January 19, 2009
Bowen Capital Management, an Asia-focused asset manager, says the financial crisis may benefit alternative energy and waste management companies—the type of companies the investor is now targeting.
Jeremy Higgs, who manages the $30 million Green Dragon Fund for the Hong Kong-based Bowen, told Reuters news agency that government fiscal stimulus packages will drive spending on environmental technology. The Green Dragon Fund lost 53% in U.S. dollar terms in 2008 after a 44% gain in 2007.
Higgs is keen on companies in renewable energy and waste management, and says potential areas for investment include makers of high-storage capacity batteries and developers of technology for the capture and storage of carbon. 'Smart grids'—the use of intelligent meters to monitor electricity consumption—is another area of interest.
Bowen's green hedge fund, which invests mostly in pure energy plays, holds stakes in Japan Wind Development Co., the Singapore-based tech firm Hyflux Ltd. and the Philippines geothermal firm Energy Development Corp.
NEWS - Commodites, Agriculture, Green Investment - NEWS
1/27/2009
1/13/2009
Ex-Lahde Capital team running sustainability strategy
Andy Springer, the former chief operating officer at Los-Angeles-based Lahde Capital Management, and his operations team, have joined forces with portfolio manager Pamela Schwab to found Santa Monica-based Resolve Capital.
Resolve currently runs one hedge fund, the Resolve Eco Fund, a long/short fund targeting investments in businesses that provide solutions to environmental, social, health and economic problems, globally. It has a minimum investment of $250,000
and a 2/20 fee structure.
To coincide with the launch of the new firm, the fund, which has been running with proprietary capital since December 2005, is now open to outside investors. According to Springer, the fund is targeting capital of $100m.
Springer and Schwab both previously worked at Los-Angeles based hedge fund powerhouse Dalton Investments. Springer worked on operations and Schwab on the firm’s global hedged equity strategy.
Springer’s most recent employer, Andrew Lahde, is best known as the hedge fund manager who made 1,000% betting against the US subprime market in 2007
Resolve currently runs one hedge fund, the Resolve Eco Fund, a long/short fund targeting investments in businesses that provide solutions to environmental, social, health and economic problems, globally. It has a minimum investment of $250,000
and a 2/20 fee structure.
To coincide with the launch of the new firm, the fund, which has been running with proprietary capital since December 2005, is now open to outside investors. According to Springer, the fund is targeting capital of $100m.
Springer and Schwab both previously worked at Los-Angeles based hedge fund powerhouse Dalton Investments. Springer worked on operations and Schwab on the firm’s global hedged equity strategy.
Springer’s most recent employer, Andrew Lahde, is best known as the hedge fund manager who made 1,000% betting against the US subprime market in 2007
1/12/2009
GFX Alternatives Launches Renewable Energy Investment Portfolio
January 12, 2009 FinAlternatives
New York-based asset management firm GFX Alternatives has created a multi-manager portfolio to invest in the alternative energy investment sector. The new platform will allocate assets to investment managers who specialize in a broad spectrum of alternative energy opportunities.
The firm is led by veteran hedge fund executives Laura louise Duffy and Anric Blatt.
“Throughout the world there is an energy revolution occurring that is driving public and private investments into the alternative energy arena,” said Duffy, CEO of GFX Group. “Investments in alternative energy solutions are aimed at achieving energy independence while reducing environmental damages.”
“Increased spending in alternative energies and renewable resources will cause significant economic growth and prosperity for the companies embracing this change, yet very few asset management companies exist to explore, develop and profit from this phenomenon,” said Anric Blatt, chairman of GFX.
GFX Alternatives will being accepting outside investors at the end of the first quarter, and aims to cap assets in the new strategy at $1 billion.
GFX Alternatives is a member of the Global Fund Exchange Group, an alternative investment management business that is focused on the alternative energy and renewable resources sectors. The firm is headquartered in New York and has offices in Hong Kong and Singapore. The firm’s mission statement is “People, Planet, and Profit.”
New York-based asset management firm GFX Alternatives has created a multi-manager portfolio to invest in the alternative energy investment sector. The new platform will allocate assets to investment managers who specialize in a broad spectrum of alternative energy opportunities.
The firm is led by veteran hedge fund executives Laura louise Duffy and Anric Blatt.
“Throughout the world there is an energy revolution occurring that is driving public and private investments into the alternative energy arena,” said Duffy, CEO of GFX Group. “Investments in alternative energy solutions are aimed at achieving energy independence while reducing environmental damages.”
“Increased spending in alternative energies and renewable resources will cause significant economic growth and prosperity for the companies embracing this change, yet very few asset management companies exist to explore, develop and profit from this phenomenon,” said Anric Blatt, chairman of GFX.
GFX Alternatives will being accepting outside investors at the end of the first quarter, and aims to cap assets in the new strategy at $1 billion.
