How to win Friends and Influence the World Economy by the E.U.


It was a tough week to be stuck in 1984 sensibilities. Back then I believed that the global warming (“GW”) argument was a specious attempt by certain groups to gain political advantage. Several years ago it dawned on me - wooops! It is amazing how we can take a very little knowledge and turn it into such a hard opinion, so hard we are willing to argue blindly over it. In America, no one could ever admit that they drive badly, are an average lover, or that their opinions were manipulated by some special-interest group or other. Yet the last part must be so, or we would not need advertising agencies.

The global warming story was front page for several days each during the month of November on every major newspaper and news-website in the United States. If you missed it, well, this time it isn’t the media’s fault. If you just don’t believe it, well, maybe you have formed a hard opinion on subject with which you have not done your research. I don’t mean to sound preachy, but you must take your game out of 1984. In order to make money at this, we need to be better informed than the other guy, and to be able to admit we are wrong before it does us real damage. If you have hardened an opinion, you have become a “believer”, and you will not be able to mitigate mistakes – believers are never wrong.

Remember, in politics and investing, nobody cares what you think. This is a beauty pageant – it is the judge’s opinion that matters. Just who are the judges? The millions of people participating in the markets.

Here is a perfect example of why it doesn’t matter what you believe. The European Union (“EU”) has enacted a directive to regulate all “Energy using Products” from the energy consumed extracting the raw materials they comprise, to the energy they use during their productive lives, to the energy necessary to destroy, dismantle, or reclaim the product.

“E.U. directive 2005/32/EC otherwise known as a directive on every EuP…
The E.U., a bureaucracy that perhaps even overshadows our own, set a date of July 6, 2007, to put the directive in place. Its goal is “establishing a framework for the setting of eco-design requirements for energy-using products [EuP].”

EuP will require manufacturers to calculate the energy used to produce, transport, sell, use, and dispose of almost every one of its products. It will require that the manufacturer go all the way back to the energy used when extracting the raw materials to make its product, including all subassemblies and components. And in time, it will set limits on a product-by-product basis of how much energy can be used in a product’s entire lifecycle.


One analyst group, Tetra Tech, in a fact sheet, explains it this way: “The scope of the directive is very wide, being potentially applicable to any energy-using product … it applies to all energy sources, although it is likely that only those using electricity or solid, liquid, and gaseous fuels will be subject to implementing measures.”
- Ephraim Schwartz

Go to europa.eu.int, select your language, put EuP in the search window, and read it for yourself.

This directive will affect every product sold within the EU, domestic or import. U.S. companies export a great many EuP’s to the EU. The effect of this directive will be strongly felt here in the U.S., long before the U.S. enacts similar regulations. I

Here is some more from Mr. Schwartz paper

“There is no denying at this point in time that if we value the lives of our children and grandchildren we must take positive steps to improve our environment. But that doesn’t mean it will come without pain. 
“When it comes into force, it will require a level of analysis and information collection that will be fairly onerous,” understates Eric Larkin, CTO of Arena Solutions, in talking about the impact of EuP on just on IT. Arena is a hosted product-lifecycle-management SaaS (software as a service) company.

Here’s why Larkin believes as he does. Article 8, section 3 of EuP says in part the following: “After placing an EuP … on the market … the manufacturer or its authorized representative shall keep relevant documents relating to the conformity assessment performed and declarations of conformity issued available for inspection by Member States for a period of 10 years after the last of that EuP has been manufactured.”

The burden will fall heavily on IT departments that must comply with a two-and-a-half-page list of “management system requirements for assessing conformity” for officials. (See Annex V of the document.)

Although Article 16 includes a three-year transitional period, some products with a “high potential for cost-effective reduction of greenhouse gas emissions” will be regulated much sooner. Among the list of products in that category are office equipment and consumer electronics.

Finally, here’s a snippet from Article 1, paragraph 2, that demonstrates the scope of this directive: “The directive provides for the setting of requirements which the energy-using products covered by implementing measures must fulfill in order for them to be placed on the market.”

Clearly the EU is taking GW very seriously. Still, you and I would be better off if we were not blind sided by such regulations.

Other political bodies will find it hard to continue their standard program of denial when it comes to GW. Take Australia. The country is reeling from a multi year drought, which this year has grown to biblical scale. The countries agricultural crisis is real and measurable, as the price of wheat (Australia is the third largest exporter of wheat) has surge over 50% this year due to poor crop yields and unrelenting demand.

“The failure of the Australian grains crop further reduces the worlds food stock piles. The "drought" in Australia is a symptom of a major redistribution of rainfall within Australia. Rainfall has decreased in the South East in many areas by half, but has increased by the same amount in the Northwest over the last 50 years (Australian Bureau of Meteorology). PM John Howard defends his lack of action on Kyoto quoting cost, but refuses to acknowledge the rainfall redistribution or that it could be a result of climate change.” Rod Campbell-Ross

I reviewed the data from the Australian Bureau of Meteorology and it would be hard to argue that a major rainfall shift has indeed occurred. Is this particular phenomenon caused by GW? Maybe, but in truth, I have no idea. Does it matter? Not even a little bit. The argument is gaining traction worldwide and governments will wish to appear to be doing something, anything, even if it is wrong.

This is not to say that I do not believe that we are altering our climate by burning fossil fuels and increasing the amount of CO2 in the atmosphere. I do. It is just that I have little faith that the G-8 nations plus China and India will be able to do the right thing for the environment and/or the economy.

Mentatt (at) yahoo (dot) com