U.S. subprime crisis, Europe and the world economy. Moderated by Thomas L. Friedman
http://www.nytimes.com/pages/opinion/index.html
Just two days ago I had my first chance to experience Airbus’ new flagship, the A380 super jumbo on a flight from Miami, FL to Frankfurt, Germany.
The 9 hours on the giant double deck aircraft went by quickly. In terms of leg space, seating comfort, noise, and entertainment, the A380 is much better than any other aircraft I have been on. Due to the size of the plane, turbulences are rare. Despite the large number of passengers, roughly 550, the boarding was being completed faster than for the average B747. One of the features of the aircraft I liked the most was the ability to access three external cameras which record the flight from take-off to landing. Especially the first 10 minutes of the flight from the take-off from Miami International Airport were spectacular. Seeing the aircraft fly over the skyscrapers of the downtown area before passing the cruise port and the island of Miami Beach was a great experience.
The world’s two biggest aircraft manufacturers, Airbus and Boeing, have different expectations regarding the future of commercial aviation. While Airbus designed it’s super jumbo to meet increased demand for efficient long-distance connections between major aviation hubs, Boeing’s new high tech aircraft, the 787 Dreamliner, should enable airlines to offer more direct connections between smaller airports with a highly fuel-efficient aircraft. Both aircraft are responses to the major trends of increasing global air traffic and rising fuel prices. The A380 addresses the problem by allowing airlines to replace numerous smaller aircraft with one big aircraft on which they can load a lot of passengers to transport them from one continent to the other. The B787 is making use of new materials that reduce the weight of the aircraft and its fuel consumption. Airlines will be able to reduce the number of connecting flights by providing more direct flights from smaller airports, instead of Airbus’ hub to hub strategy. Ultimately both concepts could find use in the world’s different aviation markets.
In July 2009 I was participating in a conference in Washington D.C. and New York City where I discussed a hypothetical crisis in the South China Sea with students from more than 100+ countries. The scenario we were discussing was an armed conflict between China, Vietnam, Indonesia, and the Philippines in the Spratly Islands in 2012.
Today I stumbled upon this article on CNN.com and it immediately caught my attention. The Spratly Islands, uninhabited and located between several Southeast Asian nations, is a group of islands in the South China Sea where geologists expect to find the largest oil reserves outside of Saudi Arabia. The problem that stems from that is the potential for conflict the discovery of oil would bear.
Alan Dupont, director at the Center for International Security Studies at the University of Sydney says, “We just came out of probably the most peaceful 25 years Asia has ever seen.”
China, chronically scarce of energy, is becoming more assertive in claiming exploitation rights for potential oil reserves, while the immediate neighbors of the islands, Malaysia, Vietnam and the Philippines, are also claiming parts of the islands.
The tense situation is about to change the dynamics of geopolitics significantly. China has tried hard over the past decade to establish and maintain good relationships with its Asian neighbors. Successfully, China was able to expand its influence over the region, while the U.S. had difficulties maintaining its naval hegemony. Now, smaller Southeast Asian nations seem to unite to counteract China’s influence in the disputed regions, which has benefits for the United States’ strategic relationships with countries such as Vietnam and the Philippines.
China is facing the tough choice between the country’s economic and political interests. On the one hand, access to energy reserves is a key priority of the government, while on the other hand, the Chinese try to avoid the “bad guy” image they are risking to get if they aggressively pursue their interests in the region and the prospect of a stronger U.S. presence in the South China Sea (CNN).
It will be interesting to see how the Spratly Islands issue develops over the coming years. From a peaceful, mutually respectful solution to a Cold War-style conflict between the regional powers, anything seems to be possible at this point. However, one thing stands out to me. If the assumptions that the area around the Spratlys holds significant oil reserves turned out to be false, the region and the environment would be saved from a lot of trouble.
The Fukushima Prefecture in Northeastern Japan has been little known to foreigners until the disastrous accident at the Fukushima Daiichi nuclear power plant in March this year. Watching the terrible consequences of the release of radiation in a densely populated industrialized country has alerted many people around the world. While the danger of nuclear accidents has barely been acknowledged by the masses in recent years due to the sense of security and economic benefits resulting from a long accident-free period, the prospects for new nuclear power projects across the world has become dire.
Did Fukushima bring the period of increased acceptance of nuclear power as a clean and cheap energy source in the face of climate change and energy scarcity to a sudden end?
Possibly. However, there is a chance the incident in Japan might set off a new wave of construction of nuclear power plants. How?
