From east to west, a chain collapses

Millions to lose their jobs as world's largest importer of waste hit by collapse in demand for packaging
Tania Branigan in Dongxiaokou
The Guardian, Friday 9 January 2009

A worker sorts out plastic waste Photograph: Dapei Xin/EPA
The scrap trader was immovable, despite Wu Wenxiu's pleas. She would pay one yuan - roughly 10p - for a kilogram of plastic. Around the corner in Shi Yuhai's yard, the offer was no better. Wu shrugged his shoulders and began to heave bags from his tricycle on to the scales. "One kuai [yuan] here, one kuai there - everywhere's the same these days. This industry has broken down," he grumbled.
Wu is one of 160,000 collectors in Beijing who make a living from the detritus of urban life - plastic sheeting, office printouts, bottles, radiators and scraps of cardboard. Recycling has become a global industry and China is the largest importer of the world's waste materials, taking in as much as a third of Britain's recyclables for example. Then came the slump, decimating the Chinese recycling industry and leaving Britain, the US and others grappling with growing volumes of recycled waste and nowhere to send it.
"It's a canary in the coalmine: it's the front and back end of industry," said Adam Minter, who runs the Shanghai Scrap blog and specialises in the metal trade. "Until about eight weeks ago, for example, the entire [US] west coast paper market was sent to China and most of it was sent south. It was processed and made into packaging for products that then shipped back to the US ... But when US consumer demand dropped off, that broke the cycle."
Across the scrap trade, prices have halved or worse in a matter of months. Each link in the chain is disintegrating, from factories to scrapyards to collectors such as Wu, 56, a former farmer who now plans to return to Hubei province.
Official media reported that four-fifths of China's recycling units had closed and that millions will eventually be left without employment.
Dongxiaokou, on the outskirts of Beijing, is a village composed of scrap: blocks of crushed metal are stacked in a tower, heaps of plastic bottles glint in the sunshine and piles of newspapers and rags fill yards. But the merchants all have the same story - they have lost tens of thousands of pounds in a few months, wiping out years of hard work.
Shi puffed on a cigarette as he counted out notes for Wu. "I've been in this business for 15 years and it's been bad before, but never this severe. Everyone's lost a huge amount of money and some can't sell their stock," he said. "Usually we sell to factories and they recycle them into plastic chips. But the price of chips has dropped so it's had a knock-on effect on us."
This area deals in domestic waste rather than imports, but Shi said every part of the industry had been affected.
Beijing dealers have taken a particularly hard hit. They stockpiled large quantities of recyclables because prices were soaring, but as the market began to soften, the Olympic security clampdown prevented trucks from entering the capital. The merchants could only watch as the value of their holdings plummeted.
"In a good year we can earn about 50,000 yuan but this year we lost 200,000," said Gong Rongchuan, 45, whose yard lies across the rutted alley from Shi's. "We came here more than 10 years ago and at the beginning we collected ourselves. Then we managed to start the business. We were too poor to get loans but we managed to borrow 100,000-200,000 from friends and relatives and we work from morning to night every day. But we haven't paid them all back because of our losses."
Minter says the predicament is typical of the trade. "People would borrow money from relatives and buy a container of scrap and then throw all that money back in and reinvest it. Great if it goes up - but the moment it starts slipping, especially if it's slipping 20-30%, you're finished," he said. Gong said: "Once we have sold all this stock we'll leave. My son's sorting it because we can't afford workers any more. We haven't figured out what to do next. We have seven people in the family and only 2.5-3 mu [less than half an acre] of farmland. It's too many people and too little land, so even if we go home there's not much we can do. We have both old and young to support."
The effects can be felt across China. Most of Gong's customers were plastics recyclers in Wen'an, Hebei, where by one estimate 93% of income depends on the trade. Some are already bankrupt. Wen'an Dongdu Jiacheng Recycling Resources is clinging on. But Miss Han, a materials buyer, said all but three of the 26 production line workers had been sent home for the new year holiday more than a month early.
There is no longer demand for plastic granules from nearby companies such as Hongkai Plastic Products, which made items such as bicycle handlebars. Its owner, Mr Zheng, has sent 20 workers home. "My factory was hit by the economic crisis - it's been closed for two months already," he said. "We usually sell our products to a dealer and most of his business is exports. He didn't give us any more orders."
At a factory down the road, the response to queries was more brusque. "We've already gone bust," said a man, and hung up.

US recycling: 'I don't even think we have an industry'

Collapse in demand for packaging in China hits US processors and exporters of recyclable material
Dan Glaister in Los Angeles
guardian.co.uk, Friday 9 January 2009 00.05 GMT

