Triple Crunch Log Jeremy Leggett

Volkswagen eschews need to go green at annual show. Showcase cars are mostly low mpg and messages centre on power. Meanwhile the heads of Renault and Nissan says climate change poses the biggest threat of the century to car industry.

Wheat tops $9 a bushel for the first time. One bushel can make about 73 loaves of bread. The Australian drought is the main reason.

Toxic chemicals blamed for dominance of female births in the Arctic. The ratio is two to one north of the Arctic Circle. It is skewed to girls for the first time across much of the northern hemisphere, especially US and Japan.

12.9.07. Credit crunch turns into a spending squeeze. The UK experiences the first fall in house prices for 2 years. Retailers expect Christmas to be a washout.

13.9.07. Northern Rock, UK’s fifth biggest mortgage lender, is bailed out by the Bank of England after the first run on a bank for decades. The bank’s shares plunge 32% as it fails to raise cash except from the “lender of last resort.”

Tory Quality of Life environment report backs taxes on flights, cars, and feed-in law. It meets a predictable response from the Right. The report mentions peak oil as a threat (p.394).

13.9.07. US states win the right (vs automakers) to regulate greenhouse emissions for the first time. Vermont wins a landmark victory as a federal judge rules against an alliance of US and European car companies seeking to kill off tough new greenhouse gas standards for motor vehicles. The US Supreme Court recognised global warming and its potentially catastrophic effects upon the environment for the first time earlier this year. Now individual states have the authority “to monitor and regulate emissions” to a tougher standard than the federal one.

15.9.07. Bush’s science advisor says unmitigated CO2 could make the planet “unliveable.” He tells the BBC “The CO2 accumulates in the atmosphere and there's no end point, it just gets hotter and hotter, and so at some point it becomes unliveable.” This is the strongest Bush Administration statement yet. Bush’s Kyoto splinter group meeting is next week.

NY Attorney General subpoenas 5 energy companies on disclosure of carbon risk from coal. Andrew Cuomo seeks to reveal whether their plans to build coal-fired power plants pose undisclosed financial risks that their investors should know about. He uses the same state securities law wielded by his predecessor, Gov. Eliot Spitzer, to investigate corruption on Wall Street: the Martin Act, a 1921 state securities law that predates the creation of the federal Securities and Exchange Commission. Targets are AES Corporation, Dominion, Dynegy, Peabody Energy and Xcel Energy. Note: about half the country’s electrical generation comes from coal. New capacity will come largely from natural gas for 2-3 years, but coal is projected to be the dominant fuel for new electricity from 2009 onward.

16.9.07. Today was the record for Arctic ice retreat: 4.13 m sq km, down from 5.32 in 2005. The National Snow and Ice Data Center (NSIDC) confirms loss of 4.13 million sq km (1.59 million sq miles), shattering all previous satellite surveys, including the previous record low: by an area roughly the size of Texas and California combined, or nearly five UKs.

Goldman Sachs analysts says oil is likely to hit $85 by year end, maybe $90. It is now 81. The reason: “weak supply growth has pushed the market into a significant deficit.” OPEC announced a half a million barrels a day increase last week: “too little, too late.”

Vatican “becomes first carbon neutral state.” It does this by accepting a donation from a Hungarian company in the form of trees planted. The Vatican has also installed solar panels.

17.9.07. Co-ordinated by the world’s central banks: $180bn (£100bn) of extra liquidity made available to banks.

Joe Farman, discoverer of the ozone hole, criticises rising use of HCFCs as a threat to the Montreal Protocol. The Protocol review meeting is this week. Campaigners call for a ten year phase out. Under its terms, developing countries need not control consumption of HCFC22 (used mainly for air-conditioning equipment) until 2016, and may maintain the 2015 consumption level until complete phase-out by 2040. HFC23, a greenhouse gas with a global warming potential 11,700 times greater than that of carbon dioxide, is a by-product of HCFC22 manufacture. Says Farman: “In developing countries, this used to be allowed to escape into the atmosphere. Now, any which is trapped and burnt can be counted as a credit for carbon trading under the Clean Development Mechanism (CDM) of the Kyoto Protocol. In 2005, the destruction of HFC23 accounted for 64% of the value of all CDM projects, and 51% in 2006. It is reported that an Indian chemicals firm (SRF) has so far sold credits worth $96m in the 2006-7 financial year, its second largest revenue stream.”

