French court judges tax would punish households while letting off big industrial polluters
Lizzy Davies in Paris
guardian.co.uk, Wednesday 30 December 2009 16.13 GMT
Nicolas Sarkozy's dreams of putting France on the frontline of the fight against global warming were in disarray today, after his flagship carbon tax was ruled unconstitutional two days before it was due to come into effect.
In an unexpected and embarrassing blow, the court responsible for ensuring the validity of French legislation rejected the reform as ineffective and unfair.
It ruled that rather than being the revolutionary measure Sarkozy promised, the tax would have let off many industrial polluters, while placing a disproportionately heavy burden on ordinary households.
"The large number of exemptions from the carbon tax runs counter to the goal of fighting climate change and violates the equality enjoyed by all in terms of public charges," said the constitutional council in its eleventh hour ruling last night.
Scrambling to salvage a project which the President had vigorously defended against criticism from opposition politicians, green groups and members of his own party, the government insisted today the carbon tax had not been put off for good. "It is a tough fight, but a worthwhile one," said spokesman Luc Chatel. Ministers promised a revised text within weeks.
However, there was little the government could do to distract from the humiliation of having a much-trailed reform batted back by the sages of the august constitutional council.
Nor will the hopes of a new and improved plan do much to calm heightening worries over revenue. Even if a revised proposal is made, the tax – which was expected to raise €1.5bn (£1.34bn) during 2010 – will take weeks to reach parliament again and even longer to start boosting state coffers.
The opposition Socialist party made no secret of their glee at seeing the right-wing president fall at the final hurdle of his marathon battle to introduce a tax which was opposed by two-thirds of the public.
"This is a good decision and shows once again that Sarkozy's way of doing things does not work," the Socialist party's parliamentary leader, Jean-Marc Ayrault, told French radio. "They announce a reform, listen to no one and produce a poor job. It's a real mess."
Sarkozy, who has championed the environmental cause with increasing vigour since the strong performance of the French Greens in June's European elections, set out his vision for the carbon tax in September with the zeal of the ecological convert he claims to be. "It's a question of survival of the human race," he said. A tax of €17 (£17.22) per tonne of carbon emissions would have been levied on oil, coal and gas consumption.
But, while green campaigners warned the tax was not high enough to be effective, the Socialists and consumer groups claimed it would lead to an unfair situation in which certain people, such as car-dependant households in isolated areas, would be hit harder than the real culprits.
The ruling of the constitutional council appeared to support those criticisms. It said that more than 1,000 of France's biggest polluters could have been exempted from the charges, and that 93% of industrial emissions would not have been taxed.
However, many big polluters are required to participate in the EU emissions trading scheme, in which they must buy carbon permits if they exceed pollution targets.
Speaking on French radio this yesterday morning, the junior minister for trade and consumption admitted mistakes had been made. "It was perhaps shocking that the sectors given exemptions were those that polluted the most," said Hervé Novelli. "So we will have to put that right."
Sarkozy, who is returning tonight from a Christmas break in Morocco with his wife Carla Bruni, has made no public comment on the setback. But Chantal Jouanno, the junior minister for ecology, said he remained "very determined" to get a carbon tax into law before the summer.
Thursday, 31 December 2009
John Gummer to quit as MP to focus on international climate change campaign
Former Tory cabinet minister announces he is to step down at the election in order to play a leading role in a pan-European campaign to tackle global warming
Will Woodward and agencies
guardian.co.uk, Wednesday 30 December 2009 10.31 GMT
John Gummer, a former Conservative cabinet minister and one of the party's most staunch environmentalists, has announced he is to quit the Commons to join a new international campaign to combat climate change.
He said the collapse of the Copenhagen talks had forced him to rethink his longstanding plans to contest his Suffolk Coastal seat, which he has represented, with boundary changes, since the 1979 election which brought Margaret Thatcher into power. He was also MP for Lewisham West from 1970-74.
Gummer is to play a leading role in as-yet-unrevealed pan-European campaign on climate change, which will be launched next month.
"I had every intention of staying on," he told the Guardian today, but said he had his mind changed by "the collapse of the Copenhagen talks and then the pressures from other people that we have got to do something about it".
The departure of Gummer, who co-chaired the party's "quality of life" policy group with Tory candidate Zac Goldsmith, weakens the "green" presence on the Tory benches. He said he had discussed his departure with David Cameron before Christmas. "I am quite sure the future of these [green issues] are in safe hands with him. He is totally committed, but not everybody internationally is."
