News June 2006

The following are summaries of news stories from the June 2006 print edition of Environmental Finance magazine

Poland and Slovakia seek to raise EU ETS emissions cap

The Slovak Republic and Poland are planning to increase the number of emissions allowances they distribute to industry in the second phase of the EU Emissions Trading Scheme (ETS) – despite the recent news that the trading scheme is awash with allowances in its 2005–07 phase.

In its draft national allocation plan, Poland is planning to allocate an additional 30 million tonnes (Mt) of EU allowances (EUAs) every year from 2008 to 2012, including a reserve for new facilities, bringing the total annual allocation to 269Mt. Poland has not published its verified emissions data for 2005, but analysts expect its companies covered by the scheme to have emitted at least 20Mt less carbon dioxide than their allocation.

Slovakia, meanwhile, plans to allocate 34.2 million EUAs a year, up from 30.5 million during the first phase of the ETS, according to Reuters.

Investors warned on pulp mill risk

Investment is pouring into emerging market pulp mills based on false assumptions about the origins and the cost of wood,according to a report from the Center for International Forestry Research – "setting up investors, forest-dependent communities, and the environment for a precipitous fall," it says.

The report, financed by the European Commission and the UK’s Department for International Development, says that some $40 billion has been invested in the sector over the past decade,and analysts project a further $54 billion in investments by 2015, mostly in Brazil, China, Indonesia, Uruguay and the Baltic states. "Low wood costs are a major factor driving expansion," it says.

JPMorgan shareholders protest climate change policy

In a reversal of the usual pattern of shareholder activism, JPMorgan Chase’s climate change policy has come under attack, with investors holding 24% of its shares voting for a proposal calling on the bank to rethink its role in campaigning for a US national framework to help reduce emissions of greenhouse gases.

The proposal was tabled at the bank’s annual general meeting (AGM) on 16 May by the Free Enterprise Action Fund, a small right-wing mutual fund with $5.2 million under management. It criticised the bank’s decision to use shareholder money to lobby for action on climate change.

JPMorgan spokesman Brian Marchiony said: "We stand by our policy."

Bonn meetings plot post-2012 climate path

The latest round of UN climate negotiations in Bonn ended with some progress on setting the agenda for the future of the international climate change regime, according to observers. However, most participants agreed that the two weeks of negotiations, which ran to 26 May, marked just the beginning of a long process.

"I was very happy that they got off to a generally good start, but these negotiations are going to be difficult," Richard Kinley, acting head of the UN Climate Change Secretariat, told Environmental Finance.

AES announces clean energy, carbon push

US power giant AES has unveiled plans to invest some $1 billion in clean energy over the next three years – and aims to capture up to one fifth of the Clean Development Mechanism market.

"We believe energy prices will level off at higher levels than we’ve seen historically, so there’s a real need to generate electricity from alternative sources," William Luraschi, executive vice president of business development at AES in Arlington, Virginia, told Environmental Finance. "We’ve made disparate efforts in this area,but we decided now is the time to focus on broader market needs," he added.

$4 trillion backs UN investment principles

Fifty investment funds managing $4 trillion of assets have signed up to the UN’s Principles of Responsible Investment, a set of six guidelines intended to provide mainstream investors with a framework to integrate environmental, social and governance considerations into investment decisions.

UN secretary general Kofi Annan, who launched the Principles at the New York Stock Exchange in late April, said they were developed to address the "disconnect between corporate responsibility as a broadly stated management imperative, and the actual behaviour of financial markets, which all too often are guided primarily by short-term considerations".

Doubts raised over RGGI plans

Emissions trading experts have raised concerns about the design of the proposed US Regional Greenhouse Gas Initiative (RGGI). In comments invited on the scheme’s draft ‘Model Rule’, and at a recent industry event, specialists have suggested that the scheme may not result in carbon dioxide (CO2) emission reductions, is too narrow to work efficiently and will be subject to "leakage" of emissions into other states.

Under RGGI, eight states in the north-eastern US plan to cap CO2 from power plants in 2009, stabilise them through 2014, then cut emissions 10% by 2019.

But this cap is higher than actual emissions, said Joel Bluestein, president of Virginia-based consultant Energy & Environmental Analysis.

