Monthly Archives: June 2009

- US House passes climate change bill
US takes first step towards cutting carbon emissions (FT)

- Border taxes linked to cap-and-trade laws
Group warn taxes may aggravate trading partners (FT)

- Putin welcomes Shell to offshore projects
Kremlin more open to international investors (FT)

- Annan and Geldof launch climate campaign
Will use mass marketing to demand ‘just and binding’ deal (FT)

- Brown calls for £60bn climate fund
First leader from developed world to address financing issue (FT)

- Exxon begins deepwater drilling off Libyan coast
Deepwater exploration marks new era for Libya (WSJ)

- Editorial comment: Cap-and-trade mess

- Business Life: Jacob Maroga – Eskom chief charged to keep the power on

Fiona Harvey

As of Friday afternoon, it looks as if there will be a vote on the US cap-and-trade bill today in the US, though it still could carry over to next week.

The bill as it stands has been heavily modified to try to garner every last possible scrap of support in the House.

This includes some major sops to farmers – the inclusion of agricultural credits, based on the sequestration of carbon in soils.

Such credits are notoriously hard to do properly – it is extremely difficult to quantify how much carbon is being released from soils, to verify that farmers have followed the correct methods to conserve carbon dioxide in the soils, and to police the awarding of the credits.

Mitchell B. Feierstein, chief executive of Glacier Environmental Funds in London, which specialises in buying and selling carbon credits, explains: “Agricultural credits can have credibility, but it’s crucial to establish credible baselines and robust methodologies ensuring any credits generated
are quantifiable, real, permanent, verified and certified by an independent 3rd party, are given unique serial numbers and stored in a credible custodial registry maintained by a creditworthy counterparty. These criteria are imperative and not flexible.”

He continues: “You have to ensure any credits involved in the US program provide genuine
environmental benefits; otherwise you are just creating a way for people to
arbitrage the system and/or opening the door to green wash.”

But he is doubtful that current methodologies for awarding such credits are adequate for use in a mandatory federal cap-and-trade system. He says: “I do not know of a proven baseline or methodology currently in existence that quantifies and ensures permanence and performance in these categories. Many existing methodologies are not robust and lack credibility. An example
is certain “credits” based on current methodologies trading for 60 cents a tonne. Mostly all of these “credits” are business as usual and would have happened anyway and provide extremely questionable environmental benefits. This must be prevented.”

But it seems that awarding large numbers of agricultural credits was politically necessary to get Representatives from the big farming states on board.

There is also a nod to industries worried that, if they are covered by a cap-and-trade system, they would be undercut by a flood of cheap imports from countries without restrictions on carbon dioxide emissions.

The bill as it stands now makes it mucht easier for the US to impose import tariffs against countries that do not control their carbon emissions.
These “border tax adjustments” may be permitted under World Trade Organisation rules, according to a report published this week by the WTO and the United Nations Environment Programme.

Kate Mackenzie

In lieu of usual Friday number/quote/image-of-the-week post, here is a multimedia report from our West Africa correspondent Matthew Green.  Navigate the labyrinthine channels of Nigeria’s oil-rich delta and watch video reports as Matthew investigates the conflicts caused by oil production in the region.

Fiona Harvey

On Energy Source:

Going to the zoo to hear about climate change from Gordon Brown

US oil prices – what oil price can the US afford?

More on the new man at BP

US catches up on offshore wind

Elsewhere:

Offshore wind plans in Norway (Reuters)

US to spend $3.9bn on smart grid (Reuters)

Oil price steadies after Nigerian pipeline attack (Bloomberg)

Petroleos de Venezuela may need to raise $3bn (Bloomberg)

Kate Mackenzie

After a long and difficult search, BP has named the man who will succeed Peter Sutherland as chairman:

BP said on Thursday that it had appointed Carl-Henric Svanberg, chief executive of Swedish telecoms equipment maker Ericsson, to take the place of Peter Sutherland as chairman of the UK oil major.

The decision ends a long search process.

Mr Svanberg will join the BP board as a non-executive director and chairman designate on September 1 before taking up his role fully on January 1 2010, the company said in a statement.

The FT’s telecoms editor, Andrew Parker, talks a bit about Svanberg in this video:

Related links:

BP names Svanberg as chairman (FT, 25/06/09)
More trouble for BP’s board, courtesy of RBS
(FT Energy Source, 07/04/09)

Fiona Harvey

Gordon Brown laid out the UK’s position in the international talks on a successor to the Kyoto protocol this morning, and he did so at a rather surprising venue: London Zoo.

There was a nod towards the natural world in his speech, when he mentioned the damaging effects of climate change.

But mostly he was talking about money – how the developed world must finance emissions reductions in the developing world, and help poor nations to adapt to the effects of climate change.

