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September, 2008:

Pollution Can Be A Risky Business

Louis Beckerling – Updated on Sep 16, 2008 – SCMP

Retail investors can get access to the emissions trading market by buying the shares of listed companies that either trade in carbon credits or invest in companies that help polluters reduce their emissions.

However, such investments are inherently risky, warn investment advisers, as indicated by the volatile price of carbon credits traded under the European Union Emissions Trading Scheme (ETS), and the performance of several counters listed on the London Stock Exchange’s Alternative Investment Market.

Following its inception in 2005, as a market on which to trade carbon credits in a bid to put a price on pollution and reduce carbon dioxide emissions, the ETS exploded into activity, providing trading opportunities for credits owned by about 12,000 carbon emitters across Europe.

In its first year of operation, 362 million tonnes of CO2e (carbon dioxide emissions) were traded for €7.2billion (HK$81.45 billion). In the flurry of activity the price of a tonne of CO2e reached a peak of about €30 by the spring of 2006.

But the market was vulnerable to protectionist forces.

“It seemed to work, but brokers had not counted on the politics. Various national governments, anxious to protect their domestic industries, generously issued emission credits for free. This flooded the European market with too many credits,” says Allianz Knowledge, a research unit of global insurer and asset manager Allianz Group, that focuses on climate change, microfinance and demographic change.

The result was a meltdown in the value of the credits as the price of a tonne of CO2e plunged to below €10 within weeks, and by September last year to just 10 euro cents. Alarmed at the prospect of giving polluters a free pass at such prices, and what that would mean for its commitments to reduce carbon emissions under the Kyoto Protocol, European governments then set an EU-wide CO2e cap of 2.08 billion tonnes for 2008-2012 – 10 per cent below the aggregate allowances sought by member states – and pledged to reduce the issue of free credits.

That sent the price of a tonne of CO2e back to €23 by the end of last year, and analysts now expect the price to reach about €30 to €35 per tonne this year, Allianz says.

The moral of the story for those intending to invest in Australian Emission Units? Caveat emptor.

Carbon Copy

Australia is the latest country to get into this potentially rewarding asset class but the fluctuation in carbon credits suggests a cautious approach

Louis Beckerling – Updated on Sep 16, 2008 – SCMP

Energy suppliers are getting the message that they will no longer enjoy a free pass to pollute the atmosphere as a regulatory trend to put a price on the emission of carbon dioxide gathers momentum around the world. Markets are being left to establish what those prices should be so investors have a new and potentially rewarding asset class in which to invest. But the roller-coaster ride taken by the price of carbon credits traded since 2005 under the European Union Emissions Trading Scheme (ETS) suggests they should proceed with extreme caution.

The latest country planning to join the club of carbon trading nations in Europe is Australia, which aims to have an emissions trading system in place within two years. By the time it is up and running in 2010, notes financial consultancy Ernst & Young, the new market will have yielded a number of investment opportunities.

“With the scheme commencing in 2010, we expect a range of new products and services to emerge in the next few years,” says Ernst & Young in a report on the proposed scheme.

Also on the cards, it predicts, is the emergence of derivative investment products based on the carbon trading permits that will be required by polluters. Australia’s largest energy provider, Australian Gas Light (AGL), has already created such a derivative instrument. It did so by taking a punt on what price the market might place on an “Australian emissions unit” that forms the cornerstone of the proposed trading system and will be equivalent to one tonne of C02e or carbon dioxide emissions.

Just weeks after the government signalled its firm intention to push ahead with an emissions trading scheme by releasing a detailed timetable on March 17, AGL announced that its operating arm AGL Hydro Partnership had sold 10,000 tonnes of AETUs at a price of A$19 (HK$128) per tonne for settlement on February1, 2012.

The forward contract has been designed to achieve a number of outcomes, the group says. “First, we will be able to provide some certainty for customers that fall within AGL’s `Major Customer’ portfolio that wish to lock in retail energy pricing now. Second, by providing the opportunity for electricity market participants and other wholesale parties to access a carbon price, it may enable some additional liquidity to be restored in forward electricity contracts beyond July 2010.”

With much of the detail yet to emerge and the business lobby either opposed to the scheme or intent on having it delayed, there has been no trade in the exploratory contract.

