Energy Producers See Cash in Kyoto (emissions credits)

By Greg Walters Staff Writers When the Dutch government expressed interest in funding the modernization of a power plant in Amursk, Khabarovsk region, last year, the Russian government stopped the deal dead in its tracks.

The Dutch wanted Russia to give up a few of its greenhouse gas emissions credits, which would be portioned out if the Kyoto Protocol on global warming takes effect.

The Dutch were prepared to pay hundreds of thousands of dollars for the emissions credits -- on top of the renovation costs. But the Russian authorities did not give their approval, leaving Unified Energy Systems out of a 10 million euro ($12.3 million) deal and with an antiquated power plant.

"We think [UES] has now lost a total of approximately 20 million euros because the government won't grant letters of approval," said Mikhail Rogankov, CEO of the Carbon Energy Fund, a nonprofit organization established by UES to handle Kyoto implementation. "But it may be as high as 60 million."

UES is not alone. While President Vladimir Putin keeps the world guessing on whether he will endorse Kyoto, some Russian businesses, like energy behemoths UES and Gazprom, are lining up to take advantage of it.

Some observers claim that Kyoto's potential benefits to the Russian energy sector will be so large -- more than $6 billion just for transferring emissions reductions, by one estimate -- that the government is stalling on the treaty until it determines who should reap the hefty financial rewards.

"The main reason Moscow is delaying is the unclear situation with regard to the privatization of electricity," said Igor Leshukov, director of the Institute for International Affairs in St. Petersburg.

"When it's clear who will get what out of electricity privatization, then we'll see ratification of Kyoto [by Russia]."

The treaty would use complex market mechanisms to reduce worldwide emissions of greenhouse gases, which many experts claim are the cause of global warming.

After Washington dumped the treaty in 2001, arguing it would hurt the U.S. economy, the future of Kyoto now hinges entirely on ratification by Moscow.

Putin ended months of silence when he voiced support for Kyoto during a summit with European Union leaders in May. A final decision is still pending.

Should the treaty be ratified, UES alone -- which produces 2 percent of the world's greenhouse gases and 70 percent of Russia's electricity -- could expect to ink between 500 million and 800 million euros in modernization deals over the next eight years, Rogankov said.

That's because under Kyoto, countries or companies that are unable to meet their own emissions reduction targets can invest in joint implementation projects to cut greenhouse gases in other countries -- and count the reductions as their own.

A number of climate change experts, as well as EU officials, maintain that Russia could make billions of dollars through joint implementation projects. The price tag for such projects would depend not only on refurbishing costs, but on the amount of greenhouse gases, like carbon dioxide, reduced.

Beyond just making joint implementation projects possible, Kyoto would also allow countries that stay below emissions limits to sell quotas to over-polluting countries.

Kyoto limits Russia's greenhouse gas emissions to 1990 levels. As a result of post-communist economic decline, Russia produces about 30 percent less than it did 14 years ago.

Much of the debate surrounding the treaty in Russia has focused on whether or not the country will retain enough "headroom" to sell emissions credits.

Kyoto supporters predict that Russia stands to make millions, if not billions, of dollars through direct sales of quotas.

Joint implementation projects would neither diminish the country's emissions ceiling nor affect the amount of quotas Russia could sell. Furthermore, supporters argue, the joint projects would help modernize aging factories while turning a tidy profit in the process.

The total amount Russia could make from emissions reductions through joint implementation projects would equal $22.4 billion in so-called carbon dollars, according to a study released in March by Benito Mueller, senior research fellow at the Oxford Institute for Energy Studies in England.

Furthermore, every "carbon dollar" would bring an additional $3 to $4 in foreign direct investment to improve aging infrastructure, Mueller estimates.

The ripple effect could be enormous for a country that attracted $6.8 billion in foreign direct investment last year.

"The problem is that these models presuppose that there's an effective market," Mueller said. "The Russian government has to designate someone who's actually in charge. People are willing to invest, but they don't know whom to approach."

In Russia, some of Kyoto's staunchest supporters are companies most likely to benefit from joint projects.