Steve Young sits back in his chair and glances up from his figures. "I don't even think we have an industry. That's how bad it is."
Young, president of Allan Company, a Los Angeles processor and exporter of recyclable materials, nods towards the window. "Across the street we would process 600 customers on a weekday, 1,000 at the weekend," he says. "The whole spectrum – the homeowner who has stockpiled aluminium cans, the bar down the street that has a load of beer bottles, the liquor store with used cardboard. Now it's probably half that number."
Young is on the frontline of a crash in commodity prices that has seen the global market for recycled paper, cardboard, plastic, metals and glass all but disappear. In three weeks in October, the price of paper went from $200 to $20 a ton, corrugated cardboard dropped from $250 a ton in August to $100 in December. It is the worst he has seen since founding the company in 1963.
The scene at one of his company's yards across the street tells the story. Skips half filled with scrap metal line the entrance, while a trickle of customers in pick-up trucks, station wagons and saloon cars unload their pickings. These are the little people who make a living on the back of the recycling industry, plundering other people's rubbish to remove beer bottles, tin cans, newspapers, anything that might carry a price at a recycling plant. But in recent weeks the clink of late-night scavengers removing bottles from bins before the morning collection has disappeared.
"Normally this would be crowded with people," says Rich Hubbard, vice-president of operations at Allan Company. But with the decline in prices, it does not pay. "It's $20 a tonne," he says of cardboard. "So you can get maybe $12 of cardboard in a truck. Add on four or five hours of your time, money for gas, it doesn't add up. I don't know what the guys who normally do this are doing for work now. They're hustlers, they must be doing something, but they're not picking up cardboard."
The US industry is suffering from a decline in demand from its principal market, China. The US exported 11m tonnes of scrap paper to China last year with a value of $11.5bn. California is the principal point of departure for recyclables as they head to Asia's paper mills. The Chinese typically use the paper from the US to make packaging material for the exports they send, typically, back to the US.
Everything seemed fine with China, says Nan Drake of Gold Coast Recycling in Ventura county, an hour north of Los Angeles, until after the Olympics. "The Chinese just kept going," she says. "The boom during the Olympics just covered things up. There was no gradual decline, it just went boom."
Gold Coast, which processes 1,600 tonnes of recyclables a day for seven cities in the area, has already laid off some of its pickers - employees, who sort through recycled waste by hand as it travels along a conveyor belt. Others have been less fortunate.
"The people who are going broke in this time are not going to come back," says Drake. "They're the little guys, they're not coming back."In the long term Drake hopes the crisis will spur a home-grown solution, with US mills taking the place of foreign markets. But she is concerned that once recycling ceases to be profitable, it will not be practised with the alacrity that has seen California save half of its solid waste from landfill. "We don't want to create a panic and say this is the end of recycling," says Drake, "but we need to continue to educate people."
Wes Muir of Waste Management, one of the US's biggest collection and recycling companies, believes recycling will weather a temporary dip in the commodities markets. "There's a strong commitment to recycling," he says. "People think it needs to be done and predicated on the belief that garbage is not a waste, it is a resource that reduces the need for the extraction of raw materials. We don't see a backpedalling … it's ingrained into the culture."
One short-term solution available to the larger companies is to store the materials in the hope that the market will rebound, a strategy pursued, albeit reluctantly, by Young. "We're only storing what we can't sell," he says. "Nobody wants to pay that bill."

There's gold in waste management

By Quentin Webb Reuters
Published: January 8, 2009

LONDON: The planned sale of a big Dutch waste-management company will test how much appetite remains for the unglamorous but dependable sector, which enjoyed its own miniboom during the credit bubble.
Essent Waste, a unit of the Dutch utility Essent, is likely to draw interest from private equity firms, infrastructure funds and bigger rivals, bankers and analysts said.
But tough debt markets and a fall-off in energy and commodity prices are likely to limit the sale value.
"Essent Waste could be a bit of a barometer for the whole infrastructure market - to see where funding's moved to after the turmoil of last autumn, where multiples have fallen to, and who's interested," said Mark Wilson, a partner at Catalyst Corporate Finance, a British merger adviser.
The sale could interest all of the big players in British waste management, Wilson said, including Shanks, Veolia Environnement, Suez Environnement and Biffa, which was bought last year by a consortium led by Montagu Private Equity and Global Infrastructure Partners.

Although the process of selling Essent Waste has not formally begun, prospective bidders received detailed due diligence before Christmas.
Essent Waste could bring more than €1 billion, or $1.36 billion, or more than 6.7 times its earnings before interest, tax, depreciation and amortization.
The utility, which is also separately selling its commercial production and delivery business, declined to comment.
Essent Waste processes about 3 million tons of waste a year, burning some for electricity, composting other waste and managing landfills.
Waste management's appeal lies in the fact that unlike water and power companies, regulators generally do not cap the returns made by the businesses that collect, bury, burn or recycle European rubbish.
And although they are not immune to a weakening economy - since commercial waste volumes tend to drop in tough times - waste companies also benefit from tougher environmental laws, said Richard Rae, an analyst at RBS.
"Waste is becoming more and more valuable because of the regulation that surrounds it, forcing more and more waste to be recycled," he said.
When debt was cheap, all this helped companies sell for "absolutely huge" prices, Rae said, often 10 to 12 times earnings before interest, tax, depreciation and amortization, or Ebitda.
In 2007, there were 132 deals in Europe's wider water and waste management sector, for a total of more than $33 billion, according to Thomson Reuters data.
But Rae said a multiple of six to eight times Ebitda "sounds quite plausible in today's credit-constrained market." That implies a value for Essent Waste of about €900 million to €1.2 billion.
Wilson at Catalyst said some deals in Britain were being struck at just four times Ebitda, with companies hit by a drop in the value of the materials they recycle.
Despite this, and tougher debt markets, private equity funds are still likely to take an interest, bankers and analysts say.
In particular, CVC and Kohlberg Kravis Roberts are big players in the sector, having together already bought and combined two big Dutch waste-management companies, AVR and Van Gansewinkel.
KKR declined to comment, while a spokeswoman for CVC was not immediately available to comment.
Still others have been able to realize profitable exits over the last couple of years - including Terra Firma, which sold the waste disposal division of Waste Recycling Group, a British company, to the Spanish company FCC for an enterprise value of £1.4 billion, or $2.09 billion, in 2006.
Credit Suisse and ING are advising Essent on the sale.

We own RBS, so are we now greenwashing ourselves?

The Royal Bank of Scotland, now majority-owned by the taxpayer, trumpet their green energy investments while keeping quiet about oil and gas. Does this mean we are now greenwashing ourselves?

