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Difficulties of establishing biofuels exposes poor thinking of HK policymakers

In 2011, Eric Ng of the SCMP wrote an article about a biofuels plant in Tseung Kwan O Industrial Estate that had to suspend construction, likely due to a lack of funding. At the same time, the article shed light on the difficulties faced by current biofuels producers in Hong Kong: stiff competition on the waste oil market, import levies for feedstocks, lack of mandatory legislation to promote biofuels use, and so on.

One of the main advantages of using biofuels is that it achieves more than some 85% reduction in greenhouse gas emissions. The European Union has already mandated a policy of fuel blending: at least 5.75 per cent of all fuel sold has to be biofuel, with the percentage to increase further in the future, and other countries in Asia also have policies encouraging biofuel consumption. Hong Kong lags behind in such initiatives, and it is not difficulty to see why: Eric Ng, in a recent update on the issue, reports official Mok Wai-chuen of the Environmental Protection Department as saying in 2007 that “biodiesel did little to improve roadside air quality”, backed up by 2002 reports from the US National Biodiesel Board and the US Environmental Protection Agency that “suggested the use of biodiesel would result in a relatively modest reduction in roadside emissions”. The irrelevance of such an analysis – blending 5% biofuel into Euro V standard diesel containing 0.001% sulphur could never have meant reducing roadside pollutants – escapes officials; much of the roadside pollutants are carried by prevailing winds from shipping lanes and industries across the border.

If public policy on biofuels is to be decided on this factor alone, then the real benefits of biofuel would be ignored: once the biofuel industry is established, it can process the city’s waste and convert it to fuel; as mentioned before, biofuels hugely reduce greenhouse gas emissions; more importantly, by helping biofuel operations purchase waste cooking oil, the practice of smuggling waste cooking oil across the border to be converted into ‘gutter oil’ and re-used as cooking oil can be stemmed – which would happen to be quite the moral thing to do, given that such usage of recycled oil is carcinogenic and harmful to human health when ingested.

Click here to read the coverage from SCMP:

Natural Gas Bombshell: Switching From Coal to Gas Increases Warming for Decades, Has Minimal Benefit Even in 2100 | ThinkProgress

Natural Gas Bombshell: Switching From Coal to Gas Increases Warming for Decades, Has Minimal Benefit Even in 2100

By Joe Romm on Sep 9, 2011 at 5:01 pm


A stunning new study by the National Center for Atmospheric Research (NCAR) concludes:

In summary, our results show that the substitution of gas for coal as an energy source results in increased rather than decreased global warming for many decades….

Coal, natural gas, and climate: Shifting from coal to natural gas would have limited impacts on climate, new research indicates. If methane leaks from natural gas operations could be kept to 2.5% or less, the increase in global temperatures would be reduced by about 0.1 degree Celsius by 2100. Note this is a figure of temperature change relative to baseline warming of roughly 3°C (5.4°F) in 2100. Click to Enlarge.

The fact that natural gas is a bridge fuel to nowhere was first shown by the International Energy Agency in its big June report on gas — see IEA’s “Golden Age of Gas Scenario” Leads to More Than 6°F Warming and Out-of-Control Climate Change. That study — which had both coal and oil consumption peaking in 2020 — made abundantly clear that if we want to avoid catastrophic warming, we need to start getting off of all fossil fuels.

But what NCAR’s new study adds is more detailed modeling of all contributors to climate change from fossil fuel combustion — positive and negative. The study is here [they just eliminated the subscription requirement], the news release is here. It’s by senior research associate Tom Wigley, one of the country’s leading experts on climate modeling.

“Relying more on natural gas would reduce emissions of carbon dioxide, but it would do little to help solve the climate problem,” says Wigley, who is also an adjunct professor at the University of Adelaide in Australia. “It would be many decades before it would slow down global warming at all, and even then it would just be making a difference around the edges.”

Wigley’s analysis is the first to include all of the relevant climate factors:

We consider a scenario where a fraction of coal usage is replaced by natural gas (i.e., methane, CH4) over a given time period, and where a percentage of the gas production is assumed to leak into the atmosphere. The additional CH4 from leakage adds to the radiative forcing of the climate system, offsetting the reduction in CO2 forcing that accompanies the transition from coal to gas. We also consider the effects of methane leakage from coal mining; changes in radiative forcing due to changes in the emissions of sulfur dioxide and carbonaceous aerosols; and differences in the efficiency of electricity production between coal- and gas-fired power generation. On balance, these factors more than offset the reduction in warming due to reduced CO2 emissions.

In the main scenario in the paper, natural gas use soars and coal use drops from 2010 to 2050 before rising again slowly. In the “Supplementary Material,” Wigley runs a sensitivity analysis where natural gas actually replaces coal entirely by 2050. The results are virtually identical — there’s extra warming through 2050 and by 2100 the total reduction in warming is slightly under 0.1°C.

