Archive for Opinions – Page 36

27 Nov

Donor-advised funds are drawing a lot of assets besides cash – taking a bigger bite out of tax revenue than other kinds of charitable giving

By Brian Mittendorf, The Ohio State University 

Donor-advised funds, or DAFs, are financial accounts funded by donors to support future charitable work. This kind of giving differs greatly from charitable giving as a whole because it’s much more likely to involve donations of assets like stock, real estate or cryptocurrencies that have gained in value.

That’s what my co-author, Helen Flannery and I, found in our new study that will soon be published in “Nonprofit Operations and Supply Chain Management” as part of an academic book series.

We examined the IRS filings of all charities from 2020 to 2022, including organizations that administer DAFs. Such DAF sponsors include charities affiliated with large financial companies like Vanguard, Schwab and Fidelity. By looking at the types of gifts received by these charities, we found that noncash giving represents more than 16% of the average DAF’s revenue versus only about 3% on average for overall charitable giving, which covers everything from animal shelters to orchestras.

This difference is even more pronounced for the largest national DAF operations, which on average had 46% of their incoming assets in noncash form.

These noncash gifts were primarily investment assets like stocks, bonds and real estate. We find that while the average conventional charity gets around 33% of its noncash contributions as investments, the average DAF sponsor gets more than 90% of its noncash donations that way.

This share is even higher, at over 97%, for the typical national DAF organization.

Why it matters

DAFs, first launched in the 1930s, have become much more widespread over the past three decades.

The total value of assets they hold is rising fast: It grew from US$70 billion in 2014 to more than $251 billion in 2023.

In some ways, DAFs operate like small foundations, since donors can get a tax break when they put money into a DAF, even if that money isn’t put into use by a charity for years. Donors also retain advisory control over the money they’ve reserved for future charitable giving.

But unlike foundations, there’s very little paperwork required, and there’s no requirement that a DAF disburse at least 5% of its assets annually – like foundations have to do.

Using investment assets as charitable donations is more advantageous to donors than just putting money in a DAF. One reason is that most large donors are eligible for a tax deduction equal to the full value of the asset that was donated at the time of the gift. That holds true, even if the value has risen significantly from what it initially was worth when the donor acquired it. The second reason is that donors don’t need to pay taxes on their capital gains as they would have had they sold it and obtained money in exchange.

Likewise, this boom in gifting investment assets can cut into government tax revenue more than typical cash gifts because it more effectively reduces an investor’s tax obligations.

Policymakers, lawmakers and regulators are currently considering whether to establish new rules for DAFs.

What’s next

We are now researching how the charities that administer DAFs differ from one another. We’re finding that some primarily market themselves as a way for donors to reduce their tax payments, while others put more emphasis on helping donors better manage their charitable giving.

The Research Brief is a short take about interesting academic work.The Conversation

About the Author:

Brian Mittendorf, Professor of Accounting, The Ohio State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Opinions Stock Market News
26 Nov

Svalbard Global Seed Vault evokes epic imagery and controversy because of the symbolic value of seeds

By Adriana Craciun, Boston University 

Two-thirds of the world’s food comes today from just nine plants: sugar cane, maize (corn), rice, wheat, potatoes, soybeans, oil-palm fruit, sugar beet and cassava. In the past, farmers grew tens of thousands of crop varieties around the world. This biodiversity protected agriculture from crop losses caused by plant diseases and climate change.

Today, seed banks around the world are doing much of the work of saving crop varieties that could be essential resources under future growing conditions. The Svalbard Global Seed Vault in Norway supports them all. It is the world’s most famous backup site for seeds that are more precious than data.

Tens of thousands of new seeds from around the world arrived at the seed vault on Svalbard, a Norwegian archipelago in the Arctic Ocean, in mid-October 2024. This was one of the largest deposits in the vault’s 16-year history.

And on Oct. 31, crop scientists Cary Fowler and Geoffrey Hawtin, who played key roles in creating the Global Seed Vault, received the US$500,000 World Food Prize, which recognizes work that has helped increase the supply, quality or accessibility of food worldwide.

The Global Seed Vault has been politically controversial since it opened in 2008. It is the most visible site in a global agricultural research network associated with the United Nations and funders such as the World Bank.

These organizations supported the Green Revolution – a concerted effort to introduce high-yielding seeds to developing nations in the mid-20th century. This effort saved millions of people from starvation, but it shifted agriculture in a technology-intensive direction. The Global Seed Vault has become a lightning rod for critiques of that effort and its long-term impacts.

I have visited the vault and am completing a book about connections between scientific research on seeds and ideas about immortality over centuries. My research shows that the Global Seed Vault’s controversies are in part inspired by religious associations that predate it. But these cultural beliefs also remain essential for the vault’s support and influence and thus for its goal of protecting biodiversity.

The Global Seed Vault gives scientists the tools they may need to breed crops that can cope with a changing climate.

Backup for a global network

Several hundred million seeds from thousands of species of agricultural plants live inside the Global Seed Vault. They come from 80 nations and are tucked away in special metallic pouches that keep them dry.

The vault is designed to prolong their dormancy at zero degrees Fahrenheit (-18 degrees Celsius) in three ice-covered caverns inside a sandstone mountain. The air is so cold inside that when I entered the vault, my eyelashes and the inside of my nose froze.

The Global Seed Vault is owned by Norway and run by the Nordic Genetic Resources Centre. It was created under a U.N. treaty governing over 1,700 seed banks, where seeds are stored away from farms, to serve as what the U.N. calls “the ultimate insurance policy for the world’s food supply.”

This network enables nations, nongovernmental organizations, scientists and farmers to save and exchange seeds for research, breeding and replanting. The vault is the backup collection for all of these seed banks, storing their duplicate seeds at no charge to them.

The seed vault’s cultural meaning

The vault’s Arctic location and striking appearance contribute to both its public appeal and its controversies.

Svalbard is often described as a remote, frozen wasteland. For conspiracy theorists, early visits to the Global Seed Vault by billionaires such as Bill Gates and George Soros, and representatives from Google and Monsanto, signaled that the vault had a secret purpose or benefited global elites.

In fact, however, the archipelago of Svalbard has daily flights to other Norwegian cities. Its cosmopolitan capital, Longyearbyen, is home to 2,700 people from 50 countries, drawn by ecotourism and scientific research – hardly a well-hidden site for covert activities.

The vault’s entrance features a striking installation by Norwegian artist Dyveke Sanne. An illuminated kaleidoscope of mirrors, this iconic artwork glows in the long Arctic night and draws many tourists.

Because of its mission to preserve seeds through potential disasters, media regularly describe the Global Seed Vault as the “doomsday vault,” or a “modern Noah’s Ark.” Singled out based on its location, appearance and associations with Biblical myths such as the Flood, the Garden of Eden and the apocalypse, the vault has acquired a public meaning unlike that of any other seed bank.

The politics of seed conservation

One consequence is that the vault often serves as a lightning rod for critics who view seed conservation as the latest stage in a long history of Europeans removing natural resources from developing nations. But these critiques don’t really reflect how the Global Seed Vault works.

The vault and its sister seed banks don’t diminish cultivation of seeds grown by farmers in fields. The two methods complement one another, and seed depositors retain ownership of their seeds.

Another misleading criticism argues that storing seeds at Svalbard prevents these plants from adapting to climate change and could render them useless in a warmer future. But storing seeds in a dormant state actually mirrors plants’ own survival strategy.

Dormancy is the mysterious plant behavior that “protects against an unpredictable future,” according to biologist Anthony Trewavas. Plants are experts in coping with climate unpredictability by essentially hibernating.

Seed dormancy allows plants to hedge their bets on the future; the Global Seed Vault extends this state for decades or longer. While varieties in the field may become extinct, their banked seeds live to fight another day.

