Reuters
Sunday, December 28, 2008
SEOUL: South Korea plans to invest 37 trillion won (£19.3 billion) from 2009 to 2022 on new power plants, including 12 new nuclear plants, to boost fuel efficiency and cut emissions, Seoul's energy ministry said on Sunday.
South Korea, the world's fifth-largest crude importer, will also build seven new coal plants, 11 LNG plants and one heavy fuel plant by 2022, but it will get rid of three existing coal plants, six LNG plants and 13 heavy fuel units to boost efficiency, it said in a statement.
"The plan is to generate more low carbon power while decreasing the use of high-priced reserves such as LNG and coal. Under the plan, the fuel cost will be about 56 percent lower than this year," the ministry said.
The total number of nuclear power units will rise to 32, or 32.92 million kilowatts, by 2022 and account for 48 percent of the country's total power generation, from 34 percent this year.
LNG, which is the most expensive fuel, will account for just 6 percent of total power generation in 2022, down from the current 22 percent.
The overall electricity power capacity will increase to 100.89 million kilowatts by 2022, up from 71.36 million by end-2008.
Separately, the ministry said it would lend a combined 289.8 billion won to petroleum developers in 2009 to help the country secure stable energy supplies.
Of the finalised budget, 60 percent will go to existing projects both at home and abroad and the remainder to new exploration.
The ministry said the government would increase the ratio of lending support to non-government companies in 2009, while it would curtail lending to the state-run Korea National Oil Corporation.
(Reporting by Angela Moon and Kim Yeon-hee; Editing by Lincoln Feast)
2008년 12월 28일 일요일
2008년 12월 27일 토요일
Architecture deluxe and delusional: An era ends
By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.
By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.
By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.
By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.
By Nicolai Ouroussoff
Thursday, December 25, 2008
NEW YORK: Who knew a year ago that we were nearing the end of one of the most delirious eras in modern architectural history? What's more, who would have predicted that this turnaround, brought about by the biggest economic crisis in a half-century, would be met in some corners with a guilty sense of relief?
Before the financial cataclysm, the profession seemed to be in the midst of a major renaissance. Architects like Rem Koolhaas, Zaha Hadid, Frank Gehry, and Jacques Herzog and Pierre de Meuron, once deemed too radical for the mainstream, were celebrated as major cultural figures. And not just by high-minded cultural institutions; they were courted by developers who once scorned those talents as pretentious airheads.
Firms like Forest City Ratner and the Related Companies, which once worked exclusively with corporations that were more adept at handling big budgets than at architectural innovation, seized on these innovators as part of a shrewd business strategy. The architect's prestige would not only win over discerning consumers but also persuade planning boards to accede to large-scale urban projects like, say, Gehry's Atlantic Yards in Brooklyn.
But somewhere along the way that fantasy took a wrong turn. As commissions multiplied for luxury residential high-rises, high-end boutiques and corporate offices in cities like London, Tokyo and Dubai, more socially conscious projects rarely materialized. Public housing, a staple of 20th-century Modernism, was nowhere on the agenda. Nor were schools, hospitals or public infrastructure. Serious architecture was beginning to look like a service for the rich.
Nowhere was that poisonous cocktail of vanity and self-delusion more visible than in Manhattan. Although some important cultural projects were commissioned, this era will probably be remembered as much for its vulgarity as its ambition.
Every major architect in the world, it seemed, was designing an exclusive residential building here. With its elaborate faux-graffiti barrier, Herzog & de Meuron's 40 Bond Street was among the most indulgent, but it had plenty of rivals, including projects by Daniel Libeskind, UNStudio, Koolhaas and Norman Foster.
Together these projects threatened to transform the city's skyline into a tapestry of individual greed.
Now that high-end bubble has popped, and it is unlikely to return anytime soon. Jean Nouvel's 75-story residential tower adjoining the Museum of Modern Art has been delayed indefinitely. And developers now seem loath to undertake similar projects. Even if the economy turns around, the public's tolerance for outsize architectural statements that serve the rich and self-absorbed has already been pretty much exhausted.
This is not all good news. A lot of wonderful architecture is being thrown out with the bad. Although most of Nouvel's MoMA tower would have been devoted to luxury apartments, for instance, it would have allowed the museum next door to expand its gallery space significantly. It would also have been one of the most spectacular additions to the Manhattan skyline since the Chrysler Building.
And it would be a shame if the recession derailed promising cultural projects like Renzo Piano's new Whitney Museum of American Art in the meatpacking district or Foster's interior renovation of the Beaux-Arts New York Public Library on Fifth Avenue.
Architecture firms, meanwhile, are suffering like everyone else. With so many projects postponed and so few new ones coming in, many are already laying off employees. Aspiring architects who are just emerging from graduate programs are likely to move on to more secure professions, which could spell a smaller talent pool in the future.
Still, if the recession doesn't kill the profession, it may have some long-term positive effects for our architecture. President-elect Barack Obama has promised to invest heavily in infrastructure, including schools, parks, bridges and public housing. A major redirection of our creative resources may thus be at hand. If a lot of first-rate architectural talent promises to be at loose ends, why not enlist it in designing the projects that matter most? That's my dream anyway.
2008년 12월 11일 목요일
Pei's Doha museum blends an Islamic past with modernity
By Nicolai Ouroussoff
Wednesday, December 10, 2008
DOHA, Qatar: Ican't seem to get the Museum of Islamic Art out of my mind. There's nothing revolutionary about the building. But its clean, chiseled forms have a tranquillity that distinguishes it in an age that often seems trapped somewhere between gimmickry and a cloying nostalgia.
Part of the allure may have to do with I.M. Pei, the museum's architect. Pei reached the height of his popularity decades ago with projects like the East Building of the National Gallery of Art in Washington and the Louvre pyramid in Paris. Since then he has been an enigmatic figure at the periphery of the profession. His best work has admirers, but it has largely been ignored within architecture's intellectual circles. Now, at 91, Pei seems to be enjoying the kind of revival accorded to most serious architects if they have the luck to live long enough.
But the museum is also notable for its place within a broader effort to reshape the region's cultural identity. The myriad large-scale civic projects, from a Guggenheim museum that is planned for Abu Dhabi to Education City in Doha, are often dismissed in Western circles as superficial fantasies. As the first to reach completion, the Museum of Islamic Art is proof that the boom is not a mirage. The building's austere, almost primitive forms and the dazzling collections it houses underscore the seriousness of the country's cultural ambition.
Perhaps even more compelling, the design is rooted in an optimistic worldview - one at odds with the schism between cosmopolitan modernity and backward fundamentalism that has come to define the last few decades in the Middle East. The ideals it embodies - that the past and the present can co-exist harmoniously - are a throwback to a time when U.S. overseas ambitions were still cloaked in a progressive agenda.
To Pei, all serious architecture is found somewhere between the extremes of an overly sentimental view of the past and a form of historical amnesia.
"Contemporary architects tend to impose modernity on something," he said in an interview. "There is a certain concern for history but it's not very deep. I understand that time has changed, we have evolved. But I don't want to forget the beginning. A lasting architecture has to have roots." This moderation should come as no surprise to those who have followed Pei's career closely. I recall first hearing his name during construction on his design for the Kennedy Library in Boston in the mid-1970s. The library, enclosed behind a towering glass atrium overlooking the water, was not one of Pei's most memorable early works, but the link to John F. Kennedy lent him instant glamour.
Completed 16 years after Kennedy's assassination, the library's construction seemed to be an act of hope, as if the values that Kennedy's generation embodied could be preserved in stone, steel and glass.
In many ways Pei's career followed the unraveling of that era, from the economic downturn of the 1970s through the hollow victories of the Reagan years. Yet his work never lost its aura of measured idealism. It reached its highest expression in the National Gallery of Art's East Building, completed in 1978.
Since that popular triumph, Pei has often seemed to take the kind of leisurely approach to design that other architects, no matter how well established, can only dream of. When first asked in 1983 to take part in a competition to design the addition to the Louvre, he refused, saying that he would not submit a preliminary design. President François Mitterrand nevertheless hired him outright. Pei then asked him if he could take several months to study French history, and spent months traveling across Europe and North Africa before earnestly beginning work on the final design.
In 1990, a year after the project's completion, he left his firm. More recently he has lived in semi-retirement, rarely taking on more than a single project at a time.
Such an attitude runs counter to the ever-accelerating pace of the global age. But Pei's methods also offer a gentle resistance to the short-sightedness of so many contemporary cultural undertakings. Many successful architects today are global nomads, who tend to be more interested in exposing cultural frictions than in offering visions of harmony.
Pei, by contrast, imagines history as a smooth continuous process, a view that is deftly embodied by the Islamic Museum, whose clean abstract surfaces are an echo of both high Modernism and ancient Islamic architecture. Conceived by the Qatari emir and his 26-year-old daughter, Sheikha al Mayassa, it is the centerpiece of a larger cultural project whose aim is to forge a cosmopolitan, urban society in a place that not so long ago was a collection of Bedouin encampments and fishing villages. The aim is to recall a time that extended from the birth of Islam through the height of the Ottoman Empire, when the Islamic world was a center of scientific experimentation and cultural tolerance.
"My father's vision was to build a cross-cultural institution," said Sheikha al Mayassa, who has been charged with overseeing the city's cultural development, during a recent interview here. "It is to reconnect the historical threads that have been broken, and finding peaceful ways to resolve conflict."
Pei's aim was to integrate the values of that earlier era into today's culture - to capture, as he put it, the "essence of Islamic architecture."
The museum's hard, chiseled forms take their inspiration from the ablution fountain of Ibn Tulun Mosque in Cairo, as well as from fortresses built in Tunisia in the eighth and ninth centuries. In order to create a similar sense of withdrawal from the world, Pei located his museum on a small man-made island. Seen from a distance, its blocklike forms are a powerful contrast to the half-finished towers and construction cranes that line the waterfront. Stepped on both sides, the apex of the main building is punctuated by a short tower with an eye-shaped opening that masks an interior dome.
From certain angles the structure has a flat, chimeric quality. From others it seems to be floating on the surface of the water. As one approaches the building, the full weight of the structure begins to bear down, and the forms become more imposing. Soon a few traditional details begin to appearlike the two small arched windows over the entry. These touches provide a sense of scale, so that the size of the building can be understood according to the size of the human body.
The blend of modern and Islamic themes continues inside, where Pei draws most directly from religious precedents. The hemispherical dome, an intricate pattern of stainless steel plates pierced by a single small oculus, brings to mind the geometric patterns used in Baroque churches as well as in ancient mosques.
Pei has created a temple of high art, placing culture on the same pedestal as religion. His aim is both to create a symbol of Islamic culture and to forge a common heritage for the citizens of Qatar and the region.
The grandeur of the atrium is only a prelude to the real climax: the galleries, which are as intimate as the atrium is soaring. Objects are encased in towering glass cabinets set on tables, giving them an accessibility rare in a major museum. And like the building itself, the collections are a reflection of the notion that Modernity and Islamic culture are not in opposition, but woven out of the same historical thread.
The most moving works are those that underscore the cosmopolitan values that are at the core of this museum: the notion that the free, open exchange of ideas is what builds great - and tolerant - civilizations. Pei's museum reminds us that building a culture, as much as a political or social agenda, can be an act of healing. Like all great art, it requires forging seemingly conflicting values into a common whole.
2008년 12월 10일 수요일
Rising emissions put pressure on Japan to set tougher limits
Reuters
Thursday, November 13, 2008
TOKYO: Japanese greenhouse gas emissions rose to a record high in the year to March, putting it at risk of an embarrassing failure to achieve its Kyoto target over the next four years.
The increase of 2.3 percent last year, largely due to the closure of the biggest nuclear power plant in Japan after an earthquake, will increase the pressure for it to give up its efforts to control emissions through voluntary measures and adopt tougher limits on industry like the European Union and Australia.
Japan is the world's fifth-largest carbon dioxide producer, behind the United States, China, Russia and India.
With developing countries already questioning Tokyo's political will to rein in emissions, Japanese actions will be seen as a milestone as governments struggle to agree on a successor to the protocol next year.
Emissions rose to 1.371 billion tons of carbon dioxide equivalent in the Japanese fiscal year through March, after a 1.3 percent decline the previous year, data from the Japanese Ministry of the Environment showed Wednesday.
Analysts said immediate action was called for if Japan was to cut emissions by the estimated 13.5 percent needed to hit its 2012 target under Kyoto of just under 1.2 billion tons, down 6 percent from 1990 levels.
"We immediately need a set of effective policies to drive a change towards a more climate-friendly society," Tetsunari Iida, executive director of Tokyo's Institute for Sustainable Energy Policies, an environment policy nongovernment organization.
Unlike the European Union, Japan has been reluctant to set a mandatory cap or a carbon tax on companies' emissions. Steel makers and other manufacturers resist such caps, saying they would hurt their products' worldwide competitiveness.
The task of cutting emissions may grow even harder with the world tilting toward what may be its worst recession in decades, one that may divert governments' focus away from climate change and the trillions of investment dollars required to stem it.
Although Japan is set to review next year its current measures, based on voluntary pledges on emission cuts across major industries, that could be too late, analysts said.
A rise was widely expected after the world's biggest nuclear plant, run by Tokyo Electric Power, had to suspend operations following a July 2007 earthquake, forcing utilities to meet demand by burning more coal, oil and natural gas, all of which emit far more greenhouse gases.
The plant is expected to remain shut until beyond next March.
While Japanese utilities have stepped up their buying of UN carbon offsets, the data released Wednesday suggests they may have to buy more if Japan is to meet its global pledge, potentially driving up global carbon credit prices.
While Tokyo has worked hard to drive utilities toward cleaner forms of energy, it has also struggled to convince power companies facing tough times to hasten investments in new nuclear power stations with low emissions.
The government also faces public distrust about the scandal-plagued Japanese nuclear industry, including safety fears over the numerous earthquakes the country suffers each year.
On Tuesday, J-Power said it had delayed the start of a major nuclear unit by two years, the latest in a string of delays to new projects.
Yet long term strategies are key to resolving the problem, analysts say.
"There will be no reduction in carbon emissions until there are viable ways of replacing energy supply and energy growth with large-scale renewables," said a climate change expert Barry Brook, of the University of Adelaide in Australia.
"That is where the focus of international action should now be."
Iida said the fact that two new coal plants were being built in Japan underscored the need for sterner government action.
The world's efforts to carve out a pact to follow Kyoto should intensify ahead of a key meeting in Copenhagen next December that negotiators have set as a deadline for establishing a post-2012 framework.
But the debate comes at a difficult time, with developed nations heading into recession, which may help curb emissions by reducing power demand, but also risks distracting from the longer-term task and fostering a return to cheaper carbon energy.
The world needs to invest $26 trillion in energy infrastructure by 2030 just to maintain fossil-based energy supply, the International Energy Agency said last week.
Tokyo has set companies and households a private-sector emissions target, to be met by voluntary steps, of 1.254 billion tons, which will be offset by a further 68 million tons a year by government spending on domestic forest conservation and credits from investing in clean technology in poorer countries.
The key to Japan's voluntary program is the electric power industry, which has pledged to cut carbon dioxide emissions to an average of 0.34 kg per kilowatt hour a year through to 2012.
But in the year to March that figure stood at 0.453 kg due to the closure of the Kashiwazaki-Kariwa nuclear power plant.
Even if the power industry met its voluntary target last year, Japnese emissions would still have exceeded its target, the Environment Ministry said.
Thursday, November 13, 2008
TOKYO: Japanese greenhouse gas emissions rose to a record high in the year to March, putting it at risk of an embarrassing failure to achieve its Kyoto target over the next four years.
The increase of 2.3 percent last year, largely due to the closure of the biggest nuclear power plant in Japan after an earthquake, will increase the pressure for it to give up its efforts to control emissions through voluntary measures and adopt tougher limits on industry like the European Union and Australia.
Japan is the world's fifth-largest carbon dioxide producer, behind the United States, China, Russia and India.
With developing countries already questioning Tokyo's political will to rein in emissions, Japanese actions will be seen as a milestone as governments struggle to agree on a successor to the protocol next year.
Emissions rose to 1.371 billion tons of carbon dioxide equivalent in the Japanese fiscal year through March, after a 1.3 percent decline the previous year, data from the Japanese Ministry of the Environment showed Wednesday.
Analysts said immediate action was called for if Japan was to cut emissions by the estimated 13.5 percent needed to hit its 2012 target under Kyoto of just under 1.2 billion tons, down 6 percent from 1990 levels.
"We immediately need a set of effective policies to drive a change towards a more climate-friendly society," Tetsunari Iida, executive director of Tokyo's Institute for Sustainable Energy Policies, an environment policy nongovernment organization.
Unlike the European Union, Japan has been reluctant to set a mandatory cap or a carbon tax on companies' emissions. Steel makers and other manufacturers resist such caps, saying they would hurt their products' worldwide competitiveness.
The task of cutting emissions may grow even harder with the world tilting toward what may be its worst recession in decades, one that may divert governments' focus away from climate change and the trillions of investment dollars required to stem it.
Although Japan is set to review next year its current measures, based on voluntary pledges on emission cuts across major industries, that could be too late, analysts said.
A rise was widely expected after the world's biggest nuclear plant, run by Tokyo Electric Power, had to suspend operations following a July 2007 earthquake, forcing utilities to meet demand by burning more coal, oil and natural gas, all of which emit far more greenhouse gases.
The plant is expected to remain shut until beyond next March.
While Japanese utilities have stepped up their buying of UN carbon offsets, the data released Wednesday suggests they may have to buy more if Japan is to meet its global pledge, potentially driving up global carbon credit prices.
While Tokyo has worked hard to drive utilities toward cleaner forms of energy, it has also struggled to convince power companies facing tough times to hasten investments in new nuclear power stations with low emissions.
The government also faces public distrust about the scandal-plagued Japanese nuclear industry, including safety fears over the numerous earthquakes the country suffers each year.
On Tuesday, J-Power said it had delayed the start of a major nuclear unit by two years, the latest in a string of delays to new projects.
Yet long term strategies are key to resolving the problem, analysts say.
"There will be no reduction in carbon emissions until there are viable ways of replacing energy supply and energy growth with large-scale renewables," said a climate change expert Barry Brook, of the University of Adelaide in Australia.
"That is where the focus of international action should now be."
Iida said the fact that two new coal plants were being built in Japan underscored the need for sterner government action.
The world's efforts to carve out a pact to follow Kyoto should intensify ahead of a key meeting in Copenhagen next December that negotiators have set as a deadline for establishing a post-2012 framework.
But the debate comes at a difficult time, with developed nations heading into recession, which may help curb emissions by reducing power demand, but also risks distracting from the longer-term task and fostering a return to cheaper carbon energy.
The world needs to invest $26 trillion in energy infrastructure by 2030 just to maintain fossil-based energy supply, the International Energy Agency said last week.
Tokyo has set companies and households a private-sector emissions target, to be met by voluntary steps, of 1.254 billion tons, which will be offset by a further 68 million tons a year by government spending on domestic forest conservation and credits from investing in clean technology in poorer countries.
The key to Japan's voluntary program is the electric power industry, which has pledged to cut carbon dioxide emissions to an average of 0.34 kg per kilowatt hour a year through to 2012.
