Wednesday, 5 November 2008

Greenpeace calls off Japanese anti-whaling mission

Campaigners focus resources on defending activists accused of stealing whale meat instead of following Antarctic boats
Justin McCurry in Tokyo,
Tuesday November 04 2008 12.26 GMT

Greenpeace said today it had decided not to harass Japanese whalers in the Antarctic this year so it can focus on clearing two activists being held for allegedly stealing whale meat it says was bound for the black market.
The group said it would plough its resources into building an anti-whaling coalition in Japan and defending Junichi Sato and Toru Suzuki against the theft charges. If convicted, they could be sent to prison for 10 years.
"Our actions have taken the plight of the whales to the top of the political agenda," Jun Hoshikawa, Greenpeace Japan's executive director, said in a statement. "But if we are to bring this hunt to an end, we have to bring change in Tokyo."
Greenpeace denied it had bowed to pressure from the Japanese authorities. "The key country we need to influence is Japan, and we want to do that inside Japan," Greenpeace spokesman Dave Walsh told the Guardian. "We do have an international impact, but there's not a lot of point in preaching to the converted.
"We have saved whales every year we've been in the Antarctic, but we want to end whaling for good and we can't do that if all our resources and energy are focused on the Southern Ocean."
However, the whaling fleet, which is due to leave for the Southern Ocean later this month, will not be able to carry out its cull unhampered.
Sea Shepherd, a marine conservation group that advocates direct action, has vowed to disrupt the fleet's attempts to slaughter whales as part of Japan's controversial scientific whaling programme.
"We intend to be more aggressive and even more relentless," Peter Hammarstedt, a Sea Shepherd activist, said in a statement. "We intend to make sure no whales are caught on our watch."
Last year Japan's whalers had planned to catch 850 minke whales but returned this spring with 551 after being frustrated by Greenpeace and Sea Shepherd activists.
Although commercial whaling was banned in 1986, Japan is permitted to catch whales for "lethal research" into the mammals' migratory and other habits in anticipation of a return to sustainable commercial culls.
Sato and Suzuki were arrested in June after intercepting 23kg of whale meat they claimed had been pilfered by crew from the factory ship the Nisshin Maru and sold on Japan's lucrative black market. They will go on trial early next year.
"Junichi and Toru's trial is politically motivated," said Sara Holden, Greenpeace's whale campaign coordinator. "If the Japanese government wants to make political prisoners out of people who oppose whaling, then they are going to have to take a lot more prisoners."
The group said 250,000 people had emailed the Japanese prime minister, Taro Aso, demanding that the charges be dropped.

Ozone hole over Antarctica grows again

Stratospheric levels of harmful CFCs will take between 40 and 100 years to dissipate and have only dropped a few per cent since reaching a peak in 2000, scientists warn
John Vidal,
Tuesday November 04 2008 11.20 GMT

The ozone hole over Antarctica grew to the size of North America this year – the fifth largest on record – according to the latest satellite observations.
US government scientists from the National Oceanic and Atmospheric Administration (NOAA) say this year's ozone hole reached its maximum level on September 12, extending to 10.5m sq miles and four miles deep. That is bigger than 2007 but smaller than 2006, when the hole covered over 11.4m sq miles.
Scientists blamed colder-than-average temperatures in the stratosphere for the ozone hole's unusually large size this year. "Weather is the most important factor in the fluctuation of the size of the ozone hole from year to year," said Bryan Johnson, a scientist at NOAA's Earth System Research Laboratory in Boulder, which monitors ozone, ozone-depleting chemicals, and greenhouse gases around the globe. "How cold the stratosphere is and what the winds do determine how powerfully the chemicals can perform their dirty work."
The main cause of the ozone hole is human-produced compounds called chlorofluorocarbons, or CFCs, which release ozone-destroying chlorine and bromine into the atmosphere. The Earth's protective ozone layer acts like a giant parasol, blocking the sun's ultraviolet-B rays. Though banned for the past 21 years to reduce their harmful build up, CFCs still take many decades to dissipate from the atmosphere
The 1987 Montreal Protocol and other regulations banning CFCs reversed the build-up of chlorine and bromine, first noticed in the 1980s.
"These chemicals – and signs of their reduction – take several years to rise from the lower atmosphere into the stratosphere and then migrate to the poles," said NOAA's Craig Long, a research meteorologist at NOAA's National Centers for Environmental Prediction. "The chemicals also typically last 40 to 100 years in the atmosphere. For these reasons, stratospheric CFC levels have dropped only a few per cent below their peak in the early 2000s."
"The decline of these harmful substances to their pre–ozone hole levels in the Antarctic stratosphere will take decades," said NOAA atmospheric chemist Stephen Montzka of the Earth System Research Laboratory. "We don't expect a full recovery of Antarctic ozone until the second half of the century."
Starting in May, as Antarctica moves into a period of 24-hour-a-day darkness, winds create a vortex of cold, stable air centred near the South Pole that isolates CFCs over the continent. When spring sunshine returns in August, the sun's ultraviolet light sets off a series of chemical reactions inside the vortex that consume the ozone. The colder and more isolated the air inside the vortex, the more destructive the chemistry. By late December the southern summer is in full swing, the vortex has crumbled, and the ozone has returned – until the process begins anew the following winter.

Eco-town plan in disarray as sites fail to meet targets

Jill Sherman, Whitehall Editor

Gordon Brown’s eco-town programme was in disarray last night with only one of 12 shortlisted sites meeting the Government’s criteria.
Rural campaigners and opposition parties demanded a halt to the scheme, which has enraged residents across the country. The policy has been beset with difficulties in the past year as developers and councils have pulled out of the zero-carbon schemes, which are expensive to build and depend on huge infrastructure support.
Three projects have already been withdrawn, and Margaret Beckett, the Housing Minister, has now vetoed another in Leeds, suggesting that it should be a pilot for an urban eco-community instead. Only three of the 12 have local council backing and the Local Government Association is threatening legal action over the failure to follow planning procedures.
But Mrs Beckett confounded critics and angered town halls by pressing ahead with the scheme yesterday and adding two more sites – in Oxford and Norwich. Rackheath, near Norwich, has been propelled to the top of the shortlist as the only site with a grade A for its suitability for an eco-town site. The other, at northwest Bicester, Oxfordshire, has been put forward as an alternative to Weston Otmoor, Oxfordshire (given the lowest grade C) after a protest campaign by Tony Henman, Tim Henman’s father.