But with the environmentally conscious Australian public solidly behind the government’s initiative and the latest study by the United Nations Environment Programme (Unep) providing encouraging signals to the environmental lobby that energy companies are accepting their responsibilities, there is little doubt that the government will push ahead with its plans.

Climate change concerns, growing support from world governments, rising oil prices and ongoing energy security concerns combined to fuel a record-setting year of investment in the renewable energy and energy efficiency industries in 2007, Unep says in a report released on July 1.

Executive director of Unep Achim Steiner says: “The clean energy industry is maturing and its backers remain bullish. These findings should empower governments – both north and south – to reach a deep and meaningful new agreement by the crucial climate convention meeting in Copenhagen in late 2009.”

The report titled Global Trends in Sustainable Energy Investment 2008 was prepared by Britain-based New Energy Finance for Unep’s Paris-based Sustainable Energy Finance Initiative and finds that more than US$148 billion in new funding entered the sustainable energy sector globally last year – up 60 per cent from 2006.

Wind energy again attracted the most investment (US$50.2 billion last year), but solar power grew most rapidly – attracting US$28.6 billion of new capital and growing at an average annual rate of 254 per cent since 2004, driven by the advent of larger project financings, it notes.

“Just as thousands were drawn to California and the Klondike in the late 1800s, the green energy gold rush is attracting legions of modern day prospectors in all parts of the globe,” says Unep’s Mr Steiner, who is also a United Nations undersecretary general. The “three pillars” outlined in the Australian government Green Paper published on July 8 and on which its climate change policy will be based, will be strategies to reduce Australia’s greenhouse gas emissions – to adapt to climate change that cannot be avoided and to help shape global solutions. It has committed to reducing Australia’s greenhouse emissions by 60 per cent by 2050 and says an emissions trading system is central to meeting that target.

Based on a formula yet to be calculated, a stock of carbon permits known as Australian Emissions Units (AEU) will be established with each unit registered with a unique ID number and equivalent to one tonne of CO2e. Controversially – given the experience in Europe – it has announced that qualifying big polluters will be allocated a certain number of permits free with the rest to be sold at quarterly auctions.

Commercial farmers will be off the hook at least until 2015 and the big polluters or Emissions Intensive Trade Exposed entities will be given “transitional assistance” yet to be spelled out in detail for the first 10 years after the scheme comes into operation in 2010.

Once permits have been acquired via auction or allocation, holders will be free to hold or sell permits on an emissions trading market likely to be operated by the Australian Stock Exchange.

In a presentation to potential players made in June (How the financial markets will service the forthcoming ETS), the exchange said the role of the market would be to provide liquidity, price discovery, risk transfer and the clearing and settlement of trades. It envisages the trade of ASX Emission Permit Futures in lots of 1,000 carbon emission permits, with each permit being an entitlement to emit one tonne of carbon dioxide equivalent gas.

Corporate Australia, not surprisingly, has expressed alarm at the prospect of a having to pay for emissions. Business-oriented think tank The Australia Institute warns that cost increases arising from the introduction of an emissions trading system may amount to US$1.4 billion a year.

But, with the voting public solidly behind the plan, business appears to be bracing itself for the introduction of the scheme.

Queries Over Pollution Fight

Updated on Sep 16, 2008 – SCMP

Can any of the readers out there give any hard facts as to the extent of just how far our government and the regional mainland government went to clear the air during the Olympics?

Whatever they did, it worked.

It has proven to be cosmetic: today’s air quality has returned to the usual filth we have become sadly accustomed to.

I had heard that our regional power companies had been asked to use a cleaner fuel: did they?

Second, how many factories closed, for what period, and what was the pollution cut-off limit?

Alastair Robins, Lamma

Pollution Is A Threat To Delta’s Development, Vice-minister Says

Shi Jiangtao in Shenzhen, SCMP – Sep 13, 2008

Severe pollution in the Pearl River Delta is threatening to hurt the area’s social and economic development, a top mainland environmental official has warned.

Pan Yue, vice-minister of environmental protection, said although the delta region remained an economic powerhouse, contributing more than 10 per cent of the country’s gross domestic product last year, it had also become one of the mainland’s most polluted areas.

“The Pearl River Delta has paid a great price in terms of environment and resources for the economic miracles it has created,” Mr Pan told the Green China Forum in Shenzhen yesterday.