Wigley’s warming in 2100 is “only” 3°C (though it just keeps warming and hits 4°C a few decades later). Other models show 2100 warming closer to 4°C or 5°C (see M.I.T. doubles its 2095 warming projection to 10°F — with 866 ppm and Arctic warming of 20°F). Either way, the switch to gas accomplishes little or nothing.

A key finding of the NCAR study is:

In summary, our results show that the substitution of gas for coal as an energy source results in increased rather than decreased global warming for many decades — out to the mid 22nd century for the 10% leakage case. This is in accord with Hayhoe et al. (2002) and with the less well established claims of Howarth et al. (2011) who base their analysis on Global Warming Potentials rather than direct modeling of the climate….

The most important result, however, in accord with the above authors, is that, unless leakage rates for new methane can be kept below 2%, substituting gas for coal is not an effective means for reducing the magnitude of future climate change.

What is the leakage rate for methane? Well, as I’ve written, we don’t know exactly because the gas companies won’t release all of their data. We do know that total life-cycle leakage and fugitive emissions from extraction, production, transport, and consumption is higher for shale gas than conventional gas.

The controversial — but peer-reviewed — paper by Cornell’s Robert Howarth, which I wrote about here, seeks to quantify the impact of the leakage from the best available data. It concluded:

Natural gas is composed largely of methane, and 3.6% to 7.9% of the methane from shale-gas production escapes to the atmosphere in venting and leaks over the life-time of a well. These methane emissions are at least 30% more than and perhaps more than twice as great as those from conventional gas. The higher emissions from shale gas occur at the time wells are hydraulically fractured — as methane escapes from flow-back return fluids — and during drill out following the fracturing. Methane is a powerful greenhouse gas, with a global warming potential that is far greater than that of carbon dioxide, particularly over the time horizon of the first few decades following emission.

I wrote about the “response” by the National Energy Technology Laboratory, the DOE’s premier fossil fuel lab, here. NETL throws dozens of numbers at the reader — and averages in shale gas with conventional gas — to obfuscate the issue. But even NETL concedes that fugitive emissions comprise 1.7% of all natural gas extracted — and point source losses (vented or flared) comprised 2.4% of gas extracted. Shale gas, in their analysis, appears to have 30% higher global warming potential for extraction and delivery, so clearly total losses are higher — much higher than 2%.

I would note that legitimate claims are being made now that the lifetimes of many new shale gas wells have been overstated considerably — see “Analysis: U.S. Shale Gas Industry Reserves Are Over Stated at Least 100 Percent.” If so, this would again suggest that total life-cycle emissions relative to total production may be higher than people have suspected for unconventional gas.

ClimateWire (subs. req’d) quotes Howarth, who is a professor of ecology and environmental biology, that the switch from coal to gas has been “overhyped”:

It’s time to move on truly green energy technologies — solar, wind — and to place a much greater emphasis on energy efficiency.

Can’t argue with that.

Reid Detchon, executive director of the Energy Future Coalition is quoted saying:

Certainly the carbon benefit was a major consideration in wanting to consider a switch from coal to gas. The Wigley analysis makes it clear that simply switching from coal to gas is not going to get the job done.”

Detchon calls for developing carbon capture mechanisms for natural gas, which should be a priority for the industry, but don’t hold your breath.

BOTTOM LINE: If you want to have a serious chance at averting catastrophic global warming, then we need to start phasing out all fossil fuels as soon as possible. Natural gas isn’t a bridge fuel from a climate perspective. Carbon-free power is the bridge fuel until we can figure out how to go carbon negative on a large scale in the second half of the century.

Since this is an NCAR study, let me end by pointing out that last year NCAR published a complete literature review of “Drought under global warming” (see here). That study makes clear that Dust-Bowlification may be the impact of human-caused climate change that hits the most people by mid-century, as the figure below suggests (click to enlarge, “a reading of -4 or below is considered extreme drought”):

drought map 3 2060-2069

The PDSI [Palmer Drought Severity Index] in the Great Plains during the Dust Bowl apparently spiked very briefly to -6, but otherwise rarely exceeded -3 for the decade (see here).

The large-scale pattern shown in Figure 11 [of which the figure above is part] appears to be a robust response to increased GHGs. This is very alarming because if the drying is anything resembling Figure 11, a very large population will be severely affected in the coming decades over the whole United States, southern Europe, Southeast Asia, Brazil, Chile, Australia, and most of Africa.

The National Center for Atmospheric Research notes “By the end of the century, many populated areas, including parts of the United States, could face readings in the range of -8 to -10, and much of the Mediterranean could fall to -15 to -20. Such readings would be almost unprecedented.”

