2013 could be 'climate game-changer'

An ice sculpture entitled 'Minimum Monument' by Brazilian artist Nele Azevedo outside Berlin's Concert Hall, September 2, 2009.

STORY HIGHLIGHTS

• The "neglected" risk of climate change seems to be rising to the top of leaders' agendas


• Extreme weather events are costing the global economy billions of dollars each year


• Gas can be an important bridge to a lower carbon future but it's not the answer


• More investment in renewable energy is needed, with fewer risks

Editor's note: Andrew Steer is President and CEO of the World Resources Institute, a think tank that works with governments, businesses and civil society to find sustainable solutions to environmental and development challenges.

(CNN) -- As leaders gather for the World Economic Forum in Davos, signs of economic hope are upon us. The global economy is on the mend. Worldwide, the middle class is expanding by an estimated 100 million per year. And the quality of life for millions in Asia and Africa is growing at an unprecedented pace.

Threats abound, of course. One neglected risk -- climate change -- appears to at last be rising to the top of agendas in business and political circles. When the World Economic Forum recently asked 1,000 leaders from industry, government, academia, and civil society to rank risks over the coming decade for the Global Risks 2013 report, climate change was in the top three. And in his second inaugural address, President Obama identified climate change as a major priority for his Administration.

Andrew Steer

For good reason: last year was the hottest year on record for the continental United States, and records for extreme weather events were broken around the world. We are seeing more droughts, wildfires, and rising seas. The current U.S. drought will wipe out approximately 1% of the U.S. GDP and is on course to be the costliest natural disaster in U.S. history. Damage from Hurricane Sandy will cost another 0.5% of GDP. And a recent study found that the cost of climate change is about $1.2 trillion per year globally, or 1.6% of global GDP.

Shifting to low-carbon energy sources is critical to mitigating climate change's impacts. Today's global energy mix is changing rapidly, but is it heading in the right direction?

Coal is the greatest driver of carbon dioxide emissions from energy, accounting for more than 40% of the total worldwide. Although coal demand is falling in the United States -- with 55 coal-powered plants closed in the past year -- it's growing globally. The World Resources Institute (WRI) recently identified 1,200 proposed new coal plants around the world. And last year, the United States hit a record-high level of coal exports—arguably transferring U.S. emissions abroad.

Meanwhile, shale gas is booming. Production in the United States has increased nearly tenfold since 2005, and China, India, Argentina, and many others have huge potential reserves. This development can be an economic blessing in many regions, and, because carbon emissions of shale gas are roughly half those of coal, it can help us get onto a lower carbon growth path.

However, while gas is an important bridge to a low carbon future—and can be a component of such a future—it can't get us fully to where we need to be. Greenhouse gas emissions in industrial countries need to fall by 80-90% by 2050 to prevent climate change's most disastrous impacts. And there is evidence that gas is crowding out renewables.

Renewable energy -- especially solar and wind power -- are clear winners when it comes to reducing emissions. Unfortunately, despite falling prices, the financial markets remain largely risk-averse. Many investors are less willing to finance renewable power. As a result of this mindset, along with policy uncertainty and the proliferation of low-cost gas, renewable energy investment dropped 11%, to $268 billion, last year.

What do we need to get on track?

Incentivizing renewable energy investment

Currently, more than 100 countries have renewable energy targets, more than 40 developing nations have introduced feed-in tariffs, and countries from Saudi Arabia to South Africa are making big bets on renewables as a growth market. Many countries are also exploring carbon-trading markets, including the EU, South Korea, and Australia. This year, China launched pilot trading projects in five cities and two provinces, with a goal of a national program by 2015.

Removing market barriers

Despite growing demand for renewable energy from many companies, this demand often remains unmet due to numerous regulatory, financial, and psychological barriers in the marketplace.

In an effort to address these, WRI just launched the Green Power Market Development Group in India, bringing together industry, government, and NGOs to build critical support for renewable energy markets. A dozen major companies from a variety of sectors—like Infosys, ACC, Cognizant, IBM, WIPRO, and others— have joined the initiative. This type of government-industry-utility partnership, built upon highly successful models elsewhere, can spur expanded clean energy development. It will be highlighted in Davos this week at meetings of the Green Growth Action Alliance (G2A2).

De-risking investments

For technical, policy, and financial reasons, risks are often higher for renewables than fossil-based energy. Addressing these risks is the big remaining task to bring about the needed energy transformation. Some new funding mechanisms are emerging that can help reduce risk and thus leverage large sums of financing. For example, the Green Climate Fund could, if well-designed, be an important venue to raise funds and drive additional investments from capital markets. Likewise, multi-lateral development banks' recent $175 billion commitment to sustainable transport could help leverage more funds from the private and public sectors.

Some forward-looking companies are seeking to create internal incentives for green investments. For example, companies like Unilever, Johnson & Johnson, and UPS have been taking actions to reduce internal hurdle rates and shift strategic thinking to the longer-term horizons that many green strategies need.

Davos is exactly the type of venue for finding solutions to such issues, which requires leadership and coalition-building from the private and public sectors. For example, the the G2A2, an alliance of CEOs committed to addressing climate and environmental risks, will launch the Green Investment Report with precisely the goal of "unlocking finance for green growth".

Depending on what happens at Davos—and other forums and meetings like it throughout the year—2013 could just be a game-changer.

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The opinions expressed in this commentary are solely those of Andrew Steer.

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2 men died in high-rise fire after rescuing elderly woman: officials

A high-rise fire on Chicago's south side killed two men and seriously injured a woman.

The two men who died in a South Shore high-rise fire had rescued an elderly woman on the seventh floor and had returned to the burning apartment with fire extinguishers when they apparently were overcome by smoke, officials said today.

Jameel Johnson, 36, and John Fasula, 50, were working in the 16-story building in the 6700 block of South Shore Drive Tuesday morning when the fire broke out on the seventh floor, officials said.

