Tuesday, 23 March 2010

Carbon traders try to reply to fears

By Fiona Harvey and Chris Flood
Published: March 22 2010 19:47 Carbon traders tried to calm market fears on Monday after the latest blow to the credibility of the European Union’s emissions trading scheme.
The International Emissions Trading Association, an industry body for traders, called for a halt to resale of certain carbon credits, after concerns that “used” credits were being “recycled”.

Credits that were submitted by companies to cover their obligations under the EU’s trading scheme were then re-sold back into the market by Hungary’s government, in a decision that – although legal – was said by carbon experts to raise questions about the correct working of the system.
Henry Derwent, president of IETA, said: “The reaction from market participants and observers across the world should convince governments that recycling is strongly disliked by the market. It also impacts the reputation of the EU ETS.”
The European Commission is to close the loophole.
Under the EU ETS, companies in certain energy-intensive industries are issued with rights to emit carbon dioxide, some free and some bought at auction. The companies must surrender to their governments enough permits to cover their emissions each year.
Companies are able increase their quota of permits by buying carbon credits from overseas, issued by the UN under the Kyoto protocol.

FT interactive graphic: Explore the technologies adopted and various developing nations’ level of participation
These are cheaper than the permits issued by the EU. It was about 1.7m of these UN credits – worth nearly €20m ($27m) – that were then re-sold by the Hungarian government, in a move that is allowed under the rules but that caused market participants to question the value of the recycled credits.
The UN credits were trading at €11.46 a tonne on Monday while EU permits were at €13.12 a tonne.
The Bluenext and Nordpool exchanges halted trading in carbon credits last Wednesday to investigate whether recycled credits were being circulated, but reopened on Monday.
The Hungarian government named Deutsche Bank as one of the bidders for the recycled credits, but the bank said it pulled out for ethical reasons.
Microdyne, a small London-based company, said it took the credits, which were then sold on to a Hong Kong company.
There was widespread anger in the market. “Hungary is playing with fire,” said one trader.
Mitchell Feierstein, chief executive of Glacier Environmental Funds, called the re-sale of used credits “idiotic” and said traders must conduct due diligence on their counter-parties.

Engyco flotation seeks to raise up to €1bn

By Fiona Harvey, Environment Correspondent
Published: March 22 2010 19:54
One of the boldest flotations of a “green” company in years is planned for next month, when the solar energy company Engyco hopes to raise €500m to €1bn (£900m) to invest in Spanish solar farms.
Interest in green technology companies was strong before the financial crisis, but since then the credit crunch and recession have combined with a poor outlook for the renewable energy business, leading to a drought of flotations.

Engyco wants to buy existing solar farms in Spain, where the climate and government support for renewable energy have encouraged the building of large-scale projects using photovoltaic technology, similar to the solar panels now seen on roofs.
Some investors see now as a good time to pick up such assets relatively cheaply, as although government subsidies guarantee attractive prices for solar energy, the cost of capital has risen in Spain with the collapse of its construction and property sectors. As a result, many owners of solar farms are willing to sell.
Engyco believes it will be able to run the solar farms at a lower cost, giving a higher rate of return.
The company has agreements in place covering about €640m of such assets, making up a capacity of about 86MW, and is looking for further opportunities.
The company is headed by several big names from the utilities industries. John Roberts, non-executive chairman, was chief executive of United Utilities and is a non-executive director at the BlackRock New Energy Investment Trust. Thomas Krupke, chief executive of Engyco, was chief executive of Solon, one of Europe’s biggest manufacturers of solar components.
Alexander Voigt, executive vice-chairman, has a history in photovoltaics going back to 1986, and was a co-founder of Solon.
Engyco’s non-executive directors include Thomas van Aubel, co-founder of Q-Cells, one of the world’s biggest solar manufacturers; Pedro Mielgo, former chairman of Spain’s national grid company Red Electrica de Espana; and Martin Negre, former chief executive of Northumbrian Water Group and chairman of Ecofin Global Utilities Hedge Fund.
Engyco has appointed Numis Securities and Ambrian Partners as advisers for its proposed listing on London’s main market, which is planned for late April or early May.
So far, the company’s capital has been supplied by its founders and directors.
Mr Roberts said: “The assets that we intend to manage enjoy both favourable operating conditions and a highly attractive pricing regime.”

