November 22, 2024

Europe’s Carbon Market Is Sputtering as Prices Dive

That is pretty small change — $3.90, or only about 10 percent of what the price was in 2008. But to the traders it came as a relief after the market had gone into free fall to record lows two days earlier, after the European Parliament spurned an effort to shore up prices by shrinking the number of allowances.

“The market still stands,” said Thomas Rassmuson, a native of Sweden who founded the company with Jonathan Navon, a Briton, in 2006.

Still, Europe’s carbon market, a pioneering effort to use markets to regulate greenhouse gases, is having a hard time staying upright. This year has been stomach-churning for the people who make their living in the arcane world of trading emissions permits. The most recent volatility comes on top of years of uncertainty during which prices have fluctuated from $40 to nearly zero for the right to emit one ton of carbon dioxide.

More important, though, than lost jobs and diminished payouts for traders and bankers, the penny ante price of carbon credits means the market is not doing its job: pushing polluters to reduce carbon emissions, which most climate scientists believe contribute to global warming.

The market for these credits, officially called European Union Allowances, or E.U.A.’s, has been both unstable and under sharp downward pressure this year because of a huge oversupply and a stream of bad political and economic news. On April 16, for instance, after the European Parliament voted down the proposed reduction in the number of credits, prices dropped about 50 percent, to 2.63 euros from nearly 5, in 10 minutes.

“No one was going to buy” on the way down, said Fred Payne, a trader with CF Partners.

Europe’s troubled experience with carbon trading has also discouraged efforts to establish large-scale carbon trading systems in other countries, including the United States, although California and a group of Northeastern states have set up smaller regional markets.

Traders do not mind big price swings in any market — in fact, they can make a lot of money if they play them right.

But over time, the declining prices for the credits have sapped the European market of value, legitimacy and liquidity — the ease with which the allowances can be traded — making it less attractive for financial professionals.

A few years ago, analysts thought world carbon markets were heading for the $2 trillion mark by the end of this decade.

Today, the reality looks much more modest. Total trading last year was 62 billion euros, down from 96 billion in 2011, according to Thomson Reuters Point Carbon, a market research firm based in Oslo. Close to 90 percent of that activity was in Europe, while North American trading represented less than 1 percent of worldwide market value.

Financial institutions that had rushed to increase staff have shrunk their carbon desks. Companies have also laid off other professionals who helped set up greenhouse gas reduction projects in developing countries like China and India.

When the emissions trading system was started in 2005, the goal was to create a global model for raising the costs of emitting greenhouse gases and for prodding industrial polluters to switch from burning fossil fuels to using clean-energy alternatives like wind and solar.

When carbon prices hit their highs of more than 30 euros in 2008 and companies spent billions to invest in renewables, policy makers hailed the market as a success. But then prices began to fall. And at current levels, they are far too low to change companies’ behaviors, analysts say. Emitting a ton of carbon dioxide costs about the same as a hamburger.

“At the moment, the carbon price does not give any signal for investment,” said Hans Bünting, chief executive of RWE, one of the largest utilities in Germany and Europe.

This cap-and-trade system in Europe places a ceiling on emissions. At the end of each year, companies like electric utilities or steel manufacturers must hand over to the national authorities the permits equivalent to the amount gases emitted.

Article source: http://www.nytimes.com/2013/04/22/business/energy-environment/europes-carbon-market-is-sputtering-as-prices-dive.html?partner=rss&emc=rss

Stocks Steady After 5-Year High

Opinion »

Room for Debate: Have We Saved the Whales?

Or have noise, fishing and global warming become a greater threat than whaling ever was?

Article source: http://www.nytimes.com/2013/01/12/business/stocks-slip-after-5-year-high.html?partner=rss&emc=rss

Stocks Slip After 5-Year High

Opinion »

Room for Debate: Have We Saved the Whales?

Or have noise, fishing and global warming become a greater threat than whaling ever was?