Fred Pearce
guardian.co.uk, Thursday 8 January 2009 11.14 GMT

Several people have contacted me about the Royal Bank of Scotland (RBS), owners of NatWest and the self-styled world's largest financier of renewable energy. This is quite a turnaround for a bank that - until a year or so ago - was equally pleased to call itself "the oil and gas bank". And from what I can see, this latter description remains much nearer the reality.
This is a special problem now. RBS was one of the banks that, back in November 2008 at the height of the credit crunch, was reportedly "hours from collapse" when it was bailed out by the government, which bought a 58% stake. So it seems that British taxpayers, through the good agencies of the Treasury, are now greenwashing ourselves.
Last year, before the bail-out, RBS put piles of leaflets in thousands of its branches declaring that "we are the largest financier of renewable energy in the world", and that it was "financing the transition to a low-carbon economy" by "only lending to projects that conform to the highest international environmental standards." Big claims.
RBS is indeed putting money into renewables. It had a bit of a splurge in 2006, the basis of its "largest financier" claim. And in October 2008, just before it was hit by the crunch, it announced that it was helping the Scottish company Burntisland Fabrications diversify from making oil production platforms for the North Sea to making the substructures for offshore wind turbines instead.
But such projects remain sidelines. RBS is still built on oil, and right now it is stumping up more cash for coal than renewables. Beside the wind power punt at Burntisland, consider what else it did in October last year:
• It led a consortium lending $500m to a US power generator called Great Plains Energy, which despite recent plans for wind turbines, powers the midwest by burning coal that emitted 26.5m tonnes of carbon dioxide in 2006.
• It announced a long-term tie-up with OilCorp, a Malaysian oil monolith, to exploit offshore oil and gas in the Middle East. A deal that could, according to OilCorp, eventually be worth "billions of dollars".
• And through its subsidiary bank ABN-Amro, it put up loans for sucking tar sands from beneath Alberta, Canada – one of the most unenvironmentally friendly energy projects in the world today.
You won't read about any of this in any of its green leaflets. Nor that its oil and gas team, which works out of offices above Liverpool Street station in London, is busy underwriting oil companies that are opening up new sources in central Asia, beneath the Arctic, in the Russian far east and off the shores of west Africa.
Nor indeed about RBS bankrolling E.On's planned coal-fired power station at Kingsnorth in Kent, which would be Britain's first new coal-powered station for more than 20 years.
Two recent studies by NGOs including Platform, People and Planet and Friends of the Earth Scotland have concluded that RBS, one of the world's largest energy investors, is still putting four times as much into fossil fuels as renewables. "RBS's business activities are contributing to climate change more than any other British bank," they said.
Just before Christmas, students in Manchester gave RBS their 2008 Greenwash Award. Spot on, guys. But now RBS is owned by us.
The British government says it wants to cut national carbon dioxide emissions by 80% by 2050, as part of a global cut of at least 50%. Much of the money that RBS, on behalf of British taxpayers, is pumping into the oil and coal industries round the world is going to build projects that will still be functioning – will still be causing carbon dioxide emissions - in 2050 and beyond. Shouldn't we be calling a halt? Now.
• How many more green scams, cons and generous slices of wishful thinking are out there? Please email your examples of greenwash to greenwash@guardian.co.uk or add your comments below

International Energy Agency 'blocking global switch to renewables'

International Energy Agency accused of consistently underestimating potential of wind, solar and sea power while promoting oil, coal and nuclear as 'irreplaceable' technologies
David Adam, environment correspondent
guardian.co.uk, Friday 9 January 2009 00.00 GMT

The international body that advises most major governments across the world on energy policy is obstructing a global switch to renewable power because of its ties to the oil, gas and nuclear sectors, a group of politicians and scientists claims today.
The experts, from the Energy Watch group, say the International Energy Agency (IEA) publishes misleading data on renewables, and that it has consistently underestimated the amount of electricity generated by wind power in its advice to governments. They say the IEA shows "ignorance and contempt" towards wind energy, while promoting oil, coal and nuclear as "irreplaceable" technologies.
In a report to be published today, the Energy Watch experts say wind-power capacity has rocketed since the early 90s and that if current trends continue, wind and solar power-generation combined are on track to match conventional generation by 2025.
Rudolf Rechsteiner, a member of the Swiss parliament who sits on its energy and environment committee, and wrote today's report, said the IEA suffered from "institutional blindness" on renewable energy. He said: "They are delaying the change to a renewable world. They continue touting nuclear and carbon-capture-and-storage, classical central solutions, instead of a more neutral approach, which would favour new solutions."
Today's report compares past predictions about the growth of wind power, made by the IEA and others, with the capacity of wind turbines actually installed.
It says: "By comparing historic forecasts on wind power with reality, we find that all official forecasts were much too low."
In 1998, the IEA predicted that global wind electricity generation would total 47.4GW by 2020. This figure was reached in December 2004, the report says. In 2002, the IEA revised its estimate to 104GW wind by 2020 – a capacity that had been exceeded by last summer.
In 2007, net additions of wind power across the world were more than four-fold the average IEA estimate from its 1995-2004 predictions, the report says. "The IEA numbers were neither empirically nor theoretically based," it says.
The IEA's most recent forecast, in its 2008 World Energy Outlook, predicts a fivefold increase in wind energy from 2006-2015, but then assumes a rapid slowdown in deployment over the following decade. The Energy Watch report calls this a "virtual stagnation" and says "no arguments are given why the wind sector should suffer such a crisis by 2015 and after".
The report concludes: "The IEA outlook remains attached to oil, gas, coal and nuclear, and renewables seem to have no chance to reverse this trend. This organisation… has been deploying misleading data on renewables for many years [and is still doing so]."
It adds: "One has to ask if the ignorance and contempt of IEA toward wind power and renewables in general is done within a structure of intent."
Mr Rechsteiner, who says he has investments in a handful of wind turbines, said the IEA routinely drew senior staff from the fossil-fuel industry. "The oil business is very skilful in keeping its energy access exclusive," he says.
The IEA describes itself as an "intergovernmental organisation which acts as energy policy advisor to 28 member countries in their effort to ensure reliable, affordable and clean energy for their citizens". It refused to comment on today's report. The Energy Watch group is run by the Ludwig Bölkow Foundation in Germany.
John Hemming, the Liberal Democrat MP for Birmingham Yardley and a member of the Energy Watch group, said: "The IEA has been complacent, and part of the conventional wisdom that the solution is more oil and gas. The British government relies on the IEA. In the land of the blind, the one-eyed man is king — but the IEA's one eye has a cataract."
Today's report says the number of wind turbines installed over the last decade has grown by 30% annually, and total windpower capacity is more than 90GW – the equivalent of 90 conventional coal or nuclear power stations. It adds that the boom in wind energy is "so far barely touched by any sign of recession or financial crisis".
If current trends continue, the report claims wind capacity could reach 7,500GW by 2025 – making half of all new power projects wind or solar. Conventional power stations could be phased out completely by 2037, it claims.
Werner Zittel of the Energy Watch group, said: "It is time to realise that the many detractors of wind energy have got it wrong. We have seen more than 10 years of unprecedented growth in this sector… This is not about morals or environment but the commercial reality that wind, coupled with hydro, solar, biomass and geothermal energy is not only a rapid and cost-effective alternative, but one that could deliver all our energy requirements within the first half of the century."