Texas is currently at a PDSI of -7.75, close to its record of -7.8 in September 1956 – see Hell and High Water Stoke Texas Blaze: “No One on the Face of This Earth has Ever Fought Fires in These Extreme Conditions”

For the record, the NCAR study merely models the IPCC’s “moderate” A1B scenario — atmospheric concentrations of CO2 around 520 ppm in 2050 and 700 in 2100, which looks close to what Wigley modeled. If this is the Golden Age of Gas, then it must be describing the color of the dust.

Exxon Mobile is again 2nd worst air polluter in the US

exxon-logoSource: Political Economy Research Institute

Exxon Mobil owns 60% of CLP

Researchers at the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst today released the Toxic 100 Air Polluters (, an updated list of the top corporate air polluters in the United States.

“The Toxic 100 Air Polluters informs consumers and shareholders which large corporations release the most toxic pollutants into our air,” said Professor James Boyce, co-director of PERI’s Corporate Toxics Information Project. “We assess not just how many pounds of pollutants are released, but which are the most toxic and how many people are at risk. People have a right to know about toxic hazards to which they are exposed. Legislators need to understand the effects of pollution on their constituents.”

The Toxic 100 Air Polluters index is based on air releases of hundreds of chemicals from industrial facilities across the United States. The rankings take into account not only the quantity of releases, but also the toxicity of chemicals, transport factors such as prevailing winds and height of smokestacks, and the number of people exposed.

The top five air polluters among large corporations are the Bayer Group, ExxonMobil, Sunoco, DuPont, and Arcelor Mittal. The Toxic 100 Air Polluters rankings have been expanded to include large privately held firms, such as number 10 Koch Industries, as well as the world’s largest publicly traded corporations.

For the first time, the Toxic 100 Air Polluters includes information on the disproportionate risk burden from industrial air toxics for minorities and low-income communities. This makes it possible to compare corporations and facilities in terms of their environmental justice performance as well as overall pollution. For example, the data reveal that minorities bear 65% of the air toxics risk from facilities owned by ExxonMobil, while minorities make up 38% of the U.S. population.

Users of the web-based Toxic 100 Air Polluters list can view the details behind each company’s Toxic Score, including the names and locations of individual facilities owned by the corporation, the chemicals emitted by those facilities, and the share of the Toxic Score borne by minorities and people living below the poverty line. The new edition also provides access to this information on all firms operating in the United States, regardless of size. Several smaller firms rank as big air polluters, topped by the Marietta, Ohio, facility of the French-owned Eramet Group and Houston-based Quality Electric Steel Castings LP.

The data on chemical releases come from the U.S. Environmental Protection Agency’s Toxics Release Inventory (TRI). The TRI is widely cited in press accounts that identify the top polluters in various localities. But reports based on TRI data alone have three limitations:

  • Raw TRI data are reported in total pounds of chemicals, without taking into account differences in toxicity. Pound-for-pound, some chemicals are up to ten million times more hazardous than others.
  • TRI data do not consider the numbers of people affected by toxic releases–for example, the difference between facilities upwind from densely-populated urban areas and those located far from population centers.
  • TRI data are reported on a facility-by-facility basis, without combining plants owned by one corporation to get a picture of overall corporate performance.

The Toxic 100 Air Polluters index tackles all three problems by using the 2006 Risk-Screening Environmental Indicators (RSEI) data, the most recent available from the EPA. In addition to TRI data, RSEI includes toxicity weights and population exposure. PERI researchers added up facility-by-facility RSEI data released by the EPA to construct corporate rankings.

“In making this information available, we are building on the achievements of the right-to-know movement,” explains Professor Michael Ash, co-Director of the Corporate Toxics Information Project. “Our goal is to engender public participation in environmental decision-making, and to help residents translate the right to know into the right to clean air.”

Can China Clean Up Its Act?

BusinessWeek by Adam Aston – May 14, 2009


Beijing has big plans to curb pollution and start a cleantech industry. But the global recession and looming trade frictions will test its resolve

China’s unprecedented growth in recent years has come at a terrible price. Two-thirds of its rivers and lakes are too polluted for industrial use, let alone agriculture or drinking. Just 1 in 100 of China’s nearly 600 million city dwellers breathes air that would be considered safe in Europe. At a time when arable land is in short supply, poisoned floodwaters have ruined many productive fields. And last year, ahead of most forecasts, China passed the U.S. to become the world’s largest source of greenhouse gases.

The immensity of these troubles has produced a result that may surprise many outside China: The nation has emerged as an incubator for clean technology, vaulting to the forefront in several categories. Among all countries, China is now the largest producer of photovoltaic solar panels, thanks to such homegrown manufacturers as Suntech Power (STP). The country is the world’s second-largest market for wind turbines, gaining rapidly on the U.S. In carmaking, China’s BYD Auto has leapfrogged global giants, launching the first mass-produced hybrid that plugs into an electrical outlet. “China is a very fast follower,” said Alex Westlake, a director of investment group ClearWorld Now, at a recent conference in Beijing.


