analysis

World hopes for climate policy change

Fourthly, the Supreme Court decision
Massachusetts v EPA, which proved that “inaction
is no option,” demonstrated that reducing
greenhouse gas emissions fell under the scope of
the Clean Air Act.
And finally, the Obama advisors and Congress
understand the connection between economic,
climate and energy policy, Claussen said.

putting policy into action

While the carbon market is a profitable one for
companies cashing in on others’ compliance
needs – and could possibly account for why this
particular conference was so heavily attended,
as banks and other businesses struggle to

US mulls climate policy meet regulatory standards for a new, more pro-
environment administration – how it will all play
out is unclear. If Grumet keeps mum at this stage,
States and industry plan for carbon caps it’s to be expected; but if Obama does not meet
the world’s, let alone most Americans’ expectations
DETAILS OF THE future US climate policy are still hard to come by, but industry and regulators for curbing CO2 emissions, it’s hard to imagine his
are preparing for a dramatic change in direction, which will have implications for North popularity continuing its ascent.
American and global carbon markets. For the first time in years, environmentalists have reason In no industry are policies of the new
to hope: While George Bush refused to sign the Kyoto Protocol, his successor Barack Obama is administration being more carefully monitored
far more climate-friendly. than in the energy and chemical sectors, while
companies such as Dow Chemical and Pacific Gas
Thus, in December, 2009 at the Climate nuclear reactor designs, clean coal and renewable & Electric (PG&E), are already adapting business
Conference in Copenhagen – where Kyoto Protocol energy. strategies to meet environmental demands and
participants meet to decide upon how to extend “President Elect Obama is not opposed to future mandates. Melissa Lavinson, director
the original agreement beyond 2012 – Obama expansion. Whether he’d embrace additional of federal environmental affairs and corporate
could ratify US participation. He could of course expansion, I just don’t know,” said Bingaman. responsibility at PG&E, said that the utility
sign on beforehand, but that’s considered Meeting moderator Eileen Claussen, president is pursuing new infrastructure and innovative
unlikely, given the current US financial crisis and
of the global climate change organisation PEW technology investment. She added that electricity
subsequent world economic fallout. Center, was even more specific. She said that and energy companies should play a role beyond
61% of US voters, according to PEW statistics, the power plant and take a more ‘holistic’ approach
Obama’s environmental advisor
are concerned about capping carbon emissions. that encompasses delivery, consumption and
“I can tell you I am absolutely firm in the infrastructure support.
Claussen is a member of the Council on Foreign
commitment to tell you nothing firm,” quipped
Relations and is former director of the US what’s at stake?
Jason Grumet, one of Obama’s environmental
Environmental Protection Agency’s (EPA’s)
advisors at a recent conference on US carbon According to the 2007 report issued by the
atmospheric programme.
markets. Yet, he said the new administration is Intergovernmental Panel on Climate Change (IPCC)
committed to hitting the ground running on 21 “Building a new green economy must be a global atmospheric concentrations of carbon
January, adding that the Obama team is anxious top three priority for the new administration, ” dioxide, nitrous oxide and methane emissions have
to reverse the present US federal policy, which Claussen said. Then she highlighted five reasons increased dramatically since 1750.
has worked counter to environmental interests. to believe that change is imminent: “Americans One state leading the way in reversing climate
“He [Obama] comes with a tremendous depth of support action on climate [change] – there is a change is California, as famously represented
information to draw from. He will move quickly on growing public understanding that the climate is by its headline-grabbing governor, Arnold
climate change,” Grumet said. in crisis, that it’s reached a tipping point.” Schwarzenegger. Speaking at a session on evolving
While the advisor would not commit to being Secondly, there is growing pressure on regional and world markets, Margret Kim of the
more substantive, others could and were more corporations and states to mandate more Air Resources Defense Board in Sacramento talked
forthcoming. stringent carbon emissions controls. 44 about how the governor’s Global Warming Solutions
For example, Senator Jeff Bingaman, who companies, she said, approve mandatory Act paved the way for other states to follow.