Gummer's departure will make Kenneth Clarke, assuming he retains his safe Tory seat at the next election, the sole surviving Commons representative of the "Cambridge mafia", a group of high-octane Conservative brains from that university which made it to the cabinet. Michael Howard is standing down and Lords Brittan, Lamont and Fowler have already left.
Gummer was party chairman under Thatcher, agriculture secretary under her and John Major, and then environment secretary for four years from 1993. He is possibly most famous, or infamous, for trying to feed his daughter Cordelia a beefburger to convince the public it was safe from mad cow disease.
His son Benedict Gummer is now Conservative candidate for neighbouring Ipswich, held by Labour's Chris Mole with a 5,332 majority but a swing seat vulnerable to a Tory challenge.
In a statement Gummer said: "Since the very disappointing results of the Copenhagen negotiations, I have been forced to rethink my plans for the future. In discussion with colleagues in the rest of Europe and the United States, as well as with international NGOs, I have realised that I cannot commit myself to the work that they believe has to be done and continue to serve my constituents as I would want.
"The things that I am urged to take on will demand a good deal of absence from home, which is simply incompatible either with the inevitably heavy legislative programme of a new parliament or with attendance at the many constituency functions upon which I have always laid great stress.
"During the 35 years that I have had the privilege of being a member of parliament, I have always put my constituency work first and I am not prepared to skimp on it now. It is therefore with very great sadness that I have decided it is simply not possible to contest the next election and still promise the kind of service that my constituents have rightly grown to expect."
More than 120 MPs have said they will step down at the next general election and many more are expected to go before the general election campaign starts. Many departures are directly or indirectly due to the outcry over MPs' expenses. Gummer attracted some criticism for claiming £9,000 in gardening expenses, including £100 a year to remove moles from his country estate.
Gummer said: "Climate change is not only a crisis without historic parallel, it is an urgent political threat. We will never win this battle if we diminish people's lives or preach at them. The threat must not be used as an excuse for unnecessary state direction and control.
"Instead, it is all of us, as citizens, entrepreneurs, and consumers, who will make change happen. Politicians and campaigners have to enable that change: they must unleash the power of the free market; they must harness the skills and innovation that drive it; and they must create the opportunities for competition to deliver new answers to this entirely new challenge.
"Those of us who have any chance to influence the course of events, even in a small way, have simply to make that our first priority, however difficult the choice."
Will Woodward and agencies
guardian.co.uk, Wednesday 30 December 2009 10.31 GMT
John Gummer, a former Conservative cabinet minister and one of the party's most staunch environmentalists, has announced he is to quit the Commons to join a new international campaign to combat climate change.
He said the collapse of the Copenhagen talks had forced him to rethink his longstanding plans to contest his Suffolk Coastal seat, which he has represented, with boundary changes, since the 1979 election which brought Margaret Thatcher into power. He was also MP for Lewisham West from 1970-74.
Gummer is to play a leading role in as-yet-unrevealed pan-European campaign on climate change, which will be launched next month.
"I had every intention of staying on," he told the Guardian today, but said he had his mind changed by "the collapse of the Copenhagen talks and then the pressures from other people that we have got to do something about it".
The departure of Gummer, who co-chaired the party's "quality of life" policy group with Tory candidate Zac Goldsmith, weakens the "green" presence on the Tory benches. He said he had discussed his departure with David Cameron before Christmas. "I am quite sure the future of these [green issues] are in safe hands with him. He is totally committed, but not everybody internationally is."
Gummer's departure will make Kenneth Clarke, assuming he retains his safe Tory seat at the next election, the sole surviving Commons representative of the "Cambridge mafia", a group of high-octane Conservative brains from that university which made it to the cabinet. Michael Howard is standing down and Lords Brittan, Lamont and Fowler have already left.
Gummer was party chairman under Thatcher, agriculture secretary under her and John Major, and then environment secretary for four years from 1993. He is possibly most famous, or infamous, for trying to feed his daughter Cordelia a beefburger to convince the public it was safe from mad cow disease.
His son Benedict Gummer is now Conservative candidate for neighbouring Ipswich, held by Labour's Chris Mole with a 5,332 majority but a swing seat vulnerable to a Tory challenge.
In a statement Gummer said: "Since the very disappointing results of the Copenhagen negotiations, I have been forced to rethink my plans for the future. In discussion with colleagues in the rest of Europe and the United States, as well as with international NGOs, I have realised that I cannot commit myself to the work that they believe has to be done and continue to serve my constituents as I would want.
