Policy-makers should view spending now to slow climate change as an issue about how much insurance to buy to offset the small chance of a ruinous catastrophe that is difficult to compensate by ordinary saving.

A decade after the US Senate voted 95-0 to discourage the Clinton administration from signing the Kyoto agreement without dramatic commitments from India and China, it is worth asking how much the political climate for climate change has improved.
According to Bloomberg.com, beyond Al Gore’s Nobel Prize, there are some positive signs. Today, far more Republicans, such as Senators John McCain and John Warner, advocate some form of capping and trading of carbon emissions. Republican Governor Arnold Schwarzenegger is getting ready to sue the Environmental Protection Agency for blocking stringent pollution controls in California. And a growing number of conservative evangelicals have started to embrace a response to global warming under the call for creation care.
But has the skeptic class disappeared? Jonathan Chait of the New Republic magazine points out that a recent National Journal poll found that 84 percent of House and Senate Republicans surveyed didn’t believe that it has been proven beyond a reasonable doubt that the Earth is warming because of man-made problems.
That rather stunning poll result causes one to ask whether these skeptics have even made themselves aware of the Fourth Assessment of the Nobel Prize-winning Intergovernmental Panel on Climate Change. In that report, the panel’s 2,000-plus scientists concluded that there was more than a 90 percent chance that human activity was the main cause of global warming over the last half-century.
The poll raises a more basic issue: Is the National Journal question the right one? Should a policy maker have to know beyond a reasonable doubt that climate change is caused by humans to support policies to address it? The answer may depend on whether you take an investment or an insurance perspective to the issue of climate change.
From a conservative investment perspective, the prudent person chooses to invest new funds only where he believes it is more likely to get a higher return than leaving the money in low-risk bonds or money markets. From this framework, the skeptic needs a relatively high probability of certainty that climate change can be affected by changes in human activity before he could justify investing resources to address it.
Yet, if this investment perspective was appropriate for all areas of life, no one would ever buy a house or life insurance. After all, there is a very low probability that in any one year, or even over many years, that the purchaser of such insurance will see a return on his investment.
People don’t need to know beyond a reasonable doubt, or even with modest certainty, that life or fire insurance will ever provide a positive return. They understand there is value in bearing modest costs to protect against the small chances of catastrophe.
The case for seeing climate change through an insurance lens comes more into focus once any cost-benefit calculation starts to include remote probabilities that the costs of inaction could be extreme.
A starting point might be the Stern Review on the Economics of Climate Change, written by former World Bank Chief Economist Nicholas Stern at the request of then-UK Prime Minister Tony Blair. True, the report was strongly criticized by Harvard Professor Martin Weitzman and Yale Professor William Nordhaus for the methodology it used, taking a low so-called social discount rate to arrive as its lofty estimates of harm to the global economy.
What it accomplished, though, was to advance the public dialog by focusing attention on the cost of doing nothing in the face of climate change.
In his critique, Weitzman suggested that by employing more of an insurance perspective one could make a strong case for swift action even while acknowledging the high degree of uncertainty in global-warming scenarios.
Policy makers, Weitzman argued, should view spending now to slow climate change as an issue about how much insurance to buy to offset the small chance of a ruinous catastrophe that is difficult to compensate by ordinary saving.
How high a probability, after all, must one have that global warming might lead to major environmental, refugee, and water and food-supply crises to see some value in taking preventative measures now?
From this perspective, even congressional skeptics who don’t believe that global warming is caused by humans might be persuaded to support a carbon cap-and-trade system just on the chance that the scientists of the Intergovernmental Panel on Climate Change are right and the skeptics are wrong. They could see it as simply taking out a little Earth insurance.

No American airline wants to be left stranded as a solo operator if Clinton or Obama ends up in the White House and taps the brakes on industry consolidation.

Green Crisis
There will be a backlash in the green movement after it becomes clear that many of the US companies claiming to be green are in fact nothing of the sort. According to Businessweek.com, businesses that proclaim they are “carbon neutral“ will find that such proclamations no longer carry much weight among far more skeptical media and consumers.

Airline Consolidation
At least one major US airline will buy another in 2008. The most likely scenario is that Delta Air Lines will go after Northwest Airlines, United Airlines, or JetBlue Airways. When that happens, others will scramble to cut their own deals. Certainly, no American airline wants to be left stranded as a solo operator if Clinton or Obama ends up in the White House and taps the brakes on industry consolidation.

Bye-Bye CDs
The music industry is in crisis. The key reason is that CD sales are plummeting. Now, it’s going to get worse. This year, the most important retailers, including Wal-Mart Stores and Best Buy, will look to radically downsize their CD sections. Perhaps there will be no more than one aisle, chock-full of mainstream pop titles. Digital music will continue to grow in influence, from iTunes and Amazon.com to ad-supported site such as imeem and fast-growing upstarts like Pitchfork.

Internet TV
For years, gearheads have dreamed of getting all that video from the Internet onto the big 52-inch screen in the den. But it’s a pain. Look for that to change in 2008. While Apple TV has been a dud, Steve Jobs & Co. will make an aggressive play this year for the most important screen in the house. Perhaps Apple will even make a gorgeous TV itself, with all the necessary Net capabilities inside. And if Apple can’t do it, someone else will.

Biggest Bribe Penalty
German electronics giant Siemens will agree to pay more than $1 billion in fines to avoid prosecution by the Securities & Exchange Commission and the US Justice Dept. on charges it paid hundreds of millions in bribes to win foreign contracts. The fine will shatter the previous record fine under the Foreign Corrupt Practices Act. Siemens will also agree to allow compliance monitors to set up shop in its Munich headquarters to ensure the company has cleaned up its act.