Worlds 1st wave and tidal energy leasing round to power up three quarter of a million homes

Monday, 22 March 2010
The Crown Estate has announced the names of the successful bidders for the world’s first commercial wave and tidal leasing round, for ten sites in Scotland’s Pentland Firth and Orkney waters.
The 1.2 GW of installed capacity proposed by the wave and tidal energy developers for 2020, 600 MW each from wave and tidal, is four times the peak output of Dounreay power station. This is enough electricity to meet the needs of up to three quarters of a million homes.
The developers have signed agreements for lease with The Crown Estate to take forward the development of their wave and tidal energy installations. This will allow developers to enter the statutory consenting process for their sites with security of access to the seabed.
As owners of the UK seabed out to the 12 nautical mile territorial limit and over 55 percent of the foreshore, we have been working closely with our partners, Scottish Government, Highlands & Islands Enterprise, Orkney Islands Council and the Highland Council, to maximise the benefits to the local area and the rest of Scotland from investments such as the offshore renewable energy programme.
The developers who have signed a total of ten agreements for lease are:
SSE Renewables Developments Ltd, 200 MW for Costa Head site
Aquamarine Power Ltd & SSE Renewables Developments Ltd, 200 MW for Brough Head site
Scottish Power Renewables UK Ltd, 50 MW for Marwick Head site
E.ON, 50 MW for West Orkney South site
E.ON, 50 MW for West Orkney Middle South site
Pelamis Wave Power Ltd, 50 MW for Armadale site.
SSE Renewables Developments (UK) Ltd, 200 MW for Westray South site
SSE Renewables Holdings (UK) Ltd & OpenHydro Site Development Ltd, 200 MW for Cantick Head site
Marine Current Turbines Ltd, 100 MW for Brough Ness site
Scottish Power Renewables UK Ltd, 100 MW for Ness of Duncansby site.
The First Minister, Alex Salmond, MSP, MP said: “Today marks a major milestone in the global journey towards a low carbon future, with the commercial-scale deployment of marine renewables set to power our economies and help safeguard the planet for generations to come. These waters have been described as the Saudi Arabia of marine power and the wave and tidal projects unveiled today – exceeding the initial 700 MW target capacity – underline the rich natural resources of the waters off Scotland.
“Leading international energy companies and innovators continue to be drawn to Scottish waters, which boast as much as a quarter of Europe’s tidal and offshore wind resource and a tenth of the continent’s potential wave capacity. Together with some 11 GW of planned offshore wind developments, these latest marine renewables projects show that Scotland is powering ahead in the development and deployment of clean, green energy.
“The Scottish Government is working with The Crown Estate, developers and key partners to support this rapidly-growing industry, to ensure communities such as those in Caithness and Orkney are well-placed to reap the benefits and to secure Scotland’s position as the green energy powerhouse of Europe.”
The Secretary of State for Scotland Jim Murphy said: “This is a welcome world-first for Scotland and I am happy to see the major steps being taken to harness Scotland’s wave and tidal energy. It is an extremely exciting time for renewables in Scotland and across the rest of the UK as we use more of our natural resources to generate our power.
“Scotland is naturally placed to make the most of this green revolution and we will continue to work with others to ensure the potential of Scottish waters, alongside wind power, is fully met.
“It is encouraging to see the number of successful bidders for the Pentland Firth and Orkney waters. There is no doubt we are set to see a significant expansion in the commercial development of wave and tidal energy in the near future and the UK government will continue to put a low-carbon and energy-secure future at the heart of its priorities.”
Roger Bright, Chief Executive of The Crown Estate said: “I am delighted that today, in Wick and Kirkwall, we have announced the successful bidders for the world’s first commercial wave and tidal leasing round in the Pentland Firth and Orkney waters. The 1.2 GW of marine renewable generation capacity, 600 MW each from wave and tidal, is generating four times the electricity of Dounreay power station in its heyday. This shows the world that marine energy can produce significant electrical power and offer a real alternative to conventional power production.
“This announcement demonstrates the UK’s position as the leader in wave and tidal technologies. Through our experience and some of the best natural resources in the world we have been able to launch the first wave and tidal energy projects on a commercial scale. This emerging industry has a bright and promising future, with vast amounts of untapped energy in the seas all around us, and The Crown Estate looks forward to working with partners in Wick and Kirkwall to realise the area’s marine energy potential.”
The level of competition for sites within the leasing round area, with bids from 20 companies for 42 sites, highlights the appetite for companies to invest in Scottish waters. The Crown Estate takes its stewardship responsibility very seriously, and is pleased that this has resulted in the signing of agreements for lease with those companies demonstrating the clearest ability and pedigree to make best use of these sites in a responsible manner.