But in the year to March that figure stood at 0.453 kg due to the closure of the Kashiwazaki-Kariwa nuclear power plant.
Even if the power industry met its voluntary target last year, Japnese emissions would still have exceeded its target, the Environment Ministry said.
EU carbon trading system brings windfalls for some, with little benefit to climate
By James Kanter
Tuesday, December 9, 2008
An RWE power plant near Düsseldorf. The company was accused in 2006 of engaging in "abusive pricing" in charges to customers for the cost of emission credits. RWE is the biggest carbon dioxide emitter in Europe.(Frank Augstein/The Associated Press)
BRUSSELS: The European Union started with the most high-minded of ecological goals: to create a market that would encourage companies to reduce greenhouse gases by making them pay for each ton emitted into the atmosphere.
Four years later, the carbon trading system has created a multibillion-euro windfall for some of the continent's biggest polluters, with little or no noticeable benefit to the environment so far.
The lessons learned are coming under fresh scrutiny now, both in Europe and abroad. EU leaders will meet Thursday and Friday to work on the next phase of their system, seeking, they say, both to extend its scope and correct its flaws. And in the United States, President-elect Barack Obama has pledged to move quickly on a similar program.
As originally envisioned in Europe, companies would buy most if not all of the permits needed to cover their projected carbon dioxide emissions for a year, one permit good for each metric ton of CO2, the main greenhouse gas. If they produced more gases than expected, they would have to buy more permits; if they came in below target, they would be able to profit by selling their extra permits to companies that were polluting over their limit.
The initiative also included another, quieter goal: to raise the price of electricity by letting utilities pass along permit costs, thereby encouraging energy efficiency and innovation among customers as well.
But the system that emerged was far from that model.
After heavy lobbying by giant utilities and smokestack industries, who argued their competitiveness could be impaired, the EU all but scrapped the idea of selling permits. It gave them out for free, in such quantities that the market came close to collapsing because of a glut.
But in line with the original strategy, utilities in countries from Spain to Britain to Poland still put a "market value" on their books for the permits and added some of that putative cost to the prices they charged industrial customers for electricity. And they did not stop there. In one particularly contentious case, regulators in Germany accused utilities of charging customers for far more permits than they were entitled to.
Nowhere was this behavior more evident than at RWE, a major German power company, which has acknowledged that it is the biggest carbon dioxide emitter in Europe. Bank analysts and environmental advocates estimate RWE had received a windfall of roughly €5 billion, or $6.5 billion at current exchange rates, in the first three years of the system, concluding in 2007 - more than any other company in Europe.
In a confidential summary of its findings, obtained by the International Herald Tribune, the German cartel office in late 2006 accused RWE of engaging in "abusive pricing," piling on costs for industrial clients that were "completely out of proportion" with its own costs. It called for cuts of up to 75 percent.
RWE settled the case last year while denying any wrongdoing. It says price increases from 2005 to 2007 predominantly reflected higher costs for hard coal and natural gas.
Europe's overall experience with carbon trading has been a sobering one.
Its implementation has been marked by maneuvers and adjustments to the original framework that have yielded significant cost benefits to many of the continent's biggest polluting industries. Meanwhile, the amount of CO2 emitted by plants and factories participating in the system rose 0.4 percent in 2006 and an additional 0.7 percent in 2007.
The United States is now considering a system of its own, with Obama proposing to make industries buy all of their permits. He has said he would devote $150 billion from the sale of those permits over 10 years to energy efficiency and alternative energy projects.
Many of the framers of the European plan, meanwhile, have thought hard about the way the legislation evolved as they prepare to take up the next phase. But they face the prospect of trying to close numerous lucrative loopholes while confronting the same tug of war between lofty environmental goals and their immediate economic costs - a challenge made even more difficult by the onset of recession.Lofty goals at the outset for curbing CO2 emissions
During long negotiations on the landmark Kyoto climate treaty more than a decade ago, the United States, through the administration of Bill Clinton, was the loudest in insisting on including a reference to "emissions trading" in the treaty.
Americans had pioneered such markets in the 1970s and used them on a broader scale during the 1990s to reduce emissions from power plants blamed for acid rain.
U.S. officials argued that markets were the most effective way of encouraging innovative, emission-reducing technologies.
The European Union initially opposed emissions trading in favor of direct taxes on polluting industries, but later agreed to trading as the price for ratification.
The United States, however, ended up failing to either ratify Kyoto or to require U.S. companies to enter a carbon trading market outside of the Kyoto accord. But the European Commission, the EU executive body, began working on plans to start such a system in Europe.
"We ourselves had invested so much in the Kyoto Protocol in choosing a global deal," Margot Wallstrom, who was the European Union environment commissioner at the time, said during a recent interview. "I was eager to put it in place as soon as possible."
Today, the EU system represents about 75 percent of global carbon trading - a market worth about €60 billion in 2008, according to Andreas Arvanitakis, an analyst with Point Carbon, a research company.
Yet from the start, Wallstrom, who is now a vice president of the European Commission, said she was lobbied heavily by governments and by companies, seeking to limit the financial burden. She would not comment on any specific contacts. But Eurelectric, the main electricity industry lobby group, and its German affiliate met often with EU environment officials to discuss the shape of the emissions trading system.
A decision was made to limit the initial scope to some of the most energy-intensive sectors of the economy: electricity, glass, steel, cement, and pulp and paper. They were chosen primarily because their stationary factories were easier to regulate quickly than moving targets like transport or aviation.
The original idea of charging for all or even most of the permits never gained traction.
Many politicians said they feared that burdening European industries would undercut their global competitiveness, since rivals in Asia or the United States would not have such extra costs imposed on them.
In addition, Europe's energy market for industrial customers was opening to cross-border competition almost simultaneously.
Wallstrom and others at the commission describe the decision to give away the vast majority of permits as having been a necessary concession to get all the players in Europe on board - especially at a time when the Kyoto climate treaty was under attack from the administration of President George W. Bush.
Still, lawmakers at the European Parliament initially sought to require industry to pay for at least 30 percent of its permits, then 15 percent. (The actual trading price on the futures market at the time ranged from €5 to €13.)
But after long negotiations with EU governments, the Parliament enacted a law on July 2, 2003, allowing up to 100 percent of permits to be given away until 2013. Governments could sell some of the permits, up to 5 percent, but only Denmark, Ireland, Lithuania and Hungary did.
Denmark sold the full 5 percent, earning 226 million Danish kroner, or more than €30 million at current exchange rates. Had all the Danish permits been sold at the same price, the government could have reaped more than €600 million for the national budget.Debate turns to arguments of jobs vs. the environment
The EU system is highly decentralized, reflecting the political reality of a bloc that now numbers 27 countries. Thus, the lobbying did not stop in Brussels, but moved on to national capitals, where governments were left in charge of setting emissions levels and distributing the permits to companies within their borders, often with deep political connections.
Germany provided a stark example of what happened next. The cross-fire between environmental advocates and politicians who expressed concern about German competitiveness - and jobs - only intensified. The Greens, a political party, was in the federal government for the first time, as junior partner with the Social Democrats of Chancellor Gerhard Schröder. But the issues were resolved in an arena where energy companies have long wielded enormous political clout, and here they benefited greatly.
After World War II, German energy companies were largely state-controlled. Today, following years of privatization and consolidation, the four energy giants, E.ON, RWE, Energie Baden-Württemberg and Vattenfall, own 70 percent of German capacity and produce an even greater share of the electricity.
Jürgen Trittin, a former Greens leader who was environment minister from 1998 to 2005, recalled being heavily lobbied by executives from power companies, and by politicians from eastern Germany seeking special treatment for burning lignite, a soft brown coal that is common around central Europe and which is highly polluting.
The EU system put the government in the position of behaving like "a grandfather with a large family deciding what to give his favorite grandchildren for Christmas," Trittin said by telephone.
RWE was a special case, he said. The company was "perfectly integrated into the Ministry of Economy, with no clear border," Trittin said.
Wolfgang Clement, the economics minister from 2002 to 2005, had, since 1998, been premier of North Rhine-Westphalia state, where RWE is based. He joined the supervisory board of RWE Power in 2006.
His deputy, Georg Wilhelm Adamowitsch, was, from 1996 to 1999, the representative for federal and European affairs at another energy company, VEW, which in 2000 merged with RWE. At least three other top government officials, including Schröder himself, went to work for energy companies after leaving office.
Trittin recalled a five-hour "showdown" with Clement on the night of March 29, 2004, in which he lost a battle to lower the overall limit on emissions from plants and factories to 488 million tons of CO2 each year, from the level then in force of 501 million tons. Trittin said he was overruled by Clement, who, with Schröder's backing, secured a reduction of just two million tons, to 499 million.
Trittin said Clement accused him of "wanting to de-industrialize Germany."
Environmental groups were disappointed, but industry leaders were relieved. "With this compromise, steel makers can apparently now continue to sustainably produce steel in Germany," Dieter Ameling, the president of the German steel makers' association WV Stahl, was quoted at the time as saying. "The steel industry thanks minister Clement for his input."
The Federation of German Electricity Companies, representing utilities like RWE, expressed its "relief"' as well. "Good sense triumphed in the end," the federation chief, Eberhard Meller, was quoted as saying.
In a recent e-mail message, Clement did not challenge Trittin's account of the meeting, but called his claims of industry influence on the ministry "just nonsense."
Clement said that, during his time in government, he had "many very serious and complicated discussions" with Trittin and other Greens politicians about climate change and the economic costs of fighting it. "I reproached them - and I'm doing this still today - that at the end of their policy there is the de-industrialization of Germany," Clement reiterated. "That's our conflict."
Adamowitsch said by phone that he was not an "ambassador for the German energy industry" while in government or at VEW.
Now an independent consultant working with the Austrian government and the European Commission, Adamowitsch said that the EU emissions system had meant much greater burden for industrial companies making products like cement, where up to one-fifth of the final cost is for energy.
"We are in an industrial battle in the middle of a period of globalization and high energy prices mean we have a real problem in Germany," he said.
Schröder declined to comment for this article.Big winners emerge in ranks of German power companies
The benefits won by German industry were substantial. Under the German national plan, electricity companies were supposed to receive 3 percent fewer permits than they needed to cover their total emissions from 2005 to 2007. The aim was to encourage them to make technical improvements that would reduce emissions and help the country meet its commitment under the Kyoto treaty.
Instead, the companies got about 103 percent of their annual needs, according to the German Emissions Trading Authority, which oversees the system in Germany. That surplus could have been sold for about €290 million at the peak of the market.
German lawmakers also approved scores of combinations of exemptions and bonuses allowing companies to gain additional free permits for things they had done years earlier, or that might only be done in the future. Among them:
Utilities could base their claim for permits at coal and gas-fired plants on emissions levels from as far back as 1994, even if improvements had been made to the plants since then.
Utilities were guaranteed free permits for 18 years to cover any newly built coal or gas plants (a perk that provoked such a reproach from Brussels that it was later revoked).
Utilities could forecast how many permits they needed for each of their plants, despite a history of conflict with regulators over projections used to set tariffs.
"It was lobbying by industry, including the electricity companies, that was to blame for all these exceptional rules," said Hans-Jürgen Nantke, the director of the German trading authority, which is part of the Federal Environment Agency. The exemptions "enabled companies to get allowances that did not reflect the real situation of their emissions."
Jürgen Frech, chief spokesman for RWE, said that policy makers had sought input from all parties affected in creating what was an unprecedented system, and that all the national plans had to be subsequently approved by the European Commission in Brussels. "For industries like electricity production with long investment cycles, it is crucial to have a stable regulatory environment," he added.
RWE received 30 percent of all the permits given out, more than any other company in Germany.
The company said it transferred some of them among its plants - including those in other EU countries - but still found itself running short, and thus did not sell any.
But there was even greater revenue to be found elsewhere.Outrage from customers as electrical bills shot up
Major power consumers in Germany began receiving bigger electricity bills shortly after the system officially started in 2005, amounting to increases of about 5 percent each year. The biggest effect was on heavy users of power in industries like steel that - unlike households - buy power wholesale at prices that are less regulated.
Those customers were enraged, and they asked the German cartel office to investigate.
RWE justified its prices to the cartel office by saying the permits, although received for free, had a value in the marketplace. By not selling them and producing electricity instead, the argument went, it was losing an opportunity for revenue that should be charged to its customers.
In a summary of its preliminary findings, sent to RWE lawyers in December 2006, the cartel office agreed that the company was justified in passing through genuine "opportunity costs." But it accused RWE of charging for more permits than it should have - and suggested that this had been done at a third of all power plants in Germany.
This was what led the cartel office to accuse RWE of "abusive pricing." Investigators said RWE lacked any real opportunity to sell many of its permits because it already had committed to providing substantial amounts of electricity. And they said RWE admitted as much at a closed-door hearing.
Frech, at RWE, said that putting a price on the carbon permits - thereby encouraging everyone to be more efficient - was "beyond reproach."
The company said it was "unable to quantitatively estimate what proportion of the end customer price" was attributable to the carbon permits, mainly because the final price was determined in part by supply and demand.
But the cartel office said RWE should reduce the amount it charged for the permits by 75 percent. At this point the case could have moved toward litigation. The company, however, agreed to a settlement involving auctions that should provide industrial customers in Germany with lower electricity costs from 2009 through 2012.
"Customers will have the CO2 allowances RWE receives for the auctioned product credited to them free of charge," the company said, referring to its permits. "This newfound understanding is preferable to protracted legal battles through several courts."
Selling power without the cost of the CO2 permits also has a downside, however. It undermines the EU goal of curbing emissions and encouraging conservation by raising the cost of electricity to consumers.No smooth path for overhaul as EU economies deteriorate
RWE's net profit jumped 73 percent, to €3.85 billion, in 2005, the first year of the system. RWE does not detail in its financial statements what percentage of net profits is attributable to the carbon system, and the company said it was not able to do so.
Seb Walhain, the global head of environmental markets at Fortis, said that RWE earned up to €5 billion from 2005 to 2007 from the EU system. Felix Matthes at the Institute for Applied Ecology, a German environmental research group, estimated that RWE benefited from windfall profits of €2.2 billion to €3.3 billion annually in 2005 and 2006. Matthes and Walhain said very little, or no, windfall profits occurred in 2007 as a result of the EU system because the price of CO2 permits had fallen virtually to zero.
But emissions have risen steadily at the German operations of RWE since the trading system began. RWE was responsible for nearly 158 million tons of CO2 in 2007, compared with about 147 million tons in 2006 and 120 million tons in 2005, according to its annual reports.
Frech said emissions rose "slightly" in 2007 in part because one of its nuclear power stations "was off line for quite a while." Nuclear-fueled power plants emit no carbon dioxide.
The company also said it was investing €32 billion over the next five years in projects including renewable energy and developing cleaner techniques for generating electricity from hard coal and lignite, which RWE mines in Germany.
"Every investment we make is linked to climate protection," Frech said.
Yet so far there are few signs the system is cutting emissions. The amount of CO2 emitted by plants and factories participating in the system rose marginally in 2006 and 2007, according to the European Environment Agency. (Neither it nor the European Commission made any forecast before the system started about how it would perform.)
Even so, the EU environment commissioner, Stavros Dimas, said in May that emissions would "most likely have been significantly higher" without the carbon trading system.
He called the 2005 to 2007 period a "learning by doing" phase, and noted that limits on emissions have been tightened for the 2008 to 2012 trading period, and the glut of free permits lessened, meaning the price should rise.
But negotiations on how to meet even more ambitious targets after 2012 are in danger of coming undone as the economy worsens.
Prime Minister Silvio Berlusconi of Italy has led the assault on the package, saying that he was not in office last year when it was agreed on. "We don't think this is the moment to push forward on our own like Don Quixote," he said at a summit meeting in October. "We have time."
Poland - which depends on coal-fired plants for 95 percent of its electricity - has threatened to block the package at another summit meeting Thursday and Friday if a compromise is not found to lessen the burden on its energy sector.
RWE, meanwhile, insists that having to pay for all its permits, starting in 2013, with no phase-in period, would distort competition across Europe, which has recently opened up to cross-border energy sales. "Companies such as ours that are giving coal a future and rely on coal-powered generation will find themselves at a distinct disadvantage vis-à-vis companies like Électricité de France, which rely solely on nuclear and have virtually no CO2 to deal with," Frech said.
Industrial customers in Germany are issuing dire warnings of ballooning electricity prices they say are sure to come if utilities try to maintain their profit margins while complying with costly new rules.
The French president, Nicolas Sarkozy, who is leading the political horse trading, continues to push for an agreement. "Europe must be an example for others," he was quoted as saying Saturday in Poznan, Poland.
Nicholas Stern, one of the world's foremost authorities on the economics of climate change since presenting a report for the British government in 2006, said during a recent interview that the United States should draw lessons from Europe's example. He recommended that Obama move quickly toward charging industry for the permits, to avoid such repeated, drawn-out battles.
"Everybody will fight their own corner," he said. "That's why it's so important to have a clear conception from the start."
Tuesday, December 9, 2008
An RWE power plant near Düsseldorf. The company was accused in 2006 of engaging in "abusive pricing" in charges to customers for the cost of emission credits. RWE is the biggest carbon dioxide emitter in Europe.
BRUSSELS: The European Union started with the most high-minded of ecological goals: to create a market that would encourage companies to reduce greenhouse gases by making them pay for each ton emitted into the atmosphere.
Four years later, the carbon trading system has created a multibillion-euro windfall for some of the continent's biggest polluters, with little or no noticeable benefit to the environment so far.
The lessons learned are coming under fresh scrutiny now, both in Europe and abroad. EU leaders will meet Thursday and Friday to work on the next phase of their system, seeking, they say, both to extend its scope and correct its flaws. And in the United States, President-elect Barack Obama has pledged to move quickly on a similar program.
As originally envisioned in Europe, companies would buy most if not all of the permits needed to cover their projected carbon dioxide emissions for a year, one permit good for each metric ton of CO2, the main greenhouse gas. If they produced more gases than expected, they would have to buy more permits; if they came in below target, they would be able to profit by selling their extra permits to companies that were polluting over their limit.
The initiative also included another, quieter goal: to raise the price of electricity by letting utilities pass along permit costs, thereby encouraging energy efficiency and innovation among customers as well.
But the system that emerged was far from that model.
After heavy lobbying by giant utilities and smokestack industries, who argued their competitiveness could be impaired, the EU all but scrapped the idea of selling permits. It gave them out for free, in such quantities that the market came close to collapsing because of a glut.
But in line with the original strategy, utilities in countries from Spain to Britain to Poland still put a "market value" on their books for the permits and added some of that putative cost to the prices they charged industrial customers for electricity. And they did not stop there. In one particularly contentious case, regulators in Germany accused utilities of charging customers for far more permits than they were entitled to.
Nowhere was this behavior more evident than at RWE, a major German power company, which has acknowledged that it is the biggest carbon dioxide emitter in Europe. Bank analysts and environmental advocates estimate RWE had received a windfall of roughly €5 billion, or $6.5 billion at current exchange rates, in the first three years of the system, concluding in 2007 - more than any other company in Europe.
In a confidential summary of its findings, obtained by the International Herald Tribune, the German cartel office in late 2006 accused RWE of engaging in "abusive pricing," piling on costs for industrial clients that were "completely out of proportion" with its own costs. It called for cuts of up to 75 percent.
