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CLP To Pay HK$730m For Wind Power Assets

Denise Tsang, SCMP – Apr 08, 2009

Electricity supplier CLP Holdings (SEHK: 0002) has agreed to buy mainland wind-power projects from its Australia-based partner for HK$730 million, making its first move to restructure its renewable energy investments overseas.

The deal involves the acquisition of a 49 per cent stake in 10 wind farms largely in Jilin and Shandong provinces from Roaring 40s Renewable Energy, a 50-50 joint venture between CLP and Hydro Tasmania of Australia.

The acquisition will add 122 equity megawatts to CLP’s renewable energy capacity, increasing it to more than 1,200MW, or 9 per cent of its total generation capacity.

To lift the renewable energy capacity ratio to 20 per cent of its total generation capacity by 2020, CLP yesterday said it would acquire Roaring 40s’ green energy portfolio in India “in the near future”.

A CLP spokesman said the India acquisition involved one wind farm. The price is still being negotiated.

Group chief executive Andrew Brandler said the restructuring of ownership of Roaring 40s’ mainland portfolio would instantly boost CLP’s exposure to the country’s fledgling green energy market while bringing its target non-carbon-emitting generating capacity closer to reality.

The company would keep its interest in Roaring 40s, which would in turn focus on renewable investments such as geothermal and solar energy in Australia after the asset restructuring, he said.

Two of the 10 wind farms are in Jilin and one in Shandong. The rest were under construction, a CLP spokesman said.

Some analysts said investment on renewable energy development was commercially viable on the mainland because of incentives such as lower tax, higher on-grid tariffs and government subsidies.

CLP, which has been accused by green groups of being Hong Kong’s biggest polluter, has aggressively expanded its clean-energy investments in hydro, wind, biomass, solar and geothermal power on the mainland, in Australia, India, Thailand and Laos as part of its non-carbon-emitting vision for 2050.

Mainland Allows HK Firms To Run Green Projects – Relaxed Rules Give Conditional Access To Greenhouse Gas Market

Cheung Chi-fai, SCMP – Apr 08, 2009

Hong Kong companies will receive conditional access to massive carbon-reduction markets across the border after mainland authorities eased the eligibility rules.

The change came about after the National Development and Reform Commission “reinterpreted” the rules recently, Secretary for the Environment Edward Yau Tang-wah said.

Beijing had previously insisted that only companies with at least half their equity supplied by Chinese capital in a strict sense would be eligible to develop projects on the mainland under the Clean Development Mechanism (CDM).

Now, it says Hong Kong-registered companies based in the city and run by Chinese nationals or Hong Kong permanent residents who constitute half of the company’s board membership will also be acceptable.

Other criteria include a minimum threshold of 50 per cent of non-circulating shares for a listed company.

Under the UN-supervised CDM – the world’s second-biggest greenhouse-gas market after the European Union’s emissions-trading system – developing countries can sell certified emission reductions generated from qualified projects, such as renewable energy, to developed nations to meet their Kyoto Protocol commitments to cut carbon emissions.

The changes will put Hong Kong back into the growing CDM market on the mainland, which is the biggest supplier of CDM projects in the world, accounting for a third of the 1,500 projects already registered with the UN. The mainland is estimated to deliver more than 100 million credits a year from the projects, with each credit equalling a tonne of carbon reductions.

Mr Yau, who said he had been informed of the change in Beijing last week, hailed it as a “turning point”.

He said Hong Kong companies were set to benefit from new business opportunities in the huge CDM market all over the mainland.

But it would be difficult to assess what kinds and sizes of companies would benefit from the relaxed rules as they would still have to satisfy the national requirements for qualifying CDM projects, he said.

“The most important thing in the change is that it has lowered the bar for entering the market,” Mr Yau said. “Without that, no matter how big or small a company is, it just can’t participate.”

Industry sources said local utilities such as CLP Power (SEHK: 0002), which had a growing investment in renewable energy such as wind or hydro power, would be major beneficiaries.

The Hong Kong General Chamber of Commerce, which had advocated the change for some time, said it would allow genuine Hong Kong companies to take part in the green-technology market on the mainland.

Last year, Beijing also relaxed rules for CDM projects in Hong Kong, allowing companies registered in the city to develop projects without paying the administrative fee imposed on the mainland.

William Yu Yuen-ping, head of WWF Hong Kong’s climate programme, said the change might draw more companies to Hong Kong – including those that specialise in verifying and certifying CDM projects.

ANALYSIS-In Big Green Push, Australia Thinks Too Small On Solar

Reuters By Leonora Walet and Bruce Hextall – Wed Apr 8, 2009

HONG KONG/SYDNEY – At first glance, a new day seems to be dawning for the overshadowed solar sector in Australia, the world’s sunniest continent.

The government is pushing through a carbon trading scheme that will penalise big greenhouse gas emitters; a major piece of renewables legislation is due for approval within months, setting a target of 20 percent green energy by 2020.

But supporters say these shiny targets may be undermined by policymakers who think too small — limiting the most generous rebates for renewables to the first 1,500 watts of capacity, or about half the minimum of the 3,000-5,000 watts used by the average Australian home.