GFX Alternatives is a member of the Global Fund Exchange Group, an alternative investment management business that is focused on the alternative energy and renewable resources sectors. The firm is headquartered in New York and has offices in Hong Kong and Singapore. The firm’s mission statement is “People, Planet, and Profit.”
1/09/2009
Investments For An Obama Administration
December 15, 2008 - David Kurzman
By David Kurzman -- We have been inundated with questions from investors wanting to know how to position their portfolios to benefit from an Obama Presidency. The talking heads on CNBC, Fox Business, and MSNBC are throwing around words like “infrastructure” and “renewables” with little real discussion about how exposed or unexposed individual companies may be to the likely trends.
Investing in Regulatory-Driven Businesses
During economic downturns, such as the severe recession we are experiencing, corporate and consumer spending declines are the norm. But businesses that are driven by regulatory requirements, such as pollution control, safety equipment, and mandated purchases of renewable power, are likely to experience a muted downturn or even significant growth.
Following eight years of a relatively toothless Environmental Protection Agency (EPA), we expect renewed vigor in environmental legislation as the incoming director will likely be given nearly carte blanche to review the existing regulations. In particular, we hope to finally get resolution related to the Clean Air Interstate Rule (CAIR), which was thrown out by the appellate court late in our current president’s second term.
CAIR was originally issued by the EPA in March 2005, and it was designed to achieve the nation’s largest reduction in air pollution in more than 10 years by regulating the permissible pollution emissions allowed to cross state lines. The key to CAIR was that it would, “…provide health and environmental benefits valued at more than 25 times the cost of compliance” by creating permanent caps on the allowable emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in the Eastern U.S. These gases are chief contributors to the production of acid rain and smog, respectively.
The Clean Air Mercury Rule (CAMR), which is closely related to CAIR, was the U.S.’s first federally mandated requirement for coal-fired electric utilities to reduce their emissions of mercury (which is released from coal when burned). But in July of 2008, a three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit ruled unanimously that the EPA overstepped its authority by instituting rules that would have established a cap-and-trade system for soot and smog. These are major components of the underlying rules. To add insult to injury, the court ruling came on the same day that the administration said it would take no steps under the Clean Air Act to regulate greenhouse-gas emissions that contribute to warming, even though the EPA formally announced that it would ask for public comment on the matter.
With the Supreme Court’s recent ruling that the EPA must regulate carbon dioxide emissions as a pollutant, we expect resolution for CAIR and CAMR soon. The Obama administration will very likely address the “fatal flaws” mentioned by the U.S. Court of Appeals and develop either by executive order or regulatory promulgation a stronger rule. In fact, a national cap and trade regime for carbon dioxide emissions (which was not covered by CAIR or CAMR) will set a precedent for revisions to CAIR and CAMR. That was a long way of saying that pollution abatement companies are positioned to benefit. Specifically, producers and suppliers of activated carbon, which is an inexpensive and market-tested way to reduce mercury and similar pollutants from coal-fired power plant emissions, are likely to benefit. There are few domestic suppliers of activated carbon (AC), and China, which until recently was a net exporter of AC (subject to a US importation tariff), has recently become a net importer of AC due that nation’s growth in new coal-fired power plants. Besides Calgon Carbon (CCC), the most promising micro-cap company we have reviewed is tiny and illiquid ADA-ES (ADES).
ADA-ES manufacturers and installs AC injection systems (the razor) and currently buys AC (the razor blade) for pollution abatement. This small-fry company has garnered nearly half of the market sales of AC injection systems, and has already broken ground on a new AC production facility at the mouth of a lignite mine in Louisiana. Interestingly, initial financing for this facility has been provided by former Goldman Sachs bankers that left to start their own fund.
We have met with ADA-ES’s management a few times and always came away feeling confident that they were the right management to execute a project of this magnitude. This is why we continue to hold a small position of ADA-ES in the KCR© Strategic Portfolio. We would like to increase the position materially, but the lack of liquidity in ADES shares and our own mandate that no position represent more than one trading day’s volume, limits our exposure at this time. We will revisit Calgon Carbon in the months to follow as there may be an opportunity there.
Renewable Portfolio Standards
There is another kind of regulatory-driven business that will likely grow and encompass the entire U.S. economy under an Obama Administration. Specifically, we are referring to the growing likelihood that a national Renewable Portfolio Standard (RPS) will be established.
Currently, about 27 states and the District of Columbia have each passed their own RPS, which mandates a specific level of electricity must be generated by renewable power sources in those states by a set date or dates. But no two state’s standards are the same. For instance, New York requires Investor-Owned Utilities to generate or acquire 25% of its delivered electricity from renewable sources by 2013. Renewable power sources, according to the New York standard, include: Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Fuel Cells, Anaerobic Digestion, Tidal Energy, Wave Energy, Ocean Thermal, Ethanol, Methanol, and Biodiesel. Also, approximately 19.3% of the target will be derived from existing renewable energy facilities (namely existing hydropower from the likes of Niagara Falls!) and 1% of the target is expected to be met through voluntary green power sales. So New York State has allowed itself to start with about “19.3% achieved,” with another 5.7% to go.