Storing more than seeds

In 2017, a delegation of Quechua farmers from the Peruvian Andes traveled to Svalbard to deposit seeds of their sacred potato varieties in the vault. In songs and prayers, they said goodbye to the seeds as their “loved ones” and “endangered children.” “We’re not just leaving genes, but also a family,” one farmer told Svalbard officials.

The farmers said the vault would protect what they called their “Indigenous biocultural heritage” – an interweaving of scientific and cultural value, and of plants and people, that for the farmers evoked the sacred.

People from around the world have sought to attach their art to the Global Seed Vault for a similar reason. In 2018, the Svalbard Seed Cultures Ark began depositing artworks that attach stories to seeds in a nearby mine.

Pope Francis sent an envoy with a handmade copy of a book reflecting on the pope’s message of hope to the world during the COVID-19 pandemic. Japanese sculptor Mitsuaki Tanabe created a 9-meter-long steel grain of rice for the vault’s opening and was permitted to place a miniature version inside.

Seeds sleeping in Svalbard are far from their home soil, but each one is enveloped in an invisible web of the microbes and fungi that traveled with it. These microbiomes are still interacting with each seed in ways scientists are just beginning to understand.

I see the Global Seed Vault as a lively and fragile place, powered not by money or technology but by the strange power of seeds. The World Food Prize once again highlights their vital promise.The Conversation

About the Author:

Adriana Craciun, Professor of English and Emma MacLachlan Metcalf Chair of Humanities, Boston University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Soft Commodities
25 Nov

Nuclear rockets could travel to Mars in half the time − but designing the reactors that would power them isn’t easy

By Dan Kotlyar, Georgia Institute of Technology 

NASA plans to send crewed missions to Mars over the next decade – but the 140 million-mile (225 million-kilometer) journey to the red planet could take several months to years round trip.

This relatively long transit time is a result of the use of traditional chemical rocket fuel. An alternative technology to the chemically propelled rockets the agency develops now is called nuclear thermal propulsion, which uses nuclear fission and could one day power a rocket that makes the trip in just half the time.

Nuclear fission involves harvesting the incredible amount of energy released when an atom is split by a neutron. This reaction is known as a fission reaction. Fission technology is well established in power generation and nuclear-powered submarines, and its application to drive or power a rocket could one day give NASA a faster, more powerful alternative to chemically driven rockets.

NASA and the Defense Advanced Research Projects Agency are jointly developing NTP technology. They plan to deploy and demonstrate the capabilities of a prototype system in space in 2027 – potentially making it one of the first of its kind to be built and operated by the U.S.

Nuclear thermal propulsion could also one day power maneuverable space platforms that would protect American satellites in and beyond Earth’s orbit. But the technology is still in development.

I am an associate professor of nuclear engineering at the Georgia Institute of Technology whose research group builds models and simulations to improve and optimize designs for nuclear thermal propulsion systems. My hope and passion is to assist in designing the nuclear thermal propulsion engine that will take a crewed mission to Mars.

Nuclear-powered rockets could one day enable faster space travel.
NASA

Nuclear versus chemical propulsion

Conventional chemical propulsion systems use a chemical reaction involving a light propellant, such as hydrogen, and an oxidizer. When mixed together, these two ignite, which results in propellant exiting the nozzle very quickly to propel the rocket.

A diagram showing a nuclear thermal propulsion system, with a chamber for hydrogen connected to several pumps, a reactor chamber and a nozzle that the propellant is ejected from.
Scientists and engineers are working on nuclear thermal propulsion systems that would take hydrogen propellant, pump it into a nuclear reactor to generate energy and expel propellant out the nozzle to lift the rocket.
NASA Glenn Research Center

These systems do not require any sort of ignition system, so they’re reliable. But these rockets must carry oxygen with them into space, which can weigh them down. Unlike chemical propulsion systems, nuclear thermal propulsion systems rely on nuclear fission reactions to heat the propellant that is then expelled from the nozzle to create the driving force or thrust.

In many fission reactions, researchers send a neutron toward a lighter isotope of uranium, uranium-235. The uranium absorbs the neutron, creating uranium-236. The uranium-236 then splits into two fragments – the fission products – and the reaction emits some assorted particles.

Fission reactions create lots of heat energy.

More than 400 nuclear power reactors in operation around the world currently use nuclear fission technology. The majority of these nuclear power reactors in operation are light water reactors. These fission reactors use water to slow down the neutrons and to absorb and transfer heat. The water can create steam directly in the core or in a steam generator, which drives a turbine to produce electricity.

Nuclear thermal propulsion systems operate in a similar way, but they use a different nuclear fuel that has more uranium-235. They also operate at a much higher temperature, which makes them extremely powerful and compact. Nuclear thermal propulsion systems have about 10 times more power density than a traditional light water reactor.

Nuclear propulsion could have a leg up on chemical propulsion for a few reasons.

Nuclear propulsion would expel propellant from the engine’s nozzle very quickly, generating high thrust. This high thrust allows the rocket to accelerate faster.

These systems also have a high specific impulse. Specific impulse measures how efficiently the propellant is used to generate thrust. Nuclear thermal propulsion systems have roughly twice the specific impulse of chemical rockets, which means they could cut the travel time by a factor of 2.

Nuclear thermal propulsion history

For decades, the U.S. government has funded the development of nuclear thermal propulsion technology. Between 1955 and 1973, programs at NASA, General Electric and Argonne National Laboratories produced and ground-tested 20 nuclear thermal propulsion engines.

But these pre-1973 designs relied on highly enriched uranium fuel. This fuel is no longer used because of its proliferation dangers, or dangers that have to do with the spread of nuclear material and technology.

The Global Threat Reduction Initiative, launched by the Department of Energy and National Nuclear Security Administration, aims to convert many of the research reactors employing highly enriched uranium fuel to high-assay, low-enriched uranium, or HALEU, fuel.

High-assay, low- enriched uranium fuel has less material capable of undergoing a fission reaction, compared with highly enriched uranium fuel. So, the rockets needs to have more HALEU fuel loaded on, which makes the engine heavier. To solve this issue, researchers are looking into special materials that would use fuel more efficiently in these reactors.

NASA and the DARPA’s Demonstration Rocket for Agile Cislunar Operations, or DRACO, program intends to use this high-assay, low-enriched uranium fuel in its nuclear thermal propulsion engine. The program plans to launch its rocket in 2027.

As part of the DRACO program, the aerospace company Lockheed Martin has partnered with BWX Technologies to develop the reactor and fuel designs.

The nuclear thermal propulsion engines in development by these groups will need to comply with specific performance and safety standards. They’ll need to have a core that can operate for the duration of the mission and perform the necessary maneuvers for a fast trip to Mars.

Ideally, the engine should be able to produce high specific impulse, while also satisfying the high thrust and low engine mass requirements.

Ongoing research

Before engineers can design an engine that satisfies all these standards, they need to start with models and simulations. These models help researchers, such as those in my group, understand how the engine would handle starting up and shutting down. These are operations that require quick, massive temperature and pressure changes.

The nuclear thermal propulsion engine will differ from all existing fission power systems, so engineers will need to build software tools that work with this new engine.

My group designs and analyzes nuclear thermal propulsion reactors using models. We model these complex reactor systems to see how things such as temperature changes may affect the reactor and the rocket’s safety. But simulating these effects can take a lot of expensive computing power.

We’ve been working to develop new computational tools that model how these reactors act while they’re starting up and operated without using as much computing power.

My colleagues and I hope this research can one day help develop models that could autonomously control the rocket.The Conversation

About the Author:

Dan Kotlyar, Associate Professor of Nuclear and Radiological Engineering, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Opinions
24 Nov

USD Index Bets continue divergence, Speculators cut their Euro bets

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday November 19th and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Changes led by the Japanese Yen

The COT currency market speculator bets were overall lower this week as just three out of the eleven currency markets we cover had higher positioning while the other eight markets had lower speculator contracts.

