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'Throwaway economy' thwarting climate goals: report – FRANCE 24

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Issued on: 19/01/2022 – 01:16

Paris (AFP) – Countries are neglecting the massive impact of the “throwaway” economy on planet-warming emissions, according to research published Wednesday that calculated more than half a trillion tonnes of virgin materials have been consumed since the 2015 Paris climate deal.

From clothing to food, planes to buildings, research by the organisation Circle Economy estimates that 70 percent of greenhouse gas emissions are linked to the manufacturing and use of products.

But in its annual report on the state of the world’s use of materials, researchers said national climate pledges to reduce emissions focus narrowly on fossil fuel use and ignore the mounting global appetite for stuff.

Matthew Fraser, head of research at Circle Economy, said the report aimed to look beyond just fossil fuel use and the transition to green energy and ask about the emissions implications of using fewer resources.

“What if we reimagine our relationship with stuff, what would that bring us? Actually, it is quite significant,” he told AFP.

The report estimates that if the economy were more circular, reducing resource extraction and consumption by 28 percent, then the world could meet the Paris warming target of 1.5 degrees Celsius above pre-industrial levels.

But only a third of nations’ climate pledges mention the circular economy as part of their emissions goals, the report said.

It warns that humanity is consuming 70 percent more virgin materials than the world can safely replenish.

Economic ‘metabolism’

The analysis looks at global material flows based on national import and export figures and translates them into estimates of materials used — and reused.

It calculates annual resource use has grown from 89.8 billion tonnes in 2016 to more than 100 billion tonnes in 2019 and estimated it at 101.4 billion last year.

Circle Economy found that almost all of the materials extracted go to waste, with just 8.6 percent of materials recycled in 2020, what they call the circularity gap.

That is an even lower proportion than in 2018, when reused materials were 9.1 percent of the total, as the global demand for more things surges.

“Even though we are getting more efficient with how we use materials — computers are getting smaller, cars are becoming lighter, recycling is getting better — these micro gains in efficiency just aren’t stacking up relative to the total increasing demand,” said Fraser.

The report identified a number of practices across sectors from food production to transportation that it said could help rein in the ever-expanding use of virgin materials.

Fraser said the model that enables people in richer countries to buy products from all over the world to be delivered within hours and days “will inevitably have to change”.

The report also weighed strategies like enabling electrical goods — which contain critical raw materials including gold, silver and cobalt — to be repaired, redesigning items to be easier to recycle, restricting single-use plastics and renting items like cars rather than buying them.

One sector it identified as having a significant opportunity to reduce its materials footprint was buildings and construction, where Fraser said current practices were far from sustainable.

He said government policy would be needed occasionally to reconfigure the economic incentives that make reusing resources more expensive than using new ones — stressing that this should be seen as an integral part of efforts to curb global warming.

But Fraser said for now the issue remains a significant blind spot for governments, which he said do not pull together data of their countries’ materials footprint.

He added that people in the future may ask tougher questions about whether materials can be recycled before they are even used.

“Could we become more strict about the metabolism of our economy? Just like you wouldn’t eat junk food all the time,” he said.

“I think in the future that could become more and more prominent.”

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EXPLAINER: Are Turkey's efforts to fix the economy working? – Yahoo Canada Finance

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ANKARA, Turkey (AP) — Turkey’s government and central bank have taken unconventional steps in recent weeks to prop up a beleaguered economy crippled by skyrocketing consumer prices, instead of ending a much-criticized plan to cut interest rates.

President Recep Tayyip Erdogan’s insistence on cutting rates — the opposite of what economists say to do to curb soaring inflation — has weakened the country’s currency and driven prices even higher, making it tough for people to buy basics like food.

Here’s a look at the impact of Erdogan’s economic policies and their long-term risks:

WHAT’S GOING ON?

Erdogan, who has grown increasingly authoritarian and long declared himself an enemy of high borrowing costs, has pressured the central bank into continually cutting interest rates even though inflation surged by 36% last month.

In comparison, inflation in the 19 countries using the euro made a record 5% jump from a year earlier, and the U.S. tallied a nearly 40-year high of 7%.

Conventional economic thinking calls for increased borrowing costs to tame inflation, like other countries have done, but Erdogan maintains it’s the opposite.

He has fired three central bank governors since 2019 over differences on interest rates, arguing lowering them will increase exports and lead to more growth and jobs. He also has cited Islamic teachings that regard usury as a sin.

Erdogan’s unorthodox policy has foreign investors fleeing Turkey, while locals have been trying to protect their savings from high prices and a depreciating currency by converting them into foreign money or gold. The Turkish lira hit successive record lows in November and December and lost about 45% of its value against the U.S. dollar last year.

With prices soaring, even basic goods are out of reach for many Turks. Opposition parties, meanwhile, are disputing the official inflation number; an independent inflation research group says the real figure is a stunning 82%.

“Anyone who goes out shopping knows that the 36% inflation is fictitious,” said Ali Babacan, a former deputy prime minister under Erdogan who was regarded as the “economy czar.”

