The Great Debate UK

The safest form of power: Everything in moderation

By Morven McCulloch

The ongoing crisis at the Fukushima Daiichi nuclear plant in north-eastern Japan, seriously damaged by a March 11 earthquake and tsunami, has led to anti-nuclear protests in several countries and forced governments to rethink their energy policies.

The UK currently has 10 nuclear power stations, representing 18 percent of the country’s energy supply according to Energy UK. Should British Prime Minister David Cameron, like German Chancellor Angela Merkel, reverse his position on the safety of nuclear power?

Environment and climate scientist Lord Julian Hunt told Reuters in a video interview that although the situation at the Fukushima plant is an “extremely serious event,” there are risks to consider with every type of power.

Hunt says: “I think the difficulty about a public debate is to weigh up very short-term risks with longer-term risks that happen all the time.

“Take for example coal, which is still used very widely in India, China and Denmark (80 percent of Danish power comes from coal). The coal is mined… which leads to massive air, water and ground pollution. A million people die a year from air pollution, according to the World Health Organisation figures, and that’s a global figure. So there are risks associated with fossil fuels, let alone the question of climate change.

“Part of the strategy has got to be to consider how climate change itself is affecting conditions for different sorts of energy supply. Because we really can’t predict everything, and all possible interactions, it seems to me to be a strong argument for continuing to have an energy mix and to invest in new kinds of technology.”

from Global News Journal:

What’s really behind Merkel’s nuclear U-turn?

(German Chancellor Angela Merkel promises a more rapid shift to renewable energy sources during a speech in the Bundestag lower house of parliament on March 17)

The consensus view in Germany is that Angela Merkel's abrupt reversal on nuclear energy after Fukushima was a transparent ploy to shore up support in an important state election in Baden-Wuerttemberg. If indeed that was her intention (she denies any political motive) then she miscalculated horribly. Her party was ousted from government in B-W on Sunday after running the prosperous southern region for 58 straight years. But what if Merkel was really thinking longer-term -- ie beyond the state vote to the next federal election in 2013? After the Japan catastrophe she may well have realised that her chances of getting elected to a third term were next-to-nil if she didn't pivot quickly on nuclear. There are two good reasons why that is probably a safe assumption. First is the extent of anti-nuclear sentiment in Germany. A recent poll for Stern magazine showed nearly two in three Germans would like to see the country's 17 nuclear power plants shut down within 5 years.  The nuclear issue was the decisive factor in the B-W election. And you can bet it will play an important role in the next national vote -- even if it is 2-1/2 years away. The second reason why the reversal looks like a good strategic decision from a political point of view is the dire state of Merkel's junior partner in government -- the Free Democrats. It was the strength of the FDP which vaulted her to a second term in September 2009. But now it looks like their weakness could be her undoing in 2013.  Merkel probably needs the FDP to score at least 10 percent in the next vote to give her a chance of renewing her "black-yellow" coalition. Right now the FDP is hovering at a meagre 5 percent and it is difficult to see how they double that anytime soon. The nuclear shift widens Merkel's options in one fell swoop. Suddenly the issue that made a coalition between Merkel's Christian Democrats and the Greens unthinkable at the federal level has vanished. Her party set a precedent by hooking up with the Greens in the city-state of Hamburg in 2008. Now she has more than two years to lay the foundations for a similar partnership in Berlin. By then voters may see Merkel's nuclear U-turn in a different light. And only then will it be truly clear if it was a huge political mistake, as the Baden-Wuerttemberg vote suggests, or a prescient strategic coup.

Tide turns against nuclear energy

By Kathleen Brooks. The opinions expressed are her own.

As the nuclear threat in Japan steps up a gear, global politicians have pre-empted a wave of anti-atomic feeling from their public and spoken out against nuclear reactors, which threatens its future as a viable alternative to oil.

As Japan has found out with devastating consequences when things go wrong with atomic energy the effect is both devastating and immediate. Unlike carbon fuels, which have a lagged detrimental effect on the atmosphere, a nuclear accident doesn’t get worse in increments – once radioactive material is released into the atmosphere the damage to the surrounding areas is done.

In contrast carbon-based fuels are more of an incipient threat. Increased rates of asthma, holes in the ozone layer and deterioration in air quality take many years take of oil-burning to come about, which makes it hard to pinpoint who the real culprit actually is. But if a radioactive cloud suddenly appears you know exactly where it has come from.

The outlook for nuclear energy is not good at this juncture. The relative infrequency with which nuclear disasters happen (there have only been three notable accidents in the past decade including the events in Northern Japan) seems to only increase their negative impact on public opinion. In contrast, individual oil companies can have multiple spillages over the same time frame and demand for crude will continue to rise.

For a world addicted to electricity, finding clean energy sources is vital. Nuclear is extremely clean and when it functions without a problem it causes very little damage to the environment. While oil usage may be tapering off in the developed world, it’s the emerging market powerhouses that are gulping down ever increasing amounts of “black gold”.

