The Green Skeptic on FOX Business: EU Emissions Permits Won't Fly

I sat down with Stuart Varney & Company in the FOX Business Studios this morning to talk about the EU proposal to require airlines to pay to offset carbon through its carbon credit scheme.

This flies in the face a long-standing global effort, which would have more consistent impact.

In other words, this permit scheme won't fly, in my humble opinion.

Here is is the video:




And here is a link if the player doesn't work in your browser: The Green Skeptic on FOX Business

Green Conflict at UN? The Green Skeptic Weighs-in on Fox Business

Questions about business connections of UN climate chief Dr. Rajendra Pachauri and potential conflicts of interest surfaced in the Telegraph earlier this week. The Green Skeptic talks with Elizabeth MacDonald of FoxBusiness:

Obama Tells G20: "I'm Putting a Gag Order on Greenhouse Gases"

LONDON, April 1 - US President Barack Obama today told the leaders of the G20 that he was "putting a gag order on greenhouse gas emissions" and that the US was going to start at home, with Congress and members of his own Administration.

"Today I have imposed a gag order on the most harmful greenhouse gas polluters in the United States," President Obama told the group of leaders gathered in London. "I have put a gag order on certain members of Congress and on members of my own Administration."

In an unusual move, the President revealed details of his plan, which many are calling the "Greenhouse Gag-order," specifically referencing some of the most wasteful CO2 polluters in Washington.

"I have put Representative Barney Frank on notice," Mr. Obama told an enthralled crowd. "Look, it's as simple as this: If he opens his mouth again, he will have to pay a hefty fine."

In addition to Congressman Frank, Chairman of the Financial Services Committee, Mr. Obama named Timothy Geithner in his gag order, suggesting that his Treasury Secretary will only be allowed to speak during the work week. This move may be designed to help curtail the Secretary's long-winded explanations on weekend television news media, which have only exacerbated the financial picture.

"Look, we have to do something about the windbags in Washington," Mr. Obama said. "It is my hope that the Secretary and Mr. Frank will be leaders in putting a cap on the greenhouse gas emissions in our own hallowed halls."

Mr. Obama went on to say that he hoped others in Washington would follow suit, and that he was considering a voluntary carbon credit option to be implemented as early as this summer.

Secretary Geithner, when asked for comment on the President's plan, said, "This is consistent with the Administration's plans to tax wealthy individuals across the board. We feel a carbon cap on loquacious individuals is totally within our reach."

A person close to the Office of the President indicated the Administration was considering similar sanctions on vociferous celebrities, such as Rush Limbaugh, Oprah Winfrey, and Robert Scoble.

Calls made to Rep. Frank's office for comment went unanswered.

President Obama wants to help fight climate change by capping emissions of greenhouse gases such as carbon dioxide, or CO2, from big industries -- and now individuals -- and allowing them to trade rights to pollute. Such systems are commonly called "cap and trade."

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CF Partners in London to Launch Carbon Hedge Fund

Early in 2009, CF Partners of London will launch a new 50 million euro (USD$70.06 million) hedge fund designed to profit from volatility in carbon markets.

The CF Carbon Fund will be one of the first dedicated carbon hedge fund products of which I'm aware. Others will likely follow.

The Fund, according to CF Partners "adopts a relative value and arbitrage-based approach to trading carbon and the correlation of carbon with other global energy markets. It seeks to capitalize on pricing inefficiencies and dislocations in these markets."

The European Union's endorsement of climate goals stretching to 2020 may make the EU's emissions trading scheme a stronger investment, according to Michael Szabo at Reuters, who reported on the announcement in London this morning. And "recent volatility in commodities markets has opened shorting opportunities."

"To date in the carbon space the majority of the players from a fund point of view have been long-only guys," Simon Glossop, one of CF's founders, told Reuters. "That's been a workable model up to this year, but carbon has now become an asset class in its own right instead of a compliance tool."

The global carbon market, which has an anticipated of US$100 billion this year, allows companies to trade rights to emit greenhouse gases.

