FiNETIK – Asia and Latin America – Market News Network

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Latin America: Investors Newsletter 15 June 2012

Petrobras Is Worst Big Oil Investment on Deepwater Disappointments: Energy   Petroleo Brasileiro SA is the worst investment among the world’s biggest oil companies this year as Brazil’s state-controlled producer suffers delays and cost overruns developing the largest oil finds in more than a decade.

Iusacell, Telefonica to challenge Mexico’s Slim America Movil  – Iusacell and Spain’s Telefonica said on Wednesday they have reached a deal to share their infrastructure in Mexico as they seek to mount a

FX swings may stir debt investors in Mexico, Peru  Mexico, Peru debt mkts most vulnerable to outflows in Latam. * Peru acting to curb FX, Mexico avoiding intervention.

Mexico’s Slim family (Grupo Carso) takes stake in Argentina YPF nationalized enegy company Mexican tycoon Carlos Slim and his family have taken a stake in Argentina’s recently renationalized energy company YPF in lieu of a loan guarantee, ..

Filed under: Argentina, Brazil, Energy & Environment, Latin America, Mexico, News, Risk Management, Venezuela, , , , , , , , , , , , , , , , , , , , , , ,

BlackRock Bob Dolls: 10 prediction for the next 10 years

“10 Predictions for the Next 10 Years” by BlackRock’s Bob Doll and what it means to investors:

  1. U.S. equities experience high single-digit percentage total returns after the worst decade since the 1930s.
  2. Recessions occur more frequently during this decade than only once a decade as occurred in the last 20 years.
  3. Healthcare, information technology and energy alternatives are leading growth areas for the U.S.
  4. The U.S. dollar continues to be less dominant as the decade progresses.
  5. Interest rates move irregularly higher in the developing world.
  6. Country self-interest leads to more trade and political conflicts.
  7. An aging and declining population gives Europe some of Japan’s problems.
  8. World growth is led by emerging market consumers.
  9. Emerging markets weighting in global indices rises significantly.
  10. China’s economic and political ascent continues.

Read Bob Doll’s full report  10 Predictions for the next Decade

Source:BlackRock / Carral Sierra, 02.08.2010

Filed under: Banking, Brazil, China, Energy & Environment, Japan, Korea, Mexico, News, Risk Management, Wealth Management, , , , , , , , , , , , , , , , , , , , , , ,

BM&FBOVESPA And BNDES Announce Development Of Stock Index Focused On Carbon Emissions – Based On The IBrX-50 Index, The Carbon Efficient Index Will Weigh Companies’ GHG Emissions

The Brazilian Security, Commodities and Futures Exchange (BM&FBOVESPA) and the Brazilian Development Bank (BNDES) announced today, during the 15th United Nations Climate Change Conference (COP15), in Copenhagen, the development of the Carbon Efficient Index. The objective of this index is to stimulate listed companies to reduce their emissions of greenhouse gases (GHG) and adopt environmental practices. The index will be weighed by the inventory of GHG emissions that result from all the activities associated to a company.

The Carbon Efficient Index will be structured in 2010, based on the Brazil Index 50 (IBrX-50), which is composed by the 50 most traded stocks at BM&FBOVESPA, weighed by free float. The weight of each stock on the new index will be based on the company’s participation on the IBrX-50 index and also its GHG emissions efficiency. This is measured by the relation between these GHG emissions and the company’s revenue, the smaller this relation is, the greater the efficiency.

Therefore, companies with more GHG emissions efficiency, in relation to the other companies of the same sector in the portfolio, may have a bigger weight in the new index, in comparison to their participation in the IBrX-50 index. On the other hand, less efficient companies, in terms of GHG emissions, will have a reduced participation in the new index.

The index’s goal is to motivate the most heavily traded Brazilian companies to measure and manage their GHG emissions; to bring more transparency about these emissions; and create an investment opportunity for environmentally aware investors. Both BNDES and BM&FBOVESPA firmly believe that this collaboration will help foster a sustainable corporate environment and prepare companies for a future economy of low carbon emissions.

Source: MondoVisione, 16.12.2009

Filed under: BM&FBOVESPA, Brazil, Energy & Environment, Exchanges, Latin America, News, , , , , , , , , , , , ,

Brasil Mata Viva And Markit Announce Brazilian Environmental Alliance – 13 Million Pending Issuance Units Listed On Markit’s Environmental Register

Markit, a leading, global financial information services company, and Brasil Mata Viva, a Brazilian standards framework for certifying carbon credits from avoided deforestation and Reduced Emission from Deforestation and Degradation (“REDD”), today announced an alliance with a new environmental market in the Brazilian State of Goiás.

The market is being developed with the coordination of the consulting firm IMEI Consultoria e Treinamento Ltda (IMEI) and Bolsa de Títulos e Ativos Ambientais do Brasil (BTAAB – Environmental Bonds and Assets Exchange of Brazil), a Goiânia-based financial exchange for the trading of environmental-related credits. IMEI and BTAAB have selected Markit’s Environmental Registry as the registry system for carbon credits resulting from the State’s projects of avoided deforestation and REDD.

The listed credits will be created and validated in Brazil under the standards framework established by IMEI and BTAAB known as Brasil Mata Viva. Markit will provide the secure online registry facility for the efficient and transparent issuance of credits, as well as ownership transfer and retirement certification. The robust offering provided by Markit’s global environmental registry will help facilitate the sale and ongoing success of the Brasil Mata Viva Credits.

Maria Tereza Umbelino, Executive Director of IMEI, Consultoria e Treinamento Ltda, said: “This new alliance with Markit will provide credibility to the environmental assets created by the Brasil Mata Viva Program. Markit’s secure and transparent credit registry will faciliate the provision of and access to reliable information about the credits available to the market.”

Ary Santos, Superintendent of the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA) and a representative of the Ministry of Environment in the Brazilian State of Goiás, said: “Brasil Mata Viva has been working in cooperation with and along the guidelines required by the State’s forestry conservation and restoration program under our coordination (Prolegal). We support their work with Markit’s internationally recognized carbon registry and the transparency they bring to this program.”

Today, 13 million Pending Issuance Units (PIUs), which will be validated according to the Brasil Mata Viva standards framework, will be issued on Markit’s Environmental PIU Registry. PIUs represent a contractual right to an emission reduction credit that is in process of being verified. Large scale projects, particularly those related to REDD, can take long periods of time to generate their issued credits. The market uses PIUs to facilitate the sale and management of expected credits. These 13 million PIUs represent the saving or replacement of approximately 40,000 hectares of forest and managed lands in the state of Goiás.

Helen Robinson, Managing Director of Markit’s Environmental Registry, added: “The development of the Brasil Mata Viva Program and the creation of an exchange on which to buy and sell these carbon credits, confirms the commitment of Brazil in its focus on reducing emissions. Forestry preservation and restoration is a key focus in climate discussions and Markit is pleased to support this innovative program designed to protect Brazilian forests.”

Source:MondoVisione, 16.12.2009

Filed under: BM&FBOVESPA, Brazil, Energy & Environment, Exchanges, Latin America, News, Risk Management, , , , , , , , , , , , , ,

China:Wind Power Dilemma: Money Blows Away

Rapid, government-subsidized expansion of China’s wind power industry has led to excess capacity and investment waste.

(Caijing Magazine) A cold front swept across northern China’s Inner Mongolia region in early November, forcing a wind energy farm at Xilin Gol to curtail operations – even as a brisk breeze whistled through idle turbine blades.

“When that much wind is moving through, the generators can’t make electricity,” explained Ma Zhanxiang, vice president of the Inner Mongolia Electric Power Industry Association (EPIA). “Money just blows by.”

The turbines were forced to shut down not because the Mongolian wind was too strong, or for mechanical reasons, but because the system for distributing power from Xilin Gol and other wind farms built in recent years in northern China is simply too weak.

When cold weather arrives, wind farms have to compete for transmission space on a power distribution grid buzzing with electricity generated by the region’s coal-fired thermal heating plants, which fire up in winter to supply heating for local residents as well as electricity.

According to EPIA, Inner Mongolia’s installed wind power capacity approaches 3.5 gigawatts, and currently nearly one-third of that is sitting idle. The remaining two-thirds capacity is supplied by turbines that run erratically, shutting off and on according to demand.

“Wind power is too concentrated” in certain regions of China including Inner Mongolia, Ma said. “When there is wind, wind power plants need to generate electricity. But power grids get overwhelmed.” And that wastes money. Nationwide, some 5 million gigawatts of wind power generating capacity never made it to the grid during the first half of 2009. Since wind farm construction costs some 10,000 yuan per kilowatt, the total idle investment is worth about 50 billion yuan.

“The winter wind blows hard, but things aren’t easy for wind power,” Ma told Caijing.

Outside Inner Mongolia, wind power capacity is unevenly spread across sections of Gansu Province in the northwest, Heilongjiang and Jilin provinces in the northeast, and coastal areas such as Jiangsu Province.

