By Fiona Harvey, Environment Correspondent
Published: May 11 2009 01:41
Companies should use a single common standard for reporting their greenhouse gas emissions under new government regulations, the CBI employers’ group will urge this week.
Mid-size companies will be obliged to monitor and report their greenhouse gas emissions from 2012, though the government has not yet decided how big companies must be before they fall under this requirement.
The move, which was enshrined in law in last year’s Climate Change Act, will mean many thousands of companies will have to report their emissions for the first time, a process for which most are unprepared.
Officials at the Department of Energy and Climate Change are devising the method by which a certain group of about 5,000 larger companies – such as retailers, banks and hospitals – should report their emissions.
But the Department for Environment, Food and Rural Affairs is also at work on a separate standard by which smaller companies should report their greenhouse gas output.
The CBI is concerned that the outcome from each department may be different, leaving companies with differing standards which would cause confusion.
Neil Bentley, director of business environment at the CBI, said: “There is huge business angst around the reporting process, and the cost of doing it. It could become very complex for companies.”
The CBI is urging the government to adopt a modified version of an international monitoring and reporting method, called the Greenhouse Gas Protocol. The employers’ body will suggest some modifications to make it better suited to British businesses in a report to be published later this week.
Mr Bentley said adopting the international standard would help businesses by simplifying the process of reporting emissions, which would help to avoid any backlash over red tape.
Copyright The Financial Times Limited 2009
Monday, 11 May 2009
Carbon Reality, Again
Australia's prime minister discovers how much an emissions trading policy will cost.
It's turning out that the biggest problem with carbon taxes is political reality. Australian Prime Minister Kevin Rudd has just announced he will delay implementing his trademark cap-and-trade emissions trading proposal until at least 2011. Mr. Rudd's March proposal would have imposed total carbon permit costs (taxes) of 11.5 billion Australian dollars (US$8.5 billion) in the first two years, starting in 2010. This would have increased consumer prices by about 1.1% and shaved 0.1% off annual GDP growth until at least 2050, according to Australia's Treasury. Support has fallen among business groups and individuals who earlier professed enthusiasm for Aussie cap and trade. Green gains were negligible; Australia accounts for only 1.5% of global greenhouse gas emissions.
The reversal, or "backflip," has caused Mr. Rudd much embarrassment. He may still push ahead with legislation in some form, as he promised when running in the 2007 election. But it's becoming clear the proposal won't be a shoo-in despite all the votes Mr. Rudd won when he campaigned as an anti-carbon apostle.
This is yet another example of politicians elsewhere cashing in politically on the current anti-carbon enthusiasm, only to discover that support diminishes as the real-world costs become clear.
It's turning out that the biggest problem with carbon taxes is political reality. Australian Prime Minister Kevin Rudd has just announced he will delay implementing his trademark cap-and-trade emissions trading proposal until at least 2011. Mr. Rudd's March proposal would have imposed total carbon permit costs (taxes) of 11.5 billion Australian dollars (US$8.5 billion) in the first two years, starting in 2010. This would have increased consumer prices by about 1.1% and shaved 0.1% off annual GDP growth until at least 2050, according to Australia's Treasury. Support has fallen among business groups and individuals who earlier professed enthusiasm for Aussie cap and trade. Green gains were negligible; Australia accounts for only 1.5% of global greenhouse gas emissions.
The reversal, or "backflip," has caused Mr. Rudd much embarrassment. He may still push ahead with legislation in some form, as he promised when running in the 2007 election. But it's becoming clear the proposal won't be a shoo-in despite all the votes Mr. Rudd won when he campaigned as an anti-carbon apostle.
This is yet another example of politicians elsewhere cashing in politically on the current anti-carbon enthusiasm, only to discover that support diminishes as the real-world costs become clear.
Government climate change report calls for new institutions to curb global warming
Julian Borger, diplomatic editor
guardian.co.uk, Sunday 10 May 2009 18.56 BST
A report commissioned by the British government will call today for an overhaul of global institutions to combat climate change.
The report, to be published by the Centre on International Co-operation at New York University, recommends the creation of powerful surveillance and enforcement mechanisms similar to those of the UN's nuclear watchdog, the International Atomic Energy Agency. The new institutions would ensure countries honour their commitments to cut carbon emissions.
"This implies a significant pooling of sovereignty, greater coercive powers at international level, and significant investment in surveillance and research," the authors, Alex Evans and David Steven, write. They say that for any new climate deal to be effective, countries that do not join the international effort to curb global warming should face pariah status.
"It seems inevitable that a long-term climate deal will ultimately require an 'all or nothing' approach to international participation. Either countries play a full part in the system, or they sit outside the international system and are effectively barred from all forms of international co-operation," they say. "Carbon default, in other words, would become as weighty an issue as sovereign default, or failure to comply with a security council resolution. That this should currently seem inconceivable indicates the extent of the shift in understanding that is still needed."
The Kyoto accord on global climate change has weak enforcement mechanisms and involved very little institutional change. Kyoto is due to expire in 2012, and summit negotiations on a successor treaty take place in Copenhagen in December.
The report, An Institutional Architecture for Climate Change, was commissioned by the Department for International Development. It does not necessarily represent the department's views, a Dfid spokesman said, but was a starting point for a necessary debate at the Copenhagen conference. "This report highlights many of the issues that will be on the table for discussion at the Copenhagen summit in December," the spokesman said.
"Copenhagen represents a once-in-a-generation opportunity to set climate goals that avoid dangerous temperature rises and it is vital that we ensure effective reform of global institutions as part of this."
The report warns that a long-term solution to global warming could be delayed if a deal in Copenhagen falls foul of wholesale cheating, exploitation by corrupt officials and rigging of carbon markets – tainting the climate change effort.
Bickering over burden-sharing, overseen by toothless institutions would waste effort and distract attention from the looming threat of catastrophic change.
