exports to the US have slumped following the imposition of sanctions, Russia has taken the opportunity to increase its shipments to the US from relatively modest levels to around 150 kb/d.

Geopolitics has added another complication to the global oil market. At the same time, production cuts have increased the spare capacity cushion. This is especially important now as economic sentiment is becoming more pessimistic and the global economy could be entering a vulnerable period. Another way in which the world is better placed to weather geopolitical storms is shown in the IEA’s five-year oil market outlook Oil 2019 – Analysis and Forecasts to 2024, which we published on 11 March. A key theme is the growing importance of the US in global markets. Rising production there is not a new story; what is game changing is that the US in 2021 will become a net oil exporter on an annual average basis. With Canadian production also increasing, and most of its exports moving to US refineries, this frees up US crude for export. This year US seaborne oil trade will move into surplus with net exports rising to nearly 4 mb/d of by 2024. The rising profile of the US not only brings greater choice to consumers, but, crucially, it enhances security of supply, especially when, as now, there are heightened geopolitical concerns.

IEA

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