Obama Team, Exxon Mobil Chief Trade Jabs on Energy

By STEPHEN POWER and IAN TALLEY

WASHINGTON -- President-elect Barack Obama's pledge to double alternative-energy production over the next three years drew a skeptical response Thursday from the chief executive of Exxon Mobil Corp., Rex Tillerson, who told reporters during an appearance in Washington that rapid increases in alternative energy would be "very challenging."
"Let's be realistic about time frames, let's don't fool ourselves," Mr. Tillerson said. "If you include biofuels, which are already at [federal] mandate levels … doubling that would require you to have available cellulosic conversion technology, which does not exist today. In terms of wind, there simply is not the manufacturing capacity today to build wind turbines…they're already backordered."
Despite billions of dollars in federal spending on various clean-energy technologies in recent decades, the U.S. energy portfolio has not dramatically changed since the administration of Richard Nixon. In 2006, fossil fuels accounted for 85% of the nation's energy supply compared with 93% in 1973, according to a report last year by the Government Accountability Office.
In his speech on economic recovery at George Mason University Thursday, Mr. Obama didn't spell out how he would go about doubling alternative-energy production, but described his goal as part of a broader strategy to "put Americans to work in new jobs that pay well and can't be outsourced -- jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain."
In response to written questions from The Wall Street Journal, an Obama transition aide said the president-elect would seek to double the amount of wind, solar, and geothermal generating capacity in the U.S. through a combination of mandates and subsidies.
"The United States currently produces roughly 24,000 MW [megawatts] of wind, solar, and geothermal power. Before the financial crisis brought the renewable industry to a halt, the wind industry publicly announced the expectation to install at least 7500 MW in 2008," the Obama transition aide said in an email. "By providing significant loan guarantees and ultimately later down the road a national [renewable portfolio standard], we are confident we will get the wind industry back on track. In addition to the 20,000+ MW of wind, we are confident that with the same combination of support and renewable standards, the geothermal and solar industries can install 4,000 MW of new power."
Mr. Obama has called for legislation that would cap and gradually reduce U.S. greenhouse gas emissions, and for a federal mandate that would require that the U.S. by 2025 get at least 25% of its electricity from renewable sources like the wind, the sun and geothermal energy (which together currently account for around 1% of U.S. electricity supply).
Turning that vision into a reality, many energy industry officials say, will require building more transmission lines, to convey wind power from remote areas in the central U.S. where it is prevalent to more densely-populated areas where the electricity is most needed. The construction and siting of such lines are often opposed at the local level. More recently, the global economic downturn has depressed investment in many forms of renewable energy.
Mr. Tillerson, whose company once funded a think tank that argued carbon-dioxide emissions were helpful to human life, has drawn criticism at times from environmentalists and activist shareholders who say Exxon Mobil is not adequately investing in alternatives to fossil fuel. While the company today acknowledges that burning fossil fuels is a significant source of greenhouse-gas emissions and increases the risks of climate change, Mr. Tillerson has also said the company expects oil and natural gas to remain the dominant fuels for decades, and that it must continue to generate needed energy while taking steps to reduce the company's "environmental footprint."
In response to Mr. Tillerson's comments, the Obama transition aide noted that the global wind turbine manufacturing industry has been growing, and said the new administration would take steps to bring a greater fraction of wind technology development and manufacturing to the United States.
"In order to achieve meaningful energy security and confront climate change we must begin to trade aspiration for achievement," the aide said. "This will require an ambitious partnership between government, industry and the American public. We invite Mr. Tillerson to join this effort."
Write to Stephen Power at stephen.power@wsj.com and Ian Talley at ian.talley@dowjones.com

Ed Miliband plays down impact on UK of Russia-Ukraine gas dispute

Hopes of big cuts in household energy bills fade as traders drive up UK prices by exporting gas
Terry Macalister and Andrew Sparrow
guardian.co.uk, Thursday 8 January 2009 10.28 GMT

