News May 2007

The following are summaries of news stories from the May 2007 print edition of Environmental Finance magazine

US Supreme Court rules for action on GHGs

The US Supreme Court has provided a boost for advocates of mandatory controls on greenhouse gas (GHG) emissions – but analysts say the Bush administration is unlikely to move fast to regulate carbon.

By a 5:4 decision on 2 April, the court told the Environmental Protection Agency (EPA) that regulating carbon emissions is indeed its job, and that it should get on with drawing up regulations.

The ruling in the case of the State of Massachusetts et al v EPA et al is a hard loss for the agency, which argued it had no authority to regulate greenhouse gas emissions from vehicles – about 30% of all US carbon emissions, by the EPA’s own accounting – as they are not classed as pollutants under the Clean Air Act.

Bids soar in Repower takeover battle

The takeover battle for German wind turbine manufacturer Repower is moving into “stratospheric” price levels, with analysts saying that some compromise is likely between the two rival suitors, if no clear winner emerges. Suzlon, an Indian wind company, currently holds the upper hand with a €150 ($204)/share offer for Repower announced on 10 April, which values the company at around €1.34 billion.

This tops the €140/share offer from Areva, a French nuclear engineering and electricity transmission company, which launched its takeover bid with an €105 offer on 22 January.

EU ETS data confuse, again

Companies in the EU Emissions Trading Scheme once more emitted less carbon dioxide than they were allocated allowances in 2006, according to preliminary figures published by the European Commission. However, the extent of the oversupply remains unclear because of a lack of clarity surrounding the data released by Brussels.

The 2006 figures, released by the Commission on 2 April from the Community Independent Transaction Log, only covered installations responsible for around 93% of all EU emissions reported in 2005. Figures were not available for Malta and Portugal and only 50% of data from Belgium and Slovakia was made available.

First cat bond issued for flood risk

German insurance giant Allianz has closed the first catastrophe bond to cover river flood risk.

The $150 million bond enables Allianz to transfer potential losses from insurance claims resulting from flood damage in the UK to the capital markets. It also covers earthquake damage in Canada and the US, excluding California.

International pressure grows for post-Kyoto agreement

Climate change should be tackled as a global “security imperative”, argued UK foreign secretary Margaret Beckett during the UN Security Council’s first debate on the issue on 17 April.

Beckett’s intervention was the third serious attempt, since the publication last month of the latest Intergovernmental Panel on Climate Change (IPCC) report, to jump-start international negotiations on climate change.

Talks under way to boost ‘carbon neutral’ credibility

A series of consultation meetings has been launched to discuss whether a common international framework is needed to ensure the credibility of the concept of carbon neutrality. The initiative is in response to concerns over the quality of some projects undertaken to offset emissions.

The meetings follow the publication of a discussion paper from The Climate Group which identified a need for a single international standard for carbon neutrality and proposed the creation of a Climate Stewardship Council (CSC) to oversee the standard and the promotion of any associated hallmark. The paper stressed that no decision has been taken to create such a body and that the name is “highly provisional” but it put forward some ideas on how the CSC might be developed as a basis for stakeholder consultations.

Car emission cuts to cost up to €23 billion

Plans by the European Commission to reduce carbon dioxide (CO2) emissions from new cars to 120 grammes per kilometre by 2012 will cost up to €23 billion, according to an impact assessment published by the Commission.

The assessment – dated 7 February but published in April – estimated it would cost €10 billion–23 billion, or €24–54 a tonne of CO2, to reduce average emissions from around their current levels of 162g CO2/km to 130g/km or less. A further reduction of 10g/km will be won through the increased use of biofuels.

SO2 auction sends ‘bearish’ signal

This year’s annual US auction of sulphur dioxide (SO2) emission allowances, organised by the Environmental Protection Agency on 26 March, did little to interrupt the steady decline in the spot market price.

In the weeks after the auction, the spot price continued to slide and hit a low of $412 in early April. In January 2006, the price was above $1,600. As Environmental Finance went to press on 17 April, however, the price had recovered to around $455.

Duke loses New Source emissions case

The US Supreme Court has ruled against Duke Energy, the country’s third largest power company, in a long-running dispute over emissions from the company’s older generating plants.However, while it has been hailed by environmental groups,the ruling may not have much impact on industry, lawyers and analysts say. “This is a huge win for clean air,” said Fred Krupp, president of Environmental Defense, the non-profit group that brought the action against Duke.The company, however, says it intends to continue its defence in the lower courts, as the 2 April judgement only settles one aspect of the case.

And some lawyers say the ruling – which concerns the interpretation of the New Source Review (NSR) provisions of the Clean Air Act – is less significant than it might appear as NSR is being overtaken by new legislation. “I don’t really think this opinion is that critical,” said Bill Bumpers of Washington law firm Baker Botts. “The NSR is one of the most messed up, least understood, poorly implemented and poorly enforced programmes in the history of the Clean Air Act.”

Emerald raises €135 million into clean-tech fund

Emerald Technology Ventures has closed its second clean technology fund, after raising €135 million ($183 million).

The fund exceeded its original target of €100 million, drawing investments from institutions including GIMV, Rabobank,Credit Suisse, Piper Jaffray, Unilever and Volvo. Venture capital firm GIMV is the main investor in the fund, contributing €30 million.

Swiss Re closes €329 million clean energy fund

Reinsurer Swiss Re has raised €329 million ($447 million) into its European Clean Energy Fund. The private equity vehicle – which the company claims is one of the largest of its type in Europe – will invest in projects which are “environmentally beneficial, generate carbon credits or tradable renewable energy certificates”, the company said.

The fund – which has a 10–year term, and is already 10% invested – provides mezzanine debt financing and equity capital to wind, solar, hydro-electric, geothermal and waste-to-energy projects, among others.

go to Features May 2007