The remaining ten proposed towns were given B ratings, suggesting that they could be suitable locations “subject to planning and design objectives”. They include many of the schemes that have been strongly opposed, such as Ford, West Sussex; Middle Quinton, Warwickshire; and Pennbury, Leicestershire.
The Conservatives claimed yesterday that Mrs Beckett had moved the goalposts for building eco-towns and altered the list in an attempt to keep the project alive. She has also delayed any announcement of the final shortlist until March or April by announcing a second consultation to cover the 12 schemes outlined yesterday.

Policy leap vital for any serious cut in carbon emissions

From The Times
November 5, 2008

Carl Mortished: World business briefing

While you were distracted by crashing banks and clashing senators, you may have missed a small environmental earthquake. The price of carbon has collapsed.
In only three months, life has become a lot cheaper for polluters; the financial cost of warming the planet has plummeted in Europe’s emissions trading system (ETS) and the effectiveness of such a volatile market mechanism in curbing carbon is being questioned.
You may recall that the ETS is a mechanism to encourage businesses to reduce their carbon output. Europe’s larger companies are allocated permits to emit CO2 , and these allowances, called EUAs, can be traded on exchanges. Companies that emit less CO2 than their allocation can sell EUAs for cash, but inefficient polluters must buy EUAs or face bigger financial penalties.
The idea is that a shortfall in EUAs allocated by government will cause the carbon price to rise, stimulating investment in carbon reduction. It’s a market solution to pollution, but this carbon market is showing a distressing tendency to behave like most financial markets - hysterically. In July, the right to spew out one tonne of CO2 from a chimney would have cost a power generator €29.33, but yesterday it could be bought for only €18.25.
The sudden collapse of the carbon price mirrors the rout in the wider commodity markets. Carbon peaked in July, its price summit occurring within ten days of the peak in the crude oil price. Since then, everything from steel to potash has been tumbling and you might think it unsurprising that carbon has tracked the general retreat. Hedge funds and other financial investors dabbled in EUAs, as they fiddled with palm oil and soya. The rush to convert hedge fund investments into cash and US Treasury bills has resulted in rapid closure of positions on various carbon exchanges.
Obviously, the credit crunch has little to do with underlying demand for EUAs in a market artificially created by regulators in Brussels. However, economic downturn and recession will have an impact on the carbon market. Less industrial and transport activity implies fewer emissions, and so the shortfall between actual emissions and allowances will shrink, reducing demand for EUAs, thereby causing the carbon price to fall.
Some analysts reckon that the carbon price has fallen far enough, even allowing for a recession.
IDEAcarbon, a rating agency, has halved its estimate of the allocation shortfall from 206 million tonnes of carbon to 98 million tonnes in 2008 and 83 million tonnes in 2009. The point is that there will still be a shortfall. Société Générale reckons that EUAs will find a floor at €15 per tonne before rebounding next year into the low €20s per tonne.
Maybe so, but the ETS is making a mockery of Europe’s stumbling attempts to lead the world in a market-based carbon strategy. It is causing irritation and frustration to the armies of advisers and investors who seek to cajole utilities into big investments in carbon reduction. James Cameron, the director of Climate Change Capital, a financial adviser and fund manager, said: “The whole purpose [of the ETS] is to take carbon out. It’s not there to benefit funds or to support trading.”
It’s those “speculators” again, the ones that pushed the oil price up the hill to $147 a barrel and then let it roll back to $60. It is a terrible irony that one aim of creating a carbon market was to provide a measure of certainty to the energy industry in estimating the future price of carbon for the purpose of planning investments in new power generators. Estimates of the carbon price at which carbon capture and storage technology might be economically viable vary between €40 and €60 per tonne. Suffice it to say we are nowhere near these levels.
More political action is needed, Mr Cameron says, with smaller carbon allocations by governments to industry, which would entail a much bigger shortfall in EUAs and a much higher carbon price. It is a moot point, however, whether there is political appetite in Europe for such a burden. The European Commission is already struggling to create a coalition of the willing to do battle with carbon emissions, and Silvio Berlusconi, the Italian Prime Minister, has made clear his preference for a gentle regime.
It’s a measure of the speed at which politics moves in response to market prices that the green agenda has almost vanished from media political chatter. Carbon’s falling price spells companies going bust, the loss of jobs and the shredding of political reputations. Over the next year, no politician with reelection hopes will back a policy that would triple the price of carbon for industry and raise consumers’ energy costs. But there is a wider question about the ETS that must be addressed and that is whether it is a sensible mechanism to regulate carbon.
Price volatility, whether in oil, gas or coal, is a huge burden for the energy industry. Violent movements in price cause financial damage and promote short-termism, the sort of thinking that is anathema to the climate change lobby.
If there is to be any prospect of a serious cut in carbon, there must be stability in carbon pricing. Although a financial market gives useful price signals, it cannot provide stability.
Only a stable regulatory regime can provide certainty, but that means carbon taxes and a policy leap that no one is yet willing to make.

ADM Makes Ethanol Push Into Brazil With Venture


Archer Daniels Midland Co. said it will enter the ethanol market in Brazil, just as the economics of biofuel production in the U.S. are deteriorating.

The Decatur, Ill., company said Tuesday it would produce ethanol from sugar cane in Brazil through a joint venture. ADM will invest $370 million over seven years in two ethanol plants, with partner Grupo Cabrera adding $130 million.

ADM also reported a sharply higher quarterly profit, blowing past analysts' expectations with a performance driven by its core business of handling and processing commodities.

ADM already produces biodiesel in Brazil using soybeans. The new joint venture would expand its footprint in Latin America and augment its portfolio of biofuels operations in Europe, Asia and North America, underscoring the company's long-term belief in the business.

ADM is one of the largest producers of corn-based ethanol in the U.S., a sector that has turned from boom to bust despite billions of dollars in federal and state subsidies. Ethanol and biodiesel were key contributors to ADM's earnings in the past two years until market dynamics left the U.S. industry "barely profitable" this year, according to Ann Duignan, an analyst at J.P. Morgan Chase.

The economics of corn-based ethanol in the U.S. have deteriorated in recent months as companies struggled with a mix of high corn costs and weak ethanol prices. Construction of new plants has ground to a virtual halt after a three-year construction boom, and several operators -- including VeraSun Energy Inc. -- have sought bankruptcy protection.

A federal mandate will increase the amount of ethanol that must be blended with gasoline next year to 11.1 billion gallons. Investments required to meet tougher emissions standards for ethanol refiners are likely to extend the advantage of producers such as ADM that have balance sheets strong enough to handle the weak pricing environment.