"The things that I am urged to take on will demand a good deal of absence from home, which is simply incompatible either with the inevitably heavy legislative programme of a new parliament or with attendance at the many constituency functions upon which I have always laid great stress.
"During the 35 years that I have had the privilege of being a member of parliament, I have always put my constituency work first and I am not prepared to skimp on it now. It is therefore with very great sadness that I have decided it is simply not possible to contest the next election and still promise the kind of service that my constituents have rightly grown to expect."
More than 120 MPs have said they will step down at the next general election and many more are expected to go before the general election campaign starts. Many departures are directly or indirectly due to the outcry over MPs' expenses. Gummer attracted some criticism for claiming £9,000 in gardening expenses, including £100 a year to remove moles from his country estate.
Gummer said: "Climate change is not only a crisis without historic parallel, it is an urgent political threat. We will never win this battle if we diminish people's lives or preach at them. The threat must not be used as an excuse for unnecessary state direction and control.
"Instead, it is all of us, as citizens, entrepreneurs, and consumers, who will make change happen. Politicians and campaigners have to enable that change: they must unleash the power of the free market; they must harness the skills and innovation that drive it; and they must create the opportunities for competition to deliver new answers to this entirely new challenge.
"Those of us who have any chance to influence the course of events, even in a small way, have simply to make that our first priority, however difficult the choice."
'Carousel' frauds plague European carbon trading markets
Why are mysterious UK businesses registering to trade carbon in Europe?
By Rowena Mason, City ReporterPublished: 6:07PM GMT 30 Dec 2009
It is a building site, formerly a derelict car park, in a deprived part of West London, where the neon glow of curry houses and late-night grocery stores could not be further from the wealth and glamour of London's financial markets.
Described as a "consulting" business, this is the address of a UK company that has signed up to trade carbon permits under the European Emissions Trading Scheme in Copenhagen. But there is no trace of its existence on the Companies House database.
At the newsagent next door, nobody has ever even heard of emissions trading – the system where companies buy and sell the right to emit carbon dioxide – and there has not been a building there for many years.
It is not the only oddity to emerge from the Danish Carbon Registry. All the expected big players are on the list – utilities, oil and heavy industry – the only sectors obliged by law to own permits to cover emissions.
Quite a few investment banks are also signed up, on behalf of industry or trading to make a profit.
But outnumbering these familiar names, hundreds of UK companies selling anything from hair loss treatments to electronics have mysteriously registered to buy and sell carbon permits in the Scandinavian nation – mostly in the last 18 months.
Many give addresses in the regions such as Yorkshire, Lancashire, Essex and other places not known for their links to the world of finance.
The appearance of these obscure British companies – among them businesses with unreachable addresses and Hotmail, Gmail or Yahoo email accounts for company representatives – has recently come to the attention of the Danish authorities.
While many are bound to be genuine individual private traders playing the carbon markets, investigators are examining the possibility that some of these unknown UK-based companies have used the system to commit "carousel" fraud linked to VAT.
As the Copenhagen summit on global warming began this month, Denmark, the host nation, was bringing in an emergency ban to halt VAT on carbon. This followed similar suspensions in Britain, France, Spain and Holland.
According to sources, the Danish registry may be at the heart of Europe's problems with carbon trading fraud. Local media has repeatedly raised the fact that few, if any, checks are done on new traders and approval can be much quicker than in other countries.
Criminals profit by importing goods VAT-free, selling them through a series of companies, each liable to VAT, before exporting them again. Then, the first link in the chain often goes missing without accounting for the VAT and the final link reclaims the VAT it has paid from the state before disappearing.
It might sound like the tinpot scheme of local small-time crooks, but fleecing the tax man can bring in big money.
Just a few weeks ago, Europol, the cross-border police force, said that carbon trading fraudsters may have accounted for up to 90pc of all market activity in some European countries, with criminals mainly from Britain, France, Spain, Denmark and Holland pocketing an estimated €5bn (£4.5bn).
"It is estimated that in some countries, up to 90pc of the whole market volume was caused by fraudulent activities," Europol said.
Figures from New Energy Finance show the value of the global market falling from $38bn (£23bn) in the second quarter to $30bn in the three months to the end of September after several countries cracked down.
The London platform, the European Climate Exchange, where banks and energy companies tend to trade, is not affected by the fraud because it does not offer the spot contracts on which VAT was payable. But British traders can still defraud authorities by buying and selling permits on other European exchanges.
This organised criminal activity has even "endangered the credibility" of the current carbon trading system, according to Rob Wainwright, the director of Europol.
So why have fraudsters particularly targeted carbon trading? And what is being done to iron out problems in Europe before other areas – such as the US – start to trade carbon in the next few years?
