Volume 11 Issue 1 Article 1 12-31-2009 Foreword to the special edition of the EBR on environmental changes Janez Prašnikar Follow this and additional works at: https://www.ebrjournal.net/home Recommended Citation Prašnikar, J. (2009). Foreword to the special edition of the EBR on environmental changes. Economic and Business Review, 11(1). https://doi.org/10.15458/2335-4216.1257 This Editorial is brought to you for free and open access by Economic and Business Review. It has been accepted for inclusion in Economic and Business Review by an authorized editor of Economic and Business Review. 5 ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 2009 | 5–8 FOREWORD TO THE SPECIAL EDITION OF THE EBR ON ENVIRONMENTAL CHANGES JANEZ PRAŠNIKAR* While the impression of a global economic crisis has led to environmental problems somewhat withdrawing into the background, at their congress in Copenhagen scien- tists delivered an alarming message: the worst-case IPCC (Intergovernmental Panel on Climate Change) scenario trajectories are in fact being realised. As regards many key parameters the climate system is already moving beyond the patterns of natural vari- ability within which our society and economy have developed and thrived. Inaction is inexcusable (International Scientifi c Congress on Climate Change: Key Messages, 2009). But why then is it so diffi cult to agree on strategies to improve these problems. In any event, the two problems are interrelated since both economic crisis and pollution are the outcomes of similar factors. Both problems have been exposed by globalisation. Th ey originate from the same source: information asymmetry in post-contractual opportunism leads to a moral hazard, which leads to ineffi cient markets in both fi elds. Th e way fi nancial markets have devel- oped led to a host of instruments and the unforeseen development of the fi nancial fi eld whereby the connections between primary issues of stocks were severed. Th is created a large increase in information asymmetry among buyers and sellers (especially due to globalisation). Risk evaluation agencies have added their part to this increase by incor- rectly valuating stocks, thereby increasing the moral hazard. Th ese events have caused the downfall of fi nancial institutions and reduced trust in the fi nancial system (Dodd and Mills, 2008; Mizen, 2008; Buiter 2008a, 2008b; Rant, 2008). Globalisation has also accentuated greenhouse gas pollution and climate change. Even though pollution has long been known as a market externality in the economics literature, it was not until globalisation that its full extent was discovered. Th e problem of greenhouse gasses is that emissions are irreversible and linger in the atmosphere for a long period of time. Th ey spread linearly throughout the world which means that the nation-state and its sub- sidiaries, typical loci for the internalisation of externalities, are limited in their remedial power (Arrow, 2007). Th erefore, polluters are aware that they will not have to bear all the costs of their polluting, especially when they are protected by national schemes that do not take the true scale of the problem into consideration. Th ey are exploiting informa- tion asymmetry and encouraging moral hazard. * University of Ljubljana, Faculty of Economic, Kardeljeva ploščad 17, SI-1000 Ljubljana, Email: janez.prasnikar@ef.uni-lj.si ECONOMIC AND BUSINESS REVIEW | VOL. 11 | No. 1 | 20096 Th e Portorož Business Conference is a major event for business audiences in Central and South-east European countries. Th e tenth conference was held on 20-21 November 2008 and addressed these important questions. Th e fi rst part was devoted to the global fi nan- cial crisis. In the second part the problems of moral hazard, information asymmetry and global regulation were applied to the environmental fi eld and challenges. Th is spe- cial edition of the EBR presents four important contributions concerning environmental changes that were discussed at the conference. Th e fi rst contribution, Climate Change and Future Adaptation by L. Kajfež-Bogataj, a member of the Intergovernmental Panel on Climate Change (‘IPPC’), provides a sum- mary of the IPPC’s fi ndings on climate change. She presents an overview of changes observed in the climate system and their relationships with physical processes as well as an overview of projections for future climate changes with a special focus on the Euro- pean and Slovenian climates. First, she claims that the serious consequences of climate change can only be stopped by reducing greenhouse gas emission early and thoroughly. An inability to do this will signifi cantly increase the risk of dangerous and unpredictable climate change, with adaptation costs rising