Why European Union might have to Rescind the Green Tax on Airlines as India,China and USA gang up

11 Jan, 2012
Climate Change

Europe which has been one of the greenest regions on earth in terms of promoting green energy and reducing carbon emissions is set to face a severe test. Europe is going to impose a Carbon Tax on Airlines flying into the region from 2012 . This has got the other major countries seeing red, with most of them planning retaliation. This Green Tax will add around $3 billion per year in terms of extra fees from airlines or around $6 per extra passenger. While airlines from USA and Canada approached the court, airlines from India and China are refusing to pay the tax outright. Indian airlines won’t supply their carbon data while China won’t pay the taxes . Note European Union is isolated in this fight against climate change . Though Carbon Trading is not a perfect system and open to abuses, at least it makes a pretense to fight global warming. On the other hand,these other countries have no plan or intention to fight climate change.

With global public opinion focused on the economic crisis , governments don’t care a hoot for a problem that is a decade away . So instead of enacting some policies to reduce carbon emissions from airlines which is around 3% of the carbon emissions or around 300 million tons, they want to browbeat the European Union.

Why European Union might have to Rescind the Green Tax

1) Retaliation by other countries on European Airlines like putting up overflight fees

2) Action against the European Airline Industry (Airbus), if countries like India and China prefer Boeing for their aircraft orders

3) Flights will be diverted away from Europe to avoid the Green Tax. The main beneficiaries will be Emirates, Ethihad over Lufthanse and British Airways on transworld flights

4) Ruling against European Union in international courts against violation of international airline treaties

EU stops the Free Carbon Lunch – Airline Prices to Increase to factor in Carbon Emissions

Airline Ticket Prices are set to go up as European Union implements its ETS Scheme on the Airline Industry from 2012.Note EU as a region has been one of the most active players in the climate change arena  and has an active carbon emissions market.Though this market has encouraged fraud and profiteering by unscrupulous players making it a good target for the fossil fuel lobby,the principle to fight against global warming is a good one.Compare that to USA,Canada and Japan who have done nothing to fight climate change despite the wealth of these nations.Canada has been guilty of abandoning the Kyoto Plan after missing its previous target.It has faced no penalties as it is not legally enforceable.The country continues down the pollute as much as you can pushing oil extraction from tar sands which is much more dangerous to the environment than normal oil drilling.

Europe’s Doomed Flight of Decarbonizing Fancy

The decision to include the airlines – responsible for just 3 percent of global CO2 emissions – in the EU cap-and-trade scheme came in the wake of the failure to agree a global agreement. While airlines will only pay for 15 percent of their emission allowances in 2012, around €256 at current market prices, from 2013 they will have to pay 18 percent. The airline industry estimates the cost over the first 8 years will be in the region of €17 billion ($23.8 billion). Although the carbon pollution bill kicked-in on January 1, 2012, invoices will not be sent to airlines until 2013; which is why non-EU governments are considering their next moves carefully.

At the heart of the “legal options” for the airline lawyers is the international agreement regulating air commerce known as the Chicago Accords. More prosaically known as the Chicago Convention on International Civil Aviation, its opening section specifically states, “The contracting states recognize that every state has complete and exclusive sovereignty over the airspace above its territory.” The new EU carbon regulations clearly violate the terms of this agreement by seeking to regulate air flight above nations outside Europe.

EU stops the Free Carbon Lunch – Airline Prices to Increase to factor in Carbon Emissions

3 Jan, 2012
Climate Change,Europe

Airline Ticket Prices are set to go up as European Union implements its ETS Scheme on the Airline Industry from 2012.Note EU as a region has been one of the most active players in the climate change arena  and has an active carbon emissions market.Though this market has encouraged fraud and profiteering by unscrupulous players making it a good target for the fossil fuel lobby,the principle to fight against global warming is a good one.Compare that to USA,Canada and Japan who have done nothing to fight climate change despite the wealth of these nations.Canada has been guilty of abandoning the Kyoto Plan after missing its previous target.It has faced no penalties as it is not legally enforceable.The country continues down the pollute as much as you can pushing oil extraction from tar sands which is much more dangerous to the environment than normal oil drilling.