RWE settled the case last year while denying any wrongdoing. It says price increases from 2005 to 2007 predominantly reflected higher costs for hard coal and natural gas.
Europe's overall experience with carbon trading has been a sobering one.
Its implementation has been marked by maneuvers and adjustments to the original framework that have yielded significant cost benefits to many of the continent's biggest polluting industries. Meanwhile, the amount of CO2 emitted by plants and factories participating in the system rose 0.4 percent in 2006 and an additional 0.7 percent in 2007.
The United States is now considering a system of its own, with Obama proposing to make industries buy all of their permits. He has said he would devote $150 billion from the sale of those permits over 10 years to energy efficiency and alternative energy projects.
Many of the framers of the European plan, meanwhile, have thought hard about the way the legislation evolved as they prepare to take up the next phase. But they face the prospect of trying to close numerous lucrative loopholes while confronting the same tug of war between lofty environmental goals and their immediate economic costs - a challenge made even more difficult by the onset of recession.Lofty goals at the outset for curbing CO2 emissions
During long negotiations on the landmark Kyoto climate treaty more than a decade ago, the United States, through the administration of Bill Clinton, was the loudest in insisting on including a reference to "emissions trading" in the treaty.
Americans had pioneered such markets in the 1970s and used them on a broader scale during the 1990s to reduce emissions from power plants blamed for acid rain.
U.S. officials argued that markets were the most effective way of encouraging innovative, emission-reducing technologies.
The European Union initially opposed emissions trading in favor of direct taxes on polluting industries, but later agreed to trading as the price for ratification.
The United States, however, ended up failing to either ratify Kyoto or to require U.S. companies to enter a carbon trading market outside of the Kyoto accord. But the European Commission, the EU executive body, began working on plans to start such a system in Europe.
"We ourselves had invested so much in the Kyoto Protocol in choosing a global deal," Margot Wallstrom, who was the European Union environment commissioner at the time, said during a recent interview. "I was eager to put it in place as soon as possible."
Today, the EU system represents about 75 percent of global carbon trading - a market worth about €60 billion in 2008, according to Andreas Arvanitakis, an analyst with Point Carbon, a research company.
Yet from the start, Wallstrom, who is now a vice president of the European Commission, said she was lobbied heavily by governments and by companies, seeking to limit the financial burden. She would not comment on any specific contacts. But Eurelectric, the main electricity industry lobby group, and its German affiliate met often with EU environment officials to discuss the shape of the emissions trading system.
A decision was made to limit the initial scope to some of the most energy-intensive sectors of the economy: electricity, glass, steel, cement, and pulp and paper. They were chosen primarily because their stationary factories were easier to regulate quickly than moving targets like transport or aviation.
The original idea of charging for all or even most of the permits never gained traction.
Many politicians said they feared that burdening European industries would undercut their global competitiveness, since rivals in Asia or the United States would not have such extra costs imposed on them.
In addition, Europe's energy market for industrial customers was opening to cross-border competition almost simultaneously.
Wallstrom and others at the commission describe the decision to give away the vast majority of permits as having been a necessary concession to get all the players in Europe on board - especially at a time when the Kyoto climate treaty was under attack from the administration of President George W. Bush.
Still, lawmakers at the European Parliament initially sought to require industry to pay for at least 30 percent of its permits, then 15 percent. (The actual trading price on the futures market at the time ranged from €5 to €13.)
But after long negotiations with EU governments, the Parliament enacted a law on July 2, 2003, allowing up to 100 percent of permits to be given away until 2013. Governments could sell some of the permits, up to 5 percent, but only Denmark, Ireland, Lithuania and Hungary did.
Denmark sold the full 5 percent, earning 226 million Danish kroner, or more than €30 million at current exchange rates. Had all the Danish permits been sold at the same price, the government could have reaped more than €600 million for the national budget.Debate turns to arguments of jobs vs. the environment
The EU system is highly decentralized, reflecting the political reality of a bloc that now numbers 27 countries. Thus, the lobbying did not stop in Brussels, but moved on to national capitals, where governments were left in charge of setting emissions levels and distributing the permits to companies within their borders, often with deep political connections.
Germany provided a stark example of what happened next. The cross-fire between environmental advocates and politicians who expressed concern about German competitiveness - and jobs - only intensified. The Greens, a political party, was in the federal government for the first time, as junior partner with the Social Democrats of Chancellor Gerhard Schröder. But the issues were resolved in an arena where energy companies have long wielded enormous political clout, and here they benefited greatly.
After World War II, German energy companies were largely state-controlled. Today, following years of privatization and consolidation, the four energy giants, E.ON, RWE, Energie Baden-Württemberg and Vattenfall, own 70 percent of German capacity and produce an even greater share of the electricity.
Jürgen Trittin, a former Greens leader who was environment minister from 1998 to 2005, recalled being heavily lobbied by executives from power companies, and by politicians from eastern Germany seeking special treatment for burning lignite, a soft brown coal that is common around central Europe and which is highly polluting.
The EU system put the government in the position of behaving like "a grandfather with a large family deciding what to give his favorite grandchildren for Christmas," Trittin said by telephone.
RWE was a special case, he said. The company was "perfectly integrated into the Ministry of Economy, with no clear border," Trittin said.
Wolfgang Clement, the economics minister from 2002 to 2005, had, since 1998, been premier of North Rhine-Westphalia state, where RWE is based. He joined the supervisory board of RWE Power in 2006.
His deputy, Georg Wilhelm Adamowitsch, was, from 1996 to 1999, the representative for federal and European affairs at another energy company, VEW, which in 2000 merged with RWE. At least three other top government officials, including Schröder himself, went to work for energy companies after leaving office.
Trittin recalled a five-hour "showdown" with Clement on the night of March 29, 2004, in which he lost a battle to lower the overall limit on emissions from plants and factories to 488 million tons of CO2 each year, from the level then in force of 501 million tons. Trittin said he was overruled by Clement, who, with Schröder's backing, secured a reduction of just two million tons, to 499 million.
Trittin said Clement accused him of "wanting to de-industrialize Germany."
Environmental groups were disappointed, but industry leaders were relieved. "With this compromise, steel makers can apparently now continue to sustainably produce steel in Germany," Dieter Ameling, the president of the German steel makers' association WV Stahl, was quoted at the time as saying. "The steel industry thanks minister Clement for his input."
The Federation of German Electricity Companies, representing utilities like RWE, expressed its "relief"' as well. "Good sense triumphed in the end," the federation chief, Eberhard Meller, was quoted as saying.
In a recent e-mail message, Clement did not challenge Trittin's account of the meeting, but called his claims of industry influence on the ministry "just nonsense."
Clement said that, during his time in government, he had "many very serious and complicated discussions" with Trittin and other Greens politicians about climate change and the economic costs of fighting it. "I reproached them - and I'm doing this still today - that at the end of their policy there is the de-industrialization of Germany," Clement reiterated. "That's our conflict."
Adamowitsch said by phone that he was not an "ambassador for the German energy industry" while in government or at VEW.
Now an independent consultant working with the Austrian government and the European Commission, Adamowitsch said that the EU emissions system had meant much greater burden for industrial companies making products like cement, where up to one-fifth of the final cost is for energy.
"We are in an industrial battle in the middle of a period of globalization and high energy prices mean we have a real problem in Germany," he said.
Schröder declined to comment for this article.Big winners emerge in ranks of German power companies
The benefits won by German industry were substantial. Under the German national plan, electricity companies were supposed to receive 3 percent fewer permits than they needed to cover their total emissions from 2005 to 2007. The aim was to encourage them to make technical improvements that would reduce emissions and help the country meet its commitment under the Kyoto treaty.
Instead, the companies got about 103 percent of their annual needs, according to the German Emissions Trading Authority, which oversees the system in Germany. That surplus could have been sold for about €290 million at the peak of the market.
German lawmakers also approved scores of combinations of exemptions and bonuses allowing companies to gain additional free permits for things they had done years earlier, or that might only be done in the future. Among them:
Utilities could base their claim for permits at coal and gas-fired plants on emissions levels from as far back as 1994, even if improvements had been made to the plants since then.
Utilities were guaranteed free permits for 18 years to cover any newly built coal or gas plants (a perk that provoked such a reproach from Brussels that it was later revoked).
Utilities could forecast how many permits they needed for each of their plants, despite a history of conflict with regulators over projections used to set tariffs.
"It was lobbying by industry, including the electricity companies, that was to blame for all these exceptional rules," said Hans-Jürgen Nantke, the director of the German trading authority, which is part of the Federal Environment Agency. The exemptions "enabled companies to get allowances that did not reflect the real situation of their emissions."
Jürgen Frech, chief spokesman for RWE, said that policy makers had sought input from all parties affected in creating what was an unprecedented system, and that all the national plans had to be subsequently approved by the European Commission in Brussels. "For industries like electricity production with long investment cycles, it is crucial to have a stable regulatory environment," he added.
RWE received 30 percent of all the permits given out, more than any other company in Germany.
The company said it transferred some of them among its plants - including those in other EU countries - but still found itself running short, and thus did not sell any.
But there was even greater revenue to be found elsewhere.Outrage from customers as electrical bills shot up
Major power consumers in Germany began receiving bigger electricity bills shortly after the system officially started in 2005, amounting to increases of about 5 percent each year. The biggest effect was on heavy users of power in industries like steel that - unlike households - buy power wholesale at prices that are less regulated.
Those customers were enraged, and they asked the German cartel office to investigate.
RWE justified its prices to the cartel office by saying the permits, although received for free, had a value in the marketplace. By not selling them and producing electricity instead, the argument went, it was losing an opportunity for revenue that should be charged to its customers.
In a summary of its preliminary findings, sent to RWE lawyers in December 2006, the cartel office agreed that the company was justified in passing through genuine "opportunity costs." But it accused RWE of charging for more permits than it should have - and suggested that this had been done at a third of all power plants in Germany.
This was what led the cartel office to accuse RWE of "abusive pricing." Investigators said RWE lacked any real opportunity to sell many of its permits because it already had committed to providing substantial amounts of electricity. And they said RWE admitted as much at a closed-door hearing.
Frech, at RWE, said that putting a price on the carbon permits - thereby encouraging everyone to be more efficient - was "beyond reproach."
The company said it was "unable to quantitatively estimate what proportion of the end customer price" was attributable to the carbon permits, mainly because the final price was determined in part by supply and demand.
But the cartel office said RWE should reduce the amount it charged for the permits by 75 percent. At this point the case could have moved toward litigation. The company, however, agreed to a settlement involving auctions that should provide industrial customers in Germany with lower electricity costs from 2009 through 2012.
"Customers will have the CO2 allowances RWE receives for the auctioned product credited to them free of charge," the company said, referring to its permits. "This newfound understanding is preferable to protracted legal battles through several courts."
Selling power without the cost of the CO2 permits also has a downside, however. It undermines the EU goal of curbing emissions and encouraging conservation by raising the cost of electricity to consumers.No smooth path for overhaul as EU economies deteriorate
RWE's net profit jumped 73 percent, to €3.85 billion, in 2005, the first year of the system. RWE does not detail in its financial statements what percentage of net profits is attributable to the carbon system, and the company said it was not able to do so.
Seb Walhain, the global head of environmental markets at Fortis, said that RWE earned up to €5 billion from 2005 to 2007 from the EU system. Felix Matthes at the Institute for Applied Ecology, a German environmental research group, estimated that RWE benefited from windfall profits of €2.2 billion to €3.3 billion annually in 2005 and 2006. Matthes and Walhain said very little, or no, windfall profits occurred in 2007 as a result of the EU system because the price of CO2 permits had fallen virtually to zero.
But emissions have risen steadily at the German operations of RWE since the trading system began. RWE was responsible for nearly 158 million tons of CO2 in 2007, compared with about 147 million tons in 2006 and 120 million tons in 2005, according to its annual reports.
Frech said emissions rose "slightly" in 2007 in part because one of its nuclear power stations "was off line for quite a while." Nuclear-fueled power plants emit no carbon dioxide.
The company also said it was investing €32 billion over the next five years in projects including renewable energy and developing cleaner techniques for generating electricity from hard coal and lignite, which RWE mines in Germany.
"Every investment we make is linked to climate protection," Frech said.
Yet so far there are few signs the system is cutting emissions. The amount of CO2 emitted by plants and factories participating in the system rose marginally in 2006 and 2007, according to the European Environment Agency. (Neither it nor the European Commission made any forecast before the system started about how it would perform.)
Even so, the EU environment commissioner, Stavros Dimas, said in May that emissions would "most likely have been significantly higher" without the carbon trading system.
He called the 2005 to 2007 period a "learning by doing" phase, and noted that limits on emissions have been tightened for the 2008 to 2012 trading period, and the glut of free permits lessened, meaning the price should rise.
But negotiations on how to meet even more ambitious targets after 2012 are in danger of coming undone as the economy worsens.
Prime Minister Silvio Berlusconi of Italy has led the assault on the package, saying that he was not in office last year when it was agreed on. "We don't think this is the moment to push forward on our own like Don Quixote," he said at a summit meeting in October. "We have time."
Poland - which depends on coal-fired plants for 95 percent of its electricity - has threatened to block the package at another summit meeting Thursday and Friday if a compromise is not found to lessen the burden on its energy sector.
RWE, meanwhile, insists that having to pay for all its permits, starting in 2013, with no phase-in period, would distort competition across Europe, which has recently opened up to cross-border energy sales. "Companies such as ours that are giving coal a future and rely on coal-powered generation will find themselves at a distinct disadvantage vis-à-vis companies like Électricité de France, which rely solely on nuclear and have virtually no CO2 to deal with," Frech said.
Industrial customers in Germany are issuing dire warnings of ballooning electricity prices they say are sure to come if utilities try to maintain their profit margins while complying with costly new rules.
The French president, Nicolas Sarkozy, who is leading the political horse trading, continues to push for an agreement. "Europe must be an example for others," he was quoted as saying Saturday in Poznan, Poland.
Nicholas Stern, one of the world's foremost authorities on the economics of climate change since presenting a report for the British government in 2006, said during a recent interview that the United States should draw lessons from Europe's example. He recommended that Obama move quickly toward charging industry for the permits, to avoid such repeated, drawn-out battles.
"Everybody will fight their own corner," he said. "That's why it's so important to have a clear conception from the start."
Polluters' windfall: Carbon into gold
By James Kanter
Wednesday, December 10, 2008
BRUSSELS: The European Union started with the most high-minded of ecological goals: to create a market that would encourage companies to reduce greenhouse gases by making them pay for each ton emitted into the atmosphere.
Four years later, the carbon trading system has created a multibillion-euro windfall for some of the Continent's biggest polluters, with little or no noticeable benefit to the environment so far.
The lessons learned are coming under fresh scrutiny now, both in Europe and abroad. EU leaders will meet Thursday and Friday to work on the next phase of their system, seeking, they say, both to extend its scope and correct its flaws. And in the United States, President-elect Barack Obama has pledged to move quickly on a similar program.
As originally envisioned in Europe, companies would buy most if not all of the permits needed to cover their projected carbon dioxide emissions for a year, one permit good for each metric ton of CO2, the main greenhouse gas. If they produced more gases than expected, they would have to buy more permits; if they came in below target, they would be able to profit by selling their extra permits to companies that were polluting over their limit.
The initiative also included another, quieter goal: to raise the price of electricity by letting utilities pass along permit costs, thereby encouraging energy efficiency and innovation among customers as well.
But the system that emerged was far from that model.
After heavy lobbying by giant utilities and smokestack industries, which argued that their competitiveness could be impaired, the EU all but scrapped the idea of selling permits. It gave them out for free, in such quantities that the market came close to collapsing because of a glut.
But in line with the original strategy, utilities in countries from Spain to Britain to Poland still put a "market value" on their books for the permits and added some of that putative cost to the prices they charged industrial customers for electricity. And they did not stop there. In one particularly contentious case, regulators in Germany accused utilities of charging customers for far more permits than they were entitled to.
Nowhere was this behavior more evident than at RWE, a major German power company, which has acknowledged that it is the biggest carbon dioxide emitter in Europe. Bank analysts and environmental advocates estimate RWE had received a windfall of roughly €5 billion, or $6.5 billion at current exchange rates, in the first three years of the system, ending in 2007 - more than any other company in Europe.
In a confidential summary of its findings, obtained by the International Herald Tribune, the German cartel office in late 2006 accused RWE of engaging in "abusive pricing," piling on costs for industrial clients that were "completely out of proportion" with its own costs. It called for cuts of up to 75 percent.
RWE settled the case last year while denying any wrongdoing. It says price increases from 2005 to 2007 predominantly reflected higher costs for hard coal and natural gas.
Europe's overall experience with carbon trading has been a sobering one.
Its implementation has been marked by maneuvers and adjustments to the original framework that have yielded significant cost benefits to many of the Continent's biggest polluting industries. Meanwhile, the amount of CO2 emitted by plants and factories participating in the system rose 0.4 percent in 2006 and an additional 0.7 percent in 2007.
The United States is now considering a system of its own, with Obama proposing to make industries buy all of their permits. He has said he would devote $150 billion from the sale of those permits over 10 years to energy efficiency and alternative energy projects.
Many of the framers of the European plan, meanwhile, have thought hard about the way the legislation evolved as they prepare to take up the next phase. But they face the prospect of trying to close numerous lucrative loopholes while confronting the same tug of war between lofty environmental goals and their immediate economic costs - a challenge made even more difficult by the onset of recession.
During long negotiations on the landmark Kyoto climate treaty more than a decade ago, the United States, through the administration of Bill Clinton, was the loudest in insisting on including a reference to "emissions trading" in the treaty. Americans had pioneered such markets in the 1970s and used them on a broader scale during the 1990s to reduce emissions from power plants blamed for acid rain.
U.S. officials argued that markets were the most effective way of encouraging innovative, emission-reducing technologies.
The European Union initially opposed emissions trading in favor of direct taxes on polluting industries, but later agreed to trading as the price for ratification.
The United States, however, ended up failing to either ratify Kyoto or to require U.S. companies to enter a carbon trading market outside of the Kyoto accord. But the European Commission, the EU executive body, began working on plans to start such a system in Europe.
"We ourselves had invested so much in the Kyoto Protocol in choosing a global deal," Margot Wallstrom, who was the EU environment commissioner at the time, said during a recent interview. "I was eager to put it in place as soon as possible."
Today, the EU system represents about 75 percent of global carbon trading - a market worth about €60 billion in 2008, according to Andreas Arvanitakis, an analyst with Point Carbon, a research company.
Yet from the start, Wallstrom, who is now a vice president of the European Commission, said she was lobbied heavily by governments and by companies, seeking to limit the financial burden. She would not comment on any specific contacts. But Eurelectric, the main electricity industry lobby group, and its German affiliate met often with EU environment officials to discuss the shape of the emissions trading system.
A decision was made to limit the initial scope to some of the most energy-intensive sectors of the economy: electricity, glass, steel, cement, and pulp and paper. They were chosen primarily because their stationary factories were easier to regulate quickly than moving targets like transport or aviation.
The original idea of charging for all or even most of the permits never gained traction.