chairs the Senate Energy and Natural Resources requirements for the US, and there is a growing The legislation established the first statewide
Committee, said: “We need to make every effort movement for strong national legislation to put greenhouse gas regulation in the US, mandating
to enact major energy change and climate this forward. 24 states involved in regulatory emission cuts to the 1990 level by 2020, with a
change. [We will] begin with energy legislation… cap-and-trade schemes are presently onboard, clear view that that is not the end point.
a renewable portfolio standard.” He went on to Claussen cited, pointing to the Regional Kim told tce after the event that California will
discuss increased efficiency. “I believe we’ve Greenhouse Gas Initiative (RGGI, called continue to implement the Act “and we are starting
demonstrated in Congress that we can get “Reggie” colloquially) as an example. RGGI is our rule making.” As for unconditional support
together [on this cause].” the first initiative in the US that would make of the new administration, she said California is
When tce asked Bingaman to comment the reduction of greenhouse gas emissions supportive but it would be premature to offer more
on the upcoming administration’s nuclear mandatory. Ten Northeastern and Mid-Atlantic details before Obama even takes office.
policies – a hot button topic with many of the states are on target to cap and then reduce CO2 Perhaps, but the new president might want
environmentalists who elected Obama – Bingaman emissions from the power sector 10% by 2018. to heed an example set by the Golden State: a
pointed to the Energy Policy Act of 2005, which Thirdly, there are very high expectations recent National Resources Defense Council study
he co-authored and which includes a stipulation around the world for the US to step it up. “The points out that if the US were to follow California’s
to expand nuclear capacity. The Energy Policy global community has been very frustrated. If example, this alone would ensure that Kyoto
Act of 2005 authorises loan guarantees for Obama wants to start off on [the right] foot, it guidelines are met.
revolutionary technologies, such as advanced is imperative to craft environmental policy.” Laurie Wiegler is a US-based science writer

www.tcetoday.com dec 2008/ jan 2009 tce 

analysis
BHP withdraws Rio
Tinto takeover offer
BHP BILLITON has called off its hostile
takeover of mining rival Rio Tinto, saying
the immediate financial outlook, falling
commodity prices, and possible divestment
demands from regulatory competition
authorities risk shareholder value.
  BHP chairman Don Argus says: “While
we have not changed our view of the basic
industrial logic of the combination [...]
we have concerns about the continued
deterioration of near-term global economic
conditions, the lack of any certainty as
to the time it will take for conditions to
improve and the risks that these issues
imply for shareholder value.”
  In February, BHP offered 3.4 BHP shares
for every Rio share in an offer worth $147b.
Subsequent falls in available capital,
commodity demand and prices, and the
resultant loss in shareprice has eroded the
offer’s value to below $70b.
  BHP ceo Marius Kloppers says that
antitrust rulings also forced the company’s
hand as the European Commission would
require divestments in iron ore and
metallurgical coal. Other fears include the
size of the deal’s inherited debt; Rio has
$40b on its balance sheet compared to
BHP’s $6.5b; and Rio’s failure to divest
non-core assets including Rio Tinto Alcan
Packaging and Rio Tinto Alcan Engineered
Products. Kloppers is sceptical of selling
these units in the current economic
environment.
Glass cartel smashes
price-fixing record
AN automotive glass cartel has been
slapped with a €1.38b ($1.7b) fine – the
EU’s largest ever price-fixing penalty.  explosion in Europe since the end of World War
The four-company cartel met at hotels
and airports across Europe and controlled
90% of the European automotive glass
market for five years.
Of the fine, Saint-Gobain will pay
€896m, Pilkington €370m, Asahi Glass
€113.5m, and Soliver €4.4m.
