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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:
Food Supply & Price G-20 Clean Power Potential Bullish Signals for Crude Oil Cancun Climate Talks Ban on U.S. Offshore Drilling Indian Nuclear Investments
SPOTLIGHT ON: FOOD SUPPLY & PRICE
World “Dangerously Close” to Food Crisis, Warns U.N.
Falling grain production around the world is putting us “dangerously close” to a new food crisis, warned the United Nations Food and Agriculture Organization (FAO) in a new report. Weather catastrophes in Russia and Pakistan will contribute to a 63 million metric ton decrease in global grain supply this year, representing a 2% reduction in total global supply. Previously, the U.N. had expected total grain yields to rise by 1.2%. The FAO anticipates a reduction of 7% in cereals, 35% in barley, and 10% in wheat. Volatility in global food markets has raised prices for some essential commodities to levels not seen since 2007 and 2008, when food shortages ignited riots in many vulnerable regions of the world. “There is no crisis at this stage, but it could come if we don’t act,” said Abdolreza Abbassian, an economist with the UN FAO. “The numbers are getting dangerously close to what we saw in 2008.” According to the report, total costs of food imports could rise over $1 trillion in 2010. This trend has prompted strong government reactions in many parts of the world, notably China, which has responded by imposing strict price limits on food and taking action against agricultural commodity market speculation. The FAO says prices may increase further if world production does not increase substantially, especially in wheat, maize and soybeans. “Just normal production will not do anymore,” warned the report. “With the pressure on world prices of most commodities not abating, the international community must remain vigilant against future supply shocks in 2011 and be prepared.”
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RENEWABLE ENERGY NEWS
China Takes Top Spot on Renewable Energy Country Attractiveness Report
G-20 Clean Power Investment Potential to Reach $2.3 Trillion by 2020: New Report
Clean power projects in G-20 nations could garner $2.3 trillion in private investments by 2020, according to a new report by the Pew Charitable Trust. Major energy demand combined with supportive federal policies has made Asia – in particular China and India – a hot spot for clean energy development. Similar growth potential exists in other G-20 nations, which stand to receive an additional $546 billion in investments over the next decade on a “business as usual” basis. However, implementing more industry-friendly government policies could boost that figure significantly. “The message of this report is clear: countries that want to maximize private investments, spur job creation, invigorate manufacturing and seize export opportunities should strengthen their clean energy policies,” emphasized Phyllis Cuttino, director of the Pew Climate and Energy program.
“A new world order is apparent in the clean energy sector,” says global consulting firm Ernst & Young, which recently ranked China as the most attractive country in the world for renewable energy investment in its latest Country Attractiveness Indices. Since 2003, Ernst & Young has analyzed and ranked global renewable energy markets on the basis of investment strategy and resource availability in each nation. Its latest report placed China at the top of the list, citing its “record spending” on clean energy this quarter, specifically in wind power. China has invested nearly $10 billion out of total global investment of $20.5 billion, meaning that just about one of every two wind turbines produced are operating in China. China’s incredible growth of wind power comes from “carefully planned energy and industrial policy that elevates cleantech to a national strategic level,” said Ben Warren, UK Energy and Environmental Infrastructure Advisory Leader at Ernst & Young. China’s solar market is on its way to “great importance in the global market place,” he noted. Although the U.S. was the global leader between November 2006 and May 2010, prolonged effects of the financial crisis and record low gas prices resulted in a drop in rankings. The U.S.’s renewable energy competitive ranking is now five points below China’s. South Korea, Romania, Egypt and Mexico all made the attractiveness list for the first time, signaling new opportunities for clean energy investments in those countries. Japan also rose three points in the rankings, thanks in part to the introduction of a Feed-in-Tariff (FIT) which may propel significant expansion in the solar cell market, potentially to $5.6 billion by 2020.