Fred Singer publishes a book arguing global warming “is good and not our fault.” The old contrarian is up to same old tricks, blind to everything.

Renewable stocks remain buoyant. The Nex index of clean energy shares gained 30.9 per cent in the first six months of the year (vs 6.0 per cent for the S&P 500 and 7.8 per cent for Nasdaq). It then lost 15 per cent of its value, then rose again: on September 7 it was 29.4 per cent up on the start of the year.

ASPO annual conference hears new evidence from industry insiders that peak oil is near. Ray Leonard of Kuwait Energy, ex Yukos head of exploration: The USGS says 700 bb will be found. The recent insider-only Hedberg Conference attendees consensus, which Leonard attended, arrived at a consensus of more like 250 bb, based on 2000-2005 exploration experience. (Siberia 55 bb vs 8 bb, Saudi 136 vs half that. The W. Siberia discovery experience is instructive: the 1^st 100 discoveries found 100 bb, 2^nd 100 found 40, 3^rd 100 found 10, 4^th 100 found c 4. As for reserve additions, the Hedburg consensus was 240 bb 1981 – 2005. 20% can come from Tertiary recovery. Extrapolating, we can expect 400-800 bb from reservoir optimization. The biggest potential is in Russia (there is no EOR in W Siberia now, and maybe 60 bb to get) and SA. His conclusion is that there is much more potential from EOR than reserve additions from exploration. There will be an oil plateau, more than than a peak, he believes, because of reserve additions: at 90-100 mbd, in a very high price environment, in 5-8 years (2012-2015).

James Schlesinger: “It will take 15-20 years to introduce carbon capture and storage, if then.” Ron Oxburgh: CCS adds 30% to coal capex and reduces efficiency 10-20%.

IPCC says avoiding 2C increase in global average temperature is “very unlikely.” That means one in ten. Martin Parry: “You cannot mitigate your way out of this problem... The choice is between a damaged world or a future with a severely damaged world.”

ESA reports that the Northern Passage is now open for the first time in history. A lightweight catamaran crewed by a French and Belgian team has just successfully navigated the full length of the 5,150km (3,200-mile) waterway without the aid of an icebreaker.

EU plans to break up large utilities and limit Gazprom’s ability to take over EU companies. Eon and EDF are targets of Commissioner Piebalgs. Russia threatens to retaliate with limitations on western companies in Russia.

20.9.07. Worst floods in Africa for a generation. Heavy rains from the Sahel to the Horn are likely to continue according to meteorologists. “We believe at least 650,000 homes have been destroyed, 1.5 million people affected and nearly 200 people so far drowned,” said Elisabeth Brys, at the UN Office for the Coordination of Humanitarian Affairs (Ocha) in Geneva. “This is harvest time for many countries and there are already food shortages.”

Oil tops $84 for the first time: this time on news of platform shutdowns in the Gulf of Mexico because of storm threat.

22.9.07. Vatican announces the Pope is to make climate change action “a moral obligation.” He intends to tour America next April and major on the issue …in election year. There are a billion Catholics in the world.

23.9.07. More than half largest 500 companies report greenhouse emissions. The Carbon Disclosure Project's (CDP) fifth annual report finds that 76% of the FTSE 500 companies who responded to its survey have put emissions reduction schemes in place - compared to 48% last year. Some 95% of those who see climate change as a commercial risk have implemented emissions reduction programmes with a specific target and timeline. The 383 top companies who responded to the survey report almost 7bn tonnes of emissions, representing 14% of all global emissions by humans. CDP is a collaboration of more than 315 global institutional investors, with assets totaling more than $41 trillion (£20 trillion). A separate partnership with Wal-Mart Stores is also underway. It will engage Wal-Mart's supply chain to report greenhouse gas emissions, emissions reduction targets and climate change strategies.

43 shareholder resolutions were introduced at the AGMs of American firms this year, according to the Investor Network on Climate Risk, a coalition of green investors. One motion calling for Exxon Mobil to set targets for emissions cuts won the approval of 31% of shareholders.