Wind farms produce 'fifth of expected electricity'

Wind farms are producing less than a fifth of the electricity predicted, a study has found.

By Rebecca SmithPublished: 7:25AM GMT 22 Mar 2010

Some wind farms operating at just ten per cent of their maximum capacity, it is found. Photo: PA
The first detailed study of onshore wind farms has found that 20 of the sites produce less than 20 per cent of their maximum output with some producing less than 10 per cent.
Blyth Harbour in Northumberland is thought to be the least efficient wind farm producing just 7.9 per cent of its maximum capacity while Chelker reservoir in North Yorkshire operates at 8.7 per cent of its capacity.

The figures were compiled by lobby group Clowd using data collected by energy regulators Ofgem.
The best wind farms operate at about 50 per cent of their predicted maximum capacity while the majority produce around 25 per cent to 30 per cent.
Experts warned that subsidies for green energy are encouraging wind farms to be built in unsuitable areas.
Prof Michael Jefferson, of the London Metropolitan Business School, said developers 'grossly exaggerate' the energy producing potential of their sites.
He said: "The subsidies make it viable for developers to put turbines on sites they would not touch if the money was available."
Nick Medic, of Renewable UK, said Britain needed every bit of green energy it could generate.
Dustin Benton, senior policy officer at the Campaign for the Protection of Rural England, said although the organisation is in favour of renewable energy development such as wind power, it is vital that such schemes get 'maximum wind gain for our landscape buck'.
He added: "We should be putting wind farms in windy places but those are often the most beautiful landscapes and while we need to maximise the energy generated from wind farms we need to be realistic that there are limits.
"Renewable energy is important but carbon is not the only thing going on."
Mr Benton said the subsidy system for renewable energy projects was 'blind to the impact on the landcape and the importance of beauty and tranquility'.
The Government has announced plans to increase the number of wind turbines onshore and offshore over the next ten years.
The Conservatives have said they create tax exemptions for wind and nuclear power and launch a 'green bank' to invest in renewable energy.

Lord Oxburgh, the climate science peer, ‘has a conflict of interest’

Ben Webster, Environment Editor

A member of the House of Lords appointed to investigate the veracity of climate science has close links to businesses that stand to make billions of pounds from low-carbon technology.
Lord Oxburgh is to chair a scientific assessment panel that will examine the published science of the Climatic Research Unit at the University of East Anglia.
The CRU has been accused of manipulating and suppressing data to overstate the dangers from climate change. Professor Phil Jones, its director, has stood down from his post while a separate inquiry, chaired by Sir Muir Russell, takes place into the leaking of e-mails sent by him and his colleagues.
Climate sceptics questioned whether Lord Oxburgh, chairman of the Carbon Capture and Storage Association and the wind energy company Falck Renewables, was truly independent because he led organisations that depended on climate change being seen as an urgent problem.