“The limit of something like 5 KW would have been a really useful driver,” said Muriel Watt, chair of the Australian Photovoltaic Association. “But the limit being 1.5 KW, it’s not going to drive the large systems we’d like to see.”

Australia draws just about 5 percent of its electricity from renewable sources, mostly hydropower and wind. Solar power comprises less than one percent.

The Clean Energy Council, Australia’s main clean-tech body, has urged the government to raise to 200 KW the limit for renewable energy installations eligible for generous rebates.

Instead, say campaigners, Australia needs to adopt a nationwide feed-in tariff structure that would allow users to generate revenue by selling excess power back to the grid.

Such “feed-in” tariffs in Germany, for example, led to the country’s solar power installations increasing 11-fold since it introduced a generous gross feed-in tariff eight years ago.

China and Japan are also ramping up solar investment, with China last month announcing a subsidy of 20 yuan ($2.93) per watt peak for large solar projects. Japan offers a further $200 million subsidy to boost home solar panel usage for the year from April 1 after a $90 million outlay from January to March.

Australia’s policies have not proved as enticing. BP Plc’s (BP.L) solar unit in Sydney, which operated the only panel-making plant in the country, closed down last month to cut costs.

That leaves the Australian market open to Japan’s Kaneka Corp (4118.T) Sanyo Electric Co Ltd (6764.T) and Sharp Corp (6753.T), and China’s Suntech Power (STP.N) and JA Solar (JASO.O).

Australian firms that have persevered despite the obstacles include electricity and gas supplier Origin Energy Australia (ORG.AX), Dyesol (DYE.AX) and Silex SLX.AU, which are working on individual solar cell technologies.

“GREENHOUSE MAFIA”

Solar, though, remains costly compared with wind power, and particularly with coal, which generates 80 percent of Australia’s energy, making it one of the most coal-reliant nations in the world.

“That’s one of the hardest things for us to compete against. There’s a real inadequacy of government programmes and inconsistencies but whatever they do it’s still competing against cheap brown coal,” said Simon Troman, vice-president of the Australian and New Zealand Solar Energy Society.

He said coal-fired power generators had long enjoyed subsidies from taxpayers, with for example, transmission lines linking power stations being built for free.

The coal lobby — together with other carbon-intensive export-oriented industries such as mining — also wields tremendous political influence, not only because of the higher costs but for fear of unstable electricity supplies in a country that regularly faces sporadic shortages.

“Everyone knows perfectly well what’s holding things back,” said renewable energy policy expert Mark Diesendorf of the Institute of Environmental Studies at the University of New South Wales in Sydney.

“It’s a group called the greenhouse mafia. It consists of the coal industry, oil, aluminium, iron and steel, cement and motor vehicle makers,” he told Reuters.

The government has backed mandatory renewable energy target legislation (MRET) that ramps up existing targets to 20 percent national green energy production by 2020. Parliament is expected to pass the law within months.

The law is expected to attract renewable energy investment of A$20 billion to A$30 billion by 2020, with wind power capturing the most investment initially, analysts say.

LITTLE INCENTIVE

Australian states and territories have introduced, or want to introduce, schemes to reward householders for power fed back into the grid. But so far, only the tiny Australian Capital Territory has opted for the more generous gross feed-in tariff from March this year for systems up to 30 KW.

Solar Shop Australia, the country’s largest installer of domestic solar systems, wants the federal government to implement a national gross feed-in tariff, instead of the less generous nett tariff backed by most states.

Diesendorf said there was no incentive for large-scale solar power from the federal government, a view echoed by the manager of an energy systems supplier.

“Even for very small commercial installations of 20 to 50 KW on buildings or small farms, there’s very little incentive,” said the manager, who did not want to be named. “The feed-in tariffs designed in most states exclude commercial solar projects.”

But engineering firm WorleyParsons Ltd (WOR.AX) announced plans last year to build the world’s largest solar plant, a 250 MW project, in Australia.

The plan would be reliant on big mining firms funding the A$1 billion ($710 million) project. Mining firms want to invest in renewable power to cut fuel costs and curb carbon emissions to meet targets under national emissions trading, expected to begin in the middle of next year.

WorleyParsons said it aimed to deliver 40 percent of Australia’s renewable energy needs with 34 solar power plants by 2020 but carbon credits would have to be priced at well over A$10 a tonne to make the solar power plants commercially viable.

The government estimates credits under its scheme will initially trade above A$20 a tonne of carbon pollution. (A$=71 U.S. cents) (Additional reporting by David Fogarty; Editing by Clarence Fernandez)

Online Guide To Climate-friendly Goods Launched – New List Shows Appliances’ Footprints

Cheung Chi-fai, SCMP – Apr 02, 2009

A green group has called on electrical appliance manufacturers to provide more low-carbon-emission products for the global market, after the publication of the first local guide on climate-friendly goods.

The online guide, launched by WWF Hong Kong yesterday, lists 300 models of nine popular electrical appliances that have low carbon footprints, are made under more than 50 brands and are available on the local market.

It offers information on annual energy consumption, efficiency, carbon emissions and price references for climate-conscious shoppers.

