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Friday, March 26, 2010

U.S. Senators Putting Final Preparations On Cap And Trade Climate Change Law

Many people both inside and outside America have long wondered when the United States will finally pass a comprehensive federal climate change law, one that includes cap and trade.  As one of the world's largest carbon emitting economies, the ultimate direction that America takes will have a significant impact on the carbon markets, green business and the environment as a whole.

Until recently, the climate subject has been relegated to secondary importance compared to the health care subject that has ensnared Congress and monopolized public thoughts and opinions.  Now that the Obama Administration has made progress in that area with the support of Congressional Democrats, climate change has an opportunity to regain traction in American politcs.

The road is not an easy one.  Major energy utilities and fossil fuel companies can be expected to lobby very hard to avoid any future climate change penalities and costs until the final possible moment.  Also, while climate change is not nearly half as polarizing as the recent health care debate in Congress, the Democrats have spent a lot of their political bullets to get the health care legislation passed and there are many fences that will need to be mended -- both inside the party and with Republicans also -- in order to pass another major piece of legislation anytime soon.

It is encouraging that climate change has always had bi-partisan support from Congressional thought leaders such as John McCain, Joe Lieberman and John Kerry (among others).  The climate change problem affects everyone equally, regardless of your politics -- nobody wants their grandkids to face severe global problems as a result of their inaction and squabbling.  Certainly the European Union and Japanese economies are helping matters by being examples of environmental consciousness and stewardship through the Kyoto Protocol.

Here is a recent update from Bloomberg and BusinessWeek on the American effort to pass some form of climate change and cap and trade legislation this year.  It seems from the article that there are some controversial offshore drilling elements to the draft bill must be resolved in the near term. Hopefully the Kerry-Lieberman efforts will equate into some tangible results in the not too distant future... in the meantime, I will continue to monitor this subject and provide updates as they occur.  One can find the original article at http://www.businessweek.com/news/2010-03-26/senators-outline-u-s-utility-carbon-market-for-climate-bill.html


Senators Outline U.S. Utility Carbon Market for Climate Bill

March 26, 2010, 12:02 AM EDT


By Simon Lomax and Kim Chipman


March 26 (Bloomberg) -- Senators Lindsey Graham and Joseph Lieberman outlined U.S. climate-change legislation that would have power companies buy and sell pollution rights in a carbon market and force oil companies to pay fixed fees for emissions.

While the bill is “a work in progress” and won’t be ready until next month, emissions from utilities will be regulated through a restricted trading system for pollution rights, Graham, a South Carolina Republican, told reporters after meeting with industry representatives in Washington yesterday.

“Nobody’s signed on, but I think we’ve got them engaged,” Lieberman, a Connecticut independent, said, referring to the meeting with industry groups that included the U.S. Chamber of Commerce and the Edison Electric Institute.

The outline marks the most Senators Graham, Lieberman and John Kerry, a Massachusetts Democrat, have said about their months-long attempt to revamp stalled legislation that would curb carbon dioxide and the other greenhouse-gas emissions linked to climate change. The next step is to convince other lawmakers, including Senator Ben Cardin of Maryland who yesterday questioned whether there is a “critical mass” of support.

While negotiations with other senators are getting better, the trio is “not there yet,” Graham said.

The senators yesterday only described their ideas for the legislation and have yet to submit a written proposal.

Coastal Senators

Ten Senate Democrats including Cardin, Bill Nelson of Florida and Ron Wyden of Oregon said yesterday they won’t back climate-change legislation if it includes provisions that open U.S. coasts and oceans to “unfettered” oil-and-gas drilling.

“The votes of these 10 coastal senators are essential,” said Dan Weiss, director of climate strategy at the Washington- based Center for American Progress, a public policy group that advises Democrats. Weiss said there is “potential” for a compromise on the issue.

The coastal senators sent a letter to Graham, Lieberman and Kerry on March 23 and warned them of the potential for oil spills that would put coastal state economies and ecosystems in jeopardy. Graham and Lieberman didn’t say yesterday if drilling provisions are included in their proposal.

Legislation to establish a cap-and-trade program, in which power plants, oil refineries and factories would buy and sell emission rights, narrowly passed the House of Representatives in June. A similar plan, which was approved by the Senate Environment and Public Works Committee in November over a Republican boycott, failed to advance any further in Congress.

Under the new legislation, oil companies would pay a fixed fee for their emissions that is linked to the price that power companies pay for carbon dioxide allowances, Graham said. Some of the trading restrictions would include a maximum and minimum price for carbon dioxide allowances, or a “hard price collar,” Graham said.

While it’s not certain how the fee will be calculated, “it’s all related to the carbon market,” Lieberman said.

