Wednesday, 3 June 2009

Obama's cap and trade troubles

By Edward Luce in Washington
Published: June 2 2009 19:09

Some time over the next few weeks, the US House of Representatives is likely to vote on what Barack Obama and others have described as an historic bill that would sharply reduce American carbon emissions. The headline looks good. The reality is not so flattering.
On the surface, its objectives are impressive. The bill, brokered by Henry Waxman, the hard-working Democrat from California and chairman of the House energy committee, would be the first concrete step by the world's largest polluter to wean itself off hydrocarbons.

Praised by the likes of Al Gore, America's patron saint of green energy, the bill would cut US carbon emissions to 83 per cent of their 2005 levels by 2020 and thereafter impose progressively steeper cuts on the emitters. It would also mandate power companies to draw a fifth of their electricity from renewable sources, such as wind and solar, by 2020.
Mindful of the need to get something in place if the US is to take leadership of the all-important global warming summit in Copenhagen in December, most environmental groups have praised the bill. So too have surprisingly large chunks of industry. But therein lies the problem.
Much like the Danish fairy tale about the emperor with no clothes, everyone in Washington has an interest in praising Mr Waxman's efforts. Few - barring Greenpeace and Friends of the Earth on the left, and groups such as the National Association of Manufacturers on the right - have come out in opposition.
But the closer one looks, the less viable it appears. The 946-page bill would surely rank as the most complex effort so far to regulate greenhouse gases. The result of painful compromise between the relatively green bi-coastal Democrats and their "brown-dog" (pro-energy
sector) colleagues from the mid-west and the south, the prospective law jumbles up huge near-term subsidies for the energy industry with strict long-term exhortations for them to change.
The history of US legislation tells us that where complexity reigns, lobby groups are usually the beneficiaries. Contrary to Mr Obama's election promise that 100 per cent of carbon trading permits would be auctioned off in the carbon market, the bill gives away 85 per cent of the allowances to different parts of the energy sector.
Local electricity distribution companies receive the largest single giveaway, at 35 per cent of all permits. Regulators will then be told to ensure the distributors pass on all of the value of the allowances to consumers. This defeats two key objects of any global warming
legislation: the polluter will not pay, and consumers will have no incentive to change their behaviour.
In addition to dispensing with the key tool of altering consumer behaviour - the price signal - it also muddies the waters on how greenhouse gas reductions will be measured. The bill would allow polluters to purchase up to 2bn tonnes a year in carbon "offsets" - measures such as tree planting - that would let them continue polluting.
This 2bn-tonne annual offset allowance exceeds all the carbon reductions envisaged between now and 2040. Furthermore, many of those offsets could be purchased overseas but counted against reductions at home, which would make a nonsense of the aim of reducing US domestic emissions. In other words, the US could hypothetically achieve its target without closing a single coal-fired plant.
Likewise, the target of generating 20 per cent of all US electricity from renewable sources by 2020 is highly fungible. Once various loopholes are added in, such as the provision that would allow power companies to count efficiency savings as part of their renewable energy target, then that number falls to nearer 10 per cent.
Defenders of the bill say it would be a huge feat for the US to pass anything in the midst of the "Great Recession". That may well be true. But if the noises coming from centrist Democrats in the Senate are any guide, in its current form this bill is unlikely to pass through the upper chamber.
But even if the Senate agreed to this heavily watered down and loophole-ridden bill, it would be unlikely to impress America's partners in Copenhagen. While Washingtonians praise each other's dress sense, foreigners like nothing more than to cry "Naked!" Copyright The Financial Times Limited 2009

Obama to stake political prestige on passing US climate bill

Congressional leaders working against a six-month deadline to pass a sweeping package of environmental legislation before global climate change talks begin in Copenhagen in December

