Reuters
Published: February 6, 2009
By Peter Starck
Renewable energy could be the next big theme for stock market investors, fund manager Jonathan Day at Morgan Stanley Investment Management said on Friday.
"Investors are thinking very much about what is the next big move ... (and) which sectors," Day said. "Maybe we'll see a resurgence of interest in green energy stocks.
"There is a definite push from governments around the world to continue to reduce greenhouse gas emissions ... and therefore companies that are focussed on energy, in particular wind and solar, could be quite interesting longer term."
For the time being Day is overweight in telecoms, consumer staples and pharmaceuticals.
"The problem with those areas is that they ... have outperformed very strongly already, so intuition says they probably will not carry on doing that for a long period of time," Day told Reuters.
"We know that there will come a point where the market changes ... and those positions will have to be adjusted accordingly," he said, adding it could be a little early to move into cyclicals, in which the fund remains underweight.
Top holdings include Swiss food group Nestle , which Day said has "good scope to gain market share" and oil major Royal Dutch Shell , which just had good numbers and whose incoming CEO, Peter Voser, is a "safe pair of hands."
BIG DILEMMA
Day's European equity fund, with about $850 million (575 million pound) in assets under management, tends to contain 30 to 50 stocks. It beat its benchmark, the MSCI Europe index , by 75 basis points in January and by 337 basis points in 2008.
The mayhem seen in stock markets worldwide, especially in the second half of last year when the MSCI Europe index lost 31 percent, has left many investors very cautious, Day said, but he saw a revival of interest in shares assuming the downturn doesn't turn into deflation.
"I think people will re-allocate to equities. One of the big dilemmas is getting the timing right. If we do face a deflationary environment, then equities are not the asset class you want to be invested in," Day said.
Hence many investors would wait to see the effects of central bank interest rate cuts and government fiscal measures aimed at stimulating economic growth and preventing deflation.
On average, European equities are trading at around 8 times long-term cyclically adjusted earnings, compared with a historical average price-to-earnings (P/E) ratio of 14.
"Valuation on a long-term basis looks quite supportive for the equity market," Day said.
He said a more sustained improvement in leading indicators, a stabilisation in U.S. and UK housing markets and a recovery in consumer confidence could herald a pick-up in stock markets.
"We are obviously focussed on trying to pick the turning point but if we miss the turning point by a few months it won't be a disaster," Day said.
(Editing by David Holmes)
Saturday, 7 February 2009
Valero Bids for VeraSun Assets
By LAUREN ETTER
Oil-refiner Valero Energy Corp. on Friday entered an agreement to buy a group of ethanol plants for $280 million from ethanol producer VeraSun Energy Corp., subject to a bidding process in Verasun's bankruptcy case.
This is the first foray into the ethanol business for Valero, one of the nation's largest oil refiners.
VeraSun, Sioux Falls, S.D., filed for bankruptcy last year amid a volatile commodities market and falling ethanol prices. Now under bankruptcy protection, the company has put up most of its assets for sale to generate cash.
"Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of company stakeholders," said Don Endres, VeraSun's chief executive officer in a statement.
Bill Day, director of media relations at Valero says the timing is right to get into the ethanol business partly because of the availability of distressed assets.
"It's a good time for us to be able to buy assets at a reasonable price," Mr. Day said in an interview. "We can make an offer that's a good deal for our shareholders."
VeraSun has signed an agreement with Valero, San Antonio, Tex., to sell five production facilities and a sixth under development. The facilities are located throughout South Dakota, Iowa, Minnesota and Indiana. The purchase agreement is worth about $280 million, plus the value of inventory and certain prepaid expenses, the companies said in a joint statement issued Friday.
Any sale of assets would still have to go through an auction where an open bidding process would allow other companies to make their own offers. But, Mr. Day said that "We're hopeful we will be able close the deal" within the second quarter of the year.
Oil companies are ethanol's biggest customers, and traditionally the two industries have remained disconnected. Ethanol companies tend to be sprinkled across Midwestern farm towns, while oil companies tend to be located near the coasts.
Also the two industries have had tortured relations in the past, with oil companies reluctantly using ethanol after energy legislation mandated its use. Under government mandates, oil companies are required to blend billions of gallons of the corn-based fuel into their gasoline supply each year.
If the sale goes through, Mr. Day said that the company would be picking up the assets at about 25% of the estimated replacement value of a new plant.
Write to Lauren Etter at lauren.etter@wsj.com
Oil-refiner Valero Energy Corp. on Friday entered an agreement to buy a group of ethanol plants for $280 million from ethanol producer VeraSun Energy Corp., subject to a bidding process in Verasun's bankruptcy case.
This is the first foray into the ethanol business for Valero, one of the nation's largest oil refiners.
VeraSun, Sioux Falls, S.D., filed for bankruptcy last year amid a volatile commodities market and falling ethanol prices. Now under bankruptcy protection, the company has put up most of its assets for sale to generate cash.
"Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of company stakeholders," said Don Endres, VeraSun's chief executive officer in a statement.
Bill Day, director of media relations at Valero says the timing is right to get into the ethanol business partly because of the availability of distressed assets.
"It's a good time for us to be able to buy assets at a reasonable price," Mr. Day said in an interview. "We can make an offer that's a good deal for our shareholders."
VeraSun has signed an agreement with Valero, San Antonio, Tex., to sell five production facilities and a sixth under development. The facilities are located throughout South Dakota, Iowa, Minnesota and Indiana. The purchase agreement is worth about $280 million, plus the value of inventory and certain prepaid expenses, the companies said in a joint statement issued Friday.
Any sale of assets would still have to go through an auction where an open bidding process would allow other companies to make their own offers. But, Mr. Day said that "We're hopeful we will be able close the deal" within the second quarter of the year.
Oil companies are ethanol's biggest customers, and traditionally the two industries have remained disconnected. Ethanol companies tend to be sprinkled across Midwestern farm towns, while oil companies tend to be located near the coasts.
Also the two industries have had tortured relations in the past, with oil companies reluctantly using ethanol after energy legislation mandated its use. Under government mandates, oil companies are required to blend billions of gallons of the corn-based fuel into their gasoline supply each year.
If the sale goes through, Mr. Day said that the company would be picking up the assets at about 25% of the estimated replacement value of a new plant.