Understanding they are in a global race, China’s leaders are supporting green businesses with policies and incentives. Beijing recently hiked China’s auto mileage standards to a level the U.S. is not expected to reach until 2020. Beijing also says it will boost the country’s share of electricity created from renewable sources to 23% by 2020, from 16% today, on par with similar targets in Europe. The U.S. has no such national goal.

While most environmentalists applaud these developments, China watchers are voicing two very different sets of concerns. Some question whether China will really stand by its ambitious targets and are worried by signs of backsliding as the recession in China’s key export markets drags down economic growth. Another group, interested mainly in America’s own industrial future, fears that China’s growing dominance in certain green technologies will harm budding cleantech industries in the U.S. After all, China’s emergence comes just as the Obama Administration is trying to nurture these same types of ventures, hoping to generate millions of green jobs. Many of these U.S. businesses will have trouble holding their own against low-price competitors from China.

Beijing’s green intentions will soon be put to the test. China is in the midst of the biggest building boom in history. A McKinsey & Co. study estimates that over 350 million people—more than the U.S. population—will migrate from the countryside into cities by 2025. Five million buildings will be added, including 50,000 skyscrapers—equal to 10 New York Cities. And as quickly as new offices and houses multiply, they are filled with energy-hungry computers, TVs, air conditioners, and the like, sharply increasing demand for electricity, which comes mainly from coal-powered plants.

Environmental groups say it is therefore critical that Beijing promote rigorous, greener standards. And to some degree, that’s happening. A government mandate states that by the end of next year, each unit of economic output should use 20% less energy and 30% less water than in 2005. Portions of Beijing’s $587 billion economic stimulus package are earmarked for cleantech. On top of that, in March the Finance Ministry unveiled specific incentives to spark solar demand among China’s builders. Included was a subsidy of $3 per watt of solar capacity installed in 2009—enough to cover as much as 60% of estimated costs to install a rooftop solar array.

Steps like these will help Himin Solar Energy Group in Dezhou, Shandong Province. Founded in 1995 by Huang Ming, an oil equipment engineer turned crusader against the use of fossil fuels, the company is the world’s largest producer of rooftop piping systems that use the sun’s rays to heat water. Its eye-catching headquarters, the Sun-Moon Mansion, showcases these heaters, which Himin cranks out in immense volumes—about 2 million square meters’ worth each year, equal to twice the annual sales of all such systems in the U.S. Because its water heaters sell for as little as $220, they are becoming standard in new housing complexes and many commercial buildings across the country.

Broad Air Conditioning, based in Changsha, Hunan Province, is also set to profit as Beijing pushes toward its green targets. By using natural gas and so-called waste heat from other machines and appliances instead of electricity, Broad’s big chillers can deliver two to three times more cooling per unit of energy than a conventional unit. In a similar fashion, Haier, headquartered in Qingdao, Shandong Province, combines low-cost manufacturing and a variety of advanced technologies to create affordable, energy-sipping refrigerators and other appliances. During the 2008 Beijing Olympics, Haier supplied more than 60,000 such devices for visiting athletes and tourists to use.

As these and other domestic players bump up against technological obstacles, they can draw on the expertise of many of the world’s top multinationals. In return for access to its domestic market, Beijing asks such companies as General Electric (GE), DuPont (DD), 3M (MMM), and Siemens (SI) to share their technology, help upgrade their China-based supply chains, and spread industrial processes to make manufacturing more efficient. These aren’t simply green practices, says Changhua Wu, Greater China director of the Climate Group, a consultancy in London that partners with companies to combat climate change. “They’re best practices.”

GE, for example, has transferred expertise to Chinese partners in everything from wind turbine construction to the building of low-pollution factories. At the Beijing Taiyanggong power plant, waste heat from the combustion process is recycled, resulting in around 80% efficiency, more than double the rate of most conventional power plants in the U.S. The bulk of GE’s sales of turbines for power plants in China are the ultra-efficient models. David G. Victor, a Stanford University professor who has studied China’s electric grid, says some of the coal plants being built there are “much more advanced than those we see in the U.S.”

Wal-Mart Stores (WMT), which buys some $9 billion worth of goods in China each year from some 20,000 vendors, infuses its supply chain with the latest ideas about energy efficiency. For example, Chinese factories that work with Wal-Mart are obliged to track vast quantities of data on energy use and make the information available for audits. “Many Western companies can’t track their own energy consumption,” says Andrew Winston, consultant and co-author of the book Green to Gold.

China’s early achievements in cleantech owe a lot to collaborations such as these. The benefits: China cleans up its own pollution, and the government-backed initiatives in solar and wind help drive down the cost of renewable energy systems in countries around the world.