The two heard an 81-year-old woman screaming for help and placed her inside an elevator and pressed a button to take her to the first floor, according to police and David A. Fields Jr., Johnson’s cousin.

Fasula and Johnson returned to her apartment with fire extinguishers, police said. They were later found by firefighters, collapsed on the floor and were in full cardiac arrest, according to police and fire officials.

The woman collapsed on the floor of the lobby after the elevator doors opened, but was revived by paramedics and taken to the University of Chicago Hospitals, where she was listed in critical condition from smoke inhalation, according to police.

“He died a hero,” Fields said in a telephone interview. “They died saving a woman’s life.”

Johnson, the father of two girls, was working as a private contractor for a cable company, his family said. He did not like being inside high-rise buildings, but the company could not find a replacement, relatives said.

“He went with the understanding that maybe it was just a service call and he could be in and out,” Fields said. “He didn’t want to be in the high-rise building, that was his whole thing. He didn’t want to be there.”

Relatives described Johnson, an Englewood native, as a fun-loving man who did whatever he could to take care of his fiance and two children, ages 14 and 3. Johnson had ventured into different careers over the years, but returned to the cable business about a year ago.

“He was a good father who was just trying to make sure his kids had the best,” Fields said.

He had been with his fiance for 15 years and the family lives in Gary, Ind., Fields said. His youngest daughter still doesn’t understand what happened, relatives said.

“She’s still looking for her father to come home,” said Johnson’s aunt, Rosemary Cohns. “That’s the hardest part.”

Relatives of Fasula said they were not surprised to hear he risked his life for someone else.

“That’s how my brother-in-law was,” said Michelle Kozicki, 65, Fasula’s sister-in-law. “There’s never going to be another one like my brother-in-law Johnny. There’s not a bad bone in his body.”

Fasula was a maintenance manager for the CTA, spokeswoman Lambrini Lukidis said. He started working for the transit agency in 1983.

Fasula’s family knew he was at the apartment building for a “side job,” though she wasn’t sure what the work entailed. Kozicki said it was common for Fasula, who had been married for nearly 40 years, to work jobs outside his day job at the CTA.
 
“He didn’t like to sit still,” she said.

He went out of his way to help his father before he died in 2009. He was with him “every step of the way,” Kozicki said. For example, Fasula took time off of work to drive his father to doctor’s appointments.

Cook County Commissioner John Daley, who knew Fasula through his father, called him an "outstanding young man" whose death is a "tremendous loss."

"If you were in trouble, John was always there," Daley said.

Fire officials have said the fire apparently started in a bedroom on the seventh floor. Fire Department spokesman Larry Langford said the cause is undetermined pending further analysis of electrical information.  It does not appear suspicious, he added.

“In short, it generally means we have to have some items looked at,” Langford said of the analysis.

chicagobreaking@tribune.com

Twitter:@ChicagoBreaking

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Cameron promises Britons vote on EU exit

LONDON (Reuters) - Prime Minister David Cameron promised Britons a vote on quitting the European Union, rattling London's biggest allies and some investors by raising the prospect of uncertainty and upheaval.

Cameron announced on Wednesday that the referendum would be held by the end of 2017 - provided he wins a second term - and said that while Britain did not want to retreat from the world, public disillusionment with the bloc was at "an all-time high".

"It is time for the British people to have their say. It is time for us to settle this question about Britain and Europe," Cameron said in a speech, adding that his Conservative party would campaign for the 2015 parliamentary election on a promise to renegotiate the terms of Britain's EU membership.

"When we have negotiated that new settlement, we will give the British people a referendum with a very simple in or out choice to stay in the European Union on these new terms; or come out altogether. It will be an in-out referendum."

A referendum would mark the second time British voters have had a direct say on the issue. In 1975, they decided by a wide margin to stay in, two years after the country had joined.

Most recent opinion polls have shown a slim majority would vote to leave amid bitter disenchantment, fanned by a hostile press, about the EU's perceived influence on the British way of life. However, a poll this week showed a majority for staying.

Cameron's position is fraught with uncertainty. He must come from behind to win the next election, secure support from the EU's 26 other states for a new British role, and hope those countries can persuade their voters to back the changes.

He also avoided saying exactly what he would do if he failed to win concessions in Europe, as many believe is likely.

Critics, notably among business leaders worried about the effect on investment, say that for years before a vote, Britain may slip into a dangerous and damaging limbo that could leave it adrift or effectively pushed out of the EU.

The United States, a close ally, is also uneasy about the plan, believing it will dilute Britain's international clout. President Barack Obama told Cameron last week that Washington valued "a strong UK in a strong European Union" and the White House said on Wednesday it believed Britain's membership of the EU was mutually beneficial.

Some of Britain's European partners were also anxious and told Cameron on Wednesday his strategy reflected a selfish and ignorant attitude. However, Angela Merkel, the leader of EU paymaster Germany, was quick to say she was ready to discuss Cameron's ideas.

FRENCH "NON"

French Foreign Minister Laurent Fabius was less diplomatic: "If Britain wants to leave Europe, we will roll out the red carpet," he quipped, echoing words Cameron used recently to urge France's rich to escape high taxes and move to Britain.

French President Francois Hollande repeated his refusal of special deals: "What I will say, speaking for France, and as a European, is that it isn't possible to bargain over Europe to hold this referendum," he said. "Europe must be taken as it is.

"One can have it modified in future but one cannot propose reducing or diminishing it as a condition of staying in."

Italian Prime Minister Mario Monti was more positive. He said he agreed with Cameron on the need to make the EU more innovative and welcomed the idea of a British referendum, saying he thought Britons would ultimately vote to stay in the bloc.

Billed by commentators as the most important speech of Cameron's career, his referendum promise ties him firmly to an issue that has bedeviled a generation of Conservative leaders.

In the past, he has been careful to avoid bruising partisan fights over Europe, an issue that undid the last two Conservative prime ministers, John Major and Margaret Thatcher.