Hopes of big cuts in household energy bills faded yesterday as traders drove up UK prices by exporting gas to fill a growing shortage across Europe.
Despite freezing temperatures and rising demand in Britain, traders switched from importing to exporting gas through an interconnector pipeline to continental Europe as a growing row between Russia and Ukraine left many countries short of supplies.
British wholesale prices have leapt in recent days due to the crisis, leading to warnings that UK householders could be denied long-awaited cuts in fuel prices. The price of gas hit 73p a therm – up 26% in three days.
Government sources warned UK energy companies not to use the Ukraine crisis as an excuse to delay passing on the benefits of otherwise lower world energy prices. One senior Whitehall figure said: "We would expect the energy companies to be responsible and not use this dispute as an excuse to hold off on the price reductions they have talked about which customers are expecting in the spring."
British Gas and others indicated late last year they would cut domestic gas bills early this year amid growing anger from consumers, but made clear this would only happen if there was a sustained fall in the price of wholesale power.
Hopes of that fall in domestic gas bills are now dwindling, said energy consultants Inenco, who count Marks & Spencer and John Lewis among their customers.
"We are not experiencing supply shortfalls in the UK but the markets are already responding [with higher prices]. With future dependence on imported gas, Britain needs to make energy security a key priority or risk being held to ransom," said Ian Parrett of Inenco.
In an interview on BBC Radio 4's Today programme this morning, Ed Miliband, the energy secretary, said it was important for the crisis between Russia and the Ukraine to be resolved "as quickly as possible", but he played down the impact it was having on British consumers.
"The point I would make is that a small proportion of gas is going through the interconnector to continental Europe because prices have gone up, but in terms of the companies that have ownership in Britain, they have legal obligations that will have to be met, and are being met, to supply UK customers," he said.
"So I don't think people should be alarmed about this dispute for whether they are going to be able to use their gas in the months ahead."
But the crisis will reignite concerns that the UK has left itself open to exploitation by foreign companies who came in and bought up major UK utilities, leaving British Gas as one of the few locally owned entities. EDF of France and E.ON and RWE of Germany are among the continental groups that dominate the sector.
There was particular concern that the huge foreign-owned utilities that dominate power supply in the UK are putting their continental customers ahead of UK energy users, although they denied this.
These companies – some of which have part-government ownership – have used a free market to buy British assets in a way that is considered unlikely to occur on mainland Europe. They are also able to use the more liberalised gas market to fill up their storage facilities during the summer and autumn.
"Even in winter, if they can get hold of UK gas via the interconnector they will use that instead of dipping into their storage facilities. By contrast, UK players can't access gas from the European market as there is no liquid market to buy from ... Also there is no third party access to European gas storage facilities, again in contrast to the UK," said one frustrated British gas trader.
E.ON, which has nearly 3 million gas customers in Britain and is a part-owner of the interconnector pipeline, confirmed that the fixed link had turned from being a net importer to net exporter of gas, because of shortages throughout parts of continental Europe.
The company admitted its gas traders might themselves be exporting gas from the UK but this was not at the expense of the UK consumer or unexpected. "It's a fairly normal time in the UK ... Southern Germany has got a problem and is being largely supplied by northern Germany, but it's certainly possible our traders [are exporting from Britain]. They are always looking for opportunities. But it is only if the situation goes completely pear-shaped that France and Germany will come looking for Norwegian gas in Britain," said a spokesman for E.ON UK.
The National Grid, which operates the gas and electricity transmission network in Britain, confirmed that 10m cubic metres of gas a day were moving though the interconnector between the UK and Belgium. But he said that this was more than made up for by imports from the continent via the BBL pipeline and Norwegian energy arriving through the Langeled link.
Mounting concerns about Britain's energy security came after Russia finally halted all shipments to Ukraine, accusing its neighbour of holding up all transit gas bound for continental Europe.
The European commission described the behaviour of Russia and Ukraine as "completely unacceptable", while the problems rekindled a long-running debate in the UK about the vulnerability of the country now that North Sea gas and oil supplies are running out fast.
John Cridland, the deputy director-general of the CBI, said that the disruption underlined the importance of the British government taking urgent action on a wider UK energy agenda.
"Ministers now need to agree an early deadline for publishing national planning statements for nuclear power, gas storage and offshore wind and tidal power as a matter of urgency so the UK can move towards achieving much greater energy security and reducing our dependence on imported gas," he said.
And David Porter, the chief executive of the Association of Electricity Producers, said it underlined the need for new coal-fired stations to keep the lights on. "New coal-fired stations can be built much sooner than new nuclear and they can help us to avoid power shortages as our ageing power stations close in the next few years," he said.
In his interview this morning, Miliband said that Britain only got 2% of its gas from Russia. "We have got a diverse range of sources where our gas comes from, which is the most important thing this dispute teaches us for all countries," he said.
Miliband said that, although the majority of Britain's gas still came from the North Sea, Britain also had long-term supply contracts with countries such as Norway (which now supplies about 20% of Britain's gas), and some storage capacity.
He acknowledged that more storage capacity would be needed in the future. But he said there were 18 different projects due to be built between now and 2020. "I feel confident that we are making the right decisions," he said.

EU says deal struck with Russia over gas supply

• Moscow accepts European monitors on Kiev pipeline• Freezing Balkans face catastrophe if pact fails
Ian Traynor in Prague
The Guardian, Friday 9 January 2009