Big business still not tackling carbon emissions

– Sam Gill is Operational Director  at the Environmental Investment Organisation. The opinions expressed are his own. —

Today’s launch of the Environmental Tracking (ET) UK 100 Carbon Rankings show just how far we have to go in tackling corporate emissions. If the first step is getting trusted, accurate data into the public domain, then 65 percent of the UK’s biggest companies are keeping us in the dark.

Only 35 percent of companies within the ET UK 100 independently verify their Scope 1 and 2 emissions (direct emissions and those from electricity use), but the rest expect us, the public, to accept their data (if even provided) at face value. In light of the financial crisis, independent verification should be the bare minimum, with those verifiers also coming under scrutiny. Recent history should ring alarm bells: it was far too easy for credit rating agencies to hand out Triple A ratings to securities they knew nothing about. In the fight against climate change – where false accounting could lead to irreversible damage to our environment – we need to be equally vigilant. It takes a brave auditor to qualify the report of large company offering lucrative contracts.

The ET UK 100 – ranking the UK’s 100 biggest companies by emissions and levels of transparency – has shown the varying attitudes among British companies in their approach towards climate change. Thirteen percent of companies failed to provide any data, including household names like the City of London Bank, Standard Chartered, and the parent company of P&O ferries, Carnival. This lack of transparency is not limited to one sector or industry but spans all of them.

Those at the bottom represent a whole range of sectors: mining, retail, finance, telecommunications. Far from it being just the worst emitters shirking their responsibility, many of the big emitters have their data independently verified, in part due to the EU emissions trading scheme (EU ETS), which demands it. But it is the difference within rather than between sectors that is most striking: mining company Randgold find themselves bottom of the Rankings having failed to disclose any data, yet their competitors BHP Billiton and Xstrata have both had their emissions independently verified. The same can be said of Shell, who disclosed and independently verified, and BP, who has produced incomplete and general figures.

Transparency is the first step, and the minimum that needs to be demanded. The Rankings show that if 35 percent of companies can fully disclose and verify their emissions, then so can all of the UK’s top 100. There is no longer an excuse when those around you are doing it, especially among the bigger corporate beasts: of all UK companies with a market value over $100BIL, only two (BP and GlaxoSmithKline) report incomplete data for Scope 1 & 2 emissions.

However, if we are going to have a serious impact on corporate emissions, we also need to include Scope 3 – emissions from all other indirect sources, such as company business travel or in the case of the financial sector and emissions linked to their investments. That will mean that Royal Bank of Scotland and HSBC will have to include emissions from investments made in the Alberta Tar Sands. At present, the definitions of Scope 3 are being redefined by the Greenhouse Gas Protocol (who set the internationally accepted and recognised standards), and once introduced into company reporting, they will give the public the a far truer picture of how a company is affecting climate change.

from Summit Notebook:

Is emerging Europe out of the woods yet?

A surge in portfolio inflows is flooding into emerging central Europe, although yield-hungry investors are picking solid policy and higher growth over countries still struggling to put the crisis behind them.

After deep contractions across the region, a two-speed recovery is underway, with countries boasting better debt fundamentals like Poland and the Czech Republic for the moment ahead of those who depend on foreign lending.

Investors are also dipping into countries like Hungary, but struggles by the new centre-right Fidesz government to get its budget deficit under control mean it is lagging for now, along with fellow International Monetary Fund benefactor Romania.

"There has... been clear differentiation between the more robust and the weaker economies of the region," Goldman Sachs wrote in a research note on the region.

"We believe that the region's stronger economies -- namely, Poland, Turkey, Israel and the Czech Republic -- will be the first to see an acceleration in financial inflows both in debt and, increasingly, equity." Turkey and Israel are often grouped with emerging European markets.

Extremely easy monetary policy in the world's developing economies, including expectations the Fed will push ahead with more asset-buying, plus continued worries over debt in troubled euro zone countries like Greece and Ireland have helped push investors into these higher-yielding countries.

But these new, more volatile, portfolio flows carry risks.

from Breakingviews:

Vedanta’s Indian oil interest is hard to fathom

Vedanta Resources' Indian oil interest is hard to fathom. No doubt Cairn Energy will have plenty of ideas for any cash it may raise by selling a stake in the UK oil explorer's Indian subsidiary. But it's harder to see what Anil Agarwal's mining group has to gain from dipping its toe into the oil business.

Vedanta's interest is in Cairn India, which pumps oil in the Rajasthan desert and has had a separate listing since January 2007. A full takeover would be a stretch. Cairn Energy's 62 percent stake is worth $8.5 billion at current market prices. Add in a control premium, and a possible offer to minority shareholders, and a deal could easily cost twice that amount.

