Current Savers Blog

While attending a meeting of prominent climate sceptics during the U.N. Climate Conference in Copenhagen in December (an anti-COP15, if you will), I listened to each of the speakers put forward their theory on why conventional evidence on the primary causes of climate change should be dismissed as, for lack of a better phrase, complete hokum.

Among their denunciations of widely-accepted truths regarding global warming, greenhouse gases, melting glaciers and rising sea levels was the assertion that a change in attitude was afoot; the public may have been duped into believing the mainstream scientific assessment of climate change, but not for long.

There was something in the air, the sceptics said, and soon people would begin to question their trust in the majority view.

I’m no scientist and am in no position to comment on the validity of any of the evidence on show; as journalists we were there to make sure both sides of the argument were being heard. This group of climate outcasts were in every sense on the fringes of COP15, but after a series of controversies in recent weeks it seems they were right about one thing at least — the public conviction about the threat of climate change is slipping.

Well, it is in Britain anyway. An Ipsos Mori poll of over 1,000 UK adults found that the proportion of people who believe climate change is definitely a reality dropped from 44% to 31% in the past year.

Meanwhile, 31% said the threat was exaggerated, up 50% on last year – worrying statistics for the government and charities trying to convince the public to change its behaviour and to accept higher priced energy and goods as a small price to pay for saving the planet.

Why the sudden drop off? The poll follows weeks of suggestions that mainstream climatologists have, in the past, manipulated data and that an influential study by the U.N.’s main climate science body contains inaccurate information.

The arguments of sceptics were fuelled late last year by the incident dubbed “Climategate”, when hundreds of emails and documents passed between leading climate scientists were leaked online. The deniers claimed this was evidence that some climatologists were colluding to distort data and mislead the public on climate change.

Elsewhere, the Intergovernmental Panel on Climate Change (IPCC) admitted its claim that Himalayan glaciers  could melt by 2035 was unsubstantiated. The U.N. has since announced it is setting up an independent board of scientists to review the IPCC’s performance.

Meanwhile a 2009 report which claimed sea levels would rise by as much as 82 centimetres by the end of the century has been withdrawn by its author, who now says the true estimate is in fact unknown. At the sceptics conference in Copenhagen I spoke to Nils-Axel Mörner, an expert in sea levels, who questioned the general conception that sea levels are rising — in the video clip below he explains why, in his opinion, they are in fact falling.

And, of course, the failure of world leaders at COP15 to agree a successor to the Kyoto Protocol didn’t help matters either.

If this trend continues, the climatologists, politicians and activists who subscribe to the mainstream view may find that the real challenge now isn’t getting the public to change their behaviour, it’s getting them to trust their evidence.

Has your faith in mainstream climate science been knocked by recent controversies? In your view, how much of a threat is global warming?

John Laforet is president of Wind Concerns Ontario, a coalition of 42 grassroots organizations aiming to curtail development of wind farms in the central Canadian province of Ontario.  He is also running for municipal public office.

Governments around the world are actively seeking private development of renewable energy projects by offering generous feed-in tariffs that often see developers paid many times the market rate for the power they produce.

This has encouraged a surge of applications, but the volume of applications and other challenges associated with these projects present potential risks to prospective investors.

Projects require transmission capacity to carry their energy to market, but the agencies accepting applications for a given jurisdiction often aren’t responsible for managing transmission systems.

In the Czech Republic, a boom of renewable projects has caused considerable challenges to the transmission system and has caused the grid operator to block future wind projects, while threatening to disrupt grid connections for existing renewable energy projects.

In Canada, Ontario’s inventory of projects under development, approved or in the proposal stage, does not consider existing grid capacity.

While individual proponents compete for feed-in-tariff agreements without guaranteed access to grid capacity, a multi-billion dollar investment by the government into the grid would be required to facilitate many of these projects getting off the ground.

In a time of plunging tax revenues and mounting deficits, and growing community opposition to these projects, this creates instability for investors.

Weak regulations designed to streamline approval processes and silence community opposition have resulted in legal action against proponents worldwide.

Developers are being sued in many jurisdictions, and in at least two notable examples, either lost in court or settled for millions of dollars.

A French court ordered the turbines in Cast and Châteaulin to be turned off between 10pm and 7am, thereby generating zero revenue or electricity during that time.

In Ontario, Canadian Hydro Developers settled a number of legal actions at a cost of $1.75 million as a result of individuals who complained of negative health effects. These include Barbara Ashbee-Lormand who says she and her husband found it intolerable to live in their home in Amaranth, a rural township that is host to 22 industrial wind turbines.