This is a very important point – as we have pointed out before, financing is a make or break issue for the ongoing negotiations set to culminate in Copenhagen this December.

Mr Brown became the first leader to put a figure on the amount needed – $100bn per year in assistance by 2020.

Which sounds good, but rather overlooks the fact that he will be long gone by then and he has no proposals for the amount of financing needed in the interim.

He also failed to put any money at all on the table from the UK. leaving wide open the question of what the UK will do to assist the developing world.

And one more lingering question – why on earth the zoo?

- White House lobbies wavering lawmakers on climate bill
Commitment to cut emissions by 17% (FT)

- Carbon credits for land use placate US farmers
Some farmers reverse opposition to cap and trade (FT)

- Europe moves to reduce pollutants
Legislation would cut emissions by a third by 2020 (FT)

- EU invests in China carbon capture and storage
Agrees to contribute €50m to building facility (FT)

- Paris poised to sell Areva stake to raise €2bn
Ready to sell to strategic partners in Asia and Mideast (FT)

- New BP head calls for ease on resources
Says growth in car ownership and air travel unsustainable (FT)

- Steep learning curve faces BP’s surprise new chairman
Svanberg’s expertise should serve oil group well (FT)

- Svanberg profile: Charmer with great contacts
Ericsson recaptured market share under his leadership (FT)

- ‘The tank’ chairman who took BP global
Outgoing chairman oversaw huge acquisitions (FT)

- Malaysia’s Petronas profits hit by increase in payments to state
Oil company is single biggest contributor to country’s coffers (FT)

- Lex: Beyond Peter

William MacNamara

On Energy Source:

Waxman-Markey and 77c gasoline increases

What oil price can America afford?

Markets: Nigeria attacks help push crude oil higher

Elsewhere:

Nasa climate scientist arrested protesting coal mining (Yale Environment 360)

Solar “concept tent” unveiled by Orange at Glastonbury (CNET)

Svanberg of Ericsson named new BP chairman (FT)

Brazil’s Vale may buy stakes in Petrobras offshore blocks (Reuters)

Total to invite Gazprom to join in developing African projects (Reuters)

Nigerian militant group says attacked Shell pipeline (Bloomberg)

The financial return on energy invested (Oil Drum)

Sheila McNulty

The question of what oil price the US can afford is not a new one. But as oil prices rise it is becoming more urgent to find the right answer.

Steven Kopits of Douglas Westwood Energy research discusses this urgency in a new report, noting that in the last 37 years, the US has suffered six recessions. From the beginning of each, he says, oil played a central role. In every case when oil consumption breached 4 per cent of GDP, he notes, the US has suffered a recession. Indeed, he says, the current US recession began within two months of oil hitting the 4 per cent threshold, when oil reached $80 per barrel.

Kopits also notes that a sustained rise in the oil price of 50 per cent or more has always been associated with recession, and this applies to the current recession as well.

Oil rose back towards the $69 mark on Thursday as further attacks on pipelines in Nigeria by militants helped reverse losses caused by a sharp jump in US fuel stocks.

Crude had dipped on Wednesday after weekly US supplies data showed gasoline stocks hit 3.9m barrels as refiners ramped up production ahead of the peak summer driving season, and distillates stocks rose to the highest level in over 10 years.

Gasoline and distillate’s relative abundance was somewhat offset by a 3.8m barrel drop in crude stocks but this, and an increase in refinery utilisation, failed to reassure many observers.

Commerzbank analysts wrote:

“The steep increase in gasoline stocks over the past weeks indicates that the underlying demand is weak and that more crude oil is being processed than there is actually demand for.”

“The American Automobile Association estimates that US holiday travel during the upcoming long Independence-Day weekend will be 1.9 per cent below last year’s level. Car travel is even expected to fall 2.6 per cent year on year. Hence, the latest decline in US crude oil inventories does not necessarily signal an improvement in the fundamental situation of the oil market [and] the oil price remains vulnerable to further declines.”

News of a raid on a Niger Delta pipeline by the principal militant group in Africa’s biggest oil exporter helped provide some support to crude prices.

The Movement for the Emancipation of the Niger Delta, the largest and most active Nigerian militant organisation targeting the country’s refining infrastructure, said it had attacked the Billie/Krakama pipeline linked to the Bonny crude terminal, one of Nigeria’s largest export points.

Years of attacks on the Nigerian oil industry have hampered production, meaning output has dropped to around two thirds of a total capacity of close to 3m barrels a day.

Nymex August West Intermediate, the US benchmark blend, rose 27 cents to $68.63, while ICE August Brent, the European oil standard, rose 45 cents to $68.78.

Read the full commodities report

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