His speech appeared to pacify a powerful Euroskeptic wing inside his own party, but deepen rifts with the Liberal Democrats, the junior partners in his coalition. Their leader, Deputy Prime Minister Nick Clegg, said the plan would undermine a fragile economic recovery.

Sterling fell to its lowest in nearly five months against the dollar on Wednesday as Cameron was speaking.

"BREXIT"?

Cameron said he would take back powers from Brussels, saying later in parliament that, when it came to employment, social and environmental legislation, "Europe has gone far too far".

But such a clawback - still the subject of an internal audit to identify which specific powers he should target for repatriation to London - is likely to be easier said than done.

If Cameron wins re-election but then fails to renegotiate Britain's membership of the EU, a 'Brexit' could loom.

Business leaders have warned that years of doubt over Britain's EU membership would damage the $2.5 trillion economy and cool the investment climate.

"Having a referendum creates more uncertainty and we don't need that," Martin Sorrell, chief executive of advertising giant WPP, told the World Economic Forum in Davos. "This is a political decision. This is not an economic decision.

"This isn't good news. You added another reason why people will postpone investment decisions."

Cameron has been pushed into taking such a strong position partly by the rise of the UK Independence Party, which favors complete withdrawal from the EU and has climbed to third in the opinion polls, mainly at the expense of the Conservatives.

"All he's trying to do is to kick the can down the road and to try and get UKIP off his back," said UKIP leader Nigel Farage.

Euroskeptics in Cameron's party, who have threatened to stir up trouble for the premier, were thrilled by the speech.

Conservative lawmaker Peter Bone called it "a terrific victory" that would unify 98 percent of the party. "He's the first prime minister to say he wants to bring back powers from Brussels," Bone told Reuters. "It's pretty powerful stuff".

Whether Cameron holds the referendum remains as uncertain as the Conservatives' chances of winning the election. They trail the opposition Labour party in opinion polls, and the coalition is grappling with a stagnating economy as it pushes through unpopular public spending cuts to reduce a large budget deficit.

Labour leader Ed Miliband said on Wednesday his party did not want an in-or-out referendum.

EU REFORM

Cameron said he would campaign for Britain to stay in the EU "with all my heart and soul", provided he secured the reforms he wants. He made clear the Union must become less bureaucratic and focus more on free trade.

It was riskier to maintain the status quo than to change, he said: "The biggest danger to the European Union comes not from those who advocate change, but from those who denounce new thinking as heresy," he said.

Asked whether, if he did not succeed in his renegotiation strategy, would recommend a vote to take Britain out, he said only: "I want to see a strong Britain in a reformed Europe.

"We have a very clear plan. We want to reset the relationship. We will hold that referendum. We will recommend that resettlement to the British people."

Cameron said the euro zone debt crisis was forcing the bloc to change and that Britain would fight to make sure new rules were fair to the 10 countries that do not use the common currency, of which Britain is the largest.

Democratic consent for the EU in Britain was now "wafer thin", he said:

"Some people say that to point this out is irresponsible, creates uncertainty for business and puts a question mark over Britain's place in the European Union. But the question mark is already there: ignoring it won't make it go away."

A YouGov opinion poll on Monday showed that more people wanted to stay in the EU than leave it, the first such result in many months. But it was unclear whether that result was a blip.

Paul Chipperfield, a 53-year-old management consultant, said he liked the strategy: "Cameron's making the right move because I don't think we've had enough debate in this country," he said.

"We should be part of the EU but the EU needs to recognize that not everybody's going to jump on the same bandwagon."

Asked after the speech whether other EU countries would agree to renegotiate Britain's membership, Cameron said he was an optimist and that there was "every chance of success".

"I don't want Britain to leave the EU," he told parliament later. "I want Britain to reform the EU."

In the 1975 referendum, just over 67 percent voted to stay inside with nearly 33 percent against.

(Additional reporting by Paul Taylor in Davos, Alexandra Hudson in Berlin, Brenda Goh in London, Jeff Mason in Washington and James Mackenzie in Rome; Editing by Guy Faulconbridge, David Stamp and Alastair Macdonald)

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Cyclical sectors lift S&P 500 to 5-year high

NEW YORK (Reuters) - Cyclical sectors led the Standard & Poor's 500 to a five-year intraday high on Tuesday as traders gobbled up bank and commodity shares on hopes the global economy continues to mend.

The market also gained on signals that Republican leaders in the U.S. House of Representatives aim on Wednesday to pass a nearly four-month extension of the U.S. debt limit. The White House welcomed the move on Tuesday, saying it defuses fears of a U.S. default on its debt.

Adding to the upbeat sentiment, Portuguese 10-year debt yields fell below 6 percent for the first time since late 2010 on news that the country was set to tap the bond market this week for the first time since it was bailed out in 2011.

"Cyclicals underperformed late last year because of the fear of the fiscal cliff and the debt ceiling," said Jack de Gan, chief investment officer at Harbor Advisory Corp, in Portsmouth, New Hampshire.

He said overall better economic numbers in the United States and China, as well as more stabilization in Europe, were driving buyers into sectors associated with economic growth.

Gains were limited, however, as investors were cautious ahead of an increase in earnings reports and the S&P 500 was rising for the fifth straight day.

"Not very often do you go very far beyond that in the short term," De Gan said, "so any (bearish) news could turn us down for a day or so."

The Dow Jones industrial average <.dji> rose 47.43 points or 0.35 percent, to 13,697.13. The S&P 500 <.spx> gained 4.18 points or 0.28 percent, to 1,490.16. The Nasdaq Composite <.ixic> added 0.25 of a point, or 0.01 percent, to 3,134.96.

Freeport-McMoRan Copper & Gold led gains in the materials sector after it reported a 16 percent rise in fourth-quarter profit on higher production. Shares gained 5.4 percent to $35.44.

