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August, 2008:

Beijing – Now What Happens?

A capital question arises: now what happens?

Josephine Ma and Shi Jiangtao – SCMP – Updated on Aug 25, 2008

There is little doubt that the Olympic Games have transformed Beijing with glittering new rail links and magnificent venues, but time will tell what intangible legacies will remain.

Wang Yongchen, of Beijing-based Green Earth Volunteers, said the Games would help China conform to international practices, on which the country has set its eyes since its opening-up three decades ago.

“The world is watching,” she said. “It is at least a good opportunity for government officials and the public to know what exactly international standards and practices is supposed to mean.”

Despite China’s rapid incorporation into the global economy and an ever-increasing role worldwide, it has rarely, if ever, been exposed to so much intense scrutiny at the international level.

“Beijing has talked a lot about catching up with the best international practices and building a modern metropolis, but we seldom have the chance to listen to how the world sees us and what other people think of us,” Ms Wang said.

International monitoring and criticism will exert pressure on China and push it to adopt global standards, she and other analysts agreed.

“We had hoped to clean up the environment, but it is because of the enormous pressure to live up to promises for a green Olympics that the government has done so much to cut pollution,” Ms Wang said.

China had shut down 200 polluting factories and treated 90 per cent of Beijing city’s waste water, and introduced vehicle emission standards to 4,000 buses, the UN said.

“All these efforts will have a lasting impact because they have changed lives,” said Khalid Malik, the UN resident co-ordinator in China. “What we now want to make sure of is that the change will not go away and will be mirrored throughout China.”

Many Beijing residents also expressed doubt over whether the clear skies, clean air and improved traffic of the past weeks can last.

Local resident Li Wei, a 30-year-old civil servant, was amazed at the clear skies and less congested roads in Beijing. “It would be the best legacy of the Games for the city if they could continue, but we know it’s not really possible as those bans on private cars, building sites and polluting factories will have to be lifted as soon as the Games are over.”

Ms Wang said the UN Environmental Programme remained cautious about the Games’ long-term impact, saying an assessment would not be available for six months. “Lasting international attention will be essential to ensure a lasting legacy.”

However, many people regretted that officials had pinned their hopes of clearing Beijing’s smog-plagued air and notorious gridlocked roads on a flurry of last-minute contingency measures.

“It should have been a great opportunity to tackle problems at their roots, but the government is apparently more interested in staging a perfect show just for the Games,” said Zhang Yang, a teacher.

Observers say the Games has yet again showed Beijing’s ability to erect world-class venues and infrastructure with seemingly unbridled spending, but the challenges it faces in democracy and urban management were also laid bare.

Beijing opened three new subway lines and the Airport Express ahead of the Games, extending the total length of track from 142km to 200km and winning the praise of millions of commuters. Despite the brand new Hong Kong-style infrastructure, the lack of signs has confused travellers.

“Beijing … still has a long way to go to fill the gap between reality and people’s expectations,” said Mr Li.

Roads And Sky Monitored For A Smooth Last Day

Al Guo – SCMP – Updated on Aug 24, 2008

Beijing authorities will impose strict traffic controls on roads close to the Olympic Green today to ensure tangle-free roads for the Games’ closing ceremony, while the weather bureau has hundreds of rockets aimed at the sky to dispel any rain clouds.

The traffic ban, which extends to almost all the roads in the city’s north, is on a similar scale to that ordered for the opening ceremony. Motorists have been told to avoid these areas from early afternoon until the end of the closing ceremony at about midnight.

Those attending have been urged to take public transport to the area as no car parks will be available.

Seven Olympic venues will host events on the last day of the Games, and temporary traffic controls will be tightened around those arenas during the competitions.

Since it is a Sunday, authorities were not concerned about general commuters needing to use the city’s road or public transport systems.

In addition to efforts on the ground for the closing ceremony, Beijing’s weather officials have plans to ward off any clouds that could threaten to dampen the finale.

There have been many predictions for cloudy weather – but no rain – in Beijing during the closing ceremony. But the capital’s meteorological department is taking no chances: it has hundreds of rockets at the ready to break up the clouds.

More than 1,000 rockets were fired into the atmosphere on August 8, the opening day of the Games, preventing rain clouds from forming.

Weather monitors will update their forecasts every 15 minutes today to decide whether or when to fire the rockets.

“We guaranteed good weather for the opening ceremony, and now we will deliver good weather for the closing ceremony,” a weather official was quoted by the Beijing Morning Post as saying.

Even so, with one day remaining, Beijing officials could not wait yesterday to declare the event a success, especially in terms of air quality and operations.

