Comment, analysis and other offerings from Friday’s FT, Philip Stephens: Now the Franco-German questionGermany will have to learn leadership, and France followship. Both will find it a wrenching experience. The rules of the European game changed for ever with the reunification of Germany, says the FT’s Stephens. It has taken the euro crisis to spell out the brutal implications. One has to feel some sympathy for Angela Merkel. Germany’s chancellor has been excoriated in turn for absent and for oppressive leadership. At one moment she is said to be standing idly by while the euro burns, and at the next of issuing teutonic diktats about the terms of its survival. Germany, the rest of us have been reminded, has always been too big for Europe. The new German question asks whether Europe – whether it is the European Union or a more closely integrated eurozone – can find a new equilibrium now that Germany is so visibly the preponderant power.
China has thrown the UN climate summit into confusion as more than 100 senior ministers from around the world fly into the South African coastal city of Durban for a final week of increasingly fraught talks on how to tackle climate change, the FT reports. In a distinct shift in rhetoric from last week, the head of the Chinese delegation, Xie Zhenhua, told reporters on Monday that Beijing was prepared to agree to some form of legally binding agreement that would cover all countries. But he said this could only happen if five conditions were met and probably not before 2020, when the current round of voluntary pledges agreed a year ago are due to end. The conditions include the European Union and other countries signing a new round of legally binding pledges under the Kyoto protocol; developed countries delivering financing to poorer ones to help them tackle climate change; and respecting the relative capacity of countries to deal with global warming.
At first sight, this looks mad. Lending to the UK government, in charge of the clapped-out British economy, now returns less than lending to Europe’s most successful country. Worse still, the yields on gilts are measured in sterling, a chronically weak currency, so not only does your money earn less, you’ll be repaid in something which history says will have been devalued by the time you get it back. Oh, and by the way, inflation is 3 per cent above the yield, making the internal devaluation painful, too. Something is seriously awry here, and two events this week offer clues to why German government 10-year paper yields more than the equivalent UK stock. On Wednesday the markets were spooked by the failure of an auction of 10-year German debt. Those in this arcane world struggled to understand what it meant, so there’s little hope for the rest of us. It’s either bad news, or very bad news, probably depending on whether you’re short of German bonds.
The US, backed by Saudi Arabia, is refusing to sign off on a flagship global climate fund, the FT reports, days ahead of an important UN climate summit. The fund is one of the few measures to emerge from seven years of talks on how countries should share the burden of cutting greenhouse gas emissions, which risk raising global temperatures to dangerous levels. At the same time, the price of carbon permits in the European Union, whose members are virtually the only wealthy countries willing to offer conditional backing for a new phase of the Kyoto pact in Durban, crashed to record lows of €7.80 on Thursday, — in part due to eurozone debt crisis, but a UBS report claiming the schem was not working also unnerved investors.
The Obama administration will seek to reroute a portion of a proposed Canada-US oil pipeline, the WSJ says, postponing until after the 2012 election a decision on an issue that has divided the Democratic Party’s environmental and union supporters. The Keystone XL pipeline could still be built in 2013 or later, but the delay marks a success for environmental campaigners who have mustered growing opposition to the project, raising concerns about the danger of leaks from the 1,700 mile pipeline, and about greenhouse gas emissions from oil production in the tar sands of Alberta in western Canada, says the FT.
After years of frenzied debate and policy somersaults, Australia became one of the first large advanced economies outside Europe to charge companies for their greenhouse gas emissions on Tuesday, after its Senate finally approved legislation for a carbon tax, the FT reports. Under a measure the nation’s coal lobby said contained “fatal flaws” that would handicap one of the economy’s largest export industries, around 500 of Australia’s biggest polluters will pay A$23 (US$23.7) per tonne of carbon they generate from next July.
Scottish and Southern Energy will break ranks with rival utilities by offering its electricity for sale to any household supplier this week, heralding the biggest change for almost a decade in the UK’s electricity market, the FT reports. The vertically integrated big six energy companies sell most of the electricity they generate directly to consumers – a system under which Ofgem, the regulator, has suggested retail energy prices shoot up like a rocket but fall like a feather. Ed Miliband, the Labour leader, pledged during his party conference speech to “break the dominance of the big energy companies” by forcing them to auction all of their electricity on the open market.
Oil and gas supplies will struggle to keep up with world demand growth, making energy prices more expensive and more volatile in the long term, the head of Europe’s largest oil company told the FT. Peter Voser, the chief executive of Royal Dutch Shell, told the Financial Times: “We will have a lot of volatility ahead of us that we cannot avoid … for energy prices in general.” He added: “We most probably will see a tightening of the supply-demand balance and hence rising energy prices for the long term. I think we should just get used to that.”
China has announced its first nationwide feed-in tariff for solar projects in a step that underscores the determination of the world’s biggest energy user to move toward renewable energy, reports the FT. Beijing has made renewable energy a keystone of its energy policy and aims to raise solar power capacity tenfold in the next five years. The long-awaited feed-in tariff guarantees solar developers a payment of Rmb1 per kilowatt-hour that their projects feed into the grid, or Rmb1.15 per kh in some cases depending on the timing and location of the project.