Technology shares underperformed as concerns about Apple's ability to continue to grow at hyper speed and a weak outlook from Intel Corp have diminished optimism about the sector's prospects. The S&P technology index <.splrct> was off 0.2 percent.

Major tech companies scheduled to report results after the market's close on Tuesday include Google Inc , IBM and Texas Instruments . Tech bellwethers Apple and Microsoft Corp are set to report earnings later this week.

"Any one of those, if there is a big surprise up or down, could shift the balance in the markets. So investors are being far more cautious than normal, especially with the market averages having broken out to five-year highs," said Fred Dickson, chief market strategist at D.A. Davidson & Co, in Lake Oswego, Oregon.

Four Dow components have already reported earnings Tuesday, and three rose on the results. Insurer Travelers was the standout, climbing 2.1 percent to $77.93.

Blue chips DuPont

, the largest U.S. chemical company by market capitalization, and Verizon Communications also posted revenue that beat forecasts.

DuPont's shares gained 1.6 percent to $47.74 while Verizon's rose 0.4 percent to $42.73.

On the downside, shares of Johnson & Johnson , the diversified health company, slipped 0.8 percent to $72.66 after it forecast 2013 earnings below expectations.

Thomson Reuters data through Tuesday morning showed that of the 74 companies in the S&P 500 that have reported earnings so far, 62.2 percent have topped expectations, roughly even with the 62 percent average since 1994, but below the 65 percent average over the past four quarters.

Overall, S&P 500 fourth-quarter earnings are forecast to have risen 2.6 percent. That estimate is above the 1.9 percent forecast from the start of earnings season, but well below the 9.9 percent fourth-quarter earnings forecast from October 1, the data showed.

U.S.-listed shares of Research in Motion jumped 11.3 percent to $17.63 a day after its chief executive said the Canadian company may consider strategic alliances with other companies after the launch of devices powered by RIM's new BlackBerry 10 operating system.

(Reporting by Rodrigo Campos and Chuck Mikolajczak; Editing by Jan Paschal)

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NFL lifts suspension of Saints coach Sean Payton

NEW YORK (AP) — Sean Payton is back as coach of the New Orleans Saints.

Payton's season-long suspension for his role in the Saints' bounty program was lifted by NFL Commissioner Roger Goodell on Tuesday, nearly two weeks earlier than expected.

The decision allows Payton to attend the Senior Bowl in Mobile, Ala., on Saturday, where some of the top college players available for the NFL draft will be competing.

Payton, along with assistant head coach Joe Vitt, general manager Mickey Loomis, and four players including Jonathan Vilma, was suspended after an investigation found the club had a performance pool offering cash rewards for key plays, including big hits. The player suspensions eventually were overturned.

"I clearly recognize that mistakes were made, which led to league violations," Payton said in a statement. "Furthermore, I have assured the commissioner a more diligent protocol will be followed."

The suspension was scheduled to end after the Super Bowl on Feb. 3, but was moved up after Payton and Goodell met on Monday.

"Coach Payton acknowledged in the meeting his responsibility for the actions of his coaching staff and players and pledged to uphold the highest standards of the NFL and ensure that his staff and players do so as well," Goodell said in a statement. "'Sean fully complied with all the requirements imposed on him during his suspension.

"More important, it is clear that Sean understands and accepts his responsibilities as a head coach and the vital role that coaches play in promoting player safety and setting an example for how the game should be played at all levels."

Saints owner Tom Benson welcomed back his coach.

"We are all thankful that Sean Payton has been reinstated," Benson said. "We have a lot of work to do and we are in the middle of it right now."

Payton also needs to fill a key position on his coaching staff following the departure last week of offensive line coach and running game coordinator Aaron Kromer, now the offensive coordinator in Chicago.

Loomis and Vitt are in Mobile evaluating players. Loomis said he was caught off guard by the news of Payton's return. But he said having Payton back sooner than expected will help the Saints.

"Every day makes a difference. We've certainly missed Sean in terms of the football team and all the things that go with our business and the game. But look, I miss his friendship. We all miss his friendship. We miss him as a person. I'm excited that he's going to be back here and fired up that he's back."

Vitt said he talked to Payton Tuesday morning and that he should join the Saints' contingent in Alabama on Wednesday.

"We just found out on the way to practice," Vitt said. "Mr. B called Mickey and we're all excited. Sean went and spent the day in New York (Monday). He just got back in Dallas. I talked to him on the phone about 5 o'clock this morning. He's packing his bags so we'll expect he'll be here some time" Wednesday.

Vitt agreed with Loomis that the timing of Payton's return is good for the team.

Payton is "going to hit the ground running with both feet. His jaw is going to be set. He'll have a note pad full of thoughts and ideas and he's going to have to get himself caught up with the evaluation process of our team and looking at film, which he'll do. This is perfect, getting him back now, because he's going to be here for the readings of our players. He's going to be here for the readings of these college seniors. We start handing out unrestricted free agent tape on Thursday and Friday of this week.

"This is where you're building the foundation of your football team, with the evaluation process of these draft eligible juniors and seniors and the free agents that are out there."

There remains one outstanding issue for the Saints stemming from the bounty probe: What will become of the Saints' second pick next spring. As part of the bounty punishment, Goodell fined the Saints $500,000 and took away second-round picks in 2012 and 2013. However, Goodell left open the possibility of restoring the 2013 second-rounder and instead docking the team a later-round pick if he is satisfied with the club's level of cooperation in the bounty matter.

What the Saints do know is that the 49-year-old Payton is set to return to New Orleans for the next five seasons. Earlier this month he signed a contract extension running through the 2017 season.

The coach is the last person punished in the bounty probe to return to work. Before Tuesday, Payton had not been at work since mid-April, when Goodell rejected the coach's appeal of his suspension.