The report suggests that a transparent formula, or algorithm, would have to be agreed which would distribute the burden of restructuring economies. A new body would be created, the International Climate Control Committee, with a robust surveillance mandate to report on, among other things, national performance in reducing emissions.
There would also have to be a new institution with an enforcement role and the capacity to make intrusive inspections, measuring emissions, in the same way that inspectors from the IAEA now oversee nuclear facilities.
The role of the World Trade Organisation would also have to be rethought, the report says, to take account of the carbon implications of international trade.
Such reform of international institutions is likely to be hugely controversial and bitterly fought out, but the authors say there is very little time left to get it right.
They estimate the world has less than a decade to limit global warming to less than two degrees, and "less time than that to design the institutions of the post-carbon age."
guardian.co.uk, Sunday 10 May 2009 18.56 BST
A report commissioned by the British government will call today for an overhaul of global institutions to combat climate change.
The report, to be published by the Centre on International Co-operation at New York University, recommends the creation of powerful surveillance and enforcement mechanisms similar to those of the UN's nuclear watchdog, the International Atomic Energy Agency. The new institutions would ensure countries honour their commitments to cut carbon emissions.
"This implies a significant pooling of sovereignty, greater coercive powers at international level, and significant investment in surveillance and research," the authors, Alex Evans and David Steven, write. They say that for any new climate deal to be effective, countries that do not join the international effort to curb global warming should face pariah status.
"It seems inevitable that a long-term climate deal will ultimately require an 'all or nothing' approach to international participation. Either countries play a full part in the system, or they sit outside the international system and are effectively barred from all forms of international co-operation," they say. "Carbon default, in other words, would become as weighty an issue as sovereign default, or failure to comply with a security council resolution. That this should currently seem inconceivable indicates the extent of the shift in understanding that is still needed."
The Kyoto accord on global climate change has weak enforcement mechanisms and involved very little institutional change. Kyoto is due to expire in 2012, and summit negotiations on a successor treaty take place in Copenhagen in December.
The report, An Institutional Architecture for Climate Change, was commissioned by the Department for International Development. It does not necessarily represent the department's views, a Dfid spokesman said, but was a starting point for a necessary debate at the Copenhagen conference. "This report highlights many of the issues that will be on the table for discussion at the Copenhagen summit in December," the spokesman said.
"Copenhagen represents a once-in-a-generation opportunity to set climate goals that avoid dangerous temperature rises and it is vital that we ensure effective reform of global institutions as part of this."
The report warns that a long-term solution to global warming could be delayed if a deal in Copenhagen falls foul of wholesale cheating, exploitation by corrupt officials and rigging of carbon markets – tainting the climate change effort.
Bickering over burden-sharing, overseen by toothless institutions would waste effort and distract attention from the looming threat of catastrophic change.
The report suggests that a transparent formula, or algorithm, would have to be agreed which would distribute the burden of restructuring economies. A new body would be created, the International Climate Control Committee, with a robust surveillance mandate to report on, among other things, national performance in reducing emissions.
There would also have to be a new institution with an enforcement role and the capacity to make intrusive inspections, measuring emissions, in the same way that inspectors from the IAEA now oversee nuclear facilities.
The role of the World Trade Organisation would also have to be rethought, the report says, to take account of the carbon implications of international trade.
Such reform of international institutions is likely to be hugely controversial and bitterly fought out, but the authors say there is very little time left to get it right.
They estimate the world has less than a decade to limit global warming to less than two degrees, and "less time than that to design the institutions of the post-carbon age."
Current climate changes a spur for some to adapt
By Mike Scott
Published: May 10 2009 11:02
Dealing with climate change is mostly couched in terms of the need to cut greenhouse gas emissions, with targets often set far in the future.
But focusing on these mitigation strategies has distracted attention from the need to adapt to changes happening now, according to experts.
“People are looking to the future and what will happen then, but climate change really is happening now,” says Paul Dickinson, chief executive of the Carbon Disclosure Project.
Some climate change is inevitable, regardless of how much emissions are cut in future, because of the gases that have already been pumped into the atmosphere.
Climate scientists meeting in Copenhagen in March heard that it will be almost impossible to meet targets to limit temperature rises to 2ºC because emissions have continued to surge.
According to New Energy Finance, the clean energy analysts, heat waves are becoming more common and rainfall patterns are changing, with increased risk of flooding and drought.
“Glaciers are melting, which will have profound effects on water supplies in locations ranging from the Indian sub-continent to North and South America,” the report says.
“Permafrost is thawing, affecting building foundations and potentially releasing billions of tonnes of previously locked away methane. Sea levels are rising; storm surge heights are increasing; and the intensity of storms is increasing, all of which will affect millions of people.”
Businesses across every sector of the economy – from aviation to agriculture – will be affected. Security of water and energy supplies, seasonal shortages, and changes in water quality will all have cost implications, says a report by Acclimatise for IBM, published last month.
Consequently, investors need to know about the exposures of the companies they own, says Rory Sullivan, head of investor responsibility at Insight Investment, a specialist asset manager. This is easier said than done, however, because exposure varies across countries and sectors of the economy.
“There are different challenges in different regions,” says Connie Hedegaard, Denmark’s environment minister. “The issues you face in northern Finland are nothing like what you have to deal with in southern Spain.”
Nonetheless, there are certain common themes when it comes to adaptation. “Scarcity of water will be one of the main challenges,” Ms Hedegaard says.
Many regions also face more severe flooding while changes to rainfall patterns mean that even if the overall amount of rainfall does not change, the amount of usable water – for water supplies, agriculture and to cool power stations – will reduce. Finally, sea level rises put at risk the lives and livelihoods of billions of people around the world who live near coasts.
As well as dredging companies and builders of sea defences such as Boskalis of the Netherlands, companies dealing with storm water management such as Hydro International and those that provide water treatment services will see their markets grow, says Bruce Jenkyn-Jones, chief investment officer of Impax, a fund manager investing in a cleaner economy.