Article source: http://www.nytimes.com/2013/01/12/business/stocks-slip-after-5-year-high.html?partner=rss&emc=rss

Germany Dims Nuclear Plants, but Hopes to Keep Lights On

Nuclear plants have long generated nearly a quarter of Germany’s electricity. But after the tsunami and earthquake that sent radiation spewing from Fukushima, half a world away, the government disconnected the 8 oldest of Germany’s 17 reactors — including the two in this drab factory town — within days. Three months later, with a new plan to power the country without nuclear energy and a growing reliance on renewable energy, Parliament voted to close them permanently. There are plans to retire the remaining nine reactors by 2022.

As a result, electricity producers are scrambling to ensure an adequate supply. Customers and companies are nervous about whether their lights and assembly lines will stay up and running this winter. Economists and politicians argue over how much prices will rise.

“It’s easy to say, ‘Let’s just go for renewables,’ and I’m quite sure we can someday do without nuclear, but this is too abrupt,” said Joachim Knebel, chief scientist at Germany’s prestigious Karlsruhe Institute of Technology. He characterized the government’s shutdown decision as “emotional” and pointed out that on most days, Germany has survived this experiment only by importing electricity from neighboring France and the Czech Republic, which generate much of their power with nuclear reactors.

Then there are real concerns that the plan will jettison efforts to rein in manmade global warming, since whatever nuclear energy’s shortcomings, it is low in emissions. If Germany, the world’s fourth-largest economy, falls back on dirty coal-burning plants or uncertain supplies of natural gas from Russia, isn’t it trading a potential risk for a real one?

The world is watching Germany’s extreme energy makeover, as politicians from New York to Rome have floated their own plans to shut or shelve reactors.

The International Energy Agency, generally a fan of Germany’s green-leaning energy policy, has been critical. Laszlo Varro, head of the agency’s gas, coal and power markets division, called the plan “very, very ambitious, though it is not impossible, since Germany is rich and technically sophisticated.”

Even if Germany succeeds in producing the electricity it needs, “the nuclear moratorium is very bad news in terms of climate policy,” Mr. Varro said. “We are not far from losing that battle, and losing nuclear makes that unnecessarily difficult.”

The government counters that it is prepared to make huge investments in improving energy efficiency in homes and factories as well as in new clean power sources and transmission lines. So far, there have been no blackouts.

But Jürgen Grossmann, chief executive of the German energy giant RWE, which owns two closed reactors here in Biblis, about 40 miles south of Frankfurt, expressed skepticism. “Germany, in a very rash decision, decided to experiment on ourselves,” he said. “The politics are overruling the technical arguments.”

The Nuclear Equation

Germany’s planners believed they could forgo nuclear energy in large part because of the country’s remarkable progress in renewable energy, which now accounts for 17 percent of its electricity output, a number the government estimates will double in 10 years. On days when the offshore wind turbines spin full tilt, Germany produces more electricity from renewable sources than it uses, according to European energy monitors.

Germany has “exceeded everyone’s expectations on renewable power,” said Mr. Varro, showing that it could be cost effective and reliable.

Until it closed the reactors, Germany was Europe’s leading energy exporter.

With a total of 133 gigawatts of installed generating capacity in place at the start of this year, “there was really a huge amount of space to shut off nuclear plants,” Harry Lehmann, a director general of the German Federal Environment Agency and one of Germany’s leading policy makers on energy and environment, said of the road map he helped develop. The country needs about 90.5 gigawatts of generating capacity on hand to fill a typical national demand of about 80 gigawatts a day. So the 25 gigawatts that nuclear power contributed would not be missed — at least within its borders.

To be prudent, the plan calls for the creation of 23 gigawatts of gas- and coal-powered plants by 2020. Why? Because renewable plants don’t produce nearly to capacity if the air is calm or the sky is cloudy, and there is currently limited capacity to store or transport electricity, energy experts say.

New coal and gas plants will use the cleanest technology available and should not aggravate climate change, government officials said, because they will operate within the European carbon-trading system in which plants that exceed the allowed emissions cap have to buy carbon credits from companies whose activities are environmentally beneficial, thus evening out the environmental ledger.

