By Fiona Harvey, Environment Correspondent
Published: May 19 2009 03:06
Trade unionists will make a last-ditch attempt on Tuesday to save more than 600 jobs in the UK’s fledgling renewable energy industry, urging government to invest directly in manufacturing capacity.
Jack Dromey, deputy secretary general of Unite union, will ask for millions of pounds in investment to save wind-turbine manufacturing when he meets Ed Miliband, the secretary of state for energy and climate change.
Last month the Danish wind company Vestas said it would close its factories on the Isle of Wight and Southampton in July, with the loss of 625 jobs, citing lack of progress in building onshore wind farms in the UK. Vestas will shift production to markets such as the US and China, where it is easier to build wind farms.
Mr Dromey said the closures would be “a disaster” for government attempts to boost “green-collar jobs” in manufacturing and services for renewable energy. It would damage the country’s prospects of generating more energy from low-carbon sources, he said.
“The government talks about how green jobs will help the country climb out of the recession, so we hope they will take action to save England’s only wind-turbine manufacturing capacity,” Mr Dromey added. He picked out for special mention the response by the Scottish parliament.
The parliament directed nearly £10m ($15m) of investment to a site to make wind-turbine towers that was closed by Vestas in Scotland this year. The money encouraged another Danish company, Skykon, to invest some £35m in wind manufacturing operations at the site, saving 100 jobs and forming about 200 more.
The government’s failure to attract investment to renewable energy manufacturing has been attacked by environmental groups and the opposition parties.
Unite will also urge the government to consider following the Spanish example of only allowing planning permission for new wind energy sites if the turbines to be built there are at least in part manufactured in that region.
The union said that would be allowed by European Union laws by invoking social and environmental clauses of the regulations.
Union leaders also want improved access to the electricity grid for wind farms, which at present can wait months or even years for a connection to be built.
The Department of Energy and Climate Change said: “This closure is a commercial decision for the company and [it] does not reflect on the UK’s industrial policies.”
“The regional development agency Seeda has put together a special taskforce to help the employees of Vestas [if the closure were to go ahead].”
Copyright The Financial Times Limited 2009
Tuesday, 19 May 2009
Car scrappage scheme: 'cash for bangers' has difficult start
The Government's "cash for bangers" car scrappage scheme appeared to be in danger of unravelling after several manufacturers including Honda and Ford put deliveries on hold.
By David Millward, Transport Editor Published: 3:56PM BST 18 May 2009
Within hours of the Government's scrappage scheme coming into force, a number of disputes came to a head over the fine print of the scheme.
Many car makers believed that the industry's £1,000 contribution would be shared between the manufacturers themselves and the dealerships – which are independent companies.
But the Government has insisted that the carmakers should pay the £1,000 in full. There is also a separate dispute over how VAT should be calculated in scrappage transactions.
This followed a meeting between the industry and officials from the Department of Business Enterprise and Regulatory Reform (BERR) in London last week.
As a result Ford has delayed implementing the scheme, as has Honda. Fiat, meanwhile, said that it had "raised concerns with reference to the lack of clarity" in how scrappage will work.
Despite the problems, it has emerged that luxury car firms including Bentley, Rolls-Royce and Porsche have signed up to the scheme.
The luxury car makers have been hit hard by the recession especially with the collapse of the banking industry.
Several have been forced to cut production and jobs at their factories as they found they were not immune from the economic downturn.
As a result they have signed contracts to participate in the Government's scrappage scheme under which drivers get £2,000 off the price of a new car if they trade in a car which is at least 10 years old.
At Bentley, the woodworking shop in Crewe even started making customised furniture to keep busy.
"The scrappage scheme is designed to stimulate demand for cars and if a potential Bentley customer was hovering, it would be churlish of us not to support the scheme," said a company spokesman.
"Of course the Government would get an awful lot more back in VAT."
Even Aston Martin, which has not signed up to the scheme, admitted that it was still "open minded" over whether to participate.
Prime Minister Gordon Brown said the scheme, under which owners of cars and small vans more than 10 years old will get £2,000 off the price of a brand new vehicle when scrapping their old motor, will prove to be a great help to the British vehicle industry.
The Government and manufacturers are sharing the cost of the scheme, which will last until the end of February 2010 or until the £300 million Government funding runs out.
A spokesman for BERR said: "It was clear in the contracts that it was the manufacturers who should provide the £1,000 subsidy. We are confident that they will get the paperwork sorted out."
By David Millward, Transport Editor Published: 3:56PM BST 18 May 2009
Within hours of the Government's scrappage scheme coming into force, a number of disputes came to a head over the fine print of the scheme.
Many car makers believed that the industry's £1,000 contribution would be shared between the manufacturers themselves and the dealerships – which are independent companies.
But the Government has insisted that the carmakers should pay the £1,000 in full. There is also a separate dispute over how VAT should be calculated in scrappage transactions.
This followed a meeting between the industry and officials from the Department of Business Enterprise and Regulatory Reform (BERR) in London last week.
As a result Ford has delayed implementing the scheme, as has Honda. Fiat, meanwhile, said that it had "raised concerns with reference to the lack of clarity" in how scrappage will work.
Despite the problems, it has emerged that luxury car firms including Bentley, Rolls-Royce and Porsche have signed up to the scheme.
The luxury car makers have been hit hard by the recession especially with the collapse of the banking industry.
Several have been forced to cut production and jobs at their factories as they found they were not immune from the economic downturn.
As a result they have signed contracts to participate in the Government's scrappage scheme under which drivers get £2,000 off the price of a new car if they trade in a car which is at least 10 years old.
At Bentley, the woodworking shop in Crewe even started making customised furniture to keep busy.
"The scrappage scheme is designed to stimulate demand for cars and if a potential Bentley customer was hovering, it would be churlish of us not to support the scheme," said a company spokesman.
"Of course the Government would get an awful lot more back in VAT."
Even Aston Martin, which has not signed up to the scheme, admitted that it was still "open minded" over whether to participate.
Prime Minister Gordon Brown said the scheme, under which owners of cars and small vans more than 10 years old will get £2,000 off the price of a brand new vehicle when scrapping their old motor, will prove to be a great help to the British vehicle industry.
The Government and manufacturers are sharing the cost of the scheme, which will last until the end of February 2010 or until the £300 million Government funding runs out.
A spokesman for BERR said: "It was clear in the contracts that it was the manufacturers who should provide the £1,000 subsidy. We are confident that they will get the paperwork sorted out."
U.S. to unveil new policy on auto fuel standards
Reuters, Tuesday May 19 2009
zz * U.S. proposal would resolve California EPA case
* Plan would combine emissions/mileage programs
* Mileage, emissions targets would run from 2012-16 (Adds Chrysler statement)
By John Crawley and David Alexander
WASHINGTON, May 18 (Reuters) - The White House will unveil an auto fuel efficiency proposal on Tuesday to resolve a dispute between California and the U.S. government over emissions and accelerate the timeframe for sharply improving mileage performance, industry and other sources said.