ADM Chief Executive Patricia Woertz said ADM would complete two ethanol plants delayed by supply shortages, and remained interested in "distressed assets" that other struggling ethanol producers might put up for sale.

Ms. Woertz described the company's fiscal first quarter, which ended Sept. 30, as an "exceptional performance." She said it reflected ADM's balance-sheet strength, which allowed the company to buy and trade commodities at a time when smaller rivals have struggled to secure credit.

ADM generated record earnings for the quarter, with net profit more than doubling to $1.05 billion, or $1.63 a share, from $441 million, or 68 cents a share, a year earlier. Revenue rose 65% to $21.16 billion, as volume was little changed but selling prices soared.

Analysts had expected earnings of 69 cents a share, and ADM's stock was ahead $3.22, or 15%, at $24.33 in 4 p.m. composite trading on the New York Stock Exchange.

The performance helped lift the broader agribusiness sector, with Bunge Ltd.'s share price rising 8.6% and Monsanto Co. climbing 7.3%. Shares in the agribusiness sector have slumped over the past six months amid slowing growth for protein-based feed for animal and human consumption.

ADM, like Bunge, has insisted that underlying demand remains strong despite the slowdown, and Ms. Woertz said Tuesday she was "frustrated" at the company's share price. The stock fell from a peak of $48.95 in April to a low of $13.53 on Oct. 10, but has rallied since then.

Ms. Woertz said the Brazilian venture would produce 70 million to 90 million gallons of ethanol a year, and added that ADM is exploring other opportunities in the country.

While Brazil is the world's largest exporter of ethanol, ADM said selling into the U.S. remained uneconomical because of tariffs and transport costs. The company, nonetheless, continues to support the U.S. tariff on Brazilian ethanol imports.

—Emily Schulman contributed to this article.
Write to Doug Cameron at

Government urged to improve 'feed in tariff' scheme for renewable energy

Energy bill will do little to boost small-scale renewable projects, say campaigners such as Friends of the Earth

Kathryn Hopkins, Wednesday November 05 2008 00.05 GMT

Industry groups, trades unions and green campaigners are today calling on the government to introduce a strong system of support for renewable energy known as a "feed-in tariff".

The government last week introduced an amendment to its energy bill going through parliament that would bring in a feed-in tariff (FIT) — under which small-scale producers of energy from wind turbines or solar panels are paid an above-market rate for every unit of energy they produce. FITs have proved very successful in other countries but Britain remains well behind in its deployment of renewables.

But a number of organisations including the British Retail Consortium, the Home Builders' Federation, the Co-operative Group and Friends of the Earth have written today to every member of the House of Lords expressing disappointment with the government's amendment. They are disappointed that it contains no timetable for the introduction of a FIT, does not even firmly commit the government to introducing one and has too low a cap on the amount of energy the projects could produce.

As a result, they say, the energy bill will do little to boost the development of small-scale renewable energy projects. The House of Lords will later today vote on amendments to the government's amendment in a bid to beef up the bill.

Ed Matthew, spokesman for Friends of the Earth, said: "A strong feed-in tariff is desperately needed to give homes, businesses, communities and local authorities a financial incentive to fit renewable energy systems and play a major role in tackling climate change.

"Unfortunately the government's woolly proposals are fundamentally flawed and will not guarantee that an effective scheme will be introduced. Proposals for a feed-in tariff must be strengthened to ensure that the UK reaps the benefits of its abundant supply of clean, green energy."

The new climate change secretary, David Milliband, unexpectedly announced on October 16 that he intended bringing in a FIT, something that delighted green campaigners — hence their disappointing at the lack of detail or commitment in last week's amendment.

Many other countries, led by Germany, have introduced similar measures which have proved highly successful at boosting the uptake of renewable energy by shortening the payback time on such investments. FITs have also been shown to be the most cost effective support method.

At specialty garage, making hybrids even greener

By Felicity Barringer Published: November 5, 2008

SAN FRANCISCO: The fig tree and the philodendron are the first things that meet the eye in the repair bay of Luscious Garage. Then the two Toyota Priuses come into focus — one with a slightly dented rear door, the other on a lift with two tires off and rusty brake rotors exposed. Then comes the eerie sense that something is missing: grime.

"You could eat off her floor," said Sara Bernard, the customer in need of brake repair.

The only hybrid specialty garage run by a woman has opened in the Bay Area, which has more Priuses — 70,000 as of 2006 — than most states. And while its owner, Carolyn Coquillette, has a preoccupation with cleanliness that may not be unique in a mechanic's shop, her ubiquitous recycling containers (for paper, plastic, rubber, metal and oil) and the solar panels on her roof set Luscious apart. So does its specialty: giving hybrid owners the option of going fully electric.

Here in the district south of Market Street, a kind of harmonic convergence of early 21st-century trends is achieved as the latest incarnation of the car culture meets the new green culture in a feminist and thoroughly wired setting.

Luscious is a secular temple built to serve hybrids, the cars powered by both an electric motor (most often engaged when starting or stopping, thus most efficient in city traffic) and a gasoline engine (most efficient on the open road). But its owner's forte is converting them to plug-in hybrids, which are functionally all-electric cars that can go 12 to 15 miles on one charge.

That's right. Fifteen miles, maximum. For a mere $6,000. (If you go farther, the gasoline motor kicks back in. )

"People do it because they are ideologically committed," said Coquillette, the co-founder and now sole owner of the garage, which employs two other mechanics, one male and one female.

She divides her conversion customers into three groups: "Some people are very tech-savvy, so they like it. Some people are extreme environmentalists, so they like it. Some just want to burn less gas."

Donald Chu, who is 65 and a physical therapist, falls into the third category. With a 10-mile one-way commute, he said: "I can go the whole week without using any gas. I can get to work and when I get to work I charge it up and then I go home."

He figures he spent $100 a month for gasoline before his Prius was converted. So it would take five to six years to recoup the cost. But, he said, "you can spend the extra money being green and more efficient, or you can spend the extra money on gasoline."

Chu was the 21st paying customer to opt for the all-electric conversion, in which an array of 20 batteries, each the size of a videocassette, are installed in a retractable tray in the trunk. Toyota, for its part, adopts a posture of studied neutrality. Its spokesman, John Hanson, said, "We don't encourage nor discourage these modifications."

They do not void the car's warranty, he added — unless company mechanics determine the conversion caused the problem.

