Tag Archives: green
If Carbon Markets Can’t Work in Europe, Can They Work Anywhere?
By Bryan Walsh April 17, 2013 But the ETS—and carbon trading more generally—is not doing well, and its problems are taking some of the green shine off of Europe. Since its launch the ETS has struggled, with the price of carbon falling as the 2008 recession and overly generous carbon allowances undercut the market. In the ETS business are given free allowances to emit carbon—too many free allowances mean they don’t need to reduce their carbon emissions much, which erodes the demand for additional carbon allowances on the market and causes the price to drop. Prices fell from 25 euros a ton in 2008 to just 5 euros a ton in February. There was a way to fix this—take 900 million tons of carbon allowances off the market now and reintroduce them in five years time, when policymakers hoped the economy would be stronger and demand would be greater. As anyone who’s taken Econ 101 would know, artificially reducing the supply of carbon allowances in such a drastic way—something called “backloading”— should force the price back up.America may be a bit of a mess when it comes to climate policy—though that mess has been surprisingly effective in reducing carbon emissions in recent years—but environmentalists could always look across the Atlantic Ocean to Europe , where greens are green, cars are small and global warming actually matters. Countries like Germany and Spain have led the way in supporting renewable energy, and cities like Amsterdam and Copenhagen put America to shame when it comes to encouraging dense development and carbon-free cycling. But the green jewel was the Emissions Trading Scheme (ETS)—the European-wide carbon market, by far the largest such system in the world. The ETS, launched in 2005, allowed Europe to put a common price on a ton of carbon, which was meant to encourage utilities and factories to reduce carbon emissions in the most efficient way popular. A similar system carbon cap-and-trade system for the U.S. died in the Senate in 2010, and there’s little chance it will be revived any time soon. ( MORE: As the World Keeps Getting Warmer, California Begins to Cap Carbon ) But on April 16, the European Parliament surprised observers by voting down the backloading plan. In turn, the European carbon market collapsed, with the price of a carbon allowance falling by more than 40% over the day. “We have reached the stage where the EU ETS has ceased to be an effective environmental policy,” Anthony Hobley, the head of climate change practice at the London law firm Norton Rose, told the New York Times. The ETS is a mess. Backloading failed because even in very green Europe, economic concerns seemed to trump environmental ones. European Parliamentary members worried that any action that would cause the price of carbon to rise would add to European industry’s already high energy costs. Europe, unlike the U.S., doesn’t have relatively cheap, relatively clean natural gas to help cushion that blow. At the same time, European nations like Germany are rethinking some of their renewable energy policies, concerned by the rising cost of electricity. It looks like a textbook example of what Roger Pielke Jr. calls the “ iron law of climate policy “: when climate policy starts to hurt economically, even the greenest states start to back away. It’s possible that backloading may get a second chance before the European Parliament, and even without a viable carbon market, Europe is still the global leader in climate action. Nor is the ETS the only game in town. California launched its own cap-and-trade system this year—though that’s come under political pressure as well—and Australia has introduced a price on carbon. China may do so as well. But the hope that we may be able to reduce carbon emissions the same way we cut pollutants like sulfur dioxide and nitrous oxide—through a well-run cap-and-trade —seems to be dimming, a victim of its own complexity and a sluggish global economy. That might leave the door open for other policies, including a straight carbon tax, more support for renewables or increases R&D funding for carbon-free power. We could use all three, but carbon markets may be finished. If carbon trading can’t make it in Europe, it can’t make it anywhere. Read more: http://science.time…./#ixzz2QjSZABlC Continue reading
Europe’s Carbon Market Left In Disarray
http://www.ft.com/cm…l#ixzz2QjRydLI8 By Pilita Clark in London and Joshua Chaffin in Brussels The world’s largest carbon market was in disarray on Tuesday after the European Parliament voted against a plan to rescue the EU’s flagship climate change policy. The 334-315 vote sent carbon prices in the EU emissions trading system tumbling to a record low of €2.63 a tonne. Analysts described the vote as a “body blow” for carbon markets in Europe – traditionally a world leader in efforts to tackle global warming – that was likely to reverberate abroad. Carbon industry executives said the EU parliamentarians had sent a worrying political signal about the bloc’s support for what has long been a cornerstone of its environmental policies. MEPs voted down a measure that would have temporarily withdrawn some 900m allowances, each of which permits a polluter to emit one tonne of carbon dioxide, from the heavily oversupplied market. Prices have fallen from a high of more than €30 in 2008 to less than €3 this year as the glut in supply was exacerbated by the economic downturn. The EU’s climate commissioner, Connie Hedegaard, vowed to press on with other measures to prop up the flailing market and pointed to a statement from the Irish EU presidency issued immediately after the vote that said there was now a “clear priority” for the 27 EU member states to act on the carbon price. “This vote is a wake-up call. We’re talking about a €1bn market,” said Ms Hedegaard. “It doesn’t mean that now it’s all over for the emissions trading system.” Ms Hedegaard is working on a separate set of more long-term measures to shore up the market, including the permanent cancellation of allowances. But carbon analyst Stig Schjølset, of Thomson Reuters Point Carbon, said the plan was now “politically dead”. “We do not envisage prices rising much above the current €3 mark and they may well drop lower,” he added. “Certainly this vote makes the EU ETS irrelevant as an emissions reduction tool for many years to come.” Some business groups welcomed the vote, saying a move to raise carbon prices during a downturn was ill-timed. “There is no need to interfere with this system,” said Markus Beyrer, director-general of Business Europe, the continent’s largest employer group. “We think once the economy picks up, carbon prices will pick up.” Continue reading