The proposal, if accepted by California and a dozen other states that want to more aggressively target greenhouse gasses, would effectively end legal and political battles with the struggling auto sector over the best way to cut fuel consumption and curtail tailpipe emissions.
It would also put more pressure on struggling U.S. automakers like General Motors Corp, Ford Motor Co and bankrupt Chrysler LLC to accelerate development of more efficient gasoline engines, as well as new gasoline/electric hybrids and all-electric cars.
Automakers, however, are likely to support key elements of the Obama plan, industry sources said on Monday. In a statement Chrysler said it welcomed the announcement, which it expects to provide regulatory certainty allowing the company to focus on developing environmentally-friendly cars.
GM shares finished 1.1 percent higher to $1.18 on the New York Exchange while Ford shares were up less than 1 percent to $5.50.
According to people briefed on the announcement, the plan in the works for months would harmonize California's preference for curtailing emissions with the federal program that sets fuel economy standards based on vehicle weight and other attributes.
Cars and trucks must average 27.3 mpg by 2011, according to current federal regulations. Under the pending administration plan for 2012-16, annual mileage goals would top out at 42 miles per gallon (17.9 kilometres per litre) for cars and just over 26 mpg for light trucks, which include pickups, sport utilities and vans.
Vehicles would have to meet California's proposed standard of a 30 percent reduction in emissions.
Those targets are much more aggressive than the current long-range goal for the U.S. fleet to average 35 mpg by 2020, a 40 percent increase over today's performance.
Some vehicles made by Japanese automakers Toyota Motor Corp and Honda Motor Co already meet or exceed the new goal for mileage and emissions.
Autos represent 17 percent of all man-made carbon emissions, according to EPA.
California Sen. Barbara Boxer, chairman of the Committee on Environment and Public Works, applauded the measure as good news in the fight against global warming and efforts to create jobs and reduce U.S. dependence on imported oil.
The new policy would give automakers flexibility to meet the standards and would weigh the impact on the environment of carbon-based fuels and other vehicle systems that emit emissions, like air conditioners.
"This could be the breakthrough we've been looking for on clean cars," said David Friedman, research director of the clean vehicle program at the Union of Concerned Scientists.
The administration would not discuss the pending announcement other than to note that action on emissions and fuel economy was long overdue.
"I think you'll see tomorrow important, groundbreaking steps in that area," White House spokesman Robert Gibbs told reporters.
The administration in April opened the way to regulating emissions by declaring climate-warming pollution a danger to human health and welfare, in a sharp policy shift from the Bush administration.
The Environmental Protection Agency (EPA) declaration was seen as a strong signal to the international community that the United States intends to seriously combat climate change.
Moreover, Congress is considering legislation to cut carbon emissions emitted by cars, coal-fired power plants and oil refineries and other sources. The bill proposes a 17 percent reduction in emissions from 2005 levels by 2020.
The Obama White House in February reversed another Bush administration directive by ordering EPA to reconsider California's request for authority to regulate emissions from new cars and trucks under a law the state passed in 2006.
The agency said the Clean Air Act gives the EPA the authority to allow California to adopt its own emissions standards for motor vehicles due to the seriousness of the state's air pollution challenges.
More than a dozen other states supported California's plan but the auto industry fought it in court, fearing dual state and federal standards would result in a patchwork of regulations that would make vehicle planning and production more complex and expensive. (Additional reporting by Tom Doggett, Deborah Zabarenko and Elinor Comlay; editing by Marguerita Choy and Carol Bishopric)
zz * U.S. proposal would resolve California EPA case
* Plan would combine emissions/mileage programs
* Mileage, emissions targets would run from 2012-16 (Adds Chrysler statement)
By John Crawley and David Alexander
WASHINGTON, May 18 (Reuters) - The White House will unveil an auto fuel efficiency proposal on Tuesday to resolve a dispute between California and the U.S. government over emissions and accelerate the timeframe for sharply improving mileage performance, industry and other sources said.
The proposal, if accepted by California and a dozen other states that want to more aggressively target greenhouse gasses, would effectively end legal and political battles with the struggling auto sector over the best way to cut fuel consumption and curtail tailpipe emissions.
It would also put more pressure on struggling U.S. automakers like General Motors Corp, Ford Motor Co and bankrupt Chrysler LLC to accelerate development of more efficient gasoline engines, as well as new gasoline/electric hybrids and all-electric cars.
Automakers, however, are likely to support key elements of the Obama plan, industry sources said on Monday. In a statement Chrysler said it welcomed the announcement, which it expects to provide regulatory certainty allowing the company to focus on developing environmentally-friendly cars.
GM shares finished 1.1 percent higher to $1.18 on the New York Exchange while Ford shares were up less than 1 percent to $5.50.
According to people briefed on the announcement, the plan in the works for months would harmonize California's preference for curtailing emissions with the federal program that sets fuel economy standards based on vehicle weight and other attributes.
Cars and trucks must average 27.3 mpg by 2011, according to current federal regulations. Under the pending administration plan for 2012-16, annual mileage goals would top out at 42 miles per gallon (17.9 kilometres per litre) for cars and just over 26 mpg for light trucks, which include pickups, sport utilities and vans.
Vehicles would have to meet California's proposed standard of a 30 percent reduction in emissions.
Those targets are much more aggressive than the current long-range goal for the U.S. fleet to average 35 mpg by 2020, a 40 percent increase over today's performance.
Some vehicles made by Japanese automakers Toyota Motor Corp and Honda Motor Co already meet or exceed the new goal for mileage and emissions.
Autos represent 17 percent of all man-made carbon emissions, according to EPA.
California Sen. Barbara Boxer, chairman of the Committee on Environment and Public Works, applauded the measure as good news in the fight against global warming and efforts to create jobs and reduce U.S. dependence on imported oil.
The new policy would give automakers flexibility to meet the standards and would weigh the impact on the environment of carbon-based fuels and other vehicle systems that emit emissions, like air conditioners.
"This could be the breakthrough we've been looking for on clean cars," said David Friedman, research director of the clean vehicle program at the Union of Concerned Scientists.
The administration would not discuss the pending announcement other than to note that action on emissions and fuel economy was long overdue.
"I think you'll see tomorrow important, groundbreaking steps in that area," White House spokesman Robert Gibbs told reporters.
The administration in April opened the way to regulating emissions by declaring climate-warming pollution a danger to human health and welfare, in a sharp policy shift from the Bush administration.
The Environmental Protection Agency (EPA) declaration was seen as a strong signal to the international community that the United States intends to seriously combat climate change.