Carbon prices, which are closely linked to energy prices, have fallen nearly half from a peak price last summer of 29.69 euros (US$41.60), according to Reuters.

Questions surrounding a new global pact on climate and uncertainty about future energy prices has made for a rocky carbon road.

"'The volatility around the market's policy risk is actually good for us from an investor point of view, so we encourage it,' Glossop told Reuters."

Glossop said that "the fund was investing in large hydro projects in China. The fund has a staff of 10 in London, with another employee on the ground in China originating deals." And the fund could grow to 250 million euros (US$350.3 million), but still needs to secure initial investment.

I'm unaware of anything like this starting up in the US, but president-elect Barack Obama's focus on a cap-and-trade program in the US could encourage development of such funds here.

---

CF Partners is a specialised environmental advisory and investments firm. The Firm’s strategic focus is on advisory, sales & trading coverage and fund management with a specialisation on environmental and global carbon products.

For more information: CF Partners Carbon Hedge Fund

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Earth: The Sequel by Fred Krup and Miriam Horn: A Review

Entrepreneurs can save the planet, but they need a cap-and-trade system to do it.

That's the premise of Earth: The Sequel, by Fred Krup and Miriam Horn, and published in March by W.W. Norton.

The authors, the head of Environmental Defense and a journalist now working for the same, respectively, argue passionately on behalf of emissions cap-and-trade as the solution to unleashing the entrepreneurial spirit of Americans (and others) to solve the climate crisis.

They also tell the story of some of "cutting-edge" innovators in the clean energy space, people like Conrad Burke of Innovalight, the solar nanotechnology company, Isaac Berzin, the chemical engineer who co-founded algae-farm biofuel developer GreenFuel Technologies, and the colorful Bernie Karl of Chena Hot Springs, who is trying to capitalize on geothermal energy found below the Alaska bush with the help of Fortune 500 company United Technologies Corporation.

The stories are simply told, some of them compelling, some bordering on boosterism, but the focus on entrepreneurs is welcome. There's nary a whiff of skepticism in these pages, however, which read like a virtual catalog of potential clean tech investments.

I realize the authors don't want to back one technology solution over another -- and the new green economy requires not just one silver bullet but a full chamber -- but a little more critical analysis of the full panoply would have been nice (see Pernick and Wilder's The Clean Revolution for more in-depth analysis of the sector).

Private investment is fine, the authors reason, whether entreprenuer or venture capitalist; however, it can't scale without a cap on carbon emissions. In their view, a cap is the only thing that will make alternative energy more affordable to generate. Without it, we will neither reduce emissions enough nor grow the burgeoning clean tech industry.

"To save the planet from calamity," write Krup and Horn, "innovation and deployment of known technologies must occur now at a pace as intense and a scope as vast as the settlement of the western frontier."

Scientists have determined we need to reduce CO2 emissions by 80 percent by midcentury to "stabilize the global climate." According to the authors, "we must produce at least 14 trillion watts of carbon-free energy by 2050 -- about as much power as we now get from the entire fossil energy business" to reach that goal.

The advantage of a cap is that it puts a true limit on total emissions; the problem is it can lead to higher prices for consumers and windfalls for certain companies.

Companies need the stability and predictability of a cap. As Dupont CEO Chad Holliday, whose company is part of a coalition calling for a national cap, says in a quote from the book, "You need some certainty on the incentives side and on the market side, because we are talking about multiyear investments, billions of dollars that will take a long time to pay off."

A national cap would provide that certainty. We just need to make sure it covers all the carbon economy and that the permits are sold not given away free, as in the current European Union scheme. There is even talk of a cap-and-dividend style program that would make equal payments to all Americans (along the lines of the Alaska Permanent Fund Dividend).

"We have before us an extraordinary opportunity," Krup and Horn conclude. "to harness the power of the United States of America's huge and dynamic markets to ensure a safe future...Enacting a cap on carbon will gather U.S. ingenuity and resourcefulness to serve a higher purpose: protecting this planet for generations to come. We have the talent and a brief window of time to create the world of possibilities. All we need is the resolve."