  Saint Gobain’s fine is the largest single
company fine in the EU’s history and well
above the €560m the company had set
aside to cover a worst-case ruling. The
EU increased its fine by 60% for previous
cartel activity. Saint Gobain says it will
appeal. Asahi co-operated with the cartel
investigation so its fine was reduced by
50%.
  Neelie Kroes, EU competition
commissioner, says: “[They] cheated the car
industry and car-buyers for five years in a
market worth €2b in the last year.”
 tce dec 2008/ jan 2009 www.tcetoday.com
Kashagan dispute ends
KazMunaiGas doubles its equity, eyes 2013 startup
AFTER 15 months of taut negotiations the
Kashagan oil field dispute has concluded with
Kazakhstan arranging an early production
agreement and its state-oil company
KazMunaiGas doubling its equity.
  Kashagan’s production delays and increasing
costs threatened to shelve the project, which
is billed as the world’s largest and most
complex oil project. Production at the
1.6m bbl/d project was originally scheduled to
begin in 2005. Under the latest agreement the
earliest possible start is now pencilled in for
October 2013.
  To date the project consortium, including
ConocoPhillips, Eni, ExxonMobil, Inpex, Shell,
and Total, has invested $12b and, keen to
resolve the conflict, the consortium settled for
a reduced share. As a result KazMunaiGas will
double its equity share to 16.81% (at a cost
of $1.78b, to be paid once production begins),
the same as the major project partners.
Five face Buncefield prosecution
FIVE companies face criminal charges over the
2005 explosion of an oil depot at Buncefield,
UK. The December 2005 accident – the biggest
II – was caused by an overflowing fuel tank
leaking 300 t of fuel and forming a vapour
cloud which then ignited.
Total UK, Hertfordshire Oil Storage, the
British Pipeline Agency, TAV Engineering, and
Motherwell Control Systems will all stand trial
at West Hertfordshire Magistrates Court in
Watford from 23 January 2009.
Hertfordshire Oil Storage is the site’s
operating company, a 60:40 joint venture
between Total and Chevron. It faces
prosecution on two charges, including failing
to take all measures necessary to prevent
major accidents. Total UK, as the site’s
operator, is also separately named in the
lawsuit, because it “failed to ensure, so far as
is reasonably practicable, that persons not in
their employment were not exposed to risks
to their health or safety”. It is also charged
with failing to ensure the safety of people
it did not employ, and of causing ground
Additionally, Kazakhstan will take 12.5%
of Kashagan oil production even before the
consortium recovers its costs.
  The negotiations have given the major
partners new responsibilities in an effort
to speed up and optimise Kashagan’s
development. ExxonMobil will manage the
drilling of oil containing high volumes of
sulphur that is under huge pressure in waters
that freeze; Shell will oversee offshore
construction; Eni will take on onshore
construction; and Total will be responsible for
coordinating oil transport.
  Eni will continue to operate phase one of
the project. A committee of representatives
from all the companies will operate the next
two phases.
  Despite reaching an agreement, Kazakhstan
is not resting on its laurels and warns the
consortium that further delays will result in
heavy penalties.
pollution as a result of fuel and chemicals
used by the firefighters leaking through the
bunds at the site – a charge also levelled
against Hertforshire Oil Storage and the British
Pipeline Agency.
TAV Engineering, which provided the
alarm switches which failed to automatically
shut down the pipeline when the tank was
overflowing, is charged with failing to
adequately protect the health and safety
of members of the public, as is Motherwell
Control Systems 2003, which fitted TAV’s
control switch and connected it to the
monitoring system at Buncefield.
The prosecution is jointly brought by the
Environment Agency and the Health and
Safety Executive after what they describe
as a “thorough and complex” criminal
investigation.
Total and Hertfordshire Oil Storage are
also facing a separate civil lawsuit over the
blast, brought by local residents, businesses
and insurance companies, which are seeking
damages totalling £700m ($1.1b).