Moreover, Congress is considering legislation to cut carbon emissions emitted by cars, coal-fired power plants and oil refineries and other sources. The bill proposes a 17 percent reduction in emissions from 2005 levels by 2020.
The Obama White House in February reversed another Bush administration directive by ordering EPA to reconsider California's request for authority to regulate emissions from new cars and trucks under a law the state passed in 2006.
The agency said the Clean Air Act gives the EPA the authority to allow California to adopt its own emissions standards for motor vehicles due to the seriousness of the state's air pollution challenges.
More than a dozen other states supported California's plan but the auto industry fought it in court, fearing dual state and federal standards would result in a patchwork of regulations that would make vehicle planning and production more complex and expensive. (Additional reporting by Tom Doggett, Deborah Zabarenko and Elinor Comlay; editing by Marguerita Choy and Carol Bishopric)
Obama to unveil tough fuel rules for cars
By Tom Braithwaite and Andrew Ward in Washington and Bernard Simon in Toronto
Published: May 18 2009 22:23
The Obama administration plans to set tougher fuel economy and emissions rules for car manufacturers in a move likely to please environmentalists but add to the industry’s challenges.
A senior administration official on Monday said that the new plan would bring “historic levels of fuel efficiency”, introducing the first rules designed to reduce carbon emissions from cars and accelerating by four years an existing plan for new vehicles to achieve an average of about 35 miles per gallon by 2020.
The corporate average fuel economy standard, which was first introduced in 1975 as a response to the oil embargo imposed on the US by Arab oil producers, had been due to rise from 25.3mpg today to 35mpg by 2020 but the new efficiency target would rise to 35.5mpg between 2012 and 2016.
The dual approach to mitigating environmental damage would see the US adopt a plan comparable in scope to that of California, which has been attempting to adopt stricter targets to fight pollution independent of the federal government.
Carmakers, including the big three US companies and foreign manufacturers with US operations such as Toyota, have previously lobbied against proposals to impose tighter fuel-economy standards, arguing that they would hurt an already reeling industry by imposing a higher cost of manufacturing.
But General Motors is struggling to avoid joining Chrysler in bankruptcy. Both companies have accepted billions of dollars in US government aid. The three large US carmakers, including Ford, based in and around Detroit have suffered from a sharp decline in sales.
The administration has sought to engage with the industry, however, and executives are expected among a gathering of officials when the plans are laid out in more detail on Tuesday.
One point in the new regulation’s favour from the industry side is the prospect of a uniform national standard imposed by the federal government, rather than a patchwork of state regulations with different deadlines and targets.
The return of the fuel efficiency issue to the political spotlight comes as President Barack Obama is attempting to push restrictions on carbon emissions through Congress as a means to fight global warming. It also follows his commitment to energy security made during the presidential campaign.
California has long pushed for lower limits on emissions as it battles against pollution. The state’s attempts to enforce tougher legislation of its own, however, were stymied under the Bush administration.
“I am very pleased by the reports that the Obama administration has brought together the federal government, the state of California, and the auto industry behind new national automobile emissions standards that follow California’s lead,” said Barbara Boxer, a Democratic senator from California and chair of the Senate environment committee.
“This is good news for all of us who have fought long and hard to reduce global warming pollution, create clean energy jobs and reduce our dangerous dependence on foreign oil,” she said.
A separate initiative to promote fuel efficiency, which includes the so-called “cash for clunkers” legislation, is being considered in Congress. This would pay a subsidy to owners of older, dirtier vehicles when they trade them in for more fuel-efficient models.
The administration’s auto task force, which is attempting to restructure GM and Chrysler, has also made fuel efficiency a condition for several elements of the government-backed merger between Chrysler and Fiat, the Italian automaker.
Published: May 18 2009 22:23
The Obama administration plans to set tougher fuel economy and emissions rules for car manufacturers in a move likely to please environmentalists but add to the industry’s challenges.
A senior administration official on Monday said that the new plan would bring “historic levels of fuel efficiency”, introducing the first rules designed to reduce carbon emissions from cars and accelerating by four years an existing plan for new vehicles to achieve an average of about 35 miles per gallon by 2020.
The corporate average fuel economy standard, which was first introduced in 1975 as a response to the oil embargo imposed on the US by Arab oil producers, had been due to rise from 25.3mpg today to 35mpg by 2020 but the new efficiency target would rise to 35.5mpg between 2012 and 2016.
The dual approach to mitigating environmental damage would see the US adopt a plan comparable in scope to that of California, which has been attempting to adopt stricter targets to fight pollution independent of the federal government.
Carmakers, including the big three US companies and foreign manufacturers with US operations such as Toyota, have previously lobbied against proposals to impose tighter fuel-economy standards, arguing that they would hurt an already reeling industry by imposing a higher cost of manufacturing.
But General Motors is struggling to avoid joining Chrysler in bankruptcy. Both companies have accepted billions of dollars in US government aid. The three large US carmakers, including Ford, based in and around Detroit have suffered from a sharp decline in sales.
The administration has sought to engage with the industry, however, and executives are expected among a gathering of officials when the plans are laid out in more detail on Tuesday.
One point in the new regulation’s favour from the industry side is the prospect of a uniform national standard imposed by the federal government, rather than a patchwork of state regulations with different deadlines and targets.
The return of the fuel efficiency issue to the political spotlight comes as President Barack Obama is attempting to push restrictions on carbon emissions through Congress as a means to fight global warming. It also follows his commitment to energy security made during the presidential campaign.
California has long pushed for lower limits on emissions as it battles against pollution. The state’s attempts to enforce tougher legislation of its own, however, were stymied under the Bush administration.
“I am very pleased by the reports that the Obama administration has brought together the federal government, the state of California, and the auto industry behind new national automobile emissions standards that follow California’s lead,” said Barbara Boxer, a Democratic senator from California and chair of the Senate environment committee.
“This is good news for all of us who have fought long and hard to reduce global warming pollution, create clean energy jobs and reduce our dangerous dependence on foreign oil,” she said.
A separate initiative to promote fuel efficiency, which includes the so-called “cash for clunkers” legislation, is being considered in Congress. This would pay a subsidy to owners of older, dirtier vehicles when they trade them in for more fuel-efficient models.
The administration’s auto task force, which is attempting to restructure GM and Chrysler, has also made fuel efficiency a condition for several elements of the government-backed merger between Chrysler and Fiat, the Italian automaker.
Italy’s solar energy rush risks overheating
By Guy Dinmore in Rome
Published: May 18 2009 18:25
Italy, a growing market for renewable energy, is on the road to becoming the first country to achieve “grid parity” – the Holy Grail of solar power, where costs of producing photovoltaic energy fall below retail electricity prices.