Write to Lauren Etter at lauren.etter@wsj.com
Tanfield to take electric vehicles to US
By David Blackwell
Published: February 6 2009 16:16
Tanfield is setting up a joint venture in order to take its electric vehicles into the US market.
The shares rose 16 per cent to 7.4p on the back of the news. However a trading update warned of a contraction this year compared with 2008.
The company is to establish Smith Electric Vehicles US Corporation in the US, in which it will retain a 49 per cent stake. SEV US will hold a licence to Tanfield’s intellectual property rights, brand, and all existing sales and sales enquiries in North America. Tanfield will receive a £1m advance on future royalties, which will be paid on every vehicle sold.
SEV US is to establish a US manufacturing, sales and marketing structure. it is expected to start production of a limited number of 7.5 and 12 tonne electric powered trucks by the end of the year.
The company said that the US division, which is expected to raise US$10m, would qualify for Federal and regional funding available for electric vehicle production. It will be headed by Bryan Hansel, who “has a track record of bringing new technologies to market in North America”.
Shares in the Aim-quoted company plunged from more than 200p last summer after it warned of production problems for its electric vehicles and a sharp drop in global demand for the industrial “cherry pickers” – or aerial platforms – which comprise most of its sales.
It experienced “much poorer market conditions” in the second half. Yesterday it said it had had “a number of loss-making months before the impact of cost cutting restored us to a break-even position on a monthly basis, before exceptional restructuring costs.” Nevertheless revenues last year grew to £146.5m (£123.3m).
Adverse trading and the unavailability of credit for customers was continuing to hit customers in all divisions. But the company said it remained free of debt, and was “well positioned to continue to ride out this downturn until eventual market recovery.”
Copyright The Financial Times Limited 2009
Published: February 6 2009 16:16
Tanfield is setting up a joint venture in order to take its electric vehicles into the US market.
The shares rose 16 per cent to 7.4p on the back of the news. However a trading update warned of a contraction this year compared with 2008.
The company is to establish Smith Electric Vehicles US Corporation in the US, in which it will retain a 49 per cent stake. SEV US will hold a licence to Tanfield’s intellectual property rights, brand, and all existing sales and sales enquiries in North America. Tanfield will receive a £1m advance on future royalties, which will be paid on every vehicle sold.
SEV US is to establish a US manufacturing, sales and marketing structure. it is expected to start production of a limited number of 7.5 and 12 tonne electric powered trucks by the end of the year.
The company said that the US division, which is expected to raise US$10m, would qualify for Federal and regional funding available for electric vehicle production. It will be headed by Bryan Hansel, who “has a track record of bringing new technologies to market in North America”.
Shares in the Aim-quoted company plunged from more than 200p last summer after it warned of production problems for its electric vehicles and a sharp drop in global demand for the industrial “cherry pickers” – or aerial platforms – which comprise most of its sales.
It experienced “much poorer market conditions” in the second half. Yesterday it said it had had “a number of loss-making months before the impact of cost cutting restored us to a break-even position on a monthly basis, before exceptional restructuring costs.” Nevertheless revenues last year grew to £146.5m (£123.3m).
Adverse trading and the unavailability of credit for customers was continuing to hit customers in all divisions. But the company said it remained free of debt, and was “well positioned to continue to ride out this downturn until eventual market recovery.”
Copyright The Financial Times Limited 2009
B&Q pulls wind turbines from shelves
Julia Finch
guardian.co.uk, Friday 6 February 2009 19.08 GMT
B&Q, the DIY chain, has withdrawn wind turbines from sale amid evidence they do not work as efficiently as had been thought. The £1,900 micro-turbines went on sale at the 320-store chain in October 2006. The company said they would generate up to 1kW of electricity, wired directly into a ring main to reduce the amount of power a household needed to buy.
But last month a survey by energy consultants Encraft warned that home turbines generated only a fraction of the energy promised by manufacturers, and in some cases used more electricity than they made.
The results of the study, which tested different types of turbines in different locations, showed the worst performing devices provided less energy than needed for a conventional lightbulb for an hour, or even to power the turbine's own electronics.
On average the turbines surveyed provided enough electricity to light an energy-efficient house, but this still only represented 5%-10% of the manufacturers' claims, said Encraft. B&Q said it had decided to withdraw the turbines as a result of the study and after "many months of customer feedback".
The retailer added: "The Encraft study suggests that B&Q's range of micro-turbines may not perform well enough to satisfy our customers' expectations."
The store is understood to have sold hundreds of the machines since they were introduced.
B&Q said the study had shown that turbines on homes in urban areas were the least likely to perform well. It added: "The vast majority of B&Q's customers live in highly urbanised areas, hence this particular finding is cause for concern for the company."
guardian.co.uk, Friday 6 February 2009 19.08 GMT
B&Q, the DIY chain, has withdrawn wind turbines from sale amid evidence they do not work as efficiently as had been thought. The £1,900 micro-turbines went on sale at the 320-store chain in October 2006. The company said they would generate up to 1kW of electricity, wired directly into a ring main to reduce the amount of power a household needed to buy.
But last month a survey by energy consultants Encraft warned that home turbines generated only a fraction of the energy promised by manufacturers, and in some cases used more electricity than they made.
The results of the study, which tested different types of turbines in different locations, showed the worst performing devices provided less energy than needed for a conventional lightbulb for an hour, or even to power the turbine's own electronics.
On average the turbines surveyed provided enough electricity to light an energy-efficient house, but this still only represented 5%-10% of the manufacturers' claims, said Encraft. B&Q said it had decided to withdraw the turbines as a result of the study and after "many months of customer feedback".
The retailer added: "The Encraft study suggests that B&Q's range of micro-turbines may not perform well enough to satisfy our customers' expectations."
The store is understood to have sold hundreds of the machines since they were introduced.
B&Q said the study had shown that turbines on homes in urban areas were the least likely to perform well. It added: "The vast majority of B&Q's customers live in highly urbanised areas, hence this particular finding is cause for concern for the company."
Flights could be rationed, says environment tsar Lord Turner
Families could see the number of flights they can take rationed in order to cut greenhouse gas emissions, Gordon Brown's "environment tsar" has warned.