Higher purpose or base greed, I don't care; let's just get moving on the new green economy.

In the end, as NYC Mayor Michael Bloomberg offers in his advance praise blurb, "Earth: The Sequel makes it crystal clear that we can build a low-carbon economy while unleashing American entrepreneurs to save the planet, putting optimism back into the environmental story."

Global Climate Change: Natsource Buys First California Carbon Credits

Reuters reports that US carbon asset manager Natsource LLC has invested in the first forest-based greenhouse gas emissions reductions under California rules.

Natsource paid a private owner of a redwood forest, the Van Eck Forest Project, in Humboldt County, California, represented by the nonprofit Pacific Forest Trust (PFT) for credits representing 60,000 tonnes of carbon emissions.

The company declined to say how much it paid for the credits, but a source familiar with the deal said Natsource bought the credits for "well below" $10 per tonne.

"The deal illustrates the significant role that management of existing forests can play in addressing climate change," according to a press release from PFT. "The transaction is the first commercial delivery of certified emissions reductions under the Forest Protocols adopted last fall by the California Air Resources Board (CARB).

The Protocols represent the only rigorous governmental accounting standards in the US for climate projects embracing forest management and avoided deforestation, while ensuring emissions reductions are real, permanent, additional and verifiable.

"Today marks a significant milestone for the recognition of the real benefits of conserving and managing U.S. forests to enhance their climate contributions," PFT president Laurie Wayburn said in a statement. "Investing in the power of forests to protect our climate is a practical action that can and should be taken now to reduce CO2 in our atmosphere. We are hoping that deals like this will provide policymakers around the world with the confidence they need to ensure that forestry becomes part of the solution to address climate change."

CARB’s leadership in adopting the Forest Protocols is helping to stimulate a new asset class in global Green House Gas (GHG) emissions markets, validating forests as a cost-effective means to achieve real GHG reductions.

The Forest Protocols, which are administered by the non-profit California Climate Action Registry (CCAR), can be
used as a model to ensure that forests be used to achieve enduring benefits and become a solution in the fight against climate change.

"Until now, forest sequestration has been an untapped asset in the effort to address climate change," said Jack Cogen, Chief Executive Officer of Natsource. "Forestry can and should be an important part of the portfolio of climate change solutions moving forward. This deal illustrates that when rigorous, clear rules are adopted, these investments can reduce costs for our compliance customers and provide what we believe are attractive investment opportunities.

In voluntary carbon deals, such as this one, payments are made for carbon credits, which investors "store" for the day when US government regulates GHG. That will, in theory, drive up prices for the credits.

Deals like this one are risky, however, as there is no guarantee the US will adopt a GHG regulatory scheme or whether they will recognize early actions.

Critics of so-called "avoided deforestation" argue that it is difficult to prove whether landowners would have protected the forest or slowed its harvest without an incentive. Others argue that it is difficult to measure the CO2 sequestered by a standing forest, with trees at varying levels of maturity, compared to a newly forested area with faster growing younger tree species.

Wayburn argues that paying the land owners to let the forest grow back more fully from the last time it was harvested is a valid option and will conform to the state's rules to ensure the reductions are verified.

Meanwhile, Wayburn told Reuters, "The additional revenue stream allows forest owners to take a long-term harvesting strategy rather than a short-term strategy."

Global Climate Change: Bush Weighing Emissions Caps

The Wall Street Journal reports this morning that George Bush and other top officials from his administration, including Treasury Secretary Henry "Hank" Paulson, are exploring a range of options to address climate change. These options may, according the WSJ article by John D. McKinnon, include "some form of economy-wide emissions caps."

The administration has long been opposed to caps, which helped lead to its position on the Kyoto Protocol, citing their opinion that emissions limits would hurt the U.S. economy while giving greater emissions freedom to developing powerhouses such as China and India.

