Asia & the Pacific

CAMBRIDGE – The world's major central banks are currently obsessed with the goal of raising their national inflation rates to their common target of about 2% per year. This is true for the United States, where the annual inflation rate was -0.1% over the past 12 months; for the United Kingdom, where the most recent data show 0.3% price growth; and for the eurozone, where consumer prices fell 0.6%. But is this a real problem?

"The price of oil continues to be set by fear, not by supply and demand," writes Leonard Maugeri. "World-wide oil production is growing quickly. By the end of the year, it will probably surpass 92 million barrels per day, with additional spare capacity of more than 3.5 million barrels. Thanks to the shale oil revolution, U.S. crude production could exceed 6.5 million barrels per day by the end of the year: around one million more barrels than the U.S. Energy Information Administration predicted in January."

Recent national trends in investments in global energy research, development, and demonstration (RD&D) are inconsistent around the world. Public RD&D investments in energy are the metric most commonly used in international comparative assessments of energy-technology innovation, and the metric employed in this article. Overall, the data indicate that International Energy Agency (IEA) member country government investments have been volatile: they peaked in the late 1970s, declined during the subsequent two decades, bottomed out in 1997, and then began to gradually grow again during the 2000s.

"...[T]he U.S. and China have been involved in intense talks about climate policy. If the two nations come together in a bilateral agreement—a real possibility—they would have much more leverage to persuade other major nations to join. From there, developing nations could be brought on board by giving them targets that reduce emissions without stifling growth. Advanced nations might agree to more-severe emissions cuts and allow developing nations to make gradual cuts in the early decades as they rise toward the world's average per-capita emissions. With the right incentives, developing countries can and will move onto less carbon-intensive growth paths."

"...[T]he Chinese may not buy GM's and Ford's assets today, but they could rescue the U.S. industry in another way: by setting an example  of good industrial policy for the United States to follow. Fuel efficiency standards in China, Japan, and even some European countries will push up demand for these sorts of cars. If U.S. firms are to remain internationally competitive, they will need to have more to offer in this regard. But Washington will also have to motivate American consumers to purchase efficient cars...."