There are also tips on the wise use of appliances.

The information was collated from data obtained from manufacturers and energy labelling schemes in Hong Kong, the United States and Europe.

“All those models in the guides are low carbon emission, but we won’t tell people how to choose as we have given them the tool to make their own choices,” said William Yu Yuen-ping, the head of WWF’s climate programme.

The appliances covered include air conditioners, compact fluorescent lamps, refrigerators, televisions, water heaters, rice cookers, laptop computers, printers and game consoles.

Dr Yu said the first six types of appliance already accounted for 85 per cent of total household electricity consumption, which grew by 34 per cent between 1990 and 2005.

The guide would fill the gaps in Hong Kong’s energy efficiency labelling scheme, which has so far made labelling mandatory only on air conditioners, compact fluorescent lamps and refrigerators.

Consumers using the guides are advised to decide what their priorities are because they might have to compromise.

For instance, the most climate-friendly model will often not be the cheapest, while the one which offers the highest energy efficiency will not necessarily be the one which consumes the least energy.

Dr Yu said it was time for individuals to act and exert their influence on the market.

“If there are demands from the public, manufacturers will be motivated to produce more low-carbon appliances.

“Let’s get started in our daily lives instead of just relying on the politicians to do something for us,” Dr Yu said, citing the Copenhagen climate conference to be held later this year.

Wat Hong-keung from the Hong Kong and Kowloon Electric Appliances Trader Federation welcomed the guide, but said consumer awareness about energy efficiency had improved in recent years.

“Many of them pay great attention to energy efficiency in case they have two choices of similar quality and price,” he said.

“But they are normally motivated by saving money rather than saving the world.”

The guide can be seen online at www.climateers.org.

Green Investments Get Pruned

Asian Investor By Simon Osborne | 2 February 2009

Investment in environmental technology and clean energy was a headline maker just a few months ago, on the back of high fossil fuel prices, climate change and wars in the Middle East. Since then the credit crisis has pushed the quest for environmental alpha into the background.

Whilst folk may be concentrating less on saving the planet in preference to saving their own personal environment, investment in green themes and clean energy was always based on hard money-making objectives in the line of producing sustainable returns.

Investors are looking up the wrong end of 30% falls to the value of green portfolios this year. That is because the environment sector is capital intensive and in the crunch it got hit. Liquidity has dried up for environmental projects, which tend to be enormously expensive to build.

Many clean-energy companies are at early stages of development and have found it hard to find funds. Venture capital and private equity investment in the space totaled $4.4 billion in the third quarter of 2008, a fall of 24% from the second quarter. The credit crisis has played havoc with the debt-laden and subsidy-driven renewable energy sector.

“Most environmental infrastructure plays are leveraged 70:30. It costs a massive amount to build these things,” says Glenn Fung, the portfolio manager of the Verde Fund in Hong Kong. The Verde Fund is 5% long and goes 10% long or short maximum net exposure, but the fund is down double digits for 2008. “There are lots of value plays, at 15 year lows in terms of value. Those entering now can get into deals at very good price levels.”

The second big black hole has been the fall in the oil price. As the oil price has tumbled to less than half of its peak levels it has meant that people are less interested in buying clean energy, which was meant to serve as a substitute. The propensity to invest in new energy sources has started to erode.

The China Growth Opportunities Fund allocates 70% to energy and clean technology, so it has not been as badly impacted as many funds. The main hit been from listed water stocks, because as project finance dries up these struggle to expand, and their valuations have tanked in line with the general stock market.

“When people are losing their jobs, companies are going bankrupt and asset prices are falling, the environment tends to get pushed to the sidelines, especially when the cost of oil more than halves,” says Simon Littlewood, who runs the China Growth Opportunities Fund. “The interesting angle is how the clean-tech sector is now being heralded by politicians like Barack Obama and Gordon Brown as the big job creator, the next wave of growth for Western economies. The question is where the funding will come from?”

President-elect Obama is promising emissions cuts of 80% by 2050, but offers no goals for 2020. He and similarly minded politicians such as Australian prime minister Kevin Rudd are motivated by energy security as well as more altruistic environmental concerns. However, given the state of the financial sector and the huge amount of distressed assets available to anyone looking to invest money, it is going to take a lot of government and state involvement to drive the sector forward, nudging the investors towards key specific environmental sub-sectors.

“Governments and politicians need to take the lead in driving green investments through regulation,” says Joost Bergsma, the head of clean energy at Fortis Investments. “This is both a national as well as a local responsibility. Local governments can be somewhat slow in approving investments and this bottleneck needs resolution.”

It is already the case that governments have acted as by far the main promoter of environmental investment. Ethanol and petrol substitute investment remain driven by governments, and as an experimental business, subsidies are still vital.

The gloomy atmosphere doesn’t mean that entrepreneurs are not pressing ahead with their green projects. PT FirstFruits is an Indonesian firm planning to produce green bio-ethanol from the nipah palm, which is grown in plantations in Papua, Indonesia. The feedstock for ethanol production varies from sugar cane, sugar beet and other agricultural products. Producing the sugar-rich Nipah Palm sap is price-competitive compared to the cost of using, say, sugar cane, palm oil, Jatropha or Arenga palm to create ethanol. Costs of production equate to approximately $0.10 per litre, with a sale price of $0.71 per litre. With this level of margin, it means that ethanol production is less affected by the lower crude oil price, as would be the case with oil sands, a field in which operating costs are a lot higher, making that investment decision more marginal.