European leaders announced a breakthrough deal with Moscow last night that could see Siberian gas flowing to the households and heating systems of Europe. But hundreds of thousands of families across the Balkans and central Europe faced a freezing weekend without heating amid uncertainty over whether the deal settling the dispute between Russia and Ukraine would stick.
With large stretches of eastern and southern Europe blanketed in snow in some of the coldest weather in a decade, an air of panic gripped parts of Bulgaria, Macedonia, Serbia, and Bosnia, all almost entirely dependent on Russian gas for central heating. The gas has been cut off since Wednesday.
Dozens of companies and factories were closed across the region, while some schools, clinics and hospitals also had to shut or improvise heating systems.
In Sarajevo, Skopje and Sofia, all Balkan capitals, tens of thousands of households were without central heating yesterday.
Demand for coal and wood soared and use of electric heaters brought surges in power systems, which threatened to break down under the strain.
The Russian gas monopoly, Gazprom, has refused to pump any gas through Ukraine's pipeline system to customers in Europe, claiming that Ukraine is siphoning off the gas for its own use after refusing to pay Gazprom's gas price. The emergency seems certain to worsen in the days ahead. Even if deliveries resume, it could take at least two days for gas to feed through to users.
Hido Biscevic, a diplomat who heads the Regional Co-operation Council grouping Balkan countries, warned of a "looming humanitarian catastrophe" in the region.
But the Czech prime minister, Mirek Topolánek, in the second week of his EU presidency, claimed a breakthrough in the dispute late last night after Europe's first attempt to engineer a settlement seemed to have failed.
At a meeting in Brussels between senior EU officials and the chiefs of the two parties to the dispute, Gazprom and its Ukrainian rival Naftogaz, the Russians initially rejected the terms for a new independent monitoring mission on the pipelines through Ukraine, aimed at guaranteeing the flow of Russian gas to Europe.
After talking to Vladimir Putin, the Russian prime minister, and Angela Merkel, the German chancellor, however, Topolánek said the Russians accepted the monitors.
"This deployment should lead to Russian supplies of gas [to Europe] being restored," said a statement from the Czech Republic. "Tomorrow is an important day," said Alexandr Vondra, the Czech deputy prime minister.
Andris Piebalgs, the European energy commissioner, said that up to 12 EU monitors would be sent to Kiev today, ready to be deployed on the pipelines to try to establish the facts about gas transmission in the midst of a fierce propaganda war between Moscow and Kiev.
"We do not intend to supply gas which is simply disappearing in Ukraine's gas transportation system," Alexander Medvedev, Gazprom's deputy chief executive, told the Reuters news agency.
Putin delivered a blistering attack on Kiev, describing the Ukrainian leadership as criminals. "Ukraine's political leadership is incapable of resolving its problems. What we see in Ukraine is the criminalisation of power," he said. "The leadership of Ukraine is not capable of organising the country's normal economic functions according to economic principles. Its power structures are corrupt."
Eighteen out of 27 EU countries are affected by the gas crisis.
While European officials blame both Russia and Ukraine for the crisis, and indirectly accuse both sides of lying, the blame game and the longer-term settlement of the dispute have quickly become sidelined by the urgent need to get the gas flowing again.
Europe imports a quarter of its gas from Russia, 80% of that via Ukraine. But while Germany is by far the biggest buyer of Russian gas, the post-communist countries of eastern Europe are much more reliant on Russian supplies and lack alternative sources of heating.
With Gazprom insisting on more than doubling the price of its gas to Ukraine, Russia cut gas supplies to the country on New Year's Eve and then stopped all gas through the pipelines to Europe on Wednesday.
European energy ministers are to hold an emergency meeting in Brussels on Monday to discuss the fuel crisis.
In Sofia, the Bulgarian capital, protesters denounced both Russia and Ukraine as "gas terrorists". Hungary said it was sending supplies of gas across its southern border to help Serbia. Poland did likewise to aid Slovakia.
US officials in Brussels said that if the fuel crisis continued, Nato might need to come to the aid of its newer members in eastern Europe.

UN Climate Conference: The countdown to Copenhagen

In 331 days' time, 15,000 officials from 200 countries will gather in the Danish capital with 1 goal: to find a solution to global warming. Michael McCarthy, Environment Editor, presents the first in a series of dispatches on the crucial summit
Friday, 9 January 2009

Alamy
The UN Climate Conference will try to work out a way for the world to act together to preserve the thin envelope of atmosphere, soil and sea which surrounds our planet and enables us to live, in the face of rising temperatures which threaten to destroy its habitability

