Carbon savings rating service

Lord Nicholas Stern put his imprimatur on a carbon-ratings service that analyzes whether emissions-reducing efforts are likely to achieve their targets.

The service was launched on June 25, 2008, by IDEAcarbon, a consultancy on carbon finance and part of IDEAglobalGroup, a Singapore-based research company, where Lord Stern is vice chairman.

The service is an attempt to draw mainstream investment to the carbon market by increasing transparency. Concerns have been raised that a significant proportion of the greenhouse gas saving projects will not deliver the savings that they have claimed.

IDEAcarbon rates projects from AAA to D depending on the likelihood that they will deliver the promised emissions reductions within the stated time period. The ratings take into account five risks: the project’s size and complexity, the participants’ experience, the local and market context, implementation factors and the regulatory framework.

Source: WSJ, 26/06/08

Impact of rising gasoline prices

Five years after the price of gasoline started climbing, Americans are finally beginning to spend less time at the wheel and drive smaller cars.

Federal Highway Administration figures show that that in March U.S. drivers logged 18 billion fewer kilometres than a year earlier. That is a 4.3% drop and the biggest-ever year-over-year reduction in kilometres driven.

As a percentage of total U.S. auto sales, sales of light trucks – a category that includes SUVs – peaked at 55% in 2005. So far this year, light trucks have accounted for 47% of auto sales.

The persistence of high energy prices plays a role. It take time for consumers to make changes that substantially lower energy use such as buying a more efficient refrigerator, a smaller house or car.

Source: WSJ, 18/06/08

Hungary's unconventional gas reserves

Located in Southeastern Hungary near the Romanian border, the Mako Trough’s reserves are widely thought to be massive.

But the gas is trapped in a rock that isn’t porous and permeable to let molecules flow through it easily. Until now, such unconventional oil-and-gas reserves were viewed as too difficult and expensive to exploit. But soaring energy prices and advances in technology such as “fraking” have made gas locked in coal, sandstone or shale economically and technically viable to extract.

Though Mako is tougher than other gas plays, it has one big advantage. Most of the large gas finds left in the world are far from global markets. By contrast, Mako is in the middle of the existing European gas-pipeline grid. That would make it easy to export the gas to Hungary’s neighbors.

Source: WSJ, 26/06/08

Chinese energy prices

The Chinese government announced on June 19, 2008 that it will boost retail prices for gasoline, diesel and electricity.

China is the world’s second-largest oil consumer, after the U.S. With the sharp run-up in oil in recent month, Beijing’s longstanding policy of fixing retail prices for gasoline, diesel and electricity has been widely criticised.

The logic behind the criticism of that policy is straightforward: By keeping down the prices that its companies and consumers pay for fuel, China is impending the normal market mechanisms that would cause demand to soften as global prices soar.

Another effect of China’s price controls has been to make it unprofitable for Chinese refiners to make gasoline and diesel, since they have to buy crude oil at global prices but sell their products at controlled local prices. Those producers have been pulling back from the market, creating widespread fuel shortages.

Similarly, power plants’ losses have been mounting as they burn coal bought at market prices to sell electricity at a low state-set price, and power shortages have been spreading.

But because of that unsatisfied demand, the increase in price should actually cause a surge in oil use that could exacerbate price gains in the near term.

The Chinese government also indicated that will not dismantle the system of government-set prices but will seek to change it. With the country facing the highest inflation in more than a decade – more than 8% since this year – officials seem unwilling to expose Chinese consumers to the full brunt of global oil price swings.

Source: WSJ, 20-22/06/08

U.S. offshore wind power

There are already more than 20 offshore wind farms in Europe, as opposed to none in the U.S. Opponents, including beachfront homeowners, claim that such installations would threaten avian and aquatic life and ruin scenic vistas.

Onshore, U.S. wind-power capacity is growing fast, thanks to federal tax credits and state laws encouraging the production of energy form renewable sources. In 2007, U.S. wind-power generating capacity grew by 45% to nearly 17,000 megawatts per hour, second only to Germany.

Wind turbines in the U.S. are expected to generate about 48 billion kilowatt hours of energy this year, or enough to power about 4,5 million homes. Even so, that is only about 1.2% of the nation’s demand for electricity. By comparison, wind already meets about 20% of Denmark’s needs and about 12% of Spain’s.

Because of favourable wind conditions, much of the U.S. construction to date has been in areas far from big population centres. In many cases, transmission systems lack the capacity to move all of the resulting electricity to where it is most needed.

Building offshore would allow developers to produce electricity closer to big cities, particularly along the East Coast. The downside is that it would also boost construction costs by 30% or more.

Another key benefit of offshore wind power is the lower rate of wind turbulence at sea vs. on land. Sunlight penetrates the water evenly, resulting in a more even range of temperature directly above the water surface, thus reducing irregularity in the flow of the wind.

Less wind turbulence means that the height of the offshore wind turbines can be lower than similar models on land, as well as potentially longer lifetime for the turbine.

Source: WSJ, 20/06/08