Suzanne Goldenberg, US environment correspondent, Tuesday 2 June 2009 14.07 BST

Barack Obama is prepared to stake his own political prestige on getting climate change legislation through Congress, and would be willing to intervene directly to ensure passage of America's first law to reduce the carbon emissions that cause global warming.
Nancy Sutley, who is pivotal in setting Obama's green agenda as the chairwoman of the White House Council on Environmental Quality, told the Guardian that the president is ready to use his considerable personal popularity to rally Congress behind a sweeping climate change bill.
"When the bill is further along in the legislative process there are some things where it may make a difference in expressing a strong view," Sutley said in an interview. "What [Obama] has been saying consistently is that he wants a bill and that this represents a very important step forward. "
Congress is now working against a six-month deadline to pass a sweeping package of environmental legislation through both houses before the world gathers at Copenhagen in December for talks on a global climate change treaty.
World leaders have warned US officials that Congress needs to take concrete action to reduce emissions if Washington hopes to bring China and other major polluters to a deal at Copenhagen.
Some Democratic leaders are pushing to bring forward the original timeline for putting in place the most crucial element of Obama's green agenda - the greenhouse gas reduction laws. The president told Congress in February he wanted legislation by the end of its current session in November 2010.
The accelerated pace set by some Democrats seems designed to capitalise on recent momentum behind a climate change bill which cleared a crucial committee in late May. The strategy also seeks to take advantage of Obama's current popularity - Gallup gave him a 65% average approval rating last month.
The Senate voted down a climate change bill a year ago and it was thought it might not attempt to move a vote on the issue again before the Copenhagen talks. But in a sign of growing confidence from the Obama administration, Democratic leaders are reportedly planning to move forward the date for the full vote in the house of representatives to the end of this month.
The house energy committee, which is weighed heavily towards coal and oil state Democrats, was the first major obstacle for the climate change bill, and Obama drew on his political capital help get it passed.
The president invited key members of Congress to the White House to make a personal appeal for the bill. Those at the meeting say the pitch was crucial to securing the support of wavering Democrats.
Obama would be ready to take further gambles on his personal popularity, Sutley said.
She said he was unlikely to intervene in the near future to shore up targets for emission reductions - already criticised by some environmentalists as failing to go as far as dictated by the science to prevent a catastrophic rise in temperature. However, the president may feel compelled to step in to shield consumers from higher electricity bills. "He has talked about the idea that we have to think about consumers," she said.
The bill in its current form would force polluting industries to reduce steadily their emissions of carbon and the other greenhouse gases that cause global warming. It would also require power companies to get 15% of their electricity from clean sources of energy like wind and sun.
As Congress resumes this week, the bill now undergoes review by as many as eight committees, which could all attempt to put their stamp on the bill. The biggest threat to the bill's survival comes from the agriculture committee, where the Democratic chairman, Collin Peterson, has threatened to impose a veto.
Peterson, and other Democrats from farming states, say the bill would hurt farmers and producers of corn-based ethanol. He told "If they don't fix this, there isn't going to be a bill."
Environmentalists are concerned that those competing pressures during the review process could force compromises that would seriously weaken the bill.
The bill is already is doing less than scientists recommend to prevent a catastrophic rise in temperature. In its current incarnation, the bill calls for a 17% reduction in greenhouse gas emissions below 2005 levels by 2020 - which is much lower than the European Union's targets. However, the US matches the longer-term EU target of 80% reductions by 2050.
Obama, when running for president, supported a 2020 target of a 14% cut in greenhouse gas emissions. However, Sutley said the president was unlikely to press for that original target, or to explicitly adopt the new more stringent 17% cut.

UK carbon offset schemes 'failing to reduce emissions'

Expansion of carbon offsetting and clean development mechanism is locking developing nations into a high-carbon path, report warns

John Vidal, environment editor, Tuesday 2 June 2009 17.59 BST

Britain is the world centre of a multibillion dollar "carbon offset" industry which is failing to lower global greenhouse gas emissions, a major report from Friends of the Earth claimed today.
The authors urged governments meeting this week in Bonn for UN climate change talks to drop plans to expand offsetting schemes, which allow rich countries to invest in projects that reduce emissions in poor countries as an alternative to more expensive emission reductions in their own countries.
Offsetting is set to expand enormously if the 192 governments meeting in Bonn allow forests, nuclear power and other sources of "clean energy" to count towards emissions reductions as part of a UN climate treaty expected to be agreed in Copenhagen this December..
The problem, said the report, is that offset schemes are delivering much lower greenhouse gas cuts than the science says are needed to avoid catstrophic climate change. Offsetting supports the idea that the cuts can be made in either rich or in poor countries " ... when it is clear that action is needed in both," said the report. "Offsets are a dangerous distraction ... It is almost impossible to prove that offsetting projects would not have happened without the offset finance. Nor is it possible to calculate accurately how much carbon a project is saving," it added.
Offsetting has been promoted heavily by the UK government in Europe and the UN as a painless way of reducing global emissions. The idea has mushroomed in the last five years with the rapid growth of the UN's clean development mechanism (CDM) which attracts investment money to poorer countries in new projects. These are expected to deliver more than half of the EU's planned carbon reductions to 2020.
"The clean development mechanism is supposed to be a way of making the same level of carbon cuts as would otherwise happen, but more cost effectively. At best it shifts a cut in a developed country to one in a developing one. In practice, it does not even do this," said Andy Atkins, executive director of Friends of the Earth UK.
Moreover, said the report, the CDM is locking in poor countries to a high-carbon path, with some big CDM projects approved for even major fossil fuel power stations. "A large part of CDM revenues are subsidising carbon intensive industries or projects building fossil fuel power stations."
Two previous analyses of the CDM suggested that companies routinely abuse the UN-backed offsetting scheme, wasting billions of pounds.
The UK government has already used offsetting as a way to justify high carbon investments in major projects like the expansion of Heathrow, it said. "Offsetting makes it far more likely that developed countries will continue on a high-carbon path, choosing to buy cheap permits rather than invest in low-carbon infrastructure," said the report's authors.
Nearly 30% of the world's 2,500 CDM projects originate in London, although not all the projects offset UK emissions.