Andrew Montford, a climate-change sceptic who writes the widely-read Bishop Hill blog, said that Lord Oxburgh had a “direct financial interest in the outcome” of his inquiry.
Lord Oxburgh has said that he believes the need to tackle climate change will make capturing carbon from power plants “a worldwide industry of the same scale as the international oil industry today”.
The CCS Association has stated that carbon capture could become a “trillion dollar industry” by 2050, but this would happen only if governments made reducing emissions a top political priority. In an interview in 2007, Lord Oxburgh said that the threat from global warming was so severe that “it may be that we shall need . . . regulations which impose very severe penalties on people who emit more than specified amounts of greenhouse gases into the atmosphere”.
The university appointed Lord Oxburgh, a geologist and former chairman of the Lords Select Committee on Science and Technology, after consulting the Royal Society, of which he is a fellow.
Professor Trevor Davies, the university’s pro-vice-chancellor for research, said that the university had been aware of Lord Oxburgh’s business interests but believed that he would lead the panel of six scientists “in an utterly objective way”. The panel will meet in Norwich next month.
He added: “We all have an interest in seeing alternatives to fossil fuel energy sources. This is going to be an issue for us all in future regardless of climate change.
“The choice of scientists is sure to be the subject of discussion, and experience would suggest that it is impossible to find a group of eminent scientists to look at this issue who are acceptable to every interest group which has expressed a view in the last few months. Similarly it is unlikely that a group of people who have the necessary experience to assess the science, but have formed no view of their own on global warming, could be found.”
He said the scientists has been selected because they had “the right mix of skills to understand the complex nature of climate research and the discipline-based expertise to scrutinise CRU’s research”.
Lord Oxburgh, a former chairman of Shell UK, said: “The shadow hanging over climate change and science more generally at present makes it a matter of urgency that we get on with this assessment. We will undertake this work and report as soon as possible.”
The university expects his report to be published before the summer.
The panel members are: Huw Davies, Professor of Physics at the Institute for Atmospheric & Climate Science at ETH Zürich; Kerry Emanuel, Professor of Meteorology at Massachusetts Institute of Technology; Professor Lisa Graumlich, Director of the School of Natural Resources and the Environment at the University of Arizona; David Hand, Professor of Statistics in the Department of Mathematics at Imperial College, London; Herbert Huppert, Professor of Theoretical Geophysics at the University of Cambridge; and Michael Kelly, Prince Philip Professor of Technology at the University of Cambridge. They will be given access to CRU’s original data and be able to interview its scientists.
Professor Bob Watson, Chief Scientific Adviser to the Department for Environment, Food and Rural Affairs, said: “I strongly support the choice of chair and panel members — all world class — and the terms of reference. This should lead to a critical evaluation of the quality of the CRU science.”

Pakistan pushes US for nuclear technology deal

• Islamabad calls for energy pact akin to US-India agreement• Deal could persuade Pakistan to cut ties to jihadist groups

Saeed Shah in Islamabad
guardian.co.uk, Monday 22 March 2010 17.53 GMT
Pakistan wants the US to provide it with nuclear technology for a civilian energy programme and is to push the Obama administration this week for a deal.
Islamabad seeks a civilian nuclear deal to mirror the package granted to India by George Bush, a proposal that would prove contentious in Washington, given Pakistan's uneven record on combating extremist groups and its sale of nuclear technology to states hostile to the west, led by the former head of its programme, Dr Abdul Qadeer Khan.
A spokesman for Pakistan's ministry of foreign affairs, Abdul Basit, said today: "Pakistan is an energy-deficit country and we're looking for all sources, including nuclear, to meeting our requirements."
A team led by Pakistan's foreign minister that includes the country's army commander and spy chief is due to arrive in Washington on Wednesday for meetings with their US counterparts, including Hillary Clinton, the secretary of state, in an effort to relaunch dialogue between the two allies. Afghanistan and help for Pakistan's near-bankrupt economy will also be on the agenda.
Many experts believe Pakistan holds the key to stabilising Afghanistan and it is trying to position itself as a sole conduit to talk to the Taliban.
The US meetings, are designed to restart talks that were last held in 2008.
Pakistan believes it has suffered from the violent fallout of US-led intervention in neighbouring Afghanistan and requires further assistance, despite a recent $7.5bn (£5bn) US aid injection.
A civilian nuclear deal, which would provide technology and fuel for power plants, could be the carrot required for Pakistan to finally cut its ties to jihad groups. A variety of incentives since 2001, including military equipment and civilian aid, have not worked, say experts.
Christine Fair, an assistant professor at Georgetown University in Washington, said: "We need a big idea for Pakistan, to transform it from a source of insecurity for the region to a country committed to eliminating terrorism and ensuring that nuclear proliferation doesn't happen again.
"We're trying to get Pakistan to do things that are in our strategic interests but not in theirs."
Pakistan craves a nuclear deal because it aspires to parity with India, say analysts.
It bristles with indignation over the perceived special treatment accorded to India, which it believes has upset the regional balance of power in South Asia.
Prof Shaun Gregory, director of the Pakistan security research unit at Bradford University, said: "Through the deal, India became a de facto member of the nuclear club and Pakistan doesn't understand why it wasn't offered the same thing. Pakistan has to position itself as an equal to India."
While Pakistan and India used to be bracketed together, Pakistan is now lumped in with Afghanistan under "Af-Pak", a diplomatic relegation, while India is lauded as a growing power.
Pakistan's past record of nuclear proliferation hangs over it, especially as its renegade scientist, Abdul Qadeer Khan, continues to make revelations about his secret arms sales. Khan was placed under house arrest in 2004 but has since been released.
David Albright, a former UN weapons inspector who is president of Institute for Science and International Security, an independent thinktank in Washington, said: "Pakistan has a chance (for a civil nuclear deal) but it has to overcome some pretty serious roads. If there was a trial of AQ Khan and he was jailed, that would help."
A US-Pakistan deal could take several years to hammer out. The US-India agreement has not been not finalised, more than five years after negotiations began.