Not only have other countries not done anything to curb emissions they have protested against EU as well for imposing carbon emission taxes on airlines.Note airlines are a big carbon emitter and this part can be easily be avoided through use of biofuels and carbon mitigation efforts.However everyone wants a free carbon lunch.In my view it is a great move and other polluting industries everywhere should be made to pay for the global common goods.The voracious use and exploitation of world resources has to stop sometime .

Gulf carriers say EU scheme may inflate fares: Report

Fast-growing Gulf airlines Emirates andEtihad Airways warned of higher ticket prices on Tuesday as they look to pass on costs of a European Union carbon trading scheme to passengers. Tim Clark, the president of Emirates, Dubai’s flag carrier and the world’s largest long-haul airline, told the Gulf News newspaper that the company would spend over 40 million euros ($51.93 million) in 2012 to purchase additional emission allowances. The EU says the new scheme, which already applies to other industries, is the fairest way to cope with aviation’s contribution to global warming.

However, it has sparked a trade spat, with the United States, China, India and others accusing it of infringing their sovereignty.

Note USA has completely given up its carbon emission plan as well despite high hopes with the election of Obama.Most firms and exchanges that were set up have closed down.EU carbon credit prices are touching new lows as the apathy towards global warming keep growing.It will only take a massive crisis to wake everyone.Lets hope its not too late.

Curtains Fall on only US Carbon Trading Chicago Climate Exchange on Republican Ascendancy

Chicago Climate Exchange the only USA Exchange to allow trading of Carbon Emission Credits has been shut down by its owner ICE.While I am no fan of Carbon Emissions Cap and Trade Policy as it gives rise to Frauds and  Misplaced Incentives,the mechanism is one of the popular subsidy tools in combating Global Climate Change.Note Carbon Cap and Trading was on the Policy Agenda of the Obama Administration,however a deadlock in the Senate prevented any move in 2010.The US has been a huge laggard in the global warming fight and  with the Republican Ascendancy following the MidTerm Polls,things are  set to stay the same.Despite the BP Oil Spill and Record Global Temperatures,US remains blind to its climate obligations.With US reluctance,the Climate Change has been in Cold Storage with little progress  expected in Cancun Meet.

Leap Green Energy – Another Indian Green Utility gets funding from Foreign Bank / Private Equity

3 Jan, 2012
Energy,Green Investing

The Indian Energy Sector has seen massive investments by Private Equity and Investment Banking Groups in the West.Green focused utilities like Orient Green Power and Greenko are already listed in the public markets.Big PE firms like Blackstone,Appollo and KKR has put money into Indian electricity companies as well.Despite losses and adverse conditions being faced,this sector continues to attract money.Leap Green Energy which is backed by the family of India’s ace motor racer Narain Karthikeyan has got Rs 100 crore in funding from JP Morgan one of the biggest investment banks in the world.Green Companies in India continue to multiply as India’s renewable energy capacity grew by 20% in 2011 or around 3.5 GW mostly wind energy.However solar power is becoming an important chunk as well with solar prices falling hard.

Note I had earlier written that the best way to invest in the Indian green energy sector was through green utilities.

Is Blackstone Gambling $300 million on Moser Baer or India’s Growth Story

Moser Baer  started a new Electricity Power Development company with ambitious  plans.It is investing in setting up 4000 MW of coal plants and 1000 MW of assorted Hydro and Solar Plants.This company also does consultancy and coal mining according to its website.Now Blackstone has decided to gamble on India’s Power Deficit Story by investing $300 million for an undisclosed stake in the company.With investment plans of $6.5 billion and parent company sinking under loads of debt,Moser Baer Projects desperately needed equity which has been provided by Blackstone.Its previous track record in Solar and Optical Media does not inspire a lot of confidence.But India’s 8-9% Growth Rate is like a Rising Tide which will lift all sorts of Boats.Blackstone is perhaps gambling more on that rather than on Moser Baer

JP Morgan invests Rs 100-cr in Narain Karthikeyan’s green power company

JP Morgan Asset Management has recently invested Rs 100 crore in Leap Green Energy Pvt Ltd, a company promoted by India’s ace motor racer Narain Karthikeyan’s family.