Leading the gains for the currency markets was the Japanese Yen (18,034 contracts) with the Australian Dollar (1,803 contracts) and the Brazilian Real (300 contracts) also showing positive weeks.

The currencies seeing declines in speculator bets on the week were the EuroFX (-35,120 contracts), the British Pound (-15,735 contracts), the New Zealand Dollar (-6,778 contracts), the Mexican Peso (-6,179 contracts), the Swiss Franc (-4,377 contracts), the Canadian Dollar (-1,177 contracts), the US Dollar Index (-401 contracts) and with Bitcoin (-286 contracts) also registering lower bets on the week.

USD Index Bets continue divergence, Speculators cut their Euro bets

Highlighting the COT currency’s data for the week was the continued divergence in the US Dollar Index price and the US Dollar Index speculator positioning.

The large speculative US Dollar Index positions decreased for a third straight week this week and for the eighth time out of the past ten weeks. This is a total decline of -22,923 contracts over the ten-week period and has brought the USD Index positioning to a new multi-year low dating back to March 3rd of 2021.

Despite this recent sentiment deficit, the US Dollar Index (DX) price has continued to go the opposite way of the speculators – which are usually trend-following and buying price on the way up while doing the opposite on the way down.

The DX rose by almost 1 percent this week and has now gained for three weeks in a row as well as for seven increases out of the past eight weeks. The DX broke through the 106.50-107.00 resistance level this week with a high above 108.00 before settling back to close the week at approximately 107.50. This is the highest weekly close since the fourth quarter of 2022. Next up, look for overhead resistance in the 109.00-110.00 areas if the bullish trend continues.

Euro bets drop sharply, exchange rate on the downswing

Euro currency bets dropped sharply by over -35,120 net contracts this week and pretty much erased the gains of the past two weeks (+14,216 contracts on Nov 12th and +28,651 contracts on Nov. 5th). Speculator positioning in the Euro has been volatile in the past few months but overall, bets have been going mostly bearish for the currency. Over the past eleven weeks, Euro net positions have in total dropped by -142,575 contracts and have taken the position from a total of +100,018 contracts on September 3rd to this week’s standing of -42,557 net contracts.

The Euro exchange rate has been taking it on the chin and has dropped by over 1 percent in each of the past three weeks. After ascending to a 2024-high in September at over 1.1200, the Euro has spiraled lower in quick work and closed this week at approximately 1.0420. This is over a 7 percent decrease in just two months. If the currency continues to slide through the 1.0400 resistance, we can look for the 1.0250 level and eventually the Euro could test parity at 1.00 to the US Dollar. The Euro last fell to parity and below in the second half of 2022 with the Euro dropping all the way to the 0.9602 level which marked the lowest level in over two decades.

Currencies Net Speculators Leaderboard

Legend: Weekly Speculators Change | Speculators Current Net Position | Speculators Strength Score compared to last 3-Years (0-100 range)

Strength Scores led by Australian Dollar

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Australian Dollar (99 percent) leads the currency markets this week. The Japanese Yen (55 percent) and the British Pound (54 percent) come in as the next highest in the weekly strength scores.

On the downside, the US Dollar Index (0 percent), the EuroFX (3 percent), the New Zealand Dollar (5 percent), the Canadian Dollar (5.7 percent) and Bitcoin (6 percent) come in at the lowest strength levels currently and are all in Extreme-Bearish territory (below 20 percent).

3-Year Strength Statistics:
US Dollar Index (0.0 percent) vs US Dollar Index previous week (0.8 percent)
EuroFX (3.3 percent) vs EuroFX previous week (18.1 percent)
British Pound Sterling (54.2 percent) vs British Pound Sterling previous week (61.3 percent)
Japanese Yen (54.9 percent) vs Japanese Yen previous week (47.7 percent)
Swiss Franc (25.8 percent) vs Swiss Franc previous week (34.6 percent)
Canadian Dollar (5.7 percent) vs Canadian Dollar previous week (6.2 percent)
Australian Dollar (98.7 percent) vs Australian Dollar previous week (97.4 percent)
New Zealand Dollar (5.4 percent) vs New Zealand Dollar previous week (18.5 percent)
Mexican Peso (38.3 percent) vs Mexican Peso previous week (41.4 percent)
Brazilian Real (45.2 percent) vs Brazilian Real previous week (44.9 percent)
Bitcoin (5.8 percent) vs Bitcoin previous week (12.1 percent)

Brazilian Real tops the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Brazilian Real (3 percent) leads the past six weeks trends for the currencies and is currently the only positive mover in the 3-Year trends data.

The Canadian Dollar (-42 percent) leads the downside trend scores currently with the New Zealand Dollar (-38 percent), EuroFX (-34 percent) and the Japanese Yen (-33 percent) following next with lower trend scores.

3-Year Strength Trends:
US Dollar Index (-1.7 percent) vs US Dollar Index previous week (-5.2 percent)
EuroFX (-34.4 percent) vs EuroFX previous week (-26.4 percent)
British Pound Sterling (-23.7 percent) vs British Pound Sterling previous week (-16.9 percent)
Japanese Yen (-33.3 percent) vs Japanese Yen previous week (-48.6 percent)
Swiss Franc (-29.6 percent) vs Swiss Franc previous week (-19.9 percent)
Canadian Dollar (-42.3 percent) vs Canadian Dollar previous week (-50.4 percent)
Australian Dollar (-1.3 percent) vs Australian Dollar previous week (10.8 percent)
New Zealand Dollar (-37.9 percent) vs New Zealand Dollar previous week (-26.2 percent)
Mexican Peso (-7.4 percent) vs Mexican Peso previous week (-3.0 percent)
Brazilian Real (2.6 percent) vs Brazilian Real previous week (29.1 percent)
Bitcoin (-17.5 percent) vs Bitcoin previous week (-2.5 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

US Dollar Index Forex Futures COT ChartThe US Dollar Index large speculator standing this week totaled a net position of -2,713 contracts in the data reported through Tuesday. This was a weekly lowering of -401 contracts from the previous week which had a total of -2,312 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 97.9 percent and the small traders (not shown in chart) are Bearish with a score of 31.7 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend.

US DOLLAR INDEX StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:60.623.810.4
– Percent of Open Interest Shorts:67.918.78.3
– Net Position:-2,7131,921792
– Gross Longs:22,6138,8833,891
– Gross Shorts:25,3266,9623,099
– Long to Short Ratio:0.9 to 11.3 to 11.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):0.097.931.7
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-1.7-1.215.1

 

Euro Currency Futures:

Euro Currency Futures COT ChartThe Euro Currency large speculator standing this week totaled a net position of -42,557 contracts in the data reported through Tuesday. This was a weekly lowering of -35,120 contracts from the previous week which had a total of -7,437 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 3.3 percent. The commercials are Bullish-Extreme with a score of 96.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.0 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend.

EURO Currency StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:23.460.611.6
– Percent of Open Interest Shorts:29.957.48.3
– Net Position:-42,55721,04721,510
– Gross Longs:154,305399,00276,465
– Gross Shorts:196,862377,95554,955
– Long to Short Ratio:0.8 to 11.1 to 11.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):3.396.119.0
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-34.435.6-32.6

 

British Pound Sterling Futures:

British Pound Sterling Futures COT ChartThe British Pound Sterling large speculator standing this week totaled a net position of 40,315 contracts in the data reported through Tuesday. This was a weekly decrease of -15,735 contracts from the previous week which had a total of 56,050 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.2 percent. The commercials are Bearish with a score of 45.8 percent and the small traders (not shown in chart) are Bullish with a score of 59.6 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend.

