Candidate Code: jfj794 Commentary 1 Title of Article: When it comes to cutting carbon emissions, the real estate industry is running out of time. Source: CNN Business https://edition.cnn.com/2021/07/14/business/euemissions-climate-cars/index.html Date the article was published: July 14, 2021 Date the commentary was written November 20, 2021 Unit of the syllabus to which the article relates: Unit 1: Microeconomics. Key Concept Used: Sustainability Word count: 800 words Candidate Code: jfj794 Article When it comes to cutting carbon emissions, the real estate industry is running out of time. When it comes to cutting carbon emissions, the real estate industry is running out of time Extreme weather events — including heat waves, droughts and floods — have unfolded all over the world this summer. The grave impact of climate change is upon us and will continue to have a profound impact on human life. But there are still largely untapped actions we can take to reduce the damage. Achieving global policy ambitions like the ones set in the 2015 Paris Agreement will require leadership from the private sector, but individual companies with strong internal climate commitments can't go at it alone. They are hamstrung unless other businesses in their ecosystem follow through with similar pledges. To accomplish this, companies need policies that require the cooperation of external stakeholders at every step of the value chain. For those of us in the real estate sector, the concern always seemed to be less about the cause of our manmade carbon footprint and more about cost. For years, we have seen rising sea levels and extreme weather events happening around us, putting property portfolios at risk. The economic and physical changes have affected insurance industry volatility, impacting construction and long-term investment prospects. However, many in the industry have yet to admit that buildings are as responsible for carbon as cars. The real estate industry makes up 49% of global carbon emissions when accounting for construction and building performance. Most carbon reduction efforts in the building sector have focused on operational efficiency — energy sources for keeping buildings at an ideal temperature, lighted, ventilated and powered — so that properties consume as little energy as possible. And while these efforts have furthered the industry's goal of getting buildings closer to net zero operationally, we can no longer ignore that building materials account for half of a building's total lifetime carbon footprint. We are out of time. And the real estate industry's wait-and-see approach is no longer acceptable. Embodied carbon — emissions associated with the manufacturing, transport, construction and disposal of building materials — must become a priority for the entire industry value chain. With commercial buildings, concrete and steel have traditionally been used for construction, along with other frequently used carbon-intensive materials like foam insulation, plastics and aluminum. However, building with structural wood has increasingly gained traction as an alternative, given that it sequesters more carbon than it emits. Developers are becoming aware of its versatility and sustainability, and if adopted on a global scale, mass timber could challenge steel and cement as the preferred materials for construction. Additionally, structural engineers have already successfully used recycled steel and low-carbon cement consisting of alternative Candidate Code: jfj794 mixtures. This, combined with using more unpolished and salvaged materials, has already proven to lower buildings' carbon footprints. And since nearly 75% of all raw materials in the US are used for the construction of buildings, the conscious decisions about the sourcing, construction and finishing of our development projects will have a lasting environmental impact. At Gensler, a global architecture and design firm, we recently issued letters to our structural engineers, vendors, suppliers, construction and general contracting leaders asking for their partnership in shaping their policy to change the value chain. Together, we are developing an agreed-upon approach for specifying quality products that align with our company's carbon neutrality promise. In early 2022, Gensler is launching new green specifications that focus on reducing high-carbon materials, using the most efficient structural solutions to reduce material quantities, sourcing materials that are extracted and manufactured locally, and minimizing waste. These specifications will be used on all of our projects. From then on, we will prioritize working with partners who meet those specifications and use materials that significantly reduce construction-related emissions, such as low-carbon concrete, steel, cross-laminated timber and alternative materials that absorb rather than emit carbon. With Gensler's design impact and its global scale, this change in demand for sustainable materials will have an immediate ripple effect across the building sector. Extreme weather