Web Crash 2.0
If a recession finally hits, Web 2.0 companies will find there are neither enough ad dollars out there for all of them to survive on, nor enough big corporate buyers such as Google, Microsoft and traditional media companies to buy them all out.

Big Brother Fears Return
For a decade, a Net-happy world has cheerfully shared personal information online, with relatively little mainstream concern over privacy. Now, the issue may come to the fore, as carriers and cable companies deploy click-tracking software and publicity about China’s Olympian Internet oversight leaks into the news.

Last year was exceptional for the Indian stock markets, not merely because of the phenomenal rise of the benchmark stock indices, the Sensex and the Nifty.
According to Hindu.com, the Sensex climbed from 12,500 in early January to close at 20,257 at the end of the year. The Nifty too set up new records and ended the year at 6,138. The strong performance of the domestic stock markets is part of the recent trend of Asian and other emerging markets coming into their own.
The slowing down of the US economy along with the persistent weakness of the American dollar has caused fund managers to seek more lucrative but safe avenues elsewhere. India and a few other markets filled the bill ideally.
While foreign institutional investors (FIIs) have always been the dominant force behind the rise in market valuations, their motivations are now more varied. Besides, the successful economic growth story, with an average annual GDP growth rate of 9 percent and above, remains intact.
The onset of the sub-prime crisis in the United States in September, with strong negative connotations for the financial systems of the developed world, was the time when India along with a few other markets emerged as sanctuaries attracting large investments from across the globe. The Sensex went up from 16,000 to 20,000 in a matter of three months.
However, the important messages of the year 2007 go beyond the role of the foreign institutional investors. When the final tally is made it will be seen that, although the FIIs will be the single largest group of investors in the Indian markets, they are less dominant than in the recent past.
Domestic financial institutions, led by the public sector LIC and the mutual funds, have invested substantial amounts and, on many occasions, taken positions that neutralized the FII actions, as they did remarkably in November and December when the FIIs pulled some $5 billion out of Indian stocks.
Indian financial institutions were able to check what would have been a precipitous fall. The domestic retail investor base remains weak but volatility, which has been a worrisome feature, is showing signs of moderating. Insurance companies have overtaken mutual funds as the second largest category of investors.
With a variety of investors having divergent objectives and different time horizons operating in the field and with no single category driving the prices, the Indian stock markets seem to be moving towards a greater degree of stability and maturity. For the New Year, there cannot be a more salutary message.

Four years after record-breaking privatization revenues, the Turkish government is expecting another bright year in 2008 as it plans for an estimated yield of YTL 11.8 billion from the sale of state-owned companies.
Despite the sales of major state economic enterprises such as Turk Telekom, TUPRAS and Erdemir for billions of dollars over the course of the last five years, the government’s IPO and privatization agenda for this year is still full, reported Todayszaman.com.
The run will start with the privatization of Tekel’s tobacco division. The transfer of the operating rights of toll roads and bridges and the initial public offering of 15 percent of shares in Turk Telekom will follow. The privatization process for electricity distribution rights is also expected to get under way this year. Public banks, especially Halkbank and Ziraat, will be among the most significant privatization discussions. Sugar refineries and the Turkish State Railways’ ports are other valuable assets to be presented to the private sector in 2008.
The date for Tekel’s tobacco division has been set as January 25, with substantial interest in the company shown by domestic and international tobacco giants. Japan Tobacco International, British American Tobacco, Korea Tobacco, the Dogan Group, European Tobacco and private equity funds, such as the Dubai Investment Group and Cinven, are among the probable contenders. The data room process has been launched, allowing bidders to acquire information about the company’s financial and operational details.
Another important item on the privatization agenda is the operating rights of bridges and toll roads, with the preliminary work for these privatizations continuing at full speed. Best practices all over the world are being assessed. Following these assessments it will be decided whether to privatize toll roads and bridges partially or in one block sale.
Currently, Australia-based Macquarie Infrastructure, Abertis of Spain, the Portuguese Brisa, Japan-based Itochu Corp. and Atlantia SpA of Italy are interested in Turkey’s toll roads and bridges. The tender for transferring the operating rights for a specified period is expected to be held in the first quarter of 2008.
Electricity distribution tenders started with the New Year. To this end, there will be data updates for the privatization of Sakarya, Baskent and Istanbul’s Asian side, which were postponed last year. In the new tenders for these three regions, the firms that had acquired pre-qualification will be automatically accepted. Domestic firms such as Enka, Limak, Zorlu and Nurol, and foreign firms such as E.ON (Germany) and Enel (Italy) are among the firms that gained pre-qualifications.
There are 20 regions under the privatization umbrella. The finance sector has been a center of interest for the major global financial powerhouses so far, and with mergers and acquisitions their share in the total domestic market has already surpassed 40 percent, including their holdings in the stock market.
As the potential of ownership for foreign financial institutions has reached its natural boundary in the private banking sector, eyes have now turned to the public banks to snap up opportunities as they are offered.
Indeed, with huge assets, a great number of customers and widespread offices all around the country, the public banks are whetting the appetites of international and domestic financial institutions. Among these state-owned banks, Halkbank is on top of the government’s list of privatizations. The sale process for Halkbank is planned to be completed in 2008, but the method of privatization has not yet been decided.
Parallel to the increase in its foreign trade, which has risen more than threefold in four years, Turkey’s ports have also started attracting investors. In 2007, the ports at Mersin, Derince and Izmir were privatized.
The ports at Bandirma, Samsun and Iskenderun, which have crucial importance for trade given their capacities, will be sold to private companies in 2008 through asset liquidation. State sugar refineries are also included in the privatization plans for the coming term.