Three hundred and thirty-one days, plus a final frantic fortnight: not very long, really, to put together the most complex and vital agreement the world has ever seen. But that's all the time there is: in 331 days from now, on 7 December, the UN Climate Conference will open in Copenhagen and the world community will try to agree a solution to the gravest threat it has ever faced: global warming.
Between 10,000 and 15,000 officials, advisers, diplomats, campaigners and media personnel from nearly 200 countries, almost certainly joined by limousine-loads of heads of state and government from America's President Barack Obama down are expected to meet in the Danish capital in one of the most significant gatherings in history.
If that sounds like exaggeration, we need only glance at some historical comparisons. The Copenhagen meeting will have a far broader reach and potential impact on the world than the Congress of Vienna, say, the 1814-1815 assembly which attempted to reorder Europe after the Napoleonic wars, or the Paris peace conference of 1919, which tried to construct a new global order after the First World War, or the 1945 meetings at Yalta and Potsdam which tried to do the same after the Second World War. For they were all dealing with national boundaries, politics and political structures, phenomena which of course are vital in human terms, but ephemeral and changeable. Copenhagen will be dealing with something fundamental to life on earth: the stability of the biosphere.
Known officially in UN-speak as COP 15 – the 15th meeting of the parties of the UN's Framework Convention on Climate Change – the meeting in Denmark will try to work out a way for the world to act together to preserve the thin envelope of atmosphere, soil and sea which surrounds our planet and enables us to live, in the face of rising temperatures which threaten to destroy its habitability.
All the world's major governments, including the once-sceptical administration of the US President George Bush, now formally accept that temperature rises have already begun, are likely if unchecked to prove disastrous for human civilisation, and are being caused by emissions of greenhouse gases such as carbon dioxide from our power plants, factories and motor vehicles.
But if all the major governments now accept it, getting them to agree on how to tackle it still seems a very long way off indeed. The essential problem, to use the jargon, is burden-sharing. We know the world has to cut its CO2 emissions drastically, and soon. But which countries are to cut them, by how much?
The Chinese, for example, with their scarcely believable economy growing at 10 per cent a year, have now overtaken the Americans as the biggest carbon emitters; but historically, America has emitted far more; and on a per capita basis, US emissions still dwarf those of China. So the Chinese have felt (so far) that they have a moral right for their economy to grow unchecked, and their carbon emissions to grow with it; but many Americans have felt (so far) that they see no reason to act unilaterally to cut their own CO2 if the Chinese are not willing to do the same.
Differences like those stubbornly percolate the whole negotiating process and make achieving a universal agreement mind-bogglingly hard. "This is the most complicated deal the world has ever tried to put together," says Tom Burke, visiting professor at Imperial College and an adviser on climate change to the Foreign Office. "In effect, you're asking nearly 200 countries to align their energy policies – to create a common world energy policy. If you look at how hard it has been for the member states of the European Union to align their energy policies, you get an idea of the difficulty of attempting it with the whole world."
Yet it has to be done, and the penalty for failure could not be higher. It is just 20 years since the world woke up to the danger of rising carbon emissions destabilising the atmosphere. Two decades ago it seemed a fairly distant threat, prefigured principally in supercomputer climate prediction programmes; something that was likely to happen a comfortably long distance away, such as at the end of the 21st century.
Three things have altered since then. First, the changing climate is now visible, not just in computer predictions, but all around us: spring in southern Britain, for example, is arriving about three weeks earlier than it did 40 years ago. At this time last year a red admiral butterfly, an archetypal creature of the summer, was photographed perching on a snowdrop, a flower of the winter – a previously unheard-of occurrence.
Second, it has become clear in the past five years that the earth is responding to the increasing CO2 loading of the atmosphere much more rapidly than scientists initially thought. There are numerous examples but to instance just one, the summer sea ice of the Arctic Ocean is melting far more quickly than anyone imagined.
Third, it has become apparent, even more recently, that global emissions of CO2 are shooting up at a rate that far exceeds anything the UN's Intergovernmental Panel on Climate Change (IPCC) thought possible when it sketched out future emissions scenarios in a special report in 2000. Even though we have had 20 years to think about emissions cuts, and 11 years of the Kyoto protocol, the treaty which actually prescribed the first cuts for the industrialised countries, emissions are soaring as never before.
Some leading climate scientists are now openly voicing concerns that this makes it increasingly unlikely we can meet the aim of keeping global temperature rise to about 2C above the pre-industrial level, which is generally regarded as the most that may be endured by human society without mortal danger. (We are now at about 0.75 degrees C above pre-industrial, and another 0.6 of a degree is thought to be inevitable because of the CO2 which has already been emitted).
Certainly, if we are to have any chance at all at holding the increase to two degrees, there is wide agreement that global emissions have to peak very soon – probably by 2015 or 2016 – and then rapidly decrease, to 80 per cent below present levels by 2050. The later the peak, the greater (and therefore more difficult) the subsequent decrease would have to be.
That's the pathway the world has to follow. Copenhagen offers the chance to set out along it. But even if the deal in December is not as ambitious as scientists and environmentalists insist is necessary – and at the moment, that seems pretty likely – it is vital that there is actually an accord. Disagreement would be a catastrophe.
Three conditions, according to Britain's Energy and Climate Change Secretary, Ed Miliband, have to be fulfilled for Copenhagen to be regarded as a success. First, the wealthy industrialised countries have to agree tough new targets for cutting their C02. Second, the developing countries led by China, even if they do not take on the same sort of numerical targets, have to move away from "business as usual". And third, the rich nations have to agree a way of financing the developing countries, especially the poorer ones, in the measures they take to adapt to the climate change that is coming anyway. Otherwise they won't sign up to anything.
Securing such a deal will be a matter of political will: a global political consensus will have to be hammered out. It is becoming clear that, over the next 11 months, the world could well do with a high-level political fixer, jetting unceasingly from capital to capital, to pull such a consensus together, in the manner in which the Argentine diplomat, Raul Estrada, managed to pull the original Kyoto agreement together in the Japanese city in December 1997. It could be Britain's Ed Miliband, according to Tom Burke. "There has to be someone who can put the time in, and go round various capitals and talk to the key people at a very high level, and not just environment ministers," he says. "Ed Miliband could play that role. He's known to be close to Gordon Brown, and Britain is reasonably respected for its record on climate change. It doesn't have to be him. But there probably needs to be someone."
However, Mr Miliband, and the British Government, may face a problem of reduced credibility in climate change terms as a result of two policy decisions likely to be taken in the next few weeks. One, which Mr Miliband will take personally, is whether or not to agree to a new coal-fired power station at Kingsnorth in Kent. If he gives it the go-ahead, without strict controls over its emissions, environmentalists will accuse him of sanctioning a new generation of power plants run on the most carbon-intensive fuel. The other is whether or not to allow Heathrow airport to build a third runway, and thus expand British aviation, whose CO2 emissions are growing faster than those of any other sector.
If both these projects go ahead – as seems perfectly possible – there is no doubt that the UK's position as a potential Copenhagen broker will be weakened. "If countries like Britain, who, for better or worse, are the global leaders, go to Copenhagen with new coal-fired power stations and expanding airports at home, it's very difficult to see how we will be taken seriously by other countries which have even more serious energy security problems and concerns about economic growth," said Robin Oakley, the head of climate change at Greenpeace UK. "That leadership can't just be shown by grandstanding at the meeting. It has to be shown by what we do in our domestic policy."
In the absence of Mr Miliband or any other leading politician emerging as the Copenhagen fixer, the key player in the process is likely to be Barack Obama. The President-elect has already opened a chasm, in terms of climate change policy, between himself and the outgoing George Bush, who, in 2001, withdrew the US from Kyoto and began years of climate policy obstructionism.
Mr Bush wanted no truck with emissions cuts of any sort; Mr Obama has pledged he will get US emissions down to 80 per cent of 1990 levels by 2050 (a target identical with Britain's) and "engage vigorously" with the international negotiating process over the next few months. Hints have been dropped that he may convene meetings of key world leaders to speed the negotiations along. It seems highly likely that he will go to Copenhagen himself – which means every other world leader will want to be present.
Whether or not they can do the deal the world needs is another matter. Yet there is no doubt the world needs it. It may seem reasonable to think, in the coldest winter for years, that global warming has gone away, yet nothing could be further from the truth.

