News May 2004

The following are summaries of news stories that appeared in the May 2004 print edition of Environmental Finance magazine

Emissions trading advocates lobby for tougher EU targets

Green groups are preparing a lobbying campaign – backed by members of the emissions trading community – to make the case for the Commission to impose tighter targets under the EU Emissions Trading Scheme.

The effort, led by Friends of the Earth and WWF, is designed to counterbalance what the groups argue is misleading lobbying and scaremongering from those industries that are to have their carbon dioxide emissions capped by the scheme, which begins operating in January.

Munich Re re-enters weather derivatives market

Munich Re, the world’s largest insurer, has re-entered the weather derivatives market and is building a global portfolio of weather trades under the management of industry veteran Paul Murray. Murray – who has traded weather at Goldman Sachs and Enron – joined Munich American Capital Markets, Munich Re’s capital markets operation, at the start of last month.

EPA proposes new trading rules for SO₂, NOx and mercury

As new US rules to combat smog and particulates pollution came into effect on 15 April, the Environmental Protection Agency (EPA) announced plans to adopt the Clean Air Rules of 2004. These include new trading programmes for sulphur dioxide, mercury and nitrogen oxides.

The new eight-hour standard for smog and particulate matter means that 474 counties – with roughly 159 million residents – across the US now fail to meet national air quality standards. However, “this isn’t about the air getting dirtier,” said Mike Leavitt, EPA administrator. “These new rules are about our new understanding of health threats, about our standards getting tougher and our national resolve to meet them.”

GE buys solar producer AstroPower

GE Energy has bought most of the assets of US solar power company AstroPower for $15 million. The 31 March purchase represents another aggressive move by General Electric into the renewable energy sector, following its purchase of Enron Wind two years ago. Delaware-based AstroPower was delisted from the Nasdaq in 2003 and filed for bankruptcy in February.

Trucost estimates S&P 500 emissions

Environmental finance analysis firm Trucost has calculated, for the first time, the carbon dioxide (CO₂) emissions of every company in the S&P 500 equity index.

The figures form part of its latest study, Climate Change and the S&P 500, due to be released on 1 May, which also examines CO₂ disclosure and the effect that an emissions trading scheme would have on companies in the index.

National Audit Office praises UK ETS

The UK’s Emissions Trading Scheme “has brought about a reduction in greenhouse gases and … has benefited the UK economy,” according to an assessment of the groundbreaking scheme, published last month by the National Audit Office.

It does note that a substantial amount of reductions in the first year of the scheme’s operation, in 2002–03, would have happened regardless, confirming a key criticism of the scheme from some quarters. But it concludes that these ‘business-as-usual’ reductions were largely unavoidable, and should be balanced against “the significant achievements of the scheme”, which include ‘learning- by-doing’ in advance of the EU ETS, which is due to commence in January.

IPE to list CCX EU Allowance contracts

The International Petroleum Exchange (IPE) is to list EU carbon dioxide emissions allowance products under development by the Chicago Climate Exchange (CCX).

Under the terms of an agreement between the two exchanges, the CCX will grant the IPE a license to list and market spot and futures EU Allowance contracts. They will be listed on the IPE’s Interchange electronic trading platform.

Southern Hydro turns to Credit Lyonnais for rain hedge

Australian power company Southern Hydro has bought a three-year weather hedge protecting around a third of its 600MW of generating assets from the effects of low rainfall on revenues. The contract follows a five-year hedge the company bought in 2002 for another part of its generation portfolio, and the company is now looking for a third hedge to complete its cover, says Darryl Flukes, its general manager of energy trading.

“Southern Hydro places a premium on cashflow and revenue stability. This transaction further protects us from the production variability inherent in hydro generation,” he adds.

Innovest automotive and US power reports show sustainability premium

Automotive companies identified as ‘sustainability leaders’ by Innovest collectively outperformed sector laggards by 20% over the past three years, while those in the US power sector outperformed by 9%, according to two recent reports from the New York-based socially responsible investment research firm.

The reports rank companies in the two sectors in relation to their sustainability, and then compare the collective share price performance of those in the top half of the table with those in the bottom.

Wind power to benefit from US NOx credits?

A US local authority plans to meet part of its nitrogen oxides (NOx) pollution reduction target through the purchase of wind-generated energy – a move which could represent the first time that renewable energy receives credit for avoided emissions within US emissions markets.

From July, Montgomery County in Maryland is to purchase 5% of its electricity needs from wind farms, and has applied to the federal Environmental Protection Agency for these purchases to receive credits under the Washington DC metropolitan area NOx reduction plan.

Oekom warns on firms’ GM policies

While many of the world’s major food and drinks companies have good environmental management structures in place, they need to address issues such as genetic modification, sourcing of raw materials and human rights more thoroughly, according to a recent evaluation by socially responsible investment analysis firm Oekom Research.

go to Features May 2004