With the exception of Jiangsu wind farms, most of the nation’s wind energy operators concentrate power generation at a grid terminus or in areas with high concentrations of thermal plant capacity. And factors such as local market demand, power grid links, wind farm expansions and capacity peaks contribute to the fact that equivalent full load hours (EFLH) are relatively rare for wind farms. An EFLH is equal to an annual power load divided by installed capacity.

Various experts have started weighing in with suggestions for reducing overcapacity and streamlining wind energy in China, which is government subsidized. For example, State Council researchers recently called for a “systematic” approach to promoting healthy development of the industry.

“Overcapacity in areas of high wind power concentration cannot be ignored,” a China Electricity Council (CEC) expert told Caijing.

Idle Power

Production restrictions at wind farms have become all too common. In the first half of the year, for example, nearly 150 million kilowatt hours of generated power went unused in the Guazhou and Yumen areas of Gansu because the grid could not absorb the power they produced. This represented 27 percent of Guazhou’s and 33 percent Yumen’s actual wind power production.

To better understand problems with power capacity loss and grid restrictions, a joint study was launched in June by the Society of Electrical Engineering’s Wind Power Committee and Tidal Power Committee. Investigators found power restrictions affecting 48 wind farms operated by the country’s seven largest wind power developers, which supply 50 percent of the nation’s wind power.

Installed capacity at affected wind farms totaled 4.4 million kw at the end of 2008, or more than 70 percent of the 6 million kw installed capacity at all plants operated by the seven companies. Grid restrictions cost 370 million kwh in lost power in 2008, which is an amount equal to 103 EFLHs.

Since these seven largest wind power developers supply 50 percent of the nation’s wind-generated electricity, grid restrictions could mean wind power losses in 2008 were as high as 740 million kwh nationwide, or close to 6 percent of the national wind power generating capacity of 12.8 billion kw. In the first five months of 2009, losses were about 620 million kwh – an EFLH of 140 hours, or more than 200 hours on an annual basis. As a result, electricity use restrictions through 2009 were expected to be even more pronounced, and could result in losses of more than 2 billion kwh for the full year.

National Development and Reform Commission (NDRC) data illustrates the seriousness of idle wind power capacity. From January to September 2009, NDRC said, wind farms with generating capacity of at least 6 megawatts produced 18.2 billion kwh of electricity nationwide – up 117 percent over the same period 2008. But that was only about 0.45 percent of all the electricity churned out by China’s major power plants, and was significantly less than wind power’s proportion of total installed capacity, which is 1.15 percent.

SOE Factor

Why is China suffering from imbalanced wind power capacity? Some point a finger at the state-owned enterprises (SOEs) that build and operate wind farms.

“Most wind power projects are owned by SOEs, while wind power equipment makers are mostly private and foreign-funded enterprises,” a CEC expert told Caijing. “This is an interesting phenomenon, and to a certain extent reflects the problems of wind power.”

CEC research said nearly all of China’s wind power producers are state-owned. In the seven provinces with major wind power development projects, central SOEs comprise 73 percent of the 92 wind power companies and control 81 percent of total installed capacity.

China began large-scale wind farm construction in 2005, and this year NDRC began arranging bids for wind power concessions. So far, bids have been completed for 15 projects, with each slated to provide more than 10 gigawatts.

Wind power is considered a crucial path for power industry SOEs seeking to expand installed capacity. And it’s a path encouraged by the government. For example, a worker at state-owned China Power Investment Corp. (CPI) told Caijing the government plans to more strictly control additional, large-scale thermal energy projects over the next two years. And the government has refused to approve any new major hydropower projects for the past two years.

“State-owned power generation companies are now striving to expand installed capacity through wind power,” the CPI worker said.

Moreover, wind power is the biggest recipient of 4.5 billion yuan in renewable energy subsidies that the government finances by adding an extra 0.002 yuan charge to each kilowatt of electricity sold nationwide.

The National Energy Board announced plans early this year to raise the wind power generation goal to 20 million kw next year and 100 million kw by 2020. The board also ordered the construction of wind power bases exceeding 10 megawatts in Gansu, Inner Mongolia, Jiangsu and Hebei Provinces within 10 years in accord with a government policy calls “build large bases, integrate with the grid.”

Meanwhile, turbine manufacturers are seizing opportunities by bumping up production capacity. According to statistics from Li Junfeng, deputy director of NDRC’s Energy Office, China today has more than 70 wind power equipment manufacturers, up from six in 2004. Installed capacity has also grown 25-fold, from 468,000 kilowatts in 2002 to 1.2 gigawatts at the end of 2008.

Too Much

But all that capacity is not necessarily indicative of a healthy industry. A glut of built turbine manufacturing plants and wind farms means too much wind power capacity for the demands of the grid.

Inner Mongolia’s situation is a clear example. Its installed capacity – 50 gigawatts — is the country’s largest, but the excess at wind farms has reached a crisis level. EPIA counts some 10 gigawatts in the region, including 3.49 gigawatts of wind power, as excess installed capacity.

Nevertheless, more power is on the way in Inner Mongolia: Projects representing hundreds of thousands of kilowatts in additional capacity are currently under construction.

Thermal power units provide much of the electricity that powers Inner Mongolia, raising unique challenges for its wind farms. For example, power grid scheduling is difficult, since the regional grid lacks the hydropower and natural gas power plants that help grid operators adjust power feeds when necessary to counteract the relative instability of wind power supplies. Rather, according to a wind power plant staffer in the region, grids can only rely on thermal power.

Additionally, field operations of wind power technology are not as simple as they look. Even China’s leading wind generator enterprise Goldwind (SZSE: 002202) cannot guarantee, from a technical perspective, that its turbines can operate in all weather.

New Ideas

China’s fast-growing renewable energy industry experienced a “policy braking” in August, when a State Council executive meeting chaired by Premier Wen Jiabao concluded the industry “tended toward excess” and needed a little cold water. A few days later, the 2009 List of Encouraged Imported Technologies and Technology Products was released by NDRC along with the ministries of commerce and finance. It removed import subsidies for polysilicon and wind turbines exceeding 2 megawatts.

On the sidelines of a recent hydropower development forum, National Energy Secretary and NDRC Vice Chairman Zhang Guobao was asked by Caijing to express his views on overcapacity in the alternative energy industry. Zhang evaded the question but said, “The State Council already has policies aimed at the overcapacity issue.”

At a State Council Information Office press conference in late September, Zhang said excess capacity was restricted to wind power equipment and did not extend to the wind power generation industry. “No one is sending out the message that China has too much wind power and needs to cut back,” he said.

Although a large amount of wind power never makes it to the grid, many local governments and enterprises are pushing ahead with zealous wind energy plans while SOEs turn to wind power for expanding installed capacity.

The government’s subsidies for alternative energy make this “equivalent to the state footing the bill for local governments and enterprises” to develop wind projects, said Fan Bi, deputy director of the Research Office of the State Council. Therefore, he said, existing subsidies and financial resources are relatively adequate for wind power development.

Fan has suggested China seek new ways to develop wind power. For starters, he thinks subsidy transparency should be improved, with monetary sources clarified, to prevent blind development. Second, concession bidding should be continued to distribute subsidies effectively and reduce on-grid wind power prices through competition. Eventually, the state could reduce subsidies and support for wind power.

The report also recommended China strengthen its wind power development plan, determine a reasonable scale for the industry, and reform the government approval process for wind power projects.

But other experts say wind power adjustments cannot be separated from China’s power industry reform, which is ongoing.

“There is still a fundamental need to deepen power industry reform,” an expert at the State Council Research Office told Caijing. “First, a separate pilot for transmission and distribution should be implemented, and work should be done on allowing grid companies to independently set prices, moving management of distribution network assets to the provincial level.

“In this way,” the expert said, “systematic reforms can be used to eliminate wind power overcapacity.”

Source: Cajing, 12.11.2009 By staff reporter Li Qiyan

Filed under: Asia, China, Energy & Environment, News, Risk Management, , , , , , , , , ,

Solar and Wind Power Pricing in China

Government planners are trying to set a benchmark price for solar power, but the industry is resisting. Will market forces prevail?

(Caijing Magazine) In a bid to drive down solar energy costs, the National Development and Reform Commission (NDRC) is preparing to set a lowball price benchmark for major solar power plants.

A source close to the NDRC, the government’s chief economic planning agency, told Caijing that a draft benchmark price plan for large, on-grid solar plants was completed in early October and would be discussed at the agency’s highest level soon.

Nevertheless, controversies in the industry over benchmark pricing could force additional changes before the plan is formally released.

Pricing is considered a crucial factor for this budding branch of the renewable energy industry as it helps potential investors calculate return expectations while driving power company and industry supplier decisions.

A 1.09 yuan per kilowatt hour price set by the government through a supplier-distributor bidding process in Gansu Province in March may have been too low for many solar power producers to match in the future ( 1 yuan = 0.14 USD)

But according to NDRC’s original plan, the 1.09 yuan price – the lowest in the young industry’s history — would be used to set the future industry benchmark. The price was set for the Dunhuang 10 megawatt photovoltaic (PV) power project. Approved prices for four, earlier solar projects averaged 4 yuan per kwh.