Report highlights
pollution problems
Lists top ten activities most urgently in need of cleanup
A TOP ten of the world’s most damaging
sources of pollution finds that many of the
most damaging industrial activities around the
world are fairly small-scale.
  The listing was compiled by the US
Blacksmith Institute – which has already
made headlines for its compilation of the
most seriously-polluted places in the world
– and Swiss environmental group Green Cross.
It lists, in no particular order, artisanal gold
mining, contaminated surface water, indoor
air pollution, industrial mining activities,
groundwater contamination, metals smelting
and processing, radioactive waste and uranium
mining, untreated sewage, urban air quality,
and the recycling of used lead acid batteries.
Small-scale operations are often the
most polluting because they lack the filters
and safeguards routinely installed at large
facilities. For example, the Blacksmith
Institute cites mercury released by small-scale
gold mining, which affects up to 15m miners
worldwide, including 4.5m women and 600,000
children.
Miners combine gold-carrying silt with
mercury to form a hard amalgam that absorbs
the gold from the silt. The amalgam is then
heated with blow torches to evaporate the
Aviation permits in EU ETS from 2012
THE European Council has formally adopted a
directive to incorporate the aviation industry
into the European Union Emission Trading
Scheme (EU ETS) from 2012.
  Carriers taking off or landing at European
airports from 1 January 2012 will purchase
permits to cover their emissions regardless of
their nationality. The move is seen as the first
step in reducing emissions from the global
aviation sector which is projected to emit
2% of total anthropogenic carbon dioxide
emissions (1999).
  In 2012, the aviation scheme aims to
cap emissions at 97% of the sector’s output
between 2006–2008. In 2013 this cap will
lower to 95%, with 85% of permits issued
free of charge and 15% auctioned off. Airline
industries say the cap-and-trade system will
www.tcetoday.com dec 2008/ jan2009
mercury, to leave the gold. Because this
is often done near the miners’ homes, the
evaporated mercury is not only inhaled by
the miners, but their families too. Mercury
that isn’t inhaled settles in the surrounding
environment, where it is absorbed by various
plants and bacteria.
 “As much as 95%of all mercury used
in small-scale mines is released into the
environment. Hundreds of pounds are used
every day. It only requires less than one
microgramme per cubic metre to cause serious
health effects,” the report states.
  Small-scale gold mining also appears on a
sub-list of the report detailing the “four least-
addressed pollution problems in the world”,
listing pollution problems that are rarely seen
on public health policy radar. The other three
are lead battery recycling, chromium, and old
and abandoned chemical weapons.
  The report points out that pollution plays
a major role in making people susceptible to
illnesses and is directly responsible for millions
of deaths each year, yet its role in disease is
poorly understood and the problem is often
overlooked in favour of more immediate causes
such as hunger and diseases like AIDS and
Malaria.
only compound the sector’s financial troubles.
Carriers are reporting falling profits and a
heightened susceptibility to the global credit
crisis.
However, other news may lift their spirits.
General Electric Aviation and Rolls Royce
are developing open rotor technology for
the engines of the aircraft being developed
by Airbus and Boeing to replace their A320
and 747 respectively. Wind tunnel trials are
announced and GE predicts it will increase fuel
efficiency and reduce emissions on commercial
flights by 18% by 2018.
  Virgin Atlantic, Airbus and Air New Zealand
are all investigating aircraft biofuels (see also
p9), while BASF says it plans to trial a high-
temperature polymer electrolyte membrane
fuel cell in an Airbus A320.
analysis
Additives “threaten
research results”
USING plastic lab equipment can skew
experimental results because plastic
additives sometimes leach into solutions,
Canadian researchers have found.
  Andy Holt, professor of pharmacology
at the University of Alberta’s Faculty
of Medicine & Dentistry, says that
quaternary ammonium biocides and
oleamides – commonly used as slip agents
and lubricants – can leach from plastic
laboratory equipment into experimental
solutions and give false test results.