“I’m glad to tell you that all 76 Olympic venues have been running smoothly and highly efficiently, and our organisation of the Games has received warm applause and praise from all parties,” said Liu Zhi, a spokesman for the Beijing municipal government.

He had reason to beam. The Air Pollution Index, a major gauge of air quality, dropped by more than 20 percentage points during the Olympics period compared with the same time last year, and the city’s major air pollutants have dropped 40 per cent on average, according to statistics released by the authorities.

Athletes seem satisfied with the air and none were reported wearing face masks during events.

Kara Goucher, a US women’s 5,000- and 10,000-metres runner, told her hometown newspaper, The Register Guard of Eugene, Oregon, that her running had not been affected by the air quality.

“There are the days where it’s hazy … but the weather has not been what we thought. It’s been way better. The air has been good. It’s been as good as it could possibly be. It hasn’t been bad,” Goucher was quoted as saying.

Last-Ditch Effort And Rain Give Best Air In Decade

Environmental chief says clear skies expected to stay for the rest of the Games

Shi Jiangtao – SCMP – Updated on Aug 20, 2008

Athletes worried about Beijing’s pollution can now breathe easy, as the capital had recorded the cleanest air in a decade thanks to frequent showers and a series of last-minute efforts to clear up the smog, a mainland official says.

The capital had enjoyed five days of blue skies up to yesterday, lifting pressure off authorities who had pledged to present the world with a “green” Olympics.

Du Shaozhong, deputy director of the Beijing Environmental Bureau, said the air quality this month was at its best level in 10 years and clear skies were expected to remain for the rest of the Olympics, which end on Sunday. Over the past 19 days, the city has had 10 days, including yesterday, when its air pollution index was below 50, or considered “good” by the national standard.

Air quality for the rest of the days was “moderate”, with API readings ranging between 51 and 100.

A reading higher than 101 is “unhealthy for sensitive groups”, especially athletes in endurance sports such as marathon running and road cycling.

While meteorologists said downpours had cleaned the city’s air, environmental officials were eager to claim credit for their desperate last-ditch attempts over the past weeks – including banning half the city’s 3.3 million cars from the road, halting construction and closing factories.

“We have adopted much tougher measures to ensure clean air for the Games than any other Olympic host cities,” Mr Du said.

“It shows our efforts to ensure good air quality, especially those contingency measures to cut pollution, have worked well.”

Weather conditions would remain favourable for the coming days, with showers expected tonight and tomorrow. Mr Du was confident that Beijing would have even clearer air towards the end of the Games.

Pollution has been one of the dominant issues and biggest headaches for the capital in the run-up to the Games. The city was still shrouded in a blanket of smog even after the Games began on August 8, drawing criticism from foreign media.

Smoggy skies mixed with sultry heat and high humidity also prompted complaints from athletes during the first week of competition. But the smog lifted on Friday thanks to heavy rain and brisk breezes.

Mr Du played down concerns that the skies would fill with smog once the traffic and construction bans were lifted after the Games, and failed to provide further details. He said the results of the contingency measures would be reviewed to decide what steps would be taken to ensure that air quality would reach a “new level after the Olympic Games”.

He said a lack of environmental awareness among the public still topped the list of challenges in the fight against pollution.

Guo Hu, director of the Beijing Meteorological Observatory, predicted a cloudy day for the closing ceremony on Sunday.

But he said meteorologists were fully prepared to use cloud-seeding technology, which was used to disperse rain clouds on the opening day, to ensure a dry closing show at the “Bird’s Nest”.

A total of 1,110 rockets with 15kg of chemical catalysts were fired to stop showers on August 8, when the four-hour opening ceremony was held.

Green Plan For Delta’s Environmental Blues

Kitty Poon – SCMP – Updated on Aug 20, 2008

At the 11th Joint Hong Kong-Guangdong Co-operation Conference held recently, Chief Executive Donald Tsang Yam-kuen and Guangdong governor Huang Huahua unveiled their plan for a “green greater Pearl River Delta quality living circle”.

The concept signifies a shift in joint efforts to protect the environment. It reflects an emerging consensus that a new framework for cross-border co-operation has to be established to ensure quality of living and the continued competitiveness of both Hong Kong and Guangdong in the long run.

Conceived at a meeting between Mr Tsang and Guangdong party secretary Wang Yang in March, the initiative to build a green delta envisions a holistic approach to environmental protection in the region as an alternative to the issue-based co-operation adopted previously. In past years, Hong Kong and Guangdong governments have worked tirelessly to combat regional air pollution. Tremendous efforts have been made.