Coquillette, 30, an Ohio native, hopes to become a prophet of the all-electric future that some Californians dream of. The alternative newspaper The San Francisco Bay Guardian named Luscious its "green small business of the year."

But being a prophet is different from making a profit. Coquillette said only that she had some money set aside to support Luscious for a while — she hopes it will last until she turns the financial corner.

If it all seems a bit self-conscious, well, it is. As Coquillette describes it, everything she has done since graduating from the University of Michigan about eight years ago with degrees in physics and English somehow led to Luscious. Her first postgraduate years were the time for career experimentation, philosophical reflection and — after she became irritated that she could not repair her own car — bonding with wrenches.

Now she owns one of perhaps three or four garages in the Bay Area that specialize in hybrids, said Dana Meyer, who runs Dana Meyer Auto Service across the San Francisco Bay in Albany. The newness of the hybrid drive train, Meyer said, causes some mechanics to shy away.

Not Coquillette. She also wants her garage, like the cars she works on, to do things differently. She recycles almost everything, picking up a used air filter, ripping out the latticework of filter paper from the plastic frame with a small knife, then separating the plastic housing from its rubber cover and putting each in its own bin.

She makes her own windshield-washing fluid from vinegar. In the waiting room, the works of Anne Sexton and Virginia Woolf sit near tomes on physics and car repair.

Coquillette tried teaching and working for a nonprofit before she decided she preferred a mechanic's overalls. Cars, unlike eighth graders, don't talk back. When she got her first job, in a garage run by her auto-repair teacher at a local community college, she found that "a car would come in broken and would leave fixed, as opposed to nonprofit work where the goals are so nebulous."

After working at garages in Ann Arbor after college, she decided to go to California and write a book about how the culture of driving has changed. It grew out of her belief that the check engine alert signifies that "we're at the whim of computers now."

The manuscript was not sold, but its spirit was channeled into Luscious. By trying to demystify engines and their foibles, through conversations and posts on her Web site,, Coquillette said she hopes to "serve as a liaison between you and your car."

She said she believed that the modern driver's "emotional relationship with the car, not just the physical one, is changing."

"This is inevitable."

In a high-tech automotive environment, she added, what is needed is a shop focused on the heavily computerized car and the driver who must adjust to it.

"Driving is a necessary evil, even in a Prius," she said. "So are garages."

She added, "We're trying to minimize the impact."

Alternative energy groups fuel European advance

By Rachel Morarjee

Published: November 4 2008 10:58 | Last updated: November 4 2008 19:21

Alternative energy stocks were in the vanguard of a rally that saw European markets make gains for the sixth consecutive session on Tuesday.

The sector, which is a key barometer for risk appetite, posted dramatic double-digit gains as investors snapped up the stocks, which had more than halved in value since touching their highs in October last year.

Hopes for a Democratic victory in the US election, which could usher in a more favourable subsidy regime, provided another boost, analysts said.

German chemicals group Wacker Chemie, which produces polysilicon for solar panels, reported a forecast-beating 21 per cent increase in third quarter net profit, boosting the solar sector as renewable energy stocks tracked the wider market higher.

Norwegian solar company Renewable Energy rocketed 21.9 per cent to NKr85.60 while Germany’s largest solar company Q-Cells surged 15.8 per cent to €40.72. In the wind sector Denmark’s Vestas flew up 15.6 per cent to DKr311 while Spain’s Gamesagained 15.8 per cent to €15.28.

In the wider market, shares shrugged off some poor results, as investors hunted for bargains among stocks which lagged before last week’s dramatic rally.

Life insurers led the advance in the financial sector, while oil and commodities stocks also posted robust gains, propelling the FTSE Eurofirst 300 up 4.3 per cent to 974.15. The index has now risen 24 per cent since its low point on October 27.

In Frankfurt Germany’s Xetra Dax jumped 5 per cent to 5,278.04, while in France the CAC 40 rose 4.6 per cent to 3,691.09, following Wall Street’s charge higher as Americans voted for their next president.

Across the Atlantic, hopes for rate cuts in theUS and UK underpinned gains after similar cuts in Australia and emerging markets, said Mike Lenhoff, strategist at Brewin Dolphin.

“There is a like-minded urgency with which central banks are now prepared to respond to the threat of recession. That has provided a much more encouraging tone for markets,” he said.

Double-digit gains pushed life insurers higher with Swiss Life surging 20.1 per cent to SFr133.20 while Dutch ING group rose 19.5 per cent to €9.09 as concerns about solvency in the sector receded, dealers said.

Swiss Re, one of the world’s biggest reinsurance companies, reversed early losses after posting third-quarter losses of SFr304m to end up 11.2 per cent at SFr56.45.

Banks put in a strong showing with UBS up 4 per cent to SFr19.70 despite the Swiss bank warning that it may make a loss in the fourth quarter. Rival Credit Suisse gained 1.2 per cent to SFr43.38, while France’s Société Générale charged ahead 11.2 per cent to €47.05.

German luxury carmaker BMW shrugged off worse-than-expected third quarter results, with net profit down by 63 per cent. Its shares rose 11.6 per cent to €22.97, following the company’s announcement that it would cut back production, after dipping in early trade.

The carmaker said its fall in revenues reflected “the noticeable reluctance of customers to spend in the face of the crisis on international financial markets”, and warned it would not be able to meet its 2008 profit targets.

Other car companies drove forward, recouping some of Monday’s losses with France’s Renault up 9.7 per cent to €25.65, Peugeot advancing 6 per cent to €22.15 and Germany’s Volkswagen, which has been volatile, edged up 1.3 per cent to €398 despite its weighting in the Dax index dropping below 10 per cent.

Copyright The Financial Times Limited 2008

Sanyo Deal Could Drain Panasonic

Panasonic could short-circuit its ambitious profit goals if it buys Sanyo Electric.

Excitement over a mooted deal between the companies drove shares of both higher Tuesday. The combination could create Japan's biggest electronics maker by sales.

But unless Panasonic makes some aggressive moves to dump or fix Sanyo's many underperforming business lines, a deal could damage its ability to maintain and expand profits, just as demand for electronics wanes along with the U.S. economy.

Both have denied reports -- in The Wall Street Journal and the Japanese press -- that Panasonic may buy Sanyo's preferred stock. Worth about $6.4 billion, that stock would give Panasonic control of 70% of Sanyo's voting rights.

The drain to Panasonic would come from Sanyo's operations that overlap its own, the biggest being commercial and home appliances and electronics.