  Holt and his team used mass
spectrometry to analyse experimental
solutions at the molecular level, and found
quaternary ammonium, oleamides and
related chemicals present. The oleamides
used as plastic additives are very similar to
oleamides that occur naturally in the body
and therefore can lead to very misleading
results, Holt says. The team traced the
problem back to plastic tubes they had
used to prepare reaction solutions. In
a different experiment, which had been
prepared using similar tubes, additives
leaching from the plastic pipes affected
the behaviour of brain receptors in a
pharmacological experiment
  Holt’s team tested pipette tips,
Eppendorf tubes and Multiwell plates from
several manufacturers. The contaminants
leached from all of these items in the
majority of cases. But the specific
contaminants, and the degree to which
they leached out, varied across different
products.
  The news could have “significant and
far-reaching implications for the integrity
of scientific work,” Holt says. The research
was published in a recent edition of
Science.
Pfizer plans stem cell
research centres
PFIZER HAS SET up a research unit to
develop pharmaceuticals based on adult and
embryonic stem cells, supported by two new
research labs to be built in the UK and the
US at a total cost of $100m.
The Global Regenerative Medicine
Research unit will be the first of several
small independent research units emulating
the innovativeness of small biotechnology
companies. The unit will work with leading
academic, biotech and pharmaceutical
partners around the world.
It will operate from two bases, Granta
Park in Cambridge, UK, and Pfizer’s Research
Technology Centre in Massachusetts in
the US. In total it will employ around 70
researchers working in small, flexible teams.
tce 
analysis
Altana speciality
chems may go private
ALTANA, a German-based producer of
speciality chemicals, could become a fully
privately-owned company if a €910m
($1.16b) buyout bid goes ahead. 
Susanne Klatten, one of Germany’s
richest women and already owner of a
50.1% stake in Altana, has tabled the
offer for the rest of the company. The bid,
which represents a 38% premium to the
company’s most recent shareprice, was
made as the company cut its forecast for
2008, blaming the weakening economy.
  Altana’s ceo Matthias Wolfgruber says
the company is open to the acquisition
offer. He points out that Klatten
has for some time taken an engaged
entrepreneurial interest in the firm, and
that she would have a “strong interest”
in its long-term success. However,
some analysts say that the offer still
undervalues Altana’s true potential.
Mitsubishi Rayon to
buy Lucite for $1.6b
MITSUBISHI Rayon, a Japanese company
specialising in the production of acrylic
fibre, has agreed to take over UK-based
acrylics company Lucite International for
$1.6b in cash.
  Lucite, which was formed in 1993 by
the merger of the acrylics businesses of
DuPont and ICI, is the world’s largest
producer of methyl methacrylate
(MMA). The company also owns the
internationally-known Lucite and Perspex
brands of acrylic plastics. The company
is majority owned by the private equity
company Charterhouse Capital Partners;
Ineos holds a minority stake.
  The deal makes Mitsubishi Rayon the
world’s largest supplier of acrylic materials
and lifts the company’s sales from ¥419b
($4.3b) to ¥600b. It will also help the
company secure cheap raw materials as
its greater size will give it more pricing
power and economies of scale and gives
it access to Lucite’s new MMA production
process (see p14).
Cleantech deal
QATAR has agreed a clean technology
partnership with the UK. It will found
a £250m ($396m) low carbon clean
technology fund for UK and European
investments.
It will pay £150m, the UK’s Carbon
Trust will pay an undisclosed sum, with
private investors providing the remainder.
The agreement includes a feasibility study
for a Qatari low-carbon innovation centre.
 tce dec 2008/ jan 2009 www.tcetoday.com
Companies react to crisis
Chemicals and steel cut costs, idle capacity to preserve margins
THE ongoing financial crisis and resulting
decline in customer demand is forcing
companies to close facilities, slow production,
shelve construction plans, and lay off staff.