UK must take 'moral lead' on climate aid, say MPs

The international development committee urges UK government to find new funds for poor countries to adapt to severe storms, floods and droughts

John Vidal, environment editor, Wednesday 3 June 2009 00.05 BST

Britain must urgently help poor countries tackle climate change or the gains made by years of development aid could be wiped out, according to a group of MPs examining Britain's assistance to developing countries.
The report of the parliamentary international development committee urges the government to take a moral lead and find new money for poor countries to adapt to the severe storms, floods and droughts that are already being seen around the world and are impacting most on the poor.
"This money should not come out of existing aid commitments which are already under pressure in the current economic downturn," said chair of the committee, Malcolm Bruce MP.
"Substantial funding will be needed. This must be additional to pledges already made for development assistance because developing countries are not responsible for the emissions which have caused climate change and the estimated costs cannot be met from existing development assistance or national budgets," said the report.
The MPs backed plans for a small international levy on all international flights and proposed that the UK consider paying to offset the carbon emitted by aeroplanes importing fruit and vegetables grown in poor countries like Kenya.
But the MPs strongly criticise the Department for International Development (DfID), saying that it could provide little evidence of progress made in the past seven years towards integrating climate change into its poverty alleviation programmes, especially in Africa.
The MPs acknowledged that DfID had a major programme in Bangladesh to combine climate change and poverty reduction but said that this appeared to be a one-off project. "We believe that such initiatives should become the norm," it said.
But the MPs, who travelled to East Africa to collect evidence, urged Britain to support poor countries like Kenya which grow large amounts of food and flowers for the UK market. "There is a danger that steps taken by consumers in the UK to reduce their contribution to carbon emissions may lead them to avoid buying produce from developing countries in the belief that air-freighted food and flowers necessarily have a higher carbon footprint. This is not true. The CO2 emissions from Kenyan flowers flown to the UK are nearly six times lower than those from Dutch flowers grown in heated greenhouses".
The MPs found that the government had made only limited progress in ensuring that climate change informed all policy decisions. "It should be central to the DfID's work. It now needs to move on to establish comprehensive climate change programmes", said the report.
So far DfID has pledged an extra £100m into research on climate change over the next five years; and £400m for World Bank funds.
A DfiD spokesman said: "We know that climate change and natural resources need to be central in our work to reduce poverty and achieve sustainable development in both the short and long term. DfiD remains committed to further mainstreaming climate change across our country programmes and climate change will be a key theme of the forthcoming white paper."

Friends of the Earth: Carbon off-sets 'add to climate change'

Times Online
June 2, 2009
Joanna Sugden

Carbon off-setting will do nothing to prevent climate change and is increasing rather than reducing carbon emissions, a leading environmental charity warns today.
The Government’s scheme to buy carbon quotas from developing countries in order to reduce global emissions should be scrapped and developed countries made to cut their own carbon output, a report by Friends of the Earth says.
“Offsetting is a having a disastrous impact on the prospects for averting catastrophic climate change,” Andy Atkins, executive director of Friends of the Earth said.
The Government will lobby other nations to increase the use of carbon off-setting at UN Climate Change talks in Bonn next week.
But campaigners say the practice is a dangerous distraction that allows rich nations to disguise rising greenhouse gas production.
“Because offset cuts are created against a hypothetical business-as-usual baseline, it is impossible to ensure that offset credits guarantee carbon cuts. Not only can it not guarantee carbon cuts, in some cases it can increase them,” the report says.
The authors argue that the practice is unjust and ineffectual, and not based on scientific evidence, which they say points towards the need for developing and developed countries to slash their emissions if climate change is to be reversed.
A spokesman for the Department of the Environment and Climate Change said: “Offsetting has a role to play in cutting emissions and can bring finance and other benefits to developing countries. The central issues are getting the safeguards right, making it as transparent and eventually moving to a more holistic approach to cutting emissions as part of a global carbon market.

Revealed: the bid to corner world's bluefin tuna market

Mitsubishi freezing fish to sell later as stock numbers plummet toward extinction
By Martin Hickman, Consumer Affairs Correspondent

Wednesday, 3 June 2009

Japan's sprawling Mitsubishi conglomerate has cornered a 40 per cent share of the world market in bluefin tuna, one of the world's most endangered fish.
A corporation within the £170bn Mitsubishi empire is importing thousands of tonnes of the fish from Europe into Tokyo's premium fish markets, despite stocks plummeting towards extinction in the Mediterranean.
Bluefin tuna frozen at -60C now could be sold in several years' time for astronomical sums if Atlantic bluefin becomes commercially extinct as forecast, a result of the near free-for-all enjoyed by the tuna fleet.