The forum was co-hosted by the Hong Kong Business Environment Council and the China Environmental Culture Promotion Association.

Guangdong’s emissions of sulfur dioxide – the main cause of acid rain – last year accounted for 5 per cent of the country’s total emissions while chemical oxygen demand, a measurement of water pollution, was also high, Mr Pan said.

Guangdong’s vice-governor, Lin Musheng, admitted that air pollution in the region, including Hong Kong and Macau, had been getting worse.

Although authorities have spent more than 30 billion yuan (HK$34 billion) on cleaning up the Pearl River, pollution at the river’s mouth shows little sign of abating.

Lax regulation, poor law enforcement and powerful interest groups are often blamed for the mainland’s widespread pollution.

“The environment of the Pearl River Delta is at a critical juncture,” Mr Pan warned. “Pollution problems will put a heavy strain on the socio-economic development of the entire region.”

The environmental official also questioned the concentration of energy-intensive and heavily polluting industries in the region.

According to Mr Pan, Guangdong and Guangxi had made separate plans to develop chemical, steel and papermaking industries along the coast of Beibu Bay.

“Have they gone through an environmental assessment of the region? Do we know whether the environment has the capacity to afford such redundant development?” he asked.

He said the campaign to control pollution in Guangdong, home to the country’s first special economic zones, would have a big impact on other regions struggling to find a balance between economic growth and environmental protection.

Fan Gang, director of the National Economics Research Institute and a central bank adviser, said the price of global competitiveness and soaring economic growth was the huge environmental costs that now had to be dealt with.

Professor Fan said mainland enterprises should not pin their hopes on avoiding their environmental responsibilities.

“A key step for the government is to increase penalties for enterprises that break the law,” he said.

High Air Pollution Indices Forecast

Hong Kong’s Information Services Department – September 12, 2008

The Environmental Protection Department warns the Air Pollution Index will remain higher than normal in the coming days due to light wind conditions in Hong Kong.

The department recorded very high indices of 125, 102 and 108 at the Tung Chung, Yuen Long and Central-Western general air quality monitoring stations at 3pm today due to high ozone concentrations.

At the roadside, the index at Central station also reached 115 due to high concentrations of nitrogen dioxide.

Under the combined effects of a continental airstream and Typhoon Sinlaku near Taiwan, the weather over south China is fine and hot with light wind. Air pollutants in Hong Kong and the Pearl River Delta region are trapped due to the light wind, and the sunny and hot weather is causing the photochemical reaction of pollutants to form ozone in the region.

At the roadside, pollutants emitted from vehicles cannot disperse effectively under the calm conditions. With the elevated background ozone concentrations, the nitrogen oxides emitted from vehicles are readily oxidised to form nitrogen dioxide.

The Hong Kong Observatory forecasts the weather will remain fine and hot with light wind in the next few days. Dispersion of air pollutants will still be poor and photochemical smog reactions will continue to be active.

With the index in the very high range, people with heart or respiratory illnesses should reduce physical exertion and outdoor activities. Click here for latest air pollution index readings or call 2827 8541.

Greens Urge Pollution Shake-Up

Joyce Ng – Updated on Sep 12, 2008

Greens have urged the government to step up the tightening of air-quality measuring standards – along international guidelines – after records in the past two months show air quality remains unsatisfactory.

The administration said it had been carrying out a review and would finalise the new measuring standards next year.

Three Greenpeace members yesterday climbed to the top of an air-monitoring station in Central and unveiled banners urging the government to revise its standards to reflect those introduced by the World Health Organisation in 2006.

The group found that in the past two months there had been 44 days when at least one monitoring station had recorded 24-hour-average concentrations of particulate matter that exceeded the WHO standards.

On one day in August, concentrations surpassed WHO standards in all but one of the 14 monitoring stations. In Causeway Bay, the measurement was 1.86 times the standard, but the official index classified the area as only having a “medium to high” level of pollution.

“The government standard, established in 1987, is too loose and outdated, failing to reflect the truth and protect our health,” Greenpeace campaigner Prentice Koo Wai-muk said.

Mr Koo urged the government to monitor minute particulates, known as PM-2.5, which research suggests can penetrate deep into human lungs and have more severe health effects than larger particulates.

In June last year, the Environmental Protection Department commissioned a study to review the air- quality objectives and develop a long-term management strategy.