The increase in severe weather events puts the insurance sector firmly in the front line of dealing with climate change. Losses from natural catastrophes were $200bn (£133bn, €150bn) in 2008, according to Munich Re. Property and casualty insurance are the most affected by this and companies are reacting by limiting cover or increasing premiums in flood-affected areas. The state government is now the biggest residential insurer in Florida, for example, because insurers have withdrawn cover from hurricane-prone areas.
Insurers are also offering new products, providing catastrophe insurance and cover for renewable energy projects and extending cover in emerging markets that are likely to be hard hit by climate change, thus increasing the resilience of businesses and consumers.
Infrastructure and the built environment will also be affected, not least because the sector involves assets that last for decades – and may therefore be heavily affected by rising temperatures and more severe weather.
Michael Riley, equity analyst at SAM, the sustainable investment specialist, says the value of property and infrastructure that will be affected is massive.
Mr Sullivan says: “Those companies that are most exposed in the short term are those that are not diversified and are in infrastructure – such as the water companies.”
Energy companies will also have to take climate effects into account during the massive programme of capacity expansion that is under way around the globe. The unforeseen impacts on electricity generators was illustrated during the 2003 heat wave in Europe, when France had to shut down nuclear power stations because of a lack of water to cool the reactors. The shortage of water hit its hydro-electric plants as well.
Businesses able to improve the resilience of the grid will benefit from increased uncertainty over supplies, as well as suppliers of uninterruptible power supplies and energy storage, says Mr Jenkyn-Jones.
Meanwhile, buildings will need more cooling as temperatures rise, but will also have to use less energy.
This will provide opportunities in areas from insulation to specialist glazing and building controls systems.
Finally, the bewildering range of changes and the need for local knowledge to assess risks and opportunities will bring strong demand for the services of environmental consultancies and companies that can provide their clients with information about their own energy consumption and emissions .
The advance of adaptation up the climate agenda will be uneven, receiving increased attention in the wake of various natural disasters, says Mr Dickinson of the Carbon Disclosure Project. “Mitigation is a business that will move at the speed of politics. Adaptation will move at the speed of events.”
Copyright The Financial Times Limited 2009
Published: May 10 2009 11:02
Dealing with climate change is mostly couched in terms of the need to cut greenhouse gas emissions, with targets often set far in the future.
But focusing on these mitigation strategies has distracted attention from the need to adapt to changes happening now, according to experts.
“People are looking to the future and what will happen then, but climate change really is happening now,” says Paul Dickinson, chief executive of the Carbon Disclosure Project.
Some climate change is inevitable, regardless of how much emissions are cut in future, because of the gases that have already been pumped into the atmosphere.
Climate scientists meeting in Copenhagen in March heard that it will be almost impossible to meet targets to limit temperature rises to 2ºC because emissions have continued to surge.
According to New Energy Finance, the clean energy analysts, heat waves are becoming more common and rainfall patterns are changing, with increased risk of flooding and drought.
“Glaciers are melting, which will have profound effects on water supplies in locations ranging from the Indian sub-continent to North and South America,” the report says.
“Permafrost is thawing, affecting building foundations and potentially releasing billions of tonnes of previously locked away methane. Sea levels are rising; storm surge heights are increasing; and the intensity of storms is increasing, all of which will affect millions of people.”
Businesses across every sector of the economy – from aviation to agriculture – will be affected. Security of water and energy supplies, seasonal shortages, and changes in water quality will all have cost implications, says a report by Acclimatise for IBM, published last month.
Consequently, investors need to know about the exposures of the companies they own, says Rory Sullivan, head of investor responsibility at Insight Investment, a specialist asset manager. This is easier said than done, however, because exposure varies across countries and sectors of the economy.
“There are different challenges in different regions,” says Connie Hedegaard, Denmark’s environment minister. “The issues you face in northern Finland are nothing like what you have to deal with in southern Spain.”
Nonetheless, there are certain common themes when it comes to adaptation. “Scarcity of water will be one of the main challenges,” Ms Hedegaard says.
Many regions also face more severe flooding while changes to rainfall patterns mean that even if the overall amount of rainfall does not change, the amount of usable water – for water supplies, agriculture and to cool power stations – will reduce. Finally, sea level rises put at risk the lives and livelihoods of billions of people around the world who live near coasts.
As well as dredging companies and builders of sea defences such as Boskalis of the Netherlands, companies dealing with storm water management such as Hydro International and those that provide water treatment services will see their markets grow, says Bruce Jenkyn-Jones, chief investment officer of Impax, a fund manager investing in a cleaner economy.
The increase in severe weather events puts the insurance sector firmly in the front line of dealing with climate change. Losses from natural catastrophes were $200bn (£133bn, €150bn) in 2008, according to Munich Re. Property and casualty insurance are the most affected by this and companies are reacting by limiting cover or increasing premiums in flood-affected areas. The state government is now the biggest residential insurer in Florida, for example, because insurers have withdrawn cover from hurricane-prone areas.
Insurers are also offering new products, providing catastrophe insurance and cover for renewable energy projects and extending cover in emerging markets that are likely to be hard hit by climate change, thus increasing the resilience of businesses and consumers.
Infrastructure and the built environment will also be affected, not least because the sector involves assets that last for decades – and may therefore be heavily affected by rising temperatures and more severe weather.
Michael Riley, equity analyst at SAM, the sustainable investment specialist, says the value of property and infrastructure that will be affected is massive.
Mr Sullivan says: “Those companies that are most exposed in the short term are those that are not diversified and are in infrastructure – such as the water companies.”
Energy companies will also have to take climate effects into account during the massive programme of capacity expansion that is under way around the globe. The unforeseen impacts on electricity generators was illustrated during the 2003 heat wave in Europe, when France had to shut down nuclear power stations because of a lack of water to cool the reactors. The shortage of water hit its hydro-electric plants as well.