Leap Green owns installed capacity of 100 MW of wind assets, which is to be doubled in the current year.

According to Venture Intelligence PE Deal database, JP Morgan first invested Rs 107 crore. The investment was made into both equity and convertible debt instruments, which, when converted would give JP Morgan a majority stake. Therefore, JP Morgan has invested over Rs 200 crore in Leap Green, which describes itself as a green Independent Power Producer.

Wind Farm Developers in India put aggressive capacity plans in place (Caparo, Greenko, Genting, Techno Electric)

Wind Power in India has shown sharp growth in 2010 and looks to have a bright future with a number of wind farm developers investing aggressively to expand capacity.Wind Turbine Companies have also been putting up factories in India to catch a slice of the world’s fifth largest wind energy market.Even Chinese companies like Dongfang and Shanghai Electric have managed to win contracts from power companies like KSK Energy.Greenko one of the first Green Utilities in India is raising funds to put even more wind turbines in India while Caparo has the biggest expansion plans in place.CLP which is the largest wind energy capacity owner in India too is plowing ahead with plans to add to the wind capacity.The most surprising entry is by Malaysian casino developer Genting which has raised debt from HSBC to put up a 92 MW Wind Farm in India.

How to make Green Investments in India – Renewable Energy Focused Power Utilities

23 Aug, 2010
Coal,Energy,Orient Green Power,Renewable Energy

Investing in Green is not easy as any investor in 2010 will tell  you.The Green Indices and ETFs have taken a pounding in 2010 after a horrible 2008 and not so great 2009.The Green Indices have sharply underperformed the broad market due to a combination of several factors.These are High Competition in Solar Energy,Declining Demand in Wind Energy,Lack of Global Agreement on Climate Change and Slow Growth of Smart Grid Technologies.With developed governments facing pressure to cut fiscal deficits,green investments are also expected to get hit from government stimulus plans.However India and China are the two bright spots in an otherwise bleak Green Investing Landscape.Both countries have a Prodigious Energy Demand which is still growing at a rapid clip.Despite their reliance on Coal and other Fossil Fuel forms,both countries realize the need to promote Renewable Energy.While Chinese Green Companies are relatively well known,Indian Green Companies are a very small and nascent set.Green Investing India – Is it worth your Money examined the initial prospects concluding there were not many good candidates.However newer government policies and private participation has thrown up some good investment opportunities.Power Utilities with a Clean Energy Focus are the best green investment choices in India.Here are the reasons for investing in these Green Utilities

1) Government Policy mandating Increasing Percentage of  Electricity to be generated from Renewable Energy

2) India’s Attractive Subsidy Scheme to Promote Solar Energy through the Jawaharlal Nehru National Solar Mission (JNNSM)

3) Large Power Demand from India’s fast Growing Economy.Most Parts of India are chronically Power Deficient with regular Blackouts of 8-10 Hours.

4) Growing Pollution and Global Warming Pressures to improve incentives for Green Energy

Prospective Companies to Invest In

India’s Green Utilities are still in the growing stage but hold good promise due to the above factors.While Big Power Utilities like Tata Power,Reliance Power,NTPC etc have plans of building Green Energy capacity as well,the interesting investment areas are pure play Green Utilities.The prospective Green Utilities are

1) Orient Green Power - This Chennai based company is expected to come out with an IPO in India soon.It already has around 200 MW of capacity which is supposed to multiply in the next few years

2) Moser Baer Projects Private Ltd - This subsidiary of Moser Baer in which the Blackstone Group made a $300 million bet might prove to be a probably buy as well.Though it has plans of a 20:80 mix of Green and Dirty Power,the Blackstone angel makes it an intriguing play

3) Greenko - This company is listed in London AIM and has been making profits already.Like Orient Green Power it is building capacity in Wind,Hydro and Biomass mainly.