A spokesman said the study was expected to be completed by the end of this year, after which the department would launch a public consultation and finalise the standards. The study would make reference to the WHO guidelines.

The existing index is calculated with reference to seven pollutants, including sulfur dioxide, nitrogen dioxide, respirable suspended particulates, carbon monoxide and ozone.

The WHO has recommended interim targets for governments to meet the more stringent standards progressively.

Air Pollution Can Hinder Heart’s Electrical Functioning

ScienceDaily (Sep. 12, 2008) — Microscopic particles in polluted air can adversely affect the heart’s ability to conduct electrical signals in people with serious coronary artery disease, researchers reported in Circulation: Journal of the American Heart Association.

In a recent study of 48 Boston-area patients, all of whom had coronary artery disease, 24-hour Holter monitors were used to examine electrocardiograms for the conductivity change called an ST-segment depression, which may indicate inadequate blood flow to the heart or inflamed heart muscle.

The average 24-hour levels for all pollutants included in the analysis were below accepted or proposed National Air Quality Standard thresholds, meaning patients were breathing air considered healthy.

“We found that an elevation in fine particles, from non-traffic as well as traffic sources, and black carbon, a marker for traffic, predicted ST-segment depression,” said Diane R. Gold, M.D., M.P.H., the study’s senior author and an associate professor of medicine and environmental health at Harvard University in Boston, Mass. “Effects were greatest within the first month after hospitalization, and for patients who were hospitalized for a heart attack or had diabetes.”

Previous studies have documented that exposure to road traffic can trigger heart attacks, and that particulate air pollution increases the risk for cardiac death or heart attack.

“When coal sales were banned in Dublin, Ireland, and black smoke concentrations declined by 70 percent within the next 72 months, cardiovascular deaths fell by 10 percent,” said Gold, citing a study published in 2002.

The ST-segment changes Gold observed were not associated with symptoms in these patients, all of whom had experienced in-hospital procedures to examine or open up their coronary arteries.

Nevertheless, the findings expand the evidence that air pollution can affect heart health, either through inflaming the heart muscle or through reducing blood flow to the heart. It suggests the need for greater vigilance by physicians and heart patients in the weeks after discharge from the hospital, researchers said.

The American Heart Association and the American College of Cardiology recommend that some heart patients, particularly those who have had a heart attack, delay driving for two to three weeks after leaving the hospital and avoid driving in heavy traffic because of the stress it creates.

“Our study provides additional rationale to avoid or reduce heavy traffic exposure after discharge, even for those without a heart attack, since traffic exposure involves pollution exposure as well as stress,” she said.

The study’s 48 participants had been hospitalized for either a heart attack, unstable angina or worsening symptoms of stable coronary artery disease. Their median age was 57 years, 81 percent were male, 40 percent had suffered a heart attack and 25 percent had diabetes.

Researchers visited the patients two to four weeks after their discharge, and then three more times at approximately three-month intervals. At each visit, a portable electrocardiograph called a Holter monitor recorded the patients’ heart activity for 24 hours. All participants were monitored on the first visit, and 35 had monitoring on more than one visit. Researchers averaged monitor readings over each half-hour, providing 5,979 half-hour observations. They then examined the relation of these ECG measurements with levels of several pollutants, including black carbon, produced by the incomplete combustion of fossil fuels, and particulate matter (PM2.5) of less than 2.5 micrometers (about 1/10,000th of an inch) in diameter.

Researchers obtained the PM2.5 and black carbon readings at a Harvard School of Public Health monitoring site, an average distance of 10.9 miles from the participants’ homes.

Among the study’s findings:

* Increased levels of particular pollution – PM2.5 and black carbon (a marker for traffic exhaust) – were associated with ST-segment depression in the study participants.
* Sulfur dioxide, a pollutant that can have non-traffic sources, also was associated with ST-segment depression.
* No significant correlation was found between ST-segment depression and increased levels of carbon monoxide, but levels of this pollutant were low in this study.
* Patients recovering from a heart attack had greater changes in ST segment depression on electrocardiograms compared to other participants. The key question remains – how breathing air polluted by PM2.5 and black carbon might cause ST segment depression.

“Further research is needed to evaluate whether the pollution-related ST-segment depression that we see is related to increased heart muscle inflammation, reduced oxygen flow, oxidative stress, or increased risk of arrhythmias,” Gold said.