“Policy for on-grid electricity decides the fate of power generation companies,” said a source at a Dunhuang power company. “If 1.09 yuan per kilowatt hour is set as the benchmark price, the majority of photovoltaic enterprises will be unable to achieve profitability.”

Instead of using a lowest bid as a yardstick – a practice that’s proven successful for setting wind power prices — solar energy firms are advocating a system that sets prices according to costs.

NDRC’s latest thinking is that setting a benchmark price of 1.09 yuan would pressure upstream solar producers to cut costs of raw materials needed for a batch of new solar projects. This would work toward achieving the long-term goal of an on-grid solar power price that’s below 1 yuan per kwh, which in turn would affect the entire solar industry.

‘Proper’ Benchmark

Before the Gansu price was determined, NDRC’s Pricing Department was more inclined to set a benchmark based on cost analysis. According to the original department plan, the benchmark price for PV electricity initially would have been set at 1.20 yuan per kwh. Further discussions led to a call for prices between 1.10 and 1.20 yuan.

“The greatest point of controversy lies in how the benchmark price will be decided,” a source close to NDRC told Caijing.

Zhang Guobao, deputy director of NDRC and director of the National Energy Bureau, introduced in 2003 a system for setting wind power prices through competition. The government would pick a relatively large wind-power plant and compile area meteorological data for potential investors, which would then calculate and offer bids.

Earlier this year, Zhang re-emphasized the importance of this pricing mechanism, saying whether a product’s price is reasonable impacts development of the entire industry linked to the product.

“Practice proves that the wind power pricing mechanism we have been using is correct,” Zhang said. “Whether investors or grids, they all found a fair price.”

Zhang said most wind power is distributed at between 0.5 yuan and 0.6 yuan per kwh. And as the scale of wind power and turbine manufacturing increases, stand-alone costs are decreasing.

On the basis of wind power tenders, the NDRC set moderate prices through bidding in various regions and then set local benchmarks.

Yet in July, NDRC said wind power prices would no longer be set by tender pricing but through a fixed, regional benchmark system. Based on wind levels and construction requirements, NDRC divided the country into four wind energy resource areas with corresponding wind power benchmarks for on-grid pricing of 0.51 yuan, 0.54 yuan, 0.58 yuan and 0.61 yuan per kwh.

In early August, NDRC said measures were being promoted to reform on-grid, retail and other types of prices for electricity. Benchmark prices for renewable energy subsequently drew significant attention. Because of the correlation between wind and solar power, industry insiders sharpened their focus on solar benchmark prices.

“New policies for on-grid energy prices significantly impact the industry,” Han Xiaoping, director of China Energy Network Information, told Caijing. A fixed price for on-grid wind power fixes expectations for investors, Han explained, and PV companies are similarly affected.

Vying for Price Power

Wind power has been the renewable energy focus for major domestic power groups in China. Solar projects have been considered too expensive.

Internationally, government subsidies are being used to spur the solar industry. But Zhang supports the use of market forces to determine prices.

“In the initial stages of development of an industry, the government can use financial subsidies to offset the high price of renewable energy sources,” Zhang said. “But as the scale increases, subsidies are not the only option.

“Market forces should determine the proper price and guide development of the industry.”

China has not ignored the subsidy approach, however. Early this year, the government launched the Solar Roofs Plan, which offers subsidies for solar architecture demonstration projects. China is also considering two plans including the Golden Sun Project to support the use of PV technology.

But officials say China’s subsidy options are limited.

“China’s financial situation makes it difficult to introduce subsidies on a large scale,” said an expert at the China Electricity Council (CEC). “Reducing the cost of solar energy through market price competition may be a more realistic option.”

NDRC’s Pricing Division proposal to use cost analysis for benchmark pricing could be a way to adjust the industry to China’s unique circumstances. Solar power plants would not use the resource classification approach to set prices, but would develop a unified benchmark price in areas with the right resource levels.

An NDRC cost analysis of solar power generation components, design, construction and installation, ancillary facilities and maintenance pointed to a proper benchmark price of 1.20 yuan per kwh. But Bureau of Energy officials said the difference between cost-based electricity and tender prices were too great, prompting a scaling back to the proposed level between 1.10 yuan and 1.20 yuan per kwh.

A source at one of the five power generating groups participating in bidding for the Dunhuang project said the 1.09 yuan price is currently the bottom line for on-grid PV. For most businesses, though, this price is too low. As a result, most PV photovoltaic companies currently prefer cost-based price setting.

Many industry experts say on-grid solar prices are not the most important issue facing the industry. Behind the proposed 1.20 yuan on-grid electricity price is a hefty serving of government support related to a chess game being played between market forces and central planning.

“The government wants to control the pricing of PV power generation services, so they need to redefine pricing from a cost-based perspective,” a CEC expert said.

Source: Cajing, 29.10.2009 by staff reporter Li Qiyan

Filed under: Asia, China, Energy & Environment, News, , , , , ,

Seeking Green Alpha- Investor enthusiasm for clean-tech plays in China remains strong, despite signs of faltering local government support for green projects.

Investor enthusiasm for clean-tech plays in China remains strong, despite signs of faltering local government support for green projects.

Almost every investor conference or salon we attend these days has a separate panel discussion on clean tech – and the recent China CEO Investment Summit in Shanghai was no exception. During a packed session, a panel of lawyers, representatives from various stock exchanges and venture capitalists impressed the audience with the enormous and diversified opportunities offered by China’s green investment sector.

One of the main areas of opportunity highlighted by the panel was water. China has historically struggled to supply many of its regions with sufficient water supplies and the rapid industrialization and urbanization over the past few decades has exacerbated this problem. According to a survey by the State Environmental Protection Administration (SEPA) published in July 2008, 35% of China’s urban water supply did not meet safe drinking-water standards, up from 20% in 2006.

This dire situation has, however, created an investment opportunity. Speaking during the session, Huang Gefei, head of China Galaxy Investment Management, said his company had been investing in wastewater treatment companies for some time. Unlike other clean-tech sectors, such as solar and wind, wastewater treatment remains relatively untapped by investors, despite enormous demand. China’s total wastewater capacity in 2008 met less than 60% of demand, below the 70% base-line set by the State Council’s Comprehensive Working Program on Energy Saving and Emission Elimination issued in 2007. The central government included plans to increase spending on expanding wastewater treatment capacity in its RMB 4 trillion stimulus package.

FiNETIK recommends:   The State of the Environment of China in 2008, Ministry of Environment, 24.06.2009

Another clean-tech investment area that interested the panelists was coalbed methane (CBM) exploitation. CBM, which is stored in coal and is generally not extracted by most coal mines, is an ideal substitute for natural gas and could help to ease gas shortages in China. In addition, panelists said that it had the potential to make coal mining safer and mitigate the risks of mine explosions – mine safety is a serious issue in China, with official statistics reporting 413,700 mining accidents and around 90,000 deaths last year. The government plans to bolster the CBM industry and increase CBM consumption to 10% of total gas use until 2010. Several supportive policies have been announced, including full VAT refunds, and the shelving of import duties on CBM equipment. Another factor that makes CBM exploitation attractive for investors is the relatively high profit-margin. CBM producers are allowed to sell gas at market prices that are not subject to the price ceiling set for natural gas. Although the sector is still in its infancy in China, it has seen several deals, including Baring Asia and Chengwei Venture’s $88 million joint investments in China Coalbed Methane Holdings Limited and IFC’s $15 million investment in Far East Energy (OTC:FEEC). Other investment opportunities highlighted during the session included energy storage, hybrid vehicles and thin-film solar technology.

The panelists stressed, however, that the continued growth of the clean-tech space in China was heavily reliant on government support. With the economic downturn continuing to bite, there is evidence that some Chinese local governments are letting environmental protection standards and clean-tech investments slide in their determination to maintain GDP growth in line with the nationwide 8% FY 09 growth target. This could create problems for clean-tech companies, especially in areas where heavily polluting industries such as paper and steel are key GDP drivers. Panelists mentioned that some desulphurization and wastewater treatment companies in particular were having difficulties as a result. This was a timely reminder that while clean-tech investments in China have enormous potential, they also carry significant potential risks.

Such a situation should not be a surprise in a country which has traditionally chased rapid GDP growth at the expense of environmental protection. But this same reason has convinced us of the central government’s new-found resolve to address environmental problems, as it now appears to recognize the fact that environmental degradation has eaten into China’s GDP growth. While conditions for clean-tech industry growth may vary from locale to locale, overall conditions appear promising – and judging by the number of people attending the recent session at the China CEO Investment Summit, this has not gone unnoticed by investors. The light at the end of the tunnel could be green.

Source: http://www.jlmpacificepoch.com, 10.07.2009 by Ivy Cheng

Filed under: Asia, China, Energy & Environment, News, , , , , , , , ,

CCX Chicago Climate Exchange signs agreement to collaborate on establishing Emissions Trading in Korea

Chicago Climate Exchange, Inc. (CCX®) signed a memorandum of understanding today in Washington, DC with Korea Power Exchange (KPX), Korea Exchange (KRX) and Korea Energy Management Corporation (KEMCO) to collaborate in preparing for the establishment of emissions trading in Korea.

