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China Introduces Local Program for Reducing Emissions

June 18, 2013 by Leave a Comment

BEIJING — China unveiled its first pilot carbon emissions exchange Tuesday, though plans for a nationwide rollout and efforts to apply the program to some heavy industries could be undermined by a slowdown in the nation’s economy.

High-emission industries like aluminum and steel are likely to resist higher costs as they are already battling weak prices caused by tepid demand and too much supply.

“It is a very big concern for Beijing and for local governments — how to strike a balance between controlling emissions and maintaining economic growth, especially amid a general slowdown in the economy,” said Shawn He, a lawyer and carbon specialist at Hualian law firm in Beijing.

Although the exchange, in Shenzhen, will not immediately lead to a big cut in China’s emissions of greenhouse gases, now the world’s highest, it does still represent a statement of intent by Beijing, campaigners said.

“This is just a baby step when you look at the total quantity of emissions, but it enables China to establish institutions for carbon controls for the first time,” said Li Yan, head of the climate and energy campaign in China for the environmental group Greenpeace.

Under such a cap-and-trade program, companies must buy allowances from others if they want to exceed carbon limits.

But there is still a long way to go in China, and the design of its pilot platforms — as well as the national program that would eventually replace them — face economic and social pressures.

“Of course, decision makers have to look at the social impact; the carbon market cannot be designed in an idealistic way, and you have to make sure the design of the mechanism will address such issues as social stability,” said Wu Changhua, China director with Climate Group, a consulting firm based in London.

And the examples set by carbon markets overseas are not encouraging, with the global financial crisis saddling Europe’s emissions trading program with a crushing oversupply of carbon credits and record low prices.

The Shenzhen carbon exchange is one of seven pilot projects due to be started this year or next and will involve 635 local industrial companies accounting for more than a quarter of local gross domestic product and more than 30 million tons of carbon dioxide emissions.

But that is still a drop in the ocean compared with the country’s total emissions — about eight billion tons last year.

Other platforms due to start in 2013 include one in Shanghai, where Baoshan Iron Steel, the leading steel producer, will participate, and one in Hubei Province, home of Wuhan Iron Steel.

Although giant oil companies like Cnooc and PetroChina will take part in the Shenzhen program, few of the companies involved will be from heavy-industry sectors, and figuring out how to include them is likely to be a challenge.

Late last year, China’s industry ministry told such companies to reduce their carbon intensity rates — the volume of carbon dioxide produced per unit of output, based on the rate from 2010 — by 18 percent by 2015. That was a huge burden for a sector already bruised by rising costs and minimal returns, with the country’s economy growing at its slowest pace in 13 years in 2012 and data so far this year surprisingly negative.

But while it will add to the costs of struggling companies, it could also give Beijing another tool to bring wayward industries in line with state policies and to force polluting companies to close.

Carbon trade will give local governments an alternative source of revenue as well as an incentive to free up some of their carbon dioxide allocations by closing small steel mills.

Jiang Feitao, a researcher at the China Academy of Social Sciences who has studied the impact of environmental policy on the steel sector, said smaller companies would be hit hardest by costs.

After Shenzhen, Shanghai and Hubei Province, four more pilot exchanges are to open in Beijing, the sprawling industrial municipalities Tianjin and Chongqing, and Guangdong Province, a major manufacturing center, probably next year.

The National Development and Reform Commission said that the seven pilot projects would begin integrating in 2015 and that a nationwide platform would go into operation before 2020. But the seven regions were given considerable leeway to design their own programs and it remains unclear how they will integrate.

“My guess at this moment is that they will set up a national platform and gradually integrate the seven pilot schemes into that one, but we don’t know the architecture yet. This is very new,” said Ms. Wu of Climate Group.

Mr. He, the lawyer, said China still needed legislation to give legal recognition to the concept of carbon trading. It also needed to solve the longstanding problem of measuring emissions.

“I don’t think it is possible to get to a national market by 2015 — there are many technical issues to be addressed to integrate these islands into one continent,” Mr. He said.

China also eventually needs to set a national limit on emissions and apply it to individual industries and provinces to establish a full countrywide trading program.

“Realistically, we are looking at 2025 before we have a cap. A few years ago some were saying 2040 or 2035, so we have already made progress,” Ms. Wu said. “Growth will continue to be the No. 1 priority. Cap-and-trade will be one of the ways of trying to grow differently, but China is still a developing country and we have to grow.”

Article source: http://www.nytimes.com/2013/06/19/business/energy-environment/china-introduces-local-program-for-reducing-emissions.html?partner=rss&emc=rss

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Europe Vote Sets Back Carbon Plan

April 16, 2013 by Leave a Comment

LONDON — Europe, which led the world in creating a system of emission permits to combat greenhouse-gas emissions, dealt a potential death blow to that system on Tuesday.

Focusing on immediate economic concerns over future environmental ones, the European Parliament narrowly rejected a proposal to cut the number of pollution permits. Fewer permits would have raised companies’ costs to emit greenhouse gases, which scientists have linked to global warming.

In voting down the changes, lawmakers seemed less worried about the global environmental implications than on holding down energy costs as Europe continues to emerge from a deep economic slump.