Loomis was suspended for eight games, Vitt for six and former defensive coordinator Gregg Williams remains suspended indefinitely

Vilma and current Saints defensive lineman Will Smith, along with former Saints Scott Fujita and Anthony Hargrove, were given suspensions of various lengths, but never served a game. Their punishments were overturned after lengthy appeals which also coincided with exhaustive litigation in federal court.

The litigation included Vilma's defamation lawsuit against Goodell, which was dismissed by U.S. District Judge Ginger Berrigan last week.

Payton's reinstatement is one more step for the Saints to return to normalcy, but for Vitt, said it doesn't bring closure to the bounty scandal.

"It doesn't for me. You're going to have ask Sean that question, Mickey that question, Vilma that question. It certainly doesn't for me. I can forgive. I'm not going to forget. It is what it is."

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7 Pressing Foreign Policy Challenges for Obama’s 2nd Term

Now that President Obama’s inaugural festivities are over, he will turn his attention to tackling gun control, immigration, climate change and a series of looming budget confrontations with Republicans. Obama and his aides hope that the winding down of the wars in Iraq and Afghanistan will help him maintain a focus on domestic priorities.

“Since 9/11, that region has been a sinkhole of American resources, lives and political capital,” says Charles Kupchan, an expert at the Council on Foreign Relations. “The real drain of resources  is diminishing and I think that Obama will make sure that continues.”

But as the crises in Mali and Algeria show, Obama will not have the luxury of focusing solely on domestic issues. A number of pressing foreign policy problems will demand his time and attention. Here is a look at seven big national security challenges he will face over the next four years:

Afghanistan and Pakistan: When Obama met earlier this month with Afghan President Hamid Karzai, the administration said it was considering removing all U.S. troops from Afghanistan when the NATO-led combat mission ends in 2014. Karl Inderfurth, a former assistant secretary of state for South Asian affairs, says the administration must make good on a promise of a responsible withdrawal. Also crucial for Obama will be managing the U.S. relationship with Pakistan, which has been fraught with tension. “Pakistan is a pressing priority because the whole withdrawal (and) transition taking place in Afghanistan could not be done successfully without some form of Pakistani cooperation,” says Inderfurth, who is now with the CSIS think tank. “But Pakistan also is a country that, because where it resides in the region, because it is a nuclear power, because it is itself at risk of Islamic extremists, if something goes seriously wrong in Pakistan, this could be a serious national security threat to the United States.” Having John Kerry as secretary of state will be an advantage. The secretary of state-designate has traveled there on behalf of the Obama administration and already has relationships with top officials.

Pivot to Asia and engaging new Chinese leadership: In 2011, Secretary of State Hillary Clinton’s declaration of a “Pacific Century” signaled the start of a “pivot” to Asia that has involved stepped-up U.S. engagement in the region. As part of that effort, Obama traveled to Asia right after the election on a tour that included a historic visit to Myanmar. While many U.S. allies in the region have welcomed the U.S. engagement, the initiative is viewed warily in Beijing. The Obama administration has been seeking to reassure China that the pivot is not aimed at containing Beijing’s influence. In November, Xi Jinping was named the new head of the Chinese Communist Party, taking over from Hu Jintao in a once-in-a-decade leadership transition. Establishing a good working relationship with the new Chinese leadership is critical.

Standoff over Iran’s nuclear program: When Obama took office in 2009, he signaled a willingness to engage personally with Tehran, saying in his first inaugural speech that the United States would “extend a hand if you are willing to unclench your first.” The gesture was aimed at showing Iran – and U.S. allies – that his administration was willing to try to diplomacy first to make headway on the nuclear issue. The West accuses Tehran of using its nuclear enrichment program to try to build a nuclear weapon while Iran insists its nuclear program is aimed at purely peaceful purposes of developing electricity. The outreach did not lead to any breakthroughs so the Obama administration shifted its focus to working with U.S. allies to put in place stiff economic sanctions. Years of sanctions are taking a  toll on Iran’s economy. In the coming months, the United States will try direct talks with Iran. As he winds down the war with Afghanistan, the last thing Obama wants is another military engagement. But he has repeatedly said that a nuclear Iran is unacceptable. If sanctions and negotiations fail, the prospect of U.S.-led military action would grow.

Hotspots in Africa and the Middle East: The crises in Mali and Algeriaserve as a bleak reminder that several smaller conflicts around the globe could engulf an entire region. The Obama administration has resisted involvement in the Mali conflict for a variety of reasons. But clashes with Islamic militants in Somalia and Yemen could increase, as the U.S. ramps up its drone attacks. Additionally, clashes with rebels in some Sub-Saharan nations, such as the Central African Republic and the Democratic Republic of the Congo have also garnered U.S. attention. If these conflicts grow, it might become necessary for the U.S. to put more resources and political capital in these areas.

Israeli-Palestinian conflict: Two days before Obama’s first inauguration, Israel and Hamas agreed to a ceasefire to their three-week war that left nearly 1,500 Palestinian dead and chances for a peace deal slim. Four years later, the two sides find themselves in an equally precarious situation, fresh off a new conflict and with political conditions less than ideal. On Tuesday, Israelis are expected to keep Benjamin Netanyahu in power as prime minister, bringing with him a more hardened conservative coalition unlikely to support a broader two-state solution. Any new peace initiative must take account of a “loss of faith among both Israelis and Palestinians about the prospects of a real resolution,” said Tamara Cofman Wittes, a senior fellow at the Brookings Institution. “Without paying attention to the politics, such an initiative is destined to fail.” Wittes says that the U.S. can have intensive discussions with each side individually to get beyond these political divides and find a solution that could cement Obama’s legacy.

Syria: President Bashar al-Assad’s crackdown on the Syrian uprising has left 60,000 dead, according to United Nations estimates. The Obama administration has steered clear of military involvement but Washington is concerned about the potential that the Assad government might use chemical weapons. If that were to happen, it would cross a red line for the United States and could prompt military intervention. In any event, the humanitarian catastrophe from the Syrian conflict and its wider mplications for the region mean will demand constant monitoring.