“For investors in our project, we have been looking to high-net-worth individuals in Brunei, Hong Kong, and Japan, plus we’ve been talking to private-equity houses,” says Yan Mandari, majority owner of PT FirstFruits. “We chose this route rather than Indonesian commercial banks, which don’t have a lot of credibility in this area. Right now it is incredibly difficult to get funding from an Indonesian bank for a project such as this.”

On the private-equity side there is a full spectrum of investment opportunities ranging from risky new technology venture capital, through to more solid infrastructure such as power stations.

On the listed side there are very large companies, for example Shell, BP, and Veolia Environment, which are active in clean technologies, but as that accounts for just a small part of their revenues; these are not pure clean-energy investments. Purer plays include solar panel manufacturers such as Suntech, Suzlon Energy (which makes wind turbines), or China High Speed Transmission (a maker of gears for wind transmission equipment). These companies tend to be smaller and subject to far more volatility. To short that end of the sector is difficult because of a dearth of liquid borrowable stocks, so hedge funds have found it hard to profit from their stock price falls.

Capital funding is drying up, but also the dislocation of markets is affecting firms in other ways, even those companies with solid order books. The shares of China High Speed Transmission fell 50% in two days during October when it ran into trouble on its convertible bond-hedging program, having offered the bonds with put protection that proved to be out of the money.

So where are the clean energy funds looking for the future?

“Converting waste to energy via incineration has additional potential as an environmental investment theme,” says Andrew Pidden, CIO of Clean Resources Asia, which runs long only and long/short clean energy and water funds. “Forestry also looks interesting, as and when subsidies are forthcoming for leaving forests intact instead of cutting them down.” He also cites hybrid technology as benefiting as electricity or biofuels replace oil in transport, as well as the cutting edge of generating fuel from algae.

The green investment space has come to an impasse. Take cars. Gas guzzlers like sports utility vehicles (known in Britain as ‘Chelsea tractors’) continue to sell below cost. The death of the Humvee may yet be premature as oil prices tumble. Investment into alternative energy has abated. Yet the long-term trend for oil prices must be upward, once China gets its growth story back on track. In China, coal is trading at $130 per ton, down from the peak of $154 per ton but well above the long-term average price of $70.

This means the old methods and fuel sources are proving more lucrative to investors than the new alternatives.

Utilities and power used to be regarded in investment circles as a ‘defensive’ area of the market. To the extent that clean energy has tried to affix itself to that sector, then given the performance of 2008, it can hardly be defined as defensive. In the Asian market, investors simply perceived alternative-energy stocks them as China-related mid caps and sold them off.

Here’s the rub: in spite of all the green initiatives, investment dollars, subsidies and carbon-credit change incentives, the world’s population is still belching out more carbon into the skies every year. None of the good intentions have paid off.

“Sadly, the credit incentives might seem good, and be well intentioned,” says Hong Kong-based scientist Dr Martin Williams, “but they are clearly woefully inadequate when it comes to tackling climate change, as are all other measures adopted so far.”

There’s still a mountain to climb, and whether you’re an investor, or just a person inhaling the pollution, the message is that dirty energy still rules.

Beijing To Help Pay For Green Cars

Peggy Sito and Reuters – Jan 28, 2009

Beijing will subsidise purchases of clean-energy vehicles in 13 mainland cities in a move to encourage carmakers to build environmentally friendly vehicles.

The trial scheme would promote the use of electric, hybrid and fuel-cell vehicles by public transport operators, taxi companies and postal and sanitary services in the cities, Xinhua reported, citing a Ministry of Finance statement at the weekend.

The 13 cities are Beijing, Changchun, Changsha, Chongqing, Dalian, Hangzhou, Hefei, Jinan, Kunming, Nanchang, Shanghai, Shenzhen and Wuhan.

Subsidies would be based on the price difference between vehicles with more energy-efficient engines and those with traditional engines, Xinhua said.

Local governments were asked to allocate money to build and maintain facilities for the green vehicles. The announcement is in line with the central government’s plan to promote the development of vehicles using alternative energy.

In November last year, Minister of Science and Technology Wan Gang said the government would launch a massive scheme to promote such cars. Ninety per cent of public vehicles would be hybrid initially, he said without giving a time frame.

China is widely believed to be the biggest source of carbon dioxide and greenhouse gas emissions from its manufacturing, energy and transport sectors, which have been blamed for rising global temperatures.

The central government is urging carmakers to take advantage of a reshuffle in the global car industry to speed up the development of vehicles running on alternative energy.

Local and global carmakers started to invest in green car manufacturing during the 11th Five-Year Programme lasting until next year.

Separately, Honda Motor, a pioneer in environmentally friendly cars, said yesterday it planned to increase its production capacity on the mainland by 23 per cent on expectation of solid demand for its fuel-efficient vehicles, according to a report.