Lighting the way: Sicily has moved its focus from large-scale wind or solar farms to microproduction this yearAt the same time, however, the photovoltaic industry is warning of the dangers of a speculative bubble unleashed by the attraction of the highest incentives in Europe but with no long-term clarity over the level of tariffs to be set after 2010.
Analysts say the collapse of the Spanish market, a victim of the credit crunch and property slump, is also driving investors towards Italy in spite of its difficult reputation for business.
“Grid parity is certainly going to be seen next year,” says Anton Milner, chief executive of Germany’s Q-Cells, the world’s largest solar cell producer, referring to Italy’s residential sector.
Speaking at a conference in Verona, he forecast cost reductions of 40-50 per cent in producing solar energy within six years, leading to greater efficiency than gas-fired power stations in southern Italy by 2015.
However, he added: “Italy must stop the overheating and abuse of the market, a stop-and-go story that we saw in Spain.”
Regional governments in southern Italy, each with its own complex sets of regulations, are under attack for being slow and bureaucratic.
Yet officials argue that they are grappling with a flood of applications to build solar farms, struggling to distinguish investors from speculators and, in some cases, suspected exploitation by the Mafia.
“We want an ethically responsible approach by investors,” said Rosanna Interlandi, head of Sicily’s environment department. “We want to know who our interlocutors are. Investors must appreciate this.”
Sicily’s regional government has taken a big step this year in deciding on a renewable energy strategy that shifts the focus from large wind or solar farms to microproduction. The aim is also to persuade the world’s largest PV component manufacturers to build their plants in Italy.
Fraser McLachlan, head of GCube, a specialist renewable energy insurer, agrees that thorough due diligence is needed. “We find, on occasion, you can run into a project partner that is not always what it is cooked up to be,” he told the Financial Times.
He said the risk profile in Italy was also increasing because “hefty” financial penalties were being introduced for solar projects not completed on time. “We are looking at this with a lot of caution. Some timelines are very tight,” he said.
Already producers of solar power in Italy are running up against a saturation of power lines that is causing delays of sometimes over a year in connection to the grid.
Puglia, in the heel of Italy with a communist as regional governor, is seen as the most attractive market at present. However, Paolo Rocco Viscontini, head of Enerpoint, warned that prices of agricultural land suitable for solar development had risen as much as six-fold in the past two years.
Cheap food produced by farmers in North Africa is driving Italian farmers off the land, forcing them to look for other sources of income. Local governments are also attracted by the property tax they impose on solar farms.
“Solar is the new real estate in Italy,” complained one project developer, saying that all sorts of property companies were piling into the sector.
Gerardo Montanino, head of GSE, the state-run power management agency, said incentives were too high in Italy at 68-75 cents a kilowatt hour, about double the level in Germany. Tariffs are expected to decrease in 2010 by 2 per cent.
Italy is projected to reach 1,200MW of installed PV capacity by the end of 2010, up from 450MW at present, which is only about 12 per cent of Spain’s installed capacity.
Copyright The Financial Times Limited 2009
Published: May 18 2009 18:25
Italy, a growing market for renewable energy, is on the road to becoming the first country to achieve “grid parity” – the Holy Grail of solar power, where costs of producing photovoltaic energy fall below retail electricity prices.
Lighting the way: Sicily has moved its focus from large-scale wind or solar farms to microproduction this yearAt the same time, however, the photovoltaic industry is warning of the dangers of a speculative bubble unleashed by the attraction of the highest incentives in Europe but with no long-term clarity over the level of tariffs to be set after 2010.
Analysts say the collapse of the Spanish market, a victim of the credit crunch and property slump, is also driving investors towards Italy in spite of its difficult reputation for business.
“Grid parity is certainly going to be seen next year,” says Anton Milner, chief executive of Germany’s Q-Cells, the world’s largest solar cell producer, referring to Italy’s residential sector.
Speaking at a conference in Verona, he forecast cost reductions of 40-50 per cent in producing solar energy within six years, leading to greater efficiency than gas-fired power stations in southern Italy by 2015.
However, he added: “Italy must stop the overheating and abuse of the market, a stop-and-go story that we saw in Spain.”
Regional governments in southern Italy, each with its own complex sets of regulations, are under attack for being slow and bureaucratic.
Yet officials argue that they are grappling with a flood of applications to build solar farms, struggling to distinguish investors from speculators and, in some cases, suspected exploitation by the Mafia.
“We want an ethically responsible approach by investors,” said Rosanna Interlandi, head of Sicily’s environment department. “We want to know who our interlocutors are. Investors must appreciate this.”
Sicily’s regional government has taken a big step this year in deciding on a renewable energy strategy that shifts the focus from large wind or solar farms to microproduction. The aim is also to persuade the world’s largest PV component manufacturers to build their plants in Italy.
Fraser McLachlan, head of GCube, a specialist renewable energy insurer, agrees that thorough due diligence is needed. “We find, on occasion, you can run into a project partner that is not always what it is cooked up to be,” he told the Financial Times.
He said the risk profile in Italy was also increasing because “hefty” financial penalties were being introduced for solar projects not completed on time. “We are looking at this with a lot of caution. Some timelines are very tight,” he said.
Already producers of solar power in Italy are running up against a saturation of power lines that is causing delays of sometimes over a year in connection to the grid.
Puglia, in the heel of Italy with a communist as regional governor, is seen as the most attractive market at present. However, Paolo Rocco Viscontini, head of Enerpoint, warned that prices of agricultural land suitable for solar development had risen as much as six-fold in the past two years.
Cheap food produced by farmers in North Africa is driving Italian farmers off the land, forcing them to look for other sources of income. Local governments are also attracted by the property tax they impose on solar farms.
“Solar is the new real estate in Italy,” complained one project developer, saying that all sorts of property companies were piling into the sector.
Gerardo Montanino, head of GSE, the state-run power management agency, said incentives were too high in Italy at 68-75 cents a kilowatt hour, about double the level in Germany. Tariffs are expected to decrease in 2010 by 2 per cent.
Italy is projected to reach 1,200MW of installed PV capacity by the end of 2010, up from 450MW at present, which is only about 12 per cent of Spain’s installed capacity.
Copyright The Financial Times Limited 2009
Australia in race for biggest solar plant
By Peter Smith in Sydney
Published: May 18 2009 17:31
Australia plans to build one of the world’s largest solar power station networks in partnership with the private sector as part of its commitment to source 20 per cent of its needs from renewable energy by 2020.
Solar collectors harness energy at a power plant in Harper Lake, California. A network of US solar plants is plannedKevin Rudd, the prime minister, said the government would invest up to A$1.4bn ($1bn, €775m, £700m) in solar energy out of the A$4.7bn Canberra has promised to spend on clean energy initiatives over the next decade.
“We don’t want to be clean energy followers worldwide, we want to be clean energy leaders worldwide,” Mr Rudd said. He disclosed that the network would be three times the size of the current largest solar power plant in California.