By Jon Swaine Last Updated: 1:19PM GMT 06 Feb 2009
Lord Turner, the chairman of the Committee on Climate Change, said people would be given personal flight limits to lower pollution from the aviation industry.
"We will have to constrain demand in an absolute sense, with people not allowed to make as many journeys as they could in an unconstrained manner," he told the Commons environmental audit committee.
Lord Turner, whose committee is investigating whether the air industry can meet a target of reducing emissions to below 2005 levels by 2050, said the restriction may need to become permanent.
He added: "It is at least possible that we will come back and say, 'Given the technological position ... we think this is doable with the first flight allocation but we think the second allocation may prove undoable'."
The comments echo a suggestion made two years ago by Tim Yeo, a Conservative MP and the chairman of the environment audit committee.
He said there was "no reason at all why people should fly around the UK" and that domestic flights should be taxed almost out of existence.
The Conservatives in 2007 briefly advocated a policy of giving people an annual allowance of short-haul flights, after which they would attract progressively higher taxes. It was quietly dropped after widespread criticism.
Norman Baker, the Liberal Democrat transport spokesman, said of Lord Turner's suggestion: "There is an absolute need to recognise the serious climate change implications of aviation but Forties-style rationing is not the way forward."
By Jon Swaine Last Updated: 1:19PM GMT 06 Feb 2009
Lord Turner, the chairman of the Committee on Climate Change, said people would be given personal flight limits to lower pollution from the aviation industry.
"We will have to constrain demand in an absolute sense, with people not allowed to make as many journeys as they could in an unconstrained manner," he told the Commons environmental audit committee.
Lord Turner, whose committee is investigating whether the air industry can meet a target of reducing emissions to below 2005 levels by 2050, said the restriction may need to become permanent.
He added: "It is at least possible that we will come back and say, 'Given the technological position ... we think this is doable with the first flight allocation but we think the second allocation may prove undoable'."
The comments echo a suggestion made two years ago by Tim Yeo, a Conservative MP and the chairman of the environment audit committee.
He said there was "no reason at all why people should fly around the UK" and that domestic flights should be taxed almost out of existence.
The Conservatives in 2007 briefly advocated a policy of giving people an annual allowance of short-haul flights, after which they would attract progressively higher taxes. It was quietly dropped after widespread criticism.
Norman Baker, the Liberal Democrat transport spokesman, said of Lord Turner's suggestion: "There is an absolute need to recognise the serious climate change implications of aviation but Forties-style rationing is not the way forward."
Drivers could be paid to trade in gas-guzzlers
Motorists could receive cash payments from the Government of up to £2,000 to trade in their old gas guzzler for a new eco-friendly model, The Daily Telegraph has learned.
By Rosa Prince, Political Correspondent Last Updated: 6:57AM GMT 06 Feb 2009
Ministers are actively considering a "scrappage" incentive scheme, similar to those already introduced in a number of European Union countries.
It would be introduced as an emergency measure during the recession, and would have the additional benefit of helping the industry to reach the Government's green targets.
In Germany, where drivers receive 2,500 euros (£2,325) to trade in cars older than nine years, hundreds of thousands of extra car sales are expected as a direct result of the scrappage scheme.
Motorists in France receive 1,000 euros (£930) to exchange their old vehicles for a new car, while a scrappage scheme was also recently introduced in Spain.
Lord Mandelson, the Business Secretary, is due to meet representatives from the Retail Motor Industry Federation, when he will be presented with their plans for a British version of the scheme.
Ministers are keen to examine how well the system operate in other countries before giving scrappage the go-ahead here, with officials at the Department for Business expressing some reservations about how many drivers in this country would benefit.
If those concerns can be overcome, then ministers are said to be keen to go ahead with the idea.
In a speech at the Confederation of British Industry last night[thurs], Lord Mandelson said: "Last week we committed to guarantees and loans that should help the UK's vital automotive sector draw down more than two billion pounds in investment ... in its vital transition to low carbon vehicles.
"That is effectively the same as underwriting the entire vehicle sector's research and development and capital expenditure for a year.
"We are working to find ways to help the finance arms of the car sector keep providing the credit that keeps the industry moving. I am also looking at other countries' experience with scrappage schemes."
He was speaking as figures released yesterday[thurs] showed that new car sales fell by 30 per cent in the last month alone, and as Ford announced 850 redundancies, with up to 500 job losses at the Transit plant near Southampton.
Figures released by the Society of Motor Manufacturers and Traders showed that last month's sales figures were the worst for a January since 1974, with just 112,087 new cars registered.
Paul Everitt, the society's chief exective, said: ``There is a clear need to stimulate demand for new vehicles in the UK market.
"A number of EU member states have launched scrappage incentive schemes, which have the benefit of boosting consumer confidence and delivering significant environmental improvements.
``The UK motor industry is urging the UK Government to introduce a similar scheme and help sustain jobs and businesses throughout the sector.''
Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA), which will present detailed proposals for a scrappage scheme to the Department for Business next week, said: "A self-financing scrappage scheme could help revive car sales, and remove high-polluting cars from the road at the same time.
"The RMIF will shortly be presenting a paper to Government that puts the case for a self-financing scrappage scheme in the UK that mirrors those successfully adopted in other EU states."
The new car market is predicted to decline by 19.3 per cent in 2009 to 1.72 million, 410,000 fewer than last year and 685,000 down on 2007.
Howard Archer, chief economist at Global Insight said: ``Sharply deteriorating car sales provide further clear evidence that consumers are very reluctant to spend, particularly on major costly items."
Mark Prisk, the shadow business minister, added: "Last month's car sales confirm that the industry needs action not words. Ministers are still dragging their feet."
By Rosa Prince, Political Correspondent Last Updated: 6:57AM GMT 06 Feb 2009
Ministers are actively considering a "scrappage" incentive scheme, similar to those already introduced in a number of European Union countries.
It would be introduced as an emergency measure during the recession, and would have the additional benefit of helping the industry to reach the Government's green targets.
In Germany, where drivers receive 2,500 euros (£2,325) to trade in cars older than nine years, hundreds of thousands of extra car sales are expected as a direct result of the scrappage scheme.
Motorists in France receive 1,000 euros (£930) to exchange their old vehicles for a new car, while a scrappage scheme was also recently introduced in Spain.