Carousel fraud has been a known scam for years among mobile commodities, such as phones, computer chips and cigarettes.
But the attraction of carbon permits is their intangible nature, so there is no need physically to ship goods across borders. All is done at the click of a mouse.
It now looks like Europe will start a so-called "reverse charge" mechanism, which would remove the need for VAT to change hands between carbon traders every time permits are sold.
But will this remove all problems from the system? It should certainly eradicate VAT fraud, but the very nature of carbon credits makes them "an incredibly lucrative target for criminals", Rafael Rondelez, who was involved with the Europol investigation, has warned.
His message is clear: other types of carbon fraud could soon spring up because there are "no strong regulations or checking principles as there is in banking to prevent such activities as money laundering."
By Rowena Mason, City ReporterPublished: 6:07PM GMT 30 Dec 2009
It is a building site, formerly a derelict car park, in a deprived part of West London, where the neon glow of curry houses and late-night grocery stores could not be further from the wealth and glamour of London's financial markets.
Described as a "consulting" business, this is the address of a UK company that has signed up to trade carbon permits under the European Emissions Trading Scheme in Copenhagen. But there is no trace of its existence on the Companies House database.
At the newsagent next door, nobody has ever even heard of emissions trading – the system where companies buy and sell the right to emit carbon dioxide – and there has not been a building there for many years.
It is not the only oddity to emerge from the Danish Carbon Registry. All the expected big players are on the list – utilities, oil and heavy industry – the only sectors obliged by law to own permits to cover emissions.
Quite a few investment banks are also signed up, on behalf of industry or trading to make a profit.
But outnumbering these familiar names, hundreds of UK companies selling anything from hair loss treatments to electronics have mysteriously registered to buy and sell carbon permits in the Scandinavian nation – mostly in the last 18 months.
Many give addresses in the regions such as Yorkshire, Lancashire, Essex and other places not known for their links to the world of finance.
The appearance of these obscure British companies – among them businesses with unreachable addresses and Hotmail, Gmail or Yahoo email accounts for company representatives – has recently come to the attention of the Danish authorities.
While many are bound to be genuine individual private traders playing the carbon markets, investigators are examining the possibility that some of these unknown UK-based companies have used the system to commit "carousel" fraud linked to VAT.
As the Copenhagen summit on global warming began this month, Denmark, the host nation, was bringing in an emergency ban to halt VAT on carbon. This followed similar suspensions in Britain, France, Spain and Holland.
According to sources, the Danish registry may be at the heart of Europe's problems with carbon trading fraud. Local media has repeatedly raised the fact that few, if any, checks are done on new traders and approval can be much quicker than in other countries.
Criminals profit by importing goods VAT-free, selling them through a series of companies, each liable to VAT, before exporting them again. Then, the first link in the chain often goes missing without accounting for the VAT and the final link reclaims the VAT it has paid from the state before disappearing.
It might sound like the tinpot scheme of local small-time crooks, but fleecing the tax man can bring in big money.
Just a few weeks ago, Europol, the cross-border police force, said that carbon trading fraudsters may have accounted for up to 90pc of all market activity in some European countries, with criminals mainly from Britain, France, Spain, Denmark and Holland pocketing an estimated €5bn (£4.5bn).
"It is estimated that in some countries, up to 90pc of the whole market volume was caused by fraudulent activities," Europol said.
Figures from New Energy Finance show the value of the global market falling from $38bn (£23bn) in the second quarter to $30bn in the three months to the end of September after several countries cracked down.
The London platform, the European Climate Exchange, where banks and energy companies tend to trade, is not affected by the fraud because it does not offer the spot contracts on which VAT was payable. But British traders can still defraud authorities by buying and selling permits on other European exchanges.
This organised criminal activity has even "endangered the credibility" of the current carbon trading system, according to Rob Wainwright, the director of Europol.
So why have fraudsters particularly targeted carbon trading? And what is being done to iron out problems in Europe before other areas – such as the US – start to trade carbon in the next few years?
Carousel fraud has been a known scam for years among mobile commodities, such as phones, computer chips and cigarettes.
But the attraction of carbon permits is their intangible nature, so there is no need physically to ship goods across borders. All is done at the click of a mouse.
It now looks like Europe will start a so-called "reverse charge" mechanism, which would remove the need for VAT to change hands between carbon traders every time permits are sold.
But will this remove all problems from the system? It should certainly eradicate VAT fraud, but the very nature of carbon credits makes them "an incredibly lucrative target for criminals", Rafael Rondelez, who was involved with the Europol investigation, has warned.