By comparison, California’s RPS requires Investor-Owned Utility, Electric Service Providers, Small and Multi-Jurisdictional Utilities and Community Choice Aggregators to generate or acquire 33% of their electricity from renewable sources by 2020. According to the state of California, qualifying technologies include: Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Geothermal Electric, Municipal Solid Waste, Anaerobic Digestion, Small Hydroelectric, Tidal Energy, Wave Energy, Ocean Thermal, Biodiesel, Fuel Cells using Renewable Fuels.
A national mandate, set in a Goldilocks fashion (“not to high, not too low, just right”) will encompass all states (most southern states burn tons of coal, and they do not have RPS’s), and create a common standard
by which all must adhere.
We expect a national RPS to drive the already-strong solar, wind, geothermal, and other renewable businesses to new heights. We have selected two of the best positioned solar manufacturers, SunPower (SPWR) and First Solar (FSLR), and geothermal power producer Ormat (ORA) for inclusion in our portfolio.
David Kurzman is Managing Partner of Kurzman CleanTech Research and Kurzman Capital. Prior to launching his consulting firm, he served as Managing Partner of Kurzman CleanTech, a five-year-old hedge fund investing in clean technology companies and led the CleanTech Research Group for Panel Intelligence, a primary research firm
By David Kurzman -- We have been inundated with questions from investors wanting to know how to position their portfolios to benefit from an Obama Presidency. The talking heads on CNBC, Fox Business, and MSNBC are throwing around words like “infrastructure” and “renewables” with little real discussion about how exposed or unexposed individual companies may be to the likely trends.
Investing in Regulatory-Driven Businesses
During economic downturns, such as the severe recession we are experiencing, corporate and consumer spending declines are the norm. But businesses that are driven by regulatory requirements, such as pollution control, safety equipment, and mandated purchases of renewable power, are likely to experience a muted downturn or even significant growth.
Following eight years of a relatively toothless Environmental Protection Agency (EPA), we expect renewed vigor in environmental legislation as the incoming director will likely be given nearly carte blanche to review the existing regulations. In particular, we hope to finally get resolution related to the Clean Air Interstate Rule (CAIR), which was thrown out by the appellate court late in our current president’s second term.
CAIR was originally issued by the EPA in March 2005, and it was designed to achieve the nation’s largest reduction in air pollution in more than 10 years by regulating the permissible pollution emissions allowed to cross state lines. The key to CAIR was that it would, “…provide health and environmental benefits valued at more than 25 times the cost of compliance” by creating permanent caps on the allowable emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in the Eastern U.S. These gases are chief contributors to the production of acid rain and smog, respectively.
The Clean Air Mercury Rule (CAMR), which is closely related to CAIR, was the U.S.’s first federally mandated requirement for coal-fired electric utilities to reduce their emissions of mercury (which is released from coal when burned). But in July of 2008, a three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit ruled unanimously that the EPA overstepped its authority by instituting rules that would have established a cap-and-trade system for soot and smog. These are major components of the underlying rules. To add insult to injury, the court ruling came on the same day that the administration said it would take no steps under the Clean Air Act to regulate greenhouse-gas emissions that contribute to warming, even though the EPA formally announced that it would ask for public comment on the matter.
With the Supreme Court’s recent ruling that the EPA must regulate carbon dioxide emissions as a pollutant, we expect resolution for CAIR and CAMR soon. The Obama administration will very likely address the “fatal flaws” mentioned by the U.S. Court of Appeals and develop either by executive order or regulatory promulgation a stronger rule. In fact, a national cap and trade regime for carbon dioxide emissions (which was not covered by CAIR or CAMR) will set a precedent for revisions to CAIR and CAMR. That was a long way of saying that pollution abatement companies are positioned to benefit. Specifically, producers and suppliers of activated carbon, which is an inexpensive and market-tested way to reduce mercury and similar pollutants from coal-fired power plant emissions, are likely to benefit. There are few domestic suppliers of activated carbon (AC), and China, which until recently was a net exporter of AC (subject to a US importation tariff), has recently become a net importer of AC due that nation’s growth in new coal-fired power plants. Besides Calgon Carbon (CCC), the most promising micro-cap company we have reviewed is tiny and illiquid ADA-ES (ADES).
ADA-ES manufacturers and installs AC injection systems (the razor) and currently buys AC (the razor blade) for pollution abatement. This small-fry company has garnered nearly half of the market sales of AC injection systems, and has already broken ground on a new AC production facility at the mouth of a lignite mine in Louisiana. Interestingly, initial financing for this facility has been provided by former Goldman Sachs bankers that left to start their own fund.