keeps knocking out America's power. Here's what we must do If all parts of the real estate ecosystem — including architects, owners, developers, investors, constructors and material suppliers — move toward a net zero ambition, together, they could save 10 billion tons of CO2 from the atmosphere. This is the equivalent of removing nearly 2.2 billion gas-powered cars from the road for an entire year. There must be global net zero building standards across major market participants, investors, developers, designers and occupiers to drive demand. We must also create policies that demand energy suppliers provide access to lowcarbon alternatives. This era of reducing the embodied carbon in building materials will change construction and real estate development. We have entered a critical period for humanity. Carbon-neutral statements, science-based targets, and promises at international forums like the UN Climate Change conference will not suffice. Tangible and immediate action is the only solution. Candidate Code: jfj794 Commentary 1 This article discusses the problem of building in retail projects on the carbon produced which affect the air quality in a negative way and can harm many creatures living who are external factors, which will affect the economy’s sustainability due to the carbon emissions. The key concept that would be used is sustainability. The aim is to focus on reducing high carbon materials by using alternatives, getting a more sustainable economy through the reduction of carbon emissions. Price MSC MPC Pe Negative externality of production Welfare Loss P1 MSB Qe Q1 retail projects using conventional material (Q) The negative externality of production graph explains the problem of carbon emissions produced of the retail projects. Where MSC meets MSB of retail projects at (Pe, Qe) assuming there is no government intervention. However, for each project built, marginal external costs are created which contributes to the carbon emission evolved by materials of building as the quantity of materials shifts to Q1 that indicates over supply, which is higher the socially efficient level at Qe Candidate Code: jfj794 which led to a negative externality. Marginal costs are created by adding these marginal external costs to marginal private cost hence threats the sustainability. Which also increase the welfare loss due to its negative impact on third parties in the world. To attain allocative efficiency, the amount that should be provided is where the MSC of production meet the MPB of consumption at Qe. The picture also implies that the price paid by consumers in the free market (P1) is lower than the price that would be paid if all expenses, including external costs, were considered. Pe is the symbol for this socially efficient price. This represents market failure which is the situation when markets don’t allocate resources in an optimal manner, so the community surplus is not maximized. “Using efficient structural solutions to reduce material quantities and minimizing waste.” Done by reducing demand on the materials used, and use alternatives to ensure that the environment is sustained. Supply (S) Price Pe P1 Demand (D1) D2 Q1 Qe Quantity of Conventional material Candidate Code: jfj794 A fall in the demand in the materials is shown in the diagram which resulted from the awareness of developers about the health hazards of their carbon footprint. Workers started using alternatives by recycling, which will lower the carbon footprint leading to a better economy. The fall in the demand is represented by shifting the D1 curve to D2, creating a new equilibrium at a lower price and decreased quantity (P1, Q1). Reducing demand has pros and cons. Where lower demand can bring down prices, making goods more affordable for consumers. In this case, it would help reducing the externality by using alternative materials. However, reducing demand can be detrimental to businesses as it leads to lower profits and maybe layoffs. This in turn can impact the overall economy, as reduced demand can result in decreased economic activity and less job creation. Another solution can be provided by the government is imposing taxes on the high carbon materials, where industries will start to look for alternatives which are cheaper and can be more beneficial on the long term. Solution #2: MSC Price MPC + High carbon materials taxes MPC Welfare Loss Pe P2 P1 Qe Q2 Q1 MSB Quantity of Material Candidate Code: jfj794 As shown on the diagram, implying taxes shifts MPC vertically upward closer to the MSC, this will result in creating a new equilibrium where P1 is raised to P2, and Q1 is lowered to Q2 which is closer to the allocative efficiency of price and quantity. As a result, the welfare loss of the society decreases and the potential welfare gain increases. New equilibrium is formed with less pollution, higher price but less quantity, based on the law of demand, taxation will help attain sustainability by reducing the carbon footprint and using alternatives which has a much less harmful effect on the