Businesses able to improve the resilience of the grid will benefit from increased uncertainty over supplies, as well as suppliers of uninterruptible power supplies and energy storage, says Mr Jenkyn-Jones.
Meanwhile, buildings will need more cooling as temperatures rise, but will also have to use less energy.
This will provide opportunities in areas from insulation to specialist glazing and building controls systems.
Finally, the bewildering range of changes and the need for local knowledge to assess risks and opportunities will bring strong demand for the services of environmental consultancies and companies that can provide their clients with information about their own energy consumption and emissions .
The advance of adaptation up the climate agenda will be uneven, receiving increased attention in the wake of various natural disasters, says Mr Dickinson of the Carbon Disclosure Project. “Mitigation is a business that will move at the speed of politics. Adaptation will move at the speed of events.”
Copyright The Financial Times Limited 2009
Gas deal between Turkey and European Union breaks Russian stranglehold
• Ankara reaches agreement with EU on new pipeline• Caspian energy bonanza could be unblocked
Ian Traynor in Brussels
The Guardian, Monday 11 May 2009
The European Union and Turkey have struck a ground-breaking gas pipeline deal unlocking a potential energy bonanza in the Caspian basin after more than a year of deadlock, according to senior EU officials.
The agreement, to be signed in Ankara on 25 June, represents a major boost to the EU's ill-starred Nabucco pipeline project, which is intended to transport natural gas to Europe from central Asia, the Caucasus and the Middle East, and is the key to breaking the Kremlin's stranglehold over Europe's gas imports. "This is a complete breakthrough," said a senior EU official involved in the tough negotiations with Turkey. "The Turks have accepted our terms. There is no conditionality."
The €9bn Nabucco project is at the centre of a contest pitting Russia against the EU and involving Turkey, Germany, Austria, Azerbaijan and the authoritarian regimes of central Asia in the effort to secure Europe's gas needs while curbing the hold Moscow and the gas monopoly Gazprom have over the supply lines. The case for Nabucco is debated, but was reinforced by Russia's gas war with Ukraine in January, which caused havoc with Gazprom supplies to eastern and central Europe. There had been similar disputes in 2006 and 2007.
Nabucco, stretching more than 2,000 miles from Turkey's eastern border to Europe's main gas hub outside Vienna, would be the main route for pumping gas to Europe not controlled by Gazprom. But the plan had faltered over deadlock between the EU and Turkey over the pipeline transit agreement. More than half the pipeline is to be located in Turkey, making it the gatekeeper of Europe's energy supplies.
Ankara has been driving a hard bargain, insisting on collecting a "tax" on the gas being pumped and demanding 15% of the transit gas at discounted prices. This, say EU officials and the six-company consortium that is to build and run the pipeline, would render Nabucco financially unviable.
The stalemate was broken at a summit in Prague last Friday between the EU and the countries involved. "The 15% demand has gone," Andris Piebalgs, the EU commissioner for energy, told the Guardian. "We've agreed on cost-based transit. We're very close to a conclusion." A senior Czech official organising the summit likened the negotiations to "bargaining in an Istanbul souk", while an EU envoy to the region worried that "nothing is done until it's done".
But the European commission president, José Manuel Barroso, said President Abdullah Gül of Turkey assured him the deal would be signed within weeks. "That's what President Gül told me," he said.
The Turkish leader indirectly linked any Nabucco deal with progress on Ankara's negotiations with Brussels on joining the EU. The negotiations are being blocked by Greek Cypriots, while several big EU states are quietly happy to see Turkey's EU bid frozen. But Barroso and others insisted that Ankara was not setting conditions for a Nabucco agreement.
The EU imports about one-third, or 140bn cubic metres, of its gas from Russia. The "southern corridor" – Nabucco and two other pipelines – is supposed to pump 60bn cubic metres a year, or 10% of requirements by 2020, bypassing Russia.
Building of the Nabucco pipeline has been delayed while the projected costs have soared, leading critics to describe the scheme as a pipedream. But the Prague summit and the imminent pact with Turkey appear to have resurrected the project.
The consortium that is planning to build and manage a pipeline stretching more than 2,050 miles from Turkey's eastern border through the Balkans to Baumgarten, east of Vienna, is headed by OMV, the Austrian oil and gas firm, with four national energy corporations – Botas of Turkey, Bulgargaz of Bulgaria, Transgaz of Romania, and MOL of Hungary, plus RWE, the German energy group that joined the consortium last year even though its government prefers collaboration with Gazprom and opposes Nabucco. All six are grouped in Nabucco Gas Pipeline International.
As well as Nabucco, the Europeans spoke specifically for the first time about supporting the building of a pipeline under the Caspian Sea connecting Turkmenistan and central Asia to Azerbaijan. The central Asian gas was up for grabs, said the senior EU official, and if Europe did not get there first, it would go to Russia or China.
If Nabucco is to happen, it will initially need the gas from Azerbaijan's BP-run Shah Deniz-2 field. But officials in Brussels view Turkmenistan, with its vast gas deposits, as the key to its longer-term viability.
The Russians are pressing the central Asians and Azerbaijan hard to try to put a stop to Nabucco and retain control of all the supply routes to the west. The Turkmens attended the Prague summit, but declined to commit, apparently deciding to try to play the Russians off against the Europeans.
Ian Traynor in Brussels
The Guardian, Monday 11 May 2009
The European Union and Turkey have struck a ground-breaking gas pipeline deal unlocking a potential energy bonanza in the Caspian basin after more than a year of deadlock, according to senior EU officials.
The agreement, to be signed in Ankara on 25 June, represents a major boost to the EU's ill-starred Nabucco pipeline project, which is intended to transport natural gas to Europe from central Asia, the Caucasus and the Middle East, and is the key to breaking the Kremlin's stranglehold over Europe's gas imports. "This is a complete breakthrough," said a senior EU official involved in the tough negotiations with Turkey. "The Turks have accepted our terms. There is no conditionality."