BASF, the world’s largest chemical company
by chemical sales, announced in mid-November
that it was embarking on a two-month cost-
saving exercise cutting worldwide output by
25% and reducing the working hours of 20,000
of its 95,000 employees.
  BASF ceo Jürgen Hambrecht warns that
customer demand is drying up and orders has
been cancelled, particularly in the automotive
sector. In response, 20,000 employees adopted
flexible working time arrangements as the
company idled 80 plants and reduced output
at 100.
  “[There is] a massive decline in demand
in key sectors,” says Hambrecht. Aside from
automotive, the construction and textile
industries are also suffering, impacting
demand for ammonia, styrene, and nylon for
plastics, coatings and fibres.
  In Ludwigshafen, Germany, BASF reduced
working hours for 5000 employees as it
temporarily closed its number one steam
cracker and idled cyclohexane, styrene, and
plastic polymerisation and compounding units.
It temporarily closed ammonia plants
(Ludwigshafen and Antwerp, Belgium);
toluene diisocyanate production (Freeport and
Geismar, US); and ethylene glycol and low-
density polyethylene units (Nanjing, China). It
reduced cracker output (Antwerp and Nanjing),
caprolactam (Ludwigshafen, Antwerp, Freeport,
and Geismar); nylon (Antwerp, Freeport,
and Geismar); acetylene and methanol
(Ludwighafen); acrylonitrile butadiene styrene,
methylene di-para-phenylene isocyanate, and
nitric acid output (Antwerp); and oxo-alcohols
(Kuantan, Malaysia).
  The €3.8b ($4.7b) takeover of specialty
chemicals producer Ciba continues unaffected
and is billed as an opportunity to further
optimise BASF’s businesses.
  Analysts expect rival chemical businesses
to follow suit with more drastic cost-
cutting because BASF’s streamlined and
well-integrated operations give it lower
manufacturing costs than many of its rivals.
BASF’s closest global rival, US-based Dow
Chemical, says a restructuring programme will
be announced by the close of 2009 but not
before tce went to press.
Third largest chemical company Ineos has
cancelled plans to build four biodiesel plants
in Antwerp, Belgium; Lavera, France; an
unnamed site in Germany; and Grangemouth,
Scotland. The facilities were scheduled for
operation over the coming four years with a
combined capacity of 2m t/y. The company
is seeking waivers on its banking covenants
and says it has reduced planned capital
expenditure for 2009 from €650m to €250m
($826m to $318m). Ineos is making serious
losses on oil purchases too – it maintains an
inventory to feed and fuel its operations, but
plummeting oil prices are eroding its margins.
Smaller chemical company LyondellBasell
Industries has temporarily shut down 16% of
its US olefins capacity and will cut 15% of
staff, or 2500 jobs, at production facilities
and offices around the world over the next
12–18 months. David Hapole, LyondellBasell
spokesperson, tells tce the olefins capacity is
likely to return in early 2009.
Steelmakers are also losing business as
global metals demand falls on the back of
the shrinking construction sector. Corus has
temporarily closed four UK blast furnaces to
cut steel production by 30%, or 3m t, from
October 2008 to March 2009.
Germany’s ThyssenKrupp has postponed its
long-term financial goals, saying it may not
reach its goal of making €5b/y in pretax profit
by 2012, and possibly not even by 2012/2013.
ThyssenKrupp is somewhat shielded from the
worst of the downturn because of the amount
of business it does via long-term contracts.
The world’s largest steelmaker ArcelorMittal
is much more exposed because it does
the majority of its business on the spot
market, and because of its large presence in
commodity steel goods such as beams. It will
respond to the “unprecedented destocking”
in the steel industry by cutting production
back by a third and trimming 2009 capital
expenditure by $1b to $4.5b. It will also lose
up to 9000 jobs – 3% of its global workforce
– primarily among administrative staff.