A growing number of American municipalities have banned the installation of industrial wind turbines in response to community opposition, including in North Carolina, and Liberty, Illinois.

Offshore, lake-based proposals in Ontario have faced two moratoriums in three years, and projects in Australia have seen endangered species legislation used to halt approvals.

While a feed-in tariff agreement may make investments in renewable energy look attractive, the lack of control project investors have over their ability to reach the market should give investors pause.

With potential for liability for negative health impacts, lawsuits from communities and growing interest from the courts, in addition to other instability built into the approval process, this is one “green” sector that could quickly turn red, at least for investors.

Photo shows Barbara Ashbee-Lormand’s mailbox in Shelburne, Ontario, with wind turbines in the background after the home was vacated in 2008. REUTERS/Handout

The blogosphere is rumbling with anticipation of the  “Bloom Box”, a pint-sized “power plant” that could change the way we power our homes and offices forever.

The buzz began Sunday when 60 minutes aired an exclusive profile of the alternative energy fuel cell developed by startup Bloom Energy and its CEO K.R. Sridhar (a former rocket scientist) in Silicon Valley. After eight years in the making, the power plant in a box is set to be released Wednesday with California governor Arnold Schwarzenegger and former Joint Chiefs of Staff chairman Colin Powell on hand.

“You’ll generate your own electricity with the box and it’ll be wireless. The idea is to one day replace the big power plants and transmission line grid, the way the laptop moved in on the desktop and cell phones supplanted landlines,” reports CNet News.

What makes this claim to the perfect, zero-emission energy source different? For starters, backing from Walmart, eBay, Google, Staples, FedEx, and hundreds of millions of dollars in investments.

And, the World Economic Forum names Bloom Energy as one of 26 top 2010 Technology Pioneers: Energy and Environment.

But the Bloom Box isn’t cheap. The Daily Tech reports: “Well, $700,000 to $800,000 will buy you a ‘corporate sized’ unit… To get a view of the cost and benefits, eBay installed 5 of the boxes nine months ago. It says it has saved $100,000 USD on energy since.”

The hype is not new. Since at least 2006, tech industry watchers have kept an eye on Bloom — which has been working on the fuel cell box for more than 8 years.

60 Minutes also ran this Skeptic’s video.

Watch CBS News Videos Online

Is it really too good to be true?

Top image shows K.R. Sridhar (L) speaking with CBS reporter Lesley Stahl on Feb 20, 2010. REUTERS/Handout/CBSNews/60Minutes

Bottom image shows an HD frame grab showing the inside of a Bloom Box that appeared on 60 Minutes, Feb 20, 2010. REUTERS/Handout/CBSNews/60Minutes

Following is the Thomson Reuters North America Shale Gas Valuation Index, based on closing share prices from Feb. 18.

The data comes from StarMine, a Thomson Reuters company, using the 12-month forward SmartEstimate, a measure that selects estimates from only the most accurate analysts.

StarMine Intrinsic Value is a variation on the dividend-discount model methodology that adjusts for biases uncovered in analyst forecasts.

MANAMA, Feb 18 (Reuters) - Dubai’s debt fiasco and real estate bubble bust pushes investors to look out for alternative assets underlying Islamic finance products – could renewable energy provide a way-out?

Predominantly, Islamic finance and investment products have been backed by infrastructure or commodities assets. But executives at the 2010 Reuters Islamic Banking and Finance Summit said product diversification was needed to cut the over-reliance on real estate in the Gulf.

“Sharia scholars are eager to support the renewable energy initiative, but the Islamic banking industry (in the Gulf) does not seem to be overly interested in this area although I am aware of a couple of deals involving acquisitions of clean tech companies in the U.S. and wind farms in the UK,” said Ayman Khaleq, partner at the Vinson & Elkins law firm in Dubai.

“The big banks have teams that focus on renewable energy as an asset class. However, the problem is that Islamic banks are not big enough to be able to cover specific sectors such as alternative energy,” he added.

In order to launch an alternative energy sukuk, the Gulf’s small local banks would need to team up with bigger international players such as Deutsche Bank, Barclays, or BNP Paribas, which have been active on the renewable horizon.

But some experts have warned more originality in the Islamic finance industry could alienate investors, who are reluctant to take on fresh risk in the wake of Dubai’s debt crisis and recent sukuk defaults in the region.

WAITING FOR THE GREEN PUSH

Despite favourable environmental conditions in the Gulf offering fertile ground for green technologies, Abu Dhabi’s Masdar initiative is so far the region’s only flagship initiative. www.masdar.ae

“Although in the Gulf, with the sun and desert, you would think that solar energy would be worth harnessing Islamically or otherwise,” Khaleq said.