Many politicians said they feared that burdening European industries would undercut their global competitiveness, since rivals in Asia or the United States would not have such extra costs imposed on them.
In addition, Europe's energy market for industrial customers was opening to cross-border competition almost simultaneously.
Wallstrom and others at the commission describe the decision to give away the vast majority of permits as having been a necessary concession to get all the players in Europe on board - especially at a time when the Kyoto climate treaty was under attack from the administration of President George W. Bush.
Still, lawmakers at the European Parliament initially sought to require industry to pay for at least 30 percent of its permits, then 15 percent. (The actual trading price on the futures market at the time ranged from €5 to €13.)
But after long negotiations with EU governments, the Parliament enacted a law on July 2, 2003, allowing up to 100 percent of permits to be given away until 2013. Governments could sell some of the permits, up to 5 percent, but only Denmark, Ireland, Lithuania and Hungary did.
Denmark sold the full 5 percent, earning 226 million Danish kroner, or more than €30 million at current exchange rates. Had all the Danish permits been sold at the same price, the government could have reaped more than €600 million for the national budget.
The EU system is highly decentralized, reflecting the political reality of a bloc that now numbers 27 countries. Thus, the lobbying did not stop in Brussels, but moved on to national capitals, where governments were left in charge of setting emissions levels and distributing the permits to companies within their borders, often with deep political connections.
The EU system already is having an effect on business opportunities in parts of Asia, where companies from rich, developed parts of the world can invest in carbon-reducing projects in countries like India to earn additional permits.
Because companies like RWE are obliged to buy larger numbers of permits to meet stricter EU pollution targets, they are increasingly attracted by these so-called CO2 offset projects, which are regulated by United Nations officials in Bonn.
Through these projects, RWE could obtain a substantial number of its required permits and do so at substantially less cost than buying permits on carbon markets in Europe.
As part of these efforts, RWE has said it is distributing low-energy light bulbs in India in exchange for UN-approved permits India and has said it bought similar permits that were generated by a composting project in China.
These carbon offsets are quickly becoming a major plank of European Union climate policy.
Proponents of these projects say they have succeeded in channeling billions of euros toward low-carbon investments in developing countries.
But the trade has also has raised questions about whether it represents genuine emissions cuts and about whether it is holding back a transition to greener power within Europe.
So far there are few signs that the carbon-trading system is cutting emissions. The amount of CO2 emitted by plants and factories participating in the system rose marginally in 2006 and 2007, according to the European Environment Agency. (Neither it nor the European Commission made any forecast before the system started about how it would perform.)
Even so, the EU environment commissioner, Stavros Dimas, said in May that emissions would "most likely have been significantly higher" without the carbon trading system.
He called the 2005 to 2007 period a "learning by doing" phase, and noted that limits on emissions have been tightened for the 2008 to 2012 trading period and the glut of free permits lessened, meaning the price should rise.
But negotiations on how to meet even more ambitious targets after 2012 are in danger of coming undone as the economy worsens.
Prime Minister Silvio Berlusconi of Italy has led the assault on the package, saying that he was not in office last year when it was agreed on.
"We don't think this is the moment to push forward on our own like Don Quixote," he said at a summit meeting in October. "We have time."
Poland - which depends on coal-fired plants for 95 percent of its electricity - has threatened to block the package at another summit meeting Thursday and Friday if a compromise is not found to lessen the burden on its energy sector.
RWE, meanwhile, insists that having to pay for all its permits, starting in 2013, with no phase-in period, would distort competition across Europe, which has recently opened up to cross-border energy sales.
"Companies such as ours that are giving coal a future and rely on coal-powered generation will find themselves at a distinct disadvantage vis-à-vis companies like Électricité de France, which rely solely on nuclear and have virtually no CO2 to deal with," said Jürgen Frech, chief spokesman for RWE.
Industrial customers in Germany are issuing dire warnings of ballooning electricity prices they say are sure to come if utilities try to maintain their profit margins while complying with costly new rules.
The French president, Nicolas Sarkozy, who is leading the political horse trading, continues to push for an agreement. "Europe must be an example for others," he was quoted as saying Saturday in Poznan, Poland.
Nicholas Stern, one of the world's foremost authorities on the economics of climate change since presenting a report for the British government in 2006, said during a recent interview that the United States should draw lessons from Europe's example. He recommended that Obama move quickly toward charging industry for the permits, to avoid such repeated, drawn-out battles.
"Everybody will fight their own corner," he said. "That's why it's so important to have a clear conception from the start."
Paul Geitner contributed reporting from Paris.
Wednesday, December 10, 2008
BRUSSELS: The European Union started with the most high-minded of ecological goals: to create a market that would encourage companies to reduce greenhouse gases by making them pay for each ton emitted into the atmosphere.
Four years later, the carbon trading system has created a multibillion-euro windfall for some of the Continent's biggest polluters, with little or no noticeable benefit to the environment so far.
The lessons learned are coming under fresh scrutiny now, both in Europe and abroad. EU leaders will meet Thursday and Friday to work on the next phase of their system, seeking, they say, both to extend its scope and correct its flaws. And in the United States, President-elect Barack Obama has pledged to move quickly on a similar program.
As originally envisioned in Europe, companies would buy most if not all of the permits needed to cover their projected carbon dioxide emissions for a year, one permit good for each metric ton of CO2, the main greenhouse gas. If they produced more gases than expected, they would have to buy more permits; if they came in below target, they would be able to profit by selling their extra permits to companies that were polluting over their limit.
The initiative also included another, quieter goal: to raise the price of electricity by letting utilities pass along permit costs, thereby encouraging energy efficiency and innovation among customers as well.
But the system that emerged was far from that model.
After heavy lobbying by giant utilities and smokestack industries, which argued that their competitiveness could be impaired, the EU all but scrapped the idea of selling permits. It gave them out for free, in such quantities that the market came close to collapsing because of a glut.
But in line with the original strategy, utilities in countries from Spain to Britain to Poland still put a "market value" on their books for the permits and added some of that putative cost to the prices they charged industrial customers for electricity. And they did not stop there. In one particularly contentious case, regulators in Germany accused utilities of charging customers for far more permits than they were entitled to.
Nowhere was this behavior more evident than at RWE, a major German power company, which has acknowledged that it is the biggest carbon dioxide emitter in Europe. Bank analysts and environmental advocates estimate RWE had received a windfall of roughly €5 billion, or $6.5 billion at current exchange rates, in the first three years of the system, ending in 2007 - more than any other company in Europe.
In a confidential summary of its findings, obtained by the International Herald Tribune, the German cartel office in late 2006 accused RWE of engaging in "abusive pricing," piling on costs for industrial clients that were "completely out of proportion" with its own costs. It called for cuts of up to 75 percent.
RWE settled the case last year while denying any wrongdoing. It says price increases from 2005 to 2007 predominantly reflected higher costs for hard coal and natural gas.
Europe's overall experience with carbon trading has been a sobering one.
Its implementation has been marked by maneuvers and adjustments to the original framework that have yielded significant cost benefits to many of the Continent's biggest polluting industries. Meanwhile, the amount of CO2 emitted by plants and factories participating in the system rose 0.4 percent in 2006 and an additional 0.7 percent in 2007.
The United States is now considering a system of its own, with Obama proposing to make industries buy all of their permits. He has said he would devote $150 billion from the sale of those permits over 10 years to energy efficiency and alternative energy projects.
Many of the framers of the European plan, meanwhile, have thought hard about the way the legislation evolved as they prepare to take up the next phase. But they face the prospect of trying to close numerous lucrative loopholes while confronting the same tug of war between lofty environmental goals and their immediate economic costs - a challenge made even more difficult by the onset of recession.
During long negotiations on the landmark Kyoto climate treaty more than a decade ago, the United States, through the administration of Bill Clinton, was the loudest in insisting on including a reference to "emissions trading" in the treaty. Americans had pioneered such markets in the 1970s and used them on a broader scale during the 1990s to reduce emissions from power plants blamed for acid rain.
U.S. officials argued that markets were the most effective way of encouraging innovative, emission-reducing technologies.
The European Union initially opposed emissions trading in favor of direct taxes on polluting industries, but later agreed to trading as the price for ratification.
The United States, however, ended up failing to either ratify Kyoto or to require U.S. companies to enter a carbon trading market outside of the Kyoto accord. But the European Commission, the EU executive body, began working on plans to start such a system in Europe.
"We ourselves had invested so much in the Kyoto Protocol in choosing a global deal," Margot Wallstrom, who was the EU environment commissioner at the time, said during a recent interview. "I was eager to put it in place as soon as possible."
Today, the EU system represents about 75 percent of global carbon trading - a market worth about €60 billion in 2008, according to Andreas Arvanitakis, an analyst with Point Carbon, a research company.
Yet from the start, Wallstrom, who is now a vice president of the European Commission, said she was lobbied heavily by governments and by companies, seeking to limit the financial burden. She would not comment on any specific contacts. But Eurelectric, the main electricity industry lobby group, and its German affiliate met often with EU environment officials to discuss the shape of the emissions trading system.
A decision was made to limit the initial scope to some of the most energy-intensive sectors of the economy: electricity, glass, steel, cement, and pulp and paper. They were chosen primarily because their stationary factories were easier to regulate quickly than moving targets like transport or aviation.
The original idea of charging for all or even most of the permits never gained traction.
Many politicians said they feared that burdening European industries would undercut their global competitiveness, since rivals in Asia or the United States would not have such extra costs imposed on them.
In addition, Europe's energy market for industrial customers was opening to cross-border competition almost simultaneously.
Wallstrom and others at the commission describe the decision to give away the vast majority of permits as having been a necessary concession to get all the players in Europe on board - especially at a time when the Kyoto climate treaty was under attack from the administration of President George W. Bush.
Still, lawmakers at the European Parliament initially sought to require industry to pay for at least 30 percent of its permits, then 15 percent. (The actual trading price on the futures market at the time ranged from €5 to €13.)
But after long negotiations with EU governments, the Parliament enacted a law on July 2, 2003, allowing up to 100 percent of permits to be given away until 2013. Governments could sell some of the permits, up to 5 percent, but only Denmark, Ireland, Lithuania and Hungary did.
Denmark sold the full 5 percent, earning 226 million Danish kroner, or more than €30 million at current exchange rates. Had all the Danish permits been sold at the same price, the government could have reaped more than €600 million for the national budget.
The EU system is highly decentralized, reflecting the political reality of a bloc that now numbers 27 countries. Thus, the lobbying did not stop in Brussels, but moved on to national capitals, where governments were left in charge of setting emissions levels and distributing the permits to companies within their borders, often with deep political connections.
The EU system already is having an effect on business opportunities in parts of Asia, where companies from rich, developed parts of the world can invest in carbon-reducing projects in countries like India to earn additional permits.
Because companies like RWE are obliged to buy larger numbers of permits to meet stricter EU pollution targets, they are increasingly attracted by these so-called CO2 offset projects, which are regulated by United Nations officials in Bonn.
Through these projects, RWE could obtain a substantial number of its required permits and do so at substantially less cost than buying permits on carbon markets in Europe.
As part of these efforts, RWE has said it is distributing low-energy light bulbs in India in exchange for UN-approved permits India and has said it bought similar permits that were generated by a composting project in China.
These carbon offsets are quickly becoming a major plank of European Union climate policy.
Proponents of these projects say they have succeeded in channeling billions of euros toward low-carbon investments in developing countries.
But the trade has also has raised questions about whether it represents genuine emissions cuts and about whether it is holding back a transition to greener power within Europe.
So far there are few signs that the carbon-trading system is cutting emissions. The amount of CO2 emitted by plants and factories participating in the system rose marginally in 2006 and 2007, according to the European Environment Agency. (Neither it nor the European Commission made any forecast before the system started about how it would perform.)
Even so, the EU environment commissioner, Stavros Dimas, said in May that emissions would "most likely have been significantly higher" without the carbon trading system.
He called the 2005 to 2007 period a "learning by doing" phase, and noted that limits on emissions have been tightened for the 2008 to 2012 trading period and the glut of free permits lessened, meaning the price should rise.
But negotiations on how to meet even more ambitious targets after 2012 are in danger of coming undone as the economy worsens.
Prime Minister Silvio Berlusconi of Italy has led the assault on the package, saying that he was not in office last year when it was agreed on.
"We don't think this is the moment to push forward on our own like Don Quixote," he said at a summit meeting in October. "We have time."
Poland - which depends on coal-fired plants for 95 percent of its electricity - has threatened to block the package at another summit meeting Thursday and Friday if a compromise is not found to lessen the burden on its energy sector.
RWE, meanwhile, insists that having to pay for all its permits, starting in 2013, with no phase-in period, would distort competition across Europe, which has recently opened up to cross-border energy sales.
"Companies such as ours that are giving coal a future and rely on coal-powered generation will find themselves at a distinct disadvantage vis-à-vis companies like Électricité de France, which rely solely on nuclear and have virtually no CO2 to deal with," said Jürgen Frech, chief spokesman for RWE.
Industrial customers in Germany are issuing dire warnings of ballooning electricity prices they say are sure to come if utilities try to maintain their profit margins while complying with costly new rules.
The French president, Nicolas Sarkozy, who is leading the political horse trading, continues to push for an agreement. "Europe must be an example for others," he was quoted as saying Saturday in Poznan, Poland.
Nicholas Stern, one of the world's foremost authorities on the economics of climate change since presenting a report for the British government in 2006, said during a recent interview that the United States should draw lessons from Europe's example. He recommended that Obama move quickly toward charging industry for the permits, to avoid such repeated, drawn-out battles.
"Everybody will fight their own corner," he said. "That's why it's so important to have a clear conception from the start."
Paul Geitner contributed reporting from Paris.
Climate-change conference hampered by U.S. political change
By Elisabeth Rosenthal
Wednesday, December 10, 2008
POZNAN, Poland: As ministers from 189 countries gather here to hammer out a new climate change treaty, progress is sorely hampered by the absence of one delegation: the team that will forge Barack Obama's climate policy.
The U.S. president-elect has called climate change "a matter of urgency," but his administration-in-waiting has not sent representatives to Poznan, where the United States is represented by the Bush administration. That has left this critical meeting in a bit of limbo, with many delegates saying they were waiting to size up the next administration's environmental commitment before making bold moves of their own.
"It has affected the meeting in a fairly significant way," said Gus Silva-Chavez, a policy expert at the Environmental Defense Fund in Washington, who has been observing the closed negotiations. "A lot of people think: 'this is not the time to put our cards on the table. Let's wait for the new administration. Why agree to anything now?"'
This problem is exaggerated by the fact that the European Union is struggling to finalize its own climate package - hampered by the global economic downturn - and so its delegates have been unusually quiet. In practice, that has meant little progress on anything except the basic decisions needed to keep the dream of a climate treaty alive.
"We have a sense of urgency but you don't see any strong decisions being taking here," said Elenita Dano, a member of the delegation from the Philippines. "Political developments in the U.S. and the EU are holding us hostage, and we have no choice but to wait."
The negotiations are meant to culminate in a treaty in Copenhagen in December 2009, which will take effect in 2013 and replace the expiring Kyoto Protocol.
So far, Obama has outlined broad policies but provided few specifics or a timetable for implementing them. His team is hashing out various options.
His administration could propose a climate bill designed to quickly pass though the U.S. Congress with concrete short-term goals like improving energy efficiency and creating "green" jobs, or it could hold off a bit to craft a more comprehensive policy proposal with long-term emissions reductions charting a course decades into the future.
"The fear is this could become a Clinton health plan, trying to do too much too soon, and ending up with nothing," said Paul Bledsoe, a former Clinton White House staffer, now with the National Commission on Energy Policy.
Even at the highest levels, officials in Poznan are awaiting results: "Another climate treaty without the U.S. doesn't make a lot of sense," said Yvo de Boer, head of the United Nations Framework Convention on Climate Change, the sponsor of the meeting.
Still, the conference has achieved some important goals.
The delegates have agreed on a method for essentially paying countries and communities to preserve forests, through a system of carbon credits.
The delegates also are nearing agreement on a fund, conceptualized a year ago, to help developing countries adapt to climate change.
Talk of a climate-change unheaval was muted, since the meeting in Poznan was meant to be a midpoint in talks that would lead to a new treaty next year.
"Expectations for this meeting were pretty low, but we're on track for a work plan covering the next year," said Angela Anderson, director of the International Global Warming Campaign of the Pew Environment Group. "If the pace picks up we could get an agreement by Copenhagen."
Delegates have been hammering out proposals for the past 10 days. On Thursday, various ministers arrive for two days of meetings to approve them.
Still, there were disturbing rumblings that industrialized nations were seeking to scale back emissions-reduction targets recommended by the Intergovernmental Panel on Climate Change, which suggested that rich countries should cut emissions by 25 to 40 percent by 2020 to avert disastrous warming. Countries like Italy have suggested that they might have a hard time meeting previous emissions-reduction goals in the current economic malaise.
In addition, a group of developing countries called the G-77 complained that their proposals for help fell on deaf ears. "We got no support from developed countries, whether in technology transfer or finances," said Tasneem Essop, of the WWF South Africa.
Such hopes and frustrations underscore the pressure the new U.S. administration is likely to feel. Jake Schmidt of the National Resources Defense Council said, "Clearly one of the major stumbling blocks has been a lack of leadership at the U.S. level, and that's about to change."
Wednesday, December 10, 2008
POZNAN, Poland: As ministers from 189 countries gather here to hammer out a new climate change treaty, progress is sorely hampered by the absence of one delegation: the team that will forge Barack Obama's climate policy.
The U.S. president-elect has called climate change "a matter of urgency," but his administration-in-waiting has not sent representatives to Poznan, where the United States is represented by the Bush administration. That has left this critical meeting in a bit of limbo, with many delegates saying they were waiting to size up the next administration's environmental commitment before making bold moves of their own.
"It has affected the meeting in a fairly significant way," said Gus Silva-Chavez, a policy expert at the Environmental Defense Fund in Washington, who has been observing the closed negotiations. "A lot of people think: 'this is not the time to put our cards on the table. Let's wait for the new administration. Why agree to anything now?"'
This problem is exaggerated by the fact that the European Union is struggling to finalize its own climate package - hampered by the global economic downturn - and so its delegates have been unusually quiet. In practice, that has meant little progress on anything except the basic decisions needed to keep the dream of a climate treaty alive.
"We have a sense of urgency but you don't see any strong decisions being taking here," said Elenita Dano, a member of the delegation from the Philippines. "Political developments in the U.S. and the EU are holding us hostage, and we have no choice but to wait."
The negotiations are meant to culminate in a treaty in Copenhagen in December 2009, which will take effect in 2013 and replace the expiring Kyoto Protocol.
So far, Obama has outlined broad policies but provided few specifics or a timetable for implementing them. His team is hashing out various options.
His administration could propose a climate bill designed to quickly pass though the U.S. Congress with concrete short-term goals like improving energy efficiency and creating "green" jobs, or it could hold off a bit to craft a more comprehensive policy proposal with long-term emissions reductions charting a course decades into the future.
"The fear is this could become a Clinton health plan, trying to do too much too soon, and ending up with nothing," said Paul Bledsoe, a former Clinton White House staffer, now with the National Commission on Energy Policy.