Parties to the agreement will explore avenues of cooperation in the establishment of Korean emissions trading and matters relating to the infrastructure for emission trading, both of which could play an important role in promoting “low carbon green growth” in Korea.

“Emissions trading is a proven tool for using market-based mechanisms to address environmental challenges and we look forward to working with KEMCO, KRX and KPX, as well as the Ministry of Knowledge Economy and other Ministries in Korea, as Korea moves forward with its important ‘low carbon’ growth goals,” said Dr. Richard L. Sandor, Chairman of CCX and Executive Chairman of Climate Exchange plc.

By creatively integrating public concerns about environmental protection and his experience in financial innovation and business development, Dr. Sandor founded CCX in December 2003 and launched the European Climate Exchange (ECX) in April 2005. CCX also operates the Chicago Climate Futures Exchange (CCFE), which handles NOX, SOX and other criteria pollutant contracts based on the U.S. Clean Air Act.

“CCX is the preeminent and most influential organization in carbon trading. This MOU not only represents a historic collaboration of the parties, but represents a crucial initiative between the United States and Korea,” said KPX CEO Il-Hwan Oh.

“CCX has many international connections we want to be part of. CCX has provided a market solution, with many products as everybody knows, and is facilitating the preparation for carbon trading, fostering green growth,” said KRX CEO Jung-Hwan Lee.

“We are confident the MOU will be part of developing infrastructure in Korea for emissions trading,” said KEMCO CEO Tae-Yong Lee.

Source: MondoVisone, 15.06.2009

Filed under: Asia, Energy & Environment, Exchanges, Korea, News, , , , , , , , , , , ,

Surprising Green Energy Investment Trends Found Worldwide

Science Daily 07.06.2009 - Some $155 billion was invested in 2008 in clean energy companies and projects worldwide, not including large hydro, a new report says. Of this $13.5 billion of new private investment went into companies developing and scaling-up new technologies alongside $117 billion of investment in renewable energy projects from geothermal and wind to solar and biofuels.

The 2008 investment is more than a four-fold increase since 2004 according to Global Trends in Sustainable Energy Investment 2009, prepared for the UN Environment Programme’s (UNEP) Sustainable Energy Finance Initiative by global information provider New Energy Finance.

Extremely difficult financial market conditions prevailed during 2008 as a result of the global economic crisis. Nevertheless investment in clean energy topped 2007’s record investments by 5% in large part as a result of China, Brazil and other emerging economies.

Of the $155 billion, $105 billion was spent directly developing 40 GW of power generating capacity from wind, solar, small-hydro, biomass and geothermal sources. A further $35 billion was spent on developing 25 GW of large hydropower, according to the report.

This $140 billion investment in 65 GW of low carbon electricity generation compares with the estimated $250 billion spent globally in 2008 constructing 157GW of new power generating capacity from all sources. It means that renewables currently account for the majority of investment and over 40% of actual power generation capacity additions last year.

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: “Without doubt the economic crisis has taken its toll on investments in clean energy when set against the record-breaking growth of recent years. Investment in the United States fell by two per cent and in Europe growth was very much muted. However, there were also some bright points in 2008 especially in developing economies—China became the world’s second largest wind market in terms of new capacity and the world’s biggest photovoltaic manufacturer and a rise in geothermal energy may be getting underway in countries from Australia to Japan and Kenya”.

“Meanwhile other developing economies such as Brazil, Chile, Peru and the Philippines have brought in, or are poised to introduce policies and laws fostering clean energy as part of a Green Economy. Mexico for example, the Global host of World Environment Day on 5 June, is expected to double its target for energy from renewables to 16 per cent as part of a new national energy policy,” he added.

Overall Highlights from the Report

Wind attracted the highest new investment ($51.8 billion, 1% growth on 2007), although solar made the largest gains ($33.5 billion, 49% growth) while biofuels dropped somewhat ($16.9 billion, 9% decrease).

Total transaction value in the sustainable energy sector during 2008 – including corporate acquisitions, asset re-financings and private equity buy-outs – was $223 billion, an increase of 7% over 2007. But capital raised via the public stock markets fell 51% to $11.4 billion as clean energy share prices lost 61% of their value during 2008.

Investment in the second half of 2008 was down 17% on the first half, and down 23% on the final six months of 2007, a trend that has continued into 2009.

One response to the global economic crisis has been announcements of stimulus packages with specific, multi-billion dollar provisions for energy efficiency up to boosts to renewable energies.

“These ‘green new deals’ lined up by some economies, including China, Japan, the Republic of Korea, European countries and the United States contain some serious clean energy provisions. These will help support the market,” said Mr. Steiner.

“However, the biggest renewables stimulus package of them all can come at the UN climate convention meeting in Copenhagen in just over 180 days time. This is where governments need to Seal the Deal on a new climate agreement-one that can bring certainty to the carbon markets, one that can unleash transformative investments in lean and clean green tech,” he added.

Green Energy Costs Coming Down — Solar Costs Set to Fall 43%

The investment surge of recent years and softened commodity markets have started to ease supply chain bottlenecks, especially in the wind and solar sectors, which will cause prices to fall towards marginal costs and several players to consolidate. The price of solar PV modules, for example, is predicted to fall by over 43% in 2009.

Carbon Markets Continue Upward

Despite the turmoil in the world’s financial markets, transaction value in the global carbon market grew 87% during 2008, reaching a total of $120 billion. Following the lead of the EU and Kyoto compliance markets, several countries are now putting in place a system of interlinked carbon markets and working towards a global scheme under the UN Framework Convention on Climate Change (UNFCCC).

Growth Shifts to the Developing World

On a regional basis, investment in Europe in 2008 was $49.7 billion, a rise of 2%, and in North America was $30.1 billion, a fall of 8%.

These regions experienced a slow-down in the financing of new renewable energy projects due to the lack of project finance and the fact that tax credit-driven markets are mostly ineffective in a downturn. With developed country market growth stalled (down 1.7%), developing countries surged forward 27% over 2007 to $36.6 billion, accounting for nearly one third of global investments.

China led new investment in Asia, with an 18% increase over 2007 to $15.6 billion, mostly in new wind projects, and some biomass plants. Investment in India grew 12% to $4.1 billion in 2008. Brazil accounted for almost all renewable energy investment in Latin America in 2008, with ethanol receiving $10.8 billion, up 76% from 2007. Africa achieved a modest increase by comparison, with investments up 10% to approximately $1.1 billion.

The Greening of Economic Stimulus Packages

Not surprisingly given market conditions, private sector investment was stalling in late 2008 but government investment looks ready to take up some of the slack in 2009. Sustainable energy investments are a core part of key government fiscal stimulus packages announced in recent months, accounting for an estimated $183 billion of commitments to date.

Countries vary significantly in terms of investment and the clarity of their measures. The US and China remain the leaders, each devoting roughly $67 billion, but South Korea’s package is the “greenest” with 20% devoted to clean energy. This green stimuli illustrates the political will of an increasing number of governments for securing future growth through greener economic development.

According to Michael Liebreich, Chairman & CEO of New Energy Finance, “There is a strong case for further measures, such as requiring state-supported banks to raise lending to the sector, providing capital gains tax exemptions on investments in clean technology, creating a framework for Green Bonds and so on, all targeted at getting investment flowing”.

“What’s most important is that stimulus funds start flowing immediately, not in a year or so. Many of the policies to achieve growth over the medium term are already in place, including feed-in tariff regimes, mandatory renewable energy targets and tax incentives. There is too much emphasis amongst some policy-makers on support mechanisms, and not enough on the urgent needs of investors right now.”

Between 2009 and 2011 UNEP estimates that a minimum of $750 billion – or 37% of current economic stimulus packages and 1% of global GDP – is needed to finance a sustainable economic recovery by investing in the greening of five key sectors of the global economy: buildings, energy, transport, agriculture and water.

2009 and beyond: Climate change, energy security and green jobs

New investments in the first quarter of 2009 fell by 53% to $13.3 billion compared to the same period in 2008, reflecting the depth of the global financial crisis, according to the report, which notes “‘green-shoots’ of recovery during the second quarter of 2009, but the sector has a long way to go this year to reach the investment levels of late 2007 and early 2008.”

Climate change, economic recovery and energy security will spur far greater investments in coming years.

In particular, the growing understanding that global carbon emissions (CO2) must peakaround 2015 to avoid dangerous climate change (based on the 4th assessment of the Intergovernmental Panel on Climate Change– UNEP/World Meteorological Organisation) will make clean energy investments national priorities.

Annual investments in renewable energy, energy efficiency and carbon capture and storage need to reach half a trillion dollars by 2020, representing an average investment of 0.44% of GDP.