environment. Taxes have pros and cons, where it would push businesses to decrease their carbon footprint by making it costlier to pollute. Which will help in the shift towards a greener economy attaining a sustainable economy. However it could be considered unfair for low-income households, as they would spend a larger portion of their earnings on energy and thus be more affected by the tax. The concept of sustainability is extremely appropriate here because the government's aim to become more sustainable may be hindered by the real estate industries objective of profit maximization and competition. The main purpose is to decrease the demand by using alternative materials which will be costly, and raise the cost of production for different real estate industries, if that’s the case, many industries can disagree for the price raise and can still use the same materials leaving a carbon footprint and posing a threat to sustainability. . Candidate Code: jfj794 Commentary 2 Candidate code: Title of Article: What is the UK inflation rate and why is the cost of living rising? Source: BBC News https://www.bbc.com/news/business-12196322 Date the article was published: September 8th, 2022. Date the commentary was written September 11th, 2022. Unit of the syllabus to which the article relates: Unit 2 Macroeconomics. Key Concept Used: Intervention Word Count: 763 words Candidate Code: jfj794 Article The cost of living is increasing faster than at any time for the past 40 years, driven largely by the rising cost of food and fossil fuels. Prices are currently 10% higher than they were 12 months ago. However, following the government's announcement on energy bills, inflation is unlikely to peak as high as previously forecast. What is inflation? Inflation is the increase in the price of something over time. For example, if a bottle of milk costs £1 and that rises by 5p compared with a year earlier, then milk inflation is 5%. Every month a figure is released, estimating how much prices are rising overall - it's currently at 10.1%. Why are prices rising so fast? The Bank of England's governor Andrew Bailey has said "the Russia shock is now the largest contributor to UK inflation". But economists agree that there are many factors, including: energy bills, which have risen rapidly because of high oil and gas prices. Bills will rise further in October,but not by as much as previously planned petrol and diesel prices, partly because the war in Ukraine has driven up the cost of crude oil. Prices recently fell from record levels but are expected to remain high food prices, as the war in Ukraine squeezes grain production and costs the cost of used cars has also gone up sharply significant increases in the costs of raw materials, household goods, and furniture and in the hospitality sector, including restaurants and hotels higher interest rates which are making mortgage payments more expensive for some homeowners Not all prices behave the same way. The cost of some other goods and services have increased only slightly or stayed the same. How much are prices rising for you? Why inflation is worse for some people than others What's happening to wages? Pay increases for many people aren't keeping up with rising prices. Average wages, not including bonuses, rose by 4.7% in the year to June 2022. But when you take inflation into account, the real value of that pay actually fell by 3% compared to 12 months ago. Pay including bonuses was down 2.5%, when adjusted for inflation. Unions say wages should reflect the cost of living - but the government argues this could push inflation even higher. Pay falls at fastest rate on record as prices soar Candidate Code: jfj794 Who measures the UK's inflation rate? To come up with an inflation figure, the ONS keeps track of the prices of hundreds of everyday items. This is known as the "basket of goods". The basket is constantly updated. Tinned beans and sports bras were added this year, reflecting a rising interest in plant-based diets and exercise. Each month's inflation figure shows how much these prices have risen since the same date last year. This is known as the Consumer Prices Index (CPI). What's happening in other countries? Other countries are also experiencing a cost-of-living squeeze. Many of the reasons are the same: increased energy costs, shortages of goods and materials and the fallout from Covid. The ONS says UK inflation is similar to the European Union average. In the eurozone (EU countries that use euro), the latest estimate of annual inflation was 8.9%. In the US, inflation fell slightly to 8.5% in July, having hit a 40-year high of 9.1% June. When will inflation come down? Inflation was forecast to peak at 14% this autumn and go as high as 18% next year. But there are encouraging signs that may not happen. Oil and food prices have already fallen from the peaks they hit following Putin's invasion of Ukraine. The UK's government's plan to limit rises in energy bills also means prices will go up more slowly than expected. Investment bank Goldman Sachs