But there is a downside. The rock-bottom prices for made-in-China green technology could make it impossible for cleantech ventures in the U.S., Europe, or Japan to compete. How, for example, will they go up against Suntech Power, based in Wuxi, Jiangsu Province, the world’s lowest-cost manufacturer of standard solar panels? The U.S. boasts plenty of advanced technology. But any efforts by Washington to nurture this sector could be quickly undercut by a flood of Chinese-made solar panels. Such a deluge is likely if there is a big increase in public subsidies for rooftop solar systems. “What [that would] do is create 10,000 Chinese jobs,” says Roger G. Little, chief executive of Spire Corp. (SPIR), a leading U.S. maker of manufacturing equipment for photovoltaics. “If we import all the [solar] modules, it will obliterate U.S. manufacturing” in this area.

A similar scenario exists in the much heralded area of electric vehicles. BYD, headquartered in Shenzhen, started selling its first plug-in hybrid, the F3DM, last year. It beat Toyota (TM) and General Motors (GM), both of which are developing such “plug-ins,” and hit the market with a price tag they probably can’t match: just $22,000. Henry Li, a BYD general manager, says the company will roll out a version of the car in the U.S. in 2011. Chevy’s answer to this car, called the Volt, is expected to cost about twice as much and won’t be out until next year.

How did BYD pull off this coup? Part of it is just being the new kid on the block. Today’s automobiles, with their advanced combustion engines, are the most complex mass-produced goods ever made, assembled from thousands of highly engineered parts provided by a web of suppliers. It’s difficult for a Chinese startup to compete on such a sophisticated playing field. But the emergence of a new, green-vehicle category clears the way. BYD was able to break in by leveraging its background as a battery maker. When it ran into technical hurdles, the company could draw on a deep pool of inexpensive, well-trained talent at China’s top engineering schools. BYD is also a leader in pure electric vehicles, the logical next step. The government is now putting some muscle behind BYD’s push. It is heavily subsidizing electric-car sales in about a dozen cities—in a stroke, making China the world’s biggest market for such advanced vehicles. Its goal is to boost domestic output of battery-powered vehicles to a half million per year in 2011.

How Washington and the beleaguered U.S. auto sector might respond to a wave of inexpensive electric vehicles from China is difficult to predict. And it is also unclear how China’s cleantech efforts in cars, energy, and other areas will be affected if key markets such as the U.S. and Europe don’t recover quickly from the recession. Chinese makers of solar photovoltaics, including Suntech, export about 98% of their production. They have been battered this year by a collapse in demand in Germany, Spain, and Japan, China’s top markets for solar gear. Suntech’s factories are currently running at half of last year’s capacity.

Even inside China, academics and business executives say Beijing needs to do more to bolster cleantech initiatives and make them recession-proof. For example, without better information on how such policies as the current Renewable Energy Law are to be enforced, “many of the terms are meaningless,” complains Himin’s Huang. And even when the terms are clear, companies don’t always adhere, says Zhou Weidong, the Guangzhou-based China director at the Business for Social Responsibility, a global consultancy promoting sustainable business practices: “Paying penalties is cheaper than complying with the law in many areas.”

At times, it seems as though Beijing is pedaling in the wrong direction. Late last year, China’s Environmental Protection Ministry loosened review standards on potentially polluting industrial projects. In an economic crunch, “environmental protection is downplayed to second, or third, or even fourth priority,” observes Guo Peiyuan of SynTao, a corporate social responsibility advisory firm in Beijing.

While acknowledging there has been some backsliding, most China watchers say the government is unlikely to stage a full-throttle retreat. Too much of its export growth is contingent on meeting strict environmental regulations. And Beijing recognizes that Chinese society can’t tolerate much more environmental degradation. The World Bank estimates damage from pollution—everything from decimated fisheries to premature human death—saps nearly 6% of China’s gross domestic product each year as well. For economic reasons alone, it will be difficult for China to turn back the clock.

with Charlotte Li and Pete Engardio

Aston is Energy & Environment editor for BusinessWeek in New York.

Why Global Warming Could Make or Break South-East Asia

Nicholas Stern and Haruhiko Kuroda, The Guardian UK, 5 May 2009

South-east Asia has the most to lose from global warming but could gain much by developing a low-carbon future

In the middle of this financial crisis there is a debate taking place over whether governments can afford both massive tax-funded spending programmes needed to revive ailing economies, and the emissions cuts that are needed to combat climate change.

Few regions on Earth throw this tension into sharper contrast than south-east Asia, where many nations are highly vulnerable to the effects of global warming while also having the chance to develop low-carbon economies.

The plain truth is that nations can no longer afford to delay action on climate change, even temporarily, and such spending can serve as effective fiscal stimulus. Despite the global economic downturn the world is still warming. A major new report from the Asian Development Bank – The Economics of Climate Change in Southeast Asia: A Regional Review – explains how countries that invest now in climate change adaptation will better protect their people, economy and environment. Even with aggressive adaptation efforts, the negative impacts of climate change will continue to worsen. Only concerted global action to reduce greenhouse gas emissions can ultimately steer the world off its current calamitous course.

