The green and digital revolutions cause turbulence

These two revolutions must continue to play an important part in any views of the future and forecasts of economic and business prospects. But the two are very different.

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  1. Charles Stanley

Prior to the pandemic, Charles Stanley set out the transformational effects of the digital and green revolutions on business and investment prospects for the years ahead. During the period of lockdowns, we emphasised the digital revolution, which received an enormous boost as companies and people sought online and remote ways of working, learning, and shopping, and turned to their iPads and smartphones for their entertainment and social life.

The greens are also hoping that a period of weeks without jet travel and much reduced vehicle movement can be in part sustained, as they seek a future based as much as possible on home and local facilities, allowing more reliance on walking and cycling.

These two revolutions must continue to play an important part in any views of the future and forecasts of economic and business prospects. But the two revolutions are very different.

Digital from grass roots

The digital revolution is much more bottom up, with people clamouring to own smartphones, electronic pads and home computers – and businesses keen to develop online answers and productivity-raising uses of artificial intelligence. All governments around the world want better broadband and more cloud capacity as they seek to facilitate the wishes of their citizens.

At the same time, they seek to use the powerful new technologies to strengthen their own control and access to data. The battles are not about whether to digitalise and to embrace the new technologies. The battles are over who owns the economic benefits, who has access to the data, and whether governments abuse the systems by deploying them to spy on users and to limit civil liberties.

Disagreements over who benefits and how you use the digital tools is leading to a Chinese-led system and a US led system. Europe, without a clear system of its own, is struggling to adapt or wrestle the US system to its own purposes. We have just witnessed the difficulties as various European countries tried to develop a centralised app to carry out tracing systems for carriers of the Covid-19 virus, only to find such systems were difficult to deploy alongside Apple and Google devices and systems.

Governments lead on green

In contrast, the green revolution is more top down. It is a set of exhortations, laws, taxes and subsidies trying to change consumer behaviour. Whilst many voters in the US and Europe claim to be believers in the theory, they have so far shown a marked reluctance to adopt electric cars on a sufficient scale or to leave their vehicle at home. They have refused to discontinue holidays abroad based on jet travel or to divert from meat diets to something less environmentally intrusive.

The last US election was, in part, a trial of green policies for America. Donald Trump narrowly won on a ticket of expressly rejecting the global treaty-based policy of cutting carbon dioxide output. Once in office, he duly pulled the US out of the climate change policy framework and set about a major expansion of oil, gas and coal to reach and surpass US self-sufficiency in a fossil-fuel-based energy strategy.

Coal is still king in some countries

More importantly for the future of carbon dioxide outputs, both China and India decline to cut their emissions. As the two largest countries in population terms by far, what they do will largely determine the success or failure of the carbon dioxide cutting aims of the world climate change conferences. Their 2.7 billion people dwarfs the 800 million Americans and Europeans.

Both countries say they accept the theory, but both claim they are special cases that need to be able to expand their use of fossil fuels at this stage of their development. Recently, both India and China have announced substantial expansions of coal production and coal-based electricity generation. Neither Indian leader Narendra Modi nor China’s President Xi Jinping believe the global warming arguments sufficiently to feel their countries need to curb their big and growing appetites for fossil fuels.

This week's news from China is reported as meaning a 22% expansion in coal production by 2025, and the fourteenth Chinese five-year plan assumes a 24% increase in coal generated power. In India, the coal sector is being liberalised using private sector investors to expand output.

The green revolution will get a big boost were Joe Biden to win the US Presidential election, as he will want the US to rejoin global environment talks and will want to adopt something like the European green deal. A committed US President might also have a bit more leverage over other parts of the world reluctant to commit themselves to a major reduction in their own fossil fuel use. It will still leave the difficult question posed by some emerging market governments of whether the West has a right to require the rest of the world to rein in its use of fossil fuels, when the West used them liberally to accelerate its development years ago, before climate change was an international worry.

Both the digital world and the green revolution are becoming forces that create disputes between countries – and are now pushing more into national or regional rather than global solutions. A lonely Europe will press on with its strict decarbonisation, hoping the US will want to join it, but with no means of getting China and India to implement the policy.

Both the US and China will rush on with their different approaches to the digital revolution, seeking to win friends and customers to their solutions. Europe is likely gradually to move to full dependence on the US system, whilst seeking to use the power of government to take more tax off the US suppliers, and to force more control over data and content onto them.

The US digital stars are still winning, but the bigger and more powerful they get, the more likely they are to encounter powerful opponents determined to limit them or to take away some of their profits.

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