These levels of investment are not impossible to achieve, especially in view of the recent four year growth from $35 billion to $155 billion. However, reaching them will require a further scale-up of societal commitments to a more sustainable, low-carbon energy paradigm.

With the current stimulus packages now in play and a hoped-for Copenhagen climate deal in December, the opportunity to meet this challenge is greater than ever, even seen from the depths of an economic downturn.

Says Michael Ahearn, President of US-based First Solar: “This report highlights the continuing importance of government leadership to ensure that renewable energies, including solar, achieve their potential in weaning us off fossil fuels and addressing climate change.”

See also: Investment in Clean Energy Exceeded Fossil Fuel Investment in 2008

Global Trends in Sustainable Energy Investment 2009 — Sector Hi-lites

Wind

Wind attracted the highest new investment ($51.8 billion, 1% growth on 2007), confirming its status as the most mature and best-established sustainable generation technology. Wind’s leading position continues to be driven by asset finance, as new generation capacity is added worldwide, particularly in China and the US.

Solar

Solar continues to be the fastest-growing sector for new investment ($33.5 billion, 49% growth on 2007), with compound annual growth of 70% between 2006 and 2008. Solar’s growth reflects the easing of the silicon bottleneck and falling costs, which are expected to decline 43% in 2009. Solar project financing underwent the most dramatic growth in 2008, rising 71% to $22.1 billion.

Biofuels

Investment in biofuels fell 9% in 2008 down to $16.9 billion. Although the technology is well established, particularly in Brazil, it has suffered for the past two years from over-investment in early 2007, followed by a fall from grace caused by a combination of high wheat prices, lower oil prices and an increasingly heated food-versus-fuel controversy. Biofuels technology investment is now focused on finding second-generation / non-food biofuels (such as algae, crop technologies and jatropha): the second half of 2008 saw next-generation technology investment exceed first-generation for the first time.

Geothermal

Geothermal was the highest growth sector for investment in 2008, with investment up 149% and 1.3 GW of new capacity installed. The competitive cost of electricity from geothermal sources and long output lifetimes have made this an attractive investment despite the high initial capital cost.

Energy Efficiency

New private investment in energy efficiency was $1.8 billion – a fall of 33% on 2007 – although this figure doesn’t capture the investments made by corporates, governments and public financing institutions.

The energy efficiency sector recorded the second highest levels of venture capital and private equity investment (after solar), which will help companies develop the next generation of sustainable energy technologies for areas such as the smart grid. Energy efficiency also attracted more than 33% of the estimated $180 billion in green stimulus measures.

Global Trends in Sustainable Energy Investment 2009 — Regional Hi-lites

Europe

Europe continues to dominate sustainable energy new investment with $49.7 billion in 2008, an increase of 2% on 2007 (37% CAGR from 2006-2008).This investment is underpinned by government policies supporting new sustainable energy projects, particularly in countries such as Spain, which saw $17.4 billion of asset finance investment in 2008.

North America

New investment in sustainable energy in North America was $30.1 billion in 2008, a fall of 8% compared to 2007 (15% CAGR from 2006-2008). The US saw a slow-down in asset financing following the glut of investment in corn based ethanol in 2007. Also, the number of tax equity providers fell for wind and solar projects due to the financial crisis.

Africa

South Africa — Feed-in Tariffs Kick Start Green Investment

On 31 March 2009, South Africa announced ‘feed-in’ tariffs that guarantee a stable rate-of-return for renewable energy projects. South Africa is hoping to spur the sort of investment spurred in Germany and Denmark through feed-in tariff schemes.

Sub-Saharan Africa — Geothermal Kenya & Sweet Sorghum Ethanol

Elsewhere in Sub-Saharan Africa, lack of finance is the principal barrier to sustainable energy roll-out. However, some notable progress was made in 2008.

In Kenya, a number of investments are underway; including the continents first privately financed geothermal plant and a 300MW wind farm planned for construction near Lake Turkana.

In Ethiopia, French wind turbine manufacturer Vergnet signed a EUR 210 million supply contract in October 2008 with the Ethiopian Electric Power Corporation for the supply and installation of 120 one MW turbines.

In Angola, Brazilian industrial conglomerate Odebrecht set up an Angolan sugar cane processing plant and plans to steer its production from ethanol to sugar when it comes online late next year. UK-based Cams Group announced plans for a 240 million liter per year sweet sorghum ethanol facility in Tanzania.

North Africa — Sun and Wind

Renewable energy in North Africa remains focused on Morroco, Tunisia and Egypt, particularly in solar and wind. Egypt recently announced its expectation that wind farms in the Saidi area will produce 20% of the country’s energy needs by 2020. Morocco’s government has also outlined plans to meet 10% of its power needs with renewable energy sources.

Asia

China – Asia’s Green Energy Giant

By 2008, China was the world’s second largest wind market by newly installed capacity and the fourth largest by overall installed capacity. Between 5GW and 6.5GW of new capacity was installed and commissioned in 2008, bringing total capacity to 11GW to 12.5GW.

China became the world’s largest PV manufacturer in 2008, with 95% of its production for the export market.

Some 800MW of biomass power was added in 2008, bringing the total installed capacity for agriculture waste-fired power plants up to 2.88GW. Development of biofuels has all but ground to a halt, mostly due to high feedstock costs.

India – Pressing Need for Grid Improvements and Clean Power Generation

In 2008 the largest portion of new investment in India went to the wind sector, growing 17% — from $2.2 billion to $2.6. Thanks to a supportive policy environment, solar investment grew from $18 million in 2007 to $347 million in 2008, most of which went to setting up module and cell manufacturing facilities.

Small hydro investment in India grew nearly fourfold to $543 million in 2008, while biofuels investment stalled and fell from $251 million in 2007 to only $49 million in 2008.

Japan – A New Push for Sustainable Energy

In December 2008, Japan unveiled a new $9 billion subsidy package for solar roofs, granting JPY 70,000 ($785)/kW for rooftop PV installation. For the first time in three years, domestic shipments of solar cells rose between April to September (up 6%), indicating a fundamental change in domestic solar demand.

Geothermal also seems to be reawakening in Japan, after a twenty-year lull. In January 2009, plans for a 60MW geothermal plant were announced.

Australia – Geothermal and Wind Gaining Support

The Australian government has set up a A$500m ($436 million) Renewable Energy Fund to accelerate the roll-out of sustainable energy in the country. A$50 million has already been committed to helping geothermal developers meet the high up-front costs of exploration and drilling.

Geothermal is expected to provide about 7% of the country’s baseload power by 2030.

Wind will also benefit from Australia’s new push for sustainable energy, and is expected to provide most of the 20% renewable energy by 2020 target.

Other Asian Countries — Philippines, Thailand, Malaysia

In late 2008, the Philippine government signed a new Renewable Energy Law, offering specific incentives (mainly tax breaks) for renewable generation — a first for Southeast Asia and perhaps a model for other countries. Thailand and Malaysia have been talking about introducing renewable energy legislation for some time; and other countries are planning biofuel blending mandates, similar to those introduced by the Philippines in 2007 and subsequently by Thailand.

Latin America

Brazil – World’s Largest Renewable Energy Market

About 46% of Brazil’s energy comes from renewable sources, and 85% of its power generation capacity thanks to its enormous hydropower resources and long-established bioethanol industry.

Some 90% of Brazil’s new cars run on both ethanol and petrol (all of which is blended with around 25% ethanol). By the end of 2008, ethanol accounted for more than 52% of fuel consumption by light vehicles.

Brazil is now moving into wind. The government has announced a wind-specific auction to take place in mid-2009, for the sale of approximately 1GW of wind energy per year.

Brazil also has a global leader in renewable energy financing. In 2008 the Brazilian Development Bank (BNDES) was the largest provider globally of project finance to renewable energy projects.

Chile, Peru, Mexico and the rest of Latin America

Brazil accounted for more than 90% of new investment in Latin American, but several other countries are looking to implement regulatory frameworks supportive of renewable energy.

Chile’s recently approved Renewable Energy Legislation is responsible for regulating the country’s renewable energy sector, where small hydro, wind and geothermal projects have become increasingly attractive for investors. It requires electricity generators of more than 200MW to source 10% of their energy mix from renewables.

In 2008 Peru introduced legislation that requires 5% of electricity produced in the country to be derived from renewable sources over the next five years, including financial incentives such as preferential feed-in-tariffs and 20-year PPAs for project developers.

Mexico has a non-mandatory target to source 8% of its energy consumption from renewable sources by 2012. However a new national energy plan expected at the end of June 2009 is expected to double that target.

For original article click here.

Source: ScienceDaily 07.06.2009

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Asia’s first cleantech funds now raising capital

Preqin shows private-equity managers in Asia are beginning to participate in the worldwide boom of cleantech funds.

Perhaps the biggest trend in private equity right now is investing in cleantech, a term that refers to products or services that improve operational performance, productivity or efficiency, while reducing energy consumption, waste and pollution. And PE managers in Asia are introducing the region’s first dedicated cleantech funds, says Preqin, a London-based consultancy specialising in private equity and infrastructure. Click here for original article.