Article source: http://www.nytimes.com/2011/08/30/science/earth/30germany.html?partner=rss&emc=rss

E.P.A. Chief Stands Firm as Tough Rules Loom

She is working under intense pressure from opponents in Congress, from powerful industries, from impatient environmentalists and from the Supreme Court, which just affirmed the agency’s duty to address global warming emissions, a project that carries profound economic implications.

The new rules will roll out just as President Obama’s re-election campaign is getting under way, with a White House highly sensitive to the probability of political damage from a flood of government mandates that will strike particularly hard at the manufacturing sector in states crucial to the 2012 election.

No other cabinet officer is in as lonely or uncomfortable a position as Ms. Jackson, who has been left, as one adviser put it, behind enemy lines with only science, the law and a small band of loyal lieutenants to support her.

Ms. Jackson describes the job as draining but says there are certain principles she will not compromise, including rapid and vigorous enforcement of some of the most far-reaching health-related rules ever considered by the agency.

“The only thing worse than no E.P.A. is an E.P.A. that exists and doesn’t do its job — it becomes just a placebo,” she said last week in an hourlong interview in Houston. “We are doing our job.”

Although she has not met with the president privately since February, Ms. Jackson said she was confident that he would back her on the tough decisions she had to make. “All of us are mindful that he has a lot of things to do,” she said.

Attacks on her and her agency have become a central part of the Republican playbook, but she said she wanted no sympathy.

“Any E.P.A. director sits at the intersection of some very important issues — air pollution, clean water, and whether businesses can survive,” said Ms. Jackson, a chemical engineer trained at Tulane and Princeton Universities and a former director of the New Jersey Department of Environmental Protection. “No one knows this job unless they’ve sat in the seat.”

Ms. Jackson said she intended to go forward with new, tougher air- and water-quality rules, including those that address climate change, despite Congressional efforts to override her authority and even a White House initiative to weed out overly burdensome regulations.

The first of these new rules is expected to be announced Thursday, imposing tighter restrictions on soot and smog emissions from coal-burning power plants in 31 states east of the Rockies. The regulation is expected to lead to the closing of several older plants and will require the installation of scrubbers at many of those that remain in operation. One former E.P.A. administrator, William K. Reilly, who served under the first President George Bush, is a sometime adviser to Ms. Jackson. He said she was taking fire from all sides.

“She’s got three very large challenges,” Mr. Reilly said. “First, she’s got to administer the Clean Air Act to try to accomplish something for which it was never designed, the control of carbon dioxide, a difficult regulatory challenge in itself. Second, she has to do that and cope with all these other regulations which are not of her making and have come to land on her desk in a climate of intense political polarization and economic distress.”

“And the third challenge,” he continued, “is that the White House — any White House — doesn’t want to hear an awful lot from the E.P.A. It’s not an agency that ever makes friends for a president. In the cabinet room, many of the secretaries got along with each other, but they all had an argument with me. It’s the nature of the job.”

Mr. Reilly said the White House had left Ms. Jackson out on a limb when it failed to push hard for the cap-and-trade climate change bill that passed the House in 2009 but stalled in the Senate last year. Administration officials had argued that legislation was far superior to agency regulation as a means of addressing climate-altering emissions. But when the bill ran up against bipartisan opposition in the Senate, Mr. Reilly said, “the White House didn’t lift a finger,” an assertion administration officials dispute.

The White House said that it fully supported the agency’s aggressive standards for a variety of pollutants to protect public health and the environment and denied that it was resisting further regulatory action for political reasons.

“It’s simply a matter of choosing the health and safety of the American people over polluters,” Clark Stevens, a White House spokesman, said in an e-mailed statement, “and doing so in a common-sense way that allows us to protect public health while also growing the economy — which will continue to be a shared goal of this entire administration.”

Article source: http://feeds.nytimes.com/click.phdo?i=4845a8b47e2c7c28ede7a1422303840f