Joint deal with Shell gives Beijing a stake in Australian coal-seam gas

• Shell and state-controlled PetroChina in £2.1bn takeover of Australia's Arrow Energy • Anglo-Dutch energy firm plans more deals with Chinese companies

Tim Webb
guardian.co.uk, Monday 22 March 2010 18.13 GMT
Shell has strengthened its hold on Australia's bulging gas reserves after Arrow Energy agreed to a joint $3.2bn (£2.1bn) takeover by the Anglo-Dutch oil company and PetroChina, which is majority-owned by the Chinese government.
The deal, which has to be approved by the coal-seam gas producer's shareholders and Australian regulators, will also reinforce Shell's relations with Beijing.
At Shell's strategy update last week, finance director Simon Henry told the Guardian the company hoped to team up with Chinese companies – who are mostly state-controlled – to buy more foreign energy firms. "We are politically neutral," Henry said. "We can enable a deal they could not do on their own."
The Chinese state-controlled aluminium firm, Chinalco, caused controversy in Australia last year, when it tried to double its stake in the miner Rio Tinto, a deal that was eventually abandoned. Both sides hope Shell's presence will see this one go through.
The deal would also see a Chinese company acquire for the first time a stake in Australia's vast reserves of coal-seam gas, where trapped gas is extracted from underground coal seams.
Shell, which already owns 30% of Arrow, and Petrochina had to up their offer by 6% to secure today's recommendation from the board.
Arrow holds the largest coal-seam gas acreage in Australia, at 65,000 sq km. It supplies a tenth of Queensland's domestic gas needs but production will increase significantly as its reserves are developed by its new owners. Shell and PetroChina will each take 50% of the surplus gas produced, which they will export as liquefied natural gas (LNG). PetroChina will sell its share into China, and Shell has indicated that it will do the same.
Shell already has plans to build an LNG plant on Curtis Island, in Queensland and the first shipment could be made in 2015.
Shell has identified Australia as key to maintaining future production growth. The company has a 25% stake in the $42bn Gorgon LNG project and a stake worth $11.4bn in Woodside Petroleum.
Malcolm Brinded, Shell's executive director of upstream international, said: "The new joint venture will be an important growth asset for Shell, and help meet growing demand for cleaner energy in Australia and international markets."
The deal is likely to face close scrutiny from Australia's Foreign Investment Review Board (FIRB), which has said it wants to restrict foreign ownership of the country's leading resource companies to a maximum of 15% and could attach stringent conditions. But analysts said the deal is unlikely to face as much hostility as the Rio Tinto and Chinalco one. This is because of Shell's presence and also because the pricing of the LNG produced by Arrow will be more transparent than the arrangements put forward for Rio to sell its iron ore to China under the Chinalco deal.
The Australian government is also keen to foster closer ties with China, the largest customer for its mineral resources. In a sign of Australia's softening stance, in December the FIRB approved the biggest takeover by a Chinese company to date, the $3.5bn acquisition of Felix Resources by Yanzhou Coal.
Under the proposed deal with Arrow, the Australian company would retain its international assets, which would be transferred into a new company, Dart Energy.
Field studies"Unconventional" oil and gas reserves are increasingly important for firms such as Shell. As conventional fields in the North Sea and elsewhere run out, firms must use sophisticated new technologies to find other reserves. Coal-seam gas is one example, found naturally beneath coal deposits, which are often too low in quality or too deep to be mined conventionally. Oil sands, from which tar is extracted, is another, more controversial, example. But companies tend to avoid the term "unconventional" because it describes most new exploration and production.