Even at the highest levels, officials in Poznan are awaiting results: "Another climate treaty without the U.S. doesn't make a lot of sense," said Yvo de Boer, head of the United Nations Framework Convention on Climate Change, the sponsor of the meeting.
Still, the conference has achieved some important goals.
The delegates have agreed on a method for essentially paying countries and communities to preserve forests, through a system of carbon credits.
The delegates also are nearing agreement on a fund, conceptualized a year ago, to help developing countries adapt to climate change.
Talk of a climate-change unheaval was muted, since the meeting in Poznan was meant to be a midpoint in talks that would lead to a new treaty next year.
"Expectations for this meeting were pretty low, but we're on track for a work plan covering the next year," said Angela Anderson, director of the International Global Warming Campaign of the Pew Environment Group. "If the pace picks up we could get an agreement by Copenhagen."
Delegates have been hammering out proposals for the past 10 days. On Thursday, various ministers arrive for two days of meetings to approve them.
Still, there were disturbing rumblings that industrialized nations were seeking to scale back emissions-reduction targets recommended by the Intergovernmental Panel on Climate Change, which suggested that rich countries should cut emissions by 25 to 40 percent by 2020 to avert disastrous warming. Countries like Italy have suggested that they might have a hard time meeting previous emissions-reduction goals in the current economic malaise.
In addition, a group of developing countries called the G-77 complained that their proposals for help fell on deaf ears. "We got no support from developed countries, whether in technology transfer or finances," said Tasneem Essop, of the WWF South Africa.
Such hopes and frustrations underscore the pressure the new U.S. administration is likely to feel. Jake Schmidt of the National Resources Defense Council said, "Clearly one of the major stumbling blocks has been a lack of leadership at the U.S. level, and that's about to change."
2008년 12월 7일 일요일
Book review: 'Le Corbusier: A Life' and 'Le Corbusier Le Grand'
By Witold Rybczynski
Thursday, December 4, 2008
Le Corbusier: A Life By Nicholas Fox Weber. Illustrated. 821 pages. Alfred A. Knopf. $45.
Le Corbusier Le Grand Illustrated. 768 pages. Phaidon. $200.
Years ago, as an architecture student traveling in Europe, I sought out Le Corbusier's home in Paris. I had the address from his books, over which I had pored for hours in the university library. Some of his writings were more than 40 years old, but their rousing rhetoric still made architecture seem more like a noble crusade than a mundane profession. Perhaps that's why I imitated his spidery ink sketches and his military-looking stenciled lettering. I admired Frank Lloyd Wright's buildings, but the old man - he had recently died - with his capes and flowery pronouncements, was a figure from another era.
I had been taught that Ludwig Mies van der Rohe was a great architect, but his buildings left me unmoved - Mies is not for the young. "Corbu," on the other hand, though he was 76, continued to produce designs that surprised and inspired - an unusual, spread-out one-story hospital for Venice, for example, with skylights instead of windows so you could see the sky while lying in bed.
Le Corbusier lived in the 16th arrondissement not far from the Bois de Boulogne, in the penthouse of an apartment building that he had designed himself more than 30 years earlier. The facade of the small seven-story building was more restrained than I had expected, mainly glass and glass blocks. The location, facing a sports field, seemed just right for someone who preached the merits of sun, fresh air and exercise. The street - Rue Nungesser-et-Coli - was named after two famous French fliers who had died attempting a trans-Atlantic flight two weeks before Lindbergh. That was appropriate, too, for Le Corbusier was a devotee of all things modern, and more than once in his career he had crashed and burned.
Although I peered into the darkened lobby - round columns, curved walls, colors - I didn't dare to press the buzzer. Just as well, for as Nicholas Fox Weber writes in his new biography, "Le Corbusier: A Life," the architect devoted every morning to painting in the studio that took up the front half of the apartment. Still, I should have been bolder. The following year - 1965 - he was dead, drowned while swimming in the Mediterranean.
That fateful summer, Le Corbusier, who was starting to feel his age and had recently lost the two people who were in many ways his closest confidantes - his mother and his wife - ignored his doctor's advice to take only a short dip at noon. Instead, he plunged in at 8 a.m. and swam for an hour or more. He was an experienced swimmer, and Weber cites speculation that the drowning may have been an "elegantly orchestrated suicide." On the strength of flimsy evidence it seems a far-fetched claim, but by the end of this absorbing book the reader may be convinced that for this proud, solitary and down-to-earth man, such a decision would not have been out of character.
"He's an odd duck," is how the French architect Auguste Perret described Le Corbusier to a neighbor, "but he'll interest you." That was 1917. The 30-year-old Corbusier, who had earlier worked for Perret, a leading exponent of reinforced concrete, had just returned to Paris.
Largely self-taught, he had studied watch engraving, his father's profession, then turned to architecture and spent a decade designing houses in his native La Chaux-de-Fonds, a town in the Jura mountains of Switzerland. The chalet-like structures are unremarkable, except for the palatial house that he built for his parents; it ate up their life savings, and they were later obliged to sell it at a loss. The fledgling architect charged them a fee, albeit less than for his usual clients. One senses that it was the embarrassment of this misguided project, as much as a desire to leave his provincial surroundings, that encouraged him to try his luck in Paris.
Le Corbusier's given name was Charles-Edouard Jeanneret. In 1920, he and his painter friend Amédée Ozenfant founded an art magazine, L'Esprit Nouveau. The firebrands both adopted noms de plume, but Weber suggests that in Jeanneret's case, this was more than simply a fashionable gesture. "Charles-Edouard Jeanneret had long sought a means to counter the perpetual vagaries of his own mind," he writes. "With his new name, he invented a person who had a protective shell." Jeanneret was a romantic, a painter, a dreamer; Le Corbusier (he claimed that the name derived from an ancestor) was a realist: tough, obsessive, even unscrupulous, if the need arose.
"It so happens that today I exist, much more rapidly and more powerfully than I would ever have thought," he wrote a German friend. "I have created my identity on my own foundations, on my own terms." Dr. Jekyll and Mr. Hyde? Of course, he could not keep the two identities separate.
The public man was always "Le Corbusier," but letters to his wife and mother are sometimes signed "Edouard," sometimes "Corbu." On the tomb that he designed for himself, he is "Charles-Edouard Jeanneret called Le Corbusier," although his wife is "Yvonne Le Corbusier."
There have been nearly 400 architectural monographs on Le Corbusier's work, by Weber's count, but this is the first full-length biography, and it's a good one. The author benefits from wide-ranging research. The German friend quoted above, for example, was William Ritter, a novelist and music critic with whom the young Le Corbusier had a long and intimate correspondence.
Weber also had unprecedented access to the architect's letters to his parents, especially his mother, to whom he wrote once a week for most of his adult life (she died at 99, only five years before him). Through these letters we meet a different Le Corbusier, not the hectoring, self-promoting missionary of modernism, but the concerned, dutiful son who describes his projects and achievements, clearly wanting his mother to be impressed - although she never is, quite. Le Corbusier's older brother, Albert, a musician, remained her favorite.
Le Corbusier's generation set out to remake architecture de novo. Most modernist architects were satisfied with following a simple formula: flat roofs, undecorated white walls, pipe railings. Le Corbusier always went further. His white-box villas sprouted voluptuous curves, colors appeared on walls and ceilings, and he introduced traditional materials like brick and fieldstone.
On my European tour in 1964 I saw as many of his buildings as I could. The earlier ones, like the Salvation Army headquarters in Paris and the Pavillon Suisse, a student dormitory, had the features associated with the International Style, but later works, like the chapel at Ronchamp and the vast Unité d'Habitation apartment block in Marseille, were different: cruder, more sculptural, almost primitive. An endearing rustic simplicity is a big part of Le Corbusier's appeal, whether he is building millionaires' residences or worker housing.
Weber's admiring biography brings Le Corbusier to life, unraveling many obscure aspects of a man who was famously secretive and, though he wrote some 50 books, divulged very little of himself.
The architect was a mass of contradictions: a hedonistic Calvinist, arrogant in public and often generous in private, elated and depressed by turns. We learn about the importance of music when he was a young man (his mother was a piano teacher), and his discovery of Louis Armstrong during a visit to Boston: "It was absolutely dazzling," the architect recounted, "strength and truth."
Le Corbusier traveled widely for his work, always alone, and while he was an attentive husband, he was not a faithful one. He had several affairs, briefly with Josephine Baker and for many years with Marguerite Tjader Harris, a Swedish-American heiress. His mistresses saw a different man than the pontificating visionary. To Baker he was a "simple man and gay." According to Tjader Harris, he "was not a complicated man, not even an intellectual, in the narrow meaning of the word. He lived by his faith and emotions."
Weber allows Le Corbusier to emerge as a fascinating if flawed human being. But Weber is not an architectural historian, and he sometimes has a narrow view of his subject's work. He devotes four chapters to Le Corbusier's masterpiece, Ronchamp, whose construction he describes as "impeccable engineering," seemingly unaware that the hidden and camouflaged structure, no less than the expressionistic form, actually represented a break with - if not a betrayal of - the modernist creed that Le Corbusier himself had proclaimed.
Weber's descriptions of buildings are sometimes over the top. The Villa Savoye is "a temple to the sun"; on the entrance ramp to the Mill-owners' Building in Ahmedabad, India, visitors arrive in "the sacred precincts of a modern temple." Weber calls L'Unité d'Habitation in Marseille "a turning point in the history of how human beings live," but fails to explain why, since, even if many similarly enormous apartment blocks were built, such innovations as very tiny apartments and an internal "commercial street" of shops never caught on.
When Jeanneret became Le Corbusier, he took on the persona not only of an astonishingly creative architect but also of an implacable, sometimes megalomaniacal city planner. Starting in 1925 with a hypothetical plan for rebuilding Paris that would have required demolishing 600 acres, or 24 hectares, of the city, Le Corbusier spent a large part of his working life traveling the world, imagining, proposing and promoting a new kind of urbanism in which tall buildings surrounded by landscaped open space replaced traditional blocks and streets. He made it sound scientific but the urban plans were no less fanciful than his building designs. Nevertheless, his planning ideas were influential. Unfortunately, as Lewis Mumford once pointed out, in practice, the Towers in a Park turned out to be Towers in a Parking Lot. On the whole, Weber gives his subject a pass on his failed social and urbanistic ideas. "For all his genius, Le Corbusier remained completely insensitive to certain aspects of human existence," he acknowledges. That is putting it mildly.
The wonderfully titled "Le Corbusier Le Grand," a 20-pound (roughly 10-kilogram) tome put together by the editors at Phaidon, is a giant scrapbook of the architect's life and work, including photographs, drawings, travel sketches and reproductions of Le Corbusier's paintings, as well as letters, newspaper clippings, travel documents, ID cards and other ephemera. It sounds confused and confusing, but it's a remarkably effective way to document the great man's life and work. Most architectural monographs include only carefully staged photographs of finished buildings. There are some of those here, but construction photos and impromptu views give a more rounded impression. The section on the Villa Savoye includes letters from the client, complaining about leaks and the architect, complaining about not being paid.
The generous format of "Le Corbusier Le Grand," 14 by 20 inches (about 35 by 50 centimeters), enables even well-known photographs to gain new meaning from being greatly enlarged. There are also many interesting portraits and informal snapshots of the architect, who peers out unblinkingly through his trademark circular glasses (he had monocular vision). The photos also reveal another contradiction: in public, the self-proclaimed bourgeois scourge was always attired in impeccably tailored suits.
The most carefree photographs of Le Corbusier are those taken in Roquebrune-Cap-Martin on the Côte d'Azur, where he and his wife spent a month every summer. On a site overlooking the Mediterranean, the most famous architect in the world built a cabanon, or cabin, about 12 feet square or 1 meter square, a rustic structure that was a cross between a monk's cell and a mountain hut of his native Jura. This was a home reduced, as Weber evocatively writes, "to diamond-hard truths." One senses that here, at least, Edouard could shed the protective shell of Le Corbusier, and be himself.
Thursday, December 4, 2008
Le Corbusier: A Life By Nicholas Fox Weber. Illustrated. 821 pages. Alfred A. Knopf. $45.
Le Corbusier Le Grand Illustrated. 768 pages. Phaidon. $200.
Years ago, as an architecture student traveling in Europe, I sought out Le Corbusier's home in Paris. I had the address from his books, over which I had pored for hours in the university library. Some of his writings were more than 40 years old, but their rousing rhetoric still made architecture seem more like a noble crusade than a mundane profession. Perhaps that's why I imitated his spidery ink sketches and his military-looking stenciled lettering. I admired Frank Lloyd Wright's buildings, but the old man - he had recently died - with his capes and flowery pronouncements, was a figure from another era.
I had been taught that Ludwig Mies van der Rohe was a great architect, but his buildings left me unmoved - Mies is not for the young. "Corbu," on the other hand, though he was 76, continued to produce designs that surprised and inspired - an unusual, spread-out one-story hospital for Venice, for example, with skylights instead of windows so you could see the sky while lying in bed.
Le Corbusier lived in the 16th arrondissement not far from the Bois de Boulogne, in the penthouse of an apartment building that he had designed himself more than 30 years earlier. The facade of the small seven-story building was more restrained than I had expected, mainly glass and glass blocks. The location, facing a sports field, seemed just right for someone who preached the merits of sun, fresh air and exercise. The street - Rue Nungesser-et-Coli - was named after two famous French fliers who had died attempting a trans-Atlantic flight two weeks before Lindbergh. That was appropriate, too, for Le Corbusier was a devotee of all things modern, and more than once in his career he had crashed and burned.
Although I peered into the darkened lobby - round columns, curved walls, colors - I didn't dare to press the buzzer. Just as well, for as Nicholas Fox Weber writes in his new biography, "Le Corbusier: A Life," the architect devoted every morning to painting in the studio that took up the front half of the apartment. Still, I should have been bolder. The following year - 1965 - he was dead, drowned while swimming in the Mediterranean.
That fateful summer, Le Corbusier, who was starting to feel his age and had recently lost the two people who were in many ways his closest confidantes - his mother and his wife - ignored his doctor's advice to take only a short dip at noon. Instead, he plunged in at 8 a.m. and swam for an hour or more. He was an experienced swimmer, and Weber cites speculation that the drowning may have been an "elegantly orchestrated suicide." On the strength of flimsy evidence it seems a far-fetched claim, but by the end of this absorbing book the reader may be convinced that for this proud, solitary and down-to-earth man, such a decision would not have been out of character.
"He's an odd duck," is how the French architect Auguste Perret described Le Corbusier to a neighbor, "but he'll interest you." That was 1917. The 30-year-old Corbusier, who had earlier worked for Perret, a leading exponent of reinforced concrete, had just returned to Paris.
Largely self-taught, he had studied watch engraving, his father's profession, then turned to architecture and spent a decade designing houses in his native La Chaux-de-Fonds, a town in the Jura mountains of Switzerland. The chalet-like structures are unremarkable, except for the palatial house that he built for his parents; it ate up their life savings, and they were later obliged to sell it at a loss. The fledgling architect charged them a fee, albeit less than for his usual clients. One senses that it was the embarrassment of this misguided project, as much as a desire to leave his provincial surroundings, that encouraged him to try his luck in Paris.
Le Corbusier's given name was Charles-Edouard Jeanneret. In 1920, he and his painter friend Amédée Ozenfant founded an art magazine, L'Esprit Nouveau. The firebrands both adopted noms de plume, but Weber suggests that in Jeanneret's case, this was more than simply a fashionable gesture. "Charles-Edouard Jeanneret had long sought a means to counter the perpetual vagaries of his own mind," he writes. "With his new name, he invented a person who had a protective shell." Jeanneret was a romantic, a painter, a dreamer; Le Corbusier (he claimed that the name derived from an ancestor) was a realist: tough, obsessive, even unscrupulous, if the need arose.
"It so happens that today I exist, much more rapidly and more powerfully than I would ever have thought," he wrote a German friend. "I have created my identity on my own foundations, on my own terms." Dr. Jekyll and Mr. Hyde? Of course, he could not keep the two identities separate.
The public man was always "Le Corbusier," but letters to his wife and mother are sometimes signed "Edouard," sometimes "Corbu." On the tomb that he designed for himself, he is "Charles-Edouard Jeanneret called Le Corbusier," although his wife is "Yvonne Le Corbusier."
There have been nearly 400 architectural monographs on Le Corbusier's work, by Weber's count, but this is the first full-length biography, and it's a good one. The author benefits from wide-ranging research. The German friend quoted above, for example, was William Ritter, a novelist and music critic with whom the young Le Corbusier had a long and intimate correspondence.
Weber also had unprecedented access to the architect's letters to his parents, especially his mother, to whom he wrote once a week for most of his adult life (she died at 99, only five years before him). Through these letters we meet a different Le Corbusier, not the hectoring, self-promoting missionary of modernism, but the concerned, dutiful son who describes his projects and achievements, clearly wanting his mother to be impressed - although she never is, quite. Le Corbusier's older brother, Albert, a musician, remained her favorite.
Le Corbusier's generation set out to remake architecture de novo. Most modernist architects were satisfied with following a simple formula: flat roofs, undecorated white walls, pipe railings. Le Corbusier always went further. His white-box villas sprouted voluptuous curves, colors appeared on walls and ceilings, and he introduced traditional materials like brick and fieldstone.
On my European tour in 1964 I saw as many of his buildings as I could. The earlier ones, like the Salvation Army headquarters in Paris and the Pavillon Suisse, a student dormitory, had the features associated with the International Style, but later works, like the chapel at Ronchamp and the vast Unité d'Habitation apartment block in Marseille, were different: cruder, more sculptural, almost primitive. An endearing rustic simplicity is a big part of Le Corbusier's appeal, whether he is building millionaires' residences or worker housing.
Weber's admiring biography brings Le Corbusier to life, unraveling many obscure aspects of a man who was famously secretive and, though he wrote some 50 books, divulged very little of himself.
The architect was a mass of contradictions: a hedonistic Calvinist, arrogant in public and often generous in private, elated and depressed by turns. We learn about the importance of music when he was a young man (his mother was a piano teacher), and his discovery of Louis Armstrong during a visit to Boston: "It was absolutely dazzling," the architect recounted, "strength and truth."
Le Corbusier traveled widely for his work, always alone, and while he was an attentive husband, he was not a faithful one. He had several affairs, briefly with Josephine Baker and for many years with Marguerite Tjader Harris, a Swedish-American heiress. His mistresses saw a different man than the pontificating visionary. To Baker he was a "simple man and gay." According to Tjader Harris, he "was not a complicated man, not even an intellectual, in the narrow meaning of the word. He lived by his faith and emotions."
Weber allows Le Corbusier to emerge as a fascinating if flawed human being. But Weber is not an architectural historian, and he sometimes has a narrow view of his subject's work. He devotes four chapters to Le Corbusier's masterpiece, Ronchamp, whose construction he describes as "impeccable engineering," seemingly unaware that the hidden and camouflaged structure, no less than the expressionistic form, actually represented a break with - if not a betrayal of - the modernist creed that Le Corbusier himself had proclaimed.