Green Energy becomes Bigger than Fossil Fuel Energy in Europe and USA during 2009

16 Jul, 2010
Climate Change,Europe,Green Investing,Renewable Energy,USA

Green Energy has increasingly become mainstream rather than a niche category supported by some environmental activists and hippies.This is proved by the fact that almost half of the Energy Capacity installed in 2009 in the developed world came from Renewable Energy Sources.According to a REN21 report, Europe and US saw more Renewable Energy installations in 2009 than Fossil Fuel Energy Installations.China was not far behind installing a huge 14 GW of Wind Capacity accounting for almost 1/3rd of the total 38 GW of Wind Capacity installed in 2009.According to the REN report a total of 80 GW of Renewable Energy Capacity was installed in 2009 out of the 160 GW of total worldwide newly installed capacity.Solar saw the sharpest  growth at 53% while Wind was not far behind at 32% growth.The massive growth in Green Energy despite the Global Financial Crisis and the failure of the Copenhagen failure,shows the huge momentum behind Clean Energy

Reasons behind Clean Energy Growth

The main reasons behind this huge growth can be listed as follows

  1. The decreasing costs of Renewable Energy and increasing costs of Fossil Fuels.While Hydro power and Wind power are near to the grid costs of electricity,other forms like Solar Energy are also fast reaching Grid Parity
  2. The opposition towards Dirty Energy Plants like Coal and Oil has made it difficult to get environment clearances for these projects even in developing countries like India
  3. Support for Green amongst the European nations has made this region as the prime driver.The 20% Renewable Energy Target by 2020 is forcing power utilities to build Clean Energy Plants.
  4. Energy Security is also playing an important role as Europe faces erratic Gas Supply from Russia and USA faces volatile Middle East Oil Supply

Despite the failure of a global agreement on Climate Change,most government are increasingly adopting renewable energy targets which range from 5-30% of their energy generation.Support for Clean Energy through government stimulus programs has played a vital role during 2009 when private capital sources dried up.Even poor and developing countries in Asia are realizing the importance of Renewable Energy and Asia should soon surpass Europe as the centre of Clean Energy growth.

Global Renewable Capacity Continues to Grow in 2009, Fueled by Policy and Ongoing Investment – REN21

The year 2009 was unprecedented in the history of renewable energy, despite the headwinds posed by the global financial crisis, lower oil prices, and slow progress with climate policy. Indeed, as other economic sectors declined around the world, existing renewable capacity continued to grow at rates close to those in previous years, including grid-connected solar PV (53 %), wind power (32 %), solar hot water/heating (21 %), geothermal power (4 %), and hydropower (3 %). Annual production of ethanol and biodiesel increased 10 % and 9 %, respectively, despite layoffs and ethanol plant closures in the United States and Brazil.

US Exim Bank criticized for providing credit finance to Mega Coal Power Plants in India and Africa

14 Jul, 2010
Climate Change,Coal,Energy,Renewable Energy,USA

US Export Import Bank (Exim) is a government owned financial institution which helps support US trade through credit financing of exports/imports of US companies.The Bank is also an instrument of US government policy which supports renewable energy and acts against climate change.However its recent policy actions have been criticized heavily by environmental groups for supporting dirty energy in developing countries of Asia and Africa.Note Exim Bank already support Energy Projects 95% of which are based on Fossil Fuels.The Exim bank has come under fire for succumbing to US business lobbies for providing credit financing to the tune of $560 million for coal mingin equipment to be supplied by Bucyrus International  to India’s Reliance Power’s massive Sasan Coal Plant.This financing which was rejected 3 weeks ago has been “reconsidered” ostensibly due to Reliance Power’s 250 Renewable Energy Plant.