"This is an urgent issue for Gazprom," said Leonid Maslov, an adviser at Gazprombank. "Total modernization costs would be $8 billion. A [joint implementation] project is the best possibility for Gazprom to minimize its costs," he told a recent conference in Moscow, Reuters reported.

Gazprom's leaky gas pipeline network would be a preferred target for joint projects, said Dirk Forrister, managing director of the emissions trading brokerage Natsource in London. Capping methane leaks would be a relatively easy way to reduce emissions, as well as improve Gazprom's efficiency, he said.

"Places that are some of the big hitters are large coal-fired power plants, district heating plants, steel plants, cement plants, aluminum plants and gas pipelines," he said.

Russian opponents of Kyoto argue that capping Russia's greenhouse gases at their 1990 levels would strangle economic growth and eventually make Russia a net buyer of emissions quotas.

High economic growth will increase carbon dioxide emissions at a rate of a 2 percent increase in emissions per 1 percent growth in GDP, according to presidential economic adviser Andrei Illarionov. Illarionov's rejection of Kyoto on economic grounds is unequivocal. But in his public comments, he has largely skirted the question of joint implementation projects.

Neither Illarionov nor Peter Kaznacheyev, another Kremlin adviser opposed to Kyoto, replied to requests for an interview.

"I've been working on this issue for 10 years, and every reputable energy expert or economist that I've talked to says it's all upside for Russia in terms of raising money," Forrister said.

"There are people who think Russia has such large volumes of excess emissions that it could swamp the market with supply over demand. But I don't think that's in [Russia's] interest."

At last month's EU summit, Putin appeared to agree to support Kyoto in exchange for European backing in Russia's bid to join the World Trade Organization. But Putin stopped short of an outright endorsement and gave no timeline for ratification, which he said was parliament's responsibility, not the president's.

To observers like Leshukov, Putin is simply biding his time before the reorganization of the power sector is complete.

Much of the opposition to the treaty, Leshukov said, can be traced to disputes between Illarionov and UES chief executive Anatoly Chubais.

"It's a redistribution of huge assets, huge gains and benefits," Leshukov said. "As soon as Moscow is sure the right people get the right stuff, they will get the green light to get more out of Kyoto."

Global Warmers Adopt New Tactic

Friday, June 04, 2004
By Steven Milloy
The global warming treaty known as the Kyoto protocol is politically dead in the U.S. But the treaty's left-leaning environmental extremist supporters haven't given up their fantasy of creating a socialist global economy through controls on energy use.

Rather, they've merely switched tactics to achieve that dubious aim -- and I'm not referring to making dopey movies like "The Day After Tomorrow" (search). The new tactic is to pressure publicly owned corporations into taking steps to reduce carbon dioxide emissions (search) -- essentially committing to private Kyoto protocols (search ) on a corporation-by-corporation basis.

The sort of pressure employed by the global warming activists is not the usual one of forcing corporate managements to cave-in under the threat of bad publicity. Instead, the activists are becoming shareholders of publicly owned companies, attempting to steer corporate policy under the guise of being owners of the corporations. During 2003, these activist-shareholders filed resolutions with more than 25 companies urging the companies to take action to reduce greenhouse gas emissions (search).

None of the resolutions came close to passing, but in some cases they did achieve significant shareholder support, such as: 32 percent at ChevronTexaco (search); 27 percent at American Electric Power (search), the largest U.S. generator of coal-fired electric power; 23 percent at General Electric (search); 21 percent at ExxonMobil (search).

In response to this pressure, American Electric Power announced in February 2004 that it would assess and report to shareholders on the risks of its greenhouse emissions and impacts of efforts to reduce those discharges. Another major coal-burning utility, Cinergy Corp. (search), also agreed to demands from state and church pension funds that it report on greenhouse emissions and other environmental matters. And let's not forget the 40 or so large corporations -- including Dupont, IBM and Boeing -- who have already caved into the activists by joining the Pew Center on Global Climate Change (search). BP has even taken to labeling its primary product, oil, a "necessary evil" in television commercials.

