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Global Fund Exchange is an asset management business specializing in a diversified global macro approach to investing in dynamic opportunities across all sectors of the New Energy Revolution.
Featured in this issue:
Threats to Global Agriculture New Chinese Energy Policies BP Spill – The Aftermath REDD Forest Conservation Water Shortage in China New Player in Carbon Trade
SPOTLIGHT ON: AGRICULTURE CRISIS
Extreme Temps & Weather Threaten Global Production
Russia’s major heat wave – the worst in over 130 years – is the latest example of extreme weather having a significant economic impact on the global agriculture sector. Droughts and forest fires have caused a wheat crop crisis in Russia, raising global prices by nearly 70% and prompting President Vladimir Putin to ban wheat exports entirely. Similar scenarios are playing out elsewhere in the world. Droughts in Kansas, for instance, have killed off over 2,000 cattle and flooding in Pakistan has destroyed thousands of acres of crops. “Over the whole globe all these changes in climate… are going to cause some real ripples in our capabilities of producing food,” warned Jerry Hatfield, laboratory director at the U.S. Department of Agriculture’s Agriculture Research Service. Estimates from HSBC analysts warn that if countries cannot not adapt to higher temperatures and more extreme weather, grain production in G20 countries may fall 8.7% by 2020. With population growth taken into account, HSBC predicts G20 per capita grain production could drop between 11.9% and 16.1% by 2020. Reduced output could “create havoc” in agricultural markets around the world, driving up the price of food and other essential goods. There is grave concern that such price spikes could result in unrest in many poor or resource-scarce countries similar to the riots that took place during 2007-2008, when global food prices spiked based on rampant market speculation.
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RENEWABLE ENERGY NEWS
With New Energy Policies, China is a Leader in Global Renewables Sector
China’s renewable energy industry has skyrocketed in recent years, and it has now overtaken the United States as the world’s leading investor in clean energy. The Chinese government continues to encourage this growth with favorable policy support. Renewables Total renewable power capacity in China reached 226GW in 2009, representing 1/4 of the nation’s total. The government is calling for a total of 500GW of renewable power capacity by 2020, or about 1/3 of total power capacity. Renewable Portfolio Standards (RPS) for Chinese utilities requires 8% of all capacity and 3% of power to be generated from non-hydro renewable sources by 2020. Revisions to the 2005 Renewable Energy Law will require increased cooperation between new renewables and the grid to ensure the generated power is transmitted efficiently. The revisions also strengthened the Ministry of Finance’s renewable energy fund, which collects a tax on all electric power sales. Wind Chinese wind power grew thirty-fold between 2005 and 2009. China is now just behind the U.S. in total installed wind capacity. Its turbine manufacturing industry grew to be the world’s largest in 4 years. The government has amended the wind power Feed-in-Tariff law and aims for 150GW of new installations by 2020. Solar The “Golden Sun” program, introduced in 2009, will provide generous subsidies for solar PV installations. Currently 300 projects have been proposed, totaling nearly $2.9 billion in investment. Nuclear China has expanded its pledge to achieve 15% of all primary energy from “non-fossil fuel sources” by 2020. This expanded directive will allow nuclear power to be included in the total accounting. Carbon New carbon intensity targets were announced in Dec ember 2009, which aim to reduce the carbon intensity of GDP by 40-45% by 2020 relative to 2005 levels. Energy Efficiency The 5 Year Plan for 2006-2010 aims to increase energy efficiency by 20%, including pumps, fans, boilers and the production of materials like steel and cement.
Greece to Invest €12 Billion in “Green Growth” by 2015
S-to-N Transfer Project Source: ChinaEnvironmentalLaw.com
Greece aims for “green growth” with €12 billion new investment
Greek officials say investing in “green growth” can help catalyze Greece’s economic growth and attract outside investment into the nation’s ailing economy. Greece’s recently announced €12 billion investment plan will include allocations for new urban improvement projects, natural gas pipelines and storage facilities in northern Greece. The government is aiming to attract a total of €22 billion in external private investment over the coming decade. Although Greece has ample wind and solar resources, renewable energy contributed only 4% of the nation’s electricity generation in 2009. However, Greece has pledged to ramp up the share of renewable energy to 40% of its total electrical output by 2020. Environment Minister Tina Birbili hopes the program will “decisively contribute to face recession and lead to dynamic economic growth.”
