 |
 |
 |
|
 |
|
 |
|
 |
|
 |
|
 |
|
 |
|
 |
|
 |
|
|
News March 2002
Bush ties GHG cuts to economic growth... 
President George W Bush’s long-awaited plan for reducing US emissions of greenhouse gases (GHGs) has met fierce criticism from environmentalists and prompted Canadian officials to voice concerns about Canada’s industrial competitiveness with the US. Government officials in Sydney cast doubt on whether Australia should ratify the Kyoto Protocol, in light of the new US domestic plan.
Bush’s proposal, announced in a speech at the National Oceanic and Atmospheric Administration on 14 February, calls for voluntary cuts in GHG emissions per unit of economic activity. Its aim is to lower US emissions to 151 tonnes per million dollars of gross domestic product (GDP) in 2012 from an estimated 183 tonnes in 2002, a reduction of around 18% in GHG intensity. This would be equivalent to taking 70 million cars off the road, Bush claimed.
... and backs emissions trading for SO2, NOx and mercury
In his 14 February speech, president Bush also announced a ‘Clear Skies’ initiative to reduce emissions of sulphur dioxide (SO2), nitrogen oxides (NOx), and mercury from power plants through nationwide ‘cap-and-trade’ programmes. The proposed legislation would require facilities to have a tradable permit for each ton of pollution they emit, he said.
The proposal calls for SO2 emissions to be cut from the current level of 11 million tons to a maximum of 4.5 million tons in 2010 and 3 million tons by 2018. NOx emissions would be reduced from 5 million tons to 2.1 million tons in 2008 and 1.7 million tons by 2018.
Sulphur starts trading in Slovakia
The first inter-company trade under Slovakia’s new ‘cap-and-trade’ sulphur dioxide market has taken place, according to Gabriela Fischerova, of the Air Protection Department in the Ministry of Environment in Bratislava.
In February, Teplaren Povazska Bystrica, a Slovak district heating firm, sold 150 tonnes of allowances to Slovmag, a magnesium producer, she says. No details were available on price.
Weather hedge boosts Atmos earnings
Atmos Energy, the fifth largest natural gas utility in the US, is reporting a $5.9 million pay-out on a weather insurance contract – which represents more than 25% of its profits for the fourth quarter of 2001.
Despite winter weather in Atmos’ area of operations that was 11% warmer than the 30-year average from October to December – hitting its sales of natural gas – the firm’s profits were only 11.6% down from the comparable period in 2000, which was considerably colder than normal.
World Bank mulls new carbon funds
The World Bank is considering plans for two new ‘carbon funds’ to attract finance into small-scale energy efficiency and carbon sink projects in developing countries. The funds – if approved – would aim to emulate the success of the Bank’s Prototype Carbon Fund (PCF), which invests in carbon-reducing projects under the 1997 Kyoto Protocol.
The move would represent a U-turn on the Bank’s stated intention not to follow the launch of the PCF in 2000 with further carbon funds. But Ken Newcombe, manager of the PCF, says initial concerns that the fund would crowd out the private sector have not been realised. “In fact, we’re buying down barriers to private sector involvement in the carbon market,” he insists.
KLD launches Nasdaq SRI index
The Nasdaq Stock Market and KLD Research & Analytics, a sustainability research provider, have joined forces to launch the first socially responsible investment index linked to a specific stock market. The KLD-Nasdaq Social Index, launched in January, includes Nasdaq-listed US companies that passed through KLD’s positive and negative social and environmental screens.
Peter Kinder, president and co-founder of Boston-based KLD, says that the index marks a new direction for his firm. It is the first of the firm’s four socially-screened indexes that tracks screened constituents of a specific market rather than broader benchmark indexes such as the S&P 500. John Jacobs, senior vice president at Nasdaq, believes that the index “is a big step forward to sustainable investment becoming more mainstream”.
Transparency code to hit SRI indexes?
A group of Dutch socially responsible investment (SRI) managers are finalising plans for a voluntary code of conduct designed to increase the transparency of their investment policies. The Association of Investors for Sustainable Development (VBDO) is leading the initiative, which it is planning to propose to the European Social Investment Forum for adoption at the European level.
“These funds ask for transparency from the companies in which they invest, so sustainable investment funds should take the lead in reporting,” says Piet Sprengers,VBDO’s director.
Consortium promises cheaper wind finance
Three European banks have come together to form a consortium to finance renewable energy projects – with a particular eye on the 18 offshore wind farms planned for the UK. The consortium, named Aeolus after the Greek god of wind, aims to provide limited recourse project funding that is competitive with on-balance sheet financing.
The expense of offshore projects – with the UK developments likely to cost £80 million–100 million ($115 million–143 million) each – would make them difficult for a bank to finance alone, says Neil Robertson, London-based project finance manager for Germany’s Norddeutsche Landesbank (Nord/LB), a consortium member.
UK to miss its carbon target?
The UK is unlikely to meet its self-imposed 2010 target for reducing its emissions of carbon dioxide (CO2) following a sharp increase in emissions in the past two years, says Cambridge Econometrics, a leading private-sector research firm. But the less ambitious target set under the Kyoto Protocol – to reduce UK emissions of greenhouse gases (GHGs) to 87.5% of their 1990 level by 2008–12 – should still be achievable, it says.
The UK government disagrees with the findings. A spokesman in the Department for Environment, Food and Rural Affairs says the company has omitted several measures from its analysis which should ensure the nation achieves its goal of cutting emissions of CO2 alone to 20% below their 1990 level by 2010. These include various energy efficiency incentives, the Climate Change Levy (a tax on industrial energy use) and the forthcoming voluntary emissions trading scheme. Thanks to these measures, the country is on track to achieve a 23% cut in its GHG emissions – almost twice its Kyoto target – the spokesman says.
French exchanges look to weather
Powernext, the Paris-based electricity exchange, is considering setting up a clearing house for privately negotiated over-the-counter (OTC) weather derivatives contracts, according to market sources. The exchange, via its clearing subsidiary Clearnet, is planning a similar clearing house for electricity contracts, which it is planning to launch in the fourth quarter of this year.
The exchange declined to comment on any plans for a weather derivatives clearing house, but Richard Katz, account manager at Powernext, confirmed that the exchange was “very interested in the weather derivatives market”, given its close connections with electricity trading.
Mitsui Sumitomo’s sticky weather hedge
Mitsui Sumitomo Insurance has developed a weather index based on both temperature and humidity, designed to measure peoples’ discomfort levels. It plans to launch derivative hedging contracts based on the index in time for the summer months to help companies whose earnings are affected by such weather conditions.
“If temperature is high in the summer season, but humidity is not, people won’t buy ice creams or Coca Cola,” says Yuji Ito, alternative risk transfer group manager in the financial solutions department of Mitsui Sumitomo Insurance in Tokyo. The index is designed for producers and manufacturers of “summer specialty products,” such as air conditioners and cold drinks, for example. “[The index] is more linked to peoples’ demand for those goods and products than temperature or humidity alone,” says Ito.
California, UK tackle carbon from cars
The California Assembly passed a bill in January that would force the state’s Air Resources Board to devise regulations to reduce the carbon dioxide (CO2) emissions of passenger vehicles by January 2004. After legislative review, the regulations would be implemented by January 2005.
Meanwhile, in the UK, employees who drive company-owned cars will have this benefit taxed, from 6 April, according to how much CO2 their cars emit. Previously, this perk was taxed on the basis of the distance travelled for business.