In the forthcoming documentary film The End of the Line, Roberto Mielgo, a former bluefin fisherman who travels the world monitoring catches, claims that Mitsubishi buys and sells 60 per cent of the threatened fish and that it has expanded its freezer capacity to hold extra bluefin.
Mitsubishi acknowledges that it freezes bluefin, but only, it says, to even out peaks and troughs in supply.
"Mitsubishi Corporation handles between 35 per cent and 40 per cent of Atlantic and Mediterranean bluefin tuna imported to Japan," the company told The Independent.
"As we explicitly explained to the makers of the film, the fishing season for bluefin tuna in the Mediterranean is very short, making it necessary to freeze tuna to provide customers with stable supplies throughout the year."
Fish stocks across the world are in retreat because of over-fishing. One study suggests oceans will be stripped clean of all fish by 2048. Bluefin is imminently at risk of commercial extinction. The wildlife charity WWF forecasts that breeding stocks of the fish that migrate from the Atlantic to spawn will be wiped out in the Mediterranean by 2012.
Although the legal bluefin catch is set at 22,000 tonnes, conservationists suspect the actual catch is 60,000 tonnes, four times the maximum that marine scientists recommend. After studying catches and sales, Charles Clover, the environmental journalist behind the film The End of the Line, believes that businesses involved in the ransacking are deep-freezing 20,000 tonnes of bluefin a year for later use.
He hopes his film will galvanise the public about over-fishing in the same way Al Gore's An Inconvenient Truth mobilised opinion against climate change.
British retailers and chefs will not stock bluefin because it is so endangered. However, as disclosed in The Independent last week, the Japanese restaurant Nobu continues to serve it – while advising diners to choose a dish that is less environmentally damaging.
The fisheries body responsible for numbers, the International Commission for the Conservation of Atlantic Tunas (ICCAT), sanctioned a bluefin catch of 22,000 tonnes this year in defiance of its own scientists who advised no more than 8,500-15,000 tonnes.
WWF said the decision was a "disgrace". In fisheries circles, ICCAT is sometimes referred to as the International Conspiracy to Catch All Tuna. Rules forbidding the use of spotter planes to identify tuna shoals are flouted and boats are thought to have connections to organised crime in Italy.
Willie Mackenzie, a Greenpeace fish campaigner, said: "Mitsubishi are best known in the UK for making cars or electrical goods – and for most people it comes as a bit of a shock to find out they are one of the world's biggest traders in the endangered bluefin tuna. Bluefin tuna are as endangered as rhinos or tigers."

This is the blue whale of our time

Wednesday, 3 June 2009

The Atlantic bluefin tuna is a dark, steel-blue teardrop of a fish which migrates across whole oceans and can swim at speeds of up to 45mph. Its acceleration, as it locks on to a ball of bait-fish, has been likened to a supercar.

The bluefin can turn on this electric display because it is one of the most highly developed fish, and warms its blood through a heat-exchanger so more energy can be released on a whim.
This top-level predator's only problem is that its flesh is one of the most delicious things on earth, eaten raw as sushi or sashimi. It is only marginally less delicious the Mediterranean way, seared with a dressing of oil and vinegar.
Bluefin flesh was eaten by Roman legionaries before battle. Its entrails, treated with herbs, were a delicacy known as garum, pots of which have been found throughout the former Roman Empire and as far north as the garrison town of York.
The British until recently called the bluefin "tunny" (from the Latin, Thunnus thynnus). Tunny hunted shoals of herring off Scarborough, where well-heeled anglers sought but never caught a 1,000lb specimen – the world rod-caught record is 1,496lb, off Nova Scotia in 1979. The run of North Sea tunny had mysteriously disappeared by the 1950s.
There are two remaining populations of bluefin; a western one, which spawns in the Gulf of Mexico, and an eastern one that spawns in the Mediterranean. The western stock was hammered close to extinction before the United States and Canada protected it and allowed only anglers to catch it, though the skippers make a fortune by exporting the carcasses to Japan.
The eastern stock is now close to collapse, mainly because of rampant overfishing for tuna "farms" that supply the Japanese market.
Scientists discovered only recently though that some of the eastern and the western stocks mix and interbreed, swimming the whole Atlantic ocean to do so. So the collapse of the bluefin now being predicted is a crisis of Atlantic proportions.
For conservationists, it is the front line. The bluefin is the blue whale for our time.
The End of the Line, the film based on Charles Clover's book, has its national premiere on 8 June, World Oceans Day

Climate change could kill your pet, warns the RSPCA

Climate change could kill pets, according to the Royal Society for the Prevention of Cruelty to Animals (RSPCA), as warmer temperatures cause an increase in exotic diseases among cats and dogs.

By Louise Gray, Environment Correspondent Published: 3:40PM BST 02 Jun 2009

In the first conference to be called on pets and climate change, scientists warned that the small heartworm, that kills dogs, cats and foxes, is already on the rise in the UK with more cases appearing in the north of the country and Scotland because of warmer wetter summers.
Furthermore because of the increased numbers of pets coming into the country from abroad without quarantine, there is a greater threat of exotic diseases that can become established in warmer temperatures and may even pose a threat to humans.

