Improving Efficiency

By Elliott H. Gue

HOKKAIDO, Japan--Some cynics will argue that the annual G8 Summit is nothing more than a chance for world leaders to eat and drink well in a scenic resort area.

In this case, they are half correct: I would agree that the Lake Toya region of Hokkaido, Japan, is among the most beautiful places I’ve ever had the  occasion to visit, and the local seafood, produce and cuisine is unparalleled.  Furthermore, the Japanese are among the most hospitable and gracious people I’ve ever met. I can’t imagine anyone in attendance not coming away from Hokkaido  with the best of impressions.

But the critics err in characterizing the annual summit as meaningless.  Although the statements and resolutions may be vague and carefully worded, the  G8 does highlight key trends, issues and governmental priorities that can prove  extraordinarily profitable for investors.

Judging from the press coverage here in Japan and the media representatives I  spoke to at the summit, the main talking point to emerge is that the US and  other G8 countries agreed to strong language in the official statement concerning greenhouse-gas reductions. The official statement calls for a goal of achieving at least 50 percent reduction of global [greenhouse gas] emissions by  2050, recognizing that this global challenge can only be met by a global  response.

The statement also reaffirmed the validity of the assessment of the  Intergovernmental Panel on Climate Change (IPCC). This marks a significant strengthening from the language concerning carbon reductions in last years summit in Germany.

But the G8 is about far more than eight big, industrialized countries; in  fact, a total of 22 participated, making the Hokkaido Toyako Summit one of the most inclusive in the history of the summit. Many of the developing countries  didn’t accept or sign on for the specific greenhouse-gas reduction targets;  countries such as China and India justifiably feel that such a target would have a severe impact on their economic growth potential.

China, India, Brazil and other developing nations were part of the so-called Meeting of Major Economies on Energy Security and Climate Change. The 11-point  declaration to emerge from these meetings noted the importance of climate change  issues and vowed to combat global warming. But that statement stopped short of offering any concrete reduction guidelines.

From an investor’s perspective, the semantics of a carefully worded, 10-page statement from the G8 aren’t particularly important. But the Hokkaido Summit does have some absolutely crucial implications for investors. First,  carbon-dioxide (CO₂) and greenhouse-gas regulations will be implemented across the developed world G8 nations. The only remaining question is what form those regulations will take.