Pressure on corporations to take action on global warming is also coming from something called the Carbon Disclosure Project (search) -- 87 institutional investors managing $9 trillion in assets. The Project has asked 500 large companies to disclose their carbon risk and plans for mitigating the problem. Global warming activists have also marshaled pension funds with about $800 billion under management to lobby the U.S. Securities and Exchange Commission to force publicly owned companies to disclose financial risks related to global warming on their balance sheets.

Even more frightening is the activists' move toward the ultimate corporate takeover. Surfing the wave of bad publicity related to corporations like Enron (search) and WorldCom (search), the activists are lobbying the SEC to propose a rule that would allow minority shareholders to nominate directors to corporate boards.

Although corporate shareholders have the right to vote for directors on corporate boards, the process of nominating those directors has traditionally been an internal corporate process not involving the shareholders. The activists hope that if they can get their candidates nominated, they hope to get them elected through a shareholder voting method called "cumulative voting," (search) a process designed to assure that minority shareholders can elect their candidates.

The activists don't plan to stop there. Ultimately, they would like to see that controlling majorities of the directors on the boards of a publicly owned corporations are "independent" -- that is, have no ties to corporate management. Ties to activists, of course, would be allowed. And perhaps the most frightening aspect of all is the lack of awareness about what the activists are up to. Of the 690 public comments received by the SEC regarding the proposal to allow minority shareholders to nominate directors, only 10 were from corporations and corporate executives. The vast majority was from activists and their supporters in favor of the proposal.

United for Jobs (search), a project of the National Black Chamber of Commerce (search), Small Business Survival Committee (search) and the United Seniors Association (search), lampooned the released of "The Day After Tomorrow" with a mock movie poster titled The Day After Kyoto featuring Depression-era unemployment lines. Fearing the disastrous ramifications of a global warming treaty, President Bush withdrew the U.S. from the Kyoto protocol in 2001. No global warming legislation has ever been seriously considered by Congress. The proposal of Sens. John McCain and Joe Lieberman to cap U.S. greenhouse emissions at 2000 levels by 2010, and create an emissions trading system is not likely to go anywhere either.

Even politicians -- on a bipartisan basis -- know that the junk science-fueled Kyoto protocol would be an economic suicide capsule. Though Greens have failed to advance their agenda through scientific and political debate in the public policy arena, they haven't quit. They've just changed pressure points.

Steven Milloy is the publisher of JunkScience.com, an adjunct scholar at the Cato Institute and the author of Junk Science Judo: Self-Defense Against Health Scares and Scams (Cato Institute, 2001).

TRADE:
IMF, World Bank Join Forces with WTO

Emad Mekay

Attempts by global financial institutions to synchronise their policies on developing nations threaten to further entrench a one-sided approach to development, fuel instability and widen the gap between the world's rich and poor, watchdog organisations warned Monday.

WASHINGTON, May 12 (IPS) - Attempts by global financial institutions to synchronise their policies on developing nations threaten to further entrench a one-sided approach to development, fuel instability and widen the gap between the world's rich and poor, watchdog organisations warned Monday.

The alarm comes only a day before two of the world's major wardens of the global economy, the Washington-based World Bank and International Monetary Fund (IMF) were to meet in Switzerland with the Geneva-based World Trade Organization (WTO) to develop a common approach to world economic policies called the ''coherence agenda''.

The meetings will be attended by senior officials of the increasingly controversial bodies, including IMF Managing Director Horst Koehler, WTO Director General Supachai Panitchpakdi and World Bank President James Wolfensohn.

Prospects of the meeting, under the umbrella of the WTO General Council - the organization's highest level decision-making body in Geneva - sends shivers down the spine of critics of the international financial institutions (IFIs), who see their policies as counter productive and in the service of a few rich nations and their sprawling corporations.

''This will limit the room of choices and policy space,'' said Aldo Caliari from the Washington-based Centre of Concern, one of 40 groups that signed a petition opposing the meetings and warning of the possible consequences.

''It's like being forced to shop from one shop - same policies and same goods.''

The IFIs say their meeting will help strengthen the global multilateral trading system, which they consider an anchor of strength and stability in the world economy.

Developing nations will benefit by getting increased market access for their products in rich developed countries, they add.

But analysts here say the record and the structure of the organisations, especially the two Bretton Woods Institutions, the IMF and the World Bank (named for the place in the U.S. state of New Hampshire where they were launched in 1944) bode ill for developing nations.