ADB, EBRD announce clean energy investment plans

The Asian Development Bank (ADB) and the European Bank for Reconstruction and Development both announced major clean energy investment plans last month.

At the ADB’s annual general meeting in India, the bank unveiled plans for a fund to invest $1 billion annually for three years in clean energy and Kyoto Protocol Clean Development Mechanism projects in the Asia- Pacific region.

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NGO study warns Australian banks of environmental risks

There is a large variation in the greenhouse gas emissions and water use intensity of activities funded through loans from Australia’s major banks, potentially exposing some banks to higher levels of environmental risk. That is the finding of a study of Australia’s finance sector published by the Australian Conservation Foundation.

The study combined data from market analyst Dealogic with data from CSIRO, Australia’s main science agency, to identify differences in the relative contribution of major banks to environmental impacts.

Using 2000–04 data, the study found activities funded by loans in the Australian market from BNP Paribas were more greenhouse gas-intensive than activities funded by loans from any other ‘top 10’ lender in the syndicated loan market.

Flurry of clean energy indexes continues

Three more index providers have stepped forward with clean energy stock indexes – bringing the number of indexes launched since the start of the year to six.

Ardour Capital Investments, a New York-based investment bank, went live with its Ardour Global Index on 17 May. This followed the 5 May launch of San Francisco-based bank Merriman Curhan Ford’s Next Generation Energy Index, and the 8 May launch of the Nasdaq Clean Edge US Index, published by the San Francisco research firm Clean Edge.

US faces "very active" hurricane season – NOAA

The US is facing another "very active" hurricane season in 2006, according to forecasts from the National Oceanic and Atmospheric Administration (NOAA).

However, a repeat of last year’s record season isn’t on the cards. The US government agency predicts eight to 10 hurricanes for the north Atlantic season, which lasts from 1 June to 30 November. Four to six of these could become major hurricanes of Category 3 strength or higher, it says.

Since 1995, the north Atlantic region has endured a climate pattern that encourages storm formation. Nine of the past 11 seasons have seen above-normal activity, and last year the US and neighbouring regions were hit by a record 15 hurricanes.

IUCN slams Shell over whale claims

IUCN, the world conservation union, has accused Shell of misrepresenting the recommendations of a panel of scientists investigating the impact of its Sakhalin II oil and gas project on the western grey whale.

This latest spat in the increasingly fraught relations between the oil giant, environmental lobby groups and the scientific panel, concerns comments made by a Shell spokesman to a UK newspaper, The Independent, stating that the scientists had given the green light to the next phase of construction on the pacific island off the coast of Russia.

In a letter to the director of the Sakhalin Energy Investment Company, a consortium led by Shell, IUCN called on the oil giant to "publicly rectify" this claim, calling it "such a loose, if not inaccurate, interpretation" of the recommendations that it "puts a serious dent in the credibility of the process".

A spokesman for Shell refused to comment directly on the allegations.

REC floats in $1.15 billion listing

Norwegian solar energy company Renewable Energy Corporation (REC) floated on 9 May, raising Nkr7 billion ($1.15 billion) in an initial public offering (IPO) that was 15 times oversubscribed, and which valued the company at some $6.5 billion.

The timing of the IPO could not have been better, say investors, coming just before the recent equity market jitters that have seen prices in the sector – and more broadly – come off dramatically.

The listing makes REC the world’s largest pure-play solar company. Analysts say the company was particularly attractive to investors because it offers a vertically-integrated play on the sector.

US House votes against EPA on toxics reporting

The US House of Representatives has voted to stop the Environmental Protection Agency (EPA) from weakening the Toxic Release Inventory (TRI) programme, which requires companies to disclose toxic emissions.

Late in 2005, the EPA proposed a "burden reduction" rule that would let emitters of up to 5,000 pounds of toxins use a "short form" to report, and allow the short form for emitters of up to 500 pounds of persistent bioaccumulative and toxic chemicals. The agency has also proposed allowing companies to report biennially instead of yearly.

The proposal drew the ire of environmental groups and socially responsible investment funds, which said the short form would lack details that allow them to screen out badly managed companies.

go to Features June 2006