The Nikkei business daily said Honda targeted a total output capacity of 650,000 vehicles per year by making multibillion-yen modifications to existing lines at its Dongfeng Honda Automobile unit, which assembles Civic cars and CR-V sport-utility vehicles.

Output at Dongfeng Honda on the mainland has steadily risen in recent years, producing more than 160,000 vehicles last year, up almost 30 per cent from the previous year, another company official said.

The company is hoping to raise its output to a full capacity of 240,000 vehicles, bringing Honda’s total mainland output to 650,000, she said.

The mainland vehicle sector grew 6.7 per cent last year. While outperforming developed nations, the rate was the country’s slowest in a decade and a sharp fall from 21.8 per cent the year before.

Air New Zealand Holds Successful Trial Flight With New Biofuel Blend

Charlotte So in Auckland, SCMP – Updated on Dec 31, 2008

New Zealand’s national carrier is hailing a successful trial flight of a Boeing 747-400 jetliner using jatropha oil as proof that biofuels can be viable in future.

The trial, a joint programme with the aircraft maker, Rolls-Royce Group and Honeywell International’s UOP unit, tested a 50-50 blend of jatropha oil and conventional jet fuel in one of Air New Zealand’s four engines.

Just under two hours of flight tests were conducted over the Hauraki Gulf.

The first sustainable biofuel flight test took off in Auckland at 11.30am local time yesterday.

The two-hour flight test will provide data for civil aviation authorities.

Although oil prices were now more than US$100 below their July peak, the airline said the flight showed the commercial potential of the biofuel.

Air New Zealand chief executive Rob Fyfe said the jatropha-extracted biofuel was still competitive.

“Biofuel could help to eliminate 40 to 50 per cent carbon footprint from the airline, which translates to US$20 million in savings a year,” Mr Fyfe said.

The European Union is implementing an emissions-trading scheme for air travel to and from and within Europe in 2012, to offset carbon emissions. Since jatropha absorbs carbon dioxide from the atmosphere during the growing process and produces less emissions upon burning, the airline could save money on the offset cost.

Air New Zealand had set a target of adopting biofuel in 10 per cent of its domestic flights in five years. Mr Fyfe said it would expand its use of biofuel to international flights if biofuel won international recognition.

Jennifer Holmgren, the general manager of renewable energy and chemicals at UOP, a Honeywell company responsible for the production of jatropha oil for the flight test, said large-scale production of the fuel would be achieved by 2012 when output topped 100 million gallons. It was estimated that the percentage of second-generation biofuel to jet fuel would amount to almost 3 per cent by 2012, Ms Holmgren said.

The biofuel does not compete with conventional food crops.

The jatropha plant grows in arid regions, and each seed produces as much as 40 per cent of its weight in inedible oil.

A Virgin Airlines test flight in February used a 20 per cent biofuel blend made from babassu nuts and coconut oil.

Continental Airways will test a jatropha-algae blend next month; Japan Airlines Corp will test a fuel based on the camelina oilseed next month.

Additional reporting by Bloomberg

Asia-Pacific: Shipping – Emissions Reductions All At Sea

Paul French, Ethical Corporation – 5 Dec 08

Ships carry most of the world’s consumer goods, but at huge cost to the environment and human health

The Shinyo Ocean is 354 metres long, 61 metres wide and (depending how full it is) about 20 metres high. It is technically a Very Large Crude Carrier (VLCC) – an oil tanker. It’s certainly a big boat.

We’re carrying 180,000 tonnes of oil from Fujarah in the United Arab Emirates to the port of Mailiao, on Taiwan’s coast, facing directly across the Taiwan strait towards mainland China. The oil is all being delivered to one of Taiwan’s largest companies, Formosa Plastics Group.

This moving island is an expensive piece of property – the boat alone is worth $130m, while even with falling oil prices we are carrying a cargo worth over $60m. In addition, we need 62 tonnes of bunker fuel a day to power the ship. At $800 a tonne that means we’re spending nearly $50,000 a day to keep moving. Factor in the costs of all the lubricants, fresh water and food we need aboard and you start to see how expensive it is to move the “black gold” around the world.

We are miles out at sea but we are far from alone. In a week on the South China Sea we experience only a few hours when there is not another large ship – carrying either containers, gas or oil – within sight.

Increasingly, the world’s shipping fleet is moving eastwards as the manufacturing powerhouses of east Asia spew out everything from T-shirts to camcorders, requiring vast amounts of oil to make them.

Straight and narrow

Currently 80% of commercial sea traffic passes through the Malacca straits, the main route from west to east, between Malaysia and Indonesia towards Singapore. You soon realise that you are just one vessel in a long line of ships heading into east Asia with oil and other raw materials on an ocean highway while container ships of finished goods head in the opposite direction to the waiting markets of the west. It’s a similar story across the Pacific from east Asia to the ports of North America’s west coast.