“Reset” of the “reset” with Russia: Obama came into office in 2009 pledging a reboot in relations with Moscow, which had deteriorated in the final years of President George W. Bush’s administration. The Obama administration viewed the “reset” with Russia as important to many of its foreign policy priorities, including the mission in Afghanistan and stepping up pressure on Iran over its nuclear program. Obama established a rapport with then-President Dmitry Medvedev and ties between the two countries improved. But Vladimir Putin is now president again and relations between Moscow and Washington have soured in recent months. In retaliation for the Magnitsky Act, which calls for U.S. sanctions on Russian officials who violate human rights, Russia has banned adoptions by U.S. families of Russian children. Obama is expected to visit Russia later this year. Analysts say the engagement will be important, though few believe there will be a huge improvement anytime soon in relations.

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Defterios: What keeps Davos relevant

STORY HIGHLIGHTS

• Since the late 20th Century, the ski resort of Davos has been synonymous with the World Economic Forum


• Defterios: I first came to Davos as a relatively junior correspondent, two months after the Berlin Wall fell


• Fall of Communism, China's opening, removal of apartheid in South Africa unfolded in the 90s
  
  


• It's the inter-play between geo-politics and business is what keeps the forum relevant

Davos (CNN) -- Veterans of Davos often refer to nature's awe-inspiring work as the Magic Mountain.

The name comes from an early 20th century novel by Thomas Mann -- reflecting on life in an alpine health retreat, and the mystery of time in this breath-taking setting.

Read more from John Defterios: Why Egypt's transition is so painful

Since the late 20th century, this ski resort has been synonymous with the World Economic Forum, which represents networking on its grandest scale.

This year nearly 40 world leaders -- a record for this annual meeting -- 2000 plus executives and it seems an equal number of people in the media, like yours truly, are in pursuit of them all. The setting is certainly more chaotic then a decade ago. The agendas of the Fortune 500 chief executives are to filled with bi-lateral meetings and back door briefings to allow for the spontaneity that made this venue unique.

Davos gets ready for leaders' gathering

HIDE CAPTION

I first came to Davos as a relatively junior correspondent in 1990, two months after the fall of the Berlin Wall. It was arguably then, after nearly two decades in the conference business, when the forum became a fixture on the global calendar.

Quest: U.S. economy to dominate Davos 2013

I can remember, quite vividly, working out of a bunker (like we do today) in the Davos Congress Centre. West German Chancellor Helmut Kohl sat side-by-side with his East German counterpart Hans Modrow. That meeting before the global community helped set the stage for monetary union, a huge unification fund for what became Eastern Germany and shortly thereafter German elections.

The early 90s at Davos were dominated by European reconstruction after the fall of communism. Former party bosses came to the forum to convince business leaders that a transition to market economics could be delivered. Boris Yeltsin made his Davos appearance during that chaotic transition from the USSR to today's Russia.

Davos 2013: New year, same old problems?

In 1992, Chinese Premier Li Peng used the setting here in the Alps to articulate plans for the country's economic opening up to the world. Not by chance, the architect of Washington's engagement with Beijing, the former U.S. Secretary of State Henry Kissinger also took a high profile that year.

Again only two years later in 1994, Yasser Arafat and Shimon Peres walked hand in hand on stage, holding a public dialogue leading up to the creation and recognition of the Palestinian Authority.

The World Economic Forum, as the saying goes, was positioned to be in the right place at the right time. While the author of the Magic Mountain talked about the complexity of time around World War I, in the 1990s time was compressed here.

The fall of communism, the lowering of global trade barriers, the opening up of China, the removal of apartheid in South Africa and the proliferation of the internet all unfolded in that decade.

Interactive: How's your economic mood?

As those events came together, so too did the major players as they made the journey to Davos. Michael Bloomberg, evolving as a global name in financial data and now the Mayor of New York City, sat alongside Microsoft CEO Bill Gates. U.S. President Bill Clinton outlined his party's historic move to the political center before a packed audience of global business executives.

To spice things up, rock stars and actors, as they became activists, chose the Davos platform: Bono, Richard Gere, Sharon Stone, Brad and Angelina would have the wealthiest and most powerful corporate titans freeze in their tracks.

Earlier this week, I walked into the main plenary hall as workers put the final touches on the stage and lighting. It is a venue which has welcomed countless political leaders and business executives, during internet booms and banking busts, in the midst of a Middle East crisis and even during the lead up to two Gulf Wars.

But that inter-play between geo-politics and business -- during the best and worst of times -- is what keeps the forum relevant. It allows this setting at the base of the Magic Mountain to endure and recreate something unique during what Mann rightly described as the ongoing complexity of our times.

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2 dead, 1 hurt in extra-alarm fire at South Side high-rise

Firefighters work to extinguish a fire on the seventh and eighth floors of a high-rise apartment building at 6730 South Shore Drive in Chicago on January, 22,2013.

Two men died and a woman was seriously injured when an extra-alarm fire broke out in a high-rise on South Shore Drive this morning.

All three victims suffered full cardiac arrest, apparently from breathing in smoke, according to Fire Department spokesman Larry Langford.

One of the men was in his 30s and the other was in his 40s, according to the Cook County medical examiner's office. The first man was pronounced dead at 9:54 a.m. at the University of Chicago Medical Center and the other was pronounced later at Jackson Park Hospital,  officials said.

Their names were not being released pending notification of family, according to the medical examiner's office.

The men were found on the seventh floor and the woman was found in the lobby of the building in the 6700 block of South Shore Drive, also in full cardiac arrest, Langford said. Paramedics were able to revive her with CPR and took her to the University of Chicago Medical Center, Langford said.

A firefighter suffered minor injuries, officials said.

The fire broke out around 8:40 a.m. and was quickly raised to a 3-11 alarm with a call for at least 10 ambulances, officials said. Firefighters on a ladder battled the blaze on the seventh floor while firefighters on another ladder tried to reach residents on balconies on the other side of the building.