The €9bn Nabucco project is at the centre of a contest pitting Russia against the EU and involving Turkey, Germany, Austria, Azerbaijan and the authoritarian regimes of central Asia in the effort to secure Europe's gas needs while curbing the hold Moscow and the gas monopoly Gazprom have over the supply lines. The case for Nabucco is debated, but was reinforced by Russia's gas war with Ukraine in January, which caused havoc with Gazprom supplies to eastern and central Europe. There had been similar disputes in 2006 and 2007.
Nabucco, stretching more than 2,000 miles from Turkey's eastern border to Europe's main gas hub outside Vienna, would be the main route for pumping gas to Europe not controlled by Gazprom. But the plan had faltered over deadlock between the EU and Turkey over the pipeline transit agreement. More than half the pipeline is to be located in Turkey, making it the gatekeeper of Europe's energy supplies.
Ankara has been driving a hard bargain, insisting on collecting a "tax" on the gas being pumped and demanding 15% of the transit gas at discounted prices. This, say EU officials and the six-company consortium that is to build and run the pipeline, would render Nabucco financially unviable.
The stalemate was broken at a summit in Prague last Friday between the EU and the countries involved. "The 15% demand has gone," Andris Piebalgs, the EU commissioner for energy, told the Guardian. "We've agreed on cost-based transit. We're very close to a conclusion." A senior Czech official organising the summit likened the negotiations to "bargaining in an Istanbul souk", while an EU envoy to the region worried that "nothing is done until it's done".
But the European commission president, José Manuel Barroso, said President Abdullah Gül of Turkey assured him the deal would be signed within weeks. "That's what President Gül told me," he said.
The Turkish leader indirectly linked any Nabucco deal with progress on Ankara's negotiations with Brussels on joining the EU. The negotiations are being blocked by Greek Cypriots, while several big EU states are quietly happy to see Turkey's EU bid frozen. But Barroso and others insisted that Ankara was not setting conditions for a Nabucco agreement.
The EU imports about one-third, or 140bn cubic metres, of its gas from Russia. The "southern corridor" – Nabucco and two other pipelines – is supposed to pump 60bn cubic metres a year, or 10% of requirements by 2020, bypassing Russia.
Building of the Nabucco pipeline has been delayed while the projected costs have soared, leading critics to describe the scheme as a pipedream. But the Prague summit and the imminent pact with Turkey appear to have resurrected the project.
The consortium that is planning to build and manage a pipeline stretching more than 2,050 miles from Turkey's eastern border through the Balkans to Baumgarten, east of Vienna, is headed by OMV, the Austrian oil and gas firm, with four national energy corporations – Botas of Turkey, Bulgargaz of Bulgaria, Transgaz of Romania, and MOL of Hungary, plus RWE, the German energy group that joined the consortium last year even though its government prefers collaboration with Gazprom and opposes Nabucco. All six are grouped in Nabucco Gas Pipeline International.
As well as Nabucco, the Europeans spoke specifically for the first time about supporting the building of a pipeline under the Caspian Sea connecting Turkmenistan and central Asia to Azerbaijan. The central Asian gas was up for grabs, said the senior EU official, and if Europe did not get there first, it would go to Russia or China.
If Nabucco is to happen, it will initially need the gas from Azerbaijan's BP-run Shah Deniz-2 field. But officials in Brussels view Turkmenistan, with its vast gas deposits, as the key to its longer-term viability.
The Russians are pressing the central Asians and Azerbaijan hard to try to put a stop to Nabucco and retain control of all the supply routes to the west. The Turkmens attended the Prague summit, but declined to commit, apparently deciding to try to play the Russians off against the Europeans.
Chipmaker TSMC eyes green sector
By Robin Kwong in Taipei
Published: May 11 2009 01:16
The world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing Company, is considering diversifying away from chips for the first time in its 22-year history to combat declining industry margins.
“If you look at the past five to 10 years, growth [in the industry] has slowed down,” Rick Tsai, chief executive, told the Financial Times. “It is very logical and natural for a company of our size to look for opportunities for extra growth.”
TSMC, which accounts for about 10 per cent of global semiconductor output, last week appointed Chao Ying-cheng, president of TSMC China, to head a new business unit that will look at possibilities in green energy, such as solar panels.
“In the long term, the world needs to be a greener place,” Mr Tsai said, but added that no decision had been made. “We’re looking at these things from a very long-term point of view. It’s not just try to get in and make a quick profit.”
The Taiwanese chip group suffered its biggest drop in revenue in the first three months of this year, barely breaking even in the first quarter, as a result of the global economic crisis.
Mr Tsai said at the time that business was picking up again. “It is pretty obvious now that we were at the bottom [of the market] at around December or January,” he said.
TSMC is playing a growing role in the chip industry as semiconductor companies that previously made their own chips outsource production to TSMC, either to tap its expansive client network or because of worsening business conditions.
Intel, the world’s biggest chipmaker, in March turned to TSMC for help in making its Atom microprocessors, the first time the US company has outsourced production of microprocessors.
Fujitsu, the Japanese electronics group, last month said TSMC would make some of its chips and that the two companies would collaborate.
Mr Tsai said the world was experiencing an unprecedented proliferation in computing power with the advent of devices such as smartphones and netbooks that blur the line between computers and consumer electronics.
“We just don’t know what will come out,” he said. “It’s a new phenomenon.”
Because computing power was more widely available, “if you want to command very high [profit] margins, that will be more difficult,” Mr Tsai said.
“For the whole industry, we do have not enough margin,” he said. “Our industry has been lowering our price continuously ... However, I think the price can go down at a more reasonable rate.”
Copyright The Financial Times Limited 2009
Published: May 11 2009 01:16
The world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing Company, is considering diversifying away from chips for the first time in its 22-year history to combat declining industry margins.