The green delta framework, if it materialises, will extend the scope of co-operation to producing clean energy, launching recycling industries, enhancing clean production measures, and making a joint effort in natural conservation and public education. This all-encompassing strategy seeks to treat environmental ills at their root.

The green delta agenda relies on a synergy of strengths while enabling each community to tackle its pressing issues. Hongkongers are striving for a better living environment. Guangdong is stressed by the need for industrial restructuring and pressure to meet green standards set out by the central government.

Through co-operation, both sides would have an opportunity to position themselves ahead of the curve. Hong Kong could channel necessary funds and advanced technologies for the establishment of green enterprises. Guangdong is well positioned for clean energy and recycling projects.

Of course, building a green delta is not a simple task. Policymaking always tests the ability and will to forge a consensus among diverse stakeholders. Agreement and co-operation across the border would inevitably be more daunting.

However, the future for a green delta remains bright, for two reasons. First, Guangdong is more determined than ever to strengthen its ties with Hong Kong. Second, intensified co-operation between Guangdong and Hong Kong also echoes the central government’s call for regional collaboration on environment protection.

Researchers from the Chinese Academy for Environmental Planning recently visited Guangdong, Hong Kong and Macau to study the prospect of a green delta. The research is expected to result in a green blueprint for the greater Pearl River Delta.

Formulating a green delta also depends on public participation. Views from entrepreneurs, advocates, academics and citizens will help ensure the creativity and feasibility of the scheme. A green delta is the way forward.

Dr Kitty Poon is the undersecretary for the environment

Dirty Smoke From Ships Found To Degrade Air Quality In Coastal Cities

ScienceDaily (Aug. 20, 2008) —

Ah, nothing like breathing clean coastal air, right? Think again.

Chemists at UC San Diego have measured for the first time the impact that dirty smoke from ships cruising at sea and generating electricity in port can have on the air quality of coastal cities.

The scientists report in this week’s early online edition of the journal Proceedings of the National Academy of Sciences that the impact of dirty smoke from ships burning high-sulfur fuel can be substantial, on some days accounting for nearly one-half of the fine, sulfur-rich particulate matter in the air known to be hazardous to human health.

Their results have particular significance for the state of California, which will require, beginning next July, that all tankers, cargo and cruise ships sailing into a California port switch to more expensive, cleaner-burning fuels when they come within 24 miles of the coast. Similar international rules requiring clean-burning ship fuels are set to take effect in 2015.

While those regulations are intended to minimize the potential hazards dirty ship smoke may pose to human health and the environment—which some researchers have estimated may be responsible for as many as 60,000 deaths worldwide and a cost to the U.S. economy of $500 million a year—no one knows the actual impact of ship smoke. The reason is that air quality experts have been unable to quantify the specific contribution of ship smoke to the air pollution of coastal cities—until now.

“This is the first study that shows the contribution of ships to fine particulates in the atmosphere,” said Mark Thiemens, Dean of the Division of Physical Sciences and a professor of chemistry and biochemistry at UCSD who headed the research team. “Ships are really unregulated when it comes to air pollution standards. What we wanted to find out was the contribution of ships to the air pollution in San Diego. And what we found was a surprise, because no one expected that the contribution from ships of solid sulfur-rich particles called primary sulfate would be so high.”

Primary sulfate, or SO4, is produced when ships burn a cheap, sulfur-rich fuel called “bunker oil.” Most of the sulfur emitted by ships burning bunker oil is released as sulfur dioxide, or SO2, a gaseous pollutant which is eventually converted to sulfate in the atmosphere. But although SO4 may be a smaller component in ship emissons, the scientists say, these primary sulfate particulates are particularly harmful to humans, because they are especially fine microscopic particles, less than 1.5 microns or millionth of a meter in size. As a result, they can travel extremely long distances because they stay in the atmosphere for longer periods and, unlike bigger dust grains and particles that are removed by the body when breathed, remain in the lungs.

“The importance of primary sulfate is usually ignored in assessments of the impact of ship emissions on air quality because less than 7 percent of all sulfur emitted by ships is found in primary sulfate particles,” said Gerardo Dominguez, a postdoctoral researcher at UCSD and the first author of the paper. “But our results suggest that this component of ship emissions is important and should not be ignored in the future. Knowing how much sulfate from ships is in the air will also allow us to better understand what happens to the other 93 percent of sulfur emitted by ships.”