Lord Mandelson, the Business Secretary, is due to meet representatives from the Retail Motor Industry Federation, when he will be presented with their plans for a British version of the scheme.
Ministers are keen to examine how well the system operate in other countries before giving scrappage the go-ahead here, with officials at the Department for Business expressing some reservations about how many drivers in this country would benefit.
If those concerns can be overcome, then ministers are said to be keen to go ahead with the idea.
In a speech at the Confederation of British Industry last night[thurs], Lord Mandelson said: "Last week we committed to guarantees and loans that should help the UK's vital automotive sector draw down more than two billion pounds in investment ... in its vital transition to low carbon vehicles.
"That is effectively the same as underwriting the entire vehicle sector's research and development and capital expenditure for a year.
"We are working to find ways to help the finance arms of the car sector keep providing the credit that keeps the industry moving. I am also looking at other countries' experience with scrappage schemes."
He was speaking as figures released yesterday[thurs] showed that new car sales fell by 30 per cent in the last month alone, and as Ford announced 850 redundancies, with up to 500 job losses at the Transit plant near Southampton.
Figures released by the Society of Motor Manufacturers and Traders showed that last month's sales figures were the worst for a January since 1974, with just 112,087 new cars registered.
Paul Everitt, the society's chief exective, said: ``There is a clear need to stimulate demand for new vehicles in the UK market.
"A number of EU member states have launched scrappage incentive schemes, which have the benefit of boosting consumer confidence and delivering significant environmental improvements.
``The UK motor industry is urging the UK Government to introduce a similar scheme and help sustain jobs and businesses throughout the sector.''
Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA), which will present detailed proposals for a scrappage scheme to the Department for Business next week, said: "A self-financing scrappage scheme could help revive car sales, and remove high-polluting cars from the road at the same time.
"The RMIF will shortly be presenting a paper to Government that puts the case for a self-financing scrappage scheme in the UK that mirrors those successfully adopted in other EU states."
The new car market is predicted to decline by 19.3 per cent in 2009 to 1.72 million, 410,000 fewer than last year and 685,000 down on 2007.
Howard Archer, chief economist at Global Insight said: ``Sharply deteriorating car sales provide further clear evidence that consumers are very reluctant to spend, particularly on major costly items."
Mark Prisk, the shadow business minister, added: "Last month's car sales confirm that the industry needs action not words. Ministers are still dragging their feet."
Green growth
An effective and efficient response to global warming could also help to revive the world economy
Jeroen van der Veer
guardian.co.uk, Friday 6 February 2009 09.00 GMT
Although the global recession is serious and its duration uncertain, the world must nevertheless continue to focus on the far-reaching threat of climate change. Indeed, if we are smart, public policy can serve the twin goals of stimulating growth and fighting global warming.
Governments hammering out a successor agreement to the Kyoto protocol at the United Nations climate conference in Copenhagen later this year should adopt strong incentives to cut greenhouse gas emissions. Doing so could kickstart private investment and help to fuel economic recovery.
The broad outlines of an effective and efficient response to global warming have been clear for years. A system to cap CO2 emissions and trade emission allowances would channel resources toward the most cost-effective reduction measures. And widespread adoption of efficiency standards for appliances, vehicles and buildings would help companies and individuals use less energy.
Moreover, several specific policy initiatives could help government and society better harness companies' agility and innovative power in the quest to control greenhouse gas emissions:
• Agreements among groups of key countries to reduce emissions in specific industrial sectors;
• Incentives for companies to capture CO2 and store it safely underground, accelerating the deployment of this promising technology;
• Technology funds to support the development and commercial demonstration of new technologies, such as advanced biofuels, with high potential for lowering CO2 emissions.
Until now, negotiators have aimed for a global deal palatable to developed and developing countries alike. While that remains the ultimate goal, it has so far proven devilishly complex to formulate.
A possible next step would be to form agreements between smaller groups of pivotal countries to cap emissions from individual high-emitting sectors of their economies. Such agreements could be important building blocks for a broader deal. Sectors to focus on include power generation, which accounts for about 35% of global CO2 emissions, and production of cement, chemicals, and steel.
Involving a limited number of the most important countries would facilitate a compromise. Such deals would ease concern in competitive global industries that strict emission rules in one region would put companies at a disadvantage relative to rivals in countries with less strict policies.
As a hypothetical example, an agreement on emissions from coal-fired power stations might include large users such as China, the European Union, India, Japan and the US, which together account for about 80% of global coal-fired capacity. Such a deal could include mechanisms for transferring clean coal technology from developed countries to developing ones. Cap-and-trade systems could provide a potential source of funds through the auctioning of emission allowances.
The need is urgent. Asia alone will build about 800 gigawatts of new coal-fired generating capacity over the next 10 years, equal to the EU's total electricity-generating capacity today. Once built, the plants will emit more than 4bn tonnes of CO2 each year – about the same as the EU's total energy-related emissions – and operate for 30 years or more.
Climate negotiators should also give CO2 capture and storage (CCS) high priority. While increased use of renewable and nuclear energy will help reduce emissions, by themselves they will not be able to keep up with fast-growing energy demand. Fossil fuels, like it or not, will remain the world's main source of energy for decades.
Indeed, "cleaning up" fossil fuels is a necessary and vital bridge to a low-carbon future. According to the UN Intergovernmental Panel on Climate Change, CCS may contribute up to 55% of the emission reductions that scientists believe are necessary during this century to address global warming. But companies are reluctant to invest in CCS because it adds substantial cost and generates no revenue. If CCS is to fulfill its potential, companies need incentives to invest and a way to make money.
Policymakers should promote CCS in several ways. First, they must put a price on CO2 emissions. They could do so by capping emissions and creating a market in which companies can buy and sell emission allowances, as in the European Emissions Trading Scheme. Second, CCS needs to be recognised within the Kyoto protocol's Clean Development Mechanism, through which developed countries can invest in emission-reduction projects in developing countries.
Finally, governments should stimulate the development and commercial demonstration of technologies that hold promise for a low-carbon energy future. The dramatic drop in energy prices in recent months makes it less likely that private investors will gamble on unproven technologies.
Clearly, strapped treasuries will have difficulty providing funds. But emission trading schemes can provide an alternative source of financing. For example, the EU recently set aside 300m tradable emission allowances, to be awarded to innovative renewable energy projects or CO2 storage projects. Depending on the market price for a tonne of CO2, that could mean about €6-9bn in assistance to get such new technologies up to scale.