Taiwan, where we’re headed, is an island of beautiful scenery and stunning coastlines but precious little in the way of oil reserves. Yet it is one of the world’s largest manufacturers of consumer electronics, machinery and chemicals – it’s a safe bet that in your house are a bunch of products marked Made in Taiwan. But with total oil production of about 8,400 barrels per day, the island needs a staggering 1 million barrels to keep its factories running. Taiwan is relies on ships like the Shinyo Ocean making regular deliveries.

For Taiwan, sea delivery of oil is really the only option – as an island, pipelines are problematic, a situation not helped by the simmering disputes between Taipei and Beijing that regularly flare up.

Taiwan is hardly alone in requiring a steady flow of oil tankers to call at its ports. Australia, New Zealand, mainland China and a host of other industrial nations – including the US and the UK – also rely largely on this sea traffic. Yet in comparison with road, rail and plane transport, there has been little discussion of the effects, adverse or otherwise, of this vast seaborne trade on the environment. While aviation has been the focus of environmentalists’ dissent of late, there is an argument that shipping actually is responsible for more greenhouse gas emissions than airlines.

Here’s the problem. In terms of emissions per kilometre, large ships like the Shinyo Ocean are the greenest of transport options. Ships emit roughly – varying slightly according to their size – 15g CO2 per km, while airfreight emits a whopping 540g/km. However, depending how you make the final calculations, shipping emits more than airfreight as the reality is that ships carry about 90% of world trade.

For the vast majority of products, moving them by plane is a luxury at best and an impossibility in most cases. There’s not much alternative – oil, coal, metals and so on are never going to be moved by air. There’s no other way to get all that iron ore from western Australia to China except by boat.

So if we’re not going to see the demise of these giant ships, can we at least make them cleaner?

The Shinyo Ocean’s main problem is the bunker fuel that powers its massive engines. Just about every vessel at sea uses bunker fuel, often also euphemistically termed residual fuel. Arthur Bowring, managing director of the Hong Kong Shipowners Association, says bunker fuel is “the end of the refining cycle, the residue; one step up from the asphalt you put on roads”.

At present bunker fuel is sold to shipowners at a discount of close to $20 on the barrel. Refiners believe this is a win-win situation: owners get cheap fuel and oil majors get rid of their rubbish. But bunker fuel has a high sulphur content, about 2.7% on average, and is just plain dirty. Sulphur dioxides emitted when it burns contribute to climate change and air pollution that harms human health.

According to a peer-reviewed scientific study submitted to the International Maritime Organisation (IMO), air pollution emitted by international shipping will be responsible for 84,000 premature deaths worldwide by 2012 if no measures are taken to cap the sulphur content of bunker fuel. The study – published in the December 2007 edition of the American Chemical Society’s Journal of Environmental Science and Technology – found that if the shipping industry could limit sulphur content to 0.5% by 2012, 50,000 of these premature deaths would be prevented.

This will not happen. As with all other forms of business the global shipping trade has those who want to proactively do something about their emissions and those less keen, who see it as an additional cost that will hit their margins.

Sulphur caps

The Hong Kong Shipowners Association – which represents about 8% of the total global fleet – is a progressive voice within the industry, as is the international independent tanker owner’s organisation, Intertanko. They are proposing global sulphur caps at various levels of about 1%.

Ultimately the less keen can be brought into line through the International Convention for the Prevention of Pollution from Ships, known as Marpol, and the IMO. Shipping is a tough and competitive business and clearly not all shipowners want to move to clean fuel. Making that shift would, incidentally, cut the need for purifiers, heating of fuel tanks, sludge control and emission abatement equipment, and the disposal of residues. Ultimately it would lead to the development of more efficient engines and more sophisticated emission reduction systems. But this is long-term thinking and short-term thinkers simply point to the fact that, depending on oil prices, fuel costs could rise by as much as $200 to $250 a tonne, or 25%-30%.

International agreements combined with lobbying could conceivably force change across the whole industry. But a major stumbling block would be the refiners. Quite simply, they are making a good profit from an otherwise generally unsellable residual product. If shipping did truly go green, what would they do with all the residual fuel? Bowring in Hong Kong says that’s their problem. Speaking for Hong Kong shipowners he declares: “We want regulations on this issue. We don’t want to leave it to the owners as it is very expensive to switch.”

If Bowring and the Hong Kong shipowners make the switch, that will have a major effect on global shipping. Hong Kong is one of the most important shipping centres in the world – a compact city that knows how bad emissions from ships can be. In Hong Kong, ships offload containers close to the city centre and shipping accounts for a high proportion of all CO2 emissions on smoggy Hong Kong Island.

If responsible shipowners start to take a lead, backed up by international agreements, then the global shipping fleet can seriously reduce its total emissions. With the vast majority of the world’s trade moving at some point by ship this would have a major impact on tackling climate change, and saving lives.

Burning Issue For Beijing

Underground coal fires are blazing out of control on the mainland, contributing greatly to the world’s greenhouse gas emissions

Tim Johnson – SCMP | Updated on Nov 17, 2008

The barren hillsides give a hint of the inferno underfoot. White smoke billows from cracks in the earth, venting a sulfurous rotten smell into the air. The rocky ground is hot to the touch, and heat penetrates the soles of shoes. Beneath some rocks, a red glow betrays an unseen hell: the epicentre of a severe underground coal fire.