His message is clear: other types of carbon fraud could soon spring up because there are "no strong regulations or checking principles as there is in banking to prevent such activities as money laundering."
Corn Cobs Have Energy Use
By IAN BERRY
The corn cob could go from farmer trash to treasure if an effort by the world's largest ethanol maker takes root.
Poet, Sioux Falls, S.D., is readying production of a new cellulosic ethanol plant that uses the corn waste product, rather than corn itself, to make the biofuel. The plant, located in Emmitsburg, Iowa, where Poet already has a traditional corn-based ethanol refinery, is expected to produce 25 million gallons per year once it starts commercial production in 2011. Poet already has a pilot project in Scotland, S.D., that produced about 20,000 gallons of cellulosic ethanol since it opened in November 2008.
The plant, called Project Liberty, could be a new revenue source for farmers, proponents say, although the future for the technology remains uncertain.
"We're looking at $30 to $60 per ton is what we'd be paying for the corn cobs," said Scott Weishaar, vice president of Commercial Development for Poet. "You take a look at a farmer who maybe has 1,000 or 2,000 acres of corn, that's pretty significant incremental income to his operation."
Currently, farmers have little use for the stripped-down corn cobs. The industry is moving toward cellulosic, as spelled out in the Environmental Protection Agency's renewable-fuel mandate. The mandate calls for cellulosic ethanol to account for 16 billion gallons of the total 36 billion gallons of production by 2022. Other sources for the cellulosic ethanol include wood waste, switchgrass and other corn "residue" besides the cob, such as the stalks. Corn cobs are currently the sole focus of Poet's cellulosic effort.
Unlike some of the other corn residue, the cobs are seen as having little if any value to the land and can be removed without depleting the soil. And the cob, unlike the grain, doesn't ignite the "food versus fuel" debate. Poet said that it is quickly finding ways to make cellulosic ethanol profitable. Since the pilot project started, it has cut costs almost in half, to $2.35 per gallon from $4.13, by reducing energy usage and enzyme costs, among other expenses. It costs roughly 50 to 80 cents more per gallon to make ethanol from corn cobs than from the grain, Poet said.
It hopes to have the costs per gallon below $2 by the start of commercial operation. Ethanol futures are trading around $1.90 at the Chicago Board of Trade.
Chief Executive Jeff Broin said that two years ago he would have considered cellulosic ethanol "a long shot" but that it is now a reality.
For farmers, harvesting the cobs requires additional equipment, and Poet is working with farm machine manufacturers to "accelerate their development" of equipment that will harvest cobs, Mr. Weishaar said.
The company hosted 16 different equipment makers in Emmitsburg for a field day in November, in which industry leaders showed off prototype machines to area farmers.
One of those companies, Agco Corp., has rarely before, if ever, taken a prototype machine to such a public event, said Agco spokesman Reid Hamre. The Duluth, Ga., company is probably at least several months away from deciding whether to mass-produce the equipment.
"It's a prototype machine, we've got some more testing and exhibiting and gathering of feedback for farmers and dealers we want to do," Mr. Hamre said.
The corn cob could go from farmer trash to treasure if an effort by the world's largest ethanol maker takes root.
Poet, Sioux Falls, S.D., is readying production of a new cellulosic ethanol plant that uses the corn waste product, rather than corn itself, to make the biofuel. The plant, located in Emmitsburg, Iowa, where Poet already has a traditional corn-based ethanol refinery, is expected to produce 25 million gallons per year once it starts commercial production in 2011. Poet already has a pilot project in Scotland, S.D., that produced about 20,000 gallons of cellulosic ethanol since it opened in November 2008.
The plant, called Project Liberty, could be a new revenue source for farmers, proponents say, although the future for the technology remains uncertain.
"We're looking at $30 to $60 per ton is what we'd be paying for the corn cobs," said Scott Weishaar, vice president of Commercial Development for Poet. "You take a look at a farmer who maybe has 1,000 or 2,000 acres of corn, that's pretty significant incremental income to his operation."
Currently, farmers have little use for the stripped-down corn cobs. The industry is moving toward cellulosic, as spelled out in the Environmental Protection Agency's renewable-fuel mandate. The mandate calls for cellulosic ethanol to account for 16 billion gallons of the total 36 billion gallons of production by 2022. Other sources for the cellulosic ethanol include wood waste, switchgrass and other corn "residue" besides the cob, such as the stalks. Corn cobs are currently the sole focus of Poet's cellulosic effort.