Australia’s plans mean it will join a global race to construct the world’s biggest solar plant. Earlier this year Southern California Edison, the US utility, signed up with a solar energy company to build a network of plants that would produce 1.3GW of energy, more than Australia envisages but which may take longer to finish.
Proposals for big solar facilities are also being considered in regions such as the Middle East and north Africa, although these are at an early stage.
Australia is one of the world’s leading coal exporters and the country derives 85 per cent of its power from burning the fuel. It has struggled to develop a domestic solar power industry, with a number of infant solar energy technologies moving to more attractive markets such as California.
Canberra said this month that it would delay the introduction of its proposed emissions trading scheme (ETS) by a year, until mid-2011. It was bowing to industry calls for more time to prepare for the scheme as the country’s economy sinks into recession.
At the same time, Canberra raised the upper limit of its carbon reduction target from 15 per cent to 25 per cent by 2020 and promised more industry support.
Climate change was a central campaign theme for Mr Rudd when he won the 2007 election. The rethink over the ETS was a significant turnround for the prime minister, who had only a month earlier said a delay would be irresponsible.
The solar power network, which is not expected to be operational before 2015, aims to produce up to 1,000MW of energy, which compares with Australia’s current energy capacity of 45,000MW.
John Connor, head of the Climate Institute, an independent research group in Sydney, said Canberra’s plan to source 20 per cent of the country’s needs from renewable energy would drive an estimated A$20bn of private sector investment.
“Australia and other countries can’t rely on a silver bullet, and what the government is doing is to help develop a mixed portfolio of clean energy options, which includes wind, geothermal, solar and carbon capture and storage,” he said. The mixed portfolio strategy would help develop the most commercially viable options, he added.
Successful private sector tenders for the solar power network are due to be made public in the first half of next year.
Additional reporting by Fiona Harvey in London
Copyright The Financial Times Limited 2009
Published: May 18 2009 17:31
Australia plans to build one of the world’s largest solar power station networks in partnership with the private sector as part of its commitment to source 20 per cent of its needs from renewable energy by 2020.
Solar collectors harness energy at a power plant in Harper Lake, California. A network of US solar plants is plannedKevin Rudd, the prime minister, said the government would invest up to A$1.4bn ($1bn, €775m, £700m) in solar energy out of the A$4.7bn Canberra has promised to spend on clean energy initiatives over the next decade.
“We don’t want to be clean energy followers worldwide, we want to be clean energy leaders worldwide,” Mr Rudd said. He disclosed that the network would be three times the size of the current largest solar power plant in California.
Australia’s plans mean it will join a global race to construct the world’s biggest solar plant. Earlier this year Southern California Edison, the US utility, signed up with a solar energy company to build a network of plants that would produce 1.3GW of energy, more than Australia envisages but which may take longer to finish.
Proposals for big solar facilities are also being considered in regions such as the Middle East and north Africa, although these are at an early stage.
Australia is one of the world’s leading coal exporters and the country derives 85 per cent of its power from burning the fuel. It has struggled to develop a domestic solar power industry, with a number of infant solar energy technologies moving to more attractive markets such as California.
Canberra said this month that it would delay the introduction of its proposed emissions trading scheme (ETS) by a year, until mid-2011. It was bowing to industry calls for more time to prepare for the scheme as the country’s economy sinks into recession.
At the same time, Canberra raised the upper limit of its carbon reduction target from 15 per cent to 25 per cent by 2020 and promised more industry support.
Climate change was a central campaign theme for Mr Rudd when he won the 2007 election. The rethink over the ETS was a significant turnround for the prime minister, who had only a month earlier said a delay would be irresponsible.
The solar power network, which is not expected to be operational before 2015, aims to produce up to 1,000MW of energy, which compares with Australia’s current energy capacity of 45,000MW.
John Connor, head of the Climate Institute, an independent research group in Sydney, said Canberra’s plan to source 20 per cent of the country’s needs from renewable energy would drive an estimated A$20bn of private sector investment.
“Australia and other countries can’t rely on a silver bullet, and what the government is doing is to help develop a mixed portfolio of clean energy options, which includes wind, geothermal, solar and carbon capture and storage,” he said. The mixed portfolio strategy would help develop the most commercially viable options, he added.
Successful private sector tenders for the solar power network are due to be made public in the first half of next year.
Additional reporting by Fiona Harvey in London
Copyright The Financial Times Limited 2009
Supplying a greener industry
Disclosure of environmental records all the way down the production chain means multinationals can't turn a blind eye
Ma Jun
The Guardian, Tuesday 19 May 2009
Globalisation has powered economic growth in developing countries such as China. Global logistics, low domestic production costs, and strong consumer demand have let the country develop strong export-based manufacturing, making the country the workshop of the world. It fuels growth and helps pull millions out of poverty.
However, this massive export-oriented industry, along with the expansion of production to meet rising domestic demand, has taken a toll on the environment. While cheap products are exported to western countries, the waste is dumped mostly in China's backyard, contaminating its air, water, soil and seas. At present, about 60% of its fresh water is contaminated, and about half its major cities do not meet the country's modest air-quality standards.
As the public and some media started linking the black rivers with globalised sourcing, some multinational companies decided to integrate environmental standards into their sourcing policy, similar to their strategy to address labour issues a decade ago. But in the absence of a strong regulatory framework, along with the bewildering number and tiers of suppliers to track – and the technical complexity of pollution control – achieving responsible environmental supply chain management remains difficult, even at the basic legal compliance level.
But a solution, which is still much unnoticed, is emerging as environmental transparency expands in China. As part of the government's initiative to strengthen environmental enforcement, legal and policy measures have been established since 2003 to facilitate public participation. Evolving policy, alongside the increased capacity of environmental NGOs in China, and corporations' aspiration to achieve sustainability, have set the stage for broad public-private collaboration to tackle its pollution.
Capitalising on increased public disclosure of pollution monitoring data, in 2006, our organisation, the Institute of Public and Environmental Affairs (IPE), launched the China Water Pollution Map, through which the public can access thousands of environmental quality and infraction records released by various government agencies.
When people have access to these records, it puts extra pressure on companies on the list. Many chose to come to the IPE to explain what has gone wrong and how they are trying to fix it. We then input their statements, along with follow-up government monitoring data they chose to provide, side by side with the original records of violations so that people could have updated view of their performance. Companies also have the chance to remove their names from the list by going through an independent third party auditing process under the supervision of local NGOs. So far more than 20 such audits have been conducted.However, most of these companies are multinationals and they represent just a tiny proportion of thousands of violators. In order to expand the effect of transparency on those who are not sensitive to public attention, corporate users need to check their suppliers. We have developed a database of over 40,000 records of specific citations of companies violating emission standards and other environmental rules in China, from 2004 onward. Now companies such as GE, Wal-Mart, Nike and Esquel are using it to monitor the environmental compliance records of their suppliers.