"When you understand how much power the industrial countries hold in the governance of the Bretton Woods institutions, you realise why the trade agenda supported by these institutions tends to be aligned with the negotiating interests of those same countries within the WTO," said Caliari.

The voting structures of the IMF and World Bank are heavily biased towards rich countries. Their leaders, for instance, are chosen through processes open only to U.S. and European citizens.

The IMF and the Bank have for years been peddling trade liberalisation, deregulation, privatisation and budget austerity to developing countries, and the results, critics say, are disappointing.

Feverish privatisation urged by the Bank and the Fund, especially of public services like water and utilities, has smoothed the way for foreign corporations to supply these services and introduce commercial pricing systems, which have often led to higher rates for poor citizens, jeopardising their access and pushing them further into poverty.

''Economies of developing countries have been characterised by slow and erratic growth, increased instability and rising income gaps,'' said the groups in their Monday statement.

''With the WTO, such misguided and failed policy reforms are being progressively locked-in through trade law backed by the threat of economic sanctions through its dispute settlement mechanism.''

Under the new distributions of roles to be discussed Tuesday, the IMF and the Bank would help ease the way for full liberalisation of trade by offering ''technical and financial support''.

The Washington-based organisations would ''assist'' developing nations to manage lower revenues because of reduced tariffs, withstand a period in which their trade preferences in industrialised nations are eliminated, secure funds to support increased trade and, finally, help create export oriented economies.

The IMF and the Bank would also raise the profile of trade in borrowing countries' Poverty Reduction Strategy Papers (PRSP) and Country Assistance Strategies (CAS), documents developed with the support of the two lenders that function as borrowers' economic roadmaps.

In return, the IMF and World Bank will receive observer status in the trade negotiations committee, which handles individual negotiating issues at the WTO and its subsidiary bodies, coupled with a role at the WTO secretariat, a body often accused of bias on disputes between rich and poor countries.

Critics say these plans should cause even more concern.

They say so-called ''technical assistance'' is really one way to force-feed the same policies on developing nations rather than give them the tools to develop independent views and, possibly, development options.

''Technical assistance is being used as a political tool to win support for a 'development agenda' that is heavily disputed in the WTO,'' said Shefali Sharma from the Geneva office of the Institute for Agriculture and Trade Policy in a statement.

''No amount of technical assistance in implementing policies that, in effect, handicap and shackle developing countries in the WTO can improve gains towards development.''

Cooperation between the three bodies is not new. The WTO director general often attends meetings of the IMFC - the assembly of the IMF and Bank governors - and of the development committee, the senior decision making body of the institutions.

Most recently, he attended the IMFC meeting in April 2003 and briefed finance ministers on the Doha trade negotiations and work programme, according to WTO documents.

The IMF and the World Bank have also been paying greater attention to trade issues in the past few years, both in the course of their regular country work and research papers. Documents have been flooding out of the two organisations in support of ''free'' trade.

In 2002, they issued a joint staff paper on "Market Access for Developing Countries' Exports", which examined patterns and costs of restrictions and distortions on developing countries' exports. (END)

USA > Domestic Politics
from the June 14, 2004 edition

TRAFFIC: California cars would emit less greenhouse gas under a first-of-a-kind plan to be unveiled Monday.
GENE BLEVINS/LOS ANGELES DAILY NEWS/AP

New war on emissions

A state plan to be unveiled Monday would be the first to curb greenhouse-gas emissions in cars.

By Mark Sappenfield | Staff writer of The Christian Science Monitor

OAKLAND, CALIF. – Once again, California is trying to change the world. This time its target is the ever-present automobile, and Monday state officials will announce emissions regulations of unprecedented scope and significance.
Never before has a country - let alone a state - required that car manufacturers reduce the amount of greenhouse gases emitted from tailpipes in an effort to combat global warming. Within the next decade, however, California will demand that new cars sold in the state cut those pollutants by 30 percent.

Related stories:

04/22/04

Smog regulations just got tougher

04/22/04

Earth Day's biggest challenge yet

E-mail newsletters

Get all of today's headlines, or alerts on specific topics.
Subscribe for free.