The report examines a wide range of climate change impacts in Indonesia, Philippines, Singapore, Thailand and Vietnam. It finds a “business as usual” approach will result in a difficult future for the region and its people.

By the end of this century temperatures in south-east Asia will rise significantly, tens of millions will experience water shortages, rice production will decline, and large swaths of forests will disappear. Rising sea levels will force the relocation of millions of island dwellers and coastal communities, and there will be a surge in dengue, malaria and other diseases.

With population centres and economic activity concentrated along south-east Asia’s coastlines and livelihoods particularly dependent on agriculture, fishing and natural resources, the region is acutely vulnerable. Adopting a similar modelling approach to that used in the 2007 Stern Review, the report concludes the region is twice as economically vulnerable to climate change compared with the rest of the world.

The good news is that far from the world’s policy makers being captive to the economic crisis, the opposite is true: the crisis may offer opportunities if we can boost programmes to improve water, sanitation, climate-proofing and reduce carbon dependency and protect forests.

At their recent London Summit, G20 leaders agreed that current stimulus programmes should be used to foster a green, sustainable recovery. As was outlined in the recent joint report from the UK’s Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy – an outline of the case for a “green” stimulus – energy efficient and low carbon technologies are not simply means for reducing carbon emissions. They are also extremely effective as a fiscal stimulus because they can be implemented quickly and are relatively labour intensive.

For Asia’s governments, these kinds of public investments, in both adaptation and mitigation, will be essential to eradicating extreme poverty, achieving the Millennium Development Goals, and making structural transformations that are needed to place the region on a low-carbon path.

Over the next 50 years, much of the world’s new energy and urban infrastructure will be built in Asia, locking in the region’s greenhouse gas emission pattern. Encouragingly, there are vast, untapped opportunities for energy efficiency improvements, cleaner transport, and for increasing the use of renewable energy sources including biomass, solar, wind, hydro and geothermal.

Some of these schemes can be financed through the government’s own fiscal stimulus programmes, others with international assistance, including both additional funding sources and the transfer of knowledge and technologies.

That might seem like a lot to ask in the midst of the worst financial crisis since the Great Depression. But the benefits will be enormous.

We have no time to delay. The financial crisis will come to an end. Without action, the same cannot be said for climate change.

• Lord Stern is chairman of the Grantham Institute for Climate Change and the Environment and the IG Patel professor of economics and government at the London School of Economics. Haruhiko Kuroda is president of the Asian Development Bank.

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.

Turmoil Offers Opportunity To Promote Green Cars

Kandy Wong, SCMP – Updated on Jan 07, 2009

The central government will soon announce the rate cut for consumption tax, which is regarded as a move to further boost sales and entice consumers to buy “green” cars in a weak market.

Beijing aims to transform the industry, with zero emissions as the goal in the next decade, using tax policies. It regards the current financial crisis as the right time to encourage fuel-efficient vehicles.

“China needs to take policy steps to help counter a serious drop-off in car sales as a result of the global economic slowdown,” Minister of Industry and Information Technology Li Yizhong has said.

The vehicle industry is lobbying government departments for a favourable consumption tax rate. Mainlanders currently pay a consumption tax of 10 per cent when they buy a vehicle. Analysts said if the tax cut was less than 5 percentage points, there would not be a strong enough effect to boost sales of small-engined vehicles.

Under one set of proposals, the tax for vehicles with one-litre engines or smaller would be lowered to 2 per cent from 10 per cent. Vehicles with 2-litre to 2.5-litre engines and 2.6-litre to 3-litre engines, which are among the most widely bought cars, would be taxed at 7 per cent and 8 per cent, respectively.

Another proposal is to eliminate the consumption tax on cars with 1.6-litre engines or smaller. But it remains unclear how aggressive the government will be in the tax cuts.

The Ministry of Finance has already doubled the vehicle consumption tax in August on large-engined cars of 4.1 litres to 40 per cent from 20 per cent in a bid to fight pollution.

Before the government implements changes to the vehicle consumption tax, the country’s fuel consumption tax has been increased effective January 1, which is seen as a move to prompt the development of fuel-efficient vehicles.

The National Development and Reform Commission announced last month that the tax for petrol would be raised from 20 fen (23 HK cents) per litre to 1 yuan and the diesel tax from 10 fen to 80 fen per litre.

Road maintenance fees levied on motorists will also be cancelled, as a way to offset the higher fuel consumption tax.

The increase in fuel consumption tax has been discussed for a decade and was turned down seven times in the past.

Motorists have said they would drive less and use more public transport because of the higher fuel consumption tax.