Forcing companies to publish their greenhouse gas emissions – a pre-election promise by both coalition partners – could cost British business up to £6bn over the next decade, the government has claimed in an impact assessment study. But the FT reports that calculation has been questioned in a report by independent consultants working for the Aldersgate Group, which represents big green-leaning companies such as Microsoft, BT, PepsiCo and Marks and Spencer. The group fears that some ministers and officials will use the environment department’s upper figure – which they believe is far too high – to justify dropping the plans later in the autumn.
Julia Gillard swept into the heartland of Australia’s coal industry in the Hunter Valley north of Sydney on Tuesday intent on heading off opposition to her government’s unpopular carbon tax proposals, reports the FT. In hard hat and orange fluorescent coat, Australia’s prime minister listened patiently to dozens of Centennial Coal miners who echoed widespread community fears that her carbon tax would destroy jobs, damage the nation’s lucrative mining and energy industries and push up living costs. A little over a week after launching plans for a A$23 (US$24) tax for each tonne of carbon emitted by the country’s 500 biggest polluters, effective from July 2012, Ms Gillard is trying to convince a sceptical electorate of the merits of a reform that will place Australia nearer to the front of global action on climate change.
The Japanese government moved to contain a spreading scare over radiation-contaminated beef by banning all shipments of cattle from Fukushima prefecture, home to Tokyo Electric Power’s stricken nuclear power plant, reports the FT. The decision comes amid growing concerns over the safety of Fukushima beef after it was found that beef from more than 500 cattle, which had been fed rice straw contaminated with high levels of radioactive caesium, had been shipped to stores throughout Japan. Inspections by local authorities found that some of the beef contained radioactive caesium that was eight times the government-designated limit, while Fukushima officials said on Tuesday they detected levels in straw used at some farms that exceed official limits. The contaminated beef is the latest health scare to emerge from the Fukushima Daiichi nuclear power plant, which was severely damaged by the March 11 earthquake and tsunami.
Naoto Kan, Japan’s prime minister, has called on the country gradually to eliminate nuclear power, in his strongest statement on atomic energy since the March tsunami sparked a crisis at the Fukushima Daiichi nuclear plant, reports the FT. “Our nation should aim to become a society that can manage fine without nuclear power,” Mr Kan said on Wednesday. Mr Kan, who has vowed to step down at an unspecified date, provided few details on timing, but his comments underscore cooling sentiment in Japan toward nuclear power.
Statoil, the Norwegian oil company, is to resume work on a large North Sea project and Centrica, the UK utility, said that it had reopened Britain’s biggest gas field following concessions by the government on taxation, the FT reports. The Treasury has said it will increase the ring fence expenditure supplement from 6 to 10 per cent, a measure that allows energy companies to offset the losses they make from investments against tax payments from future profits. The change was enough for Statoil to say that it would resume developing the Mariner oilfield, south-east of the Shetland Islands, which might hold 430m barrels. Meanwhile Centrica has reopened the UK’s largest gas field after choosing to leave it dormant for a month, a move that it linked to the tax increases in the Budget.
Comment, analysis, and other offerings from Tuesday’s FT, Gideon Rachman: America and Europe sinking togetherIn Washington they are arguing about a debt ceiling; in Brussels they are staring into a debt abyss. But the basic problem is the same, says the FT’s Gideon Rachman. Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem. America and Europe are in the same sinking boat. The debt debates underway in the US and the EU are so inward-looking and overwrought that surprisingly few people are making the connection. Yet the links that make this a generalised crisis of the west should be obvious.Sir Martin Jacomb: Greece has no future within the eurozoneThe Greek parliament has voted, but the crisis goes on. The European Union’s current policy has been driven by the political imperatives of preserving the euro and avoiding another banking crisis – but it will not yield an enduring solution, says Jacomb, chairman of Share plc and former chancellor of the University of Buckingham. The EU’s future depends on enabling its poorest member countries to regain their competitiveness – and this requires a very different approach. Everyone knows that lending more money to someone who is already heavily indebted, and has few realisable assets and woefully inadequate income or earning power, creates problems. Putting the repayment date off for 30 years simply ensures that no one in authority today will be around when the time comes.
The mayor of a small town in Japan has signed off the restart of two nuclear reactors, in a decision that could help avert a complete shutdown of Japan’s nuclear power stations, the FT reports. The decision by the mayor of Genkai, a town in Saga prefecture in southwestern Japan marks the first time the mayor of a reactor-hosting municipality has signed off on a restart since the March 11 tsunami. Meltdowns at three reactors at Fukushima Daiichi atomic station after the tsunami have turned a large swath of public opinion against nuclear power, and the government has promised a comprehensive energy-policy review. But so far, authorities in Tokyo have forced only one other atomic plant to close. Instead, it is local governments that have thrown up the biggest hurdles for the eight regional utilities in Japan that rely on nuclear power.