No one knows if the economic crisis will last months or years. But a good outcome in Copenhagen would serve the world for decades to come by sparking growth and taking steps to control greenhouse gas emissions.
Jeroen van der Veer, Chief Executive of Royal Dutch Shell, chairs the Energy and Climate Change working group of the European Round Table of Industrialists
Copyright: Project Syndicate, 2009
Jeroen van der Veer
guardian.co.uk, Friday 6 February 2009 09.00 GMT
Although the global recession is serious and its duration uncertain, the world must nevertheless continue to focus on the far-reaching threat of climate change. Indeed, if we are smart, public policy can serve the twin goals of stimulating growth and fighting global warming.
Governments hammering out a successor agreement to the Kyoto protocol at the United Nations climate conference in Copenhagen later this year should adopt strong incentives to cut greenhouse gas emissions. Doing so could kickstart private investment and help to fuel economic recovery.
The broad outlines of an effective and efficient response to global warming have been clear for years. A system to cap CO2 emissions and trade emission allowances would channel resources toward the most cost-effective reduction measures. And widespread adoption of efficiency standards for appliances, vehicles and buildings would help companies and individuals use less energy.
Moreover, several specific policy initiatives could help government and society better harness companies' agility and innovative power in the quest to control greenhouse gas emissions:
• Agreements among groups of key countries to reduce emissions in specific industrial sectors;
• Incentives for companies to capture CO2 and store it safely underground, accelerating the deployment of this promising technology;
• Technology funds to support the development and commercial demonstration of new technologies, such as advanced biofuels, with high potential for lowering CO2 emissions.
Until now, negotiators have aimed for a global deal palatable to developed and developing countries alike. While that remains the ultimate goal, it has so far proven devilishly complex to formulate.
A possible next step would be to form agreements between smaller groups of pivotal countries to cap emissions from individual high-emitting sectors of their economies. Such agreements could be important building blocks for a broader deal. Sectors to focus on include power generation, which accounts for about 35% of global CO2 emissions, and production of cement, chemicals, and steel.
Involving a limited number of the most important countries would facilitate a compromise. Such deals would ease concern in competitive global industries that strict emission rules in one region would put companies at a disadvantage relative to rivals in countries with less strict policies.
As a hypothetical example, an agreement on emissions from coal-fired power stations might include large users such as China, the European Union, India, Japan and the US, which together account for about 80% of global coal-fired capacity. Such a deal could include mechanisms for transferring clean coal technology from developed countries to developing ones. Cap-and-trade systems could provide a potential source of funds through the auctioning of emission allowances.
The need is urgent. Asia alone will build about 800 gigawatts of new coal-fired generating capacity over the next 10 years, equal to the EU's total electricity-generating capacity today. Once built, the plants will emit more than 4bn tonnes of CO2 each year – about the same as the EU's total energy-related emissions – and operate for 30 years or more.
Climate negotiators should also give CO2 capture and storage (CCS) high priority. While increased use of renewable and nuclear energy will help reduce emissions, by themselves they will not be able to keep up with fast-growing energy demand. Fossil fuels, like it or not, will remain the world's main source of energy for decades.
Indeed, "cleaning up" fossil fuels is a necessary and vital bridge to a low-carbon future. According to the UN Intergovernmental Panel on Climate Change, CCS may contribute up to 55% of the emission reductions that scientists believe are necessary during this century to address global warming. But companies are reluctant to invest in CCS because it adds substantial cost and generates no revenue. If CCS is to fulfill its potential, companies need incentives to invest and a way to make money.
Policymakers should promote CCS in several ways. First, they must put a price on CO2 emissions. They could do so by capping emissions and creating a market in which companies can buy and sell emission allowances, as in the European Emissions Trading Scheme. Second, CCS needs to be recognised within the Kyoto protocol's Clean Development Mechanism, through which developed countries can invest in emission-reduction projects in developing countries.
Finally, governments should stimulate the development and commercial demonstration of technologies that hold promise for a low-carbon energy future. The dramatic drop in energy prices in recent months makes it less likely that private investors will gamble on unproven technologies.
Clearly, strapped treasuries will have difficulty providing funds. But emission trading schemes can provide an alternative source of financing. For example, the EU recently set aside 300m tradable emission allowances, to be awarded to innovative renewable energy projects or CO2 storage projects. Depending on the market price for a tonne of CO2, that could mean about €6-9bn in assistance to get such new technologies up to scale.
No one knows if the economic crisis will last months or years. But a good outcome in Copenhagen would serve the world for decades to come by sparking growth and taking steps to control greenhouse gas emissions.
Jeroen van der Veer, Chief Executive of Royal Dutch Shell, chairs the Energy and Climate Change working group of the European Round Table of Industrialists
Copyright: Project Syndicate, 2009
Obama team revisits Bush-era decisions on car exhaust and mercury emissions
Environmental protection agency's head, Lisa Jackson, led New Jersey agency when mercury case was heard
Suzanne Goldenberg in Washington
guardian.co.uk, Friday 6 February 2009 19.07 GMT
Barack Obama put the teeth back in America's environmental protection regime today, revisiting two widely criticised decisions from the George Bush era on car exhaust and mercury emissions.
Lisa Jackson, the head of the environmental protection agency, told a conference that the Obama administration now would not stand in the way of a decision from a New Jersey court requiring coal and oil-fired power plants to install more stringent mercury controls.
The EPA also announced that it would revisit its Bush-era refusal to allow California and more than a dozen other states regulate car exhaust.Obama directed the EPA to reconsider its decision in his first week in the White House.
Jackson said the agency had launched a review, including a public hearing, of its refusal to allow California to impose more stringent controls on car exhaust. "It is imperative that we get this decision right, and base it on the best available science and a thorough understanding of the law."
Jackson's directive, announcing that the EPA was revisiting the California decision, was openly critical of the way Bush officials ran the agency.
It said the Bush administration had made a "substantial departure" from earlier practice when it refused to allow the state to regulate emissions.
"Many different parties – including California, states that have adopted or are interested in adopting California's standards, members of Congress, scientists, and other stakeholders – have expressed similar concerns about the denial of the waiver," the EPA said.