Gulf states are in need of economic diversification as the oil bonanza is slowly drying out, and are urged to develop alternative energy sources.

An industry source said sovereign wealth funds from Bahrain or Malaysia, and family offices in Saudi Arabia or Kuwait, could nevertheless become potential investors.

“There might be venture capital type of funds that could look at these new technologies in the Gulf,” the source added.

Khaleq is optimistic an alternative energy sukuk could see daylight soon: “I’m hoping in 2010, but Islamic investor, and generally regional investors, are being more conservative and so are the scholars,” he said.

“However, the ingredients are there: structures, acceptability of asset class, interest and technology. But it is a question of who will be the pioneer in making it all happen.”

Writing by Martina Fuchs

– Richard Heinberg is the author of eight books, including “Peak Everything”, “Blackout: Coal, Climate and the Last Energy Crisis” and “The Party’s Over”. He is also a senior fellow with the Post Carbon Institute. The views expressed are his own. –

Recent shale gas projects, including those involving the massive Marcellus Shale in several northeastern states, have been yielding significant quantities of fuel. Reserves of the stuff are enormous. But drilling costs and per-well decline rates are high, so producers can make a profit only if gas prices are near historic highs.

Where are oil prices headed in 2010? Forecasts for the year are all over the map, from more than $100 a barrel to under $50.

The difference hinges mostly on assumptions about whether the economy will recover or relapse. Yet it may be that price volatility has become an inherent feature of the oil market—and fossil fuel markets in general—for reasons that can perhaps best be explained with the help of a little history and an old children’s story.

Once upon a time (about a dozen years past), oil sold for $12 a barrel and a lot of people thought it would get even cheaper because the market was glutted.

But instead the price rose: many big oilfields were aging and yielding less, and it was getting harder to find new ones—especially in places easy and cheap to drill.

So the glut eroded and petroleum prices rose. Seeing a perfect opportunity (a necessary commodity with stagnating supply and growing demand), speculators drove the price up even further.

As prices lofted, oil companies and private investors also saw opportunity and started funding expensive projects to explore for oil in remote and inconvenient places, or to make synthetic liquid fuels out of lower-grade carbon materials like bitumen, coal, or kerogen.

But then in 2008, as the price of a barrel of oil reached its all-time high of $147, the economy crashed. Airlines and trucking companies downsized, motorists stayed home, and demand for oil plummeted. So did the price, bottoming out at $32 at the end of 2008.

But with prices so low, investments in hard-to-find oil and hard-to-make substitutes began to look tenuous, so tens of billions of dollars’ worth of projects got canceled. Yet the industry had been counting on those projects to maintain a steady stream of liquid fuels a few years out, so worries about a future supply crunch began to make headlines.

By mid-2009 the oil price had settled within a Goldilocks range—not too high (so as to kill the economy and, with it, fuel demand), and not too low (so as to scare away investment in future energy projects and thus reduce supply). That just-right price band appeared to be between $60 and $80 a barrel.

How long prices can stay in the Goldilocks range is anybody’s guess, but production declines in the world’s old super-giant oilfields continue to accelerate and exploration costs continue to mount, which means that the lower boundary of that just-right range will inevitably continue to migrate upward.

Meanwhile the world economy remains frail, so that even $80 oil could strain the recovery.

When discussing the increasing perils of the current oil supply-demand-price balancing act, some commentators opine that the world supply of oil has peaked; others say it is demand that has peaked. It is a distinction without a difference.

There are similarities with U.S. natural gas. Current shale gas projects are tapping into an abundant supply of fuel, and there is plenty more where that came from. But the costs of getting it out combined with the per-well decline rates are high, so gas prices need to be very high to turn a profit.

Nearly everyone believes that U.S. coal supplies are virtually endless, but the Goldilocks syndrome is coming into play there, too. Coal prices just about doubled in the two years leading up to the economic crash of 2008, and high-quality coals from the eastern region of the country are depleting fast.

We will never run out of coal, oil, or natural gas—in the absolute sense. The Industrial Revolution started in British coalfields, and there is still an enormous amount of coal in Britain; but the coal that’s left there is prohibitively expensive to mine, so that nation’s coal industry is virtually gone.

Goldilocks grew dissatisfied with her options, got up, and left. The same has been gradually transpiring in the U.S. oil patch over the past four decades, and the same will happen wherever useful non-renewable resources are found.