We have met with ADA-ES’s management a few times and always came away feeling confident that they were the right management to execute a project of this magnitude. This is why we continue to hold a small position of ADA-ES in the KCR© Strategic Portfolio. We would like to increase the position materially, but the lack of liquidity in ADES shares and our own mandate that no position represent more than one trading day’s volume, limits our exposure at this time. We will revisit Calgon Carbon in the months to follow as there may be an opportunity there.
Renewable Portfolio Standards
There is another kind of regulatory-driven business that will likely grow and encompass the entire U.S. economy under an Obama Administration. Specifically, we are referring to the growing likelihood that a national Renewable Portfolio Standard (RPS) will be established.
Currently, about 27 states and the District of Columbia have each passed their own RPS, which mandates a specific level of electricity must be generated by renewable power sources in those states by a set date or dates. But no two state’s standards are the same. For instance, New York requires Investor-Owned Utilities to generate or acquire 25% of its delivered electricity from renewable sources by 2013. Renewable power sources, according to the New York standard, include: Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Fuel Cells, Anaerobic Digestion, Tidal Energy, Wave Energy, Ocean Thermal, Ethanol, Methanol, and Biodiesel. Also, approximately 19.3% of the target will be derived from existing renewable energy facilities (namely existing hydropower from the likes of Niagara Falls!) and 1% of the target is expected to be met through voluntary green power sales. So New York State has allowed itself to start with about “19.3% achieved,” with another 5.7% to go.
By comparison, California’s RPS requires Investor-Owned Utility, Electric Service Providers, Small and Multi-Jurisdictional Utilities and Community Choice Aggregators to generate or acquire 33% of their electricity from renewable sources by 2020. According to the state of California, qualifying technologies include: Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Geothermal Electric, Municipal Solid Waste, Anaerobic Digestion, Small Hydroelectric, Tidal Energy, Wave Energy, Ocean Thermal, Biodiesel, Fuel Cells using Renewable Fuels.
A national mandate, set in a Goldilocks fashion (“not to high, not too low, just right”) will encompass all states (most southern states burn tons of coal, and they do not have RPS’s), and create a common standard
by which all must adhere.
We expect a national RPS to drive the already-strong solar, wind, geothermal, and other renewable businesses to new heights. We have selected two of the best positioned solar manufacturers, SunPower (SPWR) and First Solar (FSLR), and geothermal power producer Ormat (ORA) for inclusion in our portfolio.
David Kurzman is Managing Partner of Kurzman CleanTech Research and Kurzman Capital. Prior to launching his consulting firm, he served as Managing Partner of Kurzman CleanTech, a five-year-old hedge fund investing in clean technology companies and led the CleanTech Research Group for Panel Intelligence, a primary research firm
Alternatives Manager Expands Environmental Investments TeamWendy Spires
Associate Editor
UK-based alternative asset manager Foresight has appointed Giovanni Terranova as an investment director in its Rome office, boosting the firm's European solar team.
In his new role Mr Terranova will undertake responsibility for identifying and executing transactions for the recently launched European Solar Fund, which invests in solar energy production projects in Italy and Greece and is intended to expand to other southern European markets in the future.
Jamie Richards, who heads Foresight’s Solar Fund said: “We are seeing increasing opportunities in the solar market both in Italy and across southern Europe. Through his knowledge of the renewable energy sector and experience in originating and executing renewable transactions, Giovanni will be a valuable addition to the team as we grow our portfolio of solar infrastructure projects.”
Mr Terranova joins Foresight from Fortis Bank in Milan, where he had been an associate director in the global energy and utilities team since 2005. During his tenure Mr Terranova worked on both conventional and renewable energy projects, latterly specialising in transactions in the wind and solar power sectors, and has arranged the debt financing on deals ranging in size from €20 million ($27.2 million) to €1.3 billion.
The Foresight Group specialises in funding growth companies and small management buyouts across the environmental, infrastructure and technology-led sectors, focusing primarily on investments in unquoted UK and European companies.
Foresight manages over €250 million across a number of funds which include its UK Sustainable Investment Fund, a fund focused on investments in environmental infrastructure.
UK-based alternative asset manager Foresight has appointed Giovanni Terranova as an investment director in its Rome office, boosting the firm's European solar team.
In his new role Mr Terranova will undertake responsibility for identifying and executing transactions for the recently launched European Solar Fund, which invests in solar energy production projects in Italy and Greece and is intended to expand to other southern European markets in the future.
Jamie Richards, who heads Foresight’s Solar Fund said: “We are seeing increasing opportunities in the solar market both in Italy and across southern Europe. Through his knowledge of the renewable energy sector and experience in originating and executing renewable transactions, Giovanni will be a valuable addition to the team as we grow our portfolio of solar infrastructure projects.”
Mr Terranova joins Foresight from Fortis Bank in Milan, where he had been an associate director in the global energy and utilities team since 2005. During his tenure Mr Terranova worked on both conventional and renewable energy projects, latterly specialising in transactions in the wind and solar power sectors, and has arranged the debt financing on deals ranging in size from €20 million ($27.2 million) to €1.3 billion.