Rare Earth Minerals Lure Clean Tech Firms to China
“Rare earth” resources such as indium, gallium and lithium are essential components of many high-tech devices, from battery technologies to solar cells and wind turbines. China is far and away the world’s leading rare earth exporter, controlling 95% of the world’s resources. Recently, Chinese officials announced their intent to decrease rare earth shipments by 72%, causing anxiety among global clean tech firms. However, it will reportedly offer access to restricted resources to companies that decide to move their operations to China. Many companies are already picking up and moving to the region because of the attractiveness of low labor costs and close proximity to Asia’s fast-growing renewables sector. Many analysts expect this relocation trend to speed up as clean tech firms gear up for potential limitations on rare earth exports, many of which are essential to their production.
TRADITIONAL ENERGY NEWS
BP CEO: Gulf of Mexico Spill is a “Wake-Up” Call for Entire Offshore Drilling Industry
Australian Natural Gas Projects Attract $50 Billion in New Investment from Shell
Royal Dutch Shell Plc, Europe’s largest oil company, is making a major strategy shift to increase its focus on natural gas. As part of this transition, Shell is planning nearly $50 billion in new investment in Australian liquefied natural gas (LNG) projects. Investment in LNG projects is being catalyzed by increased demand for cleaner-burning fuels, especially in Asia, as well as advancements in technology. By 2012, Ann Pickard, Chairman of Shell Australia, expects natural gas to contribute over 50% of Shell’s total production. PetroChina, which joined with Shell to acquire Arrow Energy Ltd. and its reserves in Queensland, expects to see continued “long term” demand for LNG from Australia. “It’s a booming economy and more and more dirty energy is being replaced by clean energy. There is a need,” remarked a PetroChina rep.
An aerial view of the Deepwater Horizon offshore site
Bob Dudley, the new CEO of BP says the Gulf of Mexico spill must be a “wake-up call” for the entire offshore drilling industry. th BP successfully placed a cap on the leaking well on July 15 and expect to permanently seal the well by the end of the month. However, the saga is far from over. Since the rig explosion on th April 20 that broke open the deep-sea well, nearly 5 million barrels of oil have spilled into the Gulf of Mexico, endangering marine life and resulting in major closures of fishing waters and tourist beaches along the Gulf coastline. Estimates vary widely on how much oil remains either as surface sheen, tar balls, or lurking beneath the water. Scientists warn of continued hazards to marine life. So far, BP has spent $6.1 billion dealing with fallout from the Gulf spill, the worst in United States history. Clean up and other associated costs may reach as high as $30 billion. BP has already paid $319 million in compensation to businesses and individuals that have been affected, and will likely continue to face high costs as environmental cleanup operations proceed in the region. In the wake of the accident, the U.S. House of Representatives has taken up debate on legislation to reform off-shore drilling practices, and the U.S. Senate, the SEC and the Department of Justice have also launched their own investigations. Private lawsuits against BP have piled up as well. The combined effect has knocked nearly 40% of BP’s market value. Although all are relieved that the leak has been capped, retired Coast Guard Admiral Thad Allen, the U.S. government’s main representative in the region, expects conclusive clean up of the region will be both costly and time-consuming, and will require many more millions, many more years and much more effort from BP over the long-term.
ENERGY EFFICIENCY NEWS
China Cracks Down on Energy Use, Invests in Electric Vehicles & Shuts 2,000+ Factories
China is taking serious measures to curb its energy usage and reduce economic carbon intensity. Over 2,000 steel mills, cement works and other energyintensive factories have been ordered to close down by the end of September. This announcement comes on the heels of another order by the powerful National Development and Reform Commission which forced 22 provinces to halt provision of discounted electricity to energy-intensive industries such as aluminum production. Energy efficiency has become a high priority for China’s economic planners. China’s current five-year plan targets 20% less energy usage per unit of economic output this year compared with 2005. However, high industry output since last winter has driven China’s energy consumption to sky-high levels, producing the single largest surge ever of greenhouse gases by a single country. According to the International Energy Agency (IEA), China surpassed the United States last year to become the world’s largest consumer of energy after becoming top global carbon emitter in 2006. These rankings, combined with continued high expectations for economic growth, lead many to doubt China’s ability to meet its stated energy intensity goals. Nevertheless, China is forging ahead with plans to invest $15 billion into energy efficiency. Of this proposed funding, $8 billion would be dedicated for development into pure energy efficiency techniques. The remainder would be funneled towards infrastructure construction, potentially including electric vehicle charging stations. China is currently pushing to put 4 million eco-friendly vehicles on its roads by 2012.