Mr. Bush and his administration seem to be coming around. In May, the President promised to seek an agreement on greenhouse gas reductions on the international stage. Increasing pressure from industry, Congress, and pending international negotiations may be behind the conversion, along with growing concern about what some see as the inevitably of a cap-and-trade system.

Read the full article (registration may be required): WSJ Bush Cap

Global Climate Change: Emerging Leaders, Emerging Solutions Conference, Day One - The Debate About Carbon Trading

Day One of the ELP/NJIT "Emerging Leaders, Emerging Solutions" Climate Change Conference, for which I served on the planning committee. After the initial worry over whether all the panelists would show up for my morning plenary, "Seizing the Day: What We Need to Do to Take Advantage of Climate Change Awareness and Move to Action," and a fire alarm bringing the Q&A to an abrupt end, the day settled into a stimulating series of dialogues. (More specifically on my panel in later post.)

I'm particularly interested in how business and market-based solutions can be applied to address climate change, including such mechanisms as clean tech investments, innovative financing such as green mortgages, alternative energy credits, and energy efficiency.

But the liveliest discussion was around carbon trading and carbon offsets, as Professor Michael Dorsey of Dartmouth squared off with Neil Cohn and Eric Carlson, of Natsource and Carbonfund.org, respectively, on the issue of whether trading and offsets are flawed, failing, or just might solve the climate crisis. While the debate was lively and entertaining, it seemed Dorsey took it to an unfortunate personal level, which degenerated into a "he said, he said" debate, with Cohn and Carlson defending their body of work and attacking Dorsey for calling it into question. (It got pretty nasty.)

I love healthy debate. And, as readers will know from my questioning of the Live Earth concerts, I don't believe that questioning the tactic is the same as attacking the goal. Dorsey, who offered his criticism of the EU program earlier this year in the LA Times has some valid points, including the need for what he called a "Carbon Rescue Fund," which would tax key sectors. And there is no question that cap and trade is flawed. It needs better and consistent regulation (although I'm not convinced the UN is the best entity to serve that purpose) and more rigorous standards for baseline data.

I also don't necessarily agree with Carlson who said that 2-3 million people buying nothing but green power can change the marketplace, change how Wall Street operates and solve climate change.

For this dialogue, however, I would have preferred that the group move quickly from a debate about failure and accusations of fraud to what can be done to improve the system, make it better, and ensure the projects funded by offsets are community based and consider impacts on local people. In short, to make it work.

Global Climate Change: Professor Summers' "Practical Steps" to Tackle Global Warming

Lawrence Summers, the the Charles W. Eliot university professor at Harvard, writing in the Financial Times on Monday, offers a five point agenda for taking on climate change. He starts with the premise that the Kyoto Protocol may be as weak in controlling climate change as the League of Nations was in promoting peace. (A sad, but poignant commentary, with which we agree.)

Here are the main points of professor Summers' agenda (highlighted by The Green Skeptic):

"First, the US must engage in an energy efficiency programme that takes effect without delay and has meaningful bite. As long as developing countries can point to the US as a free rider there will not be serious dialogue about what they are willing to do. I prefer carbon and/or gasoline tax measures to permit systems or heavy regulatory approaches because the latter are more likely to be economically inefficient and to be regressive. The key point is that after Kyoto, where there was US vision in setting goals but no on-the-ground action, there must be real policy commitments.

"Second, the major industrial countries should commit to a very large increase in funding for research in technologies that offer the prospect of reducing the concentration of greenhouse gases, such as renewable energy, carbon sequestration and energy efficient engines. They should also learn a lesson from the pharmaceutical experience and commit to making intellectual property relating to clean energy available to developing countries on preferential terms. It may be that ambitious emissions- reduction targets can be achieved with existing technology, yet new technologies could help.

"Third, the World Bank, and probably the regional development banks, should be reconstituted by their shareholders as “Banks for Development and the Global Environment” and take on as a major mission the provision of subsidised capital for projects that have environmental benefits that go beyond national borders. There is much that can be done to encourage energy efficiency in almost every sector within developing countries, yet national governments have inadequate incentives to take account of global impacts. Moreover, the institutions need a new role with respect to countries other than the poorest ones at a time when the leading developing countries are actually exporting rather than importing capital.