The decisions were further evidence of the Obama's determination to remove obstacles placed by the Bush administration on court decisions that came down on the side of the environment or health concerns and would have been costly for industry.
In the mercury case, Jackson has a personal stake. She headed the state's environmental regulatory agency when a federal appeals court first struck down the Bush era EPA's refusal to move against huge power plants whose emissions had created dangerous mercury levels in New Jersey.
Jackson, at the time of the decision last year, called it a "tremendous victory".
The EPA had been balking since 2005 at regulating emissions at the plants.
The agency had also obstructed efforts by California and other states to adopt their own emission standards for cars.
Jackson's decision to announce the mercury decision at a green jobs conference was further evidence of the new reality in Washington, with the environmental and labour movements now embraced as allies of the Obama administration
On a day when the unemployment rate hit a 17-year high of 13.9%, she offered assurances that the greening of the economy that is at the heart of Obama's could help make up for the steady decline in manufacturing jobs."Green jobs are no longer a concept. They are very much a reality," Jackson said.
She went on to argue that Obama's support for green building standards, and his moves on Thursday to promote energy efficiency, would help create more well paying jobs in manufacturing.
"I am always one to remind us all that the jobs - the steel working jobs and the fabrication jobs associated with putting controls on power plants that protect human health - are jobs. They are good jobs," she said.
Suzanne Goldenberg in Washington
guardian.co.uk, Friday 6 February 2009 19.07 GMT
Barack Obama put the teeth back in America's environmental protection regime today, revisiting two widely criticised decisions from the George Bush era on car exhaust and mercury emissions.
Lisa Jackson, the head of the environmental protection agency, told a conference that the Obama administration now would not stand in the way of a decision from a New Jersey court requiring coal and oil-fired power plants to install more stringent mercury controls.
The EPA also announced that it would revisit its Bush-era refusal to allow California and more than a dozen other states regulate car exhaust.Obama directed the EPA to reconsider its decision in his first week in the White House.
Jackson said the agency had launched a review, including a public hearing, of its refusal to allow California to impose more stringent controls on car exhaust. "It is imperative that we get this decision right, and base it on the best available science and a thorough understanding of the law."
Jackson's directive, announcing that the EPA was revisiting the California decision, was openly critical of the way Bush officials ran the agency.
It said the Bush administration had made a "substantial departure" from earlier practice when it refused to allow the state to regulate emissions.
"Many different parties – including California, states that have adopted or are interested in adopting California's standards, members of Congress, scientists, and other stakeholders – have expressed similar concerns about the denial of the waiver," the EPA said.
The decisions were further evidence of the Obama's determination to remove obstacles placed by the Bush administration on court decisions that came down on the side of the environment or health concerns and would have been costly for industry.
In the mercury case, Jackson has a personal stake. She headed the state's environmental regulatory agency when a federal appeals court first struck down the Bush era EPA's refusal to move against huge power plants whose emissions had created dangerous mercury levels in New Jersey.
Jackson, at the time of the decision last year, called it a "tremendous victory".
The EPA had been balking since 2005 at regulating emissions at the plants.
The agency had also obstructed efforts by California and other states to adopt their own emission standards for cars.
Jackson's decision to announce the mercury decision at a green jobs conference was further evidence of the new reality in Washington, with the environmental and labour movements now embraced as allies of the Obama administration
On a day when the unemployment rate hit a 17-year high of 13.9%, she offered assurances that the greening of the economy that is at the heart of Obama's could help make up for the steady decline in manufacturing jobs."Green jobs are no longer a concept. They are very much a reality," Jackson said.
She went on to argue that Obama's support for green building standards, and his moves on Thursday to promote energy efficiency, would help create more well paying jobs in manufacturing.
"I am always one to remind us all that the jobs - the steel working jobs and the fabrication jobs associated with putting controls on power plants that protect human health - are jobs. They are good jobs," she said.
Price of carbon credits slumps to new low
• Cost of pollution falling with 'no bottom in sight' • US considers whether to imitate criticised scheme
Terry Macalister
The Guardian, Saturday 7 February 2009
The price of carbon has hit new lows as power generators and industrial companies continue to cash in credits to bolster their balance sheets.
The price of European Union allowances under the second phase of the emissions trading scheme has plunged to €10.15 (£8.85) a tonne, compared with highs over €30 seen in July last year.
Analysts at Barclays Capital warned the price could fall further to €9 and Utilyx, the carbon information provider, said: "There seems to be no bottom to carbon prices at the moment." Market experts blame the decline on profit-taking and a collapse in manufacturing, which plunged in Britain at the end of last year at its fastest rate since the 1970s.
Power generators and industrial firms are selling off their credits to raise cash but also because they are confident they will not need so many pollution permits at a time of falling demand for their products.
The decline in emissions is good for global warming but it also means that offset projects, in which companies invest in green schemes to counter the impact of their carbon production, are being cut back.
The slump in the price of credits under the ETS will also revive criticisms that the cap and trade scheme has turned carbon into another volatile market commodity used by speculators to make money.
Vincent de Rivaz, the chief executive of EDF Energy, told the Guardian last week that the operations of the emissions trading scheme needed to be reviewed by Brussels before carbon was turned into a "sub-prime tool" by unscrupulous companies instead of doing the job it was set up for: reducing CO2 emissions.
EDF, the power company 85% owned by the French state, admitted it had sold some of its carbon credits on the market but only in very small numbers with the rest being transferred for use around the group's other overseas businesses.
A research paper published by the environmental group WWF in combination with the Point Carbon consultancy last spring claimed that windfall profits of up to €70bn could be made by the power groups in the course of phase two of the scheme, which runs from 2008 to 2012. They pointed out that there would have to be a high carbon price to achieve those particular financial gains.
Sanjeev Kumar, emissions trading scheme co-ordinator at the WWF, warned: "The way the national allocations plans are set up is a disaster. Handing free permits to power companies is like handing them a cash bonus." He added that "cheap profits for doing nothing is scandalous".
Deutsche Bank and others predict carbon prices will rise again as industrial production picks up and the EU tightens the regulation on allowances, especially for phase three of the scheme, to run to 2020. But analysts have been consistently wrong about the direction of carbon prices, predicting 12 months ago that they would double from €22 a tonne to over €40.