Economic theory says the market will always find a substitute for whatever resource is depleting to the point of scarcity. When it comes to fuels, the substitutes are alternatives to coal, oil, and gas—primarily, renewables like wind and solar. Investing in them should be a no-brainer.

But, during the Goldilocks interval, increasing price volatility for oil, gas, and coal can make all energy investments dicey. That means that, as a society, our main strategy for navigating the energy transition will almost certainly have to be conservation.

The lesson of the parable: If you’re an investor, beware—oil prices are going to be increasingly hard to predict over the longer term.

And if you make energy policy, don’t get any more hooked on non-renewable resources than you already are. If you do, you’ll eventually be spending much of your time chasing fickle Goldilocks—and in the end, she’s a bear.

Image shows a gas drilling site on the Marcellus Shale is seen in Hickory, Pennsylvania February 24, 2009.  REUTERS/ Jason Cohn

Following is the Thomson Reuters North America Shale Gas Valuation Index, based on closing share prices from Feb. 17.

The data comes from StarMine, a Thomson Reuters company, using the 12-month forward SmartEstimate, a measure that selects estimates from only the most accurate analysts.

StarMine Intrinsic Value is a variation on the dividend-discount model methodology that adjusts for biases uncovered in analyst forecasts.

– John Kemp is a Reuters columnist. The views expressed are his own —

California is set to auction all or almost all allowances under its emissions trading programme, and rebate up to 75 percent of the proceeds to households through a lump sum payment or reductions in income and sales taxes.
The proposals, contained in a draft recommendation from the Economic and Allocation Advisory Committee (EAAC) to the California Air Resources Board (CARB), are in sharp contrast to the proposed federal programme, stalled in Congress, which would give away most permits to utilities and other energy intensive industries.
Since California’s proposed programme is one of the most advanced, and would be the largest and most comprehensive in the country, with links to other states through the Western Climate Initiative (WCI), the decision gives significant impetus to proponents of the cap and refund approach, now emerging as a credible alternative in Congress.
ADVISORY COMMITTEE MANDATE

California’s Global Warming Solutions Act 2006 (AB 32) requires the state to reduce its greenhouse gas emissions back to 1990 levels by 2020. CARB has developed a “Scoping Plan” detailing how the state will achieve this using a mix of direct regulations and an over-arching cap and trade programme.
In May 2009, CARB established an Advisory Committee, consisting of technical experts, to make recommendations on two key elements: (a) how to put allowances into circulation (via auctions, free distributions, or some combination of the two); and (b) how to allocate free allowances or the revenues from permit auctions.

In making recommendations, the Advisory Committee must take account of various statutory objectives, among them to “ensure no disproportionate impact on low-income communities” and design the regulations “in a manner that is equitable, seeks to minimise costs and maximise the total benefits to California”. The draft recommendations therefore carry weight as an expert opinion of which system best meets both equity and efficiency criteria.

ALLOCATING PERMITS BY AUCTION

The Committee reviewed a range of auction designs (single or multiple rounds, uniform or discriminating price) as well as mechanisms for free distributions (fixed allocations based on historical emissions, or allocations updated in line with changes in relative output).

In the end it recommended all or almost all permits be sold through uniform price, single round (sealed bid) auctions. Permits would be given free only to energy-intensive and trade-exposed industries at risk of a real competitive disadvantage, and only where the problem of “emissions leakage” cannot be addressed by other means such as a border adjustment.
The Committee admitted free allocations have some advantages. They compensate emitters for compliance costs in the most direct and expedient manner.

Free allocation returns allowance values directly to emitters and links them to the cost of making reductions. If the cost of compliance rises, so does the value of the allowances.

An auction system can also provide compensation by distributing revenues. But it involves two steps (auctioning and revenue distribution) rather than one (simple allocation of free allowances). “Because the auction process involves two steps, [emitters] might feel that obtaining allowance value through the recycling of auction revenue carries greater risk than obtaining value in one step through the receipt of free allowances.”

In the end, the Committee decided auctions were superior because they bring “price discovery in the market and transparency in the assignment of allowance value”. They would also make it easier to deal with sources entering and exiting the market, creating a level playing field, and avoiding giving incumbents monopoly power. The Committee noted nearly every objective of free allocation can be achieved through an appropriate distribution of auction proceeds.

Its recommendations would establish the boldest environmental market yet. The Environmental Protection Agency’s (EPA) pioneering Acid Rain Program, which is often cited as a model for carbon markets, auctioned only a small number of allowances at first, distributing most to emitters on a historic basis.

The European Union’s Emissions Trading Scheme (ETS) has so far allocated more than 95 percent of allowances free, giving recipients massive windfall profits, though the share auctioned will rise sharply from 2013.