now says inflation could peak at 10.8% in October, and slow to 2.4% by December 2023. Lower inflation does not mean prices will go down. It just means they will stop rising at their recent faster pace. What can be done to tackle inflation? The Bank of England's traditional response to rising inflation is to raise interest rates. This can encourage people to save, but means some people with mortgages see their monthly payments go up. How high could UK interest rates go? Raising interest rates also makes borrowing more expensive and - it is hoped - people have less money to spend. As a result, they will buy fewer things and prices will stop rising as fast. But when inflation is caused by things like rising energy prices worldwide, there is a limit as to how effective UK interest rate rises can be in slowing inflation. Candidate Code: jfj794 Commentary 2 Inflation is the persistent increase of a good or service over time. It is considered an issue and a concern for an economy and its citizens' welfare is where it has detrimental effects on how well an economy runs. Lately the UK has been suffering of inflation due to many factors but mainly due to the Russia- Ukraine war which raised the inflation rates in the UK mainly the increase of oil prices. However, there is no doubt other factors have affected the inflation including the rapid increase in energy bill prices, in addition to petrol and diesel prices and food prices mainly due to the Ukraine and Russian war. In this case, there is no doubt that government intervention plays an important role in correcting the hyperinflation in oil prices. Increased energy costs and shortages indicates a cost push inflation which shows a shortage in supplying goods while the demand stayed the same. Businesses are driven to raise the price of their outputs because of increasing input costs, thus leading to the inflation of prices. Thus, government intervention must be used in order to sustain a stable economy. Candidate Code: jfj794 Price Level SRAS 1 SRAS P1 P* AD* Y1 Y* Diagram 1 Real GDP Diagram 1 represents the graph of cost-push inflation. Which shows the equilibrium at (P*, Y*), as the Ukraine war has started and due to the pandemic, the economy started to suffer, and mainly the supply of oil started to get cut off which led to excess demand. Thus SRAS 1 curve is made which shifts vertically upwards from the SRAS curve at equilibrium. Therefore, a new equilibrium is formed at (Y1, P1) that shows a fall in real GDP from Y* to Y1, and an increase in prices from P* to P1 thus increasing the rate of inflation. An increase in inflation affected different factors such as export competitiveness which falls, in addition to loss of purchasing power. Wages are also affected where they rose when adjusted to inflation, however pay and bonuses went down. This can lead to lower living standards where Many people have jobs that don’t offer the security of inflation-linked incomes because of Candidate Code: jfj794 they have fixed incomes, self-employed or they have weak purchasing power. Thus, the real income of a citizen has fallen and the ability to purchase has fallen. Inflation can also affect savings, as savings starts to lose value and cannot buy what they could but in the previous year. Where people would prefer spending it with its value rather than waiting for its value to fall. To resolve this issue, government intervention had to be done by increasing interest rates to encourage people to save their money. Price Level SRAS 1 SRAS P1 P* AD AD1 Y3 Y1 Y* Real GDP The Bank of England resorted to demand contractionary policies where they raise interest rates. This led to a decrease in the AD, where This would increase the cost of borrowing and reduce consumer spending and investment. Therefore, a new equilibrium is created with a lower RGDP Candidate Code: jfj794 from Y1 to Y3, however the prices have gone back to the original equilibrium from P1 to P* which represents the lowering of prices due to the demand and supply almost getting back at their allocative efficiency, which decreases the rate of inflation. Raising interest rates has advantages and disadvantages. where higher interest rates can reduce inflation by making borrowing more expensive and discouraging spending which leads to the people saving their money instead of spending it, leading to a stable economic environment, which can benefit businesses and consumers. However, higher interest rates can increase the cost of borrowing for individuals and businesses, leading to reduced consumer spending and potentially hindering economic growth. A suggestion to solving this problem is using supply side policies. Such as reducing government intervention using deregulation policies. Reducing regulations and bureaucracy can increase competition and reduce prices, helping to bring down inflation regaining a stable economic well-being. In addition to tax cuts. Where lowering taxes on goods such as the oils can reduce the cost of production, which can help reduce prices and bring down inflation. Although