News July-August 2008

The following are summaries of news stories from the July-August 2008 print edition of Environmental Finance magazine

US court throws emissions markets into turmoil

A US court has invalidated the entire Clean Air Interstate Rule over “fatal flaws”, sending the market for sulphur dioxide and annual nitrogen oxides allowances into turmoil and creating enormous uncertainty about how the US is to control airborne pollutants.

Gary Hart, a veteran of emissions trading and a consultant to Houston, Dallas-based brokerage ICAP Energy, described 11 July, the day the court’s decision was announced, as ‘Black Friday’. “The confidence and credibility of the emissions markets have been shaken,” he said. More...  

Carbon prices hit two-year, record highs

Record oil prices have driven prices for carbon allowances (EUAs) in the EU Emissions Trading Scheme to their highest levels in more than two years, while fears of a shortage of carbon credits from projects in developing countries have pushed prices of certified emission reduction credits in the secondary market above €20 ($32) for the first time.

Crude oil rose above $145/barrel in early July, lifting European gas prices. With gains in gas prices outstripping those of coal, the latter – for the moment – remains the more profitable fuel for power generation in Europe. Given the higher carbon intensity of coal compared with gas, this generated strong demand for EUAs, say traders. More...  

Weather risk market bounces back

The market for weather derivatives has regained much of the value it lost in the slump of 2006/07, as activity continues to migrate to the Chicago Mercantile Exchange, the leading marketplace for trading weather risk.

The notional value of weather contracts traded in the year to March 2008 was $32 billion, according to a survey ofWeather Risk Management Association members, conducted by PricewaterhouseCoopers. This was 68% up on the $19 billion recorded last year, but still well short of the record $45 billion in 2005/06. More...

UK, Europe rethink commitment to biofuels expansion

The UK government looks set to take its foot off the biofuels accelerator following a review that questioned their sustainability and said that biofuel growth was raising food prices.

Meanwhile, the European Parliament’s environment committee has voted for the EU to revise downwards its biofuels target, and impose tighter sustainability criteria. More...  

California unveils emissions plan

The California Air Resources Board draft scoping plan for emissions reductions has drawn a broadly positive response, although some question if the plan’s ambition may face problems due to a weakening economy and transmission constraints.

The plan, released on 26 June, is designed to reduce California’s greenhouse gas emissions by 30% over the next 12 years. Its two centrepieces are a cap-and-trade programme and an expansion of the state’s renewable portfolio standard. More...  

German renewables industry welcomes subsidy reforms

The German renewable energy industry has broadly welcomed the government’s overhaul of its renewable energy subsidies – shrugging off reductions in solar subsidies and applauding more support for offshore wind and biomass.

Eduard Sala, research analyst for Emerging Energy Research in Barcelona, said the deal – agreed by the Bundestag in early June – was “very good news for wind power in Germany and not as bad as expected for other renewable industries”. More...  

JBIC slammed for financing Sakhalin II

The Japanese Bank for International Cooperation (JBIC) has organised a $5.3 billion syndicated loan to finance the Sakhalin II oil and gas project, to the consternation of NGOs, which called the decision “tragic news for the environmental and social credibility” of the banks involved.

The project – on the Russian island of Sakhalin – has long been criticised by local environmental groups, because it is situated in the only breeding ground of the threatened Western Grey Whale. NGOs also say work disrupts ecosystems on the island, including breeding rivers for wild salmon. A coalition of 17 NGOs wrote to JBIC to protest its decision and provide evidence which they say demonstrates that Sakhalin II violates the export-credit agency’s environmental policies. More...  

World Bank failing on climate change, says WRI

The World Bank “has not met existing G8 expectations” on integrating climate change into its operations, according to a highly critical report released as the Bank’s board approves two $5 billion plus climate funds.

Less than a third of World Bank lending to the energy sector in the last two years has integrated climate change considerations into project decision-making, according to the report, from leading think-tank the World Resources Institute. More...  

Development banks boost use of weather derivatives

The World Bank is to begin offering weather derivatives as part of a strategy to reduce the impact of drought in developing countries, while the Japanese Bank for International Cooperation is targeting Thai farmers for weather deals.

The World Bank is aiming to reduce the reliance of developing countries on donor funding to alleviate catastrophes – for example, crop failures caused by a lack of rainfall. More...  

Suez swoops on Econergy

French energy giant Suez is to buy Econergy International, after the directors of the UK-listed renewable energy and carbon project developer recommended that shareholders accept the £0.45 ($0.88) a share offer. That bid – made on 13 June – trumped a cash-and-shares offer from carbon fund Trading Emissions Plc (see Environmental Finance, June 2008, page 11).

The bid, by subsidiary Suez Energy South America, values Econergy at £39.5 million – less than half the value of the company when it listed in February 2006 at £1/share. Suez notes that the offer is a 91.5% premium to the Econergy share price at the start of April, when the company first disclosed that it was subject to a number of preliminary approaches. More...  

SG, Citi share research honours

Société Générale (SG) has been named top European socially responsible investment (SRI) and sustainability research brokerage firm in the 2008 Thomson Reuters Extel Survey. Citi Investment Research came second. However, their positions were reversed in the pure SRI research category, which does not include renewable energy, corporate governance or long-term thematic research, with Citi coming first and SG second. Last year, Citi came first in both categories.

More than 7,500 investment professionals in 63 countries were consulted in the survey, which also rated SG as the leading renewable energy brokerage firm, a new category for the awards, followed by UBS and Cheuvreux. Patrick Hummel from UBS was MikeTyrell, Citi – top for SRI named top renewables analyst, followed by Didier Laurens at SG and Morgan Carval at Cheuvreux. More...  

WWF to measure carbon in China’s supply chain

Manufacturers in China’s Pearl River delta are piloting a carbon accounting and labelling programme initiated by WWF Hong Kong. The environmental NGO aims to address concerns among Western consumers and retailers about the carbon footprint of goods sourced from China.

The delta is home to a huge number of suppliers to US and European retailers and is responsible for around a third of the value of China’s exports. And, while power generation and heavy industry have been targeted to reduce greenhouse gas emissions, there has been a lack of initiatives for manufacturers further down the supply chain, according to Karen Ho, business engagement leader at WWF Hong Kong. More...  

Aviation industry anger over EU ETS deal

The aviation industry has reacted angrily to a deal and Parliamentary vote that will see aviation emissions from all flights starting and landing in the EU included in the region’s emissions trading scheme (ETS) from 2012.

The sector’s greenhouse gas reduction target will be based on average annual emissions between 2004 and 2006,with emissions capped at 97% of this average in 2012, at 95% from 2013 onwards, and then subject to further modification as part of a general review of the EU ETS.The majority of emissions allowances, 85%, will be allocated for free and the remaining 15% will be auctioned. More...  

Carbon Trust bids to certify corporate climate claims

The UK’s Carbon Trust has launched a scheme to certify organisations which have genuinely reduced their emissions, as opposed to simply offsetting them. The ‘Carbon Trust Standard’ certificate will be awarded to organisations which reduce emissions through their entire supply chain.

Organisations are required to calculate an appropriate carbon footprint, including electricity and gas consumption, other onsite fuel use and fuel consumption in vehicles based at sites covered by the assessment. They then have to demonstrate a reduction in emissions, as on either an absolute or relative (per unit of production) basis and also provide evidence of “good carbon management”. More...  

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