Clean Coal Best Way To Fuel Asia’s Growth

Frank Ching, SCMP – Updated on Dec 23, 2008

As China this month celebrates 30 years of extraordinary growth, it is also keenly aware that it has had to pay a steep environmental price – in terms of the health of its people because of severe pollution of its air, water and land.

Pan Yue, deputy environment minister, wrote recently: “China’s reform and opening has achieved in 30 years the economic gains of more than 100 years in the west – yet more than 100 years of environmental pollution in the west have materialised in 30 years in China.”

That is to say, the pace of China’s environmental pollution matches that of its economic growth. China has now overtaken the United States as the world’s greatest emitter of greenhouse gases.

That is not a record of which to be proud. To be sure, the developed countries, in particular the US and those in western Europe, have been responsible for the bulk of greenhouse gases already in the atmosphere. But China now contributes more than the US, and India is not far behind.

But the Earth is a vessel in which we all are journeying and we will all sink or swim together. Finger-pointing is not going to help: we need to reduce, as much as possible, the carbon dioxide being put into the atmosphere by all countries.

There has been a lot of talk about switching from fossil fuels to non-polluting forms of energy such as wind, solar or nuclear power. However, in the foreseeable future, there is no alternative to fossil fuels and, in particular, coal.

Coal is abundant and cheap, and is going to be used anyway, so there is a compelling need to come up with technology to “clean” the coal. Such technology is now on the lips of politicians and scientists from Australia to Canada, and from China to the US. It is an idea whose time has come.

One example of the recognition of the need to use coal without polluting the air is the announcement in Hong Kong this month by Washington University in St Louis of its partnership with 24 premier research universities around the world, 17 of which are in Asia, including universities in the mainland, Taiwan and Hong Kong.

“The consortium’s goal is to bring university researchers, industries, foundations and government organisations together to research clean coal technology,” Mark Wrighton, chancellor of Washington University, said. “The results of such research could support the fast-growing economies of Asia to fuel further development while at the same time increasing the awareness of coal as an efficient and environmentally safe form of energy.”

At present, research into clean coal technology is going on in many developed nations. There is already some co-operation between China and the US. At the latest session of the strategic economic dialogue in Beijing earlier this month, it was announced that an “EcoPartnership” had been formed between Energy Future Holdings of the US and China Huadian. Both companies are pursuing the development of sustainable business models for “clean energy”, particularly clean coal.

China and Britain, too, have jointly launched a near zero emissions coal initiative that aims to capture and geologically sequester carbon dioxide generated by coal combustion. It is expected that a demonstration near-zero-emissions plant will be built in China by 2014.

Currently, researchers are focusing on ways in which coal can be burned without releasing carbon dioxide into the atmosphere. The thinking is that the carbon can somehow be captured and then safely stored in the ground permanently, or until science has progressed to the point that it can be disposed of in some other way.

Pooling efforts in a consortium should make the research more efficient. This is something that the world, not just China or the US, needs badly.

Frank Ching is a Hong Kong-based writer and commentator.


Energy Goals To Be Overhauled – Nuclear And Wind Power Expected To Get Far More Emphasis For 2020

Stephen Chen, SCMP – Updated on Dec 20, 2008

China’s midterm energy development goals are tipped to change radically early next year with a surge in nuclear and wind power plants.

As the central government pushes infrastructural projects to stimulate the economy, the National Development and Reform Commission (NDRC) is revising the 20-year road map it set for the energy sector last year, according to the influential 21st Century Business Herald.

The paper forecast dramatic expansion in the nuclear and wind sector as the country, under increasing pressure over greenhouse gas emissions and pollution, tries to shift from coal to cleaner, more sustainable energy sources.

If the revisions are implemented, their energy targets would make the original goals look modest.

Last year, China said that by 2020, the country’s nuclear industry would produce 40GW, more than 40 times this year’s capacity and requiring annual growth of more than 20 per cent.

NDRC Energy Bureau director Zhang Guobao said in March that the commission was considering resetting the target at 60GW. But last month, another NDRC official said that the new target, expected to be released early next year, would be 70GW or higher.

The huge shortening in the timeline meant that construction of a large number of nuclear power plants that were supposed to be built after 2010 would have to begin next year, the paper said.

The possible projects include two new power plants in Yunfu and Shanwei in Guangdong; expansion of existing power plants in Zhejiang , Shandong , Liaoning , Jiangsu and Fujian ; the first power plant for Guangxi ; and some other projects proposed by some landlocked provinces in central China, it said, quoting a source who it said was knowledgeable about the new plan.

The new target will put enormous pressure on capital investment, technology and supplies of uranium-235. But the NDRC has reason to feel optimistic about meeting the goals because the central government has vowed to invest 4 trillion yuan (HK$4.55 trillion) to stimulate the economy in less than four years; and France and the US have already sold third-generation thermal technology to China.