The RSPCA are so worried about the affect of climate change on cats and dogs, the charity is calling on pet-owners to take preventive measures against exotic diseases especially when travelling abroad.
In the second RSPCA annual conference in London a number of experts came together to discuss the issue.
Susan Shaw, from the University of Bristol, said small heartworm, a parasitic disease spread by insects that can kill dogs, cats and foxes, is already on the increase. She blamed the warmer wetter summers that means there are more slugs and snails around which spreads the disease if the dogs eat them.
"Climate change is a concern with these diseases because of its transmission on intermediate hosts like slugs and snails. [Heartworm] has already spread in the UK and we are concerned it will spread further," she said.
Professor Sandy Trees, a specialist in Veterinary Parasitology at the University of Liverpool, said exotic diseases could become established in the UK as temperatures increase. He said the number of animals coming into the country has risen from around 5,000 every year to around 100,000 every year since 2000, when the Pet Travel Scheme lifted the need for pets from the EU, US, Canada, Australia and other countries to be quarantined.
He said large heartworm, a malaria-like parasite known as babesiosis and another insect-borne disease leishmaniosis – all of which can prove fatal to cats and dogs – have already been spotted in the UK.
Prof Trees also said species of tapeworm, that can prove fatal to humans, could be brought into the country if restrictions are lifted further and temperatures are warm enough.
"Just as human travel may expose us to new disease threats, so increasingly free pet animal movement threatens pet health. Compounded in the longer term by climate change, these two phenomena of globalisation and global warming may see new and serious dog diseases becoming established in the UK," he said.
The RSPCA is calling for more research into heartworm and exotic diseases. The charity called on pet owners to prevent spread by using collars to stop ticks and fleas and consulting vets as soon as infections are spotted.

China to Encourage Solar Use

Preferential Tariff Makes Clean Energy More Competitive

NANTONG, China -- China said it will introduce a preferential tariff it will pay energy companies that use solar power for their generating capacity, as part of the government's push for greater use of clean technology.
Agence France-Press
Chinese workers check solar panels at a village in Wuhu, in southeastern Anhui province. Bejiing is moving ahead with plans to increase use of alternative energy.
The preferential tariff -- the price that China's two state-owned electricity transmission and distribution companies will pay energy companies for their solar power -- aims to make solar power competitive against traditional fuels, such as coal, which accounts for two-thirds of China's electricity.
Shi Lishan, vice director of the National Energy Administration's Renewable Energy Department, said the tariff will be 1.09 yuan (16 U.S. cents) per kilowatt hour for solar power that is supplied to the grid. Coal-fired power generation needs a tariff of just 0.3 yuan per kWh to be profitable.
China, which has overtaken the U.S. as the world's biggest emitter of greenhouse gases, wants renewable energy to account for 15% of its energy mix by 2020.
While some alternative energy sources -- such as renewable plant biomass power -- are taking time to gain traction, solar power is poised to exceed targets for installed generating capacity by 2020.
Government officials said earlier that China will likely have 10 gigawatts to 20 gigawatts of solar-power capacity by 2020, up from a previous target of 1.8 gigawatts. Installed solar-power generating capacity at the end of 2008 was less than 0.1 gigawatt.
Only 2% of China's solar-power output last year was used inside China due to the absence of clear solar-power policies. Lengthy approval processes for new projects are also hampering domestic demand.
Globally, installed global solar-power generation capacity grew to at least 5.5 gigawatts in 2008, from 2.4 gigawatts in 2007, with Spain ranking first, followed by Germany, said the European Photovoltaic Industry Association in March. Spanish and German solar investors are guaranteed favorable feed-in tariffs for more than 20 years.
Mr. Shi said China will also likely have 30 gigawatts of installed wind-power capacity by the end of 2010. This compares with previous estimates by industry and government officials of 20 gigawatts, while the official target stands at 10 gigawatts.
However, Mr. Shi damped speculation that China will introduce more preferential policies for producers of wind energy in a stimulus plan under discussion by the government.—Jing Yang

Feeling the heat

By Fiona Harvey in London, Chris Bryant in Berlin and Kathrin Hille in Beijing
Published: June 2 2009 19:59

Two workers maintain solar panels on the roof of a German warehouse. China and the US are beginning to outstrip Europe in renewable energy, calling into question politicians’ promises that the sector will lead growth