DISTRIBUTING THE POT OF GOLD

No one knows for certain how much revenue auctions would raise. Based on a literature review, the Committee indicates allowance prices “are most often estimated to be in the range of $20 to $60 per metric ton of emissions in 2020″ (in 2007 dollars). But it admits the full range is from $8 to $214 (depending on assumptions about the availability of offsets and other design features).

Under most scenarios, however, the programme will produce a substantial pool of revenues. Assuming real prices of $35 in 2020 (about the middle of the range) auction revenues would rise from $4.4 billion (2012) to $11 billion (2016) and $12.8 billion (2020).

The Committee examined three main options for using these revenues: (a) financing investments especially in clean technologies and to create jobs for disadvantaged communities; (b) returning the proceeds to the public through a rebate programme; (c) or cutting other state taxes.

MOST REVENUES TO BE REBATED

There are complex legal issues surrounding how revenues from the programme may be used; the State Legislature may need to approve further changes to the law, possibly by a difficult-to-achieve two-thirds supermajority, to comply with the State Supreme Court’s ruling in “Sinclair Paint Co v State Board of Equalization”.

But abstracting from the legal problems, the Committee recommends foregoing a small share to give free allowances to firms at risk from leakage; placing another small share in a contingency fund for environmental remediation and clean up; and reserving another one to finance transfers to low income households most affected by rising energy prices.

The Committee cites estimates showing emissions pricing will be regressive, raising costs for households in the lowest income decile by 2.09 percent of their income, sliding to 0.66 percent of income for households in the highest category. Direct transfers to low income households would meet the statutory objective of avoiding a “disproportionate impact” on these communities.

But the lion’s share of auction revenues would be devoted to financing investments related to emissions reduction, or returned to households through lump-sum payments or cuts in individual income or states sales taxes. The proportions would vary over time; the Committee shows a strong preference for investments in the early years. Ultimately the Committee recommends distributing 75 percent of the revenues as rebates/tax cuts and 25 percent for investment projects.

The Committee specifically recommends against using proceeds to prop up profits in industries hit hardest by rising energy costs, or to subsidise rising electricity bills for businesses and households, to avoid blunting the incentive for curbing energy use and reducing emissions.

The Committee’s recommendations remain provisional and subject to change. There is no guarantee they will be adopted by CARB, and there are doubts about whether a trading programme will be introduced at all.
But this is a detailed report prepared under the direction of 16 influential experts and consultants from economics, finance and environmental policy; consummate insiders in the debate. The proposals therefore carry a lot of weight, adding intellectual respectability and political momentum to the cap and refund proposal at national level.

(1) EAAC Allocation Report
(2) EAAC Presentation

How much of the Netherlands is below sea level?

a) 60 percent

b) 55 percent

c) about half

d) 26 percent

It sounds like a trivia quiz but it’s part of a scientific controversy about the environment. The worrying thing is that a lot of people who should know don’t.

If you reckon it’s 60 percent, you can point to a report by the Dutch Ministry of Transport, Public Works and Water Management, or an article in the journal Nature discussing the Netherlands’ vulnerability to flooding after Hurricane Katrina.

If you think it’s 55 percent, then you can back up your argument with page 547 of an influential 2007 report by the U.N.’s Intergovernmental Panel on Climate Change (IPCC).

And if you reckon that it’s about half, try showing off the European Commission’s report listing “facts and figures” about the Netherlands and its maritime policies.

But the Netherlands Environmental Assessment Agency , the source of the IPCC’s number, says all the above are in fact wrong — it’s 26 percent, and another 29 percent of the country is vulnerable to flooding from rivers such as the Meuse and the Waal in regions above sea level.

In this Dutch version of Chinese whispers, the problem seems to be that 26 plus 29 equals 55 which might also be ‘about half’ or ‘60 percent’.

The IPCC, under fire for exaggerating the melt of Himalayan glaciers in its 2007 report that wrongly said that they might all be gone by 2035, said that it probably made a mistake by saying 55 percent. It said that its report should probably have read that 55 percent of the Netherlands is “at risk of flooding”.

But just as worrying is that the Dutch government, the EU Commission and scientists writing in a top journal apparently get it wrong too.

Somewhere along the line this sort of number is used to decide how much money to spend on coastal or flood defences. If you reckon that 60 percent of your country is below sea level, building coastal levees probably gets a bigger share of the cash than defences against river flooding than if the right number is 26 percent.

(Picture: An excavator moves sand at the new beaches in front of the Dutch coastal village of Monster August 31, 2009. REUTERS/Jerry Lampen)