“If you look at the past five to 10 years, growth [in the industry] has slowed down,” Rick Tsai, chief executive, told the Financial Times. “It is very logical and natural for a company of our size to look for opportunities for extra growth.”
TSMC, which accounts for about 10 per cent of global semiconductor output, last week appointed Chao Ying-cheng, president of TSMC China, to head a new business unit that will look at possibilities in green energy, such as solar panels.
“In the long term, the world needs to be a greener place,” Mr Tsai said, but added that no decision had been made. “We’re looking at these things from a very long-term point of view. It’s not just try to get in and make a quick profit.”
The Taiwanese chip group suffered its biggest drop in revenue in the first three months of this year, barely breaking even in the first quarter, as a result of the global economic crisis.
Mr Tsai said at the time that business was picking up again. “It is pretty obvious now that we were at the bottom [of the market] at around December or January,” he said.
TSMC is playing a growing role in the chip industry as semiconductor companies that previously made their own chips outsource production to TSMC, either to tap its expansive client network or because of worsening business conditions.
Intel, the world’s biggest chipmaker, in March turned to TSMC for help in making its Atom microprocessors, the first time the US company has outsourced production of microprocessors.
Fujitsu, the Japanese electronics group, last month said TSMC would make some of its chips and that the two companies would collaborate.
Mr Tsai said the world was experiencing an unprecedented proliferation in computing power with the advent of devices such as smartphones and netbooks that blur the line between computers and consumer electronics.
“We just don’t know what will come out,” he said. “It’s a new phenomenon.”
Because computing power was more widely available, “if you want to command very high [profit] margins, that will be more difficult,” Mr Tsai said.
“For the whole industry, we do have not enough margin,” he said. “Our industry has been lowering our price continuously ... However, I think the price can go down at a more reasonable rate.”
Copyright The Financial Times Limited 2009
Darker Times for Solar-Power Industry
By LEILA ABBOUD
The global recession and tight credit conditions have cast a chill on the solar-power industry after years of breakneck growth, and could usher in long-term changes in the industry.
Banks have curtailed financing for major solar projects, and Spain -- the world's second-largest solar-power market after Germany -- has slashed subsidies for the industry, leading to sharply lower demand for solar cells. Sales of the tiny chips that convert the sun's rays into electricity are expected to drop by at least 20% this year.
As a result, solar-cell manufacturers are delaying construction of new factories and sharply cutting prices. Several big solar companies, including Renewable Energy Corp. of Norway and Q-Cells SE of Germany, have scaled back ambitious profit and revenue goals, and are predicting a tough year ahead. Analysts expects solar cells to fetch an average of just $2 per watt this year, down sharply from $3.95 per watt in 2008.
Q-Cells
Q-Cells, a maker of solar cells, has pushed into building energy projects, above.
"Last year we couldn't make enough solar cells to keep up with our customers' demands," said Anton Milner, chief executive of Q-Cells, the world's biggest solar-cell manufacturer by volume. "Now it's a buyer's market -- customers are coming back to ask if they can buy lower volumes and have lower prices than planned."
In environmental terms, there may be a silver lining in the industry's woes. The drop in prices for solar-power gear could make solar energy more competitive with burning fossil fuels to generate electricity, even if oil prices stay at around $50 a barrel. Today, less than 1% of the world's electricity comes from solar power.
"The dramatic cost reductions now happening in solar will be good for the industry and the environment in the long term," said Sven M. Hansen, chief investment officer of Good Energies LLC, which invests in renewable energy. "But in the short term, the outlook for solar companies has never looked more difficult."
World-wide shipments of solar cells to companies that install rooftop solar-power systems and build fields of solar panels for commercial energy production grew 85% to almost 6,000 megawatts in 2008, according to research firm Collins Stewart LLC. This year shipments are expected to fall to 5,575 megawatts.
First-quarter sales at SunPower Corp. fell 22%, and the California solar-cell producer cut its revenue forecast for 2009 by 17%. Last month, Taiwan's Motech Industries reported its worst quarter since 2003 with revenues down 15% and net income down 80% to $1.4 million.
Some industry watchers think the current downturn is more than a bump in the road. Dan Reis, analyst at investment-research firm Collins Stewart, says falling solar-cell prices could herald an era of lower profits and thinner margins. Sales of solar panels will boom in volume terms, Mr. Reis said, but since prices will be much lower, companies with low costs, such as Chinese manufacturers Trina Solar Ltd. and Yingli Green Energy, will have an advantage.
Even so, solar-cell makers may get some relief as countries including the U.S., Japan and China provide more support for renewable energy either as part of their economic-stimulus plans or to combat global warming. But those subsidies are unlikely to translate into an uptick in solar-cell orders until next year at the earliest.
In the meantime, government subsidies and private-sector financing are likely to be scarcer than in recent years. The Spanish government will subsidize just 500 megawatts worth of solar projects this year, down sharply from 2,400 megawatts last year.
Utilities and other developers are also finding it harder to get loans or raise investment capital for big solar projects. In the first quarter, global financing for renewable-energy projects fell to €11.5 billion from €20.5 billion in the fourth quarter, says London consulting firm New Energy Finance.
To adapt, Q-Cells' Mr. Milner has slashed capital-spending more than 40% from last year, and has postponed the construction of a new factory by six months. This year, the company, which hired 800 workers in 2008 as its revenue rose 30%, has let the contracts of its temporary workers expire and has laid off about 80 people.
"I've gone from managing for rapid growth to managing for cost reductions," said Mr. Milner.
To protect margins, the Q-Cells CEO pushed into the business of building big solar-energy projects. Last year, he formed a division that finds the project site, obtains the permits, builds the solar installation, and then sells the project off to investors, banks or utilities. "We've seen amazing growth, and this will soon become a significant part of our business," he said.
