Today's Headlines

Today's Headlines - 19 May 2023

Go circular to end plastic pollution: UNEP

GS Paper - 3 (Economy)

Global plastic pollution can reduce by 80 per cent by 2040 if countries and companies make deep policy and market shifts using existing technologies and shift to a circular economy, according to a new report launched by United Nations Environment Programme (UNEP) on 16 May, 2023.

More about the report

  1. The report titled Turning off the Tap: How the world can end plastic pollution and create a circular economy has been launched just days ahead of a second round of negotiations on a legally binding instrument to end plastic pollution (Intergovernmental Negotiating Committee-2 or INC-2) to be held in Paris.
  2. INC-1 was held in Punta Del Este, Uruguay. The meet recognised the growing concern stemming from the links between plastichuman health, and environmental health.
  3. The meeting in Uruguay had come nearly 10 months after the Fifth Session of the United Nations Environment Assembly (UNEA-5.2) adopted resolution 5/14 titled “End plastic pollution: Towards an international legally binding instrument (ILBI)”.

Going circular

  1. The report urged governments and businesses alike to adopt a circular economy approach for tackling the problem of plastic pollution.
  2. Countries need to eliminate unnecessary and problematic plastic uses. They need to make three market shifts — reuserecycle, and reorient and diversify.
  3. For each necessary shift (reuse, recycle, reorient and diversify), the report accounted for likely implications on polymer and chemical producersplastic convertersbrands / manufacturersretailersgovernmentsconsumerswaste pickerswaste management companies, and recycling companies.
  4. The reports suggested setting and implementing design and safety standards for disposal of non-recyclable plastic waste, and making manufacturers responsible for products shedding micro plastics, among others.
  5. The report also highlighted that highest costs in both a throwaway and circular economy are operational.

 

G-7 Hiroshima summit

GS Paper - 2 (International Relations)

Leaders of seven of the world’s most powerful democracies will gather this weekend for the Group of Seven summits in Hiroshima, the location of the world’s first atomic attack at the end of World War II.

What is the G-7 Summit?

  1. The Group of Seven is an informal group of leading industrialised nations. It consists of CanadaFranceGermanyItalyJapan, the United Kingdom and the United States.
  2. This year is Japan’s turn to host, but the presidency of G-7 summits revolves among the seven members. Two representatives of the European Union also join.
  3. As is customary in recent years, leaders from some non-G-7 countries and international organizations will also participate in some sessions. The leaders discuss a wide range of issues, including economic policysecurityclimate changeenergy and gender.
  4. The first summit was in 1975, when France hosted what was then a Group of Six meeting to discuss tackling a recession that followed an Arab oil embargoCanada became the seventh member a year later.
  5. Russia joined to form the G-8 in 1998 but was expelled after Moscow’s 2014 annexation of Crimea.

Why Hiroshima?

  1. Hiroshima is Kishida’s hometown. His choice of venue underscores a determination to put nuclear disarmament and non-proliferation at the top of the agenda of this year’s summit.
  2. A path to nuclear disarmament has appeared more difficult with Russia’s recent nuclear weapon threats in Ukraine, as well as nuclear and missile development by China and North Korea.
  3. Japan, which is protected by the US nuclear umbrella, has also faced criticism that its nuclear disarmament pledge is an empty promise. Kishida is trying to forge a realistic roadmap between the current harsh reality and the ideal of a world without nuclear weapons.

What are the top issues?

  1. G-7 leaders are expected to strongly condemn Russia’s war on Ukraine while pledging their continuing support for Ukraine. Ukrainian President Volodymyr Zelenskyy will join the session via the internet.
  2. There will also be a focus on Beijing’s escalating threats against Taiwan, the self-governing democratic island Beijing claims as its own, and ways to reduce Western democracies’ economic and supply chain dependency on China.
  3. To address the rise of Global South nations, including many former colonies of Western powers with varied views on and ties to Russia and China, the G-7 will offer these countries more support in healthfood security and infrastructure to develop closer ties.

 

India’s supercomputing ambitions

GS Paper - 3 (ITC)

India is today home to 23 supercomputers — powerful computers that are primarily used for scientific and engineering work that demands ultra high-speed computations. Although indigenous development of supercomputers began in 1980 — with the involvement of organisations such as BARCC-DAC and C-DOT, among others — it was the launch of the National Supercomputing Mission (NSM) in 2015 that accelerated efforts in a big way.