"Fourth, a goal should be set of eliminating by 2025 the more than $200bn the world spends each year on energy subsidies, and enforced through strategies such as those used for inappropriate subsidies in trade. This is a clear case where environmental and economic imperatives coincide and it is one where external political commitment is likely to be desirable in many countries, just as in the trade area. This will require considerable work on the definition of and measurement of total energy subsidies. Such work will lay a foundation for the more ambitious efforts that may be needed in harmonising world energy prices above market levels in the future.

"There is a final critical process element in the policy response. Given that viable solutions depend on significant changes in developing country policies and that these countries are unlikely to make them unless they see their own interests as at stake, it is essential that they be full participants in setting the global direction. They are surely likely to do more if they can help shape policy than if it is simply the Group of Seven leading industrialised nations seeking to bring them along."

We like this kind of thinking at The Green Skeptic.

Read the full article in FT: Summers

Global Climate Change: Energy Giant Backs Climate Trading at APEC Forum

Angela MacDonald-Smith of Bloomberg News reports that Russell Caplan, chairman of Royal Dutch Shell in Australia called for global carbon trading to set a price on carbon and allow for investments in new energy-supply projects while reducing emissions. According to the article, which appeared in yesterday's International Herald Tribune, Caplan said Monday at the Asia-Pacific Economic Cooperation energy business forum in Darwin, "that while the European Union's carbon trading system is 'a good start,' a worldwide plan is required."

"'Market mechanisms are likely to be the most effective means of implementing change,' Caplan said at the forum. 'Trading needs to become global to become truly effective and establish a clear market price for CO2 that will be factored into the investment evaluations of the new technologies and energy conservation measures that we need for a low-carbon future.'"

Read the full article here: Energy

Access Mr. Caplan's speech: Caplan

Global Climate Change: IPCC Says It's Possible to Mitigate Climate Change, Minimize Costs

The latest report issued last week by the UN International Panel on Climate Change (IPCC), a group of climate science experts, outlines the best ways to mitigate climate change. Their conclusion? We have what it takes to mitigate climate change and minimize the costs.

Working Group III's Report "Mitigation of Climate Change" (click here for a PDF Summary for Policymakers) is the third segment of the larger IPCC report. The first, released in February, concluded that global warming is almost certainly human-caused and the second, which came out in April, warned of the consequences already occurring and yet to come such as massive human death and disease, droughts, floods, and storms.

The new report proposes limiting concentrations of greenhouse gases, currently factored at 380 parts per million (ppm) to between 445 and 650 ppm. More importantly, however, the report indicates a variety of mitigation strategies, including energy efficiency and conservation, reducing deforestation, and investing in solar and other renewables to accelerate the world's response to the changing climate.

As many of us have maintained, the report concludes that the costs of tackling climate change now are dwarfed by the potential damages of global warming. There is also some consensus around the idea that investments now may foster economic development through investments in available technologies and other measures.

"This report for the first time has dealt with lifestyles and consumption patterns as an important means by which we can bring about mitigation of greenhouse gas emissions," says IPCC Chairman, Rajendra Pachauri. "Of course you can look at technology, you can look at policies, but what is an extremely powerful message in this report, is the need for human society as a whole to start looking at changes in lifestyles and consumption patterns,”

That may be tough for many to swallow, especially those opposed to actions that require such lifestyle changes, carbon taxes, or that strengthen limits to CO2 emissions in order to encourage carbon trading.

"There are measures that come currently at an extremely high cost because of the lack of available technology," said James Connaughton, head of the White House Council on Environmental Quality, in response to the report. Connaughton and others are concerned that some scenarios outlined by the IPCC report may bring cuts in world gross domestic product of as much as 3 percent. That, suggests Connaughton, is "something that we probably want to avoid."