Workers at the Q-Cells solar panel plant at Thalheim, in Germany’s “Solar Valley”, are slowly adjusting to their new shorter working week. Until recently, the plant struggled to meet the vast demand for panels stirred up by Germany’s generous subsidy system. Now the production lines are quieter and there are many empty bays in the car park.
“If you go into the technology or administration departments they’ll tell you it’s nice having an extra day off per week. The staff have been working flat out for years,” says Stefan Dietrich, the company spokesman. But other employees are less pleased. “Production workers don’t get such super-high wages and if their families have to go without €100 each month then that’s not so great. They know why it’s happening, though – they read the papers and watch the news. They know it’s about preserving their jobs.”
Across Solar Valley and beyond, the story is the same, despite the subsidies and the continuing rhetoric from Berlin about the threat from global warming. Workers are struggling with lower pay and are being hit not just by a global recession but by a crisis in an industry whose potential was once considered almost limitless.
Investment in renewable energy worldwide dropped by $13.3bn (£8bn, €9.3bn) in the first quarter of 2009, down 53 per cent compared with the same period in 2008. A decline in conventional energy prices and softening demand were behind the plunge, which followed five years of stellar growth. In the solar industry, oversupply also played a part – investments made in extra capacity in recent years have now come onstream, bringing down the price of components and cutting solar companies’ profit margins to the bone.
But the problems of Germany’s solar workers also reflect a broader trend in the renewable energy industry. Europe was once the manufacturing hub of renewable energy components. European governments poured billions into subsidies to encourage utilities and householders to take up the technology, and the renewables market was the biggest in the world.
That is changing. The US and China have begun to outstrip Europe in renewable energy, both generation and manufacturing. Last year, the US overtook Germany to become the country producing the most wind energy. China added more wind capacity than any country but the US. China also overtook Japan as the biggest manufacturer of photovoltaic components, silicon cells that convert sunlight to electricity and are the building blocks of solar panels.
This dramatic change has implications far beyond the woes of German solar power workers.
Political leaders around the world – including US president Barack Obama, José Manuel Barroso, European Commission president, and Gordon Brown, UK prime minister – have hailed low-carbon technology as the industry of the future, promising millions of “green-collar jobs” that will help lift their economies out of the recession and into an era of solid growth.
Mr Obama marked Earth day this year with a visit to Newton, Iowa, where a former Maytag washing machine plant, shut last year with the loss of hundreds of jobs, has been taken over by a company making wind turbine towers. It was an example, he said, of “a new, clean-energy economy” that would “create millions of new jobs right here in America”.
The potential for growth in the global industry, analysts agree, is real. The world must move to tackle greenhouse gas emissions as a matter of urgency, and energy security is a key problem for governments that renewable sources of power can help to solve.
But will the growth in renewables benefit western economies in the way their politicians claim?
“The big question for the solar industry,” says Phil Schneider, principal at Deloitte Consulting, “is where manufacturing investment and job growth will happen.”
On a windswept plain close to the deserts of Inner Mongolia, Dalu Industrial Investment Group thinks it has the answer. A Chinese conglomerate that started as an engineering provider for utilities, it is betting heavily on solar power. It has secured a vast plot where it is building a plant to make photovoltaic components, but ultimately: “We want to build a manufacturing base there covering the entire value chain, including a large-scale solar farm,” says Yu Yajie, administrative executive director.
Dalu is not alone. There are now more than 100 solar power companies in China, with more springing up. Although the Chinese renewable energy market has suffered in the downturn, it is still well-placed to weather the storm.
Already China accounts for one-third of global solar component production. The Chinese industry has tripled in size in the past few years. Li Junfeng, deputy chairman of the China Renewable Energy Industry Association, believes the country will become the world’s biggest source of solar components next year. Almost all the production – about 98 per cent – is destined for markets abroad, although the domestic market is also growing under new incentive systems.
China’s push into renewables and its formidable manufacturing base has led to component prices tumbling. New Energy Finance, a consultancy, says the spot silicon price has fallen sharply, from $136 per kg in January 2009 to $73 per kg in early May. The price of finished photovoltaic cells is forecast to fall by more than 43 per cent this year.
This is particularly painful for manufacturers in other regions, who complain that they cannot hope to compete on price with lower quality Chinese components.
Nobuo Tanaka, executive director of the International Energy Agency, says it is “inevitable” that the manufacturing of renewable energy components – mainly solar modules and wind turbines – will move to China and, to a lesser extent, India. “The PV cells made there are not of as high a quality yet [as those made in Europe] but they will get there.”
This view is echoed by George Frampton, former chairman of the White House Council on Environmental Quality and a member of the Obama campaign’s transition team. He says: “There is a very strong momentum. And it’s not just because of the cost, it’s also that I’m not that optimistic that this market is going to boom in the US.”
He believes implementing a cap-and-trade system on carbon emissions will be essential to create and keep jobs in renewable energy in the US.
Andrew Dorchak, co-author of a recent University of Illinois report on low-carbon industry, warns that the US risks being left in the worst position of all. He believes it could end up losing out both to Europe, which holds much of the intellectual property behind wind turbine technology, and to China, which is grabbing a growing share of the lower-value end of “green manufacturing”, particularly cheap solar panels.
“Some green jobs will be created in America, but nowhere enough to offset those being lost in traditional manufacturing industries,” he says.
For western politicians, the uncomfortable truth is that the expansion of renewable energy in developed countries, aimed at reducing their carbon emissions, may result in a bonanza for poorer nations rather than a grand influx of jobs to their home countries.
This will not be the case across the board. Although solar panel components are relatively small and easily transported, some parts of a wind turbine – such as its long, elegant blades, which are difficult to ship long distances – must be manufactured in the same region where it will be installed. However, modern wind turbines are made up of more than 8,000 parts and many of the less delicate ones can be made anywhere and assembled close to the final destination.
Vestas, one of the world’s biggest wind turbine manufacturers, recently decided to close its manufacturing plant in the UK to invest instead in production facilities in the US and China. Meanwhile, Q-Cells of Germany is opening a production line in Malaysia and about one-third of rival SolarWorld’s 1,800 employees are based in the US.
In Germany’s subsidies regime, “jobs were always an important argument”, says Matthias Fawer, sustainability analyst at Bank Sarasin. “It’s only a question of time until politicians seize on this and say – wait, we’re paying for something that’s no longer creating jobs here.”
Indeed, says Joachim Pfeiffer, energy co-ordinator for chancellor Angela Merkel’s CDU party, “The whole world has to some extent been producing for the German market. We’re concerned that the German electricity consumer is subsidising foreign production.”
Additional reporting by Andrew Ward