See also: Investment in Clean Energy Exceeded Fossil Fuel Investment in 2008

According to Preqin, there are now four Asia-based PE funds trying to raise capital for dedicated cleantech funds (see table below). The two largest are from Hong Kong-based First Vanguard, which is raising $500 million for the China and Pacific Rim Water Infrastructure Fund; and Singapore-based Middle East & Asia Capital Partners, which is raising $400 million for its MAP Clean Energy Fund.

There are two more players raising $250 million funds: in Singapore, Ant Global Partners is financing its Ant Global Partners Cleantech Fund; and in Malaysia, Abundance Venture Capital seeks capital for its AVC Abundance Energy Fund.

The first private-equity or venture-capital fund to include a cleantech focus, within a diversified portfolio, emerged in 2005 in India, where IDFC closed a $440 million infrastructure fund. Then in 2006, China’s Prax Capital closed a $153 million fund that included cleantech themes, as did China’s Northern Light Venture Capital, which closed a $350 million fund.

Since then activity has picked up: in 2008, funds in India, China and Hong Kong closed over $5 billion worth of diversified funds that included cleantech plays, while earlier this year, Singapore’s SEAVI Advent closed a $178 million diversified buyout fund.

Preqin says there are now at least 10 PE funds trying to raise capital towards themes that include cleantech, of which four are dedicated, as mentioned above. Together these 10 seek to raise up to $3.6 billion, with the four dedicated funds accounting for $1.4 billion of that.

Preqin has released a report on cleantech funds that shows huge interest among institutional investors and funds of funds. Despite the global financial crisis, overall cleantech fundraising remained steady in 2008, with 29 funds raising a total of $6 billion worldwide, roughly the same as was raised in 2007. The majority has gone to VC funds, with infrastructure funds also playing a big role.

In North America, funds this year seek to raise up to $9 billion, making this the biggest market, followed by European funds, which want to raise over $7 billion, Preqin says.

The consultants also find more than half of cleantech-focused VC firms prefer to take minority stakes, while buyout and infrastructure firms mostly prefer controlling stakes. For institutional investors, these funds represent the preferred means of accessing cleantech themes, as opposed to via the public markets, because the sector is too new to be well represented in the listed space.

Preqin’s 10 largest funds with a cleantech focus raised by Asian fund managers

Fund Fund Type Size (Mn) Vintage Fund Cleantech Focus Fund Manager Fund Manager Location
Baring Asia Private Equity Fund IV Balanced 1,515.0 USD 2008 Diversified Baring Private Equity Asia Hong Kong
IDFC Private Equity Fund III Infrastructure 700.0 USD 2008 Diversified IDFCPrivate Equity India
IDFC Private Equity Fund II Infrastructure 440.0 USD 2005 Diversified IDFCPrivate Equity India
LC Fund IV Venture (General) 400.0 USD 2008 Diversified Legend Capital Management China
Northern Light II Venture (General) 350.0 USD 2007 Diversified Northern Light Venture Capital China
Qiming Venture Partners II Venture (General) 320.0 USD 2008 Diversified Qiming Venture Partners China
Softbank China Venture Capital III Venture (General) 2,000.0 CNY 2008 Diversified SB China Venture Capital China
Nexus India Capital II Early Stage 220.0 USD 2008 Diversified Nexus India Capital India
SEAVI Advent Equity V Buyout 178.0 USD 2009 Diversified SEAVI Advent Singapore
Prax Capital II Expansion 153.0 USD 2006 Diversified Prax Capital China

Preqin’s 10 largest funds with a cleantech focus currently raising by Asian fund managers

Fund Fund Type Target Size (Mn) Fund Status Vintage Fund Cleantech Focus Fund Manager Fund Manager Location
ORYX-STIC Fund II Buyout 500.0 USD Raising 2009 Diversified STIC Investments South Korea
China and Pacific Rim Water Infrastructure Fund Infrastructure 500.0 USD Raising 2009 Pure Cleantech First Vanguard Hong Kong
Sandalwood Capital Partners II Early Stage 350.0 EUR Raising 2009 Diversified Sandalwood Capital Partners India
Ascent India Fund III Expansion 450.0 USD Raising 2009 Diversified UTI Venture Funds India
MAP Clean Energy Fund Infrastructure 400.0 USD Raising 2009 Pure Cleantech Middle East & Asia Capital Partners Singapore
AmKonzen Asia Water Fund Infrastructure 320.0 USD Raising 2009 Diversified AmKonzen Water Investments Management Singapore
Asia Strategic Capital Fund Mezzanine 300.0 USD First Close 2008 Diversified Asia Mezzanine Capital Group Hong Kong
Tripod Capital II Buyout 300.0 USD Raising 2009 Diversified Tripod Capital China
Ant Global Partners Cleantech Fund Venture (General) 250.0 USD Raising 2009 Pure Cleantech Ant Global Partners Singapore
AVC Abundance Energy Fund Natural Resources 250.0 USD Raising 2009 Pure Cleantech Abundance Venture Capital Malaysia

Source: AsianInvestor.net, 08.06.2009 by Jame DiBiasio

Filed under: Asia, China, Energy & Environment, Hong Kong, India, Korea, Malaysia, News, Services, Singapore, , , , , , , , , , , , , , , , ,

Investment in Clean Energy Exceeded Fossil Fuel Investment in 2008

In a sign of the growing importance of renewable sources of energy, global investment in wind power, solar power, and other alternative forms of energy last year exceeded investments in coal, oil, and carbon-based energy for the first time. The United Nations Environmental Program (UNEP) reported that in 2008, 56 percent of all money invested in the energy sector went to green sources of power, with $140 billion in investments in renewable energy compared to $110 billion in fossil fuel technologies.

Wind power attracted the most investment, with $51.8 billion worldwide, while investments in solar power rose 49 percent to $33.5 billion, UNEP reported. Investment in geothermal energy rose most rapidly, increasing 149 percent over 2007, to $2.2 billion. China drove much of the growth in investment in renewable sources, particularly in wind power. Despite booming investment in green energy, the renewable sector still only accounts for 6.2 percent of total power generating capacity.

Source:Yale Environment 360, 03.06.2009,     New York Times, 05.06.2009

Filed under: Energy & Environment, News, , , , , , , , , , ,

Worldbank: State and Trends of the Carbon Market 2009

Over the past year, the global economy has cooled significantly, a far cry from the boom just a year ago in various countries and across markets. At the same time, the scientific community communicated the heightened urgency of taking action on climate change. Policymakers at national, regional and international levels have put forward proposals to respond to the climate challenge.

The most concrete of these is the adopted EU Climate & Energy package (20% below 1990 levels by 2020), which guarantees a level of carbon market continuity beyond 2012. The EU package, along with proposals from the U.S. and Australia, tries to address the key issues of ambition, flexibility, scope and competitiveness. Taken together, the proposals tabled by the major industrialized countries do not match the aggregate level of Annex I ambition called for by the Intergovernmental Panel on Climate Change, or IPCC (25-40% reductions below 1990). Setting targets in line with the science will send the right market signal to stimulate greater cooperation with developing countries to scale up mitigation.

Download: Trends of the Carbon Market May 2009 Worldbank

Overall Market Grows
The overall carbon market continued to grow in 2008, reaching a total value transacted of about US$126 billion (€86 billion) at the end of the year, double its 2007 value (Table 1). ApproximatelyUS$92 billion (€63 billion) of this overall value is accounted for by transactions of allowances and derivatives under the EU Emissions Trading Scheme (EU ETS) for compliance, risk management, arbitrage, raising cash and profit-taking purposes. The second largest segment of the carbon market was the secondary market for Certified Emission Reductions (sCERs), which is a financial market
with spot, futures and options transactions in excess of US$26 billion, or €18 billion, representing a five-fold increase in both value and volume over 2007. These trades do not directly give rise to emission reductions unlike transactions in the primary market.

See also: Investment in Clean Energy Exceeded Fossil Fuel Investment in 2008

Source: Worldbank, 26.05.2009

Filed under: Australia, Brazil, China, Energy & Environment, India, Japan, Latin America, Library, Mexico, News, Risk Management, , , , , , , , , , , , , , , , , , , ,

A New Growth Industry: Carbon Fraud

As the U.S. Congress gears up to begin debate on a cap-and-trade system aimed at reducing emissions of carbon dioxide and other global warming gases, fraudsters are licking their lips at the multi-billion dollar potential for gaming the system.

As honey attracts bees, money draws thieves. Such is human nature. So if you create a new multi-billion dollar market, it won’t take long for the bad guys to find a way to get in on the game. The new game is called cap-and-trade and the new currency is the carbon credit. The federal budget put forth by the Obama administration earlier this year forecast revenues of $650 billion over 10 years from the sale of carbon credits. And worldwide, the global carbon trading market is expected to grow to $700 billion annually by 2013 and as much as $3 trillion by 2020 – a fraudster’s dream come true.                                                                                                                  Read orignal article by Kroll  Tendencias May 2009
Cap-and-trade is a market-based system that aims to decrease greenhouse gases in the atmosphere by capping the emissions of polluting companies and reducing those caps over time. If polluters produce emissions below their legal limit, they earn carbon credits which they can sell to companies that do not meet their targets. These credits can be bought and sold on regulated exchanges.