BRITISH POUND StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:46.036.512.7
– Percent of Open Interest Shorts:27.854.113.3
– Net Position:40,315-39,066-1,249
– Gross Longs:101,71380,54728,148
– Gross Shorts:61,398119,61329,397
– Long to Short Ratio:1.7 to 10.7 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):54.245.859.6
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-23.727.4-33.9

 

Japanese Yen Futures:

Japanese Yen Forex Futures COT ChartThe Japanese Yen large speculator standing this week totaled a net position of -46,868 contracts in the data reported through Tuesday. This was a weekly advance of 18,034 contracts from the previous week which had a total of -64,902 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.9 percent. The commercials are Bearish with a score of 46.6 percent and the small traders (not shown in chart) are Bullish with a score of 58.0 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend.

JAPANESE YEN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:31.152.814.7
– Percent of Open Interest Shorts:49.533.415.7
– Net Position:-46,86849,209-2,341
– Gross Longs:78,973134,06537,427
– Gross Shorts:125,84184,85639,768
– Long to Short Ratio:0.6 to 11.6 to 10.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):54.946.658.0
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-33.331.9-8.4

 

Swiss Franc Futures:

Swiss Franc Forex Futures COT ChartThe Swiss Franc large speculator standing this week totaled a net position of -37,071 contracts in the data reported through Tuesday. This was a weekly reduction of -4,377 contracts from the previous week which had a total of -32,694 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 25.8 percent. The commercials are Bullish-Extreme with a score of 85.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 5.5 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend.

SWISS FRANC StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:4.984.010.9
– Percent of Open Interest Shorts:49.720.429.7
– Net Position:-37,07152,622-15,551
– Gross Longs:4,03669,4999,009
– Gross Shorts:41,10716,87724,560
– Long to Short Ratio:0.1 to 14.1 to 10.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):25.885.35.5
– Strength Index Reading (3 Year Range):BearishBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-29.641.5-49.9

 

Canadian Dollar Futures:

Canadian Dollar Forex Futures COT ChartThe Canadian Dollar large speculator standing this week totaled a net position of -183,566 contracts in the data reported through Tuesday. This was a weekly decrease of -1,177 contracts from the previous week which had a total of -182,389 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.7 percent. The commercials are Bullish-Extreme with a score of 94.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.8 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend.

CANADIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:6.982.08.6
– Percent of Open Interest Shorts:59.627.310.7
– Net Position:-183,566190,676-7,110
– Gross Longs:23,904285,75530,046
– Gross Shorts:207,47095,07937,156
– Long to Short Ratio:0.1 to 13.0 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):5.794.69.8
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-42.343.0-29.6

 

Australian Dollar Futures:

Australian Dollar Forex Futures COT ChartThe Australian Dollar large speculator standing this week totaled a net position of 31,598 contracts in the data reported through Tuesday. This was a weekly gain of 1,803 contracts from the previous week which had a total of 29,795 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 98.7 percent. The commercials are Bearish-Extreme with a score of 13.8 percent and the small traders (not shown in chart) are Bearish with a score of 38.7 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend.

AUSTRALIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:47.735.813.3
– Percent of Open Interest Shorts:30.350.715.8
– Net Position:31,598-27,106-4,492
– Gross Longs:86,70364,98724,189
– Gross Shorts:55,10592,09328,681
– Long to Short Ratio:1.6 to 10.7 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):98.713.838.7
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-1.313.8-54.9

 

New Zealand Dollar Futures:

New Zealand Dollar Forex Futures COT ChartThe New Zealand Dollar large speculator standing this week totaled a net position of -18,438 contracts in the data reported through Tuesday. This was a weekly fall of -6,778 contracts from the previous week which had a total of -11,660 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.4 percent. The commercials are Bullish-Extreme with a score of 94.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 16.7 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend.

NEW ZEALAND DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:29.964.64.6
– Percent of Open Interest Shorts:55.235.48.5
– Net Position:-18,43821,323-2,885
– Gross Longs:21,76247,0923,323
– Gross Shorts:40,20025,7696,208
– Long to Short Ratio:0.5 to 11.8 to 10.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):5.494.616.7
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-37.945.4-64.9

 

Mexican Peso Futures:

Mexican Peso Futures COT ChartThe Mexican Peso large speculator standing this week totaled a net position of 14,014 contracts in the data reported through Tuesday. This was a weekly fall of -6,179 contracts from the previous week which had a total of 20,193 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.3 percent. The commercials are Bullish with a score of 63.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 6.0 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend.

MEXICAN PESO StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:43.550.02.5
– Percent of Open Interest Shorts:33.557.94.7
– Net Position:14,014-11,007-3,007
– Gross Longs:60,64269,5813,539
– Gross Shorts:46,62880,5886,546
– Long to Short Ratio:1.3 to 10.9 to 10.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):38.363.66.0
– Strength Index Reading (3 Year Range):BearishBullishBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-7.48.1-9.5

 

Brazilian Real Futures:

Brazil Real Futures COT ChartThe Brazilian Real large speculator standing this week totaled a net position of -7,277 contracts in the data reported through Tuesday. This was a weekly advance of 300 contracts from the previous week which had a total of -7,577 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.2 percent. The commercials are Bullish with a score of 55.8 percent and the small traders (not shown in chart) are Bearish with a score of 22.4 percent.

Price Trend-Following Model: Strong Downtrend

Our weekly trend-following model classifies the current market price position as: Strong Downtrend.

BRAZIL REAL StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:54.032.73.3
– Percent of Open Interest Shorts:63.024.13.0
– Net Position:-7,2777,003274
– Gross Longs:43,89826,5552,703
– Gross Shorts:51,17519,5522,429
– Long to Short Ratio:0.9 to 11.4 to 11.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):45.255.822.4
– Strength Index Reading (3 Year Range):BearishBullishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:2.6-2.5-0.4

 

Bitcoin Futures:

Bitcoin Crypto Futures COT ChartThe Bitcoin large speculator standing this week totaled a net position of -2,084 contracts in the data reported through Tuesday. This was a weekly decrease of -286 contracts from the previous week which had a total of -1,798 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.8 percent. The commercials are Bullish-Extreme with a score of 95.7 percent and the small traders (not shown in chart) are Bullish with a score of 68.8 percent.

Price Trend-Following Model: Strong Uptrend

Our weekly trend-following model classifies the current market price position as: Strong Uptrend.

BITCOIN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:75.64.74.4
– Percent of Open Interest Shorts:80.71.52.5
– Net Position:-2,0841,294790
– Gross Longs:31,1521,9171,833
– Gross Shorts:33,2366231,043
– Long to Short Ratio:0.9 to 13.1 to 11.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):5.895.768.8
– Strength Index Reading (3 Year Range):Bearish-ExtremeBullish-ExtremeBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-17.510.528.2

 

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Forex and Currency News Opinions
23 Nov

Speculator Extremes: Ultra T-Bonds, AUD, 5-Year & USD Index lead Bullish & Bearish Positions

By InvestMacro

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on November 19th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)

Here Are This Week’s Most Bullish Speculator Positions:

Ultra U.S. Treasury Bonds


The Ultra U.S. Treasury Bonds speculator position comes in as the most bullish extreme standing this week. The Ultra U.S. Treasury Bonds speculator level is currently at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled a positive 24.6 this week. The overall net speculator position was a total of -225,304 net contracts this week with an increase by 15,980 contract in the weekly speculator bets.

Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

Australian Dollar


The Australian Dollar speculator position comes next in the extreme standings this week. The Australian Dollar speculator level is now at a 98.7 percent score of its 3-year range.

The six-week trend for the percent strength score has tailed off a bit and was -1.3 this week. The speculator position registered 31,598 net contracts this week with a weekly gain of 1,803 contracts in speculator bets.

Lean Hogs


The Lean Hogs speculator position comes in third this week in the extreme standings. The Lean Hogs speculator level resides at a 96.4 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 34.5 this week. The overall speculator position was 71,982 net contracts this week with a decline of -4,000 contracts in the weekly speculator bets.