--Editors: Romaine Bostick, Steve Geimann.

Monday, March 15, 2010

US EPA Announces New National Threshholds for CO2 Emissions

The United States Environmental Protection Agency has recently announced its future plans to require new carbon emissions permits for pollution point sources (such as electric utilities) emitting over 75,000 tons of carbon annually.  This is a major development that should impact many companies and businesses in America.  The EPA seems to be acting in a manner intended to push the Senate and House to pass a federal climate change control regime (such as cap-and-trade).  These EPA measures are intended to be a baseline or fall-back regulatory position in lieu of similar or stricter Congressional legislation.

I believe that if the EPA continues to advance the ball on carbon emissions regulation, it will only be a matter of 12 months or so before the Congress responds with a more robust and business friendly version.  It is expected that the Congressional version will include some version of carbon trading in order to mitigate the costs of regulation and pump new money into the economy. 

In the meantime, it is exciting that the EPA is taking the steps that it is currently taking -- please see the short newsflash below from Dow Jones.  I will stay on top of all related developments as they occur.  Cheers.


EPA: CO2 Threshold At Least 75,000 Tons/Year Until 2013

By Ian Talley, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The U.S. Environmental Protection Agency will set an emissions threshold of at least more than 75,000 tons a year--and possibly more than 100,000 tons a year--for power plants and other industrial projects for the initial stage of stationary-source greenhouse-gas regulations between 2011 to 2012, the head of the agency said Wednesday.

Importantly, EPA Administrator Lisa Jackson indicated the agency may still require projects such as power plants and refineries that applied in prior years--say in 2009 or 2010--to apply for new greenhouse-gas permits. Industry may view her comments as imposing de facto greenhouse-gas regulations on projects now under development, potentially stunting growth.

The new figure--multiples of what the agency proposed late last year-- gives the first indication of the new standards the EPA is planning to set under new regulations due out as soon as late this month.

The threshold level and time line is critical to thousands--if not tens of thousands--of businesses such as power plants, refineries, cement kilns, steel mills and chemical plants. The higher the level in the initial stages, the fewer facilities will be required to comply.

The EPA said it would raise the threshold after state regulators warned that the agency's proposed rules would cover substantially more facilities than it realized, potentially compromising not only businesses but also economic growth.

Asked by Senator Dianne Feinstein (D., Calif.) in an appropriations hearing if the first phase of the greenhouse-gas regulations would be more than 75,000 to 100,000 tons a year, EPA Administrator Lisa Jackson said, "That's absolutely true."

"It will probably be at least two years before we would look at something like, say, a 50,000 threshold," Jackson told a Senate appropriations subcommittee reviewing the agency's budget.

Later asked by reporters to clarify, Jackson said, "If you're smaller than 75, 000 tons for the next two years, you would not need a permit," and said her comments applied to the years 2011-2012.

Fully two thirds of the stationary-source emissions are from sources emitting more than 100,000 tons per year, she said.

But some industry experts warn the new thresholds and delayed start date may prove futile if the EPA requires facilities already in the permit process now to apply for new greenhouse-gas permits later.

Asked if the EPA would pursue such requirements, Jackson said "the permit requirements apply at the time that the permit is issued."

While Jackson said the EPA wouldn't intentionally hold up permits, she said, " the permitting process for major stationary sources ... can take years, so it isn't fair to say that at some point in there, there may not be changes in the regulatory environment."

Bill Wehrum, a former head of the EPA's air programs and now a partner at Hunton & Williams, said that EPA was urged in public comments against requiring companies already in the permit process to reapply. He said industry may view Jackson's comments as imposing de facto greenhouse-gas regulations on projects now under development and that if the EPA pursues that policy, it could stunt business growth.

"It doesn't make any sense," he said. "If EPA requires anybody who's applied for a permit but not obtained final approval to go back and get new greenhouse- gas permits, it will significantly delay any number of important projects already in the pipeline."

For example, a senior BP Plc (BP) official said last week that refinery modifications required to meet new fuel specifications could be put on hold or delayed in such a situation.

After a wave of state regulators warned the EPA that its initial threshold of 25,000 tons a year was too low and would cover far more facilities than the agency realized or regulators are able to process, the EPA said last week it would raise the threshold "substantially."

Jackson said she was making the decision to avoid absurd results and to aid the administrative process. State regulators say they lack the resources-- both money and staff--to handle the expected influx of new permit applications.

Industry groups, such as the U.S. Chamber of Commerce and the National Association of Manufacturers, warn that the regulations will lead to a cascade of lawsuits and damage the economy. The EPA said it will regulate with a sensitivity to the economy.

The EPA said it intends to pursue regulation of smaller sources after 2016. Some state regulators say that would cover up to six million facilities, including large bakeries, churches, hospitals and small mom-and-pop businesses.