Working with Thiemens, Dominguez developed a chemical fingerprinting technique that allowed the scientists to distinguish primary sulfate from ship smoke from the tailpipe emissions of trucks, cars and other sources. This was done using an oxygen-isotope technique developed by Thiemens that allows scientists to determine the signature of sulfate molecules made in the atmosphere. The researchers discovered that primary sulfates from ship engines incorporated molecular oxygen (the type we breathe in to live) and are easily distinguished from primary sulfates from car and truck diesel emissions.

Sampling air at the end of the pier at the UC San Diego’s Scripps Institution of Oceanography in La Jolla, the scientists found that the smoke from ships contributed as much as 44 percent of the sulfate found in fine particulate matter in the atmosphere of coastal California. On the days when the proportion of ship sulfate approached one-half of the fine particulate matter, the scientists determined from wind direction and speed calculations that ships burning high sulfur fuel in the Los Angeles, Long Beach and San Diego ports were a major influence.

“We found that in San Diego, the Port of Los Angeles can be a significant influence on air quality because these fine particulates can travel so far,” said Dominguez.

The researchers said the chemical fingerprinting techniques they developed in their study for ship primary sulfur emissions should assist the California Air Resources Board as well as regulators in other states and countries monitor the impacts of ships off their coasts as new restrictions on bunker oil burning by ships are implemented.

“This will tell us whether California’s new regulation requiring cleaner burning fuel 24 miles off the coast is having the effect it’s intended to have,” said Thiemens. “And because a large part of the world’s population live in major cities with shipping ports—such as New York City, San Francisco, Hong Kong, Houston, and Singapore—and global shipping is expected to increase in the decades to come, this should help policy makers around the world make more informed decisions about improving the health of their citizens.”

Other UCSD researchers involved in the study were chemist Terri Jackson, graduate student Lauren Brothers and undergraduate students Burton Barnett and Bryan Nguyen. The research project was financed by grants from the California Air Resources Board, the Camille and Henry Dreyfus Foundation, and the UC Office of the President.

Gebrselassie Rues Marathon Pull-Out

‘I was here in February, I didn’t see no blue sky’

Agencies – Updated on Aug 19, 2008

Marathon world record-holder Haile Gebrselassie regrets pulling out of the race over fears that Beijing’s air pollution would damage his health. But he has not discounted running in London in 2012.

“I’m surprised. What do you expect from me? I was here in February, I didn’t see no blue sky,” the Ethiopian runner said yesterday with the sun shining in a slightly hazy sky. Asked if he was sorry not to be running in Sunday’s marathon, he said: “Don’t push me. Yes.”

Gebrselassie, 35, who suffers from asthma, announced in March that he would not run the marathon and called on China to deal with the pollution, saying it would be a hazard to athletes.

IOC chief Jacques Rogge said last year that endurance events could be rescheduled if efforts to clear Beijing’s polluted skies failed.

As it turned out, the opening days of the Games were marred by smoggy skies but the weather has cleared for the second week.

“It’s really good for everybody, good for all. To keep such clean air, that’s fantastic,” Gebrselassie said.

Gebrselassie ran in the men’s 10,000m on Sunday, an event in which he has twice won a gold medal. He finished in sixth place, behind fellow Ethiopians Kenenisa Bekele and Sileshi Sihine, who took gold and silver respectively.

“Getting sixth in the 10,000m, it was not bad,” he said. “The only problem I had yesterday was just the last 250m, the last 300m. I have no more sprint. My training is mostly for a marathon.”

He said he may return to the 10,000m and is also keen to run in the marathon in London in the 2012 Games even though he will be 39 years old.

Gebrselassie set the world record in Berlin last year. He will return to Berlin on September 28 to try to break his marathon record of two hours, four minutes and 26 seconds, before turning his thoughts to London. He said: “I have no plans to stop running, I want to run for at least the next 10 years.

“My next competition is the Berlin marathon, I know the course well because I have run it twice. I know where I have to push the pace, that is why I do well there.”

Can he lower his world record there? “It’s a secret”, replied the Ethiopian who was 10,000m champion in 1996 and 2000.

In his absence, Gebrselassie believes triple London marathon winner, Martin Lel will be favourite on Sunday.

“It is very difficult to say who will win, but the Kenyans are strong,” he said. “Martin Lel is a good bet, but it’s an open field and you just never know.”

Gebreselassie was at the Bird’s Nest stadium to see Liu Xiang withdraw from the men’s 110m hurdles with a foot injury yesterday. Gebreselassie said he had sympathy for the Chinese athlete, who was under tremendous pressure to win gold on home soil.

He said: “Liu Xiang is obviously very sad and I can understand his pain.

“It is painful for him, but the pain is not in his leg. Where is the pain? It’s up here,” said Gebrselassie, pointing to his head.