With Launch of Pilot Trading Program, China Enters Global Carbon Trade
Seeking to become a player in the global carbon trading system, China announced it will launch a series of test trading programs in 2011 with possible implementation of a mandatory system in the future. The International Energy Agency (IEA) reports that China has overtaken the United States as the world’s largest energy consumer. However, the Chinese government disputes these IEA figures and claims it is still #2. Regardless, Chinese energy consumption and domestic power production are expected to continue to grow strongly. By some estimates, Chinese power capacity could double to 1,600GW within the decade. This growth has already had significant impact on carbon emissions. Under intense international pressure to control its skyrocketing emissions, China has focused on increasing energy efficiency and reducing the carbon intensity of its economy. No firm details have been released yet, but it is expected that a commitment to carbon trading will be incorporated into China’s next Five-Year Plan. By introducing a carbon price - something United States lawmakers have thus far been unable to do – China believes it can ramp up its energy efficiency efforts without limiting capital flows to its growing renewable and cleantech space.
China Begins Construction of $62B River Diversion Plan to Supply Industrial Region
Energy regulator says UK needs energy reform
Source: Daily Mail
S-to-N Transfer Project
To combat massive water shortages, China has begun construction on a $62 billion project which would essentially re-route the flow of the nation’s largest rivers from southern river deltas to parched northern regions. The drought in China’s industrial north is reaching dangerous levels – the area is home to 44% of the population, but only 14% of the water. As industrial production increases, Chinese power plants in the north will need 82 million ML of water each year by 2030. This river diversion project will transport 44.8 million ML of water every year through a complex, threepronged plan which encompasses nearly 1800 km of pipelines, 23 pumping stations, up to 7 dams and 2 giant tunnels beneath the Yellow River. The project will drain one river to fill another while pumping water against gravity. Although officials say this project may “ease the water shortage in the north” in the short term, conservation and new efficiency measures are the true long-term measures to solve China’s water woes. China is not the only nation experiencing firsthand the impact of limited water supplies on industrial production and energy generation. According to a special report by IEEE Spectrum magazine on the water vs. energy supply conundrum, it is estimated by the year 2030, the Earth’s 8 billion people will demand 45% more water than today. Annual water shortfall vs. demand may be as high as 2,700 billion cubic meters. As evidenced in China, vast quantities of water are needed for electricity generation. In the United States for example, over 500 billion liters of freshwater travel through power plants everyday – twice what flows through the Nile River. Thirtynine percent of all withdrawn freshwater in the U.S. goes towards cooling of thermoelectric power plants as they generate power for consumers.
Higher Economic Activity & Coal Usage Will Raise U.S. Carbon Emissions in 2010 – EIA
Figures released by the Energy Information Administration (EIA) indicate that stronger economic activity and use of traditional energy such as coal and natural gas will lift U.S. carbon emissions in 2010. Fossil-fuel related emissions may rise by 3.4%, and emissions from the industrial and electric power sectors may rise by 3.9%, according to the EIA. Coal-related emissions alone are on track to rise by 6% this year. Despite these projected increases, total U.S. carbon emissions for 2010 and 2011 will still fall below 2008 levels, for that matter or any year during the period 1999 – 2008.
CLIMATE POLICY NEWS
U.N. Forest Conservation Plan Moves Forward in Fight against Deforestation
Reduced Emissions from Deforestation and Degradation (REDD) is a fledgling program backed by the United Nations designed to save the world’s tropical forests and reduce deforestation, which contributes between 20-25% of total global emissions, according to the U.N. The REDD program assed an important hurdle recently when its carbon accounting system passed the first of two audits required by the Voluntary Carbon Standard (VCS), a Washington-based standards group.
The REDD program seeks to limit global deforestation
One of the few proposals to achieve widespread support at the Copenhagen climate talks, REDD encourages developing nations to preserve vulnerable
forest land by awarding conservation measures with carbon offsets which can then be traded on the global market. Projects approved by the REDD scheme range widely and encompass various plans to protect forests from logging, farmland conversion, fires and collection of fuel wood and thus reduce carbon emissions. Many developed nations have lent support to help develop REDD, most notably Norway, which has signed a $1 billion forest conservation deal with Indonesia. REDD aims to become part of a broader global climate accord in 2013.
We regularly gather information from the following reputable news sources, including but not limited to: RenewableEnergyWorld.com Forbes.com: Energy News Green Inc. – The New York Times New Energy World Network Scientific American: Energy SustainableBusiness.com GREENBUZZ New Carbon Finance EnergyandCapital.com New Energy Finance Streetwise Reports: The Energy Report Thomson Reuters REChargeNews.com Climate Change Business Journal WSJ.com: Environmental Capital Carbon Credit Capital
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