No one had thought the price of carbon would drop to nearly zero in the first phase of the scheme, when the credits were all given out free, but since then some credits have been auctioned to the highest bidder. The auction system is expected to be used even more heavily in the third phase, which is still going through the political approval process in Brussels.
Barack Obama's new US administration is considering whether to set up its own federal carbon emissions trading scheme, in another step towards a global trading scheme, but critics say all these projects should be halted.
Terry Macalister
The Guardian, Saturday 7 February 2009
The price of carbon has hit new lows as power generators and industrial companies continue to cash in credits to bolster their balance sheets.
The price of European Union allowances under the second phase of the emissions trading scheme has plunged to €10.15 (£8.85) a tonne, compared with highs over €30 seen in July last year.
Analysts at Barclays Capital warned the price could fall further to €9 and Utilyx, the carbon information provider, said: "There seems to be no bottom to carbon prices at the moment." Market experts blame the decline on profit-taking and a collapse in manufacturing, which plunged in Britain at the end of last year at its fastest rate since the 1970s.
Power generators and industrial firms are selling off their credits to raise cash but also because they are confident they will not need so many pollution permits at a time of falling demand for their products.
The decline in emissions is good for global warming but it also means that offset projects, in which companies invest in green schemes to counter the impact of their carbon production, are being cut back.
The slump in the price of credits under the ETS will also revive criticisms that the cap and trade scheme has turned carbon into another volatile market commodity used by speculators to make money.
Vincent de Rivaz, the chief executive of EDF Energy, told the Guardian last week that the operations of the emissions trading scheme needed to be reviewed by Brussels before carbon was turned into a "sub-prime tool" by unscrupulous companies instead of doing the job it was set up for: reducing CO2 emissions.
EDF, the power company 85% owned by the French state, admitted it had sold some of its carbon credits on the market but only in very small numbers with the rest being transferred for use around the group's other overseas businesses.
A research paper published by the environmental group WWF in combination with the Point Carbon consultancy last spring claimed that windfall profits of up to €70bn could be made by the power groups in the course of phase two of the scheme, which runs from 2008 to 2012. They pointed out that there would have to be a high carbon price to achieve those particular financial gains.
Sanjeev Kumar, emissions trading scheme co-ordinator at the WWF, warned: "The way the national allocations plans are set up is a disaster. Handing free permits to power companies is like handing them a cash bonus." He added that "cheap profits for doing nothing is scandalous".
Deutsche Bank and others predict carbon prices will rise again as industrial production picks up and the EU tightens the regulation on allowances, especially for phase three of the scheme, to run to 2020. But analysts have been consistently wrong about the direction of carbon prices, predicting 12 months ago that they would double from €22 a tonne to over €40.
No one had thought the price of carbon would drop to nearly zero in the first phase of the scheme, when the credits were all given out free, but since then some credits have been auctioned to the highest bidder. The auction system is expected to be used even more heavily in the third phase, which is still going through the political approval process in Brussels.
Barack Obama's new US administration is considering whether to set up its own federal carbon emissions trading scheme, in another step towards a global trading scheme, but critics say all these projects should be halted.
Emissions Accomplished
By John Griffiths
Published: February 7 2009 02:00
The best part of driving General Motors' latest sports-utility vehicle is when you're at traffic lights, fingers innocently drumming the steering wheel, feigning unawareness of the neck-craning stares of other drivers - and feeling insufferably smug.
Being entirely without sin (strictly in a motoring sense, of course) I felt tempted to cast a few metaphorical moral stones at the BMWs, Mercedes and Volkswagens of my fellow travellers as we stop-started along the Unter den Linden towards Berlin's Brandenburg Gate. All that carbon dioxide pouring from their petrol and diesel engines; to say nothing of the hydrocarbons and other pollutants pouring from their auspuffs. Disgraceful.
My exhaust was, almost literally, pure as the driven snow. Looked at closely in the bitterly cold evening air, it could be seen emitting only what appeared to be a thin stream of steam.
It was steam. I was driving GM's HydroGen4. It is powered by a fuel cell; the technology which many hope will all but remove cars from the global-warming equation. Fuel cells take hydrogen and oxygen and combine them, in a reversal of the electrolysis process, to produce electrical power to drive the car. The only tailpipe emission is harmless hot water vapour.
The motoring world is on the cusp of a seismic technology shift. January's Detroit motor show could have been overshadowed by the crisis gripping the auto industry, but on almost every major manufacturer's stand there was evidence that environmentally clean hybrid and battery-powered cars are accelerating hard from distant fantasy towards near-term reality, thanks mainly to big strides being made in battery technology.
GM itself showed not only a virtually production-ready model of its plug-in electric Chevrolet Volt, which it hopes to sell from next year, but also an electric-driven Cadillac concept car, the Converj, using adapted Volt technology. Chrysler unveiled both a battery-powered Jeep and a similarly powered concept car, the 200C EV.
The big European companies are advancing on all fronts, too, while Toyota unveiled its third-generation Prius hybrid - now facing stiff competition from Honda's about-to-be-launched Insight hybrid. Small companies are also getting in on the act. Within the next 12 months, exotic, lithium-ion battery powered sports cars are due to be put on sale by California-based Fisker and its local rival Tesla.
Most of these cars are so-called "range extenders", capable of travelling 40-50 miles on battery power alone. In addition, most have a small on-board petrol or diesel engine, which, on longer trips, cuts in to power a generator, giving the car's electric motor sufficient charge for an extra 200 miles or so - enough for most trips.
Such a propulsion system is obviously not as "green" as a fuel cell; but, technologically, the fuel cell has proved a rather tougher nut to crack in terms of balancing power with cost. The biggest problem of all, though, is creating a refuelling infrastructure for hydrogen, requiring investments of many billions. Because of this fuel-cell cars remain in third place in the race to market for "alternatively" powered vehicles, despite a few companies such as Honda, Mercedes and GM having launched limited production trials.
Lars-Peter Thiesen, head of GM's hydrogen and fuel-cell deployment strategy, insists that the gap is closing swiftly. "There is now a consensus that the first fuel-cell cars for normal commercial sale could arrive about 2015," he tells me, as I pull out into the traffic.