“It’s bad luck, not just for Liu Xiang or for China, but for everyone. We all wanted to see the best race between him and Cuba’s Dayron Robles.

“The race won’t happen but that unpredictability is one of the good things about sport.”

Reuters, Agence France-Presse

Ship Pollution In Ports On Rise

Tuesday, August 19, 2008 – Houston Business Journal – by Greg Barr

Dirty smoke from ships cruising at sea and while running engines in port in order to generate electricity affects the air quality of coastal cities like Houston, according to California researchers.

Scientists from the University of California at San Diego report in the online edition of the Proceedings of the National Academy of Sciences that the impact of dirty smoke from ships burning high-sulfur fuel can be substantial, on some days accounting for nearly one-half of the fine, sulfur-rich particulate matter in the air known to be hazardous to human health.

Until now, air quality experts have been unable to quantify the specific contribution of ship smoke to the air pollution of coastal cities.

“Ships are really unregulated when it comes to air pollution standards. What we found was a surprise, because no one expected that the contribution from ships of solid sulfur-rich particles called primary sulfate would be so high,” said Mark Thiemens, dean of the division of physical sciences and a professor of chemistry and biochemistry at UCSD.

Primary sulfate, or SO4, is produced when ships burn a cheap, sulfur-rich fuel called “bunker oil.” Although more sulphur is typically found in other particles produced by ships, SO4 particulates are particularly harmful to humans because they are especially fine microscopic particles that can remain in the lungs. The tiny particles can also travel long distances.

The scientists developed a chemical fingerprinting technique that distinguished ship smoke primary sulfate from the tailpipe emissions of trucks, cars and other sources. These techniques should help regulators in other states and countries monitor the impact of ships off their coasts as new restrictions on bunker oil burning by ships are implemented, the researchers said. International rules requiring clean-burning ship fuels are set to take effect in 2015.

“Because a large part of the world’s population live in major cities with shipping ports — such as Houston, New York City, San Francisco, Hong Kong and Singapore — and global shipping is expected to increase in the decades to come, this should help policy makers around the world make more informed decisions about improving the health of their citizens,” Thiemens said.

Merrill’s Green Financier Sees Mission In Emissions

Abyd Karmali’s role in carbon trading could help save planet

Eric Ng – Updated on Aug 18, 2008 – SCMP

Climate change and global warming have become hot topics as more extreme weather – from droughts to cyclones – is witnessed across many regions of the world.

The drive to reduce greenhouse gases – and prevent what many fear will be a global catastrophe – is creating increasingly sophisticated emission trading schemes and attracting the attention of the world’s biggest finance companies.

Abyd Karmali, appointed global head of carbon emissions of Merrill Lynch in August last year, has a ringside seat to the unfolding developments. A member of a new breed of environmental financiers, he is responsible for developing carbon-related businesses at the United States-based investment banking giant.

Major investment banks have set up carbon emission trading desks and investment products in recent years to tap the fast-growing market. Emission trading allows companies to buy and sell permits for emissions or credits for reductions in emissions of certain pollutants.

Prior to joining Merrill Lynch, the 40-year-old Briton worked for climate change consultancy IFC International in Washington, Toronto and London, where he served as European managing director. From 1996 to 1997, Mr Karmali was climate change officer at the United Nations Environment Programme’s (UNEP) Industry office in Paris where he worked on negotiations on the landmark Kyoto Protocol. He was recently elected president of the Carbon Markets and Investors Association, a carbon finance industry body.

The emission trading industry is set for big changes. Reduction commitments under the Kyoto Protocol are due to expire in 2012 and negotiators want to seal a new pact at a United Nations conference in Copenhagen in December 2009.

Bringing on board major polluters such as the US, China and India is widely believed to be the key to a global deal and prevention of catastrophic fallout from climate change.

In addition, more signatories to the global emission reduction pact will bring about opportunities for more trading of emission rights, which have become an investment asset on their own, besides being a compliance tool.

In his spare time, the African-born Mr Karmali has volunteered to work on projects for development agencies such as the Aga Khan Development Network and Focus Humanitarian Assistance Europe Foundation. These organisations provided him with a scholarship to attend the Massachusetts Institute of Technology (MIT). London-based Mr Karmali holds a Master of Science degree in technology and policy from the MIT. His hobbies include running, football, world music, adventure travel and gastronomy.

You have had a 17-year career in climate change and carbon markets. What drove you to this industry in the first place?