BP shares plummet ahead of “dreadful” third quarter results. The usual reaction: Tony Hayward says “[We] will reduce the number of layers from the workers up to the CEO from 11 to about seven.”

23.9.07. Wheat prices hit a new record of $9.42 a bushel as global output estimate is slashed. The International Grains Council reduces its forecast from 607m tonnes to just 601m tonnes and slashes its estimate for Australian output to 13.5m tons: 2m tonnes below the most recent forecast from the Australian government and 9m tonnes lower than last month’s estimate by the ICG.

24.9.07. UN leader tells 80 heads of state that emissions must be cut. Ban Ki-moon says at a climate change meeting in NY: “It has been 10 years since the Kyoto protocol was adopted. Yet most industrialised country emissions are still rising and their per capita emissions remain unacceptably high.” Bush and Brown are not present.

24.9.07. First US nuclear operating license in 29 years filed in Texas. There are 103 nuclear power plants in the US. They are so old they are being forced to get 20-year extensions on their 40-year operating licenses. They provide 20 per cent of the nation's energy. 17.9.07: James Schlesinger at ASPO: there is only 1 application before the NRC, even with the offer of subsidies. (Nuclear lobbyist at Royal Society later, Dec 07: 4)

HSBC sets up first benchmark climate change index of companies that make money from fighting climate change. There are 300 companies in the index – the HSBC Global Climate Change Index. They have produced nearly twice the profits or returns of other stocks as measured by the MSCI World Index.

25.9.07. Yemen has ordered five nuclear reactors from a US company. Powered Corporation has signed up to build them over the next ten years.

25.9.07. Large majorities in 21 countries believe Man is causing global warming and must act soon. A BBC World Service poll of more than 22,000 people in 21 countries shows this THIS. The results show a great deal of agreement on the issue. An average of 79% of respondents to the BBC survey agreed that “human activity, including industry and transportation, is a significant cause of climate change.” Nine out of 10 people say action was necessary, with two-thirds of people going further, saying “it is necessary to take major steps starting very soon.” In no country did a majority say no action was necessary to combat climate change.

26.9.07. UK Government minister welcomes Severn Barrage. The ten mile £15bn scheme could be ready by 2017, engineering companies believe, displacing 3 nuclear power stations or 18 million tons of coal.

Oil majors spend tens of billions buying back their own shares. ExxonMobil spent almost $30 bn in 2006, and $16 bn in H1 2007. BP spent $15 bn in 2006. Chevron now plans to spend $15bn. They have also been returning huge sums to shareholders. They are supposedly finding difficulty spending their huge cash flows from the high oil price. Why not on exploration, it might be asked?

Lovelock and Rapley propose stimulating oceanic CO2 uptake to save the planet. They want to look at bringing cold water up from the depths in huge pipes to stimulate surface production.

Chinese officials warn Three Gorges dam could prove to be an environmental catastrophe. Unforeseen impacts are soil erosion, landslides and water pollution. The project is due for completion end 2008.

Sixteen nations convene in Washington at Bush’s request to discuss climate change. An EU Official calls it a cynical process of greenwash that will endeavour to derail the Kyoto process. Representatives attend from Australia, Britain, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, South Africa and the US, accounting for more than 90% of global greenhouse-gas emissions.

Coal breaks $100 a tonne barrier for the first time. Prices have been rising all year as availability has tightened. Freight rates have also broken records, forcing up the delivered cost of coal. In January, prices were around $65.00 a tonne.

Kingspan’s Tom Paul questions role for micro-renewables. At an Architects Journal conference he says the UK micropower “cottage industry” makes claims that could have come from “telly-tubbyland.” “There is no way we can load up on micros just to get to Sustainable Code Level 5 or 6. It’s not competitive or cost-effective.” “Who wants to live in a mini-power station? Is that acceptable to home owners?”

28.9.07. Italian electricity and gas authority head warns of winter blackouts. The gas system could crash under pressure if the weather is bad.

Australian beef industry in crisis as drought bites harder. Cattle are fattened on wheat, barley and sorghum, and the price of grain has gone through the roof.