The Foresight Group specialises in funding growth companies and small management buyouts across the environmental, infrastructure and technology-led sectors, focusing primarily on investments in unquoted UK and European companies.
Foresight manages over €250 million across a number of funds which include its UK Sustainable Investment Fund, a fund focused on investments in environmental infrastructure.
1/02/2009
WaterAid chosen for 2008 charity appeal
By Martin Dickson
Published: September 24 2008 16:13 | Last updated: September 24 2008 16:13
The Financial Times has selected WaterAid, which helps some of the world’s poorest people get access to safe water and sanitation, for its 2008 seasonal charity appeal to readers.
The seasonal appeal, which runs from November to mid-January, raised over £2.2m in the last two years for Camfed International, which supports the education of girls in Africa.
WaterAid was chosen for this year in a vote of FT staff around the world. The partnership was announced Wednesday by Barbara Frost, chief executive of WaterAid, at the United Nations High Level Event in New York. This brings together world leaders to assess progress towards the UN millennium development goals - targets for reducing poverty by 2015.
Ms Frost said that in New York she would be “addressing world leaders, calling on them to prioritise water and sanitation and recognise their essential role in reducing poverty. By choosing WaterAid for this year’s seasonal appeal the Financial Times’ staff have given recognition to the importance of our work.”
Lionel Barber, the FT’s editor, said: “We are delighted to be supporting WaterAid. Water issues are becoming an increasingly urgent issue globally - and we hope to use the campaign to help put this further up the global agenda.”
Founded in the UK in 1981, WaterAid works in 17 countries in Africa, Asia and the Pacific region and has fund-raising and policy offices in London, New York and Melbourne.
It estimates that over 1bn people do not have access to safe water while over 2.5bn lack adequate sanitation - many of them in urban slums. Diarrhoeal diseases caused by dirty water and poor sanitation, such as cholera, typhoid and dysentery, are common across the developing world. Water-related diseases are the second biggest killer of children, claiming 5,000 lives a day.
WaterAid helps communities set up and manage their own water and sanitation systems. The communities contribute their own labour and materials to help keep the cost of projects low and develop a sense of local responsibility for their management.
The charity also promotes hygiene education and campaigns for the adoption of a more integrated approach to development that recognises the importance of water and sanitation in reducing poverty.
Copyright The Financial Times Limited 2008
Published: September 24 2008 16:13 | Last updated: September 24 2008 16:13
The Financial Times has selected WaterAid, which helps some of the world’s poorest people get access to safe water and sanitation, for its 2008 seasonal charity appeal to readers.
The seasonal appeal, which runs from November to mid-January, raised over £2.2m in the last two years for Camfed International, which supports the education of girls in Africa.
WaterAid was chosen for this year in a vote of FT staff around the world. The partnership was announced Wednesday by Barbara Frost, chief executive of WaterAid, at the United Nations High Level Event in New York. This brings together world leaders to assess progress towards the UN millennium development goals - targets for reducing poverty by 2015.
Ms Frost said that in New York she would be “addressing world leaders, calling on them to prioritise water and sanitation and recognise their essential role in reducing poverty. By choosing WaterAid for this year’s seasonal appeal the Financial Times’ staff have given recognition to the importance of our work.”
Lionel Barber, the FT’s editor, said: “We are delighted to be supporting WaterAid. Water issues are becoming an increasingly urgent issue globally - and we hope to use the campaign to help put this further up the global agenda.”
Founded in the UK in 1981, WaterAid works in 17 countries in Africa, Asia and the Pacific region and has fund-raising and policy offices in London, New York and Melbourne.
It estimates that over 1bn people do not have access to safe water while over 2.5bn lack adequate sanitation - many of them in urban slums. Diarrhoeal diseases caused by dirty water and poor sanitation, such as cholera, typhoid and dysentery, are common across the developing world. Water-related diseases are the second biggest killer of children, claiming 5,000 lives a day.
WaterAid helps communities set up and manage their own water and sanitation systems. The communities contribute their own labour and materials to help keep the cost of projects low and develop a sense of local responsibility for their management.
The charity also promotes hygiene education and campaigns for the adoption of a more integrated approach to development that recognises the importance of water and sanitation in reducing poverty.
Copyright The Financial Times Limited 2008
TORTUOUS ROUTE TO COPENHAGEN
Financial Times
1988 Intergovernmental Panel on Climate Change set up for the world’s leading climate scientists to report on global warming.
1992 Earth Summit in Rio, at which nations including the US sign up to the United Nations Framework Convention on Climate Change, requiring them to take action to combat climate change.
1997 After tortuous negotiations, the Kyoto protocol to the UNFCCC is agreed, setting out the commitments to emissions cuts required to fulfil the parent treaty. Developed countries must cut their emissions by an average of
5 per cent compared with 1990 levels by 2012. The US signs the protocol but fails to ratify it.
2001 President George W. Bush explicitly rejects the Kyoto protocol and casts doubt on the scientific basis of climate change.