E-mail this story

Write a letter to the Editor

Printer-friendly version

Permission to reprint/republish

On one hand, it is a measure of California's clout: 12 percent of all cars sold in the United States roll off lots here. Yet it also marks a reprise of California's role as Washington West - the primary counterweight to the policies of the Bush administration. As a result, the decision could stir states dissatisfied with Washington's leadership, despite the fact that the program could eventually add $1,000 to new car prices.

"In a number of states, a lot of misgivings have been expressed about the failure of the federal government to do anything about greenhouse gases," says Therese Langer of the American Council for an Energy Efficient Economy in Washington. "That will make this very appealing."

In recent years, seven Northeastern states - including New York, New Jersey, and Massachusetts - have adopted California's auto-emission regulations, which are tougher than the federal standard. California's new plans, however, represent something unique. It has never before regulated gases such as carbon dioxide, which many scientists believe contribute to global warming.

While some European countries have voluntary guidelines for reducing tailpipe greenhouse-gas emissions, California would be the first in the world to create a mandatory standard, introducing it in 2009 and gradually strengthening it until 2015. Since California is home to some of the most car-clogged cities in the US, the change would have an obvious environmental effect.

Yet even environmentalists say the greater significance is political. As it has done many times before, California has crafted a new policy for other states and countries to follow. In 1960, for example, California established the world's first agency to control air pollution; several years later it became the first state to regulate pollutants such as carbon monoxide.

Already, New York has said it would follow California's new greenhouse-gas regulations, and Canada has made similar intimations. The California Air Resources Board is expected to lay out the details of the plan Monday. Two years ago, the legislature passed a bill - signed by former Gov. Gray Davis - that gave the agency the authority to regulate greenhouse gases. Gov. Arnold Schwarzenegger says he will support the decision.

"If it weren't for California, the environment would be much worse in this country," says Roland Hwang of the Natural Resources Defense Council. "It puts pressure on the auto industry and Washington to come up with a solution."

For its part, the auto industry wants nothing to do with the new California policy, and it has said it might sue. At issue is California's authority. The federal Clean Air Act clearly gives California the right to set its own emissions policy in order to curb pollution. Many times in the past, California has used this authority to pass stricter regulations than those that existed in other states.

But critics of the new plan suggest that one of California's fundamental goals is to improve fuel-efficiency, and Washington still retains total authority over national fuel-efficiency standards. Experts suggest that there are other ways to lower greenhouse-gas pollutants besides improving fuel efficiency, such as cutting the carbon content of gasoline. Yet improved fuel economy is "the great untapped resource," says Ms. Langer.

A study by her organization found that fuel economy could be doubled using existing technology - such as lighter materials and more sophisticated transmissions - with no change in a car's appearance and no loss of performance. The cost: between $1,000 and $1,500 per car - roughly in line with California's estimates. Moreover, if California's plan can survive, the state hopes its mandate will spur further innovation. It has happened before: In the 1970s, California pioneered the use of the catalytic converter, which is now standard equipment on all automobiles.

"[Auto manufacturers] don't want to make two different cars," says Mr. Hwang. But if California's new regulations spread as previous ones have, he says, "the California car may become the de facto national car."

This is another case of the life-guard commanding the seas to recede, and sure enough they do. They'll be back in a moment, but then he can bravely command them to recede again.

They are wisely setting the date for the standard to take effect well into the future, when the lawmakers will be safely into another term, or with good luck have already moved up into higher office.

If the price of gas continues to rise, there is going to be a market for more efficient engines. Even without that market incentive, engine designers are in competition with one another and that alone keeps things moving along nicely.

It amuses me that politicians try to take credit for something they will never know how to do. I can't see many of these guys changing their own spark plugs, let alone inventing anything useful. But they will command it, and just like magic, thanks to smarter men than they, and thanks to a dynamic they will never understand, it will happen.

The whole thing depends obviously on the advance of technology which is completely out of these men's hands. If its technically feasible, it will happen and these guys can take credit for it on their resumes. If it doesn't, someone else can take the political hit for not making it, or they can simply negotiate some slippage in the dates and still stand tall.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.