Some legislators say that even with the higher thresholds and expected delay of implementation EPA announced, they're worried the agency's actions won't prevent damage to industry.

"I am quite concerned that EPA's action in this area will harm our economy at a time that we can least afford it," said Sen. Lisa Murkowski (D., Alaska). The Senator is leading a bipartisan effort to stop the EPA from regulating greenhouse gases.

-By Ian Talley, Dow Jones Newswires

Thursday, March 11, 2010

New Ukrainian Cabinet of Ministers Appointed -- New Coalition Government Underway

Ukraine's Verkhovna Rada (Parliament) appointed the new Prime Minister of Ukraine, Mykola Azarov, and announced the complete new Cabinet of Ministers as listed below.

240 People's Deputies voted in favor of the new Cabinet, of the 353 registered in the hall.

The full list of Ministers is as follows:

Andrei Klyuyev - First Vice Prime Minister

Boris Kolesnikov - Vice Prime Minister

Vladimir Seminozhenko - Vice Prime Minister

Volodymyr Sivkovych - Vice Prime Minister

Victor Slauta - Vice Prime Minister

Sergei Tigipko - Vice Prime Minister

Viktor Tikhonov - Vice Prime Minister

Victor Boyko - Minister of Environmental Protection

Yuri Boyko - Minister of Fuel and Energy

Constantine Efimenko - Minister of Transport and Communications

Dmitry Kolesnikov - Minister of Industrial Policy

Michael Kulinyak - Minister of Culture and Tourism

Alexander Lavrinovych - Minister of Justice

Zinovy Mitnick - Minister of Health

Anatoly Mogilev - Minister of Interior

Basil Nadraga - Minister of Labor and Social Policy

Alexander Popov - Minister of Housing

Michael Prisazhnyuk - Minister of Agrarian Policy

Ravvil Safiullin - Minister of Family, Youth and Sports

Dmitry Tabachnik - Minister of Education

Anatoliy Tolstoukhov - Minister of the Cabinet of Ministers

Vasyl Tsushko - Economy Minister

Fedor Yaroshenko - Minister of Finance

Vladimir Yatsuba - Minister of Regional Development and Construction

Yuri Yaschenko - Minister of Coal Industry

Nestor Shufrich - Minister of Emergency Situations

Konstantin Gryshchenko - Minister of Foreign Affairs

Michael Yezhel - Minister of Defense

Best Regards
Jon

Tuesday, March 9, 2010

French President Calls For Nuclear Energy Carbon Credits

Generally speaking, nuclear energy has been the red headed stepchild of climate change cap-and-trade.  Ignored completely by the Kyoto Protocol and related schemes, the sector has never been eligible for creating valuable carbon credits and therefore misses the multi-billion dollar carbon finance boat.  French President Nicolas Sarkozy currently wants to change this and expand the carbon credit market to include nuclear energy also.

President Sarkozy would like to improve the financing options for nuclear energy and make it more widespread.  Climate change mitigation proponents and cap-and-trade advocates have traditionally been divided over the subject of nuclear energy, due to the long half-lives of radioactive fuel materials and the dilemma of how to dispose of them safely over time.

Nuclear power supporters, like President Sarkozy, argue that these are outdated arguments. There is little risk of a future Chernobyl or Three Mile Island recurrence, they say, using modern technology; it is time for a changed perception towards nuclear power.

I am not qualified to speak on the merits of either side, surely.  But I can say that if nuclear power is allowed to participate in the future carbon market, it will have a definite impact on prices and project market characteristics.  So with that in mind, here is a recent public article from the Wall Street Journal on President Sarkozy's recent statements and views on this important subject.  You can find the original at http://online.wsj.com.

Cheers -- Jon



Wall Street Journal Online

8 March 2010

Sarkozy Urges Easier Financing for Nuclear Energy

By Adam Mitchell & Geraldine Amiel

PARIS—French President Nicolas Sarkozy on Monday urged the World Bank and other international institutions to help ease financing for civil nuclear-power projects around the world.
In a speech at an international conference in Paris on the theme of access to nuclear power, Mr. Sarkozy said he proposes to "eliminate the ostracism of nuclear energy in international financing."

"I do not understand why international financial institutions and development banks do not finance civil nuclear energy projects," Mr. Sarkozy said. "The current situation means that countries are condemned to rely on more costly energy that causes greater pollution."

The French president said he would propose to change that situation. "The World Bank, the EBRD [European Bank for Reconstruction and Development] and the other development banks must make a wholehearted commitment to finance such projects," he said. Mr. Sarkozy also called for nuclear power to be included in carbon-credits systems.