While some responsible companies move quickly to use the new tool, it is no surprise for us to meet with resistance from those who don't seem to be ready to recognize that there might be major gaps in their management. For example, one of the world's leading outdoor footwear and accessories manufacturers based in America rejected our suggestion delivered through an American NGO for it just to check by itself the compliance status of its suppliers through the database. If it did, however, it might instantly find on the air pollution database one supplier listed by local governmental agencies as violators in five consecutive years and another one with three years of non compliance records in water pollution.China, like many developing countries, is facing a serious environmental challenge. If major companies sourcing in developing countries care only about price and quality, local suppliers will be lured to cut corners on environmental standards to win contracts. Such market practice is destructive as it will lead to a globalised "race down to the bottom".
However, the social progress made in China makes it possible for responsible firms to increase their environmental transparency and collaborate with multiple stakeholders, including the government, suppliers and NGOs, to green their supply chain in a more effective and efficient way. Greening the globalised manufacturing and sourcing will be the single biggest help multinationals could make to the tough pollution control in China and other developing countries.
Ma Jun is director of the Institute of Public and Environmental Affairs, www.ipe.org.cn. Read a longer version of this piece online and more comment and features in the China at the crossroads series at guardian.co.uk/china
Ma Jun
The Guardian, Tuesday 19 May 2009
Globalisation has powered economic growth in developing countries such as China. Global logistics, low domestic production costs, and strong consumer demand have let the country develop strong export-based manufacturing, making the country the workshop of the world. It fuels growth and helps pull millions out of poverty.
However, this massive export-oriented industry, along with the expansion of production to meet rising domestic demand, has taken a toll on the environment. While cheap products are exported to western countries, the waste is dumped mostly in China's backyard, contaminating its air, water, soil and seas. At present, about 60% of its fresh water is contaminated, and about half its major cities do not meet the country's modest air-quality standards.
As the public and some media started linking the black rivers with globalised sourcing, some multinational companies decided to integrate environmental standards into their sourcing policy, similar to their strategy to address labour issues a decade ago. But in the absence of a strong regulatory framework, along with the bewildering number and tiers of suppliers to track – and the technical complexity of pollution control – achieving responsible environmental supply chain management remains difficult, even at the basic legal compliance level.
But a solution, which is still much unnoticed, is emerging as environmental transparency expands in China. As part of the government's initiative to strengthen environmental enforcement, legal and policy measures have been established since 2003 to facilitate public participation. Evolving policy, alongside the increased capacity of environmental NGOs in China, and corporations' aspiration to achieve sustainability, have set the stage for broad public-private collaboration to tackle its pollution.
Capitalising on increased public disclosure of pollution monitoring data, in 2006, our organisation, the Institute of Public and Environmental Affairs (IPE), launched the China Water Pollution Map, through which the public can access thousands of environmental quality and infraction records released by various government agencies.
When people have access to these records, it puts extra pressure on companies on the list. Many chose to come to the IPE to explain what has gone wrong and how they are trying to fix it. We then input their statements, along with follow-up government monitoring data they chose to provide, side by side with the original records of violations so that people could have updated view of their performance. Companies also have the chance to remove their names from the list by going through an independent third party auditing process under the supervision of local NGOs. So far more than 20 such audits have been conducted.However, most of these companies are multinationals and they represent just a tiny proportion of thousands of violators. In order to expand the effect of transparency on those who are not sensitive to public attention, corporate users need to check their suppliers. We have developed a database of over 40,000 records of specific citations of companies violating emission standards and other environmental rules in China, from 2004 onward. Now companies such as GE, Wal-Mart, Nike and Esquel are using it to monitor the environmental compliance records of their suppliers.
While some responsible companies move quickly to use the new tool, it is no surprise for us to meet with resistance from those who don't seem to be ready to recognize that there might be major gaps in their management. For example, one of the world's leading outdoor footwear and accessories manufacturers based in America rejected our suggestion delivered through an American NGO for it just to check by itself the compliance status of its suppliers through the database. If it did, however, it might instantly find on the air pollution database one supplier listed by local governmental agencies as violators in five consecutive years and another one with three years of non compliance records in water pollution.China, like many developing countries, is facing a serious environmental challenge. If major companies sourcing in developing countries care only about price and quality, local suppliers will be lured to cut corners on environmental standards to win contracts. Such market practice is destructive as it will lead to a globalised "race down to the bottom".
However, the social progress made in China makes it possible for responsible firms to increase their environmental transparency and collaborate with multiple stakeholders, including the government, suppliers and NGOs, to green their supply chain in a more effective and efficient way. Greening the globalised manufacturing and sourcing will be the single biggest help multinationals could make to the tough pollution control in China and other developing countries.
Ma Jun is director of the Institute of Public and Environmental Affairs, www.ipe.org.cn. Read a longer version of this piece online and more comment and features in the China at the crossroads series at guardian.co.uk/china
Greenpeace warns on Shell oil sands projects
By Carola Hoyos in London
Published: May 18 2009 19:37
Royal Dutch Shell, Europe’s biggest oil company, will on Tuesday face renewed opposition to its investments in Canada’s carbon-intense oil sands.
A study by Greenpeace and several other environmental campaigners has concluded the company’s carbon intensity will rise 85 per cent as it develops its oil and gas fields in the coming years.
“When Shell’s total resources are taken into account, the amount of greenhouse gases emitted per barrel of oil equivalent produced will outstrip those of its nearest competitors,” environmentalists found in its report, which will be released Tuesday in time for Shell’s annual meeting.
Campaigners will warn Shell’s investors that this disadvantages the company vis a vis its peers as US and European policymakers move towards a broad cap-and-trade system to limit carbon emissions. Shell’s growing carbon intensity stems from its resource base, which is heavily made up of Canadian oil and Nigerian gas whose production is relatively carbon intense, environmentalists said.
In its latest sustainability report Shell admitted its upstream energy intensity had risen by more than a quarter since 2001 as it had ventured into dirtier projects. But Shell said: “On a ‘wells-to-wheels’ basis, oil sands fuel is 15 per cent more CO2-intensive than conventional crude-based fuel, and we continue to seek opportunities for GHG emission reduction.”
Shell was an early entrant into Canada’s vast oil sands reserves, which in the past six years have attracted interest from all the big western oil companies.
Shell, Total of France, Chevron of the US and the rest of their peers have found it increasingly difficult to invest in conventional oil fields, such as those in the North Sea and the Middle East. Many of the older fields are drying up, and those fields with the most potential are being closely guarded by the national oil companies of the countries that control them.
This has left companies such as Shell having to venture into ever more remote and complicated oil fields.