Rising Ethanol Prices Another Blow to Viability of Biofuels
April 15, 2013 By Robert Potts Ongoing drought in Midwest America is driving up the price of ethanol and threatening the long term sustainability of the biofuels industry. Heavy water shortages across the “corn belt,” the major maize producing region of the United States, have damaged the supply of corn bushels, driving up the price of ethanol fuel. This is another blow to the biofuels industry at a time when it is facing sustained criticism from politicians and environmental groups worldwide. Many people claim that ethanol is not a long term alternative to fossil fuels due to associated rises in global food prices and changes in land use. This latest blow, however, even casts doubt over ethanol’s ability to provide a short term fuel solution. According to the USDA , record-high corn prices are likely to continue throughout 2013, rising up to 19 per cent higher than the last two years; in some cases, farmers in Missouri have seen their annual crops fall to up to 5.5 percent of their normal yield. Nearly 10 per cent of the US’s ethanol plants have ceased production in the past year, unable to cope with rising resource costs and shrinking demand. Government intervention and bloated supply Only five years ago, ethanol was hoped to be the savior to the long term depletion of fossil fuels. As a wholly renewable source of energy, the fuel can be blended with traditional gasoline and sold at gas stations across America. For the last 10 years the US government has mandated that gasoline must contain at least 10 per cent biofuel. Ethanol production was subsequently supported with a tax credit of 45 cents per gallon, although this deal expired at the end of 2011, making it a lucrative trade for farmers and producers. As a result, the number of ethanol plants has grown to hundreds in US states like Missouri, bringing huge economic gains to small towns. Farmers have been able to find a new market for their corn crops, while ethanol producers reacted by building new plants and creating thousands of new jobs. However, recent economic conditions have since exposed weaknesses in the government’s biofuel policy. The original 10 per cent ethanol mandate assumed that overall demand for gasoline would grow over time. However, the current recession has seen overall demand for gasoline, and ethanol, shrink, exposing a bloated ethanol industry overly reliant on state subsidies. Over supply of ethanol has now created thousands of barrels of ethanol which are sitting in storage plants across the Midwest unused; these barrels will remain idle until there is enough gasoline available to blend with them. The current supply side crisis has therefore served to compound pre-existing structural issues within the industry. “It’s a more sombre mood,” said Todd Sneller, the administrator of the Nebraska Ethanol Board. “The growth opportunity that existed some years ago is still out there in theory, but the reality is that it’s going to take an awful lot of time, money and political battles to realise that opportunity.” “Blend wall” creating demand side difficulties With most cars and service stations only able to cope with a fuel blend of 10 per cent ethanol, known as the “blend wall”, demand restrictions clearly exist; the hope that demand will rise for higher percentage ethanol blends has not yet materialised. “Flex-fuel” vehicles, which can operate on 85 per cent ethanol, are also yet to be taken up by the mass market, and technological advancement in electric vehicles will only add further pressure to the industry’s long term competitiveness. In the EU, discussions are currently under way to limit the production of first generation biofuels, like ethanol, to half of Europe’s renewable fuel target, as a result of concerns over their long term environmental sustainability. Underdeveloped second generation fuels With ethanol under pressure, many hope that in the longer term, developments in second generation biofuels, synthesised from non-food sources, will provide a more viable alternative. Although cost advances are being achieved in these ‘cellulosic’ biofuels, productive capacity is still very small in comparison to ethanol. Whether these crops can be commercialized without requiring similarly high levels of water and changes in land use is open to much debate. Whether the biofuels industry can dust off this recent blow also remains unknown. Idle plants and unused barrels could clearly be short term side effects of changes in the economic cycle, but could also be a sign of longer term decline: “Is that going to be temporary or permanent? It’s hard to say,” said Eric Lee, Citibank commodities expert. However, with producers hoping to produce an extra three-tenths of a gallon of ethanol per bushel of corn, technological development could yet save an industry merely bruised from a particularly tough year. Robert Potts is owner of RPM Fuels, providers of tanks and pumps to the fuel industry. RPM Fuels supply oil tanks as well as specific equipment for biofuels and bio diesel. Continue reading