Coal mining profits in Australia could fall by up to 4% under Canberra’s proposed carbon pricing scheme, according to Citigroup research. In an analysis issued on Thursday, Citi based its estimate on a carbon price of $20 a tonne for the government’s planned tax on greenhouse gas emissions, reports the FT. Prime minister Julia Gillard aims to implement the charge from mid-2012 before moving to a market-pricing mechanism. The Citi report concluded that “pure play” coal miners including Coal and Allied, Macarthur Coal, New Hope Corp and Whitehaven Coal would be the most exposed to the proposed carbon tax. More than 1,000 companies, including Anglo American Australia, Xstrata, Peabody Energy Australia, Centenary Coal, BHP Billiton and Rio Tinto would be affected by the tax. But Elaine Prior, Citi analyst, said that even at a carbon price of $50 a tonne, diversified miners such as BHP, Rio and Wesfarmers would “barely” be affected by the tax, with net profit likely to fall by 1%. Meanwhile, BusinessSpectator (free registration) examines the ‘Catch-22′ of carbon pricing.
Coal mining profits in Australia could fall by up to 4 per cent under Canberra’s proposed carbon pricing scheme, according to Citigroup research. In a detailed analysis issued on Thursday, Citigroup based its estimate on a carbon price of $20 a tonne for the government’s planned tax on greenhouse gas emissions, reports the FT. Julia Gillard, the prime minister, wants to implement the tax from mid-2012 before moving to a market-pricing mechanism such as an emissions trading scheme. The Citi report concluded that “pure play” coal miners including Coal and Allied, Macarthur Coal, New Hope Corp and Whitehaven Coal, would be the most exposed to the proposed carbon tax. More than 1,000 companies, including Anglo American Australia, Xstrata, Peabody Energy Australia, Centenary Coal, BHP Billiton and Rio Tinto, would also be affected by the tax. But Elaine Prior, Citi analyst, said even at a carbon price of $50 a tonne, major diversified resources companies such as BHP, Rio and Wesfarmers would “barely” be affected by the tax, with net profit expected to fall by 1 per cent. Rather, it would be the “smaller ‘pure’ coal companies that are more exposed . . . Coal and Allied and Whitehaven appear potentially the most exposed”, she noted.
Killing a camel to earn a carbon credit may seem a curious way to tackle climate change, but one country is poised to allow investors to do precisely that, reports the FT. The camel culling plan is one of the first to arise under the Australian government’s new “carbon farming initiative”, a scheme that lets farmers or investors claim carbon credits if they can show they have cut greenhouse gas emissions. Such emissions are plentiful in Australia’s desert centre thanks to the region’s large population of feral camels, a legacy of the herds introduced in the 19th century to help settle the continent’s interior. More than 1m camels are now believed to be roaming across the Australian outback – one of the biggest camel populations in the world – and each emits methane, a greenhouse gas significantly more potent than carbon dioxide. “It’s one of those ‘out of sight, out of mind’ problems,” said Tim Moore, managing director of Northwest Carbon, an Adelaide-based carbon project developer whose culling plan is one of only three proposals to have been accepted for official assessment by the carbon farming initiative so far.
Germany will close its 17 nuclear power plants – which generate one-quarter of the country’s electricity – by 2022, following the partial nuclear meltdown at Japan’s Fukushima Daiichi plant in March, reports the FT. In a controversial move, amid industry warnings about price rises, chancellor Angela Merkel committed Germany to doubling the amount of electricity from renewable sources to 35% this decade. She had previously decided to prolong the operation of Germany’s nuclear plants by 14 years to 2036, saying they were a necessary bridge to greater use of renewable energy. After talks between her Christian Union party and their Free Democrat coalition partners on Monday, Merkel described the policy U-turn as “a big challenge” which nevertheless would make Germany a leader in green technology. Opinion polls show most Germans oppose nuclear energy.
General Electric is making “a big bet on gas” in an attempt to benefit from the increased use of the fuel for power generation, in part as a back-up to variable renewable energies such as wind and solar power, the FT reports. John Krenicki, the vice-chairman of GE in charge of its energy business, said the group was “looking at a 25-year, very bullish market” for gas, and making acquisitions and investing in new products to profit from it. The rise of gas for power generation is being driven by cheap supplies becoming available in the US, and perhaps eventually elsewhere, as well as by its lower carbon dioxide emissions when burnt than coal and its good fit with renewable energy. Mr Krenicki said: “We are betting on gas in a big way, investing ahead of the curve.
Naoto Kan, prime minister, has called for “fundamental reform” of Japanese nuclear power regulation, taking aim at failings exposed by the crisis at the Fukushima Daiichi atomic plant, reports the FT. At a press conference on Wednesday Kan announced a regulatory review of the sector, marking a new stage in the Japanese government’s efforts to rebuild domestic and international confidence in its ability to ensure the safety of the nation’s large nuclear power sector.
Comment, analysis and other offerings from the FT, Martin Wolf: The eurozone’s journey to defaultsA story is told of a man sentenced by his king to death. The latter tells him that he can keep his life if he teaches the monarch’s horse to talk within a year. The condemned man agrees. Asked why he did so, he answers that anything might happen: the king might die; he might die; and the horse might learn to talk. This has been the eurozone’s approach to the fiscal crises that have engulfed Greece, Ireland and Portugal, and threaten other member states, writes the FT’s Martin Wolf.