One scenario would put the stabilization level of greenhouse gases in 2030 between 445 and 535 parts per million. This scenario estimates that the negative impact on gross domestic product would be less than 3 percent over more than two decades, with an annual impact estimated at less than 0.12 percent.

Much depends upon the price of carbon, as the Wall Street Journal reported over the weekend. The IPCC report used a range of between $20US and $100US for every ton of CO2 to analyze its scenarios. Carbon was trading at $25US in Europe under its carbon trading scheme as recently as last week. A McKinsey & Company study from January suggested "that greenhouse gas cuts approximately as stringent as those surveyed in the UN study would cost as much as $40US a ton of avoided CO2."

Whatever the costs, two questions remain: Will we make the necessary adjustments to reduce emissions now and possibly reap the benefits of a new economy? And will we make the necessary lifestyle changes to make a difference quickly and efficiently?

For now, the IPCC report suggests we have the know-how and can make it work economically. What remains is the will to change for the sake of a future, especially a future that remains uncertain.

Global Climate Change: Carbon Trading Global Market Exceeded $30bn in 2006

The Guardian (UK) reported yesterday that the global market in carbon trading tripled last year to $30bn (£15bn), but quoted the World Bank, which cautioned that the market's "role in the battle against climate change could be hit by worries about the effectiveness of unregulated carbon offset projects."

The bulk of carbon trading, some $25bn, was carried out through the sale of allowances under the European Union's emissions trading scheme, according to the World Bank's seventh annual carbon market intelligence report, which was published this week.

“These numbers are relevant because they demonstrate that the carbon market has become a valuable catalyst for leveraging substantial financial flows for clean energy in developing countries,” said Warren Evans, World Bank Director of Environment, in a press release.

The EU scheme has been criticized for being weak on allowances under the initial phase, which created little incentive to cut emissions and, subsequently, precipitated a fall in the price of carbon.

Sources familiar with the situation indicate that allowances have been toughened up for the second phase, which will begin in 2008 and be in force until 2012. The tougher standards may address the fact that polluters have been less obliged to trade. The weaker standards have also given detractors of cap-and-trade schemes fodder for arguing that carbon trading "doesn't work."

According to the Guardian article, officially-backed carbon offset projects, subject to the Kyoto agreement, wherein companies and countries invest in emissions reduction schemes in developing countries and emerging markets, doubled to $5bn over the same period and, the bank estimates, "carbon purchases have raised $14bn in 'associated investments' supporting clean energy in developing countries since 2002."

We've argued before on this blog that an overarching set of standards is needed to reduce reputational risk and so that both regulated and voluntary schemes can be judged comparatively. The World Bank study seems to corroborate this view.

Yvo de Boer, the head of the UN Climate Change secretariat, told The Guardian (UK) that "the official clean development programme (CDM) was working well but some analysis of the scheme was failing to differentiate between the highly regulated CDM and a growing number of unregulated or self regulated enterprises. 'Some confusion can be expected, but some analysis of the CDM has dangerously missed the mark,'" De Boer said.

To access the World Bank report, see the bank's Carbon Finance Unit's website.

Global Climate Change: IPCC Suggests Change Energy Sources

Andrew Revkin reports in today's New York Times. "The world needs to divert substantially from today's main energy sources within a few decades to limit centuries of rising temperatures and seas driven by the buildup of heat-trapping emissions in the air, the top body studying climate change has concluded.

"In an all-night session capping four days of talks in Bangkok, economists, scientists and government officials from more than 100 countries agreed early Friday on the last sections of a report outlining ways to limit such emissions, led by carbon dioxide, an unavoidable byproduct of burning coal and oil.

"The final report, from the Intergovernmental Panel on Climate Change, said prompt slowing of emissions could set the stage later in the century for stabilization of the concentration of carbon dioxide, which, at 380 parts per million now, has risen more than a third since the start of the industrial revolution and could easily double from the preindustrial level within decades."

Read Andrew Revkin's full article on Climate Panel