supply side policies can increase economic growth, supply-side policies can also increase the productive capacity of the economy and boost economic growth. Government intervention in this case is crucial, since it helps reducing inflation of oil price by raising interest rates or referring to supply-side policies and help retain a stable economy in the UK, which will encourage people to save and invest in the economy sustaining a better well-being for the people. Candidate Code: jfj794 Commentary 3 Title of Article: EXCLUSIVE Lebanon to slash official exchange rate from Nov. 1, finance min says. Source: Reuters https://www.reuters.com/markets/asia/exclusive-lebanon-apply-weakerofficial-exchange-rate-finance-minister-says-2022-09-28/ Date the article was published: September 28, 2022 Date the commentary was written January 30, 2023 Unit of the syllabus to which the article relates: Unit 3 Global Economics. Key Concept Used: Economic Well-being Word Count: 763 Candidate Code: jfj794 Article: EXCLUSIVE Lebanon to slash official exchange rate from Nov. 1, finance min says. BEIRUT, Sept 28 (Reuters) - Lebanon plans to slash its official exchange rate, replacing the 1,507 per dollar rate adopted 25 years ago with a rate of 15,000 in a step towards unifying numerous exchange rates, the finance minister told Reuters on Wednesday. After saying the move would come into effect on Nov. 1, the ministry later said the step was conditioned on the approval of a plan to address the crisis, which is under discussion in parliament. The Lebanese pound has plunged by more than 95% from the official rate since Lebanon fell into financial crisis three years ago, with dollars currently changing hands at around 38,000 on a parallel market. "The goal is for there to be a unification of the exchange rates in Lebanon," Finance Minister Youssef Khalil said, calling the decision a "fundamental step" in that direction. The step would come into force on Nov. 1, the ministry said. "Today, Lebanon has entered a new phase and is no longer using an official U.S. dollar exchange rate that makes no sense ... Now we have one that is useful, based on which you can steer the economy toward a better situation," he said. The decision - which Khalil said was agreed with central bank governor Riad Salameh - marks a milestone in the meltdown that has plunged swathes of the population into poverty in the worst crisis since the 1975-90 civil war. Salameh told Reuters via text message that the decision "will require time before it is implemented. "We have to wait before anticipating further moves," he said. Ruling politicians have so far taken scarcely any action towards tackling the crisis. Candidate Code: jfj794 Unifying the numerous exchange rates operating in the country is one of several conditions set by the IMF for Lebanon to secure a badly needed aid package. The Fund has said this is crucial to boosting economic activity. The IMF said last week progress in implementing reforms remained very slow, with the bulk yet to be carried out. In addition to official and parallel market exchange rates, authorities have created several others during the crisis, including unfavorable rates applied to withdrawals of Lebanese pounds from hard currency deposits in the frozen banking system. Khalil noted that unification of the exchange rates was an IMF demand, but added it was also something that must happen regardless, saying the government was taking a gradual approach. On Monday, the parliament approved a state budget that applied the 15,000 rate to customs taxes - a step aimed at boosting state revenues. Khalil said this had paved the way for the decision he announced on Wednesday. He said discussions were under way with stakeholders including banks and depositors on the implications of the decision and how it would be applied. "We have taken this month to explain to everyone carefully what is happening," he said. Financial authorities would also work to contain any social or financial repercussions, especially regarding housing loans and "help the private sector on an orderly transition to the new exchange rate", a ministry statement added. Several economists contacted by Reuters said there were not enough details to comment on the move. RECOVERY PLAN Lebanon's crisis was caused by decades of profligate spending by a state riddled with corruption and waste, together with unsustainable financial policies. Depositors have paid a big price, mostly unable to access dollar savings or forced to make withdrawals in pounds at unfavorable rates. A recovery plan that would address some $72 billion in losses in the financial system has yet to be finalized. Asked by Reuters how the decision would affect depositors, Khalil said "there should not be any impact" while adding that this was under study. Khalil said an update to a draft government financial recovery plan was being discussed in parliament. Candidate Code: jfj794 "It needs time," he said, adding that Wednesday's decision would reflect positively on the plan "because it is