As obvious to anyone who seriously dealt with the issue, the public has been made aware of the increased risk stemming from old nuclear plants. And without a doubt, pressure to shut down these old plants instead of prolonging their operating cycles - as has become a common practice in many countries - has increased. Still, it is important to consider why many nuclear power plants stay online longer than they were intended to at their time of construction.
Opposition to nuclear power plants has been strong ever since the Chernobyl disaster in 1986. This made it more difficult for governments and power companies to get permission to build further nuclear plants without having to fight costly court battles for decades. Germany even moved as far as to gradually phase out nuclear power plants completely. A result of this development was the drop in planning for new reactors and the increased efforts to extend the operating cycles of existing ones, as having an old reactor run longer was less problematic for the public and politicians than building a new one.
Consequently, increased public opposition to nuclear power increased the risk by prolonging the lives of old reactors while avoiding or at least postponing their replacement with newer reactors with more advanced technology and increased safety. This is a perfect example of how uninformed public opinion is being addressed by populist politicians and corporations with negative implications for the overall well-being of the economy and environment.
Until March 11, 2011, this seemed to work out for everyone. The public did not have to fight too many new nuclear power projects, politicians could rely on the benefits of a zero emissions energy source and energy companies were making a profit off long written-off old reactors producing cheap electricity and selling it for higher market prices.
Some nuclear power opponents now hope that the accident will lead to a quick phasing out of existing plants and no plans for new reactors. In my opinion, this is unlikely to happen for a number of reasons.
Firstly, in a world with a growing global population, rising energy demand and high energy prices, it is unlikely that a lower share of nuclear power will find a lot of support in the long run. Consumers tend to favor the cheapest form of energy available, and as fossil fuel prices will increase due to scarcity and rising demand, nuclear power will seem the even more attractive alternative.
Secondly, as the world is watching carbon emissions closely due to their role in climate change, there can hardly be an energy policy that completely shuns a cheap, zero carbon dioxide emissions power source. The necessity of reducing carbon emissions at an affordable price will make nuclear one of the few feasible options.
In fact, I wouldn’t be surprised to see an increase in the construction of new nuclear power plants in the medium term.Ā Given that Tokyo Electric Power Corp. manages to achieve a cold shut down without drawing much more negative attention and the tangible consequences of the accident turn out to be more moderate than feared, there is an opportunity for politicians and energy companies to win the public’s approval for the construction of new, safer power plants by offering a quicker phase out of old reactors.
According to the New York Times, the public opinion of nuclear power in Japan is surprisingly good with more than half of the population willing to “retain” the existing level of nuclear power in the country.
If the public in Western countries can be convinced that new nuclear power plants replacing old reactors will actually reduce the risk of future radiation releases, a new era of nuclear power could begin.
The earthquake that struck Japan on March 11 and the resulting tsunami devastated vast areas of northeastern Japan, left hundreds of thousands of people homeless and killed more than 10,000. On top of all the misery, an out-of-control nuclear plant threatens to contaminate the region. Even though thousands of miles away, the United States feels the impact of the quake. If we are lucky, the temporary negative impact will be moderate: we will have to deal with increased prices for oil and gas as Japan has to rely more on fossil fuels to compensate for a reduced nuclear power capacity. These cost increases will weigh on the earnings of businesses in the transportation sector, major energy consumers as well as households’ incomes. The resulting drop in purchase power and firms’ willingness to hire can slow the economic recovery. Ā Also, the tourism industry will feel the lack of Japanese visitors. Many manufacturing companies depending on Japanese parts suppliers such as auto companies and computer manufacturers will have to halt production. Now if Japanese authorities manage to avert a nuclear crisis and focus on the reconstruction after completing the relief operations, Japan might see economic growth in the medium term far above the painfully low levels of the “lost decade(s)”. However, if a nuclear catastrophe was to happen, the outlook for both Japan and the world would be grim. Escalating costs for crisis management, relief and reconstruction efforts would soon push Japan’s already unhealthy fiscal situation to the point of defaulting on its massive debt.Ā Lack of uncontaminated food and water supplies, catastrophic damage to the public infrastructure, lack of energy and widespread chaos would result in the bankruptcies of countless Japanese firms, a depression in Japan and most likely in another severe global recession with limited means of supporting the countries in desperate situations and stabilizing world markets. Long supply-chain interruptions and investor uncertainty would bring U.S. unemployment to new highs, jeopardize several manufacturers which would struggle to permanently substitute supplies from Japan and several providers of luxury goods and services to the Japanese would be in huge trouble too. Overall, the best case scenario for the U.S. would mean pain in the short run but a potentially strong recovery in the medium term. The worst case scenario is highly damaging and painful.