2005 The Kyoto treaty comes into force after Russia ratifies it. The UK’s Tony Blair makes climate change a priority for the summit he hosts of the Group of Eight industrialised nations.
2007 The US agrees at the G8 summit to start negotiations with the UN for a framework to replace the Kyoto protocol after 2012. At a UN meeting in Bali, Indonesia, governments set out the “Bali roadmap” for two years of talks on a new agreement.
2008 The European Union passes a package of measures to cut emissions by 20 per cent by 2020, compared with 1990 levels, and offers to raise the reductions to 30 per cent if other countries also agree to cuts. The UN meets at Poznan, Poland, to set out the timetable for a year of final negotiations on a successor to Kyoto.
2009 Representatives from 190 countries will meet in Bonn, headquarters of the UNFCCC, in April and June to hammer out the details of a deal, including publishing a draft text. In September, world leaders are due to meet at the UN General Assembly in New York to discuss the plans. December brings a UN conference in Copenhagen where a final agreement is intended to be forged on a Kyoto replacement.
2010-12 If an agreement is reached, countries submit it to their domestic legislatures for approval.
2012 Current provisions of the Kyoto protocol expire.
‘As night from day’
By Fiona Harvey - Financial Times
Published: January 1 2009 19:49 | Last updated: January 1 2009 19:49
Poznan, a grey industrial city in the west of Poland, was the appropriately bleak venue for United Nations talks last month that marked the halfway point in a two-year effort to forge a new global response to climate change. Delegates from the 180 nations represented were acutely aware that negotiations were stuck in a holding pattern.
Only one topic of conversation had the power to quicken people’s interest – Barack Obama. The US president-elect did not, of course, attend – that would have been an unthinkable breach of protocol. Yet his presence seemed pervasive. The change in the White House promises to be the single most important factor governing the world’s approach to tackling what many governments and scientists regard as the biggest problem of the century.
Ban Ki-moon, secretary-general of the UN, told delegates: “Yes, the economic crisis is serious. Yet when it comes to climate change, the stakes are even higher. The climate crisis affects our potential prosperity and our peoples’ lives, both now and far into the future.” With this year intended to bring a new global agreement to curb global warming, he added agitatedly: “We must keep climate change at the top of national agendas.”
For the past eight years, while evidence for humanity’s role in warming the earth has piled up and the consequences have started to become clear, negotiations on a global framework for cutting emissions have stalled. The US, historically the world’s biggest emitter, under President George W. Bush firmly opposed the Kyoto protocol – the world’s only treaty on emissions cuts – or any possible successor. Washington refused until late 2007 to enter into UN talks on a future agreement.
The current Kyoto provisions, binding developed nations to cut their emissions by an average of 5 per cent from 1990 levels, expire in 2012. The UN has warned that unless a successor treaty could be agreed by the end of 2009, there would be little chance of governments having time to ratify it before the 2012 deadline.
For delegates used to the glacial pace of climate negotiations – which have been going on since 1992 – the change in the White House offers the best hope yet of real movement. “It will be as different as night from day,” promised Senator John Kerry, the former Democratic presidential candidate and member of the Obama camp, who attended the talks in order to report back to the president-elect. “Obama has made clear he supports a mandatory target [on global emissions reduction]. This is a significant departure from where we have been to date.”
As well as pledging to negotiate an international deal, Mr Obama supports a cap-and-trade system to limit carbon dioxide emissions within the US. During his campaign, he advocated cuts that by 2020 would return the US to the emissions levels of 1990. He has also called for an overhaul of US industry to set it on a low-carbon path, which would require a $150bn (£104bn, €106bn) investment in renewable energy and create millions of jobs. This would form a central plank of his much-vaunted stimulus package to revive the national economy.
Indeed, while the Poznan powwow was under way, Mr Obama gave further proof of the seriousness of his intent by appointing a team of prominent climate change scientists and administrators who will carry out his environmental policies (see below). But although the change in the White House and the subsequent actions of the president-elect have proved everything that the European Union, the UN and other supporters of action on emissions could hope for, an agreement at the conference in Copenhagen scheduled for December is far from a foregone conclusion.
For an agreement to be struck, UN officials say, several components are essential: setting a mid-century goal on global emissions cuts; a goal for cuts by 2020, probably only for rich countries; separate commitments, falling short of absolute cuts in greenhouse gases, for poorer countries; and a means of transferring technological know-how and finance for low-carbon technologies to the developing world.
Of these, the most problematic is agreeing what actions developing countries must take. Until recently, rich nations were responsible for the lion’s share of greenhouse gas emissions. But in the past decade, emissions from poor countries have risen to outstrip those of the developed world. China is now the world’s biggest annual emitter and India rivals European Union countries, with Brazil, South Korea and Mexico following close behind.
Poor countries had no obligation to cut their emissions under Kyoto and many are reluctant to shoulder such responsibilities in any replacement agreement, arguing that their per capita emissions are still much lower than those of their richer counterparts.