My interest in climate change stemmed from a landmark book published in 1987 called Our Common Future, which was the report of the Brundtland Commission on Sustainable Development. The report made a compelling case for a need to shift to a more sustainable mode of development and began to identify the adverse impacts on the environment under a business-as-usual scenario. During my undergraduate degree I discovered that I was interested not so much in pure engineering but in the social and market dimensions of technology and this led to my doing the masters programme in technology and policy at MIT.

You participated in the Kyoto Protocol negotiations during your stint in Paris. What was your role and most memorable experience in the Kyoto Protocol negotiations in 1996-97?

The negotiations in Kyoto were incredibly intense and came close to a complete breakdown on several occasions, particularly on the last night. As a UNEP person rather than a country delegate, my role was to work with several government delegations to improve understanding about the key technical and policy issues. I was in a privileged position to be sitting at the UNEP desk during the early morning drama and was present when the deal was reached at 6am on December 11, 1997.

How has your upbringing affected your views?

Perhaps by virtue of being born in Africa of Asian ancestry with parents who instilled in me a strong sense of social consciousness, having my formative education in Europe and obtaining significant professional experience in North America, I have been able to develop an international perspective. This has also attracted me to work on such a global issue as climate change that requires solutions to be designed across disciplinary, cultural and geographic boundaries.

What is Merrill Lynch’s role in the carbon emission rights market?

We work with different types of buyers such as those that need to comply with emission restrictions in Europe and Japan. We can also sell to investors who are interested in a portfolio of different categories of carbon credits. We have credits from Chinese wind farms to Russian natural gas pipelines emission reduction projects. You can create a portfolio representing different carbon risks.

Merrill has launched the “Green & Gold” initiative to drive proactive voluntary emission reduction. Companies tend not to spend a lot on emission reduction until they are required to do so. How do you convince companies to buy into the carbon strategy concept? As there is little or no regulation over voluntary emission offset programmes launched by corporates, how can consumers trust what they are told when they buy such emission reduction add-ons to, say, their air tickets?

This is true but we also think that there are a growing number of companies which are looking to take proactive action to reduce emissions, including through buying carbon offsets because of pressures from consumers and because of the opportunity to develop a leadership position in their sector. Merrill Lynch’s view is that carbon strategy is becoming an area where companies increasingly have to compete, just as they do on choice of technology, research and development efforts, labour costs, and supply-chain management.

How mature is carbon credits as an investment class? Carbon credits are being aggregated into asset-backed investment products as did subprime mortgages. Are there risks of over-securitisation in this nascent sector?

Carbon is a relatively new commodity that has been around only since 2005. Its growth trajectory is quite remarkable, with a market value of US$65 billion last year, possibly reaching US$1 trillion in 2020 if all of the right scenarios play out. But it is more policy-driven than any other commodity we have ever seen. There is massive policy uncertainty in this market.

We think it’s unlikely to appeal to a really broad set of investors. It’s fine for sophisticated investors who are aware of the policy risks. We have developed structured emission products with those investors in mind, but it’s unlikely to reach a point where it is something which can be distributed to the mass market.

Do you think carbon will one day become a hot investment product given the increase in carbon emission awareness?

Sure. The reason why Merrill has developed a global carbon price index, renewable energy index, energy efficiency index and carbon leaders index, is because we realise that institutional investors want to pursue carbon as an individual asset class. It appears from our analysis that carbon as an asset class is not well correlated to many other investments, so from a portfolio diversification point of view, it makes a lot of sense.

This is particularly so given carbon pricing affects the value of other asset classes such as stocks of listed companies. Companies can be directly affected, such as those in the power, cement, steel, paper and refining sectors, or indirectly affected, like aluminium smelters that use a lot of electricity.

Merrill Lynch has invested US$9 million in a deforestation prevention scheme in Aceh, Indonesia. Can such a project be implemented in China where deforestation is also a big problem?

We have had some preliminary discussions with mainland government officials about the interest in doing such a project.

This is under the so-called “Reduced Emissions from Deforestation and Degradation” category of project with the potential to generate carbon credits under a financial mechanism being discussed by the United Nations.

Eventually, this may be fully fungible with carbon credits from the UN’s Clean Development Mechanism scheme.

Why is it easier to start in smaller nations?

This is an area where we need strong government support. There needs to be clarity about legal title of carbon credits to be generated. One of the biggest questions here is who owns the carbon rights to a particular area, and are governments willing to grant licences for credits to be sold to external counter-parties. In Brazil, there were different opinions between central and state governments about who owns carbon rights in the Amazon. While Merrill is interested in being involved, we don’t think it’s the right time due to lack of clarity about who owns title. Aceh has some degree of autonomy, which makes it an easier party to work with.