In the year ended in March, Sanyo's white-goods and consumer-electronics unit, which accounted for over a third of its revenue, showed an operating margin of only 2.3% against 5.8% and 6.6% at the two Panasonic groups that make similar products.

Panasonic has an ambitious plan that targets a 10% companywide operating margin through the fiscal year ending in March 2010. Even what Sanyo calls a "challenging target" -- a margin of 4.2% in fiscal 2010 -- falls far short of that.

Where Sanyo does offer Panasonic something unique is in areas like lithium-ion batteries -- being developed with Volkswagen for hybrid cars -- and solar panels. The unit that includes these high-margin products accounted for almost half of Sanyo's sales last fiscal year.

Still, investors cheering the takeover talks today might want to start pressing Panasonic on how it plans to address the other problems. If they don't, they could be in for a high-voltage shock.

Write to James Simms at

Luxury Consumers Scrimp for Sake Of Planet, and Because It's Cheaper


In this economy, it's easy being green.
Kelli Donley, a 29-year-old executive at a nonprofit group in Tempe, Ariz., says she has always been environmentally conscious, bringing her own bags to the grocery store and limiting her driving. Now she's "conserving clothing," too, by shopping at second-hand stores.

A reusable shopping bag makes an iconic appearance in a grocery store.
A year ago, when Ms. Donley and her six closest friends got together, they would discuss the latest designer jeans at Nordstrom, Dior's new cosmetics and exotic vacations. More recently, as the value of their stock portfolios and homes has plummeted, the talk has turned to crockpot recipes, coupon clipping and their latest purchases at thrift shops.
"It's definitely all of a sudden very cool to be cheap," Ms. Donley says.
The twin currents of an economic downturn and rising concern about the environment are merging in a shift in consumer psychology. After a decade of conspicuous consumption, many middle- and upper-income Americans are no longer comfortable showing off $300 Gucci sunglasses and $8,000 Hermes Birkin bags. They are developing a distaste for extravagance that promises to affect spending on everything from cars and travel to electronics, fashion and household goods -- and to last at least as long as the recession.
"Our retail and manufacturing clients are seeing almost an aversion to consumption," says Todd Lavieri, chief executive of Archstone Consulting, which tracks retail spending patterns. "In previous downturns [such as in 1991 and 2001], we have often seen shopping as therapy." Now, with credit conditions so tight, Mr. Lavieri says, "people aren't shopping to feel better. They actually are not shopping to feel better."
And that behavior (to be sure, a luxurious problem in a bad economy with high unemployment) dovetails neatly with environmentalism, another way people like to feel better.
Over the past year, some affluent Americans have simply "given up the fight to keep up with the Joneses," says Pamela Danziger, president of Unity Marketing, a research firm in Stevens, Pa., while others have decided that "spending money on luxury is a poor use of resources in a climate of high gas prices and rising carbon footprint."

Ms. Danziger is already seeing a significant change in behavior. In a Unity Marketing survey of 1,200 affluent consumers in early October, more than half of the respondents, whose average annual household income was about $210,000, said they had shopped less frequently in the past year and were cutting spending by shopping at outlet stores or at sales.
At a panel last week, Peter Boneparth, who was chief executive of Jones Apparel Group Inc. when it owned the upscale Barneys New York chain, said, "The luxury business is in for a really hard time" and that it would be "the slowest to recover." Mr. Boneparth said the global financial crisis had triggered a fundamental change in wealthy consumers' psychology and that "it's no longer chic to be spending" as in the past.
The shift began even before the credit markets broke down and the stock market plunged. Many Americans had already begun to question their "freewheeling consumption" and move toward "a culture of responsibility," says J. Walker Smith, president of global trends researcher Yankelovich, a unit of the Futures Company. For many, he says, environmental concerns were an important factor in this shift.
Environmental consciousness has often been associated with added expenses such as solar panels and organic food. But Wendy Liebmann, chief executive of consulting firm WSL Strategic Retail, has noticed that the economic downturn is accelerating mainstream acceptance of the thriftier behaviors of the green movement, like cutting out bottled water and growing vegetables.
"People are saying, 'We are going to save money, and we are going to save the environment,' " she says.
Lindsay Lefevere, a 31-year-old book editor in Carmel, Ind., has been economizing by cutting out weekly shopping trips to Target and daily coffees at Starbucks. Ms. Lefevere, long an avid recycler and crockpot user, has now begun canning apple butter and cherries for holiday gifts, recycling household items as wrapping paper and consolidating her errands to conserve gas. The economic crisis "is definitely making me more conscious about the environment," she says.
Even when they spend, some people are seeking environmental benediction for their purchases. Miranda Garcia, who at 33 is expecting her first child, recently bought a new Lexus SUV with side air bags that her husband thought would be safer than their old car. Ms. Garcia at first resisted, saying that buying a new car seemed ostentatious. She is still uneasy about it, but is quick to point out that the SUV is a hybrid.
"We wanted to do the right thing," she says.—Ray A. Smith contributed to this article.
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SSE Sells Half UK Wind Farm To Npower For GBP308M

(Adds RWE Innogy comment.) By James Herron
LONDON (Dow Jones)--Scottish and Southern Energy PLC (SSE.LN) Monday said it has agreed to sell half of the Greater Gabbard offshore wind farm it plans to build in the Thames Estuary to Npower Renewables, a U.K. subsidiary of German utility RWE AG (RWE.XE), for GBP308 million.
RWE's payment will give it 50% of the equity in the wind farm holding company and reimburse SSE for half the costs incurred in the development of the project so far.
Once completed, the project will have a capacity of 500 megawatts, making it the world's largest offshore wind farm.
Ian Marchant, Chief Executive of SSE, said: "Greater Gabbard is a major development in every sense, and its significance is underlined by RWE Innogy's investment in it. Our priority is to make sure construction work proceeds in an efficient and timely manner, so that it can begin to play its important part in meeting the U.K.'s energy needs as soon as possible."
Kevin McCullough, Chief Operating Officer of RWE Innogy, of which Npower renewables is a subsidiary, said: "This acquisition is a perfect addition to our existing offshore wind portfolio, and is also an important step towards reaching RWE Innogy??s goal of increasing its renewables production capacity to 4,500MW by 2012."
A London-based equity analyst said the sale was to be expected.
"SSE was always going to bring in a partner," after buying Fluor's (FLR) 50% stake in May, he said. SSE is in a closed period now ahead of its earnings, so it's difficult to know if they got a good price, he added.
Onshore work on the construction of the wind farm is under way and offshore work is on track to begin in the middle of 2009. The project will be commissioned in two phases, with the first phase generating electricity from 2010 and the entire construction scheduled to be completed in 2011. The full development is expected to cost GBP1.3 billion. SSE will operate the project.
SSE shares were down 0.9% or 11 pence, at 1203p at 1419 GMT Monday.
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317;