Unlike some of the other corn residue, the cobs are seen as having little if any value to the land and can be removed without depleting the soil. And the cob, unlike the grain, doesn't ignite the "food versus fuel" debate. Poet said that it is quickly finding ways to make cellulosic ethanol profitable. Since the pilot project started, it has cut costs almost in half, to $2.35 per gallon from $4.13, by reducing energy usage and enzyme costs, among other expenses. It costs roughly 50 to 80 cents more per gallon to make ethanol from corn cobs than from the grain, Poet said.
It hopes to have the costs per gallon below $2 by the start of commercial operation. Ethanol futures are trading around $1.90 at the Chicago Board of Trade.
Chief Executive Jeff Broin said that two years ago he would have considered cellulosic ethanol "a long shot" but that it is now a reality.
For farmers, harvesting the cobs requires additional equipment, and Poet is working with farm machine manufacturers to "accelerate their development" of equipment that will harvest cobs, Mr. Weishaar said.
The company hosted 16 different equipment makers in Emmitsburg for a field day in November, in which industry leaders showed off prototype machines to area farmers.
One of those companies, Agco Corp., has rarely before, if ever, taken a prototype machine to such a public event, said Agco spokesman Reid Hamre. The Duluth, Ga., company is probably at least several months away from deciding whether to mass-produce the equipment.
"It's a prototype machine, we've got some more testing and exhibiting and gathering of feedback for farmers and dealers we want to do," Mr. Hamre said.
Investing in coal is dysfunctional
Power companies, investment bankers and pension fund managers are fuelling an unlivable future – with our money
Jeremy Leggett
guardian.co.uk, Wednesday 30 December 2009 14.23 GMT
The acid test of the Copenhagen climate change summit was always going to be coal. Had governments managed to come up with a meaningful agreement, those who seek to continue burning coal would have faced significant risk that they would be spending their money on what investors call "strandable" assets – assets that become obsolete and therefore worthless. And for their part, financial institutions would have had to think twice whether they should keep pouring billions of dollars into new coal-fired electricity generation, seeking short-term returns while knowingly fuelling future climate ruin that is not costed in today's books.
But there was no meaningful agreement. And so we see the first in the queue to foist coal horrors upon us already knocking at the door. Since Copenhagen, E.ON has announced that any further emissions cuts by the company will depend on governments making progress in 2010 in the climate negotiations. E.ON and Centrica have both said they are less likely to build coal plants attempting carbon capture and storage. We can expect to see similar sentiments from most of the other big energy companies. Enlightened business leadership ahead of legislation is not their bag. More plans for unsequestered coal, without trapping and burying the carbon dioxide, will be the best we can expect.
To be fair to the power companies, the fault is wider. Most investors expect this behaviour of them. Most banks, insurance companies and pension funds are happy, as things stand, to continue investing in coal.
When it comes to the London Stock Exchange, they will have their first major chance soon. The largest Russian steam coal producer is eyeing an initial public offering in London during the first half of 2010. Suek, owned by two oligarchs, is worth $8-9bn (£5-6bn), and will be floating as many as a quarter of its shares. As one anonymous banker put it to Reuters: "There haven't been any good opportunities in this sector for a long time, and the sector is on its way up, so therefore this will be a positive story."
Of course, at the same time, those buying shares will be fuelling long-term wealth destruction – let me not be so base as to mention killing people to boot, let's stick to the money – by stoking climate change. This is the bottom line with the dysfunctional form of capitalism we have allowed to evolve. And the most galling thing is this: the bonus cultists are doing it, in large part, with our money.
A pension fund manager invests billions built up from tiny parcels of the peoples' pension contributions. He is rewarded, like everyone else in the temples of finance, on the basis of short-term returns. That the pension holder might retire into a world that is increasingly unliveable because of the actions of his fund manager features nowhere in any bonus calculation.
Hugo Chávez gloatingly told the Copenhagen summit that capitalism is to blame for climate change. He has more than half a point. After this failure of a summit many leaders had cast as a last-chance saloon, surely now we have to think hard about capitalism in the form we have allowed it to evolve.
The fact is that as things stand – to use the parlance of the investment bankers who will scrabble to win the Russian coal business and the pension fund managers who will line up to invest in the listing – there is no place on the global balance sheet for the assets most relevant to the survival of economies: ecosystems and civilisation. There is plenty of space for spectres they label as assets while shovelling the attendant megarisks off the books. That is the real bottom line.
Unless, that is, we can mobilise enough people-power, on enough fronts, for the citizenry to turn around the course of a war in which our leaders are currently displaying toothless impotence. The listing by Suek, and the role of our money it, might be a good place to start.