helping economic activity and increases revenues for the state". Khalil said money coming into Lebanon was avoiding the banking sector due to distortions in the exchange rate and a lack of confidence, which he said he hoped would be assuaged by the unification of rates. Candidate Code: jfj794 Commentary 3 The article highlights the plan for Lebanon to slash their exchange rate replacing the 1,507 per dollar rate adopted 25 years ago with a rate of 15,000 in a step towards unifying numerous exchange rates which is plan after the 95% plunge that they faced. They plan to raise their exchange rates to normal rates, which has dropped tremendously due to the incident that happened 3 years ago. This commentary will be focused on the key concept of economic wellbeing, which refers to the economy’s ability to demand goods and services, in relation to its needs. A fall in exchange rate means that the value of one currency has decreased in relation to another currency. This can be illustrated in a diagram by showing a downward trend in the exchange rate over time. Price of Lira/ $ S1 S2 P1 P2 D Q1 Q2 Quantity of Lebanese Lira Candidate Code: jfj794 The diagram represents a depreciation in the currency of the Lebanese lira. Which is when the price of a currency falls in terms of another any floating exchange rate system, this graph shows the depreciation of the Lebanese Lira which has been done due to several reasons such as Political and economic instability, where the country has faced political turmoil, and corruption, leading to economic instability and a decrease in investor confidence. Where the diagram shows a surplus in the Liras exchange rate, as the exchange rate was at equilibrium (P1,Q1), after the different events have occurred which led to supply of the currency to increase as people started to exchange their currency, thus creating a surplus devaluating the currency. Which is represented by a shift in S downwards (S1 to S) There are ways for Liras unification plan to work. For example, using fixed exchange rate systems, where the value of a country's currency is pegged to a specific foreign currency or a basket of currencies. The central bank of the country then buys or sells its currency to maintain the fixed exchange rate. This would protect the value of the currency by having a certain value which helps in stabilizing the economy, where unifying the exchange rate of the LBP requires stabilizing the economy and reducing inflation. This can be achieved through measures such as reducing the budget deficit, increasing government revenue, and controlling the money supply. A suggestion to solve this problem would be increasing the demand on the Lebanese lira through buying their own currency from the foreign exchange rate market. This is a concept known as currency intervention. Which is the process of a central bank purchasing its own currency in the foreign exchange market in order to influence its exchange rate and stabilize its value. Candidate Code: jfj794 Currency intervention can be used to address economic imbalances and help maintain a stable exchange rate leading to a stable economic well-being, which can be beneficial for trade, investment, and economic growth. However, it can also be a controversial strategy, as it involves central bank intervention in the foreign exchange market and can have unintended consequences, such as inflation. SPrice of Lira/ $ S1 S2 P1 P2 D2 D Q1 Q2 Quantity of Lebanese Lira At the initial exchange rate (P2, Q1), the quantity of the Lira was oversupplied, which create a surplus depreciating the Lira exchange rate. However, buying their own currency (Lira) from the foreign exchange rate market leads to an increase in demand, the demand curve shifts from D to D2. As a result of the increase in demand, the exchange rate increases from P2 to P1 back to equilibrium but at a grater quantity and a higher price than the initial exchange rate. This means that the domestic currency is now more expensive relative to the foreign currency. At the new exchange rate, the quantity of the domestic currency is back at equilibrium at a higher price and the a higher quantity (P1, Q2). Which would also encourage people to invest and start saving in Lebanon due to the revaluation, this would lead to a healthy economic well-being by getting a Candidate Code: jfj794 stable economy and retrieving the lira’s original exchange rate value. Stable exchange rate can improve economic conditions by reducing inflation and increasing the competitiveness of exports. This can support economic growth. Currency intervention can be limited, especially in the case of lack of foreign currency reserves. In such cases, currency intervention may only provide temporary relief, and the underlying problems will continue to affect the exchange rate. Currency intervention can be expensive, as it requires a significant amount of foreign currency reserves. In the case of Lebanon, where the country has limited foreign currency reserves, currency intervention may not be a viable solution.