Big Box looks to small packages

By Jonathan Birchall in New York
Published: November 4 2008 02:00

Standing on a Wal-Mart shelf in Arizona, Arm & Hammer's new Essentials cleaning sprays present an unusual challenge for the average shopper.
Rather than the usual 32oz of liquid, the clear trigger-spray bottles are entirely empty. Instead, each comes with a cartridge of concentrate, to be added at home once the empty plastic bottle is filled with water.
"You are essentially asking the consumer to buy an empty product, and to fill it at home," says Steve Bolkan, director of innovation at Church & Dwight, owner of the brand. "It is a change in habits and practices."
Church & Dwight says its new bottles can be refilled up to seven times with cartridges that cost around 25 per cent less than a traditional cleaner. The product saves consumers money, while reducing not only the amount of plastic waste but the fuel and truck journeys needed to ship it to retailers, the company says.
The refillable bottles are perhaps the most striking examples of the US consumer goods industry's surge of interest in more environmentally sustainable products and packaging.
And while consumer demand may be slowing as recession deepens, the drive to reduce packaging is being pushed onwards by two things - potential cost savings and the interest of the largest US customer, Wal-Mart.
Wal-Mart accounts for a fifth of Church & Dwight's sales and was the first national retailer to stock the Essentials cleaning product, which was launched in September. "They have been very supportive of this initiative," says Bruce Tetreault, product manager for the Essentials brand.
The concentrated cleaner follows another of Wal-Mart's 'green packaging' initiatives. Its decision in 2006 to stock only double concentrate liquid laundry detergent led to the entire US detergent industry shifting to smaller, lighter bottles by the start of this year, saving millions of dollars in fuel costs.
To support its drive to reduce packaging across its global supply chain by 5 per cent by 2013, the retailer is assessing progress made by its suppliers in reducing the impact of packaging materials. Hundreds of suppliers have now entered details of their products into the system, which rates packaging according to factors ranging from the amount of greenhouse gas created by its production, to the effectiveness of shipping in pallets and containers (see below). One supplier, for instance, will start using new cereal boxes that will use 20 per cent less packaging.
"No single mandate has had a greater impact on packaging," says Ben Miyares, of the Packaging Machinery Manufacturers Institute, the leading packaging industry association. He notes that at the PackExpo event this month, over 500 of the 1,600 participants will be promoting sustainable packaging products - compared with fewer than a dozen in 2006 when Wal-Mart announced the launch of its scorecard.
But Arm & Hammer's empty bottle strategy also raises the question of how far consumers are prepared to be led by retailers, amid evidence that when products change, some people will complain.
The shift to double concentrate detergent, and related packaging changes, provoked angry responses on the website of Tide, Procter & Gamble's leading US brand, with consumers inveighing against "new Tide".
"I see I am not the only long-time Tide user that despises the new 2x product. What is P&G thinking?" asked one typically impassioned respondent.
Wal-Mart has introduced new rectangular milk containers at its Sam's Club stores, which allow trucks to carry 7 per cent more milk per journey, but it has faced complaints that the bottles spill more easily. As a result, it has organised in-store demonstrations in milk pouring.
When a Wal-Mart buyer wrote on the retailer's Check Out business blog this summer that the retailer was planning to introduce cardboard packaging for expensive computer games, J Richard Cooke, one of several apparently incensed customers, warned: "Do not take away my plastic cases. I'll be very upset."
Matt Kistler, who oversees Wal-Mart's sustainability efforts, argues that the retailer - which prides itself on being the advocate of its customers - can sometimes lead its customers to new products. It has been successful, for example, in selling more expensive, but longer lasting compact fluorescent lightbulbs.
"I think Wal-Mart is prepared to lead more with what we think the customer is going to want, versus just, and only, providing what they are currently buying. We can be a little bit further out in design, and in what the consumer will need in the future," says Mr Kistler. "We are experimenting and seeing what's possible."
The amount of packaging being redesigned to deliver improved sustainable performance still remains relatively low.
Other trends, too, are working in the opposite direction: one is a focus on new shapes designed to attract attention on the shelves; another is convenience.
But Pat Conroy, US consumer products leader at consultant Deloitte & Touche USA, says that sustainability is now "very high in importance in the minds of top industry executives".
"They would view it as one of the top two or three things they are concerned about. The open question is how far do you have to go to attract or retain customers . . . [and] that opens up the milliondollar question of whether consumers are really willing to pay more."
Ultimately, for both consumers and suppliers, cost savings - either in the supply chain or on the shelf - are likely to be the primary drivers of change, especially amid the pressures of rising fuel costs.
"If I can take a dollar and get three packages out of it rather than one package, I've extended my ability to sustain my business," says Mr Miyares at the PMMI. "And the environmental benefits derive as a kind of secondary consequence."
Church & Dwight executives say they know that they are taking a potentially expensive gamble on consumers' willingness to pour out their own cleaning fluid, even if changing behaviour saves them money.*
"There's a lot riding on it from our standpoint," says Mr Bolkan. But he adds: "Ten years ago, retailers were not driving this, now they are."
How Wal-Mart keeps score on suppliers' green commitment
From February this year, Wal-Mart has asked its suppliers - they number more than 60,000 - to submit, in an online "scorecard", data on the packaging they use so they can "evaluate themselves relative to other suppliers".
The card gives each product a final score based on a mix of nine factors, ranging from the amount of greenhouse gas produced per ton of packaging to the transport costs, the amount of recycled materials used and the level of sustainable innovation involved.
"Suppliers will receive an overall score relative to other suppliers as well as relative scores in each category," the retailer says.
Wal-Mart has said the results would be used to "measure and recognise the entire supply chain, based on each company's ability to use less packaging, utilise more effective materials in packaging and source these materials more efficiently relative to other suppliers".
"When you are such a dominant customer and the customer says 'we want you to do this' . . . the industry tends to comply," says Ben Miyares, at the Packaging Machinery Manufacturers Institute.
Wal-Mart is also translating the scorecard into Mandarin Chinese as part of its broader drive to improve the sustainability of its supply chain in China.
Copyright The Financial Times Limited 2008

UK prince calls for agency to help forests

By Lisa Murray in Jakarta and Fiona Harvey in London
Published: November 3 2008 17:56

Britain’s Prince Charles has called for the establishment of an international agency to issue long-term environmental bonds to provide emergency funding to rainforest nations and protect the world’s endangered forests.
During a visit to Indonesia on Monday, the Prince of Wales said the proceeds of such a fund would be used to reduce developing nations’ reliance on industries such as palm oil and logging, which lead to the destruction of forests.