The Kyoto Protocol will expire in 2012. How likely is it that some form of agreement will be struck by the December 2009 target for mandatory and voluntary carbon emission reductions to continue?

Our view is that we are likely to see a breakthrough in the international negotiations in December 2009 in Copenhagen, but we are also realistic that that would be only one year after a new US president will be in office. Maybe it is more appropriate to look toward 2010 for an agreement. That said, we are of the view that the carbon market cannot afford a gap period between the end of the first commitment period ending 2012 and whatever happens next, be it a second commitment period of Kyoto or an alternative agreement. It would be a disaster if there is this gap during which carbon credits have no value. We are reasonably optimistic about the prospect of a breakthrough partly because Australia has ratified Kyoto Protocol. It is probably the country experiencing the physical impact of climate change the most. China understands its vulnerability with regard to the impact of change in precipitation on agricultural productivity, and the potential of the eastern coast being affected by rising sea levels. We also believe India understands its vulnerability, and what a shift in monsoon timing and location would do to Indian infrastructure.

What if some small nations hold out and do not join the eventual agreement? Are you worried that pollution-prone activities will move to these nations?

This is a valid concern, but given a small number of large nations are responsible for most of the emissions, this is not a major problem. Also, economic activities shift around the globe not just based on costs, but also technology, legal environment, labour cost, productivity and environmental standards.

Do you think the United Nations’ Clean Development Mechanism (CDM) that allows developed nations to help finance carbon emission reduction projects in developing ones will be retained?

There is consensus that a carbon market mechanism absolutely has to be at the core of a global emission reduction agreement, and that the market mechanism does deliver emission reduction in a cost-effective way. I can’t think of any country that would oppose the continuation of CDM or emission trading.

How do you assess the success and shortcomings of the CDM?

There is no question that CDM is imperfect. It’s a very new mechanism. Inevitably there are some teething problems. But we are overall very satisfied with the market mechanism. One of the mechanisms Merrill and other financial institutions are advocating is that there be some kind of private sector-oriented advisory board, given this is a US$65 billion market. This is something the CDM executive board recognises. The board is primarily made up of government officials who may have little experience in implementing projects on the ground, and also little experience from the financial perspective.

What other changes do you envision should the CDM be retained?

I see increasing performance benchmarking, especially for the larger developing nations like China and India. This will mean higher qualifications requirements for projects and a reduction in the number of credits granted to these nations. There was precedence. In the phasing out of ozone-depleting substances under the Montreal Protocol, initially individual projects were proposed, and each was evaluated painstakingly. Eventually, the administrators realised they did not have enough resources to evaluate each project and also wanted to raise the bar. They came up with benchmarks for each project category and it worked.

Many countries and regions in Asia are vying to set up carbon exchanges. Are there significant first-mover advantages and can only a few survive?

One of the challenges to figuring out an answer for this is that there is a heterogeneous set of nations. Japan is a signatory to Kyoto Protocol. Australia is a recent signatory but will be the first country which will have an emission trading scheme within the country. You also have small country like New Zealand eyeing to set up an exchange. Then there are China and India, big sellers of carbon credits under CDM, as well as regional trading hubs like Singapore and Hong Kong. Our view is that initially you will probably see several attempts to have exchanges.

Do you think Hong Kong’s proximity to the world’s largest carbon credit generating market, mainland China is an advantage?

It is difficult to say whether geographical proximity actually makes any difference. It’s more a function of market participants’ comfort with the rules of the exchanges, the clearing mechanism and the contracts. For example, the European Carbon Exchange is a virtual platform that is not physically situated in any one place. Similarly, New York’s Nymex Green Exchange has managed to attract reasonable amount of liquidity of the European Union’s emissions allowance market without even being in Europe.

Do you think Hong Kong will succeed in having a successful carbon exchange?

Hong Kong has a well-established track record for being a regional financial centre. If I was to look into the crystal ball, I’d say that Hong Kong and Singapore would be the natural best prospects to be the regional emission exchange hubs. But part of it depends on the degree to which how they link emissions to other related commodities.

Technology’s Role In Clean, Green Buildings

Barbara Chiu – Updated on Aug 18, 2008 – SCMP

The operations of Hong Kong’s high-rises account for about 24 million tonnes in annual greenhouse gas emissions. Hong Kong’s first guidelines for conducting carbon audits on buildings were officially launched last month. This is a great step towards a greener environment, which will enable users and managers of buildings to calculate the amount of greenhouse gas their buildings emit. It will lend further impetus to the government’s emissions-reduction campaign.

A carbon audit will be conducted on the Central Government Complex at Tamar and private developers have also been encouraged to do the same.