29.9.07. Bush isolated as he advocates no mandatory caps on emissions. He says “energy security and climate change are two of the great challenges of our time,” but advocates only voluntary use of clean coal, nuclear and other low carbon energy technologies. “It’s a total charade and has been exposed as a charade” says an anonymous diplomat. Meanwhile, in contrast, California has signed a law committing to 25% GHG reductions by 2020, and its three biggest utilities must hit 20% energy from renewables by 2010.

1.10.07. Oil industry split on peak oil, report on closed AAPG conference shows. The Hedburg conference on future supply was held last September. Few in the industry agreed with the bullish AAPG assessments, according to Ray Leonard of Kuwait Petroleum. He sees a plateau in 5-8 years at 95-100 mbd. The USGS’s World Petroleum Assessment of 2000 forecast discovery of around 22 billion barrels per year between 1995 and 2025. In the first quarter of that period discovery has averaged just 9 bn bbls annually. Last month the USGS revised down one of its most controversial regional assessments: East Greenland’s oil potential went from 47 billion barrels to just 9 billion.⁸⁴

1.10.07. Industry leaders warn of nuclear bottleneck in UK if new programme doesn’t start soon. GE and others worry that big infrastructure projects are taking too many project managers who could be building the new generation of nuclear plants. There could also be a parts bottleneck.

Over the next ten years > 50% of people working in the US utility industry will retire, a survey shows.⁸⁵

UK householders all but give up on micropower grants in wake of BERR revisions. The cap is down from £15k to £2.5k and added bureaucracys mean current uptake would extend the £18.7m for LCBP Phase 1 (only £5.23m spent) for 15 years.

2.10.07. Gazprom issues another gas ultimatum to Ukraine. Settle a $6.6 bn bill or else. Pro-western parties have just won an election there.

UK Sustainable Development Commission supports Severn Barrage with caveats. Costing £15 bn it could provide up to 5% of UK electricity. Some 300 turbines generating 8GW would sit in a 10 mile long barrage. Tidal stream should come first, the SDC says. It also could do 5%. The EA says the barrage would breach EU habitats and birds directives, but the SDC disagrees, so long as there is a requirement to create “compensatory habitat.” The barrage should be publicly owned to allow low discount rate so as to finance the compensatory habitat.

3.10.07. Aviva runs ads saying “Our strategy for the future is to make sure there is a future.” Small print: “We’re committing to becoming the first insurer to go carbon neutral.” No more words than that, and a picture of windfarm.

Oil supply threatened by shortage of skilled staff, CERA says. The workforce is dominated by people close to retirement and inexperienced graduates. The problem is worldwide, but particularly acute in the ME. Also equipment is a problem, with lead times of up to 18 months and exhorbitant costs. Aramco’s plan, according to the EIA, is to get from 10.5-11 mbd to 12.5 by 2009 and 15 by 2020. There are c.270 rigs in the ME today, compared to 158 in Sept 2000, c.130 in Saudi. The oil and gas industry faces a shortfall of of 15% engineers by 2010, some 5,500 – 6,000 people.

Ukraine strikes a gas deal with Gazprom. Kiev will avoid cuts in supply by paying $1.3 bn by November 1, or so Gazprom says.

Plans for $3bn Saudi aluminium smelter underway despite gas shortage fears. Malaysian infrastructure and energy group MMC Corporation and its partner Saudi Binladin Group partner agree to co-build an aluminium smelter in the Middle East with the Aluminium Corporation of China. As the IEA’s Natural Gas Market Review 2007 points out (p154): “Both Saudi Arabia and Kuwait are also facing gas shortages, as a result of allocations for power generation projects and in the former, petrochemicals.” Saudi Arabia is often thought of as as a potential net gas exporter from the region. However, as the IEA observes, “unconfirmed reports suggest that near and mid-term gas availability even for domestic uses is tight. This has had the impact of delaying supplies of feedstock for planned petrochemical projects and may cause future project plans to be revised. Saudi Arabia has also reverted to the use of oil products for some new power generation, rather than natural gas, in contrast to previous policies favouring natural gas as a means of displacing oil use.”

