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Are banks encouraging students to get in debt?

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One thing is almost guaranteed upon graduation from university, and that’s that students will leave with an often hefty debt to pay off. Though the bank of Mum and Dad may help out with repayments, Hope Nelson, a financial planning trainee at Gaeia, writes how some high street names are not overly kind to new graduates.

Halifax has revealed its student account for the new 2013/14 academic year, offering an overdraft of up to £3,000 on a deal it said was “designed by students for students”.

This has undoubtedly been met with cries of thanks from prospective and current undergrads who were previously offered a measly £1,000, with which they had to spread over the next three or four years.

But are banks encouraging students to indulge in a culture of debt?

As being a student becomes an ever more costly business, with rents high, tuition fees higher and everything you need- the nice clothes, the bedroom accessories, the nights out, the £100 text books – the cost of living (fashionably) is highest. Gone are the days when being a student meant shabby chic; instead, the young adults you see around big university cities are some of the most expensively dressed. And for a short while, they think they can afford to be. Regular payments from the bank of Mum and Dad, the student loan company and the extensive overdraft keep us from ever thinking about planning our finances.

Being a very recent graduate (class of 2012), I know what it is like to feel the false sense of security that comes with the regular instalments of the student loan, and the pressure to make the most of your never-seen-again free time and holidays. Festivals, trips to Thailand, black tie balls; they all happened while I was still in higher education.

Halifax has listened to what students say they want and found their single greatest need is for a flexible overdraft facility.”

I think there is some confusion between want and need here. Yes, almost all of us like the idea of extra ‘free money’ but in reality we probably don’t need it – if we budget accordingly. Now being in full-time work, I spend what I earn and cannot imagine living on any less, like I did when I was a student. And so the principle of the overdraft is similar.

Most students will spend it, regardless of whether they need the money for urgent reasons. Most of us at university talked about our overdrawn bank balances as if we were in the plus. “I’ve got £400” actually meant “I’ve got £400 left of my overdraft limit”.

All of my closest friends ended university with an overdraft sitting in the bank. Many have still not paid it off, with new salaries only filling the gap on payday. The overdraft culture drifts through on to graduate jobs, where working hard and playing harder (must make up for not being a student any longer) becomes the mantra.

Thank heavens then, that graduate accounts let the student overdraft roll on for another couple of years.

The Lloyds account offers a fee-free planned overdraft of up to £2,000 to students. The limit is tiered so that up to £1,500 can be borrowed in the first, second and third year, and up to £2,000 in year four.

But what Lloyds doesn’t state is that the student account expects to be paid back – and quick. Within less than 12 months of graduation, a friend of mine was told she must have cleared her overdraft, or take out a loan with the bank to pay it off, with a 2.3% interest rate.

This new ‘deluxe-basic’ student lifestyle is being promoted by more and more companies. The banks decision to make overdrafts bigger and better to help students with their everyday needs, also attach some not so everyday offers to encourage students to sign up.

These include the standard free NUS extra card for three years, which offers discounts from a range of retailers and brands, including Apple (average computer: £1,000), student favourite Topshop (average pair of women’s shoes: £80) and Domino’s Pizza (average meal: £10). Not even cheap with the 10% discount.

Many banks also offer £75 off a holiday booked with STA Travel, who are specialists in round the world trips. God knows what kind of STA travel holiday you can afford if you desperately need an extra £3,000 just to keep going in life. Just as well you get commission-free foreign currency too.

Luckily, both banks have mobile banking apps. Good job students have got a nice iPhone to look at their overdrawn balance with.

Hope Nelson is a financial planning trainee at Manchester-based ethical financial advisory firm Gaeia. This article originally appeared on Gaeia’s blog.

Further reading:

Why I switched to ethical banking

65% of university students want ‘impact jobs’

Britain becoming more ‘positive’ with money – but many struggle with debt

25 universities to share £5m for green projects – as A-level results are revealed

The Guide to Sustainable Banking 2012

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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