“We think that our findings, which are definitely subclinical, may represent a process that increases clinical risk for people with symptomatic coronary artery disease,” she said.

Co-authors are: Kai Jen Chuang, Ph.D.; Brent A. Coull, Ph.D.; Antonella Zanobetti, Ph.D.; Helen Suh, Sc.D.; Joel Schwartz, Ph.D.; Peter H. Stone, M.D.; Augusto Litonjua, M.D.; and Frank E. Speizer, M.D. Individual author disclosures can be found on the manuscript.

The National Institute of Environmental Health Services, the Environmental Protection Agency, and the National Science Council funded the study.

Higher Risk Of Death For Poor On Bad Air Days

Reuters in Hong Kong – Updated on Sep 11, 2008

Poor people in Hong Kong have a higher risk of death when air pollution is bad, a seven-year study has found.

“The finding is that people living in highly-deprived areas had higher risk of mortality after bad air pollution days,” Wong Chit-ming, an associate professor at the University of Hong Kong’s School of Public Health, said in an interview.

“Most deaths occurred a day after the air pollution index showed a rise,” said Mr Wong, one of the researchers in the study, which was published in Environmental Health Perspectives.

The researchers pored through 215,240 deaths in Hong Kong between 1996 to 2002 from respiratory and cardiovascular causes. They had details on the districts they lived in, the income they earned when they were alive, whether they were single or married and if they lived alone before they died.

The data was compared against air pollution readings in the territory, taking into account four pollutants â nitrogen dioxide, sulphur dioxide, particulate matter less than 10 micrometers in diameter, and ozone.

The researchers found that more deaths occurred in poor neighbourhoods right after air pollution readings shot up.

“These areas have more unemployed people, households earning less than US$250 a month, single-person households, and more people living in shared flats,” Mr Wong said.

Such a phenomenon was not observed in richer neighbourhoods.

Explaining why poorer people were more susceptible, Mr Wong said: “They may smoke more, have less time to exercise, have poorer nutrition, less access to healthcare.”

Idling Engine’s Fouling Hong Kong

On other matters …

Updated on Sep 11, 2008 – SCMP

On the afternoon of September 3, commuters exiting Mong Kok MTR station’s B2 exit were greeted by blasts of hot and polluted air courtesy of the mobile showroom manned by American International Assurance (AIA) and JF Asset Management.

In case your readers have forgotten, in 2006 these companies launched Hong Kong’s first “socially responsible” MPF fund named the Green Fund (“Green fund widens MPF choice”, April 2, 2006). Companies are chosen for their financial performance as well as their “environmental credentials”, as classified by Innovest Strategic Advisers, an independent ratings agency.

These are fine words, but the level of sincerity to environmental protection is obviously nil when the promotion of the AIA-JF funds is carried out via a vehicle whose idling engine is fouling one of Hong Kong’s most congested and polluted streets.

AIA-JF is not alone. I have also seen PCCW, Sony Ericsson and Standard Chartered Bank use similar modified showroom vehicles. These companies have also pledged their commitment to be socially responsible corporate entities. What is more, except for PCCW, such promotions would not be tolerated in the perpetrators’ home countries.

One also has to question the ethics of the management of these companies that encourage young and impressionable staff members to ignore the health risks these promotions pose.

In view of the high levels of congestion on our streets and the ever-declining quality of our air, when can we expect the secretaries for transport and the environment to take action?

In the meantime, concerned citizens can do their bit by lodging a complaint with the authorities every time they spot one of these polluters in their neighbourhood.

Mary Melville, Tsim Sha Tsui

We Can Bring Back Blue Skies

Updated on Sep 11, 2008 – SCMP

It was curious to note some unusually lovely clear blue skies over Hong Kong during the Olympics. It was the best I’ve seen it in 10 years.

The skies are noticeably greyer now. Why? A friend has a textile factory in the Pearl River Delta and told me a lot of factories closed for the Games and more gas was used by Hong Kong power companies to help clear the air pollution. So for those who say it is too hard to fix the pollution, it’s nonsense.

We just need political willpower. The prospect of international shaming worked miracles.

Now we just need to find a way to get our complacent politicians to keep the momentum going and understand that local people deserve clean air, not just visitors with higher standards than ours.

P. Gilbert, Lam Tin