What

  1. Compared to five or 10 years ago, India’s supercomputing journey has been quite successful. Until 2016India had only four supercomputers.
  2. The superfast machines are in use in the field of computational chemistrymaterial sciencequantum mechanics, and more, with nearly 5,000 users executing close to 8 lakh jobs on them.
  3. On the flip side, however, use of supercomputers is currently limited to research institutions.
  4. In terms of supercomputing capacity, India has made commendable progress, though it still lags other leading nations.
  5. As of June 2022, China boasted a staggering 173 of the world’s 500 most powerful supercomputers, while the US had 128. From India, only three systems — Param Siddhi AI (ranked 111)Pratyush (132), and Mihir (249) — made it to the list.

Exascale goal

  1. While exascale computing — involving billions of computations per second — is evolving rapidly, India has no exascale supercomputers yet.
  2. We are still looking at petaflops [quadrillion flops, where a ‘flop’ — or floating point operations per second — is a measure of computer performance].
  3. The Indian government has initiated efforts to develop indigenous exascale computing capabilities through NSM by 2024. Does this delay signify an oversight on the part of the country?
  4. Param-Shankh, India’s new indigenous exascale supercomputing monster from C-DAC, is set to launch in 2024. Thus, India has not ignored the exascale revolution. Under the NSM scheme, C-DAC is aiming to install 70 supercomputers pan India.

 

Financial Regulators Transitioning from LIBOR

GS Paper - 3 (Economy)

The RBI stated that some banks and financial institutions were yet to facilitate an absolute transition away from the London Interbank Offered Rate (LIBOR) benchmark. They had not inserted fallback clauses into all their financial contracts that reference U.S.$ LIBOR or the corresponding domestic Mumbai Interbank Forward Outright Rate (MIFOR). Both LIBOR and MIFOR would cease to be a representative benchmark from June 30 this year.

What is LIBOR?

  • LIBOR is a global benchmark interest rate that combines individual rates at which banks opine they may borrow from each other (for a particular period of time) at the London interbank market.
  • It is used as a benchmark to settle trades in futures, options, swaps and other derivative financial instruments in over-the-counter markets (participants engaging directly without using an exchange) and on exchanges globally.
  • Further, consumer lending products including mortgages, credit cards and student loans, among others, too use it as a benchmark rate.

Why it is being discarded?

  • The central flaw in the mechanism was that it relied heavily on banks to be honest with their reporting disregarding their commercial interests.It must be noted that the rates were made public.
  • Therefore, it would not be particularly useful to impress upon potential and current customers the various disadvantages in obtaining funds.
  • The phenomenon was particularly on display during the 2008 financial crisis when submissions were artificially lowered (amid the crisis).
  • In 2012, Barclays admitted to the misconduct and agreed to pay $160 million in penalties to the U.S. Dept of Justice.
  • The Wall Street Journal too had studied in May 2008 that several panelists were paying “significantly lower borrowing costs” than what other market measures were suggesting.
  • Another observed phenomenon was the tendency to alter (higher or lower) the submission as per the entities’ trading units’ derivative positions to acquire more profits.
  • Derivates refer to financial contracts whose value is related to a specific indicator, commodity or financial instrument.
  • Prior to February 2014, LIBOR was administered by the British Bankers’ Association (BBA). However, in April 2013, the maintenance of the benchmark was brought under the purview of the FCA.

What are the alternate Options now?

  • in 2017, the U.S. Federal Reserve announced the Secured Overnight Financing Rate (SOFR) as a preferred alternative.
  • Accordingly, in India, new transactions were to be undertaken using the SOFR and the Modified Mumbai Interbank Forward Outright Rate (MMIFOR), replacing MIFOR.
  • As stated by the International Finance Corporation (IFC), it is based on observable repo rates, or the cost of borrowing cash overnight, which is collateralised by U.S. Treasury securities.
  • Thus, making it a prevailing transaction-based rate and drifting away from the requirement of an expertise judgement as in LIBOR. This would make it potentially less prone to market manipulation.
  • MMIFOR would use adjusted SOFR (compounded in arrears for varied tenors and obtained from the Bloomberg Index Services) among other components.SOFR is published on each market business day at 8 a.m. ET.

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