Users in developed economies, he said in a speech in Jakarta, should be buying the bonds to pay developing countries for using their forests “in the same way as [consumers] pay for our water, gas and electricity”.
Prince Charles said long-term environmental bonds could be an emergency fund-raising tool. He said the bonds would be guaranteed by developed countries to make them attractive to investors.
He claimed to have already lined up some interested buyers, having worked closely with the P8, a group of 10 leading global pension funds which account for more than US$2,000bn (€1,573bn, £1,260bn) under management.
“I know that there is an appetite for quality, long-term investments that would help combat climate change,” Prince Charles told an audience including Indonesia’s president, Susilo Bambang Yudhoyono.
But, it is unclear whether such bonds would be attractive to developed countries in the grip of the financial crisis. Past attempts to reach a deal by which rich countries pay for poor countries to preserve their forests have floundered.
The issue is complicated by the difficulty of ensuring that forests are protected and not cut down illegally as well as the fact that preserving one section of forest from loggers can merely lead them to move to another area. Countries have mooted awarding carbon credits to forests that could be traded in the world’s emissions trading schemes, but traders are concerned that such credits would flood the market, bringing the price of all credits drastically low.
Countries are also currently negotiating the inclusion of a Reducing Emissions from Deforestation and Degradation (REDD) scheme in the successor to the Kyoto protocol, allowing those with high rates of deforestation to sell carbon credits if they stop, or reduce, land clearing, which releases huge amounts of carbon dioxide into the atmosphere.
But such a scheme, even if it were adopted, would still be years away from being able to provide the incentive for countries to stop clearing land for profitable palm oil plantations.
Copyright The Financial Times Limited 2008

‘Green’ jobs promise appears exaggerated

By Fiona Harvey, Environment Correspondent
Published: November 3 2008 03:09

Gordon Brown’s promises of a large number of new “green” jobs for the UK are unlikely to materialise, the Financial Times has found.
The prime minister has repeatedly promised employment creation in renewable energy of more than 160,000 new jobs by 2020, with further jobs in other environmental industries. The UK total could be less than half that, FT research suggests.
Many of the 160,000 jobs are likely to be generated overseas – for instance, in making wind turbines and other equipment in which the UK has only a tiny manufacturing base.
A Department of Energy and Climate Change official said: “The 160,000 jobs refers to global jobs created from meeting the UK’s 15 per cent target [for renewable energy generation] and does not include any estimates of the number of jobs in the UK associated with the global expansion in renewables.”
Another of the government’s estimates – that 10,000 new jobs would be created by its £100m electric cars initiative – is not based on research. An official told the FT the claim emerged from Department for Business expertise in the area.
Several leading industry observers have expressed scepticism over the government’s claims.
Qatar invests in UK renewable energy
Qatar is to set up a £250m fund to invest in low-carbon technology, primarily in the UK .
It will invest £250m in the Qatar-UK Clean Technology Investment Fund, with the rest to be sought from other investors. The fund will make venture capital investments in clean energy businesses.
The deal between the Qatari Investment Authority and the Carbon Trust, a UK government-funded body, marked a measure of success for Gordon Brown’s trip to the Middle Easton Sunday – part of his bid to attract new investment from oil-rich economies, as finance and credit have dried up in other markets.
Several governments in the Gulf region have begun showing interest in renewable energy in the past few years, amid rising concerns over finite oil reserves and climate change.
“I don’t see how they can get there on current form,” said Andrew Simms, policy director of the New Economics Foundation think tank.
Michael Liebreich, chief executive of New Energy Finance, a consultancy specialising in renewables, agreed: “We fear that expectations are being set unrealistically high by politicians who are making promises inconsistent with economic fundamentals.”
The prospect of new renewable energy jobs is seen as an important justification for adopting the European Union target of generating 20 per cent of energy from renewables by 2020. It would require the UK to generate 35 to 40 per cent of electricity from renewables.
A key plank in the government’s “green industrial strategy”, to be detailed by ministers next year, is attracting more renewable energy manufacturers to the UK – chiefly wind companies. Marine renewables, such as tidal and wave energy, are included in government plans but are in their infancy. The UK is unlikely to be able to tempt large, established wind turbine manufacturers to set up major operations. “The UK has missed the boat,” said Jim Dehlsen, chief executive of Clipper Windpower, a turbine maker.
The government hopes to kickstart a new industry – making wind turbines designed for use at sea. But the market for offshore turbines may be much less than the government predicts.
Offshore wind is two to three times more costly than onshore turbines. Most countries are concentrating on onshore wind. The US and China, rapidly becoming the biggest wind markets, have much land available and little need to expand offshore. Other European countries have fewer viable offshore wind sites than the UK.
Thus, the export market for UK-built offshore turbines is likely to be limited. Mr Dehlsen of Clipper, which recently set up a test facility in Blyth and plans to make offshore components there, said the UK was likely to be his biggest customer.
The number of people required to manufacture turbines is in doubt. Douglas-Westwood, which made the forecasts on which the UK’s renewable jobs estimate is based, assumed manufacturing each megawatt of wind capacity would generate three jobs directly.
“That sounds too high to me,” Mr Dehlsen said. He added that Clipper planned to produce 200 turbines a year at its plant, each capable of producing 7.5 to 10mw, by 2020. He expected the plant to employ 2,000 to 2,500 people, about a third to half the number implied by the government’s estimates.
An estimate by Bain and Company provides more evidence that the government’s job-creation claims are overblown. Bain found that if a third of the wind turbines needed to make the government’s renewable energy targets were made in the UK, it would create 36,000 jobs.
Copyright The Financial Times Limited 2008