Time to look at the benefits of growing and using more wood

In the search for policies that will meet the aims of providing jobs and meeting the UK's climate change targets, two major areas stand out as excellent ways of generating jobs quickly, writes Chris Goodall from Carbon Commentary, part of the Guardian Environment Network
Thursday 8 January 2009 16.12 GMT

Government officials are searching for policies that will meet the twin aims of providing jobs and meeting the UK's climate change targets. It is proving a difficult task. The easiest ways of reducing fossil fuel use will probably not create many new jobs in the UK. All large wind turbines are built abroad and although the construction work on a nuclear power station will generate a few thousand jobs, most of the key components will need to come from Europe and Japan. So where are the opportunities? I think two major areas stand out as excellent ways of generating jobs quickly without also dragging in expensive imports or sharply raising prices.
One opportunity is well understood. The UK's houses are the worst insulated in northern Europe and the scope for improvement is clear. The other idea is newer. I think that massively increasing the availability and use of wood for fuel can generate large numbers of jobs both in forestry and in business such as horticulture that can productively use the cheap heat from small wood-burning power stations.
HousingInitially government seems to have hoped that the clear need for improved heat retention means that the insulation industry could be used as a way of generating large numbers of jobs as an army of installers laid thick wads of cladding in UK lofts. But once the Department of Energy and Climate Change had worked out the numbers, it looked as though the potential for extra employment was limited.
I think that the department was far too pessimistic when it looked at the opportunity. Although it is true that almost all UK houses now have loft insulation, remarkably few have a thick enough layer. Most commentators say that increasing the thickness to at least 25cm (10 inches) will save more in central heating bills than it costs. My estimate is that at least 15 million homes could profitably increase their loft insulation to this level. A large-scale programme of installation would reduce UK gas consumption and provide tens of thousands of jobs for several years.
However, lofts should not be the biggest focus of the green new deal. They are responsible for less than 10% of the heating losses of a typical house. Far more heat leaves through walls, windows, and floors. Surprisingly, almost as much energy is lost through doors as through the roof. Losses from draughts are also far more important than the loft. A sustained national programme to improve the heat retention characteristics of our housing would be hugely beneficial. It would reduce fuel bills, cut the UK's use of insecure supplies of Russian gas, and provide the prospect of employment for hundreds of thousands of people in manufacturing and installation industries. We should be installing cavity wall insulation in millions of homes, replacing leaky single-glazed windows, carefully repairing draughty floors and walls, and hanging properly insulated well-fitting doors. All simple and straightforward measures that can be taken using British-made goods and newly trained people. More complicated schemes such as re-cladding blocks of flats make even more sense financially, but will require us to import some skills and products from Europe. For the average house, a saving of 30% of the heating bill is easily achievable.
How would we finance this programme? We can copy the successful features of the German eco-renovation policies which are now systematically reducing energy use in several hundred thousand homes each year. Through soft loans, grants for achieving energy reduction targets, and other measures, householders and landlords have been incentivised to take measures that sometimes cut domestic heat need by 80% or more. The German government claims that the cost per tonne of carbon saved is impressively low and trumpets that household emissions of greenhouse gases have fallen by a third since 1990. This finding chimes with what we already know: house insulation makes financial sense and people just need the right incentives and advice. The Energy and Climate Change people should look again at the scope of generating jobs and reducing emissions.
WoodlandThe UK is one of the least forested countries in the temperate world. Only about 11% of the land area is covered by trees. Simply planting more trees would have value: they will soak up CO2, reduce the risk of catastrophic flooding in times of intense storms, and possibly help reduce summer peak temperatures. Of course people would be employed planting and looking after the trees. But the even more important objective is to reduce fossil fuel use by replacing coal and gas. In other northern countries, wood fuel provides a substantial fraction of total heat needs through district heating systems that burn the wood in central plants and then distribute hot water to local homes. This replaces the need to use gas or oil. Increasingly, these wood-fuelled heating plants are also generating electricity as well using turbines. The UK could aim to install thousands of small-scale wood-burning (or, more likely, wood gasification) plants dotted around forested areas.
There's little competition from other users for wood in many areas of the country. Even in woodlands close to major cities, such as the Chilterns, prime wood is increasingly left unused. Beautiful wooded areas won't stay that way if we don't manage them properly. Creating a market for wood by encouraging the growth of small-scale local electricity generators is an excellent way of incentivising proper care of our woodlands.
How much difference could a major reforestation plan make? Moving the UK from 11 to 12% forest cover would add 250,000 hectares of woodland. Fast-growing species might produce a yearly yield of up to 10 tonnes per hectare, with enough energy to replace over 5% of our electricity need for ever, as well as huge amounts of useful heat. The reduction in UK emissions is potentially worth tens of millions of tonnes a year. But is it a feasible target to increase woodlands by 250,000 hectares? Think of it this way: China has reforested 4 million hectares every year for the last two decades. So of course it is possible and, moreover, much of the employment would be in areas of low incomes and poor job prospects. Planting and nurturing young trees is a skilled job, and these skills have atrophied in the UK in recent years. But given the right incentives, traditional farmers could hire and train the people needed to plant large areas of fast-growing coppices.
The best use for the heat from wood-using power plants would be in homes and other buildings such as offices and schools. But we should also use spare heat for a new generation of horticultural greenhouses. The fall in the value of the pound has made imported fruit and vegetables expensive. We could grow much more food in the UK using cheap heat and some electricity from small wood power stations for glasshouses. The great advantage of this is that horticulture is highly labour intensive and so it can revive areas of limited prosperity such as Cornwall. Replacing Dutch and Spanish fruit and vegetables with home-produced products in greenhouses heated by local wood could transform the economic prospects of parts of the UK. The percentage of the Dutch labour force working in agriculture is almost three times the level here and widely available cheap heat could pull the UK back up towards the Dutch employment level.
Is such a plan financially possible? I think that at current prices for advanced small-scale electricity plants wood is probably just about economic as a source of heat and electricity. As with other low-carbon technologies, we need to reduce further the cost of the plant and equipment. This will happen as more small wood power stations are installed and manufacturing costs are reduced. With some sensible government support, a plan to reforest 1 or 2% of the UK clearly makes economic sense, not least because of its potential employment impact and for its effect on carbon reduction.
• This article was shared by our content partner Carbon Commentary, part of the Guardian Environment Network