Langford said the fire may have started in the bedroom of an apartment on the 7th floor. The blaze spread to an apartment on the 8th floor, he said. The fire was under control by 9:25 a.m.

Edward Parks, 48, said he was sleeping in his 11th floor apartment when the fire alarm went off. Parks said he grabbed the warmest clothes he could find and joined other residents in the hall.

"It was real cloudy in the halls when I went out to see what was happening," Parks said, his mustache covered in icicles. "There was a fireman in the hall. It was an orderly exit."

Parks, who has lived in the building for five years, said he had been standing outside for more than an hour in the freezing weather.

Jevon Smith, 30, lives on the 5th floor and said he was at a neighbor's apartment when he saw the fire from a window.  "There were huge flames coming from three apartments," Smith said. "I'm glad I wasn't home - just hope no one was hurt."

"This cold is brutal," Smith said, rubbing his hands together.

Jay Fizer, 20 was sleeping in his 10th floor apartment when smoke alarms started going off.  "Next thing I know, I open the door and hear a little panic and whatever. . .We just grabbed our stuff and got out of there."

Fizer said a "big old wind of smoke just came out of nowhere" as soon as he and a few other residents got about halfway down the stairs. But they made it to the first floor exit.

"We did it on our own," Fizer said. "No help. Just God."

This is "the worst time for this to happen," he said, standing outside the building in nearly subzero temperatures.

The fire department did not order an evacuation of the building, telling residents it was safer to stay in their apartments, Langford said. Firefighters then went door to door, checking on them.

Water from hoses and hydrants had turned to sheets of ice around the building. Dozens of fire trucks, ambulances and police cars lined South Shore Drive.

An American Red Cross team was on the scene to help find shelter for families displaced by the fire, spokeswoman Patricia Kemp said.

Kemp said the crisis team would likely be meeting the injured residents and their families at the hospital. "We'll also be replacing some items lost in the fire," Kemp said.

Chicago Tribune reporter Carlos Sadovi also contributed.

chicagobreaking@tribune.com

Twitter: @ChicagoBreaking

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Netanyahu tops Israel vote despite losses: exit polls

JERUSALEM (Reuters) - Prime Minister Benjamin Netanyahu emerged the bruised winner of Israel's election on Tuesday, with his hawkish bloc unexpectedly losing ground to resurgent center-left challengers, exit polls showed.

They suggested the Israeli leader's Likud party, yoked with the ultra-nationalist Yisrael Beitenu group, would still be the biggest bloc in the 120-member assembly with 31 seats, 11 fewer than the 42 they held in the previous parliament.

If the exit polls compiled by three Israeli television channels prove correct, Netanyahu would be on course to secure a third term in office, perhaps leading a hardline coalition that would promote Jewish settlement on occupied land.

But his weakened showing in an election he himself called earlier than necessary could complicate the struggle to forge an alliance with a stable majority in parliament.

The projections showed right-wing parties with a combined strength of 61-62 seats against 58-59 for the center-left.

"According to the exit poll results, it is clear that Israel's citizens have decided that they want me to continue in the job of prime minister of Israel and to form as broad a government as possible," Netanyahu wrote on his Facebook page.

But the mood was subdued at his Likud party's election headquarters, with only a couple of hundred party activists and supporters in a venue that could house thousands.

The 63-year-old Israeli leader promised during his election campaign to focus on tackling Iran's nuclear ambitions if he won, shunting Palestinian peacemaking well down the agenda despite Western concern to keep the quest for a solution alive.

After a lackluster campaign, Israelis voted in droves on a sunny winter day, registering the highest projected turnout since 1999 when Netanyahu, serving his first term as prime minister, was defeated by then-Labour Party leader Ehud Barak.

The strong turnout buoyed center-left parties which had pinned their hopes on energizing an army of undecided voters against Netanyahu and his nationalist-religious allies.

The centrist Yesh Atid (There is a Future) party, led by former television talk show host Yair Lapid, came second with 18 or 19 seats, exit polls showed - a stunning result for a newcomer to politics in a field of 32 contending parties.

Lapid won support amongst middle-class, secular voters by promising to resolve a growing housing shortage, abolish military draft exemptions for Jewish seminary students and seek an overhaul of the failing education system.

The once dominant Labour party led by Shelly Yachimovich was projected to take third place with 17 seats.

A stream of opinion polls before the election had predicted an easy win for Netanyahu. The final opinion polls on Friday showed his Likud-Beitenu group still on top, but losing some ground to the Jewish Home party, which opposes a Palestinian state and advocates annexing chunks of the occupied West Bank.

The exit polls projected 12 seats for Jewish Home.

COALITION BUILDING

Full election results are due by Wednesday morning and official ones will be announced on January 30. After that, President Shimon Peres is likely to ask Netanyahu, as leader of the biggest bloc in parliament, to try to form a government.

The former commando has traditionally looked to religious, conservative parties for backing and is widely expected to seek out self-made millionaire Naftali Bennett, who heads the Jewish Home party and stole much of the limelight during the campaign.

Political sources said before the election that Netanyahu might approach center-left parties in an effort to broaden his coalition and present a more moderate face to worried allies.

British Foreign Secretary William Hague warned Israel on Tuesday it was losing international support, saying prospects for a two-state solution to the Israeli-Palestinian conflict were almost dead because of expanding Jewish settlements.

U.S.-brokered peace talks broke down in 2010 amid mutual acrimony. Since then Israel has accelerated construction in the West Bank and east Jerusalem - land the Palestinians want for their future state - much to the anger of Western partners.

Tuesday's vote is the first in Israel since Arab uprisings swept the region two years ago, reshaping the Middle East.

Netanyahu has said the turbulence, which has brought Islamist governments to power in several countries long ruled by secularist autocrats, including neighboring Egypt, shows the importance of strengthening national security.