steeply. Second, societies all over the world must take on the challenge of adapting to climate change, a step which is unavoidable in spite of any successful restriction of its infl uences. In order for adaptation eff orts to be successful, effi cient co-operation among stakeholders is required coupled with being well-informed about the decision areas and knowing the potential adaptation possibili- ties. Th e author warns that there is a lack of institutional organisation and appropriately educated labour in the area of decisions concerning climate change adaptation. Th e second paper, Th e Kyoto Protocol in a Global Perspective, by A. Cirman, P. Do- madenik, M. Koman and T. Redek deals with two questions: What are the intentions of the Kyoto Protocol (1997) and why in comparison with the Montreal Protocol (1987) on reducing the ozone hole is the former doing poorly. Th e fi rst reason for the unsuc- cessful implementation of the Kyoto Protocol is the fear of unwanted macroeconomic consequences. Th e authors show that welfare loss in terms of GDP and lost growth is low. However, it diff ers among economies. Th e second reason is surely the lack of sup- port from a few key countries. Th e USA did not ratify the Kyoto Protocol since major corporations are not supportive of it. China and India do not want to cut their emissions until they complete the process of industrialisation. Another special value of the paper is that it focuses on some countries which are usually not in the focus of the debate. In particular, the South-east European countries eff orts made toward achieving the Kyoto Protocol requirements are taken into consideration. In their contribution Environmental Strategies and Th eir Motives and Results in Slov- enian Business Practice, T. Čater, J. Prašnikar and B. Čater test a model of the environ- mental behaviour of enterprises that is built on the causal-consecutive link ‘motives for environmental strategies – environmental strategies – results of environmental strate- gies.’ Th ey fi nd that that prevailing motives for environmental activity are top manage- ment’s commitment and public concern, followed by legislation. Creating a competitive advantage is among the last motives companies cite when explaining their environmen- PRAŠNIKAR | FORWARD TO THE SPECIAL EDITION OF EBR ON ENVIRONMENTAL CHANGES ... 7 tal action, revealing that do not see environmentally-friendly activities as a way of being competitive. Slovenian companies still chiefl y regard the implementation of environ- mental strategies as a cost. Among functional strategies, greatest importance is attrib- uted to production, more specifi cally waste management, recycling and, where possi- ble, using renewable energy sources. Packaging is the most important environmental concern in marketing. Th e lowest level of importance is attributed to procurement and HRM. Small companies demonstrate a bigger environmental commitment than large ones. Th e results of this study are not signifi cantly diff erent to those obtained in similar research around the world (Henriques and Sadorsky, 1999; Banerjee et al., 2003; Moon, 2008) which have found that the logic of the opportunistic behaviour in companies is as follows: why take the initiative in the environmental fi eld if it generates additional expenses and will not be done by your competitors? How to Cope with Distance in the Future? is the title of G. Fournier’s article. Th e article clearly describes a ‘sandwich’ position in which automobile manufacturers have found themselves as a result of globalisation, the increasing need for mobility, the gap between oil supply and demand as well as global warming. Does all of this threaten the mobility of individuals? Not according to Fournier. His position is underpinned by the radical innovations seen in the automotive industry in the areas of new energy sources (biomass and biomethane, microalgae, hydrogen and electricity). Th e future belongs to electric vehicles which are the most energy-effi cient and very environmentally-friendly. Tradi- tional manufacturers are still reacting slowly to these new initiatives since they still build price premiums on the performance, comfort and safety of vehicles. Yet important in- novations are emerging to satisfy tendencies for appropriate pricing and environmental effi ciency, especially in the low-cost and medium-cost car segments. Th e car market will still see a reduction in vehicle sizes, but will not see the disappearance of the premium vehicle segment. Th e fact that most consumers are willing to buy alternative vehicles will sustain the mass production of hybrid cars for longer journeys and electric cars for shorter distances. 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