Coffee


The Coffee speculator position comes up number four in the extreme standings this week and continues to see strong speculator sentiment. The Coffee speculator level is at a 93.0 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a modest change of 6.0 this week. The overall speculator position was 68,918 net contracts this week with a small rise of 450 contracts in the speculator bets.

Steel


The Steel speculator position rounds out the top five in this week’s bullish extreme standings. The Steel speculator level sits at a 91.4 percent score of its 3-year range. The six-week trend for the speculator strength score was 1.9 this week.

The speculator position leveled at -1,297 net contracts this week with a dip of -489 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

5-Year Bond


The 5-Year Bond speculator position comes in as the most bearish extreme standing this week. The 5-Year Bond speculator level is at the lowest level in 3 years or a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -20.4 this week. The overall speculator position was -1,983,026 net contracts this week with a shortfall of -113,816 contracts in the speculator bets.

US Dollar Index


The US Dollar Index speculator position comes in tied for the most bearish extreme standing on the week. The US Dollar Index speculator level is at a 0.0 percent score of its 3-year range despite a rising price.

The six-week trend for the speculator strength score was -1.7 this week. The speculator position was -2,713 net contracts this week and had a decrease by -401 contracts in the weekly speculator bets.

Heating Oil


The Heating Oil speculator position comes in as third most bearish extreme standing of the week. The Heating Oil speculator level resides at just 0.5 percent score of its 3-year range.

The six-week trend for the speculator strength score was -24.5 this week. The overall speculator position is standing at -16,138 net contracts this week with a drop of -6,622 contracts in the speculator bets.

2-Year Bond


The 2-Year Bond speculator position comes in as this week’s fourth most bearish extreme standing. The 2-Year Bond speculator level is at a 2.5 percent score of its 3-year range.

The six-week trend for the speculator strength score was -14.1 this week. The speculator position was -1,447,344 net contracts this week with a decline of -23,473 contracts in the weekly speculator bets.

Euro


Finally, the Euro speculator position comes in as the fifth most bearish extreme standing for this week. The Euro speculator level is at a 3.3 percent score of its 3-year range.

The six-week trend for the speculator strength score showed a strong negative sentiment at -34.4 this week. The speculator position was -42,557 net contracts this week with a huge drop of -35,120 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Opinions
22 Nov

Companies are still committing to net-zero emissions, even if it’s a bumpy road – here’s what the data show

By L. Beril Toktay, Georgia Institute of Technology; Abhinav Shubham, Georgia Institute of Technology; Donghyun (Daniel) Choi, Georgia Institute of Technology, and Manpreet S. Hora, Georgia Institute of Technology

Companies around the world are increasingly committed to cutting their greenhouse gas emissions to slow and ultimately reverse climate change.

One indicator is the number of companies that have set emissions targets as part of the Science Based Targets initiative, or SBTi, a global nonprofit organization. That number grew from 164 companies in late 2018 to over 6,600 by November 2024. And thousands more have committed to lower their emissions.

It’s not always a smooth road, however. Some of those companies – including big names like Microsoft and Walmart – have had to pull back on some of their SBTi commitments.

We study the history of SBTi pledges to understand these commitments and what can undermine them. We believe there is more to the story of these pullbacks than meets the eye.

What is net zero?

To understand corporate climate commitments, let’s start with the concept of “net zero.”

The Paris Agreement, an international treaty on climate change, aims to limit global warming to well below 2 degrees Celsius (3.6 Fahrenheit) and ideally to 1.5 C (2.7 F). Meeting the more ambitious target of 1.5 C will require reaching net-zero greenhouse gas emissions by around 2050.

Net zero is the point at which the amount of greenhouse gases released into the atmosphere is balanced by greenhouse gases removed, either through natural sources like forests or technologies such as carbon capture and storage.

The Science Based Targets initiative, developed alongside the Paris Agreement in 2015, provides a framework to help companies align their efforts with the 1.5 C goal.

SBTi commitments have grown quickly

To join the initiative, companies begin by signing a letter of commitment to set near-term (2030) and long-term (2050) targets for reducing their emissions. Companies have 24 months to develop targets that adhere to SBTi guidelines. If the targets are validated and approved by SBTi, the company announces its targets publicly. The targets must be revalidated every five years, or they expire.

The number of global companies committing to and setting targets with SBTi has grown rapidly in recent years.

By the end of 2023, 7,929 companies representing 39% of global market capitalization had committed to set targets, and 4,205 had targets already validated by SBTi. By November 2024, that number had grown to 6,614.

This impressive participation is particularly significant given SBTi’s high expectations. SBTi requires near-term targets to be set so companies reduce emissions by at least 42% by 2030 from 2020 levels.

Why some companies have pulled back

So, why are companies like, Walmart, Microsoft and Amazon scaling back their commitments with SBTi?

While some people attribute these moves to political pressure from fossil fuel supporters, a closer look at data since 2013 reveals a more complex set of factors that may better explain their actions.

We found that, over the past decade, 695 companies either withdrew near- or long-term commitments or had a commitment that expired and was terminated by SBTi. These actions were concentrated in two distinct periods.

The first period followed SBTi’s decision in April 2019 to update its criteria, including tightening the minimum target from under 2 C to either “well below 2 C” or 1.5 C. We believe several companies were unprepared to meet the new requirements. Among the 500 companies that had either committed to or set a target by the end of 2018, 94 (18.8%) terminated their initial commitments after the criteria changed.

The second period was after January 2023, when SBTi introduced a new compliance policy and began removing commitments that had expired. In this period, 531 commitments were terminated – 497 of them because the commitment expired, and 16 because the company withdrew.

It’s important to recognize that SBTi strategically raised the bar to encourage companies to accelerate their progress in addressing climate change.

Reasons some companies have struggled

In a report in March 2024, SBTi provided a candid look at companies’ climate commitments from 2019 to 2021 and, importantly, where they struggled.

Approximately half of the companies that responded to its survey identified the complexity of addressing Scope 3 emissions – emissions from a company’s supply chain and use of its products – as a primary obstacle to setting net-zero targets. The supply chain is often considered a blind spot for measuring environmental impact and is difficult for companies to control.

On the day the report was released, SBTi removed the long-term commitments of 239 companies. About 60% of those companies had near-term targets that remained.

This helps explain the news around companies such as Walmart, Microsoft and Amazon.

Walmart’s and Microsoft’s long-term net-zero commitments were terminated, though both companies still have valid near-term targets with SBTi.

Moreover, both reaffirm their environmental commitments in their annual reports. Walmart is currently finalizing its Scope 3 emissions analysis to inform future strategy development, and Microsoft is investing in carbon removal technologies to become carbon-negative by 2030.

Amazon presents a more challenging case. The company may have faced difficulty meeting SBTi’s stringent mandate, particularly around supply chain emissions. Amazon has said it is still committed to reaching net-zero emissions and plans to explore setting targets with other organizations.

Many companies are on track

Our analysis of SBTi’s progress data, which includes all companies that had set a target by 2022 for which SBTi has emissions data, reveals that companies are cutting their emissions by a median annual rate of 5.4%.

Looking just at direct emissions from companies’ operations (Scope 1) and their purchased electricity (Scope 2), companies did even better. The median annual emissions decrease was 7.25% for companies with both Scope 1 and Scope 2 targets.

Scope 2 emissions are the low-hanging fruit and frequently align with cost-saving measures like improving energy efficiency.

Scope 3 emissions, those generated by companies’ suppliers and by consumer use of their products, are the biggest challenge. Companies with a separate Scope 3 target only reduced those emissions by a median annual rate of about 3%.

In 2024, SBTi announced plans to revise its Net-Zero Standard and allow companies to use carbon offsets to meet their Scope 3 emissions targets, drawing intense criticism. Carbon offsets allow companies to pay projects to reduce emissions on their behalf, such as by planting trees or managing forests.