One big missing element is China’s lack of enriched uranium, but Chen Xinyang , general manager of the China Nuclear Energy Industry Corporation, said the solution was to import it.

Mr Chen said the price of nuclear fuels had been driven higher by six major suppliers that controlled more than 80 per cent of the world supply, and after the September 11 terrorist attacks, some major shipping companies had stopped transporting nuclear fuel as controls on radioactive materials intensified.

“We solve the issue by making some long-term fuel supply contracts … and secured transport routes from Central Asia and Russia and across the ocean,” Mr Chen said. “By 2020, no matter whether the goal is 40GW, 60GW or more, we can guarantee enough supply.”

The paper also reported yesterday that wind power generation would also more than triple to a targeted capacity of 100GW by 2020. The new target is 10 times the capacity this year, but it is not unrealistic as China’s wind power generation has doubled since 2005, according to Qin Haiyan , secretary general of the China Wind Power Association.

But Mr Qin said China was still relatively inexperienced in building wind farms and had much research to do before construction begins.

Alarm Raised Over Energy, Population

By Doreen Yu, – Updated December 04, 2008 12:00 AM

HONG KONG – Before an audience held in rapt attention, Minister-Mentor Lee Kuan Yew of Singapore painted a dire world scenario, both in the short and the long term.

In a dialogue with former US President Bill Clinton at the Clinton Global Initiative-Asia here last Tuesday, Lee said he believed the current financial crisis will not be a short one, but whether it will be of medium or prolonged duration depends on what the US economic team tasked to sort out the mess will do in the next three to six months.

“The unorthodox must be considered,” he said when asked about prescriptions to fix the problem.

“The danger now is not inflation but deflation. People feel poor and so they don’t spend. Assets lose their value. You have to put a floor on this,” Lee said, even as he expressed confidence in the economic team that US President-elect Barack Obama has put together, including Larry Summer and Paul Volcker.

The minister-mentor, who had reportedly just gotten out of hospital after implantation of a pacemaker, was uncompromising in his assessment of the global energy situation.

Alternative energy – solar, wind, tides – cannot replace carbon or fossil fuels, he said, since these can only meet about 5 percent of energy demand the world over. The only possible replacement is nuclear energy, which has a lead time of 10 years to implementation.

A $6-billion solar project of a Norwegian corporation is currently in development in Singapore.

He moreover believes that the current drop in world oil prices is only temporary.

“We are in for a spike in oil prices,” he stated, which would mean more coal plants will be put up, which in turn means more CO2 emissions.

As Clinton noted the expected increase in world population from the current 6.7 billion to about 9.5 billion by 2050, Lee said that “population growth is one of the basic problems societies must confront.”

“How many people can the world hold?” he asked.

In response to Clinton’s proposition that the only answer to the population problem is “to send more girls to school,” Lee said that education alone is not enough; there must also be equal job opportunities for women.

Eliciting laughter from the audience that included Mongolian President Nambaryn Enkhbayar (Clinton had remarked in his introduction that he “just wants you (Lee) to tell him how to make Mongolia as rich as Singapore”) and actress and UN ambassador Michele Yeoh, Lee said that in many cases women in Asia – particularly Japan, in response to a question from a Japanese – were highly educated but were merely prepped to become “wives of CEOs.”

“They are highly educated but they don’t work. They stay at home and have many children,” prompting Clinton to quip, “Boy, if I had made that statement…”

With more people in the world, “the demand for all resources will grow,” straining these resources, especially carbon fuel, which is finite and exhaustible.

While encouraging energy efficiency measures such as automatic climate controls and efficient lighting for hotels and other buildings, Lee said this “still won’t solve the problem, only delay it.” Even the discovery of new sources of fuel – citing reports from Russia of rich deposits in the Antarctic – is not a solution but merely a delay of the inevitable.

This delay, however, is “a good thing,” Clinton pointed out, “because it will give us some time to figure out what to do.”

Lee was less pessimistic about the issue of water, contrary to the view that water will increasingly become an ever more valuable resource and that more wars will be fought over water than over oil.

Citing the example of Singapore, which used to import more than half of its water from Malaysia but is now practically self-sufficient, Lee explained that the city state retains all rainfall on the island, and waste water is recycled for industrial use. He also cited the importance of fighting pollution, saying that all factories in Singapore are required to treat their waste water before release into the sea or river.

“It (water self sufficiency) can be done if you fight pollution,” and implement technologies that are already available for water resource management. Besides, he added, with global warming, seas will rise, which will lead to more precipitation and thus more water.

Acknowledging that climate change is an inescapable reality, Lee says that “the world must prepare for more adaptation” as a response to climate change, by taking a hard and serious look at the way we live, what we consume, and how we behave.

The two-day Clinton Global Initiative-Asia is a project of the William J. Clinton Foundation, and gathered 11 current and former world leaders, plus leaders of business and industry, education, health, environment and non-government organizations.