4.10.07. UN warns that climate change is upon us. Ocha, the UK Office for Coordination of Humanitarian Affairs, has had to issue a record 13 “flash” appeals so far this year, all but one climate related. The emergency relief co-ordinator, UN Under-Secretary-general for humanitarian affairs Sir John Holmes, says the impacts are upon us. Ocha requested $338m, and only $114m of that has come from donors. Donor fatigue may be kicking in.

8.10.07. Excavation set to begin on UK’s largest open cast coal pit. At Ffos-y-fran, near Merthyr Tydfil, 1,000 acres excavated down to 600 feet, the pit produces coal that will emit 30m tonnes of CO2. In 2006, planners approved 10 such pits. Eon, RWE npower, Scottish Power and SSE are all planning new coal plants: £20bn worth by 2020. Yet Alistair Darling said in a Parliamentary debate in May that CCS “may never become available.” Certainly there are no commercial plans. Note: the government gave over £200m in subsidies to the coal industry between 2000-4.

9.10.07. Brown’s Pre-Budget report has almost nothing new on climate change. To the bitter disappointment of NGOs, and counter to the speech at last month’s party conference where he pledged “to make Britain a world leader in tackling climate change,” the only new measure is a tax on planes.

10.10.07. Cost of UK nuclear cleanup rises 16% to £73 bn. The Nuclear Decommissioning Authority has ramped up its estimate of the cost for UK’s 20 nuclear facilities. Greenpeace puts it at closer to £100m. Earlier this month the NDA halted competitive tendering on the first Magnox contract because of lack of interest. Eon now calls for speed up of nuclear programmes, speaking of a “moral imperative.”

Army Corps of Engineers works on a plan to retreat from Mississippi coast, not rebuild. $40bn should be spent on rebuilding wetlands as storm defence, they argue.

Five states agree a pipeline from the Caspian bypassing Russia. Azerbaijan, Georgia, Ukraine, Poland, Lithuania …all former Communist states. The pipeline sould go from Baku in Azerbaijan to Plock in Poland, across the Black Sea by tanker.

British High Court Judge says that Gore’s film has nine scientific errors. This is response to a protestor who objected to the film being shown in schools. The Judge ruled it can still be shown.

11.10.07. Cement industry calls for CCS. 18 cement companies gather in Brussels. Their industry produces 5% of all global emissions. After water, concrete is the second most used substance on the planet. 44% of all cement is used in China. Cement manufacture requires kilns at 1,500C, fuelled by the burning of coal, and cutting emissions will require CCS.

BP to cut thousands of jobs as third quarter profits slump 20% despite the high oil price. Up to four layers of management are to go. An organisational restructuring includes incorporating the Gas, Power and Renewables division into the other two: Exploration and production, and Refining and Marketing. Analysts like it because it copies the Exxon model. A separate division will be created for low carbon business.

12.10.07. Al Gore and the IPCC jointly win the Nobel Peace Prize. The FT thinks this will push the issue into the front row of the US election campaign: front page headline is “Gore prize transforms debate on climate.”

Islamic leaders write a letter to the Christian leaders seeking common understand for survival. A letter addressed to Pope Benedict XVI and other Christian leaders by 138 prominent Muslim scholars from every sect of Islam urges Christian leaders "to come together with us on the common essentials of our two religions", spelling out the similarities between passages of the Bible and the Qur'an. Issued by Jordan's Royal Aal al-Bayt Institute for Islamic Thought following its annual convention last month in Amman. Many of the signatories are grand muftis each with tens of millions of followers. Four British supporters include Cambridge academic Abdal Hakim Murad Winter. 29 pages. Muslims and Christians together make up well over half of the world's population. “The basis for this peace and understanding already exists. It is part of the very foundational principles of both faiths: love of the One God, and love of the neighbour. …..These principles are found over and over again in the sacred texts of Islam and Christianity. ….The Prophet Muhammad said: ‘None of you has faith until you love for your neighbour what you love for yourself’. In the New Testament, Jesus Christ said: ‘Hear, O Israel, the Lord our God, the Lord is One. / And you shall love the Lord your God with all your heart, with all your soul, with all your mind, and with all your strength. This is the first commandment./And the second, like it, is this: 'You shall love your neighbour as yourself.' There is no other commandment greater than these." (Mark 12:29-31)