SBTi’s challenge lies in finding a balance that maintains the integrity of its standards while encouraging broader participation, especially from high-impact industries.

Other ways companies are reducing emissions

While setting and achieving SBTi targets signals a strong commitment to combating climate change, many companies are setting emissions goals and working toward them without joining SBTi.

An example is the Drawdown Georgia Business Compact. It was created to accelerate the adoption of 20 technology- and market-ready solutions and includes nearly 70 companies, from multinationals headquartered in Georgia like Delta and UPS to small- and medium-size enterprises operating in the state.

Through the compact, companies are advancing initiatives with local economic benefits. For example, they are exploring ways to maximize Georgia forests’ ability to remove carbon and discussing effective ways to deploy sustainable aviation fuels.

The road to net-zero emissions will be bumpy. Yet the rapid growth of global corporate commitments, as well as action by a wider range of companies at the regional level, suggests corporate efforts are nevertheless moving forward.The Conversation

About the Authors:

L. Beril Toktay, Professor of Operations Management, Georgia Institute of Technology; Abhinav Shubham, Ph.D. Candidate in Operations Management, Georgia Institute of Technology; Donghyun (Daniel) Choi, Ph.D. Candidate in Operations Management, Georgia Institute of Technology, and Manpreet S. Hora, Professor of Operations Management, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Opinions Stock Market News
21 Nov

Asking ChatGPT vs Googling: Can AI chatbots boost human creativity?

By Jaeyeon Chung, Rice University 

Think back to a time when you needed a quick answer, maybe for a recipe or a DIY project. A few years ago, most people’s first instinct was to “Google it.” Today, however, many people are more likely to reach for ChatGPT, OpenAI’s conversational AI, which is changing the way people look for information.

Rather than simply providing lists of websites, ChatGPT gives more direct, conversational responses. But can ChatGPT do more than just answer straightforward questions? Can it actually help people be more creative?

I study new technologies and consumer interaction with social media. My colleague Byung Lee and I set out to explore this question: Can ChatGPT genuinely assist people in creatively solving problems, and does it perform better at this than traditional search engines like Google?

Across a series of experiments in a study published in the journal Nature Human Behavour, we found that ChatGPT does boost creativity, especially in everyday, practical tasks. Here’s what we learned about how this technology is changing the way people solve problems, brainstorm ideas and think creatively.

ChatGPT and creative tasks

Imagine you’re searching for a creative gift idea for a teenage niece. Previously, you might have googled “creative gifts for teens” and then browsed articles until something clicked. Now, if you ask ChatGPT, it generates a direct response based on its analysis of patterns across the web. It might suggest a custom DIY project or a unique experience, crafting the idea in real time.

To explore whether ChatGPT surpasses Google in creative thinking tasks, we conducted five experiments where participants tackled various creative tasks. For example, we randomly assigned participants to either use ChatGPT for assistance, use Google search, or generate ideas on their own. Once the ideas were collected, external judges, unaware of the participants’ assigned conditions, rated each idea for creativity. We averaged the judges’ scores to provide an overall creativity rating.

One task involved brainstorming ways to repurpose everyday items, such as turning an old tennis racket and a garden hose into something new. Another asked participants to design an innovative dining table. The goal was to test whether ChatGPT could help people come up with more creative solutions compared with using a web search engine or just their own imagination.

The results were clear: Judges rated ideas generated with ChatGPT’s assistance as more creative than those generated with Google searches or without any assistance. Interestingly, ideas generated with ChatGPT – even without any human modification – scored higher in creativity than those generated with Google.

One notable finding was ChatGPT’s ability to generate incrementally creative ideas: those that improve or build on what already exists. While truly radical ideas might still be challenging for AI, ChatGPT excelled at suggesting practical yet innovative approaches. In the toy-design experiment, for example, participants using ChatGPT came up with imaginative designs, such as turning a leftover fan and a paper bag into a wind-powered craft.

Limits of AI creativity

ChatGPT’s strength lies in its ability to combine unrelated concepts into a cohesive response. Unlike Google, which requires users to sift through links and piece together information, ChatGPT offers an integrated answer that helps users articulate and refine ideas in a polished format. This makes ChatGPT promising as a creativity tool, especially for tasks that connect disparate ideas or generate new concepts.

It’s important to note, however, that ChatGPT doesn’t generate truly novel ideas. It recognizes and combines linguistic patterns from its training data, subsequently generating outputs with the most probable sequences based on its training. If you’re looking for a way to make an existing idea better or adapt it in a new way, ChatGPT can be a helpful resource. For something groundbreaking, though, human ingenuity and imagination are still essential.

Additionally, while ChatGPT can generate creative suggestions, these aren’t always practical or scalable without expert input. Steps such as screening, feasibility checks, fact-checking and market validation require human expertise. Given that ChatGPT’s responses may reflect biases in its training data, people should exercise caution in sensitive contexts such as those involving race or gender.

We also tested whether ChatGPT could assist with tasks often seen as requiring empathy, such as repurposing items cherished by a loved one. Surprisingly, ChatGPT enhanced creativity even in these scenarios, generating ideas that users found relevant and thoughtful. This result challenges the belief that AI cannot assist with emotionally driven tasks.

Future of AI and creativity

As ChatGPT and similar AI tools become more accessible, they open up new possibilities for creative tasks. Whether in the workplace or at home, AI could assist in brainstorming, problem-solving and enhancing creative projects. However, our research also points to the need for caution: While ChatGPT can augment human creativity, it doesn’t replace the unique human capacity for truly radical, out-of-the-box thinking.

This shift from Googling to asking ChatGPT represents more than just a new way to access information. It marks a transformation in how people collaborate with technology to think, create and innovate.The Conversation

About the Author:

Jaeyeon Chung, Assistant Professor of Business, Rice University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Opinions Programming
21 Nov

Americans face an insurability crisis as climate change worsens disasters – a look at how insurance companies set rates and coverage

By Andrew J. Hoffman, University of Michigan 

Home insurance rates are rising in the United States, not only in Florida, which saw tens of billions of dollars in losses from hurricanes Helene and Milton, but across the country.

According to S&P Global Market Intelligence, homeowners insurance increased an average of 11.3% nationwide in 2023, with some states, including Texas, Arizona and Utah, seeing nearly double that increase. Some analysts predict an average increase of about 6% in 2024.

These increases are driven by a potent mix of rising insurance payouts coupled with rising costs of construction as people build increasingly expensive homes and other assets in harm’s way.

When home insurance averages $2,377 a year nationally, and $11,000 per year in Florida, this is a blow to many people. Despite these rising rates, Jacques de Vaucleroy, chairman of the board of reinsurance giant Swiss Re, believes U.S. insurance is still priced too low to fully cover the risks.

It isn’t just that premiums are changing. Insurers now often reduce coverage limits, cap payouts, increase deductibles and impose new conditions or even exclusions on some common perils, such as protection for wind, hail or water damage. Some require certain preventive measures or apply risk-based pricing – charging more for homes in flood plains, wildfire-prone zones, or coastal areas at risk of hurricanes.

Homeowners watching their prices rise faster than inflation might think something sinister is at play. Insurance companies are facing rapidly evolving risks, however, and trying to price their policies low enough to remain competitive but high enough to cover future payouts and remain solvent in a stormier climate. This is not an easy task. In 2021 and 2022, seven property insurers filed for bankruptcy in Florida alone. In 2023, insurers lost money on homeowners coverage in 18 states.

But these changes are raising alarm bells. Some industry insiders worry that insurance may be losing its relevance and value – real or perceived – for policyholders as coverage shrinks, premiums rise and exclusions increase.

How insurers assess risk

Insurance companies use complex models to estimate the likelihood of current risks based on past events. They aggregate historical data – such as event frequency, scale, losses and contributing factors – to calculate price and coverage.

However, the increase in disasters makes the past an unreliable measure. What was once considered a 100-year event may now be better understood as a 30- or 50-year event in some locations.