Solar power companies in China have had reason to rejoice. In March, the government thrilled the industry with a pledge to subsidise roof panels, writes Kathrin Hille.
The announcement, made by the finance and housing ministries, sent shares of several solar companies soaring. But that enthusiasm has since waned, amid evidence that the component makers are not immune to the global recession.
The Sino-US Suntech, the world’s largest photovoltaic module maker – which in January shed 4,000 people, or 30 per cent of its workforce – revealed last month that 30 per cent of sales in the first quarter had gone to an affiliate. The announcement gave rise to fears of swelling inventories. Suntech added that selling prices had been sliding and would continue to do so.
Also of concern to the sector is that Beijing did not make it clear whether the subsidies were a one-off or a permanent programme. Some industry reports have since said that Beijing’s budget for this is capped at Rmb2.5bn ($366m, €257m, £222m), limiting installations under the programme to 180MW. In addition, the announcement failed to explain whether and how projects under the subsidy programme would be linked to the electricity grid.
Amid this caution, ReneSola became the first to announce a project under the subsidy plan, investing Rmb160m in a 5MW rooftop scheme in south-eastern Zhejiang province. The group based in Jiashan, west of Shanghai, expects to gain additional subsidies from the provincial government; approval from central authorities is pending.
Suntech said meanwhile it had agreed with provincial authorities in Jiangsu, just north of Shanghai, to build a 1.5MW rooftop project there. Jiangsu is one of several provinces in China’s densely populated and power-hungry coastal belt that have incentive policies of their own.
Beyond the rooftop market, China’s vast, dry and sunny hinterland holds potential for another segment: solar farms generating power on a much larger scale. Two such plants were recently completed, in Shanghai and Inner Mongolia, and the government is planning for more. China Longyuan Electric Power Group is, for instance, to build China’s largest solar farm in Qinghai province in the far north-west, which would have a capacity of 200MW on completion, scheduled for 2011.
Wang Zhongying, deputy head of the government-backed Energy Research Institute, predicts that a sharp drop in component prices will help China build up to 20GW in solar power generation capacity by 2020 – more than 10 times the current target of 1.8GW for that year.
That would still leave solar power trailing behind wind energy, where installations have been driven by preferential tariffs. Installed wind-power capacity is set to grow eightfold to 100GW until 2020, according to the National Energy Administration.
A lack of clear rules has led to a large amount of idle capacity, however, as the state grid often refuses to link up wind power generation sites – typically in remote locations – to its network.

The gleaming dark-blue panels that bedeck scores of buildings in the picture-postcard city of Freiburg, in south-west Germany, might lead the casual observer to assume the solar industry is in rude health, writes Chris Bryant.
The region’s residents are among the many beneficiaries of lavish government subsidies that made Germany the largest solar market in the world, in spite of a lack of sun.
But for the country’s panel-makers, the recession is accelerating a consolidation process that could see many companies disappear as the mass production of solar cells makes cost a decisive factor.
“We’re at the start of huge structural changes in the industry,” says Johannes Segner, chief operating officer of Solibro, which supplies thin-film solar modules. “There are over 300 firms producing solar modules worldwide ... This kind of fragmentation cannot last.”
Germany’s photovoltaic industry employs 48,000 people and generated revenues of €7bn ($10bn, £6bn) last year, according to BSW-Solar, the industry association. But with margins plummeting, European groups are looking to expand production overseas.
“Companies must be nearer to fast-growing markets in Asia, southern Europe and north America, and costs will play an increasingly important role,” says Matthias Fawer, sustainability analyst at Bank Sarasin.
Since 2000, the federal government has forced utilities to pay consumers with solar panels an artificially high rate for the electricity they feed into the grid. Renewable energy makes up 14.8 per cent of German electricity but solar power represents only 1 percentage point of that. Even so, a recent study put the inflation-adjusted cost of renewable feed-in tariffs at €34.7bn, assuming a phase-out in 2010.
However, the government has so far ignored calls to slash subsidies to the bone, opting last year for a cut of just 8-9 per cent instead.
Some solar analysts still see a bright future, forecasting a return to solid sales growth in 2010. Others cast doubt on predictions that Germany’s entire solar industrial base is about to disappear.
“The growth dynamics will certainly be greater in other countries,” says Stefan Dietrich at Q-Cells, the world’s largest solar cell manufacturer. “But in the long term Germany has an advantage because the research and development skills are here. Many of the [research] institutes are still expanding and new products are coming out of the labs.”
Copyright The Financial Times Limited 2009

Ethanol's Grocery Bill

Two federal studies add up the corn fuel's exorbitant cost.