Weber's descriptions of buildings are sometimes over the top. The Villa Savoye is "a temple to the sun"; on the entrance ramp to the Mill-owners' Building in Ahmedabad, India, visitors arrive in "the sacred precincts of a modern temple." Weber calls L'Unité d'Habitation in Marseille "a turning point in the history of how human beings live," but fails to explain why, since, even if many similarly enormous apartment blocks were built, such innovations as very tiny apartments and an internal "commercial street" of shops never caught on.
When Jeanneret became Le Corbusier, he took on the persona not only of an astonishingly creative architect but also of an implacable, sometimes megalomaniacal city planner. Starting in 1925 with a hypothetical plan for rebuilding Paris that would have required demolishing 600 acres, or 24 hectares, of the city, Le Corbusier spent a large part of his working life traveling the world, imagining, proposing and promoting a new kind of urbanism in which tall buildings surrounded by landscaped open space replaced traditional blocks and streets. He made it sound scientific but the urban plans were no less fanciful than his building designs. Nevertheless, his planning ideas were influential. Unfortunately, as Lewis Mumford once pointed out, in practice, the Towers in a Park turned out to be Towers in a Parking Lot. On the whole, Weber gives his subject a pass on his failed social and urbanistic ideas. "For all his genius, Le Corbusier remained completely insensitive to certain aspects of human existence," he acknowledges. That is putting it mildly.
The wonderfully titled "Le Corbusier Le Grand," a 20-pound (roughly 10-kilogram) tome put together by the editors at Phaidon, is a giant scrapbook of the architect's life and work, including photographs, drawings, travel sketches and reproductions of Le Corbusier's paintings, as well as letters, newspaper clippings, travel documents, ID cards and other ephemera. It sounds confused and confusing, but it's a remarkably effective way to document the great man's life and work. Most architectural monographs include only carefully staged photographs of finished buildings. There are some of those here, but construction photos and impromptu views give a more rounded impression. The section on the Villa Savoye includes letters from the client, complaining about leaks and the architect, complaining about not being paid.
The generous format of "Le Corbusier Le Grand," 14 by 20 inches (about 35 by 50 centimeters), enables even well-known photographs to gain new meaning from being greatly enlarged. There are also many interesting portraits and informal snapshots of the architect, who peers out unblinkingly through his trademark circular glasses (he had monocular vision). The photos also reveal another contradiction: in public, the self-proclaimed bourgeois scourge was always attired in impeccably tailored suits.
The most carefree photographs of Le Corbusier are those taken in Roquebrune-Cap-Martin on the Côte d'Azur, where he and his wife spent a month every summer. On a site overlooking the Mediterranean, the most famous architect in the world built a cabanon, or cabin, about 12 feet square or 1 meter square, a rustic structure that was a cross between a monk's cell and a mountain hut of his native Jura. This was a home reduced, as Weber evocatively writes, "to diamond-hard truths." One senses that here, at least, Edouard could shed the protective shell of Le Corbusier, and be himself.
2008년 11월 19일 수요일
Skyscrapers and Business Cycles
Shanghai World Financial Center
[This article originally appeared in the Quarterly Journal of Austrian Economics vol. 8, no. 1 (Spring 2005).
Introduction
The skyscraper index, created by economist Andrew Lawrence shows a correlation between the construction of the world's tallest building and the business cycle. Is this just a coincidence, or perhaps do skyscrapers cause business cycles? A theoretical foundation of "Cantillon effects" for the skyscraper index is provided here showing how the basic components of skyscraper construction such as technology are related to key theoretical concepts in economics such as the structure of production. The findings, empirical and theoretical, suggest that the business-cycle theory of the Austrian School of economics has much to contribute to our understanding of business cycles, particularly severe ones.
The skyscraper, that unique celebration of secular capitalism and its values, challenges us on every level. It offers unique opportunities for insightful analysis in the broadest terms of 20th-century art, humanity, and history. When criticism becomes captive to centers of power or prevailing theories or fashions, unwilling or unable to probe the process and the results, something important has gone wrong with one of the stabilizing and balancing forces of a mature society. (Huxtable 1992, p. 120)
In the overheated speculation of the 1920s, as land prices rose, towers grew steadily taller. Or should the order be: as skyscrapers grew taller, land prices rose? The variables that contributed to real estate cycles were even more complex than this "chicken and egg" conundrum. (Willis 1995, p. 88)
The skyscraper is the great architectural contribution of modern capitalistic society and is even one of the yardsticks for 20th-century superheroes, but no one had ever really connected it with the quintessential feature of modern capitalistic history — the business cycle. Then in 1999, economist Andrew Lawrence created the "skyscraper index" which purported to show that the building of the tallest skyscrapers is coincidental with business cycles, in that he found that the building of world's tallest building is a good proxy for dating the onset of major economic downturns. Lawrence described his index as an "unhealthy 100 year correlation."
The ability of the index to predict economic collapse is surprising. For example, the Panic of 1907 was presaged by the building of the Singer Building (completed in 1908) and the Metropolitan Life Building (completed in 1909). The skyscraper index also accurately predicted the Great Depression with the completion of 40 Wall Tower in 1929, the Chrysler Building in 1930, and the Empire State Building in 1931. There are, however, important exceptions in the ability of the index to predict, so the first question is: how good of a predictor is the skyscraper index?
Second, what is the nature of the relationship between skyscraper building and the business cycle? Surely, building the world's tallest building does not cause economic collapse, but just as clearly, there are economic linkages between construction booms and financial busts. What theoretical connections can be made between skyscraper building and business cycles? Andrew Lawrence noted overinvestment, monetary expansion, and speculation as possible foundations for the index, but did not explore these issues. With the destruction of the World Trade Towers and the increased threat of terrorism, the skyscraper index may have already lost its usefulness for future prediction,[1] but even if that were the case, the theoretical linkages between skyscraper building and business cycles may still have usefulness in improving our understanding of business cycles and the economic theory behind them.
In order to better examine the relationship, the evidence in support of the skyscraper index is examined and compared to the reliability of other market indicators. The ability of most market indicators is found to be weak, while the ability of the skyscraper index to predict severe changes in the business cycle is strong. The general relationship between the business cycle and skyscraper building is examined with respect to the role of "Cantillon effects" in skyscraper cycles. The unique and distinguishing features of abnormally large swings in the business cycle, as manifested in record-setting skyscrapers, are then shown to be uncommon features of most business-cycle theories and a unique feature of the Austrian School's theory of the business cycle. Finally, the data linking the world's tallest skyscrapers and business cycles is reexamined to evaluate the index's incorrect predictions and as a result the index is shown to be more accurate than previously thought.
Do Skyscrapers Predict?
Lawrence (1999a) was apparently the first to make the claim that the construction of the world's tallest building was correlated with impending financial crisis although the subject of the world's tallest skyscrapers and their relation to economic crisis is also prominent in Grant (1996). Lawrence showed that in almost all cases the initiation of construction of a new record-breaking skyscraper preceded major financial corrections and turmoil in economic institutions. Generally, the skyscraper project is announced and construction is begun during the late phase of the boom in the business cycle; when the economy is growing and unemployment is low. This is then followed by a sharp downturn in financial markets, economic recession or depression, and significant increases in unemployment. The skyscraper is then completed during the early phase of the economic correction, unless that correction was revealed early enough to delay or scrap plans for construction. For example, the Chrysler Building in New York was conceived and designed in 1928 and the groundbreaking ceremony was conducted on September 19, 1928. "Black Tuesday" occurred on October 29, 1929, marking the beginning of the Great Depression. Opening ceremonies for the Chrysler Building occurred on May 28, 1930, making it the tallest building in the world.
"The ability of most market indicators is found to be weak, while the ability of the skyscraper index to predict severe changes in the business cycle is strong."
The business press reported Lawrence's findings positively, but not with much fanfare. Investors' Business Daily seemed somewhat sympathetic to his "impressive" evidence, but asked "How could something bad come of building the world's biggest skyscraper? After all, bigger is better. Having the biggest building on earth can be a source of national pride" (Investors' Business Daily 1999). Also positive was Barron's who seemed to agree that it was an "excellent forecasting tool for economic and financial imbalance" (Pesek 1999a). Business Week also made mention of the skyscraper index, although the first and most concerned reports of the index came from the Far Eastern Economic Review which noted that China was planning on breaking the record for the world's tallest building and constructing three of the 10 tallest buildings on the planet by 2010.[2]
The reason for the rather muted response to the skyscraper index is that most "indicators" have failed to remain robust and do not pass the test of time. Indeed, the skyscraper index has not predicted all major economic collapses such as the depressions of 1920–21, 1937–38, and 1981–82 and has predicted economic collapse when downturns were relatively mild such as 1913 and the early 1970s. The index could easily become obsolete due to factors such as terrorism and the evolving nature of the economy. There have been numerous indicators put forth to help us predict the business cycle and stock markets. The Super Bowl indicator, for example, predicts that if a team from the National Football Conference (the old NFL) beats the team from the American Football Conference in the Super Bowl game, it should be a good year for the stock market and ipso facto a good year for the economy. This is a classic case of a "coincidental" indicator in that the statistical relationship is only a matter of coincidence.[3] There are seasonal indicators like the January effect, which has only questionable causal links, and political indicators relating to the political business-cycle theory which also makes suggestions as to when and how the economy and the stock market will perform. Leading indictors with good causal-economic links with the economy include the inverted yield curve and the index of leading economic indicators, the once official crystal ball of the economy that lately has had greater difficulty accurately predicting changes in the economy. In fact, the cost and difficulties of maintaining the index led in recent years to it being privatized.[4] Economist Richard Roll explained that such indicators have only fleeting value for real-world investing:
I'm not just an academic but also a businessman … we could sure do a heck of a lot better for our clients in the money management business than we've been doing. I have personally tried to invest money, my client's money and my own, in every single anomaly and predictive device that academics have dreamed up…. I have attempted to exploit the so-called year-end anomalies and a whole variety of strategies supposedly documented by academic research. And I have yet to make a single nickel on any of these supposed market inefficiencies. (Roll 1992, pp. 29–30)
The problems with indicators are many. Some have a poor track record of predictions, while others have a good track record but without any economic rationale (e.g., the Super Bowl indicator) and thus offer little confidence that the track record is not simply a statistical anomaly. Other indicators offer mixed signals, such as the January effect, which can be based either on the performance of the stock market (which one?) during the first week of January, or during the entire month. The January effect is also said to suffer from the fact that once everyone is aware of the effect, it becomes anticipated and therefore no longer offers reliable investment advice or insight into the economy. As a result, such indicators do not have a much better record predicting the business cycle than professional economists.
The skyscraper index, in contrast does have a good record in predicting important downturns in the economy. This index is a leading economic indicator in that the announcement of building plans predates the onset of the economic downturn. There have been four major skyscraper booms in the 20th century interspersed by periods of relative normality and less severe business cycles. Table 1 presents the history of the world's tallest buildings that demonstrates that many major economic downturns were associated with the building of the world's tallest skyscrapers. A more visually enhanced perspective of this history is provided for in Figure 1.
Table 1: World's Tallest Buildings
| Completed | Building | Location | Height | Stories | Economic Crisis |
|---|---|---|---|---|---|
| 1908 | Singer | New York | 612 ft. | 48 | Panic of 1907 |
| 1909 | Metropolitan Life | New York | 700 ft. | 50 | Panic of 1907 |
| 1912 | Woolworth | New York | 792 ft. | 57 | —— |
| 1929 | 40 Wall Street | New York | 927 ft. | 71 | Great Depression |
| 1930 | Chrysler | New York | 1,046 ft. | 77 | Great Depression |
| 1931 | Empire State | New York | 1,250 ft. | 102 | Great Depression |
| 1972/73 | World Trade Center | New York | 1,368 ft. | 110 | 1970s stagflation |
| 1974 | Sears Tower | Chicago | 1,450 ft. | 110 | 1970s stagflation |
| 1997 | Petronas Tower | Kuala Lumpur | 1,483 ft. | 88 | East Asian |
| 2012 | Shanghai | Shanghai | 1,509 ft. | 94 | China? |
The first skyscraper cycle occurred between 1904 and 1909 and included the Singer Building becoming the world's tallest when completed in 1908 and the Metropolitan Life Building setting a new record in 1909. The Panic of 1907 occurred at a time when seasonal factors relating to fall harvests coincided with cyclical factors in money and credit. It was ignited into financial panic when a bank regulated under the National Banking system refused to clear funds for the Knickerbocker, an unregulated trust. The result was widespread runs on banks and one of the sharpest downturns in American economic history. This episode is particularly important and of continuing relevance because it is widely considered to be a key event in the passage of the Federal Reserve Act in 1913. The Panic is widely considered to have been caused by problems associated with the structure and regulation of the National Banking system. The solution adopted was to increase the size and regulatory power of the national government in matters of money and banking, although in recent years some economists have questioned whether that was the proper response.[5]
Figure 1: Skyscrapers and Economic Crisis
Bypassing the Woolworth Building, which at first does not seem to fit the general pattern in Lawrence's analysis, the second episode of the world's tallest buildings occurred at the onset of the Great Depression. Three record-setting skyscrapers were announced during the late 1920s, when the stock-market boom was being matched by booms in residential and commercial construction. In 1929, the skyscraper at 40 Wall Street was completed at 71 stories, followed by the Chrysler Building in 1930 at 77 stories, and the Empire State Building in 1931 at 102 stories. Clearly, there was a capital-oriented boom in the construction of ever-taller buildings before the Great Depression.
Economists have offered many different explanations for the Great Depression and Robert Lucas (1987) has even claimed that it defies explanation. What should be clear is that there was a significant increase in the money stock between the founding of the Federal Reserve and the stock-market crash, a significant restructuring in banking and bank regulation, a significant decline in the supply of money after the crash, a significant number of bank failures, and a variety of other important factors that contributed to the initiation and duration of the depression, including the Smoot-Hawley tariff and the New Deal.
The third major cycle of skyscraper records occurred in the early 1970s. Once again the economy was coming off a strong and sustained boom in economic activity during the 1960s. The economic downturn of 1970 marked the beginning of more than a decade when the economy struggled with inflation and recession, as well as disrupted institutions and markets. From 1970 to 1982 the American economy suffered from stagflation, several deep recessions, and from high levels of the misery index (inflation rate + unemployment rate). As the last vestiges of the gold standard were being abandoned and the Bretton Woods system was disintegrating, construction workers in New York and Chicago were busy building the next set of the world's tallest buildings. Breaking records set in the early days of the Great Depression, One World Trade Center was completed in 1972 and Two World Trade Center was completed in 1973, both of 110 stories. In Chicago, the Sears Tower was completed in 1974, which was also 110 stories but reached a height of 1,450 feet compared to the 1,368 feet of the World Trade Towers. Once again, economists failed to anticipate the downturn in the economy, failed to provide a good explanation for the economic problems, and did not provide effective remedies for the economic problems of the day. Even though high oil prices occurred after the economy began its contraction, the theory of "supply shocks" was born.[6]
The fourth cycle ushered in the East Asian economic crisis. The Pacific Rim countries such as Hong Kong, Malaysia, Singapore, Vietnam, and South Korea experienced significant economic growth during the 1980s and 1990s.
With the region's leading economy, Japan, in recession and stagnation for much of the 1990s, the "Asian Tigers" were considered miracle economies because they were strong and durable despite being small and vulnerable. The Petronas Towers were completed in Kuala Lumpur, Malaysia in 1997 setting a new record for the world's tallest building at 1,483 feet beating the old record by 33 feet (the two towers were only 88 stories high compared with the 110 story giants built in the early 1970s). It marked the beginning of the extreme drop in Malaysia's stock market, rapid depreciation of its currency, and widespread social unrest. Financial and economic problems spread to economies throughout the region, a phenomenon known as the "Asian Contagion."
"Clearly, there was a capital-oriented boom in the construction of ever-taller buildings before the Great Depression."
The common pattern in these four historical episodes contains the following features. First, a period of "easy money" leads to a rapid expansion of the economy and a boom in the stock market. In particular, the relatively easy availability of credit fuels a substantial increase in capital expenditures. Capital expenditures flow in the direction of new technologies that in turn creates new industries and transforms some existing industries in terms of their structure and technology. This is when the world's tallest buildings are begun. At some point thereafter, negative information ignites panicky behavior in financial markets and there is a decline in the relative price of fixed capital goods. Finally, unemployment increases, particularly in capital- and technology-intensive industries. While this analysis concentrates on the US economy, the impact of these crises was often felt outside the domestic economy.
It would be very easy to dismiss the skyscraper index as a predictor of the business cycle, just as other indicators and indexes have been rightly rejected. However, the skyscraper has many of the characteristic features that play critical roles in various business-cycle theories. It is these features that make skyscrapers, especially the construction of the world's tallest buildings, a salient marker of the 20th century's business cycle; the reoccurring pattern of entrepreneurial error that takes place in the boom phase that is later revealed during the bust phase. In the 20th century the skyscraper has replaced the factory and railroad, just as the information and service sectors have replaced heavy industry and manufacturing as the dominant sectors of the economy. The skyscraper is the critical nexus of the administration of modern global capitalism and commerce where decisions are made and transmitted throughout the capitalist system and where traders communicate and exchange information and goods, interconnecting with the telecommunications network. Therefore it should not be surprising that the skyscraper is an important manifestation of the 20th-century business cycle, just as the canals, railroads, and factories were in previous times.
Cantillon Effects in Skyscrapers
Cantillon effects are named for their discoverer, Richard Cantillon, who is widely credited as the first economic theorist, and in particular, was the first to show that changes in the money supply and credit have important impacts on the economy by changing relative prices.[7] Cantillon showed that an increase in the supply of money would cause economic expansion, but that ultimately the process would be self-reversing as prices would rise and imports would increase, sending money back out of the economy. Cantillon further showed that monetary inflation does not affect all prices equally or at the same time, but in sequences that depend on the spending behavior of money holders all along the channels of monetary flows. These ideas have been adopted and extended by Knut Wicksell, Ludwig von Mises, and F.A. Hayek and more recently by McCulloch (1981) and Garrison (2001).
Cantillon effects are the real fundamental changes in resource allocation that result from changing relative prices between the time of the creation of new money and the full adjustment to the increase in supply. For Cantillon, an increase in commodity money, such as silver, would increase employment and prices. It would impose "forced savings" and lower real incomes on those whose income was not changed due to monetary inflation, possibly leading to unemployment or emigration. If the money supply increased due to a balance-of-payments surplus, then the additional money could cause an increase in manufacturing or expansion in whatever the new money holders chose to spend their money on.
Most importantly, changes in the supply of money can have effects on the interest rate and once again the effect will depend on how the money enters the economy. On the one hand, if it comes into the hands of traditional borrowers or lenders, such as developers, the rate of interest would initially fall. This is similar to the Austrian theory of the business cycle in that when banks expand the money supply and lower the interest rate below what it would have been, borrowers invest in longer-term capital projects. On the other hand, if the money came into the hands of consumers, the rate of interest might rise as suppliers attempt to meet the new demand for goods. In the Austrian view, changes in the interest rate change the relative price between longer-term capital projects and shorter-term capital projects. A lowering of the interest rate raises the prices of longer-term capital goods relative to shorter-term capital goods.