Rail link sell-off will raise £2bn for green energy projects

Chancellor insists budget measures will be 'sensible and workmanlike' rather than pre-election giveaway

Larry Elliott and Patrick Wintour
guardian.co.uk, Sunday 21 March 2010 20.28 GMT
Alistair Darling will use the proceeds from the state sell-off of the Channel Tunnel rail link to pay for a £2bn green infrastructure fund, in a budget designed to help business and tackle Britain's emerging energy crisis, Treasury sources said tonight.
The chancellor, who insisted today that Wednesday's package of measures would be "sensible and workmanlike" rather than a pre-election giveaway, plans to earmark the first tranche of cash from the privatisation of High Speed 1 for seedcorn capital for low-carbon energy projects.
The projects likely to benefit from the fund will include low-carbon cars, wind energy, green waste projects and a new generation of nuclear power stations. Darling will claim that the fund will create 400,000 low-carbon jobs by 2015.
Without the investment, Britain would struggle to meet its targets for the next decade of cutting CO2 emissions by 34% and producing 15% of its energy from renewable sources.
Darling will also announce that Britain's banks will contribute £250m to a £500m growth capital fund, designed to ease the financial pressures on the small and medium-sized companies most affected by the credit crunch.
"A little bit of government help can unlock a lot of private sector investment, and that is going to be the focus this week," Darling said in a BBC interview.
He picked out the creative industries and the pharmaceutical sector as two industries warranting extra government help.
The overall aim of the budget is to set out a pathway for growth, and to give fresh details on the deficit reduction plans outlined in December.
The chancellor ruled out rises in VAT and indicated he would dedicate any windfall from lower than expected borrowing figures and unemployment to investments in the future, rather than extra departmental spending.
"If a politician offered Christmas trees the voters would roll their eyes and say, 'Oh well, you know you've clearly lost touch'," he argued.
Darling is expected to provide fresh detail on how government departments are meeting efficiency targets, deemed to be essential to plans to halve the deficit by 2013-14.
He also insisted there would not be an emergency budget after the election, and said he hoped the 50p income tax rate on those earning £150,000 or more would be a temporary feature of the tax landscape.
The government is expected to announce fresh measures to reduce youth unemployment, as well as some extra cash for defence.
Overall, the budget will represent a shift to a more European interventionist industrial policy. Darling and Lord Mandelson, the business secretary, believe the case for a more hands-on approach has been made by the success of limited state support for Nissan in Sunderland, which last week announced plans for a new electric car, and for Sheffield Forgemasters, one of only two plants in the world capable of making reactor vessels for the nuclear industry.
The High Speed 1 rail link was taken into public ownership last year, and Darling intends to use £1bn from the sell-off to attract a further £1bn from the private sector for a fund to be set up in 2011.
Other state assets earmarked for sale include the Dartford crossing and the Tote.
Treasury sources said Britain needed to spend £165bn over the next 15 years to replace 40% of its energy infrastructure, and public money had to be found – even in tough financial times – to attract private finance for new and unproven technologies. Mandelson's business department are also looking at using more active industrial policies – such as government procurement policies and small-scale loans – to help business recover from the deepest and longest recession since the second world war.
The budget is likely to set a target for the percentage of government business that should go to SMEs and propose an updated form of 3i, set up after the war to provide venture capital for start-up companies. "The fund is needed to deal with the problem of barriers to entry for private sector investment in technologies perceived to be high risk", a Treasury source said.