“The people are paying a high cost (for Erdogan’s policies) in the form of hardship and poverty,” added Babacan, who has since formed his own party.

WHAT IS ERDOGAN DOING TO FIX THE SITUATION?

Faced with a rapidly crashing currency but determined not to raise interest rates, Erdogan announced a program last month meant to encourage people to convert foreign currency into lira and keep their savings in Turkish money.

Under the “exchange rate-protected deposit” system, the government guarantees it will cover losses should the interest they receive when the account matures be less than what they would have earned by keeping the savings in foreign currency.

The lira, which had dropped to an all-time low of 18 against the dollar, rallied after the announcement to around 11.

Since then, the government extended the program to corporate accounts. The central bank said exporters would be required to exchange 25% of their foreign currency revenue into liras. And the government increased contributions to private pension plans.

It also said it was raising the minimum wage by 50%. But simultaneously, it raised gas and electricity prices by 50% for low-consumption households and by 125% for those using more.

ARE THE EFFORTS WORKING?

Erdogan maintains that the lira deposit system is a success.

“We are pleased with the trust our citizens have shown in the exchange rate-protected deposits. We are pleased with the decrease in volatility in exchange rates and continued stability,” the state-run Anadolu Agency quoted him as saying this week.

Treasury and Finance Minister Nureddin Nebati says people have deposited 131 billion lira ($9.67 billion) into such accounts so far.

Babacan insists Turkish investors are holding on to their foreign currencies and just switching any existing lira deposits into accounts under the program.

“There is no incentive for those who have foreign currency to change it (into liras),” he said on Turkey’s Fox TV.

Babacan and many others assert that the lira’s spectacular rally last month wasn’t due to the government’s program, but to the central bank selling billions of U.S. dollars from its dwindling reserves to bolster the Turkish currency.

“When we took a look, we saw that on that night, and the following few days, the central bank furiously sold dollars through the backdoor,” Babacan said. “In December, the central bank sold $17 billion. Of the 17 billion, 9 billion were sold through covert measures.”

Nebati has rejected the claims: “Thousands of individual sellers stepped in. They competed with each other. People raced to exchange their currency.”

The lira, meanwhile, has lost some of its gains, slipping to around 13.50 lira per dollar.

WHAT ARE THE RISKS GOING FORWARD?

The deposit system has provided a respite for Erdogan, ending the lira’s excessive volatility even though the shift to exchange rate-protected accounts is limited. But analysts fear the program will create additional long-term economic woes.

Should the lira fall again, Turkey’s treasury would have to foot the bill for exchange rate losses, further increasing inflation and financially burdening the government, they say.

“The fact that these deposits are tied to foreign currency puts the central bank and the treasury under an unquantifiable burden,” Babacan said.

Economist Ozlem Derici Sengul agreed.

“If we see a depreciation in the currency, the treasury will have to pay the difference between deposits’ return and the depreciation. That will put additional burden over public finances,” she said.

Experts also note the government hasn’t devised a plan to control inflation.

“Inflation is the real risk, of course, because the monetary policy is quite loose,” said Sengul, founding partner at Istanbul-based Spinn Consulting. “The inflationary pressures are not likely to disappear easily unless you follow a quite tight monetary policy.”

Erdogan insists his policies are combating high prices.

“As a matter of fact, the result is showing itself. Inflation has started to decline and will continue to do so,” he said.

Suzan Fraser, The Associated Press

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C$ outshines G10 peers as oil posts multi-year high

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The Canadian dollar edged up against its broadly stronger U.S. counterpart on Tuesday as oil prices climbed to their highest level since 2014 and investors bet that the Bank of Canada would raise interest rates as soon as next week.

The loonie was trading 0.1% higher at 1.2503 to the greenback, or 79.98 U.S. cents, after trading in a range of 1.2487 to 1.2563. It was the only G10 currency to gain ground against the greenback.

The move higher in crude prices “is supporting some oil proxies in the FX space,” said Bipan Rai, North America head of FX Strategy at CIBC Capital Markets.

Canada is a major producer of oil, which settled 1.9% higher at $85.43 a barrel as possible supply disruption after attacks in the Middle East added to an already tight supply outlook.

The U.S. dollar was bolstered by a jump in U.S. Treasury yields as traders prepared for the Federal Reserve to be more aggressive in tackling unabated inflation.

Canadian inflation data for December is due on Wednesday, which could offer clues on the Bank of Canada interest rate outlook.

Canadian restrictions to tackle COVID-19 will likely come at a cost of slower economic growth at the start of the year than in the United States, but that has not stopped investors from raising bets the BoC will hike interest rates at the Jan. 26 policy announcement.

Data from the overnight index swaps market shows the chances of a hike next week at nearly 70%.

Canadian housing starts fell 22% in December compared with the previous month as both multiple urban and single-detached urban starts decreased, data showed.

Canadian government bonds tracked the move in U.S. Treasuries. The 10-year yield climbed 7.6 basis points to 1.882%, its highest level since March 2019.

 

(Reporting by Fergal Smith; Editing by Nick Zieminski and Andrea Ricci)

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