In response to the change in relative prices, more resources are allocated to long-term capital goods. Unlike other aspects of the self-adjusting market process, such as money, land, labor, and short-term or intermediate capital goods, these resources become suspended or fixed in long-term fixed capital goods. These resources become formulated in a highly specific capital good that may not be well suited to the alternative production processes of the postadjustment economy. As a result, all of the adjustment in these long-term fixed capital goods must come from a change in price and this will entail large losses and possible bankruptcies by the owners of these capital goods. To the extent that these types of adjustments are widespread, they pose a threat to capital markets and the banking system.
The Cantillon effect works much like the Alchian and Allen effect, a simple application of price theory, the bread and butter of economic analysis.[8] Economists Armen Alchian and Richard Allen answered the question: Why are high-quality apples shipped out of apple-growing regions, leaving only lower-grade apples for the local market? They explain that the cost of transporting apples from Washington State across the country is a "flat" rate per crate of apples. This fee lowers the relative price of higher-quality apples for consumers in nonproducing states and raises it in producing states. If a high-quality apple cost $1 and a standard-quality apple cost 50¢ then the relative price is 2-to-1. If a transport fee of 50¢ per apple is charged then the prices are $1.50 for high quality and $1.00 for standard quality and thus the relative price of the high-quality apples falls from 2-to-1 down to 1.5-to-1. In Washington, the consumer must forgo 2 standard-quality apples when purchasing 1 high-quality apple, but in nonproducing regions the consumer need only forgo 1.5 standard-quality apples. Therefore the change in relative prices explains why the preponderance of high-quality apples are shipped out, leaving the local markets with lower-quality apples. The same is true for other products such as lobsters from Maine and potatoes from Idaho, a result now known as the Alchian and Allen effect. The impact of relative price changes has proven to be a useful puzzle solver in areas outside of the grocery store.[9]
Changes in relative prices also affect the type of capital goods produced. Modern economics has great difficulty in dealing with real-world capital goods and mainstream economists have gone to great pains to ignore the heterogeneity of capital and to great lengths to count or add up what are otherwise dissimilar and unique items like skyscrapers, factories, and mining operations. Treating capital goods as homogeneous goods that can be counted has facilitated much of neoclassical theorizing, but is also a major blind spot for neoclassical economists when issues and answers rest on the heterogeneity of capital. However, some inroads have been made to correct this blind spot and to consider the heterogeneity of capital as a focal issue. For example, Goolsbee (1998) applied the Alchian-Allen effect to the case of tax subsidies for capital good purchases and found that such subsidies induce buyers to purchase higher-priced machinery, rather than greater quantities of capital goods. Basically, tax subsidies allow buyers to substitute tax-subsidized quality for nonsubsidized expenditures such as training and future maintenance, thereby tipping the balance of relative prices in favor of higher-quality capital goods. In this very short-run orientation, capital goods do not change, only their composition, and there is a large deadweight loss associated with the tax subsidy.
While this application is certainly illustrative of the impact of changes in relative prices on capital allocation, it did not address the longer-run orientation of changes in the production side of the economy. In effect, Goolsbee addressed the question of how well two different qualities of cooking pans sell when subject to a 10 percent discount, but not whether new high-tech pans will be introduced or if production will take place in the supplier's garage or in a humongous factory with computers and robots doing much of the work. How productive and "roundabout" the process of production is will depend crucially on what capital goods are selected and built.
The skyscraper is considered an art form, but its construction is essentially a business that must pay heed to incentives and constraints and therefore skyscraper construction can be expected to closely follow even small changes in relative prices. In reevaluating the early skyscraper artistically, Huxtable (1992, pp. 23–24) noted:
Essentially, the early skyscraper was an economic phenomenon in which business was the engine that drove innovation. The patron was the investment banker and the muse was cost-efficiency. Design was tied to the business equation, and style was secondary to the primary factors of investment and use…. The priorities of the men who put up these buildings were economy, efficiency, size, and speed.
That is not to say that the early skyscrapers were without artistic merit, or that later structures failed to improve artistically, quite to the contrary. Nevertheless, post–World War I skyscrapers continued to emphasize profits and technology. The early skyscraper drew from existing technology and was considered an engine of innovation. Even in modern times, design continues to grow and evolve, but the "structural rationale for such a tall structure is technically and economically inescapable."[10] For Huxtable (1992, p. 105) "Architecture simply doesn't count…. With pitifully few exceptions in the past, New York's skyscrapers have never reached for anything but money." And while technology is certainly an awe-inspiring facet of skyscrapers, it should be remembered that the important technology of the first "skyscrapers" in the late 19th century was already available before the Civil War and that the basic "structural principles of the tall building, developed by the turn of the century, have remained essentially unchanged."[11] Art, technology, government regulations, and even ego must be considered, but the skyscraper is essentially a captive of economic forces and motives. Therefore when architects are asked what makes for the "super skyscraper," economic forces are considered preeminent, or as Robert Sobel meekly put it, "I think there are financial forces working to make this happen."[12]
Changes in the rate of interest (the relative price between consumption goods and capital goods) can have three separate Cantillon effects on skyscrapers. All three effects are reinforcing and all three effects are interconnected to the transformation of the economy toward more roundabout production processes. When the rate of interest is reduced, all three effects contribute to the desire to build taller structures. The world's tallest buildings are generally built when there is a substantial and sustained divergence between the actual interest rate and the natural rate of interest, where the actual rate is below the natural rate as a result of government intervention. When the rate of interest increases, the financial effects all reduce the value of existing structures and the demand to build tall structures and when combined with depressed economic activity, the desire to build at all.
The first Cantillon effect is the impact of the rate of interest on the value of land and the cost of capital. A lower rate of interest tends to increase the value of land, especially in the central business districts of major metropolitan cities. Land values rise because lower rates of interest reduce the opportunity cost or full price of owning land. Treating the rate of interest as an exogenous cause, a reduction in the interest rate will increase the demand for land and result in an increase in land prices. However, the overriding issue with land is "location, location, location," so that the interest rate will have differential effects on land prices.
"Modern economics has great difficulty in dealing with real-world capital goods and mainstream economists have gone to great pains to ignore the heterogeneity of capital…"
When the rate of interest is falling, the land best suited for the production of the longer-term, more capital-intensive, and more roundabout methods of production will increase in price relative to land better suited for shorter term, more direct methods of production. As land prices generally rise, the yield from any piece of land that would make ownership of it profitable also rises. Combined with a lower cost of capital brought about by a lower rate of interest, land owners will seek to build more capital-intensive structures and, at the margin, this will cause land to be put to alternative uses. In the central business district, this means more intensive use of land and thus higher buildings. Simplified, higher prices for land reduce the ratio of the per-floor cost of tall vs. short buildings and thus create the incentive to build buildings taller to spread the land cost over a larger number of floors. Lower rates of interest also reduce the cost of capital, which facilitates the ability to build taller. Thus, higher land cost leads to taller buildings.[13]
The second Cantillon effect from lower rates of interest is the impact on the size of the firm. A lower cost of capital encourages firms to grow in size and to become more capital intensive and to take advantages of economies of scale. Production and distribution become more specialized and take place over a larger territory. Instead of a dairy farmer raising cows and producing milk for the domestic market, larger firms raise a greater quantity of dairy cattle, ship raw milk to processing plants and ship processed dairy products back to wholesale and retail distribution sites. The production of dairy products becomes more roundabout, but also more productive. As part of this more roundabout production process, firms develop central offices or headquarters, as well as marketing offices within their market territory. This increases the demand for office space in central business districts. This demand in turn raises rents and encourages the building of more, and still taller, office buildings within the central market district.
The third Cantillon effect is the impact on technology of constructing taller buildings. Inevitably, record-breaking skyscrapers require innovation and new, untried applications of technology. Buildings that reach new heights pose numerous engineering and technological problems relating to such issues as building a sufficiently strong foundation, ventilation, heating, cooling, lighting, transportation (elevators, stairs, parking), communication, electrical power, plumbing, wind resistance, structural integrity, fire protection, and building security. There is also a host of "public" issues connected with increases in employment density brought about by tall structures, such as transportation congestion and environmental concerns.[14] Beyond the mere technology it takes to build the world's tallest building, every vertical beam, tube, or shaft in a building takes away from rentable space on each floor built, and the more floors in the structure, the greater the required capacity of each system in the building, whether it is plumbing, ventilation, or elevators. Hence, there is a tremendous desire to innovate with technology in order to conserve on the size of building systems or to increase the capacity of those systems. Therefore, as the height of construction rises, input suppliers must go back to the drawing board and reinvent themselves, their products, and their production processes.
"Skyscraper construction can be expected to closely follow even small changes in relative prices."
All three Cantillon effects resulting from lower rates of interest are, of course, interrelated and reinforcing. All three are generally recognized by those involved in the building of large office buildings including architects, bankers, contractors, design specialists, engineers, entrepreneurs, finance specialists such as bond dealers, government regulators, and the tenants themselves. In addition to the location and prestige of a skyscraper address, tenants place higher value on office space with better light, view, and networking opportunities.[15] Higher interest rates discourage the building of taller buildings and of construction in general because capital is scarcer and land is less in demand and available at lower prices. Existing structures experience financial difficulties that relate back to Cantillon effects, such as higher borrowing costs, lower capital asset values, and a decreased demand for office space. Firms engaged in office-building construction and their suppliers face a decrease in the demand for their services, the impact of which falls hardest on those firms who specialize in the production of the tallest buildings. It is not atypical for the owners of such buildings and the builders of such elaborate construction projects to go bankrupt during economic slumps.
The interest rate is what makes the construction business, in part, such as speculative business. Home builders build "spec houses" and face the risk of finding a buyer at a profitable price. Developers build speculative office buildings which in contrast to many corporate headquarters are investments that rely on an uncertain flow of rental income. Separating the winners from the losers is not as much a matter of greed as it is a matter of time. Carol Willis (1995, p. 157) explained the difference between normal times and boom times.
In normal times, when costs of land, materials, and construction are predictable, developers use well-tested formulas to estimate the economics of a project. These calculations are based on the concept of the capitalization of net income. This value takes into account the net income for thirty or forty years … the conventional market formulas and the concept of economic height were widely known and followed in the industry. Most speculative building was not risky, but reserved in its calculations and highly responsive to market desires.
All of the normal calculations that help ensure profit and avoid loss are not, however, reliable during the boom phase of the business cycle. As Willis explained (1995, pp. 157–58):
In booms, the so-called rational basis of land values is disregarded, and the answer to the question "What is the value of land?" becomes "Whatever someone is willing to pay." Some speculators estimate value on new assumptions of higher rents; others simply plan to turn a property for a quick profit…. But due to the cyclical character of the real estate industry, the timing of a project is crucial to its success, and the amount a property reaps in rents or sale depends on when in a cycle it is completed or comes onto the market.
Building the world's tallest building has been a matter of particularly bad timing by entrepreneurs and even if they were able to successfully steal away enough tenants from the remaining pool of renters, the economic problem for society is that valuable resources are lost in the process of constructing buildings that are bad investments and underutilized.[16] However, it is not the entrepreneur's formula that is at fault, but a system-wide failure that has occurred periodically throughout the 20th century and before, known as the business cycle. Hoyt (1933) found the building cycle was a "motion of a definite order" lasting 18 years, on average, from peak to peak. But Willis (1995, p. 159) raised the key issue as it relates to skyscrapers:
Indeed, a key question about cycles is, if their pattern is so predictable, why don't people foresee the inevitable bust? This conundrum can perhaps be answered by looking more closely at the dynamics of speculation and at a typical skyscraper development.
Hoyt suggested that the cycle is long enough for people to forget the lesson of the previous cycle and thus not be able to apply it to the next cycle. However, the building cycle is much more volatile than their 18-year average would suggest and the construction industry is affected by other cycles of shorter duration. Together with the impact of local economic conditions and government intervention, the combination blurs any usefulness of the simple knowledge that business cycles exist. As Willis (p. 164) noted:
After the collapse of an inflated market, it is easy to look back on the grave errors of judgment that preceded a crash; yet the basic indicators of the twenties economy seemed to promise unimpeded growth. Pent-up demand for office space after World War I, the expanding numbers of the white-collar workforce, and the increasing per-person average for office space all fueled the building industry. Each year, the summaries of annual construction figures reported record numbers.
Willis did correctly identify that "easy financing underlie all booms," but this does not answer her conundrum because easy financing and low interest rates are also at the heart of genuine economic growth. The entrepreneur's problem is that profit calculations cannot show for sure whether interest rates will remain low and projects will succeed (economic growth) or rates will rise and projects will fail (business cycle). It seems that only time will tell. Furthermore, it should be made clear that low interest rates and "easy financing" are terms not defined on the basis of their magnitudes, but in relation to their natural rates and levels — based on savings, which are not known or observable. Increases in the money supply will tend to generate increases in construction spending, but nominal interest rates (the most visible rate) tend to move with movements in construction spending (Barth et al., 1988). The business cycle may indeed have a predictable pattern, but its timing and magnitude may be beyond rational human construction. Overbuilding by the construction industry is not a problem of the construction industry per se, but a problem of too much financing and some sort of government-caused distortion. For example, Hendershott and Kane (1992, pp. 61–69) made the following conclusions concerning the construction boom of the 1980s:
Why did our nation overbuild so much and so long? The answer lies largely in the distortion of private incentives by misguided governmental policies on both the regulatory and legislative fronts…. Building requires both construction and permanent financing; overbuilding requires too much of each, financed at too low a rate … developers have traditionally used substantial debt financing and this tendency was especially strong in the U.S. during the 1980s. Highly leveraged building projects were a natural response to government-distorted incentives.
The history of speculative bubbles in construction is paralleled by a history of big increases in debt financing whether it is generated by endogenous factors, gold flows, central banks, or in this case bank regulators.
Cantilloned Buildings and Business Cycles
As Abraham and Hendershott (1994, p. 15) have noted: "We don't really know what starts the speculative bubbles." The problem with business-cycle theories is that they are often more like descriptions of business cycles rather than theories about business cycles and their causes. Each description emphasizes particular features which are then raised to the status of causal forces. Each stage of the business cycle is characterized by several features (e.g., speculation, unstable supply of money, decreased aggregate demand, and exogenous real factors). As a result, business-cycle theories are generally "perspectives" in which the economist has identified institutions on which to place blame, along with their preferred remedies. One solution to this problem is to recast the business cycle with its paired features and then analyze those features with economic theory to provide a theoretical understanding of the business cycle.
"Higher interest rates discourage the building of taller buildings and of construction in general because capital is scarcer and land is less in demand and available at lower prices."
Business cycles are reoccurring sequences of varying length of expansions, downturns, contractions, and upturns in many types of economic activity such as production, employment, income, sales, housing starts, money, credit, and prices. Interest rates, inventories, fixed capital, and loans outstanding tend to be procyclical.
Expansions and booms are generally characterized by low and stable interest rates, increased borrowing and credit formation, increases in the monetary stock and money supply, and investment speculation. Employment increases and so does production. Prices of capital assets, stock prices, and land values all tend to increase during the expansion phase of the business cycle. Speculation could cause such an expansion based, for example, on changes in expectations of the future. However, speculation is unlikely to be the first cause of a reoccurring cyclical phenomenon, although it certainly is a regular component of that phenomenon known as the expansion or boom. Likewise, investment is an important component of the expansion phase but it too has prior causes. Endogenous investment could ignite an expansion and increase the amount of loans and the money supply, but again such a change is unlikely to represent a reoccurring cyclical phenomenon. Most importantly, increased speculation and the related concept of increased investment would normally not represent the potential for systemic error on the part of investors because in each case their actions were based on group-wide assessments of future conditions. It would be most unlikely that such economy-wide assessments would be systemically incorrect on an ongoing basis. Therefore, while it is imaginable that entrepreneurs might self-ignite an economic expansion, and that such an expansion could turn out to be false, it is unlikely that they would continue to self-ignite self-defeating expansions on a reoccurring basis.
The economy can also experience an expansion if there is an increase in the supply of loanable funds. If the supply of saving increases due to a decrease in time preference, then interest rates fall and more resources are made available to entrepreneurs to invest in future production. The result is that the rate of economic growth will increase and consumption will increase when the new investments come on line and start producing. Banks can also simulate an increase in the supply of saving by reducing bank reserves held against demand deposits. It is unlikely that a single bank could influence the market rates of interest with this approach or orchestrate a significant or sustained reduction in interest rates via this mechanism. It would also be odd for an industry to reduce the price of its product in order to sell more loans to less desirable customers and thereby put the assets of banks at greater risk.[17] It is possible for a central bank or monopoly bank to reduce the market rate of interest by providing banks with additional bank reserves. The lower interest rate will induce a reduced amount of saving and an increase in the amount of borrowing, heavily weighted to investment expenditures. The gap between the increased investment and the decreased savings is filled with resources paid by "forced savings."
The interest rate, which normally establishes the intertemporal market clearing between saving, investment, and consumption, is here the source of important imbalances. First it establishes an increased responsibility to pay (borrowed funds) with a decreased ability to buy (reduce interest income from savings). Second, when interest rates are perceived to be stable and the market rate is reduced from the natural rate of interest that would have existed in the market, entrepreneurs are enticed to invest in more roundabout methods of production. Entrepreneurs simultaneously begin the development of new, more capital-intensive and less labor-intensive means of production that are more roundabout and efficient given the new interest-rate signals they face.
"The problem with business-cycle theories is that they are often more like descriptions of business cycles rather than theories about business cycles and their causes."
Investment in more roundabout production processes means that investors are investing in new independent projects involving unique capital goods and new technologies and "ways of doing things" that were previously "on the shelf" but not in general use. Spending money on research and development, for example, is investment in more roundabout production processes, as is building a net to fish rather than using your hands or a crude object such as a sharpened stick. Transportation provides other examples such as building canals to compete with road traffic, or building railroads to compete with canals and river traffic. The most direct way of communicating with someone is to walk over to them and begin talking while a more roundabout method would be to run telephone lines between your location and their location and to use telephones to communicate.
This activity however implies the existence of a wide variety of capital goods as well as the production of wires, phones, telephone poles to string the wires, etc. Phones are therefore more roundabout than the "walk and talk" method, but are definitely more productive. Likewise, replacing regular phone lines with fiber optic cables is more roundabout but more productive. The cables are more roundabout because we have to first build new capital goods to produce the optic cables while the capital goods to produce traditional phone lines already exist for the most part. Fiber optic cables are also more productive than traditional phone lines in that they can do everything a traditional line can do and transmit data at faster speeds. The "technology" of "just in time inventory" systems could also be an example of a more roundabout process. More roundaboutness implies the use of a different technology, in the broad sense of the word. Entrepreneurs do not embark on more roundabout production techniques that are less productive than less roundabout techniques as they seek to produce consumer goods as quickly as possible, because "time is money."[18]
An office building is a capital good that is used to bring a variety of consumer goods to market in the sense that production in the office building involves the decision-making process over all aspects of the firm. Its use is ubiquitous in "big business" and is totally absent in small businesses such as family farms, hot dog stands, plumbing services, auto body repair shops, etc. The office building is a critical capital good in very roundabout production processes that represent virtually all modern production and all cutting-edge goods and service production. The modern economy is inextricably linked with the large office building or as Carol Willis (1995, p. 181) put it: "Skyscrapers are the ultimate architecture of capitalism."