London receives £362,000 grant to save food from landfill

The funding will pay for the equivalent of 800,000 meals to be distributed to vulnerable groups by the FareShare network

Hélène Mulholland
guardian.co.uk, Monday 22 March 2010 16.35 GMT
London's recycling board has allocated cash to help divert 300,000 tonnes of edible food from costly landfill sites each year as part of a drive to reduce waste in the capital.
A £362,000 grant from the London Waste and Recycling Board (LWARB) will ensure that the equivalent of 800,000 meals is distributed to homeless and other vulnerable groups of Londoners rather than ending up in the bin.
The funding was announced as the mayor of London, Boris Johnson, hosts a three-day event involving delegates from cities around the world who have gathered to discuss how to minimise rubbish, boost recycling and look at the technologies for managing waste.
The FareShare Community Food Network provides a paid-for collection service to the food and drink industry to distribute food that no longer has a commercial value but is fit for purpose to local community groups. The funding will pay for a new depot in north-west London.
With an estimated 1.4m tonnes of food waste produced each year in the capital – 40% of which ends up dumped in landfill sites – the initiative is part of a wider effort to reduce waste in London as close to source as possible, according to James Cleverly, a Tory member of the London assembly who was previously Johnson's youth ambassador, and was appointed chair of the board after the mayor decided to stand aside.
He said the pan-London board's short-term plan to reduce waste is coupled with a longer term aim to set up the infrastructure necessary for mass waste recycling in the capital to avoid the "painful transition" when councils can no longer afford to send waste to landfill.
Working in conjunction with London boroughs, the board has a budget of £84m to spend by 2012 to improve waste management in the capital through increased recycling, minimising waste generation and finding more environmentally friendly ways to process rubbish.
The board also has a role to play in delivering the mayor's strategy on waste and recycling – currently out for consultation – which makes waste reduction aims explicit for the first time. The draft strategy also highlights measures to improve recycling rates, as figures show the capital lags behind both the rest of the UK and other international cities, with wide variations between boroughs across the capital.
With landfill rates set to increase from current associated costs of around £245m to £307m by 2013, Johnson wrote to London borough leaders earlier this year to press home the need to redouble their efforts in recycling to avoid extra pressure on council tax bills in the future.
The mayor wants the capital to be recycling at least 45% of its municipal waste (which includes street litter, grass cuttings and some waste from small businesses as well as household waste) by 2015, rising to 60% by 2031, sending "zero municipal waste" directly to landfill by 2025, with any residue from other waste processing being banned from landfill by 2031.
Cleverly said practical factors such as population density and high-rise flats were partly to blame for poor recycling rates in the capital. But he said there was a need for politicians to have the "political will" and be "gutsy" enough to confront a few bad headlines as councils seek to influence people's rubbish habits by, for example, reducing bin collections for general waste.
But he admitted that the push to improve recycling among residents needed to be coupled with moves to establish the facilities needed to turn waste into new sources of energy or into recycled products.
"I'm a Tory, we don't like waste," joked Cleverly when asked how to reduce landfill costs. "When waste reduction becomes a totally embedded habit we have to think what we do with the waste that will inevitably arise. At the moment we don't have the infrastructure to deal with waste as efficiently as we could do – and that's both financial efficiency and ecological efficiency so we do need to work on that."
Cleverly said landfill was quickly becoming a very expensive option, but without intervention there would be a long and financially painful gap until the market provides an alternative through large-scale recycling plants.
"People will build facilities when they feel they can make money, which is when the cost of landfill is so high. What we need to do – particularly at the moment with the economic situation – is make sure that the facilities are online and are ready to rock and roll sooner rather than later."
The government is meanwhile proposing a national ban on sending a list of common items to landfill: paper and card; food; textiles; metals; wood; garden waste; glass; plastics; and electrical and electronic equipment which together represent 84% of waste collected, according to the government's waste advisers, Wrap.
Last week, Wrap published its biggest-ever study of what should be done with waste. It found that in more than 80% of cases recycling was the best option, followed by incineration, and composting and anaerobic digestion.