"Outdated ideology means that a country developing civil nuclear energy cannot obtain carbon credits," he said. "And yet, these credits are used to finance all other forms of decarbonized energy."

Mr. Sarkozy said carbon dioxide credits should "be used to finance all forms of decarbonized energy under the new global architecture after 2013."

Nuclear power is the main source of electricity in France and the country has a fleet of 58 reactors, which it is in the process of expanding. Mr. Sarkozy wants France to export the country's nuclear technology as widely as possible and has long spoken in favor of boosting access to civil nuclear power around the world.

Separately, Mr. Sarkozy said he wants to boost nuclear expertise through expanding training opportunities. "I have decided to step up our efforts by creating an International Nuclear Energy Institute that will include an International Nuclear Energy School," Mr. Sarkozy said.

The institute will be an "integral part," Mr. Sarkozy said, of an international network of specialized centers of excellence that is now taking shape, that will see the first center being set up in Jordan.

Thursday, March 4, 2010

Ukraine Dismisses Tymoshenko Government, Sovereign Debt Risk Falls & Stock Markets Rise In Response

Yesterday was another roller coaster day in Ukrainian politics, and it was a difficult day for Ukraine's former Prime Minister Yulia Tymoshenko. Despite her best political maneuvering efforts, she lost a no confidence vote in Parliament.  As a result she has been dismissed from her post and is reported to be heading off on an indefinite vacation.

This is not the death knell for Ms. Tymoshenko's political future by any extent, she will remain a powerful figure in local politics... for one thing, national campaigning is a highly expensive competitive sport in Ukraine; there is only a small set of rich players who can afford the game. One only needs to look at the current President Victor Yanukovych's 5 year career arc to see how a resurrection theoretically could be possible.

A charismatic, photogenic and highly recognizable international personality, most of the former Prime Minister's popularity problems at home stem from serious perceived shortcomings in her economic policies and business sector leadership. Case in point: after the announcement of her dismissal, almost all Ukrainian stocks responded with positive gains on the day (http://ux.com.ua/en), while international economists and analysts widely predicted positive outlooks on her country's debt and default risk profiles.

If Ms. Tymoshenko plans to try for a Yanukovych-style comeback in future years, she could do well to listen to her economic and business critics, and learn from this experience to build a more functional business platform into her political agenda. Charismatic speeches and being a a popular personality are great assets for a politician, and they can make someone a media darling overseas, but among the home town voters the economy needs to work too. One cannot ignore this core fact and focus primarily on witty soundbites and biting criticisms of one's opponents, looking the part and talking rhetoric -- a country of Ukraine's size and importance requires effective top-down leadership and a working economy.

If President Yanukovych and the coalition in power achieve large economic improvements during her absence, Ms. Tymoshenko may face an uphill battle back into power. She will need to convince future voters and financial contributors that the next version of "Yulia" is a better business prospect... not a step backwards to her crisis enhancing populism of 2007-2009.

The Wall Street Journal had the following to say about Ms. Tymoshenko's dismissal, in an article entitled "Ukraine Debt Risk Falls As Tymoshenko Loses Vote" published shortly after the no confidence vote occured (below).  Best regards -- Jon


Ukraine Debt Risk Falls As Tymoshenko Loses Vote
MARCH 3, 2010, 11:41 A.M. ET
By William Mauldin 
   Of DOW JONES NEWSWIRES 

MOSCOW (Dow Jones)--Risks to Ukrainian bondholders fell Wednesday as Prime Minister Yulia Tymoshenko's government lost a vote of confidence in parliament, paving the way for President Viktor Yanukovych to assemble a coalition to repair the country's finances.

The cost of insuring Ukrainian sovereign debt against default for five years fell to the lowest level since October 2008. Credit-default swaps with five-year protection fell 55 basis points to 834 basis points, showing that "investors think Ukraine is much less risky now," said Tatyana Chub, a trader at BG Capital in Kiev.

The hryvnia strengthened 0.6% against the U.S. dollar, and the yield on Ukraine's bond maturing in 2016 fell to 8.95%, from 9.005% Tuesday, Chub said.

Following the no-confidence vote and the collapse of the ruling coalition Tuesday, Yanukovych's allies in parliament can now begin the process of creating a new government with the goal of renewing a $16.4 billion lending program from the International Monetary Fund, which would help repay $6 billion in debt due this year.

"The collapse of Ukraine's government earlier today may paradoxically be a positive development, but a lot of progress still needs to be made before access to IMF funding is unfrozen," Capital Economics said. "While it is possible that the government can scrape through this year without external financing, Ukraine will remain particularly vulnerable to swings in global investor risk appetite for some time to come," it added.

Ukraine needs political stability to help revive the economy after a 15% drop in gross domestic product last year.

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