The skyscraper is not just a large version of the office building. Skyscrapers can be used to house the offices of a single corporation, the central offices and branch offices of multiple corporations, hotel and residential living space, commercial space, convention space, a wide variety of personal service businesses, and specialized tenants such as stock exchanges, theaters, and television studios. The skyscraper can serve as a much larger and more advanced office building (being both more productive and producing a higher-quality service). It can even take on the status of a business community or specialized form of privately controlled marketplace. Naturally, greater amounts and diversity of production are possible in larger skyscrapers. The world's tallest building, past and present, also adds the status of a distinct address.
"Skyscrapers are the ultimate architecture of capitalism."
Economists of the Austrian School have a theory of the business cycle based on capital theory where the structure of production is distorted by artificial changes in the interest rate. Economic activity is based on "fundamentals," but the fundamentals themselves can be distorted and induce bad investments (hysteria and speculation) that ultimately are revealed to be bad investments during the economic contraction.
In contrast, many mainstream economists ignore the structure and roundaboutness of production. Indeed, for more than the last half a century, economists have been concentrating on the subject of the quantity of capital while generally ignoring the details of real-world capital goods and the intricacies of the structure of how capital goods are actually used to produce goods. This emphasis by the profession has unfortunately left many economists with little knowledge of a most important aspect of economics and the economy: the nexus of capital and entrepreneurship known as technology. As Alan Greenspan (2003) has testified before the US Congress, "Economists understand very little about how technological progress occurs."
Other leading economists feel that markets and investments are not based on rational foundations and that economists would be well advised to study psychology rather than price theory. Still others, like the Austrians, feel that business cycles are based on some sort of technological change, but they either do not know why technology changes or view it as a random process. All of these views are well expressed by Robert Shiller:
I think that most price movements of any size are unrelated to news about fundamentals [p. 26]…. The most straightforward explanation, then I think, is one that is inconsistent with market efficiency — namely, a speculative bubble. People were selling, in short, simply because they thought other people were going to sell [p. 27]…. I will say, however, that such speculative behavior is kind of a depressing lesson for economists. It's very difficult for us to model these things; it suggests we have learned the wrong research skills. The strong suggestion from this evidence is that much that occurs in financial markets doesn't make sense in terms of fundamentals.
I also suspect that what we have recently learned about financial markets probably extends to macroeconomic issues as well — that is, to matters like the business cycle. For example, there's a recent fashion in the macroeconomics literature called "real" business cycle models. Such models try to make sense out of macroeconomic fluctuations entirely in terms of optimal responses to new information about fundamentals. In fact, the only thing that drives most of these models is technological change. That is, the ups and downs of the business cycle are being caused predominantly by technological progress, which uproots some industries while giving rise to others. (Shiller 1992, pp. 26–28)
Fortunately, there does seem to be a growing appreciation for the Austrian theory of the business cycle, if not an accurate understanding of the theory itself. As Pesek (1999a) has noted, the causal factors relating skyscrapers to the business cycle share the "basic tenet of Austrian economic theory."
The Austrian theory is based on the economics of the capital structure and the distinction between true interest-rate signals which generate economic development and false interest-rate signals which generate business cycles. Understanding the giant skyscraper as a manifestation of the business cycle and thus understanding how price- and interest-rate signals can distort the structure of production in the economy into bad investments and improperly allocated labor might go a long way toward improving economists' understanding of business cycles and their cures.[19] Unfortunately, the theory is blind in the sense that it offers no way of knowing if the actual rate of interest is above or below the so-called natural rate and therefore it offers little in the way of exact prediction. It should be clear that despite its good record of predictions, the skyscraper index is not recommended as a remedy for this deficiency, but simply as a good illustration of the strengths of the Austrian theory of the business cycle.
When the Skyscraper Index Is Wrong
No index or predictor is perfect, and the skyscraper index as presented by Andrew Lawrence has a far-from-perfect record. First, as noted by Lawrence, the skyscraper index failed to predict in the case of the Woolworth building in 1913. Second, the index did not predict in the case of Japan, which has suffered a rolling recession since 1990. Lawrence did not mention this presumably because none of the recessionary periods in Japan were extraordinary, only their cumulative impact. Third, the skyscraper index did not predict the stock-market crash in the NASDAQ stock market although this did occur after his article was published and has not yet resulted in what the consensus views as a severe downturn in the economy.[20] Nor were there any "predictions" of the severe downturns of 1920–21, 1937–38, and 1980–81. The skyscraper index is primarily an index that predicts severe changes in the economy, although it might be possible to improve and refine the data to predict business cycles of various magnitudes.
The primary counterexample to the competence of the skyscraper index is the Woolworth Building. This project was announced in March of 1910, but at first it was planned to be a "modestly tall" building. In November of 1910 its projected height was increased, but it was still only slated to become the third tallest building in the world. In January of 1911 the building was replanned to become one of the tallest buildings in the world at 750 feet, but latter this figure was raised still higher to more than 792 feet high (Landau and Condit 1996, pp. 381–82). The opening ceremonies for the Woolworth Building were held on the night of April 24th, 1913 although it was not fully completed until latter (p. 390). The economy peaked and began its contraction in the first quarter of 1913 and continued to contract until the fourth quarter of 1914. This contraction included the third-worst quarterly decline in real GNP between 1875 and 1918, and was worse than any quarterly performance between 1946 and 1983.
We should also add that the founding of the Federal Reserve System in 1913 and the coming of World War I in Europe in 1914 did much to provide short-term stabilization for the American economy and to shorten the life of the contraction.[21] Therefore, it would seem that the Woolworth Building was not a complete exception or error of the skyscraper index, after all. It could simply be that the intervention of World War I did not provide ample time for the economic slump to deepen and receive the historical label (e.g., "Depression of 1913") that would have kept it in our historical consciousness. Also, it is worth noting that the completion of the Masonic Temple in Chicago (the first building to exceed 300 feet) in 1892 was preceded by the beginning of the largest swing (contraction) in recorded US history, culminating in the largest quarterly decline in real GNP in our history and was followed by the Panic of 1893. Likewise the completion of the Park Row Building in 1898 — the world's tallest building — was preceded by the fourth-largest quarterly decline in real GNP over the period of 1875–1918 and is sometimes called the Panic of 1897.[22]
A reexamination of the evidence suggests that the skyscraper index is a better predictor than first formulated by Lawrence (1999). Obviously this does not suggest that building heights should be used as a guide to fiscal and monetary policy or that skyscraper heights should be limited to prevent economic crisis. It does however lend additional standing to the Austrian theory of the business cycle.[23] Furthermore, it does suggest that both the cause of skyscrapers reaching new heights and severe business cycles are related to instability in debt financing and that the institutions that regulate debt financing should be reevaluated, if not replaced with more efficient and stabilizing institutions.
Mark Thornton is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War and editor of The Quotable Mises and The Bastiat Collection. Send him mail. Comment on the blog. Hear his podcast on this topic.
This article originally appeared in the Quarterly Journal of Austrian Economics vol. 8, no. 1 (Spring 2005).
References
Abraham, Jesse M., and Patric H. Hendershott. 1994. "Bubbles in Metropolitan Housing Prices." NBER Working Paper No. 4774. Cambridge, Mass.: National Bureau of Economic Research (June).
Atack, Jeremy, and Robert A. Margo. 1996. "'Location, Location, Location!' The Market for Vacant Urban Land: New York 1835–1900." NBER Historical Paper 91. Cambridge, Mass.: National Bureau of Economic Research.
Barth, James R., Michael D. Bradley, Joseph A. McKenzie, and G. Stacy Sirmans. 1988. "Stylized Facts About Housing and Construction Activity During the Post–World War II Period." In Real Estate Market Analysis: Methods and Applications. John M. Clapp and Stephen D. Messner, eds. New York: Praeger. Pp. 215–35.
Bernanke, Ben S. 2003. "A Perspective on Inflation Targeting." Remarks to the Annual Washington Policy Conference of the National Association of Business Economists. Washington, D.C. (March 25).
Cochran, John P., and Fred R. Glahe. 1999. The Hayek-Keynes Debate: Lessons for Current Business Cycle Research. Lewiston, N.Y.: Edwin Mellon Press.
Colwell, Peter F., and Roger E. Cannaday. 1988. "Trade-Offs in the Office Market." In Real Estate Market Analysis: Methods and Applications. John M. Clapp and Stephen D. Messner, eds. New York: Praeger. Pp. 172–91.
Cowen, Tyler, and Alexander Tabarrok. 1995. "Good Grapes and Bad Apples: Applying the Alchian and Allen Theorem." Economic Inquiry 33, no. 2 (April): 253–56.
Eichengreen, Barry, and Kris Mitchener. 2003. "The Great Depression as a Credit Boom Gone Wrong." Bureau of International Settlements Conference Paper (March).
Ekelund, Robert B., and Mark Thornton. 1992. "The Union Blockade Versus Demoralization of the South: Relative Prices in the Confederacy." Social Science Quarterly 73, no. 4 (December): 890–902.
Garrison, Roger W. 2001. Time and Money: The Macroeconomics of Capital Structure. London: Routledge.
Glaeser, Edward L., and Jesse M. Shapiro. 2001. "Cities and Welfare: The Impact of Terrorism on Urban Form." NBER Working Paper No. 8696. Cambridge, Mass.: National Bureau of Economic Research (December).
Goolsbee, Austan. 1998. "Taxes and the Quality of Capital." NBER Working Paper No. 6731. Cambridge, Mass.: National Bureau of Economic Research (September). Current version is August 2000 and is forthcoming in the Journal of Public Economics.
Granitsas, Alkman. 1999. "The Height of Hubris: Skyscrapers Mark Economic Bust." Far Eastern Economic Review 162, no. 6 (February 11): 47.
Grant, James. 1996. The Trouble with Prosperity: The Loss of Fear, the Rise of Speculation, and the Risk to American Savings. New York: Random House.
Greenspan, Alan. 2003. "Testimony of Chairman Alan Greenspan: Aging Global Population." Before the Special Committee on Aging, US Senate, February 27.
Hendershott, Patric H., and Edward J. Kane. 1992. "Causes and Consequences of the 1980s Commercial Construction Boom." Journal of Applied Corporate Finance 5, no. 1 (Spring): 61–70.
Hershey, Robert D., Jr. 1995. "U.S. Farms Out Compiling of Leading Indicators." New York Times (September 8): D1.
Hoyt, Homer. 1933. One Hundred Years of Land Values in Chicago: The Relationship of the Growth of Chicago to the Rise in Its Land Values, 1830–1933. Chicago: University of Chicago Press.
Huxtable, Ada Louise. 1992. The Tall Building Artistically Reconsidered: The Search for a Skyscraper Style. Berkeley: University of California Press.
Investors' Business Daily. 1999. Editorial: "Edifice Complex." Investors' Business Daily (May 6).
Kim, Sukkoo. 2002. "The Reconstruction of the American Urban Landscape in the Twentieth Century." NBER Working Paper No. 8857. Cambridge, Mass.: National Bureau of Economic Research (April).
Koretz, Gene. 1999. "Do Towers Rise Before a Crash?" Economic Trends, Business Week (May 17): 26.
Landau, Sarah Bradford, and Carl W. Condit. 1996. Rise of the New York Skyscraper, 1865–1913. New Haven, Conn.: Yale University Press.
Lawrence, Andrew. 1999. "The Curse Bites: Skyscraper Index Strikes." Property Report, Dresdner Kleinwort Benson Research (March 3).
— — — . 1999a. "The Skyscraper Index: Faulty Towers!" Property Report, Dresdner Kleinwort Benson Research (January 15).
Lucas, Robert E., Jr. 1987. Models of Business Cycles. New York: Basil Blackwell.
McCulloch, J.H. 1981. "Misintermediation and Macroeconomic Fluctuations." Journal of Monetary Economics 8: 103–15.
Pesek, William, Jr. 1999a. "Want to Know Where the Next Disaster Will Hit? Look Where the World's Biggest Skyscraper's Going Up." Barron's (May 17): MW11.
— — — . 1999b. "To the Sky: Does Chicago Skyscraper Augur a U.S. Market Crash?" Barron's 79, no. 39 (September 27): 14. Roll, Richard. 1992. "Volatility in U.S. and Japanese Stock Markets: A Symposium." Journal of Applied Corporate Finance 5, no. 1 (Spring): 29–33.
Rothbard, Murray N. 1984. "The Federal Reserve as a Cartelization Device." In Money in Crisis: the Federal Reserve, the Economy, and Monetary Reform. Barry N. Siegel, ed. San Francisco: Pacific Institute for Public Policy Research and Cambridge, Mass.: Ballinger.
Selgin, George. 1992. "Bank Lending 'Manias' in Theory and History." Journal of Financial Services Research 6: 169–86.
Shiller, Robert. 1992. "Volatility in U.S. and Japanese Stock Markets: A Symposium." Journal of Applied Corporate Finance 5, no. 1 (Spring): 25–29.
Sobel, Russell S., and Thomas A. Garrett. 1997. "Taxation and Product Quality: New Evidence from Generic Cigarettes." Journal of Political Economy 105, no. 4 (August): 880–87.
Thornton, Mark. 1998. "Richard Cantillon and the Origins of Economic Theory." Journal of Economics and Humane Studies 8, no. 1 (March): 61–74.
— — — . 1991a. The Economics of Prohibition. Salt Lake City: University of Utah Press.
— — — . 1991b. "Alcohol Prohibition was a Failure." Policy Analysis No. 157. Washington, D.C.: Cato Institute.
Willis, Carol. 1995. Form Follows Finance: Skyscrapers and Skylines in New York and Chicago. New York: Princeton Architectural Press.
Zarnowitz, Victor. 1992. Business Cycles: Theory, History, Indicators, and Forecasting. Chicago: University of Chicago Press.
Zijp, Rudy van. 1993. Austrian and New Classical Business Cycle Theories: A Comparative Study Through the Method of Rational Construction. Brookfield, Vt.: Edward Elgar.
Notes
[1] Glaeser and Shapiro (2001, p. 15) did not find a statistically significant effect between the amount of terrorism and the numbers of skyscrapers built. They also note that the number of skyscrapers may not be market determined because of government intervention (e.g., building codes) as well as the builder's desire for personal aggrandizement.
[2] Koretz (May 17, 1999, p. 26) and Granitsas (February 11, 1999 p. 47); also see Die Abgabewelle Wirtschaftwoche (May 27, 1999) for a report on the skyscraper index.
[3] This type of coincidental indicator (with no causal connections) should be differentiated from coincidental economic indicators that simply follow or track changes in the business cycle, such as payroll statistics, which are linked with economic activity.
[4] Hershey (1995) notes that the Commerce Department announced that the Conference Board won the bidding against several competitors to take over compilation of the Index of Leading Economic Indicators, and the coincident and lagging indicators.
[5] Naturally members of the Free Banking School such as Lawrence White and George Selgin would be critical of such a policy response. See Rothbard (1984) for a public-choice critique of the founding of the Federal Reserve.
[6] It is worth quoting academic economist and Federal Reserve Governor Ben Bernanke (2003) at length on the profession's failure to look past the obvious to the economic. With the help of 25 years of hindsight, he concludes,
The upshot is that the deep 1973–75 recession was caused only in part by increases in oil prices per se. An equally important source of the recession was several years of overexpansionary monetary policy that squandered the Fed's credibility regarding inflation, with the ultimate result that the economic impact of the oil producers' actions was significantly larger than it had to be. Instability in both prices and the real economy continued for the rest of the decade, until the Fed under Chairman Paul Volcker reestablished the Fed's credibility with the painful dis-inflationary episode of 1980–82. This latter episode and its enormous costs should also be chalked up to the failure to keep inflation and inflation expectations low and stable. In contrast to the 1970s, fluctuations in oil prices have had far smaller effects on both inflation and output in the United States and other industrialized countries since the early 1980s. In part this more moderate effect reflects increased energy efficiency and other structural changes, but I believe the dominant reason is that the use of constrained discretion in the making of monetary policy has led to better anchoring of inflation expectations in the great majority of industrial countries.
[7] See Thornton (1998) for a modern assessment of Cantillon's contributions.
[8] See Thornton (1991a) for a more complete discussion of the Alchian and Allen Effect and the theory of relative prices.
[9] For example, the reason that illegal drugs such as heroin, cocaine, and marijuana have become so highly potent is that the risk of moving drugs into the market and selling them encourages drug dealers to supply the most concentrated forms of their products, an effect often referred to as the Iron Law of Prohibition (Thornton, 1991a). This effect was also prominent during alcohol prohibition (1920–1933) when a nation consisting mostly of beer drinkers switched to highly potent moonshine and bathtub gin (Thornton, 1991b). The relative price effect also played a role in the American Civil War when running the Union blockade of the Confederacy was a risky business. The "Rhett Butler Effect" meant that blockade runners like the fictional character from Gone with the Wind imported high-priced items and luxury goods, like coffee, cognac, and formal dresses rather than bulky items like salt and flour — the fixed-risk cost of running the blockade made it more profitable to do so (Ekelund and Thornton, 1992). There has been some confusion when economists have tried to apply the Alchian-Allen Effect (Cowen and Tabarrok, 1995), but it continues to show its real-world applicability in both complex and simple cases (Sobel and Garrett, 1997).
[10] Helmut Jahn quoted in Huxtable (1992, p. 96).
[11] The editors of Architectural Forum circa 1950 quoted in Huxtable (1992, p. 99).
[12] As quoted in Huxtable (1992, p. 117).
[13] See Atack and Margo (1996). They examined the market for land in New York City during the 19th century. Their evidence suggests that land values tended to increase during deflationary periods, but less so during inflationary periods.
[14] Kim (2002) showed how increases in skyscraper building and, in particular, improvements in skyscraper technology, lead to increases in employment density.
[15] See for example the evidence presented by Colwell and Cannaday (1988).
[16] See for example Hendershott and Kane (1992, p. 68) who estimated that there was more than $130 billion wasted in the commercial construction boom of the 1980s. The Empire State Building was nicknamed the "Empty State Building" because of its high vacancy rates until after World War II.
[17] See for example Selgin (1992) who shows that there is little in either economic theory or history that indicates lending manias are endogenous to laissez-faire banking systems.
[18] Government bureaucrats and college presidents often do consider and implement more roundabout processes that are less or equally productive due to the inability to calculate economically, to bribery, and to the need to spend the bureau's budget within a time constraint.
[19] See for example Eichengreen and Mitchener (2003) for an excellent analysis of the Great Depression by neoclassical standards. However, their desire to count and their failure to incorporate capital structure leaves them with an incomplete analysis and their admittedly weak proposals for reform such as preempting the boom and eliminating fraud and abuse.
[20] This is not entirely true, as Pesek (1999b, p. 14) reported that a new "world's tallest building" was announced well before the crash/recession began in the spring of 2000, but plans were put on the shelf.
[21] A case could be made that these two events rank as two of the most economically destructive of the century, at least by those who oppose inflation and war and by those who link America's entry into, and the results of, World War I as the cause of World War II.
[22] See Zarnowitz (1992, pp. 80–81) for estimates of quarterly changes in real gross national product, 1875–1983.
[23] For a comparison of Austrian business-cycle theory with many of the competing business-cycle theories see Zijp (1993), Cochran and Glahe (1999), and Garrison (2001).
피드 구독하기:
글 (Atom)