What many people do not realize is that the rise of so-called “secondary perils” – an insurance industry term for floods, hailstorms, strong winds, lightning strikes, tornadoes and wildfires that generate small to mid-size damage – is becoming the main driver of the insurability challenge, particularly as these events become more intense, frequent and cumulative, eroding insurers’ profitability over time.

Climate change plays a role in these rising risks. As the climate warms, air can hold more moisture – about 7% more with every degree Celsius of warming. That leads to stronger downpours, more thunderstorms, larger hail events and a higher risk of flooding in some regions. The U.S. was on average 1.5 degrees Celsius (2.6 degrees Fahrenheit) warmer in 2022 than in 1970.

Insurance companies are revising their models to keep up with these changes, much as they did when smoking-related illnesses became a significant cost burden in life and health insurance. Some companies use climate modeling to augment their standard actuarial risk modeling. But some states have been hesitant to allow climate modeling, which can leave companies systematically underrepresenting the risks they face.

Each company develops its own assessment and geographic strategy to reach a different conclusion. For example, Progressive Insurance has raised its homeowner rates by 55% between 2018 and 2023, while State Farm has raised them only 13.7%.

While a homeowner who chooses to make home improvements, such as installing a luxury kitchen, can expect an increase in premiums to account for the added replacement value, this effect is typically small and predictable. Generally, the more substantial premium hikes are due to the ever-increasing risk of severe weather and natural disasters.

Insurance for insurers

When risks become too unpredictable or volatile, insurers can turn to reinsurance for help.

Reinsurance companies are essentially insurance companies that insure insurance companies. But in recent years, reinsurers have recognized that their risk models are also no longer accurate and have raised their rates accordingly. Property reinsurance alone increased by 35% in 2023.

Reinsurance is also not very well suited to covering secondary perils. The traditional reinsurance model is focused on large, rare catastrophes, such as devastating hurricanes and earthquakes.

Two maps show highest costs on the coasts and in the West and Northeast.
Maps illustrate the average loss from flooding alone and expected increases by mid-century. About 90% of catastrophes in the U.S. involve flooding, but just 6% of U.S. homeowners have flood insurance.
Fifth National Climate Assessment

As an alternative, some insurers are moving toward parametric insurance, which provides a predefined payment if an event meets or exceeds a predefined intensity threshold. These policies are less expensive for consumers because the payouts are capped and cover events such as a magnitude 7 earthquake, excessive rain within a 24-hour period or a Category 3 hurricane in a defined geographical area. The limits allow insurers to provide a less expensive form of insurance that is less likely to severely disrupt their finances.

Protecting the consumer

Of course, insurers don’t operate in an entirely free market. State insurance regulators evaluate insurance companies’ proposals to raise rates and either approve or deny them.

The insurance industry in North Carolina, for example, where Hurricane Helene caused catastrophic damage, is arguing for a homeowner premium increase of more than 42% on average, ranging from 4% in parts of the mountains to 99% in some waterfront areas.

If a rate increase is denied, it could force an insurer to simply withdraw from certain market sectors, cancel existing policies or refuse to write new ones when their “loss ratio” – the ratio of claims paid to premiums collected – becomes too high for too long.

Since 2022, seven of the top 12 insurance carriers have either cut existing homeowners policies or stopped selling new ones in the wildfire-prone California homeowner market, and an equal number have pulled back from the Florida market due to the increasing cost of hurricanes.

To stem this tide, California is reforming its regulations to speed up the rate increase approval process and allow insurers to make their case using climate models to judge wildfire risk more accurately.

Florida has instituted regulatory reforms that have reduced litigation and associated costs and has removed 400,000 policies from the state-run insurance program. As a result, eight insurance carriers have entered the market there since 2022.

Looking ahead

Solutions to the mounting insurance crisis also involve how and where people build. Building codes can require more resilient homes, akin to how fire safety standards increased the effectiveness of insurance many decades ago.

By one estimate, investing $3.5 billion in making the two-thirds of U.S. homes not currently up to code more resilient to storms could save insurers as much as $37 billion by 2030.

In the end, if affordability and relevance of insurance continue to degrade, real estate prices will start to decline in exposed locations. This will be the most tangible sign that climate change is driving an insurability crisis that disrupts wider financial stability.

About the Authors:

Justin D’Atri, Climate Coach at the education platform Adaptify U and Sustainability Transformation Lead at Zurich Insurance Group, contributed to this article.The Conversation

Andrew J. Hoffman, Holcim (US) Professor of Sustainable Enterprise, Ross School of Business, School for Environment & Sustainability, University of Michigan

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Economics & Fundamentals Opinions
13 Nov

Countries spend huge sums on fossil fuel subsidies – why they’re so hard to eliminate

By Bruce Huber, University of Notre Dame 

Fossil fuels are the leading driver of climate change, yet they are still heavily subsidized by governments around the world.

Although many countries have explicitly promised to reduce fossil fuel subsidies to combat climate change, this has proven difficult to accomplish. As a result, fossil fuels remain relatively inexpensive, and their use and greenhouse gas emissions continue to grow.

I work in environmental and energy law and have studied the fossil fuel sector for years. Here’s how fossil fuel subsidies work and why they’re so stubborn.

What is a subsidy?

A subsidy is a financial benefit given by a government to an entity or industry. Some subsidies are relatively obvious, such as publicly funded crop insurance or research grants to help pharmaceutical companies develop new drugs.

Others are less visible. A tariff on an imported product, for example, can subsidize domestic manufacturers of that product. More controversially, some would argue that when a government fails to make an industry pay for damage it causes, such as air or water pollution, that also amounts to a subsidy.

Subsidies, especially in this broader sense, are widespread throughout the global economy. Many industries receive benefits through public policies that are denied to other industries in the same jurisdiction, such as tax breaks, relaxed regulations or trade supports.

Governments employ subsidies for political and practical reasons. Politically, subsidies are useful for striking bargains or shoring up political support. In democracies, they can mollify constituencies otherwise unwilling to agree to a policy change. The 2022 Inflation Reduction Act, for example, squeaked through Congress by subsidizing both renewable energy and oil and gas production.

Practically, subsidies can boost a promising young industry such as electric vehicles, attract business to a community or help a mature sector survive an economic downturn, as the auto industry bailout did in 2008. Of course, policies can outlive their original purpose; some of today’s petroleum subsidies can be traced to the Great Depression.

How are fossil fuels subsidized?

Fossil fuel subsidies take many forms around the world. For example:

  • In Saudi Arabia, fuel prices are set by the government rather than the market; price ceilings subsidize the price citizens pay for gasoline. The cost to state-owned oil producers there is offset by oil exports, which dwarf domestic consumption.
  • Indonesia also caps energy prices, then compensates state-owned energy companies for the losses they bear.
  • In the United States, oil companies can take a tax deduction for a large portion of their drilling costs.

Other subsidies are less direct, such as when governments underprice permits to mine or drill for fossil fuels or fail to collect all the taxes owed by fossil fuel producers.

Estimates of the total value of global fossil fuel subsidies vary considerably depending on whether analysts use a broad or narrow definition. The Organization for Economic Cooperation and Development, or OECD, calculated the annual total to be about US$1.5 trillion in 2022. Tche International Monetary Fund reported a number over four times higher, about $7 trillion.

Why do estimates of fossil fuel subsidies vary so dramatically?

Analysts disagree about whether subsidy tabulations should include environmental damage from the extraction and use of fossil fuels that is not incorporated into the fuel’s price. The IMF treats the costs of global warming, local air pollution and even traffic congestion and road damage as implicit subsidies because fossil fuel companies don’t pay to remedy these problems. The OECD omits these implicit benefits.

But whichever definition is applied, the combined effect of national policies on fossil fuel prices paid by consumers is dramatic.