Any company investing in that IPO is a company that I will no longer bank or insure with. And any pension fund investing in it is one that I will encourage all my friends to switch their pension out of.
Jeremy Leggett, jeremyleggett.net, set up his company, Solarcentury, to fight climate change.
Jeremy Leggett
guardian.co.uk, Wednesday 30 December 2009 14.23 GMT
The acid test of the Copenhagen climate change summit was always going to be coal. Had governments managed to come up with a meaningful agreement, those who seek to continue burning coal would have faced significant risk that they would be spending their money on what investors call "strandable" assets – assets that become obsolete and therefore worthless. And for their part, financial institutions would have had to think twice whether they should keep pouring billions of dollars into new coal-fired electricity generation, seeking short-term returns while knowingly fuelling future climate ruin that is not costed in today's books.
But there was no meaningful agreement. And so we see the first in the queue to foist coal horrors upon us already knocking at the door. Since Copenhagen, E.ON has announced that any further emissions cuts by the company will depend on governments making progress in 2010 in the climate negotiations. E.ON and Centrica have both said they are less likely to build coal plants attempting carbon capture and storage. We can expect to see similar sentiments from most of the other big energy companies. Enlightened business leadership ahead of legislation is not their bag. More plans for unsequestered coal, without trapping and burying the carbon dioxide, will be the best we can expect.
To be fair to the power companies, the fault is wider. Most investors expect this behaviour of them. Most banks, insurance companies and pension funds are happy, as things stand, to continue investing in coal.
When it comes to the London Stock Exchange, they will have their first major chance soon. The largest Russian steam coal producer is eyeing an initial public offering in London during the first half of 2010. Suek, owned by two oligarchs, is worth $8-9bn (£5-6bn), and will be floating as many as a quarter of its shares. As one anonymous banker put it to Reuters: "There haven't been any good opportunities in this sector for a long time, and the sector is on its way up, so therefore this will be a positive story."
Of course, at the same time, those buying shares will be fuelling long-term wealth destruction – let me not be so base as to mention killing people to boot, let's stick to the money – by stoking climate change. This is the bottom line with the dysfunctional form of capitalism we have allowed to evolve. And the most galling thing is this: the bonus cultists are doing it, in large part, with our money.
A pension fund manager invests billions built up from tiny parcels of the peoples' pension contributions. He is rewarded, like everyone else in the temples of finance, on the basis of short-term returns. That the pension holder might retire into a world that is increasingly unliveable because of the actions of his fund manager features nowhere in any bonus calculation.
Hugo Chávez gloatingly told the Copenhagen summit that capitalism is to blame for climate change. He has more than half a point. After this failure of a summit many leaders had cast as a last-chance saloon, surely now we have to think hard about capitalism in the form we have allowed it to evolve.
The fact is that as things stand – to use the parlance of the investment bankers who will scrabble to win the Russian coal business and the pension fund managers who will line up to invest in the listing – there is no place on the global balance sheet for the assets most relevant to the survival of economies: ecosystems and civilisation. There is plenty of space for spectres they label as assets while shovelling the attendant megarisks off the books. That is the real bottom line.
Unless, that is, we can mobilise enough people-power, on enough fronts, for the citizenry to turn around the course of a war in which our leaders are currently displaying toothless impotence. The listing by Suek, and the role of our money it, might be a good place to start.
Any company investing in that IPO is a company that I will no longer bank or insure with. And any pension fund investing in it is one that I will encourage all my friends to switch their pension out of.
Jeremy Leggett, jeremyleggett.net, set up his company, Solarcentury, to fight climate change.
More China Companies Are Going Green
By JASON DEAN
BEIJING -- Chinese entrepreneurs and private citizens are starting to become more active in trying to address concerns over global warming, a nascent trend that could have significant long-term impact on the ability of the world's largest greenhouse-gas emitter to curb its effects on the climate.
The shift is most pronounced among a small-but-growing group of private business executives, who are adjusting their business practices and helping to spread awareness more broadly among the public.
Wang Shi, the 58-year-old chairman of China Vanke Co., the country's largest housing developer, said he became concerned about global warming through mountain climbing, a hobby he took up in 1998. He had read the Ernest Hemingway story "The Snows of Kilimanjaro," and in 2002 went to Tanzania to scale the mountain in the title. He was surprised at what he found.
"I didn't see any snow," he says. "I did more research, and discovered that within 50 years...its glaciers could be entirely gone as well."