As the United States enters the uncharted waters of cap-and-trade, much of the debate will revolve around the impact of imposing such a quota system for polluters on the cost of doing business. Will cap-and-trade unfairly burden US industry? Will it lead to protectionist policies aimed at emerging markets where emissions are not likely to be capped for many years to come? These discussions are sure to overshadow the issue of fraud. But the artificial restraints of cap-and-trade are certain to propel a new generation of malefactors to quickly learn the art of concealing and trading  not stolen art or African ivory  but emissions credits.

While new in the US and Latin America, carbon markets have been operational elsewhere since 2005. London-based consultancy New Carbon Finance estimates that the global carbon trading market increased from $64 billion in 2007 to $116 billion in 2008, based mostly in the European Union. Globally, the carbon market could reach $669 billion by 2013, according to a report last month by market research firm SBI. That figure includes an estimated $117 billion generated by the proposed cap-and-trade system in the US. In Latin America, Mexican officials have already expressed interest in bringing large polluters, such as Pemex and Cemex, into a cap-and-trade market.

With such huge sums at stake, there is a growing recognition of the potential for fraud. A recent report by accounting firm Deloitte warns that fraud in carbon markets “may be especially prevalent during the early stages of regulation by those looking to take advantage of naive market participants.”

Although still in its infancy, a few of the possibilities for fraud in a cap-and-trade system include:

Pumping Up the Baseline – A baseline scenario is an estimate of greenhouse gas emissions that would occur in the absence of a proposed project. If a project, once completed, produces fewer emissions than its pre-established baseline, the difference can be sold for credits. This gives project owners an incentive to exaggerate a baseline in order to receive more credits than they deserve. In the absence of proper oversight, there is enormous potential for abuse.

Potemkin Factories – Jim Lane, Miami-based editor of Biofuels Digest, a daily online compendium of news stories and commentary on renewable energy projects around the globe, refers to a Potemkin factory as a project built specifically for the sake of generating emissions credits. Like the Soviet Union’s Potemkin villages built to show off a phony communal paradise to naïve foreigner visitors, new emissions reduction projects could be contrived in a similar manner. The Potemkin factory charge has been used in connection with plans to build refrigerant gas plants in China. Critics alleged that the plants, which produce the harmful greenhouse gas HFC23, could potentially generate more revenue from the sale of emissions credits than from their core business.

Outsmarting the Auditors – Clever crooks (think Enron) have been outsmarting even the most conscientious auditors for as long as they have been around. No matter how tight the controls are on carbon production and carbon reduction, the urge to cheat, especially with wildly fluctuating prices of carbon per ton, will be great. For example, highly sophisticated meters and other equipment will need to be installed at companies that claim to be sequestering carbon dioxide emissions. But, as one carbon credit expert recently observed, sometimes gaming the system is as easy as sending air through the meter instead of gas.

Good Old Corruption – Given the amount of money in play, there always remains the possibility that an agent whose job it is to monitor and verify emissions reductions could be bribed. It is worth noting that the auditors that are currently empowered to verify emissions reductions programs around the world are all certified by the United Nations. If the oil-for-food program is any guide, that kind of certification program is far from foolproof.

Controls to prevent such fraudulent activity have been debated and will continue to be discussed during and following the December 2009 Copenhagen Climate Conference, where environment ministers from 192 countries aim to craft an agreement to replace the United Nations Kyoto Protocol, which ushered in the era of cap-and-trade and will expire in 2012. Much practical experience has already been gained from the European Union Emission Trading Scheme, the world’s first operational cap-and-trade system, which went into effect in 2005. Nonetheless, the risks will remain.

While a simpler alternative to cap-and-trade, such as a carbon tax, would be less attractive to fraudsters, some form of carbon trading will likely come into effect in the US and eventually in parts of Latin America. Governments and companies wishing to play the game of carbon credits need to have their eyes open about the real risks of fraud. As Yuda Saydun, founder and CEO of Florida-based carbon operations consultancy ClimeCo, notes, “tight, frequent, ongoing monitoring will be fundamental to the integrity of any cap-and-trade system.”

Source: Kroll Tendencias May 2009 – The author: Shanti Salas (shsalas@kroll.com)  is an Associate Director with Kroll in Miami.

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How to develop Carbon Credits and make money

South Pole is a carbon asset manager that helps companies develop projects that create credits to trade on carbon trading markets. We talk to Renat Heuberger, a managing partner at South Pole, about the industry.

How aware are Asian companies about the carbon trading market?
The world of carbon is dividing into two parts — those with Kyoto targets and those without Kyoto targets. The countries that have Kyoto protocol targets at the moment are mainly OECD (Organisation for Economic Co-operation and Development) countries, and in Asia (ex-Australia), Japan is the only country that has such targets. As a result, only Japan has so far been acting as a buyer.

In other Asian countries, however, there are many companies that are active on the selling side of the carbon trading market. These include Korea, Thailand, Indonesia, Malaysia and of course China and India. The way they participate is by, for example, introducing CO2 reduction measures for their companies, whereby the resulting certificates are then sold. So the level of participation in carbon trading really depends on what country you come from. So Asia is aware of the market.                      Read orignal article by FinanceAsia.com

You help companies that are investing in projects that potentially qualify for emission reduction credits. How does that work?
South Pole is a carbon development and carbon trading company. We have offices staffed with technology experts all around the world. When we’re talking about selling to the carbon market (so I’m talking now about the countries outside of Japan) what these experts do is approach companies and identify what they could do to reduce emissions. Of course, we have a lot of experience in what works and what doesn’t. This is very important, because you need to take measures that reduce at least 50,000 tonnes of CO2 per year to make it worthwhile. If it’s lower than that, it gets tricky, it’s not really worth the effort so much to participate in carbon trading. So we are quite aware of what industries work for carbon trading and we approach companies in those industries and propose emission reduction measures.

We also have technology partners, for instance providers of bio-gas engines, generation equipment or boilers — technology that is directly or indirectly used for reducing emissions — and we introduce these technology providers to the companies.

So basically we come through the door and say: ‘Ok guys, we see an opportunity for emission reductions, and guess what, we have a solution. We can help you reduce the emissions and you can even make money from it.’

How long does this whole process take?
There are two parallel steps. The first part, which is to get the technology in place and start reducing the emissions, can take from six months up to several years. How long this takes is often linked to the question of how fast you can get your financing act together. In parallel, the process to register the project (so it is accepted as a clean development mechanism, or CDM, project) normally takes another year.

Just to be clear to our readers. Under the Kyoto Protocol, developed countries with quantitative emission limits can invest in carbon projects in developing countries to assist their sustainable development. Those projects are known as CDM projects. And those CDM projects produce tradable carbon credits called certified emission reductions or CERs. But there are also voluntary emission credits, or VERs, which are also called carbon offsets. In this case, a purchaser — typically a commercial firm — buys an emissions allowance to offset the carbon produced. This happens mainly for reputational purposes, and to contribute voluntarily in the fight against climate change. There is no formal market for VERs.

So, my question for you is, do you normally do projects that are CDMs, that will produce certified CERs? You don’t usually do VERs, do you?
We do both. Our focus is obviously on CERs because the market is much bigger, but the voluntary market is growing. The good thing is it doesn’t stop in 2012. On the voluntary market you can transact emission reductions for as long as you want. While on the compliance market, things may change once the political circumstances change.

We are the only carbon credit development company in the world which has an office in Taiwan. Taiwan doesn’t qualify for CDMs because its legal status with the United Nations is not clear due to its dispute with China and it is not under the Kyoto Protocol. So we are generating VERs in Taiwan, which is quite an interesting model as well.

Do you tell a company “I think you should produce CERs” or do they usually tell you what they would prefer to do?
It depends. There are certain industries, for instance the starch or the ethanol industry in Thailand, which are already aware that they can produce CERs by covering their waste-water lagoons and producing bio-gas. The starch industry is quite busy in Thailand and these companies are more or less aware of carbon trading and basically it comes down to what company they are comfortable doing business with to produce their CERs.

For other industries, it’s all quite new. There are sectors, such as the transport industry, or producers of energy efficient appliances, which only recently became aware that there is this possibility. So in these cases, it’s typically us going to them and saying: “You have this potential, why don’t you do this…?”

Ok, so once a project has CDM status and you’ve produced CERs, how are they then traded?
For CDMs, it’s like trading crude oil. The volume may be a bit smaller, but it’s the same mechanics. It mostly happens in Europe, because most of the buyers are in Europe. But every day you can check the current spot price. And so you develop your project, and you sell it at a good moment — when you believe the price is not going to move against you. It’s very classic trading techniques.

The difference is that when you trade crude oil, someone actually has the product. You have the one gallon of oil. With carbon trading, you don’t have a product. You just have a couple of bytes on a server at the United Nations. It’s an abstract commodity, if you will. But it can be traded.