He views Iran's nuclear program as a mortal threat to the Jewish state and has vowed not to let Tehran enrich enough uranium to make a single nuclear bomb - a threshold Israeli experts say could arrive as early as mid-2013.

Iran denies it is planning to build the bomb, and says Israel, widely believed to have the only nuclear arsenal in the Middle East, is the biggest threat to the region.

The issue barely registered during the election campaign, with a poll in Haaretz newspaper on Friday saying 47 percent of Israelis thought social and economic issues were the most pressing concern, against just 10 percent who cited Iran.

One of the first problems to face the next government, which is unlikely to take power before the middle of next month at the earliest, is the stuttering economy.

Data last week showed the budget deficit rose to 4.2 percent of gross domestic product in 2012, double the original estimate, meaning spending cuts and tax hikes look certain.

(Reporting by Jerusalem bureau; Editing by Alastair Macdonald)

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European shares test two-year highs, yen volatile before BOJ

LONDON (Reuters) - European shares inched towards two-year highs on Monday, as a political attempt to break a budget impasse in the United States and expectations of aggressive Japanese stimulus bolstered the appetite for shares.

U.S. House Republican leaders said on Friday they would seek to pass a three-month extension of federal borrowing authority in the coming days to buy time for the Democrat-controlled Senate to pass a plan to shrink budget deficits.

European shares <.fteu3> were supported by the news <.eu>, but with no clear response from the Democrats and a thin session expected due to a market holiday in the United States, the impact on assets such as bonds and commodities was limited.

By 1500 GMT London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were up 0.4 to 0.6 percent, leaving the pan-European FTSEurofirst 300 within touching distance of a two-year high and MSCI's world index <.miwd00000pus> steady at a 20-month high. <.l><.eu/>

Expectations that the Bank of Japan will deliver a bold monetary easing plan at the end of its two-day meeting on Tuesday also supported shares and created choppy conditions in the currency market.

According to sources familiar with the BoJ's thinking, the government of new Prime Minister Shinzo Abe and the central bank have agreed to set 2 percent inflation as a new target, supplanting a softer 1 percent 'goal'.

The yen, which has fallen 13 percent against the dollar over the last two months as the shift in Japanese policy has taken shape, touched a new 2-1/2 year low in early trading but then firmed as traders cut short positions given the BOJ has often fallen short of market expectations.

"Investors are being mindful that the moves we have seen over the course of the last month or two are just worth locking in at least until we understand how the BOJ are really going to play in the future," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

CURRENCY WARS

Japanese equities have surged in recent weeks in anticipation of a more aggressive monetary policy stance, but not everyone is happy.

The slump in the yen has prompted Russia's deputy central bank governor to warn of a new round of 'currency wars' and the medium-term risk of running ultra-loose monetary policies is likely to be a theme of the World Economic Forum in Davos, which opens on Wednesday.

With little in the way of economic data or debt issuance and U.S. markets shut for the Martin Luther King public holiday, the rest of the day was expected to be a fairly quiet for investors.

As the first European finance ministers' meeting of the year got under way, most euro zone government bonds were trading virtually flat and the euro was steady at $1.3316.

Market pressure on Europe is now less intense thanks to the European Central Bank's promise to prevent a collapse of the euro. Policymakers are set to discuss Cyprus's plight and plans for the euro zone's bailout fund to directly recapitalize banks.

French Finance Minister Pierre Moscovici said as he arrived at the Brussels meeting that a proper recapitalization strategy was very important.

"Negotiations will be complex, and a final decision is unlikely to emerge soon. Risks for sovereign spreads in the periphery should be limited, but we have some concerns that the long-term solution may fall short of what a real banking union needs," said UniCredit economist Marco Valli.

POLITICAL GAME

The efforts by Republican lawmakers to give the U.S. government leeway to pay its bills for another three months dented demand for safe haven assets and pushed German government bond yields near the top of this year's range.

The U.S. Treasury needs congressional authorization to raise the current $16.4 trillion limit on U.S. debt sometime between mid-February and early March. A failure to achieve that could lead to a debt default.

"This is part of the political game, it remains to be seen whether the Democrats will accept it," KBC strategist Piet Lammens said, adding that investors' working scenario was that a solution to raise the ceiling would be eventually found anyway.

One of the key factors that drove 2-year German yields higher last week was also the prospect of sizeable early repayments of the 1 trillion euros euro zone banks took from the ECB roughly a year ago.

The central bank will publish on Friday how much banks plan to return at the optional first repayment date on January 30. A Reuters poll on Monday showed around 100 billion euros are expected to be repaid although some predict it could be as high as 250 billion.

OIL OVERSUPPLY

German markets showed no reaction after the country's center-left opposition party edged Chancellor Angela Merkel's conservatives from power in a regional election on Sunday, reviving its flagging hopes for September's national election.

The Bundesbank's latest report delivered an upbeat message on the country's economy, saying a recent slump should be short-lived and may have already bottomed out.

Oil prices took their cues from a report in the United States at the end of last week that showed consumer sentiment at its weakest in a year as a result of the uncertainty surrounding the country's debt crisis.

Concerns about demand overshadowed supply disruption fears reinforced by the Islamist militant attack and hostage-taking at a gas plant in Algeria, a member of the Organization of Petroleum Exporting Countries.

Brent futures were down by 40 cents to $111.47 per barrel by mid-afternoon. U.S. crude shed 43 cents to $95.13 per barrel after touching a four-month high last week.

"The over-riding fundamental feeling in the market is that crude oil is over-supplied in 2013," said Tony Nunan, an oil risk manager at Mitsubishi.

Last week's data showing a pick-up in the Chinese economy helped keep growth-sensitive copper prices steady at roughly $8,056 an ounce. Gold, meanwhile, reversed Friday's losses to stand at $1,688 an ounce.

(Additional reporting by Sudip Kar-Gupta, Marious Zaharia and Anooja Debnath; Editing by Peter Graff)

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