Write to Leila Abboud at leila.abboud@wsj.com
The global recession and tight credit conditions have cast a chill on the solar-power industry after years of breakneck growth, and could usher in long-term changes in the industry.
Banks have curtailed financing for major solar projects, and Spain -- the world's second-largest solar-power market after Germany -- has slashed subsidies for the industry, leading to sharply lower demand for solar cells. Sales of the tiny chips that convert the sun's rays into electricity are expected to drop by at least 20% this year.
As a result, solar-cell manufacturers are delaying construction of new factories and sharply cutting prices. Several big solar companies, including Renewable Energy Corp. of Norway and Q-Cells SE of Germany, have scaled back ambitious profit and revenue goals, and are predicting a tough year ahead. Analysts expects solar cells to fetch an average of just $2 per watt this year, down sharply from $3.95 per watt in 2008.
Q-Cells
Q-Cells, a maker of solar cells, has pushed into building energy projects, above.
"Last year we couldn't make enough solar cells to keep up with our customers' demands," said Anton Milner, chief executive of Q-Cells, the world's biggest solar-cell manufacturer by volume. "Now it's a buyer's market -- customers are coming back to ask if they can buy lower volumes and have lower prices than planned."
In environmental terms, there may be a silver lining in the industry's woes. The drop in prices for solar-power gear could make solar energy more competitive with burning fossil fuels to generate electricity, even if oil prices stay at around $50 a barrel. Today, less than 1% of the world's electricity comes from solar power.
"The dramatic cost reductions now happening in solar will be good for the industry and the environment in the long term," said Sven M. Hansen, chief investment officer of Good Energies LLC, which invests in renewable energy. "But in the short term, the outlook for solar companies has never looked more difficult."
World-wide shipments of solar cells to companies that install rooftop solar-power systems and build fields of solar panels for commercial energy production grew 85% to almost 6,000 megawatts in 2008, according to research firm Collins Stewart LLC. This year shipments are expected to fall to 5,575 megawatts.
First-quarter sales at SunPower Corp. fell 22%, and the California solar-cell producer cut its revenue forecast for 2009 by 17%. Last month, Taiwan's Motech Industries reported its worst quarter since 2003 with revenues down 15% and net income down 80% to $1.4 million.
Some industry watchers think the current downturn is more than a bump in the road. Dan Reis, analyst at investment-research firm Collins Stewart, says falling solar-cell prices could herald an era of lower profits and thinner margins. Sales of solar panels will boom in volume terms, Mr. Reis said, but since prices will be much lower, companies with low costs, such as Chinese manufacturers Trina Solar Ltd. and Yingli Green Energy, will have an advantage.
Even so, solar-cell makers may get some relief as countries including the U.S., Japan and China provide more support for renewable energy either as part of their economic-stimulus plans or to combat global warming. But those subsidies are unlikely to translate into an uptick in solar-cell orders until next year at the earliest.
In the meantime, government subsidies and private-sector financing are likely to be scarcer than in recent years. The Spanish government will subsidize just 500 megawatts worth of solar projects this year, down sharply from 2,400 megawatts last year.
Utilities and other developers are also finding it harder to get loans or raise investment capital for big solar projects. In the first quarter, global financing for renewable-energy projects fell to €11.5 billion from €20.5 billion in the fourth quarter, says London consulting firm New Energy Finance.
To adapt, Q-Cells' Mr. Milner has slashed capital-spending more than 40% from last year, and has postponed the construction of a new factory by six months. This year, the company, which hired 800 workers in 2008 as its revenue rose 30%, has let the contracts of its temporary workers expire and has laid off about 80 people.
"I've gone from managing for rapid growth to managing for cost reductions," said Mr. Milner.
To protect margins, the Q-Cells CEO pushed into the business of building big solar-energy projects. Last year, he formed a division that finds the project site, obtains the permits, builds the solar installation, and then sells the project off to investors, banks or utilities. "We've seen amazing growth, and this will soon become a significant part of our business," he said.
Write to Leila Abboud at leila.abboud@wsj.com
Hybrids Battle for Green
Toyota Rolls Out Major Push for Third-Generation Prius
By SUZANNE VRANICA
With sales of hybrid vehicles sinking, a green-advertising battle is erupting between Toyota Motor's new Prius and Honda Motor's new Insight.
Beginning today, Toyota, the world's largest auto maker, is rolling out a major U.S. ad push for its 2010 Prius, the third generation of the world's top-selling hybrid vehicle. The car hits dealerships in the coming weeks.
The Prius television ads -- heavy on the special effects -- feature a utopian landscape made entirely of people; the sun, clouds and ocean are depicted by humans moving in unison. The new slogan: "Harmony between man, nature and machine."
The Prius campaign also will deploy some outdoor-marketing gimmicks, including transforming certain bus shelters in cities such as Boston, Chicago and Los Angeles into cooling stations that use solar panels to power fans. It's a way to demonstrate how solar panels on the Prius's moon roof keep the car cool.
Toyota's new ad for its third-generation Prius shows a planet in harmony, with humanized clouds, fields and flowers bursting into song.
Toyota's ad push will go head to head with a campaign for the Insight. Honda has been blanketing the airwaves with ads since March. Its pitch carries the slogan "A Hybrid for everyone," a nod to the price, which is just shy of $20,000. The Prius is more expensive, with a starting price of $22,000, unchanged from the base price for the 2009 model.
Still, Toyota says it will introduce a cheaper version of the car in the fall that will start at $21,000. It's unclear how much supply Toyota will have of the lower-priced Prius. Toyota ads won't mention the Prius's price.
Some experts believe that price should be a big factor in the campaigns; hybrids typically cost thousands of dollars more than comparable gas-burning models. "They need to emphasize not only the social benefits of hybrids but also the economics," says Rebecca Lindland, director of the automotive group at IHS Global Insight. "One of the big hang-ups with these cars is that they cost more."