The Obama Administration is pushing a big expansion in ethanol, including a mandate to increase the share of the corn-based fuel required in gasoline to 15% from 10%. Apparently no one in the Administration has read a pair of new studies, one from its own EPA, that expose ethanol as a bad deal for consumers with little environmental benefit.
The biofuels industry already receives a 45 cent tax credit for every gallon of ethanol produced, or about $3 billion a year. Meanwhile, import tariffs of 54 cents a gallon and an ad valorem tariff of four to seven cents a gallon keep out sugar-based ethanol from Brazil and the Caribbean. The federal 10% blending requirement insures a market for ethanol whether consumers want it or not -- a market Congress has mandated will double to 20.5 billion gallons in 2015.
The Congressional Budget Office reported last month that Americans pay another surcharge for ethanol in higher food prices. CBO estimates that from April 2007 to April 2008 "the increased use of ethanol accounted for about 10 percent to 15 percent of the rise in food prices." Ethanol raises food prices because millions of acres of farmland and three billion bushels of corn were diverted to ethanol from food production. Americans spend about $1.1 trillion a year on food, so in 2007 the ethanol subsidy cost families between $5.5 billion and $8.8 billion in higher grocery bills.
A second study -- by the Environmental Protection Agency's Office of Transportation and Air Quality -- explains that the reduction in CO2 emissions from burning ethanol are minimal and maybe negative. Making ethanol requires new land from clearing forest and grasslands that would otherwise sequester carbon emissions. "As with petroleum based fuels," the report concludes: "GHG [greenhouse gas] emissions are associated with the conversion and combustion of bio-fuels and every year they are produced GHG emissions could be released through time if new acres are needed to produce corn or other crops for biofuels."
The EPA study also explores a series of alternative scenarios over 30 to 100 years. In some cases ethanol leads to a net reduction in carbon relative to using gasoline. But many other long-term scenarios observe a net increase in CO2 relative to burning fossil fuels. Ethanol produced in a "basic natural gas fired dry mill" will over a 30-year horizon produce "a 5% increase in GHG emissions compared to petroleum gasoline." When ethanol is produced with coal burning mills, the process "significantly worsens the lifecycle GHG impact of ethanol" creating 34% more greenhouse gases than gasoline does over 30 years.
Both CBO and EPA find that in theory cellulosic ethanol -- from wood chips, grasses and biowaste -- would reduce carbon emissions. However, as CBO emphasizes, "current technologies for producing cellulosic ethanol are not commercially viable." The ethanol lobby is attempting a giant bait-and-switch: Keep claiming that cellulosic ethanol is just around the corner, even as it knows the only current technology to meet federal mandates is corn ethanol (or sugar, if it didn't face an import tariff).
As public policy, ethanol is like the joke about the baseball prospect who is a poor hitter but a bad fielder. It doesn't reduce CO2 but it does cost more. Imagine how many subsidies the Beltway would throw at ethanol if the fuel actually had any benefits.

Wood Group branches out as winds of change blow

Published Date: 03 June 2009
By Hamish Rutherford, City Correspondent

WOOD Group, the Aberdeen oil services giant, has won its first major off-shore wind farm contract – providing substations for a major development off the coast of East Anglia.
The group already has revenues of more than £3 billion a year, delivering projects for the oil and gas industry around the world.But it has begun targeting the growing renewable energy sector in a search for new ways to develop business.Yesterday Wood's engineering division revealed news of a contract to design and project manage the construction of two substations for the 315 megawatt Sheringham Shoal offshore wind farm Norfolk coast.The substations will capture energy generated from the wind farm's 88 turbines close to the source, before sending it back to shore – a more energy efficient process than using onshore substations.Wood did not disclose the value of the contract, but Les Thomas, a director of the company's engineering division, said the group's experience in operating in the North Sea meant it already has the expertise to provide services for offshore wind farm projects.Thomas commented: "Wood Group's move into the renewable energy sector is a natural progression from the services it provides to the oil and gas and power sector."With 30 year's experience working with oil and gas operators in the eastern hemisphere, (Wood Group] is well placed to apply its technical expertise to offshore wind farm developments."Wood's dedicated renewable energy service business aims to provide services for the offshore wind farm sector world wide, sourcing machinery parts and providing, maintenance and management services for industrial wind farms.Sheringham Shoal offshore wind farm is being developed by Scira Offshore Energy, a 50:50 joint venture company owned by two Norwegian energy companies, StatoilHydro and Statkraft.Due to be completed in 2011, it will be situated on the north Norfolk Coastat an estimated cost of around £1 billion . Sheringham Shoal is expected to produce enough power to supply more than 220,000 homes.In March, Wood Group set up a renewables business within the gas turbines division, with offices in Aberdeen and Houston.The company said then that renewable energy was "essential to meeting the increasing demand for clean energy and wind power is one of the most important contributors".Late last year JP Kenny, Wood's subsea and pipeline business, was appointed as the lead contractor on the Cornwall Wave Hub development to test wave energy devices prior to commercialisation.