A successful outcome this year depends on a settlement between the developed and developing world. Mr Kerry made this clear, saying: “We will not pass a treaty unless it is global. All countries need to be on notice.” But the Poznan meeting ended in discord, with a few developing countries accusing rich nations of selfishness and failing to take responsibility for global warming. Yvo de Boer, executive secretary of the UN Framework Convention on Climate Change and the UN’s top climate change official, said: “Poznan achieved what it was supposed to but it ended on a rather grim note . . . It’s a worrying sign that people are taking up positions for a hard negotiation.”
Among developed countries, there is broad consensus that a halving of global emissions by 2050 will be needed, probably implying much bigger cuts – of about 80 per cent – from rich countries, and that substantial cuts in their emissions by 2020 will be necessary to meet such a goal.
Yet, even among the coalition of the fairly willing, there are stark differences. After some wrangling, the EU in December agreed cuts of 20 per cent, compared with 1990 levels, by 2020, and offered to raise this to 30 per cent if other countries joined in on an agreement – even if those others fell short of such stringent targets. But countries such as Japan and Canada, the traditional allies of the EU on Kyoto, have failed to come up with similar targets. Australia, a more recent convert, has set itself a target reduction of only 15 per cent from 1990 levels by 2020.
The US has yet to come up with a medium-term emissions goal. Mr Kerry set out an ambitious possible goal in Poznan when he quoted scientific advice that cuts of 25-40 per cent by 2020 were necessary. “Europe can be a very important partner in helping us to achieve that,” he said. Such a target is far above what Mr Obama promised on the campaign trail but is in line with the advice of the Intergovernmental Panel on Climate Change.
It may be possible for Mr Obama to agree such a target, based on the advice of his scientists, but to pass into law it will have to be ratified domestically. Some lawmakers from heavily industrial or coalmining states are reluctant to agree to targets they fear will penalise their industries.
Then there are the countries that environmentalists regard as troublemakers. “We must not forget Saudi Arabia,” said Angela Anderson, director of international global warming at the Pew environment group in the US. The oil-producing country has a history of disrupting UN climate negotiations, though recently it has taken steps to invest in renewable energy. The Saudis “will continue to pose some real challenges in the negotiations”.
Russia is another potential dealbreaker. Moscow played a vital role when, in 2004, it provided the final ratification needed for the Kyoto protocol to come into effect, in exchange for EU support for its membership of the World Trade Organisation. But, rich in fossil fuels, it may perceive its interests lie elsewhere this year.
With so much still unresolved, is the deadline of December for the conclusion of talks realistic? Some think there is still too much to do. As the UN’s Mr de Boer put it at Poznan: “I don’t think that where we are now it’s going to be foreseeable to produce a fully elaborated and comprehensive agreement in Copenhagen.”
A further factor clouding the talks is the financial crisis. Mr Obama has become the foremost proponent of the argument, also espoused by the EU, that restructuring the economy along low-carbon lines – such as by improving energy efficiency, investing in renewable energy sources and electric vehicles and using new methods of building construction – both offers a way out of the current economic quagmire and lays a sound foundation for growth in the coming decades.
Critics say such a strategy also provides the best hope of regenerating developed-country economies in a form less vulnerable to competition from rapidly industrialising countries such as China, which are markedly higher in carbon per unit of output. Others argue that tackling climate change should be delayed while the economy recovers, by which time counter-carbon measures will have become cheaper.
But as the clock ticks on hopes for an agreement, and the effects of the financial crisis grow more pronounced, forging a deal that aligns economic solace with environmental imperatives becomes harder. Mr Obama acknowledged as much when he made global warming one of the first concerns of his presidency.
Mr de Boer is insistent that agreement on a target for emissions cuts still needs to come this year, even if the talks spill into 2010. “What we need to achieve in Copenhagen is clarity on key political issues so that everything after that is filling in the details.”
If, some might ask, taking delegates to Poznan, one of Europe’s more polluted cities, failed to concentrate minds, what hope of even an outline accord being struck in the clean Danish capital? The answer will depend to a big extent on the way the political wind blows in Washington during Mr Obama’s first year.
OBAMA’S GREEN APPOINTMENTS: ‘THEY WILL TELL THE PRESIDENT AND THE AMERICAN PEOPLE THE TRUTH’
Two key appointments by President-elect Barack Obama show how differently climate change will be treated under the new US administration.
Steven Chu, a Nobel prize-winning physicist, was named head of the Department of Energy. Mr Chu, director of the Lawrence Berkeley national energy laboratory in California, has warned of imminent catastrophe if the world does not drastically and urgently reduce its greenhouse gas emissions.
Barack Obama with Steven Chu, appointed to be energy secretary
He is a member of the Copenhagen Climate Council, a group of scientists and business leaders pressing for a worldwide agreement to replace the Kyoto protocol.