Persuading consumers to buy a new car in this economic climate won't be easy. Toyota hasn't been spared in the auto industry's sales collapse. Its $7.8 billion loss for the January-March quarter, reported Friday, is bigger even than General Motors'.
Moreover, the allure of hybrids has waned with the decline in oil prices. Prius sales have fallen about 50% from Jan. 1 to April 30. It's a change from last summer, when consumers were clamoring for fuel-efficient cars as gas prices topped $4 a gallon. And for all their earth-friendly cachet, hybrid cars represent only 2% of the light-vehicle market, according to IHS Global Insight.
Toyota
Artist's rendering of one of the solar-cooling bus shelters Toyota will use to show how solar panels on the moon roof of its Prius hybrid cool the car.
"It's stunning," says Ms. Lindland of IHS. "Despite all the successes of the Prius and the emphasis on global warming, we can't get significant hybrid penetration."
The Prius campaign ranges across television, print and online ads. Toyota says it will spend more on the new campaign than it did for the second generation of Prius, which received $58.3 million in ad support, according to WPP's TNS Media Intelligence. Toyota declines to disclose its exact spending for this latest pitch.
"We recognize that normally hybrid sales fall with gas prices, but with this new product we think we can break that paradigm," says Kim McCullough, Toyota's corporate manager of marketing communications. The newly remodeled Prius will have more mass appeal, she says, because it is slightly bigger, with more horsepower.
The initial Prius advertising largely targeted the early adopter and the tree-hugging crowd, while the second generation of the vehicle was seen as the family's second or commuter car. This campaign is about the "mainstreaming of the product," Ms. McCullough says.
"The big barrier for mass consumers is they worried that the Prius was underpowered and small," says Mike McKay, executive creative director at the Los Angeles offices of Saatchi & Saatchi, the Publicis Groupe agency that created the ad effort.
Addressing the power question in another of its outdoor gimmicks, Toyota will head to some big parks, where it will set up 8- to 12-foot-tall flower sculptures equipped with solar panels that can be used as cellphone- and laptop-recharging stations. In August, the company will have billboards in California made of flowers.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
By SUZANNE VRANICA
With sales of hybrid vehicles sinking, a green-advertising battle is erupting between Toyota Motor's new Prius and Honda Motor's new Insight.
Beginning today, Toyota, the world's largest auto maker, is rolling out a major U.S. ad push for its 2010 Prius, the third generation of the world's top-selling hybrid vehicle. The car hits dealerships in the coming weeks.
The Prius television ads -- heavy on the special effects -- feature a utopian landscape made entirely of people; the sun, clouds and ocean are depicted by humans moving in unison. The new slogan: "Harmony between man, nature and machine."
The Prius campaign also will deploy some outdoor-marketing gimmicks, including transforming certain bus shelters in cities such as Boston, Chicago and Los Angeles into cooling stations that use solar panels to power fans. It's a way to demonstrate how solar panels on the Prius's moon roof keep the car cool.
Toyota's new ad for its third-generation Prius shows a planet in harmony, with humanized clouds, fields and flowers bursting into song.
Toyota's ad push will go head to head with a campaign for the Insight. Honda has been blanketing the airwaves with ads since March. Its pitch carries the slogan "A Hybrid for everyone," a nod to the price, which is just shy of $20,000. The Prius is more expensive, with a starting price of $22,000, unchanged from the base price for the 2009 model.
Still, Toyota says it will introduce a cheaper version of the car in the fall that will start at $21,000. It's unclear how much supply Toyota will have of the lower-priced Prius. Toyota ads won't mention the Prius's price.
Some experts believe that price should be a big factor in the campaigns; hybrids typically cost thousands of dollars more than comparable gas-burning models. "They need to emphasize not only the social benefits of hybrids but also the economics," says Rebecca Lindland, director of the automotive group at IHS Global Insight. "One of the big hang-ups with these cars is that they cost more."
Persuading consumers to buy a new car in this economic climate won't be easy. Toyota hasn't been spared in the auto industry's sales collapse. Its $7.8 billion loss for the January-March quarter, reported Friday, is bigger even than General Motors'.
Moreover, the allure of hybrids has waned with the decline in oil prices. Prius sales have fallen about 50% from Jan. 1 to April 30. It's a change from last summer, when consumers were clamoring for fuel-efficient cars as gas prices topped $4 a gallon. And for all their earth-friendly cachet, hybrid cars represent only 2% of the light-vehicle market, according to IHS Global Insight.
Toyota
Artist's rendering of one of the solar-cooling bus shelters Toyota will use to show how solar panels on the moon roof of its Prius hybrid cool the car.
"It's stunning," says Ms. Lindland of IHS. "Despite all the successes of the Prius and the emphasis on global warming, we can't get significant hybrid penetration."
The Prius campaign ranges across television, print and online ads. Toyota says it will spend more on the new campaign than it did for the second generation of Prius, which received $58.3 million in ad support, according to WPP's TNS Media Intelligence. Toyota declines to disclose its exact spending for this latest pitch.
"We recognize that normally hybrid sales fall with gas prices, but with this new product we think we can break that paradigm," says Kim McCullough, Toyota's corporate manager of marketing communications. The newly remodeled Prius will have more mass appeal, she says, because it is slightly bigger, with more horsepower.
The initial Prius advertising largely targeted the early adopter and the tree-hugging crowd, while the second generation of the vehicle was seen as the family's second or commuter car. This campaign is about the "mainstreaming of the product," Ms. McCullough says.
"The big barrier for mass consumers is they worried that the Prius was underpowered and small," says Mike McKay, executive creative director at the Los Angeles offices of Saatchi & Saatchi, the Publicis Groupe agency that created the ad effort.
Addressing the power question in another of its outdoor gimmicks, Toyota will head to some big parks, where it will set up 8- to 12-foot-tall flower sculptures equipped with solar panels that can be used as cellphone- and laptop-recharging stations. In August, the company will have billboards in California made of flowers.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
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