News, June 2001

UK clarifies emissions trading plans

The UK’s pioneering greenhouse gas (GHG) emissions trading scheme will begin in earnest on 1 April 2002, rather than 1 January as had been expected. The postponement was announced in the long-awaited draft rules for the scheme published by the Department of the Environment, Transport and the Regions (DETR) on 3 May. Industrialists and emissions specialists say the paper holds few other surprises but provides valuable clarity on several important issues.

As a result of the new timetable, companies volunteering to join the scheme will have longer than expected in which to prepare their bids for incentive payments and the first compliance period will last only nine months rather than a full year.

Analysts not convinced by green issues

Environmental and social factors remain well down the list of issues of concern to UK analysts, investors and financial journalists when assessing corporate performance, according to a new survey. And respondents rated the usefulness of their primary source of environmental information – that provided by companies themselves – as poor. “Leading companies that are putting lots of effort into social and environmental management aren’t seeing the results in the City,” says Belinda Howell, a director of Business in the Environment (BiE), the UK business led pressure group which commissioned the survey.

Axia files second suit against Hetco

Axia Energy has filed a second suit against four of its former weather derivatives traders, seeking damages for the alleged disclosure of “confidential and proprietary business information”. The new suit arrived hours before a judge in Wichita, Kansas verbally ruled on an earlier suit against the traders, who are now trading weather at Hess Energy Trading (Hetco) in New York, on 26 April.

Rule change shrinks California’s NOx market

Power plants in the Los Angeles region will not be allowed to buy nitrogen oxide (NOx) emission credits in the Regional Clean Air Incentives Market (Reclaim) until at least 2004 under new rules designed to ease the energy crisis in California.

The measures, announced at a board meeting of the South Coast Air Quality Management District (SCAQMD) on 11 May, go further than temporary curbs on the market imposed in February, says Josh Margolis, senior vice-president with Cantor Fitzgerald’s environmental brokerage services in San Francisco (see Environmental Finance, March 2001 page 4).“We’ve taken a step away from a pure trading market,” he says.

Entergy commits to GHG reductions

Entergy has become the first US electricity company to publicly pledge to cut its greenhouse gas (GHG) emissions. The New Orleans based power company says it will stabilise its domestic GHG emissions at 1990 levels until 2005 and has set aside $25 million to help it achieve this goal.

“It is incumbent upon every individual and business to take voluntary initiatives to limit greenhouse gas emissions,” says chief executive officer Wayne Leonard. “As businesses, we know the right answer without government action to force us to act more responsibly.

EC backs market approach to sustainable development

All policies adopted by the 15 nation European Union “must have sustainable development as their core objective”, says a new paper* from the European Commission (EC), the executive arm of the EU.

“Sustainable development is not a choice. It’s an imperative,” said EC president Romano Prodi at the launch of the report on 16 May. Acknowledging the scale of this ambition, the Commission proposes that the EU should focus on a small number of problems “which pose severe or irreversible threats to the future well-being of European society.”

These it identifies as: climate change; public health issues such as food safety; growing pressure on natural resources; poverty and social exclusion; an ageing population; transport congestion; and pollution.

*A sustainable Europe for a better world:A European Union strategy for sustainable development. [COM(2001) 264] May 2001

Research shows efficiency of eco-efficiency

Equity portfolios based on eco-efficiency are likely to outperform the stock market regardless of broader macro-economic trends, according to new research from QED International. The New York based quantitative investment consultancy looked at a portfolio of stocks chosen using Innovest Strategic Value Advisor’s EcoValue 21 ranking system over four years. It found an average annual outperformance of 3.53% over the S&P 500 equity index.

But more importantly, says Herbert Blank, president of QED, the eco-efficiency portfolio outperformed even more strongly after ‘factor bets’ – such as sensitivity to interest rate moves, crude oil prices and other macro-economic factors – were neutralised.

OECD calls for more permit trading

Countries in the Organisation for Economic Co-operation and Development (OECD) should increase their use of tradable permits, phase out damaging subsidies and reform environment related taxes to aid progress towards sustainable development. This was the message from a joint meeting of environment and finance ministers of the 30 nation group held in Paris on 16–17 May.

“All OECD countries should make better use of market-based instruments and combine them effectively with regulation,” the ministers said in a statement.

CDM offers international law window

The Kyoto Protocol provides a crucial opportunity for policymakers to address potential conflicts between international investment law and future market-based environmental protection agreements, according to a new report* from the World Resources Institute (WRI).

The report examines potential conflicts between the Kyoto Protocol’s Clean Development Mechanism (CDM) and the estimated 1700 international investment agreements (IIAs). It also makes recommendations on how rules governing the CDM could be shaped to avoid such conflicts and on how future IIAs could be drafted.

*Will Environmental Investment Rules Obstruct Climate Protection Policies? www.wri.org/cdm/investrules.html

OTC NOx market beats target for 2000

Emissions of nitrogen oxides (NOx) from sources in the nine US states participating in the Ozone Transport Commission (OTC) were little changed last year on their 1999 level but 11% below the allocated limit for 2000. In 1999, actual emissions were more than 19% below the limit but the number of allocated allowances was significantly reduced for 2000. Total emissions last year were less than 40% of their 1990 level.

Pensions guide aims to boost development

War on Want and Traidcraft have published a guide* to socially responsible investing (SRI) that aims to raise the profile of international development issues among pension fund trustees and fund managers.

The guide, produced by the Just Pensions Project, a collaboration between the two non-governmental organisations (NGOs), provides general advice on how pension funds can frame SRI policies – focusing on ‘engagement’ with companies – and specific examples from development issues.

“SRI as a whole needs to be tightened up, but there’s a feeling that more could be done on international development,” says Duncan Green, project co-ordinator. “This is an attempt to raise the profile of these issues among those individuals framing SRI policies.”

* Just Pensions – Socially Responsible Investment and International Development. Available free from www.justpensions.org