If the HydroGen4 is typical of the various prototype fuel-celled cars, including Honda's FCV (already on trial in the US), consumers will have no problem acclimatising to such vehicles when they eventually go on sale. It is the sheer ordinariness of the driving experience that leaves the most lasting impression. Simply switch on the ignition, engage the perfectly conventional automatic transmission and go.
In performance terms, HydroGen4 feels much in line with its standard, petrol-powered counterpart; it does not quite have the "thump in the back" acceleration from standstill of purely battery-powered cars. But apart from its notable quietness - there are far fewer moving mechanical parts in a fuel-cell drivetrain compared with petrol or diesel - there is virtually nothing to distinguish it from any modern "soft roader" SUV. Even the extra weight of the still-prototype drivetrain (fuel cell plus electric motor), at 600kgs, has no seriously detrimental effect; it being packaged very low down in the car and sited amidships. And, as senior GM executives are keen to stress, by the time such vehicles go on normal sale, the weight, cost and complexity of the fuel cell will have been much reduced if they are to be price-competitive with conventional cars.
In Berlin's Spandau district, I pull in at French oil group Total's hydrogen refuelling station, one of three installed in Berlin so far under the Clean Energy Partnership. The CEP is Europe's largest and most sophisticated test project for hydrogen as a road fuel, involving the German government, which has sunk €500m into the project, and 12 industry partners.
Filling HydroGen4's tank is only a little more complex, and takes only a little longer, than filling a conventional car at the petrol and diesel pumps. Safety is a priority: a puncture at pressures of around 10,000lbs per square inch would probably propel the car from Berlin to Munich - at high altitude and without the need of wings.
Copyright The Financial Times Limited 2009
Published: February 7 2009 02:00
The best part of driving General Motors' latest sports-utility vehicle is when you're at traffic lights, fingers innocently drumming the steering wheel, feigning unawareness of the neck-craning stares of other drivers - and feeling insufferably smug.
Being entirely without sin (strictly in a motoring sense, of course) I felt tempted to cast a few metaphorical moral stones at the BMWs, Mercedes and Volkswagens of my fellow travellers as we stop-started along the Unter den Linden towards Berlin's Brandenburg Gate. All that carbon dioxide pouring from their petrol and diesel engines; to say nothing of the hydrocarbons and other pollutants pouring from their auspuffs. Disgraceful.
My exhaust was, almost literally, pure as the driven snow. Looked at closely in the bitterly cold evening air, it could be seen emitting only what appeared to be a thin stream of steam.
It was steam. I was driving GM's HydroGen4. It is powered by a fuel cell; the technology which many hope will all but remove cars from the global-warming equation. Fuel cells take hydrogen and oxygen and combine them, in a reversal of the electrolysis process, to produce electrical power to drive the car. The only tailpipe emission is harmless hot water vapour.
The motoring world is on the cusp of a seismic technology shift. January's Detroit motor show could have been overshadowed by the crisis gripping the auto industry, but on almost every major manufacturer's stand there was evidence that environmentally clean hybrid and battery-powered cars are accelerating hard from distant fantasy towards near-term reality, thanks mainly to big strides being made in battery technology.
GM itself showed not only a virtually production-ready model of its plug-in electric Chevrolet Volt, which it hopes to sell from next year, but also an electric-driven Cadillac concept car, the Converj, using adapted Volt technology. Chrysler unveiled both a battery-powered Jeep and a similarly powered concept car, the 200C EV.
The big European companies are advancing on all fronts, too, while Toyota unveiled its third-generation Prius hybrid - now facing stiff competition from Honda's about-to-be-launched Insight hybrid. Small companies are also getting in on the act. Within the next 12 months, exotic, lithium-ion battery powered sports cars are due to be put on sale by California-based Fisker and its local rival Tesla.
Most of these cars are so-called "range extenders", capable of travelling 40-50 miles on battery power alone. In addition, most have a small on-board petrol or diesel engine, which, on longer trips, cuts in to power a generator, giving the car's electric motor sufficient charge for an extra 200 miles or so - enough for most trips.
Such a propulsion system is obviously not as "green" as a fuel cell; but, technologically, the fuel cell has proved a rather tougher nut to crack in terms of balancing power with cost. The biggest problem of all, though, is creating a refuelling infrastructure for hydrogen, requiring investments of many billions. Because of this fuel-cell cars remain in third place in the race to market for "alternatively" powered vehicles, despite a few companies such as Honda, Mercedes and GM having launched limited production trials.
Lars-Peter Thiesen, head of GM's hydrogen and fuel-cell deployment strategy, insists that the gap is closing swiftly. "There is now a consensus that the first fuel-cell cars for normal commercial sale could arrive about 2015," he tells me, as I pull out into the traffic.
If the HydroGen4 is typical of the various prototype fuel-celled cars, including Honda's FCV (already on trial in the US), consumers will have no problem acclimatising to such vehicles when they eventually go on sale. It is the sheer ordinariness of the driving experience that leaves the most lasting impression. Simply switch on the ignition, engage the perfectly conventional automatic transmission and go.
In performance terms, HydroGen4 feels much in line with its standard, petrol-powered counterpart; it does not quite have the "thump in the back" acceleration from standstill of purely battery-powered cars. But apart from its notable quietness - there are far fewer moving mechanical parts in a fuel-cell drivetrain compared with petrol or diesel - there is virtually nothing to distinguish it from any modern "soft roader" SUV. Even the extra weight of the still-prototype drivetrain (fuel cell plus electric motor), at 600kgs, has no seriously detrimental effect; it being packaged very low down in the car and sited amidships. And, as senior GM executives are keen to stress, by the time such vehicles go on normal sale, the weight, cost and complexity of the fuel cell will have been much reduced if they are to be price-competitive with conventional cars.
In Berlin's Spandau district, I pull in at French oil group Total's hydrogen refuelling station, one of three installed in Berlin so far under the Clean Energy Partnership. The CEP is Europe's largest and most sophisticated test project for hydrogen as a road fuel, involving the German government, which has sunk €500m into the project, and 12 industry partners.
Filling HydroGen4's tank is only a little more complex, and takes only a little longer, than filling a conventional car at the petrol and diesel pumps. Safety is a priority: a puncture at pressures of around 10,000lbs per square inch would probably propel the car from Berlin to Munich - at high altitude and without the need of wings.
Copyright The Financial Times Limited 2009
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