“Don’t stay too long,” warned Ma Ping, a retired coal miner. “The gases are poisonous.”

Another miner tugs on the sleeve of a visitor.

“You can cook a potato here,” said Zhou Ningsheng, his face still black from a just-finished shift, as he pointed to a vent in the earth. “You can see with your own eyes.”

The mainland has the worst underground coal fires of any place on Earth. The fires destroy as much as 20 million tonnes of coal annually, nearly the equivalent of Germany’s entire annual production. The costs go beyond the waste of a valuable fuel, however.

Scientists identify uncontrolled coal fires as a significant source of greenhouse gases, which lead to global warming. Unnoticed by most people, coal fires can burn for years – even decades and longer – producing carbon dioxide, methane and other gases that warm the atmosphere.

“Coal fires are a disaster for all of humanity. And it’s only due to global warming that people are finally beginning to pay attention,” said Guan Haiyan, a coal fire expert at Shenhua Remote Sensing and Geo-engineering.

The rising demand for coal to satisfy a worldwide hunger for energy has given way to increased mining, and a proliferation of fires in coal seams and abandoned mines. The mainland, which has tripled coal production in the past three decades, has mobilised thousands of firefighters to combat the 62 known coal fires scattered across the north.

Major fires have been extinguished. However, Dutch scientists scribbling back-of-the-envelope calculations say that fires on the mainland may still be the cause of 2 per cent to 3 per cent of the world’s annual emissions of carbon dioxide from burning fossil fuels. They call for greatly increasing efforts to extinguish the mainland’s fires – and those in places such as India, Russia and Indonesia – as a practical step to fighting global warming.

“It’s a relatively cheap way to stop greenhouse gas emissions,” said Horst Rueter, a German geophysicist who is the scientific co-ordinator for a Sino-German initiative to combat coal fires.

Dr Rueter said that mainland coal fires accounted for at least half the global emissions from coal fires around the world, making them a steady source of pollutants.

Others said that such runaway fires, while significant, paled beside overall emissions from the United States, a fossil-fuel glutton that may give off a quarter of the world’s carbon emissions.

Coal fires can occur naturally and are not a new phenomenon. Australia’s Burning Mountain has smouldered for thousands of years. An underground coal fire in Centralia, Pennsylvania, began in 1962, eventually opening sinkholes that threatened to gobble and incinerate pets and children. Centralia became a ghost town, and experts say the fire there may burn for a century or more.

At the Rujigou coalfield in the Ningxia Autonomous Region of western China, fires have burned since the late Qing Dynasty (1644-1911). Legend has it that miners who were angry over not being paid started a coal fire more than a century ago. “It was industrial revenge,” Mr Guan said.

Many coal fires begin spontaneously when underground seams come in contact with the air – either through fault lines from earthquakes or mining activity – generating a chemical reaction that can slowly heat and ignite the coal. Human activity can intensify the fires, however, especially when workers abandon dust-filled mines without sealing the airshafts, allowing temperatures to build.

The mainland’s coal fires stretch across a northern belt that runs nearly 5,000km from east to west. A cluster of them are in Ningxia and a little to the north in Inner Mongolia , at the edge of the Gobi Desert. The concentration of coal fires in the region puts it in the running for one of the world’s worst ecological disasters, and only humans can extinguish the problem.

“These fires just don’t go out,” said Anupma Prakash, a University of Alaska at Fairbanks expert on mapping coal fires.

Coal fires pollute the air with putrid smoke and wreak havoc on water supplies and above-ground ecology, creating “heat islands” where little vegetation can grow, not even hardy grasses. Wildlife flees.

“There used to be rabbits and pheasants around here, but not any more,” said Liang Guobao, who oversees a generator facility at the San Kuang coal mine in the sprawling Wuda coalfields in Inner Mongolia. His generator powers fans to clear the air in underground shafts.

Mr Liang walked with a visitor around the barren landscape, pointing out places where the ground had collapsed after subterranean coal fires ate away seams and left empty caverns.

“The mine started here in 1958, and almost immediately the fires began,” Mr Liang said.

Coal fuels the mainland’s roaring economy, powering its factories but also taking a human, social and environmental toll. The mainland uses coal for 70 per cent of its primary energy needs, far higher than the world average of 40 per cent. Mainland coal production topped 2.3 billion tonnes last year, equalling the output of the US, Russia, Australia and India combined, according to Yang Fuqiang of the Beijing office of The Energy Foundation, a San Francisco group that promotes energy efficiency.

Even as it provides power, coal exploitation leaves a trail of deaths.

Last year, 3,786 mainland miners died in accidents, a rate 70 times higher than for miners in the US.

Coal burning is a principal cause of air pollution on the mainland, where 400,000 people die each year from illnesses – mainly heart and lung diseases – related to that pollution, the World Bank estimates.

For those who grew up in the region, the scarring of the hilly environment from unseen coal fires is part of the landscape. Mr Ma recalled walking in the hills as a youth and discovering long, deep fissures in the earth.

“We wouldn’t know how deep they were. If we dropped a stone in, we could hear it bounce off the walls … but we couldn’t hear it hit bottom,” Mr Ma said.