Hong Kong, with its high proportion of high-rise buildings, is typically considered to be heavily reliant on electricity. Developers are extremely sensitive to initial capital costs, and prefer only the most established technologies and building methods. Other concerns include reductions in efficiency and a decline in our stature as a world-class centre to do business.

However, this is a misconception. The fact is that the majority of our high-rises are of relatively recent origin. Most can easily be technology-enabled. It is, after all, technology that can help developers and building managers reduce emissions without sacrificing efficiency or performance.

Most of the energy consumed in Hong Kong’s buildings actually goes towards building operations, powering heating and air-conditioning systems, electric lighting, and information and communication technology equipment. The best method for improving building performance is through the integration of systems. Smart buildings equipped with sensors can monitor the amount of sunlight coming into a room and adjust indoor lighting accordingly, or turn off air conditioning and lights when rooms or floors are empty. They can oversee other functions such as security, fire suppression and lift operations.

Buildings that are integrated in this way – so-called “connected” buildings – are both smart and green. Integrating information and electrical technologies can help building owners and operators boost environmental performance dramatically. In the case of new buildings, this has the benefit of lowering building operating expenses, reducing land use, increasing energy efficiency and cutting greenhouse gas emissions.

Collaborative technologies create virtual offices or mobile spaces that allow workspaces to be redesigned, reducing square footage per employee, and per capita use of equipment and IT infrastructure. Wi-fi technology can be used to manage air conditioning and reduce cabling, leading to reduced electricity consumption.

As with other initiatives with ramifications for society as a whole, there is a need for enlightened public-private partnership in green initiatives related to buildings.

With the right public policies and industry initiatives, our buildings could really help clean up the air – and we wouldn’t even notice.

Barbara Chiu is general manager of Cisco (Hong Kong and Macau)

Newly Detected Air Pollutant Mimics Damaging Effects Of Cigarette Smoke – Eurekalert

Eurekalert –  August 18, 2008

A previously unrecognized group of air pollutants could have effects remarkably similar to harmful substances found in tobacco smoke, Louisiana scientists are reporting in a study scheduled for presentation today at the 236th National Meeting of the American Chemical Society. Inhaling those pollutants exposes the average person up to 300 times more free radicals daily than from smoking one cigarette, they added.

The discovery could help explain the long-standing medical mystery of why non-smokers develop tobacco-related diseases like lung cancer, said H. Barry Dellinger, Ph.D., the Patrick F. Taylor Chair of Environmental Chemistry at Louisiana State University in Baton Rouge.

“Free radicals from tobacco smoke have long been suspected of having extremely harmful effects on the body,” Dellinger said. “Based on our work, we now know that free radicals similar to those in cigarettes are also found in airborne fine particles and potentially can cause many of the same life-threatening conditions. This is a staggering, but not unbelievable result, when one considers all of diseases in the world that cannot currently be attributed to a specific origin.”

Scientists have long known that free radicals exist in the atmosphere. These atoms, molecules, and fragments of molecules are highly reactive and damage cells in the body. Free radicals form during the burning of fuels or in photochemical processes like those that form ozone. Most of these previously identified atmospheric free radicals form as gases, exist for less than one second, and disappear. In contrast, the newly detected molecules — which Dellinger terms persistent free radicals (PFRs) — form on airborne nanoparticles and other fine particle residues as gases cool in smokestacks, automotive exhaust pipes and household chimneys. Particles that contain metals, such as copper and iron, are the most likely to persist, he said. Unlike other atmospheric free radicals, PFRs can linger in the air and travel great distances.

“You basically have to be in certain places to inhale transient gas-phase radicals,” Dellinger said. “You’d have to be right next to a road when a car passes, for example. Whereas we found that persistent radicals can last indefinitely on airborne fine particles. So you’re never going to get away from them.”

Once PFRs are inhaled, Dellinger suspects they are absorbed into the lungs and other tissues where they contribute to DNA and other cellular damage. Epidemiological studies suggest that more than 500,000 Americans die each year from cardiopulmonary disease linked to breathing fine particle air pollution, he says. About 10 to 15 percent of lung cancers are diagnosed in nonsmokers, according to the American Cancer Society. However, Dellinger stresses additional research is necessary before scientists can definitely link airborne PFRs to these diseases.

Smokers likely get a double dose of PFRs every time they light up, Dellinger said, since tobacco smoke also contains these molecules. In the five minutes it takes a typical smoker to finish a cigarette, he or she will breathe in an equal number of PFRs from the air and the smoke itself, likely compounding the damaging effects.

236th National Meeting of the American Chemical Society