John Holdren, a Harvard professor of environmental policy, is to be chief adviser to the president on science. He formerly advised President Bill Clinton and has long studied how to develop a scientific understanding of the causes and consequences of climate change into specific policies to tackle the problem.
Under President George W. Bush, scientists including James Hansen, head of Nasa’s Goddard Institute, complained that their work on climate change was suppressed or censored by the administration. One White House political adviser caused a scandal by appearing to water down scientific advice on the severity of climate change in a leaked document.
Jonathan Lash, president of the World Resources Institute, a Washington think-tank, describes Mr Chu and Prof Holdren as “outstanding scientists of enormous integrity”, adding: “They will tell the president and the American people the truth about the scientific findings on our most important challenges. Each of them has shown a deep understanding of the risks created by human pressure on our environment and each has experience and skill in helping policymakers understand and base their decisions on science.”
Environmental groups are jubilant at the two appointments and a sprinkling of others including that of Carol Browner, who is to co-ordinate energy and environmental policy from the White House.
As head of the Environmental Protection Agency under Mr Clinton, she fought many battles with a Republican-run Congress for greater powers to curb pollution.
BONES OF CONTENTION: THE KEY QUESTIONS THAT NEED TO BE ANSWERED IN ANY POST-2012 FRAMEWORK
TARGETS:
How far must the world cut its greenhouse gas emissions in order to avoid the worst effects of climate change?
Countries are expected to agree a mid-term goal (for emissions cuts by 2020) and a long-term goal (cuts by 2050).
Scientific advice in 2007 suggested at least a halving of global emissions by 2050 would be necessary to avoid warming of more than 2 degrees, regarded as the limit of safety. But since then, some scientists have argued cuts of 80 per cent or more would be needed.
As for a mid-term goal, the IPCC says cuts of between 25 per cent and 40 per cent by 2020 from developed countries are necessary to avoid dangerous climate change.
The bulk of the cuts are expected to come from developed countries, which have far bigger emissions per capita than the developing world, and are responsible for a greater share of historical emissions.
The EU has agreed to cut its emissions by 20 per cent by 2020, and by 30 per cent if other countries participate in an agreement. Some countries, such as the UK, have set their own long-term targets – in the UK’s case, an 80 per cent cut by 2050. But others have set less ambitious goals: Australia’s is for reductions of 15 per cent by 2020, compared with 2000 levels.
Those yet to come up with clear targets include the US, Japan and Russia.
BURDEN SHARING:
What undertakings will developing countries sign up to?
Developing countries are not expected to sign up to absolute cuts in their emissions in the medium term. Instead, they will be required to make commitments to curb the expected growth in their emissions as they industrialise – in the UN jargon, to “deviate from business as usual”. The effects of their actions must be “measurable, reportable and verifiable” – in other words, they will be monitored to ensure they live up to their goals.
Little has yet been agreed on the nature of such commitments, how they will be measured and against what benchmarks. Some countries, such as India and Brazil, have argued vociferously that poor nations must be placed under no obligations that could harm their economic growth, and have accused rich governments of selfishness.
But without strong commitments from China and other rapidly industrialising countries, the US and others are unlikely to agree to a deal.
MECHANISMS:
How can emissions be reduced?
Under the Kyoto protocol, a system of emissions trading was set up to help rich countries to meet their targets by financing emissions cuts in poor nations. This has mobilised tens of billions of dollars in finance for poor countries, and encouraged other countries to set up cap-and-trade systems.
But critics say a stronger global cap-and-trade system will be needed, which does not rely, as the current one does, on small emissions-cutting projects gaining approval individually from the UN. Others worry about the potential for fraud, and some argue that a carbon tax or simple overseas aid from rich to poor countries offer a less complex alternative.
WILD CARDS:
Forestry: How can deforestation be avoided?
Deforestation is responsible for about a fifth of greenhouse gas emissions. Not cutting down forests is one of the cheapest ways of avoiding climate change, and brings other benefits such as preserving eco-systems.
But there is no clear agreement at present on how poor countries, which contain most of the world’s remaining rainforests, should be compensated for not exploiting them. Countries such as Brazil and Indonesia will use their forests as a bargaining chip.
Sectoral agreements: How can governments ensure businesses are not placed at a competitive disadvantage?
One idea for a level playing field is for “sectoral agreements” by which the biggest companies in a given sector would sign worldwide or countrywide agreements binding them all to cut emissions relative to a benchmark. This would avoid the problem of “carbon leakage” whereby companies relocate from areas of stringent environmental regulation to more lax regimes.
This will be discussed in 2009, but whether it is included in a final agreement is difficult to predict.
Russia: Will Russia try to impede progress on a deal?
This is a distinct possibility, given Moscow’s tepid response to climate fears and its vast resources of fossil fuels. Russia has taken little part in negotiations to date, and is not obliged to reduce emissions under the Kyoto protocol, but will react if its interests appear threatened.
Copyright The Financial Times Limited 2009
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