Producing oil from Alberta’s sands is environmentally challenging and costly. The oil must be separated from the sand, either by being mined and mixed with hot water, or by being coaxed from the ground by steam injection.
These processes use a lot of energy and therefore produce higher emissions than conventional oil production. But because extracting this oil is also more expensive than producing conventional oil, Shell has delayed the second phase of its Canadian oil sands development, thereby also delaying the expected emissions release.
Copyright The Financial Times Limited 2009
Published: May 18 2009 19:37
Royal Dutch Shell, Europe’s biggest oil company, will on Tuesday face renewed opposition to its investments in Canada’s carbon-intense oil sands.
A study by Greenpeace and several other environmental campaigners has concluded the company’s carbon intensity will rise 85 per cent as it develops its oil and gas fields in the coming years.
“When Shell’s total resources are taken into account, the amount of greenhouse gases emitted per barrel of oil equivalent produced will outstrip those of its nearest competitors,” environmentalists found in its report, which will be released Tuesday in time for Shell’s annual meeting.
Campaigners will warn Shell’s investors that this disadvantages the company vis a vis its peers as US and European policymakers move towards a broad cap-and-trade system to limit carbon emissions. Shell’s growing carbon intensity stems from its resource base, which is heavily made up of Canadian oil and Nigerian gas whose production is relatively carbon intense, environmentalists said.
In its latest sustainability report Shell admitted its upstream energy intensity had risen by more than a quarter since 2001 as it had ventured into dirtier projects. But Shell said: “On a ‘wells-to-wheels’ basis, oil sands fuel is 15 per cent more CO2-intensive than conventional crude-based fuel, and we continue to seek opportunities for GHG emission reduction.”
Shell was an early entrant into Canada’s vast oil sands reserves, which in the past six years have attracted interest from all the big western oil companies.
Shell, Total of France, Chevron of the US and the rest of their peers have found it increasingly difficult to invest in conventional oil fields, such as those in the North Sea and the Middle East. Many of the older fields are drying up, and those fields with the most potential are being closely guarded by the national oil companies of the countries that control them.
This has left companies such as Shell having to venture into ever more remote and complicated oil fields.
Producing oil from Alberta’s sands is environmentally challenging and costly. The oil must be separated from the sand, either by being mined and mixed with hot water, or by being coaxed from the ground by steam injection.
These processes use a lot of energy and therefore produce higher emissions than conventional oil production. But because extracting this oil is also more expensive than producing conventional oil, Shell has delayed the second phase of its Canadian oil sands development, thereby also delaying the expected emissions release.
Copyright The Financial Times Limited 2009
Black-and-white answers to motley puzzle
By Fiona Harvey in London
Published: May 18 2009 22:08
Tackling climate change rarely looks like a black-and-white problem, but scientists are now proposing deceptively simple solutions involving white paint and soot.
A traditional stove in Mumbai. The smoke and soot triggers respiratory illness and blackens the atmosphere, adding to the greenhouse effectWhite paint reflects heat back into space, so changing the colour of roofs and pavements could make a big difference
Meanwhile, soot produced by traditional methods of cooking, such as burning wood, straw and animal dung, is causing an increase in the amount of heat the earth absorbs by blackening the atmosphere. When it falls on snow, the soot contributes to melting. About half of the Arctic ice melting can be attributed to this “black carbon”, according to research by the US space agency Nasa and Columbia University in New York.
Cutting pollution from cooking fires – for instance, by replacing them with more efficient stoves, or even “solar cookers” using the sun’s energy – would also help to remove one of the leading causes of death for women and children in the developing world. Smoke inhalation and burns claim many victims.
That can be achieved comparatively easily, compared with other ways of tackling climate change. Efforts to fight global warming have so far centred on grinding negotiations, which have continued for two decades without producing an accepted international framework to carve up our common responsibility to cut greenhouse gas emissions. Scientists have stated, ahead of crucial talks in Copenhagen in December, that we are fast running out of time.
But look outside the limitations of the current policy framework and there are more options available, says Durwood Zaelke, president of the Institute for Governance and Sustainable Development in Washington.
“The time has come to explore these other options,” he says. Tackling soot, which comes from poorly protected factory chimneys and coal-fired power plants as well as cooking fires, is one challenge, along with seemingly exotic actions such as painting roofs white. “These could be big, short-term wins,” says Mr Zaelke.
Al Gore, the former US vice-president who has helped to lead the climate change battle, warned political leaders last month: “Black carbon is settling in the Himalayas. The air pollution levels in the upper Himalayas are now similar to those in Los Angeles.”
Another option for cutting greenhouse gases is to expand the remit of the world’s most successful environmental treaty to date.
The Montreal protocol is largely forgotten, as is the problem it was drawn up to solve: the hole in the earth’s ozone layer, which in the 1980s and 1990s was the most serious example of human activity damaging natural systems. The accord, requiring countries and industries to phase out substances that deplete ozone in the atmosphere, has been so effective that the ozone layer is on the road to recovery by the middle of this century.
Climate change is a separate problem, with different causes. But the two issues are linked, and the Montreal protocol has brought about a significant fringe benefit: many ozone-depleting substances covered by the treaty are also powerful greenhouse gases.
As a result, the protocol has had more than five times the effect in reducing climate change than the Kyoto protocol – designed to limit greenhouse gas emissions – has had to date.
Later this year, the United Nations will discuss extending the Montreal protocol further, in order to cover gases known as hydrofluorocarbons (HFCs), which are more than 11,000 times as powerful a greenhouse gas as carbon dioxide. If successful, this move could cut greenhouse gases by as much as a tenth.
However, doubts remain on whether the White House is supportive of such a move. The US missed a deadline in early May for expressing an interest in participating in negotiations.
Pursuing these options alone will not be enough to halt climate change, Mr Zaelke says. An agreed framework for cutting greenhouse emissions will also be needed. The Copenhagen talks will decide whether the world can achieve that. But, he adds, the pursuit of other efforts could help to make success more likely.
Copyright The Financial Times Limited 2009
Published: May 18 2009 22:08
Tackling climate change rarely looks like a black-and-white problem, but scientists are now proposing deceptively simple solutions involving white paint and soot.
A traditional stove in Mumbai. The smoke and soot triggers respiratory illness and blackens the atmosphere, adding to the greenhouse effectWhite paint reflects heat back into space, so changing the colour of roofs and pavements could make a big difference
Meanwhile, soot produced by traditional methods of cooking, such as burning wood, straw and animal dung, is causing an increase in the amount of heat the earth absorbs by blackening the atmosphere. When it falls on snow, the soot contributes to melting. About half of the Arctic ice melting can be attributed to this “black carbon”, according to research by the US space agency Nasa and Columbia University in New York.