Oil, for example, is traded on a global market, but the price per gallon of petrol varies enormously around the world, from about 10 cents in Iran, Libya and Venezuela – where it is heavily subsidized – to over $7 in Hong Kong, the Netherlands and much of Scandinavia, where fuel taxes counteract subsidies.

What is the world doing about fossil fuel subsidies?

Global leaders have acknowledged that subsidies for fossil fuels undermine efforts to address climate change because they make fossil fuels cheaper than they would be otherwise.

In 2009, the heads of the G20, which includes many of the world’s largest economies, issued a statement resolving to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.” Later that same year, the governments of the Asia-Pacific Economic Cooperation forum, or APEC, made an identical pledge.

In 2010, 10 other countries, including the Netherlands and New Zealand, formed the Friends of Fossil Fuel Subsidy Reform group to “build political consensus on the importance of fossil fuel subsidy reform.”

Yet these commitments have scarcely moved the needle. A major study of 157 countries between 2003 and 2015 found that governments “collectively made little or no progress” toward reducing subsidies. In fact, the OECD found that total global subsidies nearly doubled in both 2021 and 2022.

So why are fossil fuel subsidies hard to eliminate?

There are various reasons fossil fuel subsidies are hard to eliminate. Many subsidies directly affect the costs that fossil fuel producers face, so reducing subsidies tends to increase prices for consumers. Because fossil fuels touch nearly every economic sector, rising fuel costs elevate prices for countless goods and services.

Subsidy reform tends to be broadly felt and pervasively inflationary. And unless carefully designed, subsidy reductions can be regressive, forcing low-income residents to spend a larger percentage of their income on energy.

So, even in countries where there is widespread support for robust climate policies, reducing subsidies can be deeply unpopular and may even cause public unrest.

The 2021-22 spike in fossil fuel subsidies is illustrative. After Russia’s invasion of Ukraine, energy prices surged throughout Europe. Governments were quick to provide aid for their citizens, resulting in their largest fossil fuel subsidies ever. Forced to choose between climate goals and affordable energy, Europe overwhelmingly chose the latter.

Of course, economists note that increasing the price of fossil fuels can lower demand, reducing emissions that are driving climate change and harming the environment and human health. Seen in that light, price spikes present an opportunity for reform. As the IMF noted, when prices recede after a surge, it “provide[s] an opportune time to lock in pricing of carbon and local air pollution emissions without necessarily raising energy prices above recently experienced levels.”The Conversation

About the Author:

Bruce Huber, Professor of Law, University of Notre Dame

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Opinions
12 Nov

Companies are buying up cheap carbon offsets − data suggest it’s more about greenwashing than helping the climate

By Sehoon Kim, University of Florida 

Carbon offsets have become big business as more companies make promises to protect the climate but can’t meet the goals on their own.

When a company buys carbon offsets, it pays a project elsewhere to reduce greenhouse gas emissions on its behalf – by planting trees, for example, or generating renewable energy. The idea is that reducing greenhouse gas emissions anywhere pays off for the global climate.

But not all offsets have the same value. There is growing skepticism about many of the offsets sold on voluntary carbon markets. In contrast to compliance markets, where companies buy and sell a limited number of allowances that are issued by regulators, these voluntary carbon markets have few rules that can be enforced consistently. Investigations have found that many voluntary offset projects, forest management projects in particular, have done little to benefit the climate despite their claims.

I specialize in sustainable finance and corporate governance. My colleagues and I recently conducted the first systematic, evidence-based look at the global landscape of voluntary carbon offsets used by hundreds of large, publicly listed firms around the world.

The results raise questions about how some companies use these offsets and cast doubt on how effective voluntary carbon markets – at least in their current state – are in assisting a global transition to net-zero-emissions.

Which companies use low-quality offsets might surprise you

Our analysis shows that the global carbon-offset market has grown to comprise a rich variety of offset projects. Some generate renewable energy, contribute to energy-efficient housing and appliances, or capture and store carbon. Others preserve forests and grassland. The majority are based in Asia, Africa and the Americas, but they exist in other regions too.

Companies use these projects to boost their environmental claims in order to help attract investors, customers and support from various groups. That practice has skyrocketed, from virtually nothing in 2005 to roughly 30 million metric tons of carbon offset per year in 2022. Investment banking firm Morgan Stanley in 2023 forecast that the voluntary offset market would grow to about US$100 billion by 2030 and to around $250 billion by 2050.

For our analysis, we examined 866 publicly traded companies that used offsets between 2005 and 2021.

We found that large firms with a high percentage of big institutional investors and commitments to reach net-zero emissions are particularly active in voluntary carbon markets.

Our results also reveal a peculiar pattern: Industries with relatively low emissions, such as services and financial industries, are much more intensive in their use of offsets. Some used offsets for almost all of the emissions cuts they claimed.

In contrast, high-emissions industries, such as oil and gas, utilities or transportation, used negligible amounts of offsets compared to their heavy carbon footprints.

These facts cast a cloud of doubt on how effective voluntary carbon markets could really be at cutting global greenhouse gas emissions. They also raise questions about companies’ motives for using offsets.

Why companies rely on offsets: 2 explanations

One explanation for these patterns is that offsetting is a means to “outsource” efforts to transition away from greenhouse gas emissions. Companies with smaller carbon footprints find it cheaper to buy offsets than to make expensive investments in reducing their own emissions.

At the same time, we found that emissions-heavy companies were more likely to reduce their own emissions in-house, because offsetting massive amounts of emissions every year for an indefinite future would be more costly.

A more pernicious explanation for the growth in voluntary offsets is that offsets enable “greenwashing.” In this view, companies use offsets to cheaply refurbish their image to naive stakeholders who are not well informed about the quality of offsets. Agencies rate offset projects on how likely they are to meet their climate claims, among other indicators of the trustworthiness of offsets. Our reviews of pricing data and ratings found that projects rated as low quality have substantially lower prices.

We found that relatively few of the 1,413 offset projects used by companies in our sample had been verified as high quality by an external carbon rating agency. Most offset credits used by companies were strikingly cheap. More than 70% of retired offsets were priced below $4 per ton.

These explanations are not mutually exclusive. We found that low-emissions companies could easily alter their peer rankings for ESG performance – how well they do on environmental, social and governance issues – by offsetting a small quantity of emissions.

Fixing the voluntary market for the future

Our findings have important implications as policymakers and regulators debate rules for the voluntary carbon markets.

The data suggests that voluntary carbon markets are currently flooded with cheap, low-quality offsets, likely due to a lack of integrity guidelines and regulations for voluntary carbon markets to ensure the transparency and authenticity of offset projects. This lack of guidelines may also encourage the use of low-quality offsets.

Ever since Article 6 of the Paris climate agreement created principles for carbon markets and ways countries could cooperate to reach climate targets, agreeing on how to implement those principles has been a challenge. For the principles to be successful, negotiators must agree on project eligibility and information disclosure standards, among other issues.

In April 2024, SBTi, the world’s leading science-based arbiter of corporate climate targets, added urgency to that process when it announced that it would allow companies to meet their carbon goals with carbon offsets to cover emissions in their supply chains.

The following month, the U.S. Treasury, Energy and Agriculture departments jointly released a policy statement laying out their own template for rules to govern voluntary carbon markets. “Voluntary carbon markets can help unlock the power of private markets to reduce emissions, but that can only happen if we address significant existing challenges,” U.S. Treasury Secretary Janet Yellen said at the time.

Article 6 and standards for carbon offsets are on the agenda for the 2024 United Nations climate conference, COP29, Nov. 11-22 in Baku, Azerbaijan.

With many segments of voluntary carbon markets faltering, the COP29 summit may be a make-or-break moment for voluntary carbon offsets to become a viable contributor to decarbonization going forward.The Conversation

About the Author:

Sehoon Kim, Assistant Professor of Finance, University of Florida

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Economics & Fundamentals Opinions
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