As much as 40 per cent of the mainland’s coal comes from small local mines rather than big state-owned enterprises. Small operators follow a pattern when their mines catch fire.

“When they have a fire, they just leave and go to another place,” said Li Jing, the director of the Institute of Resource Technology at Beijing Normal University.

Over the past decade, Beijing has put far greater emphasis on attacking coal fires. The work is labour intensive, costly and dangerous in its initial stages. The blazes can reach underground temperatures of 700 to 800 degrees Celsius, imperiling firefighters.

“First, they shape the terrain and cool down the surface so the heavy machinery can work,” Dr Rueter said. Teams drill holes down through the burning coal in 50 to 60 spots and inject water for several months “to cool down the entire rock volume”.

Later, they may make up a slurry of sand, water, cement and some chemicals, and pour it into the holes. Once the fire is out, the entire rock area must fall below 70 degrees to ensure that the coal does not re-ignite. A layer of clay is put on top and trees planted to gauge whether the fire has begun anew.

Dr Prakash, the coal fire expert in Alaska, said she thought that worldwide efforts to combat coal fires had fallen short. “The coal exploration is more intense than the coal firefighting efforts,” she said. “In the areas I have seen – China, India, Indonesia, South Africa – they haven’t got any better.”

Beijing is sensitive to charges that it may not be doing enough to put out the fires. Fourteen months ago, it announced with much fanfare that it had finally put out the Rujigou coal fires in Ningxia that had burned for decades. A Xinhua report said the state had spent US$53 million over a decade to douse the fires.

A visit to the site, however, showed that the fires weren’t completely extinguished.

“The leaders said they’d put out all the fires,” said one miner, who preferred to remain anonymous.

There were many reasons that the work was never completed, he said. “One reason is that the investment to put out the fires was not enough. And the leaders changed too frequently.”

 

McClatchy-Tribune

Green Investment Makes Business Sense

Lau Nai-keung, SCMP – Nov 14, 2008

In an interview immediately after his US presidential election victory, Barack Obama listed four priorities for his administration. The first one is, of course, the economy, then energy, health care and the environment. To him, directing more resources away from oil dependency and saving the environment are good for the economy, too. He is right on the button.

Our government, and for that matter, authorities in Guangdong, have to understand that money spent on improving the environment is not a budget extravagance that should be cut during hard times.

Instead, it is a growth area that can, first of all, employ people, including the less educated and unskilled. Moreover, it can be hi-tech. Reduce, reuse and recycle is a dirty phrase here, but there are a lot of technologies involved, including physics, chemistry, biochemistry, engineering and logistics. Doing it on a regional scale requires highly sophisticated management skills, too.

In fact, China is now the world’s leading producer and user of solar water heaters. DuPont’s new venture in Hong Kong and Shenzhen will put us at the forefront of solar energy technology. Electricity-generating wind turbines are sprouting like mushrooms in certain parts of Guangdong. Nuclear energy, which is back in vogue and considered clean energy worldwide, is now gaining a bigger presence in the province, with at least two new plants in the pipeline.

Hong Kong, on the other hand, is too obsessed with hi-tech. If our recycling business does not join its counterparts in the Pearl River Delta, it will not survive. And, without government subsidies from both Hong Kong and Guangdong, the whole recycling industry may die as commodity prices fall.

Some 2.81 million tonnes of Hong Kong’s solid waste was separated for recycling last year, slightly less than in 2006. However, only 1 per cent, or 30,000 tonnes, was recycled in Hong Kong, compared with more than 11 million tonnes a year earlier. The remainder of the recoverables was exported for recycling. This is one area where we need co-operation between Guangdong and Hong Kong. Collaboration on used tyres or construction materials is an ideal way to start. There has been talk about recycling used tyres since 2003.

Investing in the environment is money well spent, because it can cut social costs, such as health care, and reduce hardship and suffering. These costs are estimated to total more than 3 per cent of gross domestic product, according to the Organisation for Economic Co-operation and Development.

Carbon trading is another area of regional co-operation where Hong Kong will play a prominent role. Our power plants generate more than 60 per cent of carbon emissions in Hong Kong. Figures from last year show that the two plants generated about 28 million tonnes of greenhouse gases, and are therefore good candidates to start the ball rolling. Guangdong also has its mandatory emissions targets to fulfil.

China, on the whole, is the largest carbon trading market in the world and is the biggest beneficiary of the United Nations Clean Development Mechanism. It is estimated that, by 2012, China, which is by far the largest carbon-emitting developing nation, will occupy about 50 per cent of the multibillion-euro carbon trading market.

There is much discussion on the mainland about setting up a carbon exchange. Hong Kong is the most suitable place for this institution. It should take the initiative and approach the central government about the subject.

If Guangdong wants to be the number one province, regional co-operation in environmental protection is perhaps the only viable option. If Hong Kong wants to seek opportunities in a depression, this is also the most feasible direction. We only have to “liberate our thoughts”, as Guangdong party secretary Wang Yang has urged.

Lau Nai-keung is a member of the Basic Law Committee of the NPC Standing Committee, and also a member of the Commission on Strategic Development