Mr. Wang is gradually replacing wood used in the interiors of Vanke's apartment buildings with recyclable materials. Vanke is using more solar and other renewable energy, and adopting prefabrication techniques, borrowed partly from Japan, that are less wasteful than standard Chinese construction.
Mr. Wang is building a new corporate headquarters in Shenzhen designed by Steven Holl, an American architect, that he aims to make the first building in China with a platinum ranking -- the highest available -- on the international Leadership in Energy and Environmental Design rating system for "green buildings."
"China is a big country," says Mr. Wang, who founded Vanke 25 years ago. "It should try to shoulder the responsibilities of a large country, and therefore China's companies need to shoulder their own responsibilities."
In 2004, Vanke's Mr. Wang and about 60 other businessmen founded the Society of Entrepreneurs and Ecology to promote awareness and action on climate change and other environmental issues. It now has 160 members, each of whom pays 100,000 yuan ($14,620) in annual dues. That means an annual budget of at least $2.3 million, not including other contributions like free rent -- a hefty sum for a Chinese NGO.
SEE uses the funds for reforestation programs in China and educational efforts, and to help support more than 150 smaller environmental groups around the country.
On Dec. 8, at the beginning of the Copenhagen climate summit, the group joined several other organizations representing 200 business members to issue a communiqué pledging to reduce their companies' emissions and calling on governments to reach a deal including binding legal benchmarks.
Yang Peng, SEE's secretary-general, says the growing green consciousness is a natural outgrowth of China's development.
"In the past, people just wanted to get enough to eat. Now, many people live in nicer homes, and they're more concerned about the environment," he says. "Low carbon is a new idea, but it's spreading very fast."
Most of the focus in assessing China's climate-related practices has been on the government. That is logical, since Beijing, in addition to setting policy, plays an enormous direct role in the economy. The government has pledged to reduce China's carbon emissions relative to the size of its economy, but has refused to commit to outright emissions cuts. Some foreign officials and scientists have criticized China's stance and said it contributed to the failure of the Copenhagen summit to reach a breakthrough. China says it played a constructive role at the summit, but can only agree to a deal that treats developing nations fairly.
But the participation of private businesses and regular citizens in the world's most populous nation will also be a major factor in China's climate impact.
Until recently, there was little of the sort of nongovernmental activity on climate change and other environmental issues that is common in more-developed places like Europe, Japan and the U.S. Now, climate experts take heart in the increasing activities of some executives, educators and others -- even if it is too early for them to have had major impact, and abundant examples remain of indifference and waste.
"We are starting to see a growing level of awareness of climate change among people" in China, says Barbara Finamore, China program director for the Natural Resources Defense Council, a New York-based environmental organization. Ms. Finamore points to educational efforts in schools and by the state media to make people aware of climate issues, as well as "forward-looking companies who recognize the importance of this issue and are taking a leading role in trying to encourage their government to do more."
Some executives are changing their personal, as well as corporate, behavior. Zhang Yue, chairman of Broad Air Conditioner Co., was one of China's first entrepreneurs to buy a private jet, back in 1997. About five years ago, he became aware of the huge volume of carbon dioxide produced by a single 1,900-mile trip on the jet. Since then, he has heavily restricted the jet's use, and he often takes commercial flights.
Mr. Zhang has also made emissions reduction a central mission of his company. Broad is a major producer of giant air conditioners used in buildings, and it specializes in chillers that don't use electricity, instead relying on other energy sources like natural gas and waste heat. Broad says its air conditioners have only 20% the carbon-dioxide emissions of electric models.
Still, Mr. Zhang, who considers himself a pioneer on climate-change issues in China, is pessimistic about the overall level of awareness in the country.
"Public understanding of energy conservation and emissions reduction is still woefully behind," he says, adding that more education and publicity of the issue by the government is needed.
Others see progress already. Huang Ming, the chairman of Himin Solar Energy Group Co., China's largest maker of rooftop solar water heaters, says the desire among some of his customers, particularly educated, urban residents, to use more-environmentally friendly devices is helping to boost Himin's sales.
If property companies like Vanke change their behavior, it could have an especially strong impact, since China has the largest building market in the world by floor space. Building operations create about one-sixth of China's total carbon emissions, according to the China Greentech Report 2009, published by a business consortium.
A separate report in October by the NRDC and Boston Consulting Group estimated that "moderate" energy conservation, affecting 5% of China's existing buildings and 60% of new buildings, would have an environmental impact equivalent to halting global air traffic for four months.
Write to Jason Dean at jason.dean@wsj.com
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