Aside from it being abstract, the market is also slightly different because it is exposed to political decisions. If the political winds move in a way that makes them say, no one wants these products anymore, obviously the price will fall. But if the political winds blow in another way, and politicians say we’ve not done enough to prevent global warming and we need to reduce emissions even more, the pricing will go up. So my point is, this market is not only driven by fundamentals but also by political decisions, and that makes it unique from other commodity markets. That’s the CER market.

I think, however, it’s also important to note once again the difference between CERs and VERs because the VERs don’t have this 2012 deadline, which is when the Kyoto Protocol expires. They can sell indefinitely. The voluntary market is like selling any product. For this, you go out and talk to banks and airlines, anyone who can be interested in voluntarily offsetting and making a contribution to prevent global warming and promote sustainable development in the developing world.

So the CER market has this political element, which makes it different, while the VER market doesn’t have such a political element, but much more of a reputational element.

In December, world leaders are coming together in Copenhagen to try to reach a decision on how to, if at all, continue the Kyoto Protocol. Do you think there will be an agreement in Copenhagen in December?
In 2012, the Kyoto Protocol expires. Unfortunately, the world has yet to agree what will happen after that. This is unfortunate right now, because, as I mentioned, it takes about two years to take a project to market, and we’ve only got three years left to go with the Kyoto Protocol. So now, if you were to start a project, you’re only talking about one, maybe two, years of trading under Kyoto — but a typical CDM project could generate up to 21 years worth of credits. One or two years versus 21 years is obviously a big difference. So of course we hope that a resolution is reached in December in Copenhagen that calls for countries to extend their commitment beyond 2012.

At the moment we are hopeful that this will happen because of the new administration in the US. What challenges the whole thing is the financial crisis, which is changing the focus for politicians. Their priority is fighting the financial crisis rather than focusing on the Kyoto Protocol. So the climate issue goes on the back burner. But there are positive signs from the US and Europe. European leaders, for example, have said that if other countries participate they would aim for 30% less emissions by 2020.

Now, what would happen if it doesn’t go through? The reality is this market won’t collapse. The good news is it would not go away just because there is no agreement. What would happen is there would be regional markets. For example, in Australia, the new government has embarked on an emissions trading scheme that is likely to launch in 2010 or 2011. Once it’s online, it will include commitments that go way beyond 2012.

The Europeans have also committed that even if there is no agreement they would continue carbon trading. Of course, the big unknown is the price. No one knows what the price would be in those schemes.

The good thing about the Kyoto market is that there’s one set of rules that applies to everybody. But if nothing is passed in Copenhagen, what could emerge is that we have a series of domestic schemes — one plan in Australia, another in Europe, another in Canada — with everyone having different rules. And that complicates matters. So once you start developing projects you would have to do it according to the rules of the country in which you were going to sell the credits. This would be more complicated, but it could work.

What type of products does South Pole specialise in?
We specialise in renewable energy and energy efficiency. And we of course specialise in the highest quality products — Gold Standard credits — you could say that we dominate that market, as we think it adds far more value. What qualifies as Gold Standard? Mainly energy efficiency and renewable energy. So we have a lot of wind power, hydropower, thermal-power, solar power, bio-gas — these types of projects. There’s a lot of potential in Asia. For example, countries like Thailand and Malaysia have a lot of potential for bio-gas power. And wherever there are mountains — there is potential for hydropower, so Vietnam, Indonesia and China are good countries. So there’s room to grow.

Tell us a little more about the Gold Standard carbon credit that South Pole created.
The point of these projects is to reduce emissions as the main aim is to protect the planet against global warming. But, you get there in different ways. You may have a project where you have a landfill site and you burn the landfill gas. That is good for reducing emissions, but that’s it. There’s no other benefit in doing this. The “only” benefit is to prevent climate change.

Now, there is a group of NGOs, such as WWF and the like, who said: ‘If we do this carbon trading mechanism, we should actually distinguish between the projects that only reduce climate gases and those that reduce climate gases and provide additional benefit to their host country.” We agreed, and contributed to make the Gold Standard happen.

The Gold Standard is given to projects that reduce carbon gases but also have social benefits. Some examples would be employment generation, or other positive impacts on air pollution, or a project that also reduces water pollution, and so on. The focus of the Gold Standard is projects that have a community element — so the money doesn’t just go to the industry but to the community as well. A very good example is rural electrification, which brings clean energy to people in the countryside.

What do you say to people when they are sceptical about CO2 emissions, arguing that it’s not necessary, or whatever their criticism may be? Do you hear criticisms? Or by the time they come to you, are they already convinced that they need to do something?
Well there are two types of critics. Both of them are clearly wrong, I would say. The first type of critic is still sceptical about climate change and the question of whether the problem is man-made. If you’ve got hundreds of scientists agreeing to the fact that the fast worsening of climate change is man-made, it’s amazing there are still people questioning this. There’s just an overwhelming amount of evidence, and it’s just very, very hard to find convincing evidence to the contrary. But there will always be people who will say crazy things.

But even if there wasn’t the issue of climate change, it still makes sense to reduce CO2 emissions, because when you do that you typically save fuel. And the fuel we use — such as crude oil — is going to run out at some point. So there’s anyway value to reducing our use of it.

The second set of critics say that carbon trading is not a good thing — they argue it’s not sound. This is clearly wrong too. Because nations have set up a very extensive set of compliance rules — that’s why it takes more than one year to complete a project — and the process is extremely conservative, in the way we prove and calculate and certify it by an independent entity.

Plus there are lots of economic arguments for carbon trading. Money incentivises people to reduce emissions. If a European company finds it difficult to reduce their emissions any further, it makes sense that they finance a measure in Asia where it can be less expensive to reduce emissions. That’s what climate trading is all about. It leads to a good allocation of resources so that we can protect the planet in the most efficient manner.

Finally, another important point for Asia (and also the rest of the world) is that most of the Asian companies, who participate in carbon trading, actually end up making money doing it (and I’m not talking about trading here, I’m talking about the process). Because what is an emission? It’s waste, it’s inefficiency. And it does intuitively make sense to reduce your inefficiencies.

Source:FinanceAsia, 07.05.2009

Filed under: Asia, Australia, China, Energy & Environment, Library, Malaysia, News, Risk Management, Thailand, Vietnam, , , , , , , , , , , ,

S&P launches US Carbon efficient index

Standard & Poor’s, the world’s leading index provider, today announced the launch of the first in a series of global low carbon indices to meet the growing investor demands for environmentally focused indices.
The S&P U.S. Carbon Efficient Index will measure the performance of large cap U.S. companies with relatively low carbon emissions, while seeking to closely track the return of the S&P 500.

The new Index, which is part of the Standard & Poor’s global thematic index series, provides a benchmark to the market, as represented by the S&P 500, while allowing investors to create financial products that seek to gain exposure from a more environmentally efficient perspective.

“Organizations around the world are paying greater attention to the impact of greenhouse gases on our climate, as increasingly more investors consider carbon efficiency as an important investment theme,” said David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor’s Index Services.

“Standard & Poor’s is the first independent index provider to offer a broad U.S. market index with an environmental focus, reinforcing our position as the premier provider of global thematic focused indices.” With the addition of the S&P US Carbon Efficient Index to the global thematic family, the series will now cover such green themes as Water, Forestry, Eco and Carbon efficiency.

To reflect its carbon efficiency, the Index is comprised of constituents of the S&P 500 that have a relatively low Carbon Footprint, as calculated by Trucost Plc. Trucost, the environmental data organization quantifies the environmental impact of over 4,500 companies across different sectors and geographies. Trucost calculates the carbon intensity of companies in the S&P U.S. Carbon Efficient Index by researching and standardizing publicly disclosed information and engaging directly with companies to verify its calculations on an annual basis.

Carbon Footprint is calculated as the company’s annual greenhouse gas emissions assessment (expressed as tons of carbon dioxide equivalent) divided by annual revenue.

“With the world’s most st comprehensive database of corporate carbon emissions, Trucost is uniquely able to provide Standard & Poor’s with information to significantly reduce the carbon exposure of its Index,” said Simon Thomas, Chief Executive of Trucost Plc.

The Index is rebalanced quarterly at which point the stocks in the S&P 500 are ranked by their Carbon Footprint. The 100 equities with the highest Carbon Footprints, whose aggregate exclusion does not reduce any individual GICS(i) sector weight of the S&P 500 by more than 50%, are removed.

Historically, the choice to maintain at least 50% of each GICS sector weight provided the greatest reduction in carbon footprint while closely tracking the return of the S&P 500. Standard & Poor’s also excludes companies, if any, which have not yet been assigned a Carbon Footprint by Trucost.

Through 2008, the average annual Carbon Footprint of the S&P U.S. Carbon Efficient Index was 48% lower than that of the S&P 500.

Source: Standard & Poor’s, 10.03.2009

Filed under: Data Management, Data Vendor, Energy & Environment, News, , , , , , , , ,

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