Cutting pollution from cooking fires – for instance, by replacing them with more efficient stoves, or even “solar cookers” using the sun’s energy – would also help to remove one of the leading causes of death for women and children in the developing world. Smoke inhalation and burns claim many victims.
That can be achieved comparatively easily, compared with other ways of tackling climate change. Efforts to fight global warming have so far centred on grinding negotiations, which have continued for two decades without producing an accepted international framework to carve up our common responsibility to cut greenhouse gas emissions. Scientists have stated, ahead of crucial talks in Copenhagen in December, that we are fast running out of time.
But look outside the limitations of the current policy framework and there are more options available, says Durwood Zaelke, president of the Institute for Governance and Sustainable Development in Washington.
“The time has come to explore these other options,” he says. Tackling soot, which comes from poorly protected factory chimneys and coal-fired power plants as well as cooking fires, is one challenge, along with seemingly exotic actions such as painting roofs white. “These could be big, short-term wins,” says Mr Zaelke.
Al Gore, the former US vice-president who has helped to lead the climate change battle, warned political leaders last month: “Black carbon is settling in the Himalayas. The air pollution levels in the upper Himalayas are now similar to those in Los Angeles.”
Another option for cutting greenhouse gases is to expand the remit of the world’s most successful environmental treaty to date.
The Montreal protocol is largely forgotten, as is the problem it was drawn up to solve: the hole in the earth’s ozone layer, which in the 1980s and 1990s was the most serious example of human activity damaging natural systems. The accord, requiring countries and industries to phase out substances that deplete ozone in the atmosphere, has been so effective that the ozone layer is on the road to recovery by the middle of this century.
Climate change is a separate problem, with different causes. But the two issues are linked, and the Montreal protocol has brought about a significant fringe benefit: many ozone-depleting substances covered by the treaty are also powerful greenhouse gases.
As a result, the protocol has had more than five times the effect in reducing climate change than the Kyoto protocol – designed to limit greenhouse gas emissions – has had to date.
Later this year, the United Nations will discuss extending the Montreal protocol further, in order to cover gases known as hydrofluorocarbons (HFCs), which are more than 11,000 times as powerful a greenhouse gas as carbon dioxide. If successful, this move could cut greenhouse gases by as much as a tenth.
However, doubts remain on whether the White House is supportive of such a move. The US missed a deadline in early May for expressing an interest in participating in negotiations.
Pursuing these options alone will not be enough to halt climate change, Mr Zaelke says. An agreed framework for cutting greenhouse emissions will also be needed. The Copenhagen talks will decide whether the world can achieve that. But, he adds, the pursuit of other efforts could help to make success more likely.
Copyright The Financial Times Limited 2009
Cap and trade or coach and horses
Published: May 18 2009 19:47
Whether a climate change bill emerges from the US Congress this year is much in doubt. Most Republicans still oppose the very idea of reducing emissions of greenhouse gases. Democrats are less than united in their commitment to it, once forced to consider the implications. The signs are that if a bill does somehow pass, it will be ugly.
A subcommittee of the House of Representatives has taken the lead in drafting a cap-and-trade plan – the approach promised by Barack Obama – but its initial efforts give one pause.
Under cap and trade, emitters require permits and the supply of these allowances is capped at a level that reduces total emissions. So long as the cap binds, the permits have a value and the system creates a market to trade them. This ensures that cuts in emissions happen where they can be made at least cost. As a result, cap and trade is much more efficient than decreeing a uniform cut regardless of the source of emission.
The problem is not with the basic idea. A well-designed cap-and-trade scheme, though lacking the simplicity and transparency of an outright carbon tax, can do the job nearly as well. Unfortunately, Congress seems keen to take the opportunities for gaming that cap and trade presents, and increase them tenfold.
During the campaign for the presidency, Mr Obama promised that all permits would be auctioned. His first budget counts on revenues from that source to finance his “Make Work Pay” tax credits for the low-paid – to the tune of more than $600bn over 10 years. The House committee’s current proposal chooses to give 85 per cent of the permits away. The hole in Mr Obama’s long-term fiscal arithmetic just got bigger.
That is not all. Predictably, in the disbursement of this enormous windfall gain, the House proposes to reward favourites, such as regulated utilities, and punish villains, notably the oil companies. Some emitters will receive more permits in relation to their needs than others. This would create a perpetual struggle for political advantage. If you wanted to promote corruption, this would be a good way.
Still not content, the House wants to set conditions on its gifts of permits – including commitments to shield consumers from higher energy costs. Yet the whole point of this exercise is to make high-carbon energy dearer. On the drawing board is a vast and unfathomably complex new system, which fosters corruption, raises little revenue and tries to suppress the incentives that are its entire purpose. Otherwise, it all looks quite promising.
Copyright The Financial Times Limited 2009
Whether a climate change bill emerges from the US Congress this year is much in doubt. Most Republicans still oppose the very idea of reducing emissions of greenhouse gases. Democrats are less than united in their commitment to it, once forced to consider the implications. The signs are that if a bill does somehow pass, it will be ugly.
A subcommittee of the House of Representatives has taken the lead in drafting a cap-and-trade plan – the approach promised by Barack Obama – but its initial efforts give one pause.
Under cap and trade, emitters require permits and the supply of these allowances is capped at a level that reduces total emissions. So long as the cap binds, the permits have a value and the system creates a market to trade them. This ensures that cuts in emissions happen where they can be made at least cost. As a result, cap and trade is much more efficient than decreeing a uniform cut regardless of the source of emission.
The problem is not with the basic idea. A well-designed cap-and-trade scheme, though lacking the simplicity and transparency of an outright carbon tax, can do the job nearly as well. Unfortunately, Congress seems keen to take the opportunities for gaming that cap and trade presents, and increase them tenfold.
During the campaign for the presidency, Mr Obama promised that all permits would be auctioned. His first budget counts on revenues from that source to finance his “Make Work Pay” tax credits for the low-paid – to the tune of more than $600bn over 10 years. The House committee’s current proposal chooses to give 85 per cent of the permits away. The hole in Mr Obama’s long-term fiscal arithmetic just got bigger.
That is not all. Predictably, in the disbursement of this enormous windfall gain, the House proposes to reward favourites, such as regulated utilities, and punish villains, notably the oil companies. Some emitters will receive more permits in relation to their needs than others. This would create a perpetual struggle for political advantage. If you wanted to promote corruption, this would be a good way.
Still not content, the House wants to set conditions on its gifts of permits – including commitments to shield consumers from higher energy costs. Yet the whole point of this exercise is to make high-carbon energy dearer. On the drawing board is a vast and unfathomably complex new system, which fosters corruption, raises little revenue and tries to suppress the incentives that are its entire purpose. Otherwise, it all looks quite promising.
Copyright The Financial Times Limited 2009
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