News October 2006

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

EU carbon prices fall, as uncertainty lingers

Prices of EU carbon dioxide allowances (EUAs) fell in mid-September, with some market participants arguing that the EU Emissions Trading Scheme market could be beginning its long-anticipated trend towards zero.

Meanwhile, other traders say that the delayed submission of member states’ national allocation plans – setting emissions targets for Phase II of the EU ETS, from 2008, is harming the market.

On 21 September, the European Climate Exchange’s December 2006 EUA contract closed at €13.55 ($17.35)/t, down from €16.25 three days earlier.

Abu Dhabi launches $250 million cleantech fund

The government of Abu Dhabi has invested $100 million into a new clean technology fund in partnership with investment bank Credit Suisse and the Consensus Business Group, a UK-based property investment firm.

The Masdar Clean Tech Fund will “invest in companies with promising clean tech, advanced energy and sustainability-related technologies,” according to a statement from the three partners. Credit Suisse and CBG have invested $100 million and $50 million respectively into the fund, which is open to further investment.

A spokesman for CBG said that the three parties are still deciding the fund’s investment remit, ahead of its global launch in November, but it will invest globally.

Climate Change Capital on track for $1 billion carbon fund

Climate Change Capital (CCC) is expecting to top $1 billion for its second carbon fund – making the London-based boutique merchant bank the world’s biggest private sector carbon asset manager. CCC had reached $830 million by its first close on 11 September, taking just three months to raise the money, which came from Dutch pension funds ABP and PGGM, UK-based energy company Centrica and a fourth unnamed investor, described as a “global emerging markets banking group”.

“This is further proof that the so-called ‘green economy’ has arrived,” said CCC vice chairman James Cameron.“The profile of the investors backing this new asset class, created due to the Kyoto Protocol, confirms this, reflecting very real progress in the development of the carbon market.”

Takara weather fund morphs into RenRe

Weather and energy hedge fund Takara Capital Management has closed, but the business will continue within Renaissance Reinsurance, a Bermuda-based insurance and reinsurance group specialising in natural catastrophe risk.

The Takara fund was established almost one year ago by former Swiss Re and Enron weather traders Mark Tawney and Bill Windle, with initial capital of $150 million. They were joined by Bill MacLauchlan and Claudio Ribeiro.

Windle confirmed to Environmental Finance that a new company, RenRe Investment Managers, had been set up on 1 September. Takara is in the process of returning money to investors, as the new company will use its own capital.

ANZ in the dock over logging

Acoalition of non-governmental organisations, including the Australian Conservation Foundation (ACF), has lodged a complaint with the OECD over Australian bank ANZ’s involvement with a major logging company’s operations in Papua New Guinea.

The complaint alleges that ANZ has breached the OECD Guidelines for Multinational Enterprises. Lodged by three Papua New Guinea and two Australian NGOs, it focuses on ANZ’s longstanding commercial relationship with Malaysian forestry company Rimbunan Hijau, for which it provides “financing and the provision of other financial services”, the groups say.

Gavin Murray, ANZ’s director of institutional and corporate sustainability, told Environmental Finance the bank was “disappointed that this has happened”.

Nomura on the look-out for cleantech investments

Japanese financial giant Nomura has set up a new energy and clean technology private equity business, to focus on late-stage venture capital (VC) investing.The company has hired Russell Pullan from the UK’s Carbon Trust to head the team.

“We’ll be looking for bigger, really good deals,” said Pullan, who will be investing Nomura’s own capital. “If we see something really exciting, we can go up to $25 million or $30 million-plus, over two or three rounds.”

Car makers under fire on CO2 emissions

EU car makers will have to “substantially increase their efforts” if they are to meet voluntary targets to reduce carbon dioxide (CO2) emissions from new cars, according to the European Commission.

In its annual monitoring report on CO2 emissions from cars, released on 28 August, the Commission said average specific emissions were 12.4% below 1995 baseline levels in 2004 compared with an 11.8% reduction in 2003. The Commission welcomed the reduction but said that, if the car industry failed to honour its commitments, it would have to consider other measures, including legislation, to ensure that the necessary CO2 reductions were achieved.

US EPA ‘simplifies’ New Source Review

The US Environmental Protection Agency has proposed changes that it says will simplify the New Source Review (NSR) programme for power and industrial plants. NSR is meant to ensure that new power plants, factories and refineries include sufficient pollution controls.

But the programme has become controversial in its application to existing facilities, which can be re-categorised as new sources if owners make expansions or upgrades that increase emissions or extend plant lives. Those sources would then have to invest in additional pollution controls.

Investors to pour $80 billion into ethanol by 2021

Investment in ethanol plants will top $80 billion over the next 15 years, according to a report by the McIlvaine Company.

Biofuels World Markets and Projects predicts that the US will replace Brazil as the leading producer of ethanol for use as a biofuel, largely because it will need to source 75 billion gallons a year, or five times current world production, to meet the Bush administration’s targets.

FTSE4Good and DJSI review index components

Two socially responsible investment (SRI) index families, FTSE4Good and the Dow Jones Sustainability Indexes (DJSI), have implemented the latest annual reviews of the companies they track.

FTSE4Good added 24 companies to its 724-component index group, including Drax Group, which operates Western Europe’s largest coal-fired power station.

Zurich-based asset management company SAM Group’s annual review of the DJSI led to 46 companies being added and 36 removed from the DJSI World Index, which tracks the most sustainable 10% of the 2,500 biggest companies in the world.

California bill could spawn giant REC market

The California Legislature has passed a bill requiring 20% of electricity to come from renewables by 2011, and allowing trading of renewable energy certificates (RECs) to help achieve that goal.

California already has a renewable portfolio standard, requiring utilities and retail power marketers to increase the share of renewables in their portfolios by at least 1% annually, reaching 20% by the end of 2017. SB107 moves the deadline forward to the end of 2010.

In addition, SB107 would allow trading of RECs, which cannot at present be used for compliance. This would include out-of-state RECs that meet certain standards

Chemical industry sets out sustainability plan

The European chemicals industry has developed a 20-year strategy to focus R&D spending on improving the sustainability of the sector.

Industry body SusChem, the European Technology Platform for Sustainable Chemistry, released a 150-page draft action plan at the end of August, detailing the directions that R&D should take if it is to contribute to sustainable economic growth, create job opportunities and protect the environment.

The plan includes a long-term strategy to move away from a dependency on oil, instead exploiting biomass derived feedstocks.

Market seen beating US renewable fuels standard

The US Environmental Protection Agency (EPA) has set out its plans for a Renewable Fuels Standard (RFS), with credit trading, to increase the proportion of biofuels used in the US. However, analysts say market forces will create more demand than the RFS mandates.

The Energy Policy Act of 2005 charged the EPA with establishing an RFS, requiring that a rising proportion of motor vehicle fuel sold comes from renewable sources. In August, the EPA proposed a standard that starts at 3.71% in 2007 and rises to 4.85% in 2012.

“What’s on the books will be largely met by market forces,” said Nathaniel Greene, senior policy analyst in the New York office of the Natural Resources Defense Council.

World Bank raises spending, exceeds target, on renewables

The World Bank is spending $680 million on renewable energy and energy efficiency projects in the 2006 fiscal year. This is an increase of 48% over last year’s commitments, the Bank announced in mid-August, and double the growth rate it promised two years ago.

From July 2005 to June 2006, the Bank and its associated organisations – the International Finance Corporation, the Multilateral Investment Guarantee Agency, its carbon finance operations and the Global Environment Facility – have committed $490 million to energy efficiency and $190 million for new renewable energy projects.

go to Features October 2006