News May 2008

The following are summaries of news stories from the May 2008 print edition of Environmental Finance magazine

EU allowance delays threaten ‘cascade of defaults’

An ongoing delay in the issuance of EU allowances to emitters in the EU Emissions Trading Scheme could lead to “mass-scale default” in the EU emissions market, market participants have warned.

Lionel Fretz, CEO of London-based carbon trading firm and fund manager Carbon Capital Markets, told Environmental Finance that “a lot of our clients traded in the forward market last year for delivery in February”, and owing to the failure of EU governments to issue the allowances, the contracts are now in default. More...  

ADB rejects Bangladeshi coal project

The Asian Development Bank has pulled the controversial Phulbari coal project from its pipeline.

The proposed $3 billion project involves London-listed GCM Resources establishing an openpit coal mine and up to 1,000MW of coal-fired power generation in north-western Bangladesh. The plan has raised concerns about local pollution, climate change impacts and human rights. More...  

Global food crisis threatens EU biofuels target

The European Commission’s target to use 10% biofuels in petrol and diesel by 2020 has come under pressure from rocketing food prices and shortages in developing countries.

Most of the feedstocks for producing bioethanol and biodiesel are also foodstuffs, such as maize (corn), soy and palm oil. The prices of almost all agricultural commodities have soared this year, with some blaming a shift to biofuels. More...

Credit crunch hits clean energy financing

New investment in clean energy fell sharply in the first quarter of 2008, according to figures from New Energy Finance, while mergers and acquisitions activity jumped dramatically – indicating that contracting financial liquidity is making its effect felt. However, the Londonbased analysis company is holding to its 2012 investment forecasts, maintaining that the “fundamentals remain strong”.

Just $807 million was raised on the public markets, down from $5.2 billion in the first quarter of 2007,while private equity and venture capital investment dropped to $2.4 billion, down from $3.7 billion. More...  

US power firms go on solar spree

US power developers and utilities this month signed a series of solar deals worth billions of dollars, as the firms seek to supply their own customers with solar power and exploit global opportunities.

AES Corporation and private equity firm Riverstone Holdings led the pack, launching a joint venture that plans to invest up to $1 billion into photovoltaic solar projects around the world. More...  

EU emissions data helps drive allowance prices

Carbon dioxide (CO2) emissions from installations in the EU Emissions Trading Scheme rose 1% in 2007, catching most participants in the European emissions market by surprise, it emerged at the start of April. A decline in emissions had been widely expected,owing to a milder-than-usual winter last year, plentiful hydro reserves, cheaper gas prices in the summer (which would have encouraged more gas-burn in place of coal for power generation) and a slowing economy in the second half of the year.

Analysts have thus extrapolated that the cap on emissions over Phase II (running from 2008 to 2012) will be even tougher than initially thought. Deutsche Bank analysts Mark Lewis and Isabelle Curien calculate that 2007 emissions – including installations that have since joined the scheme – will reach 2,247 Mt CO2, compared with an annual cap of 2,083 Mt over 2008–12. More...  

Investor to market Guyanese forest’s ecosystem services

Canopy Capital has signed a deal tomarket the ecosystem services provided by 371,000 hectares of rainforest in Guyana.The London-based private equity firm, established last year by UK charity the Global Canopy Programme (GCP),hopes the deal will lead to a proper value being placed on the‘utility’ services provided by rainforests, such as sequestering and storing carbon, generating rainfall, storing water and providing biodiversity.

“Science is showing us is that forests are like global utilities that we all use but don’t pay for. Currently, forests are worth more dead than alive. we don’t know their value economically,” said Andrew Mitchell, executive director of the GCP and a partner in Canopy Capital. More...  

IMO proposes ship emissions offset scheme, eyes CDM

The International Maritime Organisation (IMO) is to consider using an emissions trading scheme (ETS) to control the greenhouse gases produced from shipping, as well as an offset scheme which would tap into the Kyoto Protocol’s Clean Development Mechanism.

Despite ruling out the use of emissions trading to control other pollutants, such as sulphur dioxide and nitrogen oxides, the IMO’s Marine Environment Protection Committee (MEPC) decided at a meeting in April to work on proposals for an ETS to tackle carbon dioxide, which it would consider alongside other control measures at the next MEPC meeting. More...  

New regulations to boost US wetlands market

The size of the US wetland banking mitigation market is set to treble, following new regulations likely to transform the emergingecobusiness. On 10 April, the US Army Corps of Engineers and the Environmental Protection Agency jointly released regulations that promote wetland mitigation banking while pushing back its competitors.

The endorsement is expected to increase the number of mitigation banks operating in the US from 500 to 1,500 within the next three to five years, said Rich Mogensen, a wetland scientist and past president of the National Mitigation Banking Association. More...  

Ceres attacks Wall Street ‘inconsistency’ on climate change

Mutual fund providers such as Morgan Stanley are “inconsistent” on climate change, voting against shareholder resolutions on global warming, even though they offer products and invest in the opportunities it poses, such as clean energy, according to a report by Ceres.

The investor and environmentalist coalition analysed the proxy voting patterns of 1,285 mutual funds offered by 62 firms, and found that opposition to shareholder resolutions on climate change fell between 2004 and 2007. More...  

RAN slams Citi, BoA on coal financing

Despite big-number climate change commitments, Citi and Bank of America are continuing to bankroll the coal sector, according to a report by the Rainforest Action Network.

It argues that Citi and Bank of America, while making headline-grabbing commitments on climate change, “are directing the lion’s share of their energy financing resources into an out-of-date energy infrastructure, based on coal and other fossil fuels”. More...  

Babcock & Brown pitches 2.2GW of wind assets

Babcock & Brown Wind Partners has put up for sale 2.2GW of European wind energy assets, and has appointed Deutsche Bank and JP Morgan to advise on the disposal of some or all of the portfolio.

The Australia-listed wind energy developer hopes that the sale will “demonstrate and capture currently unrecognised value”, leading to speculation that it will settle for a partial sale to provide a pricing point for the rest of its book, while others suggest it is looking to take advantage of prices for wind assets “that will never be higher”. More...  

Electricity users, generators at odds over ETS

The International Federation of Industrial Energy Consumers is calling for an overhaul of the EU EmissionsTrading Scheme (ETS), moving away from auctions of allowances towards free allocations based on a system of ‘benchmarking’ – a proposal slammed by generators.

Under proposals from the European Commission, as part of a package on how the bloc will meet its climate and renewable energy targets, auctioning in the EU ETS will be ramped up from a maximum of 10% in Phase II (2008–12) – although only a few member states have chosen to take up the option – to 100% by the end of the 2013–20 phase. Electricity generators would be expected to buy all their allowances from the first year of the phase. More...  

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