True, Vedanta's net debt at the end of March was just $900 million. But it would struggle to finance a purchase while maintaining its coveted investment-grade credit rating. Issuing equity is complicated by Agarwal's determination to keep control of the business. A share sale that diluted his 61 percent stake to just over 50 percent would not raise much more than 1 billion pounds.

One option is for Cairn to sell a 12 percent stake in its Indian business. This would allow it to retain control, while freeing up cash for its Capricorn exploration arm to go in search of new projects in other parts of the world. At Cairn India's current share price of 340 rupees per share, the stake would cost Vedanta around $1.7 billion. It would also keep Vedanta below the 15 percent level at which Indian takeover rules would require it to make a public offer to buy a further 20 percent.

That would be a more palatable option for Vedanta's creditors. But it wouldn't answer the question of what Agarwal hopes to gain from getting into the oil game. He may be looking to create an Indian version of BHP Billiton, combining mining assets with oil fields. But it's hard to see any real synergies between oil production and refining and Vedanta's aluminium, copper, zinc and coal businesses. A minority shareholding would make even less sense.

Agarwal's controlling stake puts him in a strong position to pursue his ambition. But judging by the 7 percent drop in the company's share price following confirmation of the talks, Vedanta's other shareholders will take some convincing.

Facebook group defends “harassed” BP

BP’s chief executive Tony Hayward branded “the most hated man in America” may be surprised to find himself cast in the role of victim by a growing clan of web-based supporters on Facebook.

One such group ‘Support BP’ calls itself the defender of an “undeservedly harassed institution” and seeks to show that the public opprobrium BP faces over its now 60-day-old Gulf of Mexico oil spill is not universal.

Members have been increasingly vocal since a succession of strong rebukes of BP by U.S. President Obama and lawmakers at Thursday’s congressional hearing, which they are calling a “lynch mob”.

The outburst of sympathy follows an apology to Hayward from Texas Republican Representative Joe Barton on Thursday, later withdrawn, for having to agree to a deal with President Obama to set up a $20 billion fund for Gulf claim damages.

Some of the Facebook posts echoed this same spirit of regret: “My apologies as an American to Tony Hayward for the rude and insulting conduct as well as the rush to judgement by U.S. politicians on 16/7,” wrote George Gray, 50, from Pennsylvania, referring to Thursday’s hearing.

The bulk of the group’s posts are written by Americans.

What next for the environment under the new government?

- Juliet Davenport is founder and CEO of Good Energy, a renewable electricity supplier. The opinions expressed are her own. -

When parliament resumes, roughly a third of all MPs will be taking their seats in Westminster for the first time.

The key question now is, what are their views on the issues that matter? What do they believe needs to be done to tackle climate change?

How do they think the government should encourage people to move towards a low-carbon lifestyle?

What do they believe should be for the government to decide and what should be left to the market to deliver?

Of course, all of these questions will be framed by the backdrop of the largest budget deficit since the Second World War; this is something that will obviously restrict ministers’ ability to use public funding to implement policy.

That means there will be more competition between Whitehall departments for what money is available, so the twin issues of energy and climate change will need more allies and champions in parliament than ever.

from Environment Forum:

Can the U.S. compete with China in the green economy?

Fred Krupp is president of the Environmental Defense Fund. The views expressed are his own.

It’s as though three mammoth challenges facing America are intertwined like the strands of a rope: reducing our dependence on Mideast oil; creating new American jobs from clean energy; and reducing pollution responsible for climate change.

Together, those strands are a lifeline to the future.

While the House of Representatives passed comprehensive energy and climate legislation last summer, polarization has created gridlock in Washington, paralyzing most major legislative initiatives, including clean energy.

But a new, “tripartisan” partnership has emerged in the Senate that offers a hopeful way forward.

The legislation being crafted now by Sens. John Kerry, Lindsey Graham and Joe Lieberman is garnering interest on both sides of the aisle.

from The Great Debate:

Peak demand leaves refineries idle

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

U.S. refiners have emerged as the biggest losers from the previous surge in oil and push for cleaner energy. The industry's brief golden age has swiftly given way to a prolonged dark period of adjustment and decline.

What went wrong? Like other sectors, refiners have been hit by the cyclical downturn, which has cut trade volumes and the related demand for transport fuels such as aviation fuel and marine diesel especially hard.

But cyclical factors are compounding a structural decline in consumption that began around 2007 and has continued through the recession, as high prices and legislative responses force greater conservation and a shift towards biofuels.

Even as the economy recovers, U.S. consumption of petroleum-derived gasoline and distillate fuels is unlikely to exceed the record set in 2007. The resulting "demand peak" has left up to 10 percent of total U.S. refining capacity (around 1.8 million barrels per day) surplus to requirements.

FALLING UTILISATION RATES

No new refineries have been built on greenfield sites since the 1970s because permitting regulations are so strict. But there has been substantial brownfield growth at existing sites as well as increases in potential throughput as a result of debottlenecking and improvements in operations and maintenance.