Note the order 3 weeks ago had found huge opposition from political and business groups.The usual reasons  were touted for opposing this order such as loss of  jobs,loss of orders etc etc.There was no consideration for the fact that Coal is the dirtiest form of energy and needs no explicit and implicit subsidies.It is estimated that Fossil Fuels get $550 Billion in Subsidies globally and this is one the major reasons behind the slow uptake of Green Energy forms like Solar,Wind,Geothermal etc.Such retrograde decisions under pressure from vested interests will help neither US nor India ,only the profiting business and political groups.Environmental groups are lobbying to force multilateral lending institutions like the Exim Bank,World Bank and IFC to consider GHG emissions in their lending decisions.Even US officials are talking about it.However action speak louder than words.

U.S. Export-Import Bank Reconsiders India Coal Financing Deal – Bloomberg

The U.S. Export-Import Bank will reconsider its rejection of a loan guarantee for Bucyrus International Inc. so it can sell coal-mining equipment for a power project being developed by India’s Reliance Power Ltd.The bank acted after Democratic lawmakers in Wisconsin, where Bucyrus is based, appealed the rejection last week of $560 million in financing on environmental grounds. Reliance told the bank it may buy U.S. equipment for a renewable energy project, bank Chairman Fred Hochberg said in a letter.

The bank “will take into account Reliance’s expressed commitment to invest in the renewable energy sector” in its review, Hochberg wrote to Reliance chairman Anil Ambani today.Bucyrus would lose an order worth as much as $560 million for electric drag lines and rope shovels to mine coal without getting the Export-Import bank’s guarantee, Bucyrus Chief Executive Officer Timothy Sullivan said in an interview June 28. The financing request was turned down last week as part of the lender’s review of the project because of its potential carbon emissions.

Exim bank applauded for decision on Sasan – Business Standard

A San Francisco-based non-profit organisation, Pacific Environment’s Responsible Finance Program holds public banks such as the US Export-Import Bank accountable to taxpayers, project-impacted communities and the environment.The group issued statement after the businesses and local politicians in Wisconsin asked President Barack Obama and Ex-Im Bank to reverse its decision, with regard to not approve the financing the project as it would result in hitting as many as 1,000 jobs in the US.

The 3,960 megawatt (MW) Sasan coal power and mine is one of the 9 earmarked ‘ultra-mega’ coal-fired power stations proposed by the Indian government as an effort to reach specific energy capacity goals by 2017.The project would release vast amounts of pollution into the local environment and the global atmosphere. The annual greenhouse gas emissions from this project alone would nearly triple the total annual emissions of all fossil fuel projects approved by Ex-Im Bank in 2009, the statement said.

“We have been long concerned that Ex-Im Bank’s fossil fuel financing has been skyrocketing, and support for Sasan would have sent those emissions off the charts,” said Norlen, adding we hope the decision on Sasan marks a pivotal point for Ex-Im Bank as they avert future involvement with harmful fossil fuel projects.

Ex-Im Bank’s decision to decline support for Sasan brings the federal government export credit agency more in line with the rest of the Obama Administration’s efforts to reduce fossil fuel subsidies and expand support for renewable energy and energy efficiency, the NGO said.

U.S. eyes geothermal for Exim Bank’s $1 bln Indonesia credit – Reuters

Part of a $1 billion credit facility backed by the Export-Import Bank of the United States (Exim Bank) for Indonesia should be used to help develop clean energy projects such as geothermal power, a senior U.S. official said on Monday.The U.S. Exim Bank announced in late June it had pre-approved 11 Indonesian banks to receive funds under the scheme, which aims to make credit available to public and private sector businesses under low or fixed-interest rates.

U.S. companies currently have $18 billion worth of investment in Indonesia, which boasts the potential to produce an estimated 27,000 megawatts of electricity from geothermal sources.U.S. energy major Chevron Corp is among firms that have bid for a geothermal power project in Indonesia, as the country seeks to boost erratic power supply and cut its greenhouse gas emissions.

However, geothermal energy production is expensive and struggles to compete in Indonesia, where fossil fuels are heavily subsidized.

Most Popular

Recent Comments