UN report: World's biggest cities merging into 'mega-regions'

Trend towards 'endless cities' could significantly affect population and wealth in the next 50 years

John Vidal, environment editor
guardian.co.uk, Monday 22 March 2010 17.50 GMT
The world's mega-cities are merging to form vast "mega-regions" which may stretch hundreds of kilometres across countries and be home to more than 100 million people, according to a major new UN report.
The phenomenon of the so-called "endless city" could be one of the most significant developments - and problems - in the way people live and economies grow in the next 50 years, says UN-Habitat, the agency for human settlements, which identifies the trend of developing mega-regions in its biannual State of World Cities report.
The largest of these, says the report - launched today at the World Urban Forum in Rio de Janeiro - is the Hong Kong-Shenhzen-Guangzhou region in China, home to about 120 million people. Other mega-regions have formed in Japan and Brazil and are developing in India, west Africa and elsewhere.
The trend helped the world pass a tipping point in the last year, with more than half the world's people now living in cities.
The UN said that urbanisation is now "unstoppable". Anna Tibaijuka, outgoing director of UN-Habitat, said: "Just over half the world now lives in cities but by 2050, over 70% of the world will be urban dwellers. By then, only 14% of people in rich countries will live outside cities, and 33% in poor countries."
The development of mega-regions is regarded as generally positive, said the report's co-author Eduardo Lopez Moreno: "They [mega-regions], rather than countries, are now driving wealth."
"Research shows that the world's largest 40 mega-regions cover only a tiny fraction of the habitable surface of our planet and are home to fewer than 18% of the world's population [but] account for 66% of all economic activity and about 85% of technological and scientific innovation," said Moreno.
"The top 25 cities in the world account for more than half of the world's wealth," he added. "And the five largest cities in India and China now account for 50% of those countries' wealth."
The migration to cities, while making economic sense, is affecting the rural economy too: "Most of the wealth in rural areas already comes from people in urban areas sending money back," Moreno said.
The growth of mega-regions and cities is also leading to unprecedented urban sprawl, new slums, unbalanced development and income inequalities as more and more people move to satellite or dormitory cities.
"Cities like Los Angeles grew 45% in numbers between 1975-1990, but tripled their surface area in the same time. This sprawl is now increasingly happening in developing countries as real estate developers promote the image of a 'world-class lifestyle' outside the traditional city," say the authors.
Urban sprawl, they say, is the symptom of a divided, dysfunctional city. "It is not only wasteful, it adds to transport costs, increases energy consumption, requires more resources, and causes the loss of prime farmland."
"The more unequal that cities become, the higher the risk that economic disparities will result in social and political tension. The likelihood of urban unrest in unequal cities is high. The cities that are prospering the most are generally those that are reducing inequalities," said Moreno.
In a sample survey of world cities, the UN found the most unequal were in South Africa. Johannesburg was the least equal in the world, only marginally ahead of East London, Bloemfontein, and Pretoria.
Latin American, Asian and African cities were generally more equal, but mainly because they were uniformly poor, with a high level of slums and little sanitation. Some of the most the most egalitarian cities were found to be Dhaka and Chittagong in Bangladesh.
The US emerged as one of the most unequal societies with cities like New York, Chicago and Washington less equal than places like Brazzaville in Congo-Brazzaville, Managua in Nicaragua and Davao City in the Phillippines.
"The marginalisation and segregation of specific groups [in the US] creates a city within a city. The richest 1% of households now earns more than 72 times the average income of the poorest 20% of the population. In the 'other America', poor black families are clustered in ghettoes lacking access to quality education, secure tenure, lucrative work and political power," says the report.
The never-ending city
Cities are pushing beyond their limits and are merging into new massive conurbations known as mega-regions, which are linked both physically and economically. Their expansion drives economic growth but also leads to urban sprawl, rising inequalities and urban unrest.
The biggest mega-regions, which are at the forefront of the rapid urbanisation sweeping the world, are:
• Hong Kong-Shenhzen-Guangzhou, China, home to about 120 million people;
• Nagoya-Osaka-Kyoto-Kobe, Japan, expected to grow to 60 million people by 2015;
• Rio de Janeiro-São Paulo region with 43 million people in Brazil.
The same trend on an even larger scale is seen in fast-growing "urban corridors":
• West Africa: 600km of urbanisation linking Nigeria, Benin, Togo and Ghana, and driving the entire region's economy;
• India: From Mumbai to Dehli;
• East Asia: Four connected megalopolises and 77 separate cities of over 200,000 people each occur from Beijing to Tokyo via Pyongyang and Seoul.