Green Energy Boost Needed To Reach 2020 Goals

BRUSSELS (Dow Jones)--The production of green energy must be expanded swiftly across the European Union in order to meet the E.U.'s 2020 environmental targets - but it can be done, E.U. Energy Commissioner Andris Piebalgs said Monday.
As much as 34% of the E.U.'s electricity will likely come from renewables by 2020, with wind and biomass playing a key role, Piebalgs said. Solar energy will also become important as its cost is expected to halve by 2020, he added.
The European Commission has put forward a package of proposals to cut greenhouse gas emissions in the E.U., boost energy efficiency and increase to 20% the share of renewable energy for the bloc's energy needs by 2020.
In Spain, 10% of electricity in an average day is provided by wind energy and France already uses tidal power to produce electricity, Piebalgs said in a speech to the European Council of Applied Sciences, Technologies and Engineering in London.
The commissioner said the cost of meeting the green energy targets is "very modest."
"There is clearly a direct cost of the policy but it is relatively minor, and we believe there is a clear medium-term gain," he said.
In the U.K., the cost of the package would be less than GBP1 billion a year by 2020, he said. Taking into account the investments needed to replace aging power plants and other energy infrastructure, the amount is relatively small and the gains significant, he said.
National governments and the European Parliament are negotiating over the package, and some countries, including Italy and Poland, have complained that the proposals are too costly and will hamper growth at a time of economic downturn.
"We don't have a long-term choice about developing a low-carbon economy," Piebalgs said.
"Climate change, vulnerability to high fossil-fuel prices and energy security mean that we must not let current market turmoil distract us," he added.
-By Alessandro Torello, Dow Jones Newswires; +32 2 741 14 88;

Brown signs UAE clean energy deal

By Robin Wigglesworth in Abu Dhabi
Published: November 3 2008 23:30

Gordon Brown, the UK’s prime minister, on Monday signed a clean energy co­-operation agreement with a leading renewable energy company in the United Arab Emirates.
Mr Brown is on the last leg of a tour of the region to raise money from oil-rich Gulf states for the International Monetary Fund, an effort which, despite visits to Saudi Arabia and Qatar this week, has not yet produced any firm commitments.

The memorandum of understanding with Masdar to develop clean technologies came a day after neighbouring Qatar said it had agreed to invest £150m ($238m, €187m) in a UK low-carbon energy technology fund alongside Britain’s ­Carbon Trust and private investors.
Gulf states are planning for the day oil and gas runs out and several have targeted renewable energy as a strategic sector into which to diversify.
Masdar – a government-owned company based in Abu Dhabi, capital of the UAE – last month said it was taking a 20 per cent stake in the 1,000 megawatt London Array offshore wind farm for an undisclosed sum.
The company is also building a $22bn (€17bn, £14bn) city in the desert outside Abu Dhabi that it says will be carbon neutral when it is completed.
Mr Brown offered to support Gulf countries that want an increased say in the IMF in return for any contributions.
The Group of 20 countries – which includes Saudi Arabia, the regional heavyweight – will meet this month to try to strengthen the IMF ahead of what is expected to be a series of bail-outs by the fund.
Copyright The Financial Times Limited 2008

Scientists discover Patagonian diesel that grows on trees

Alok Jha, green technology correspondent
The Guardian,
Tuesday November 4 2008

The 'myco-diesel' fungus Gliocladium roseum, which grows inside the ulmo tree in northern Patagonia
A tree fungus could provide green fuel that can be pumped directly into vehicle tanks, US scientists say. The organism, found in the Patagonian rainforest, naturally produces a mixture of chemicals that is remarkably similar to diesel.
"This is the only organism that has ever been shown to produce such an important combination of fuel substances," said Gary Strobel, a plant scientist from Montana State University, who led the work. "We were totally surprised to learn that it was making a plethora of hydrocarbons."
In principle, biofuels are attractive replacements for liquid fossil fuels used in transport that generate greenhouse gases. The European Union has set biofuel targets of 5.75% by 2010 and 10% by 2020. But critics say current biofuels scarcely reduce greenhouse gas emissions and cause food price rises and deforestation. Producing biofuels sustainably is now a target and this latest work has been greeted by experts as an encouraging step.
The fungus, called Gliocladium roseum and discovered growing inside the ulmo tree (Eucryphia cordifolia) in northern Patagonia, produces a range of hydrocarbon molecules that are virtually identical to the fuel-grade compounds in existing fossil fuels. Details of the concoction, which Strobel calls "mycodiesel", will be published in the November issue of the journal Microbiology. "The results were totally unexpected and very exciting and almost every hair on my arms stood on end," said Strobel.
Many simple organisms, such as algae, are known to make chemicals that are similar to the hydrocarbons present in transport fuel but, according to Strobel, none produce the explosive high energy density found in this fungus. Strobel said that the chemical mixture produced could be used in a modern diesel engine without any modification. Another advantage of the fungus is its ability to eat up cellulose, the compound that makes up much of the organic waste that is currently discarded, such as stalks and sawdust. Converting this plant waste into fuels is an important goal for the biofuel industry, which currently uses food crops such as corn.
"Fungi are very important but we often overlook these organisms," said Tariq Butt, a fungus expert at Swansea University. "The discovery and its potential applications are fantastic. However, more research is needed, as well as a pilot study to determine the costs and benefits." John Loughhead, executive director of the UK Energy Research Centre, also welcomed the "encouraging" discovery but noted it was at its earliest stage of development.

Ethanol producers

Published: November 3 2008 09:22

Sometimes, the best cure for a hangover is to keep drinking. But ethanol investors, hit by the shakes since they binged on the corn-based fuel in 2005 and 2006, should think twice before taking the hair of the dog. The bankruptcy of VeraSun Energy, the biggest listed US ethanol producer, is the latest grim news for a sector where listed companies have lost 80-90 per cent of their market value over the past two years. Ironically, for an industry savaged by rising corn costs, VeraSun shows that falling corn prices are one of the biggest short-term threats.

Like some rivals, VeraSun took out hedges to protect against rising prices after corn hit a record price of $8 a bushel in June. Yet those hedges backfired as bushel prices went on to halve, leaving the company strapped for cash. For others also, the recent pullback in corn prices has offered little respite. As recession fears have grown, ethanol prices have plunged in tandem with corn prices, so depriving producers of any hoped-for boost to margins.
Eventually, demand will improve. The amount of ethanol to be blended into gasoline in the US is set to quadruple by 2022 because of government mandates. With annual sales running at about $20bn, the supply glut that has pushed down ethanol prices should ease by 2010 or 2011 as demand catches up. But in the long run, low barriers to entry – all it takes to become a producer is a field of corn and a simple still – means gains will be fleeting. New producers will compete away margins, leaving the biggest buyers of ethanol – the refiners who blend it into gasoline – able to dictate prices. The likely result is prices that are sufficient to keep ethanol plants ticking over, but barely profitable. All the more reason for investors to pull up the covers and go back to bed.