“This is a sign of a new era,” said Fabien Roques, an energy analyst at the market research firm IHS CERA in Paris. “It is a signal that policy makers will have to take into account competitiveness and costs.”

The measure was meant to put teeth into efforts to reduce carbon emissions from the smokestacks of utility companies and manufacturers by curtailing the availability of permits that allow companies to emit greenhouse gases.

Critics say that when the trading system was put into place in 2005, too many emission permits were created. The weak economy, which has reduced economic activity, has added to the glut, driving the price of permits, some of which are now auctioned, to nearly zero.

The proposed measure, which in effect would have made it much more costly to pollute, was rejected by a vote of 334 to 315.

While carbon emissions continue to rise globally, Europe’s own emissions have dropped 10 percent from 2007 to 2012, with the sluggish economy responsible for much of the decline. That has weakened the political will among European lawmakers to adopt tougher measures to cut carbon production.

At issue is the European Union’s Emissions Trading System, which, when introduced, was considered a potential global model for gradually raising the costs of emitting greenhouse gases and encouraging industrial users of coal and other carbon-heavy fuels to pursue cleaner types of energy.

Carbon emission permits are essentially licenses to release greenhouse gases, priced in units that allow the holders to emit a ton of greenhouse gases. Because a big user of coal-burning power plants might release millions of tons of greenhouse gases a year, the higher the price for the permits, the higher the cost for polluting.

The idea behind the Emissions Trading System, a concept called cap and trade, was to create a market in allowable emission credits by putting a cap on the amount of those credits and letting companies and investors trade those rights.

But a glut of permits has meant prices have been so low that big carbon polluters have had little incentive to curtail their smokestack emissions. After the vote Tuesday, the market price of a carbon allowance, which lets a factory emit one ton of carbon, fell about 40 percent, to 2.63 euros, or $3.47, a ton. Later in the day it recovered to 3.15 euros.

“Prices will sink very low — potentially below 1 euro a ton and liquidity will dry up,” wrote Kash Burchett, another IHS analyst.

Analysts say a price of 30 euros a ton or higher would be needed to persuade companies to switch to cleaner fuels like natural gas, the main alternative to coal for producing electrical power. Natural gas is priced about three times as high in Europe as in the United States, which is benefiting from a shale gas boom.

Some European industry groups and conservative politicians on Tuesday applauded the defeat of the measure, which would most likely have put upward pressure on electricity prices and have added to the costs of manufactured goods.

“Arbitrary interventions in the carbon market would just make it more difficult for businesses to produce cost-effectively in the E.U.,” Eurochambres, which represents millions of European businesses, said in a statement after the vote.

Conservative British members of the European Parliament, who opposed the measure, seemed to be concerned about both tampering with a market and the possible economic consequences. Doing so, they said in a statement, “will only serve to discourage green investments” and “undermine much needed market predictability as the E.U. economy strives to find a way out of the economic crisis.”

Advocates of carbon trading systems conceded that the vote was a severe blow to the European effort to use carbon permits to reduce greenhouse gas emissions.

John M. Broder contributed reporting from Washington.

Article source: http://www.nytimes.com/2013/04/17/business/global/europe-rejects-carbon-plan.html?partner=rss&emc=rss

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Court Adviser Backs E.U. Plan to Compel Airlines to Pay for Carbon Emissions

October 6, 2011 by Leave a Comment

BRUSSELS — The European Union won a preliminary victory Thursday for its plan to charge the world’s biggest airlines for their greenhouse gas emissions even as international opposition to the plan grew fiercer and support among European countries weakened.

The opinion by the advocate general at the European Court of Justice strongly endorsed the E.U. push to include global airlines in its Emissions Trading System. The system already covers other heavy industries and represents the Union’s boldest step yet to lead the world in efforts to control climate change.

The opinion also dealt a significant blow to the global airline industry’s effort to avoid being required, starting Jan. 1, to become part of a system that it argues will be ineffective in cutting carbon emissions and lead to higher ticket prices.

The Air Transport Association of America, which brought the case with three major U.S. airlines, said it was disappointed, but that the opinion “does not mark the end of the case.” It said the final opinion still could “vary from the preliminary opinion.” The International Air Transport Association, a global industry body, said so many countries were now opposed to the measures that the Union should drop its plans and restart talks on how to regulate greenhouse gases from aviation at a global level.

“Rather than risking a further escalation of tensions amongst states, I encourage Europe to support a successful, global and effective solution,” said Tony Tyler, the director general of the I.A.T.A.

Mr. Tyler said that more than 20 countries — including India, China, Japan, the United States and Russia — signed a declaration last week vowing to challenge the plan at the International Civil Aviation Organization, an arm of the United Nations.

The I.C.A.O.’s 190 member states passed a resolution in 2010 committing themselves to devising a market-based solution, though without a fixed timetable. Impatient with the pace of the I.C.A.O. talks, the European Union moved ahead with its own plan.

Fitch, the ratings agency, warned this week that the issue had the potential to “escalate into a wider international trade dispute, as airlines and governments grow more vocal over the regulation’s economic impact.”

The case was brought by three U.S. airlines — United and Continental, which merged last year, and American Airlines — and the A.T.A. The parties argued that Europe’s decision infringed on the sovereignty of other countries and conflicted with existing international aviation treaties.

On Thursday, the court’s legal adviser, Juliane Kokott, rejected those arguments.

“E.U. legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law and is compatible with the relevant international agreements,” Ms. Kokott wrote.

She also wrote that any flight touching down or taking off from an E.U. airport provided “an adequate territorial link for the whole of the flight in question to be included in the E.U. emissions trading scheme.”

The opinion is not binding on the judges, but the court follows the advocate general’s opinion in the vast majority of cases. A final ruling is expected in the coming months.

The system is due to take effect next year, and the airlines would not have to hand over the first batches of permits until the spring of 2013 to compensate for flights made in 2012. That still could leave room for a compromise over the next year.

The emissions rules were approved by the 27 member countries of the European Union in 2008 and were designed to make airlines speed up adoption of greener technologies at a time when air traffic, which represents about 3 percent of carbon dioxide emissions worldwide, is growing much faster than efficiency gains.

But it emerged on Thursday that the mounting international opposition had sown doubts at least two European countries about the wisdom of going forward with the system.

The Dutch state secretary for infrastructure and the environment, Joop Atsma, had become “very worried about the external resistance in other countries,” his spokeswoman, Karin van Rooijen, said Thursday.

Mr. Atsma “is not against the system,” she said. “But if other European countries think the situation is bad, he is considering supporting a postponement.”

Article source: http://feeds.nytimes.com/click.phdo?i=2e4d8a0738cf846279c137966d063d03

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I.H.T. Special Report: Energy: A Green Solution, or the Dark Side to Cleaner Coal?

June 19, 2011 by Leave a Comment

The silos, which are scheduled to start operation in July, are designed to blend cleaner-burning imported coal with China’s own high-polluting domestic coal, which is contaminated with sulfur and dust.

Coal blending will produce a mixture that will help electric utilities meet China’s steadily tightening environmental regulations. It will also increase the efficiency of coal-fired plants by slightly reducing the quantity of coal needed. Burning less coal means less greenhouse gases emitted.

But critics argue there is a darker side to cleaner coal.

“Anything that makes coal more cost effective, like blending, which is only enabling China to burn more coal, is bad news for the global struggle against carbon emissions,” said Orville Schell, the Arthur Ross director of the Center on U.S.-China Relations at the Asia Society in New York.

The Chinese government’s decision this month to import more coal in order to lessen power outages — and control rising coal prices — ensures that blending will increase rapidly.

Industry executives are quick to tout the practice’s environmental benefits. Blending “is a sound solution to reducing greenhouse gas and pollutants emissions from coal-fired power plants,” said Howard Au, the director and chairman of Petrocom Energy Ltd., which owns the blending facility here.

But environmentalists worry that by reducing the amount of sulfur and dust emitted from burning coal, blending makes coal more acceptable in the short-term and stalls the conversion to cleaner or renewable fuels. They say coal blending strengthens the case for companies — and countries — that want to continue to rely on coal for decades.

“Does it help with acid rain? Yes,” said Allen Hershkowitz, a specialist in Appalachian coal fields at the Natural Resources Defense Council, an environmental group based in New York. “It hurts us when it comes to global warming.”

Coal remains a particularly dirty form of electricity generation when it comes to producing climate-changing gases.

The global warming calculus for coal blending is less clear. Blending makes it easier to feed a power plant with exactly the right coal mixture at which its boilers work most efficiently. This means the plant can burn less coal and emit less greenhouse gas. How much less — and how does that improvement compare with switching to other fuels — varies a lot depending on the power plant and the coal it burns without blending. Better operating efficiency at the power plant helps offset the cost of blending, which can add up to 4 percent to the price tag of the coal.

China does not just have an ancient civilization, it also has a lot of very old coal. Much of it has been tightly compressed over millions of years. That has pluses and minuses.

Chinese coal releases a lot of heat when burned and has very little moisture left, two very desirable features, according to coal traders. But Chinese coal deposits also contain a lot of sulfur as well as so-called fly ash — dust that is not combustible and contributes to particulate air pollution.

China also has some deposits of young coal which has fairly low heat content and requires blending before it can be burned.

China has the third-largest coal reserves, after the United States and Russia, and consumes more coal than any other country. It accounted for nearly half the 7.3 billion metric tons burned around the world last year.

Four-fifths of China’s reserves, however, do not comply with the country’s standards for industrial use, according to the government-run China Coal Research Institute. Complicating matters, the China’s environmental regulators have signaled plans to reduce further the allowable levels of sulfur.

China led the world last year in clean energy investments, with $54.4 billion, according to a study by the Pew Charitable Trusts. But coal is still China’s dominant energy source, accounting for 73 percent of electricity capacity.

Because coal-fired plants run day and night — while alternatives like wind turbines and hydroelectric dams only run when enough wind or water is available — coal accounted for 83 percent of electricity generation last year.

Article source: http://www.nytimes.com/2011/06/15/business/energy-environment/15iht-sreCHINA15.html?partner=rss&emc=rss

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