In Clean Energy Race, U.S. Faces “Sputnik Moment” on Energy: Secretary Chu
To stay competitive in the global clean energy race, Department of Energy Secretary Dr. Steven Chu says the United States must significantly increase investments in energy research and development. Other nations around the world, especially China, are outpacing the United States both in progressive federal energy policies and government spending on research, leaving the United States facing a “Sputnik moment” on energy, he said. “America still has the opportunity to lead in a world that will need a new industrial revolution to give us the energy we want inexpensively but also carbon-free. It’s a way to secure our future prosperity. But, I think time is running out.” Secretary Chu’s remarks followed the release of a new report from the President’s Council of Advisors on Science and Technology on how best to “accelerate the pace” of technology development in the U.S. The report’s primary recommendations include major increases in energy research and development spending and new demonstration projects. Currently, the U.S. utilizes about 0.14% of the federal budget for energy-related research. After adding in private sector funding, total research spending in the U.S. is around 0.03% of GDP. This amount is three times smaller than Japan’s, and far behind that of many other nations. Instead of the $5 billion a year we spend today, the Council says annual energy research investments should grow to $16 billion. Without more federal support, the report warns, we will not achieve “game changing” technology developments needed to make clean energy cost effective and mainstream.
In his concluding remarks, Secretary Chu emphasized the importance of sustained federal support. “Innovation is the
TRADITIONAL ENERGY NEWS
Weather, Supply Concerns & Stimulus Action Push Crude Higher to Reverse 2 Yr. Contango
U.S. Policy Developments – Bans on Offshore Drilling & Nat Gas “Fracking”
Two policy decisions in the United States will have important implications for both oil and natural gas production in the year ahead. Firstly, President Obama has extended a moratorium put in th place after the April 20 BP oil rig explosion in the Gulf of Mexico. This moratorium would prohibit deepwater drilling in the Atlantic, Pacific and eastern parts of the Gulf of Mexico. However, offshore drilling will be allowed to continue in western sections of the Gulf of Mexico. In total, the Deepwater Horizon rig spill poured 4.9 million barrels of crude oil into the Gulf waters, devastating local tourism and fishing industries and damaging coastline across many Gulf States, the extent of which is still being determined by scientists in the region. Secondly, New York State has taken a step to restrict the highly productive, yet controversial natural gas horizontal drilling procedure known as hydraulic fracturing or “fracking.” New drilling operations will not be permitted in the state until July 2011 to allow environmental regulators to conduct a review of the process’ effect on drinking water supplies. The use of fracking has contributed to a natural gas boom in the United States. However, concerns over potential contamination in watershed areas have turned the process into a hot political topic. If other drilling states pass or consider legislation like New York’s, the natural gas industry may face very serious repercussions.
Speculation of future stimulus moves by the Federal Reserve plus a snap of cold weather in Europe and North America have boosted crude oil prices to a 26 month high nearing $90 a barrel –their longest advance in four weeks. Oil producers and merchants have increased their net-short positions in crude futures and options, reversing a two-year contango. In its Commitments of Traders report, the Commodity Futures Trading Commission (CFTC) showed that hedge funds and large oil speculators have increased net-long positions by 26%. This bullish positioning is indicative of a wide-spread expectation of future crude oil price increases. Analysts have begun to see a “backwardization” trend with crude contracts beginning in September 2011, where prices for future months are dropping lower than earlier months, suggesting oil demand may begin to outpace supply in the second half of next year. This theory is corroborated by recent upwardly revised demand forecasts from OPEC and the International Energy Agency (IEA). OPEC now predicts global consumption will reach close to 87 million barrels per day next year, and the IEA raised its 2011 global oil demand forecast to 88.5 million barrels per day (compared with the 87.3 million barrels per day projected for 2010). “Ninety dollars a barrel is now like a magnet that the bulls in the market want to break through,” commented Victor Shum, senior principal at Purvin & Gertz Inc. “These days, sentiment is so bullish that any bad news on the economic front can’t hurt the rally in oil.”
Chinese Coal Imports to Surpass Monthly Record
Chinese coal imports are expected to reach an all-time high this month as the nation’s appetite for energy continues to increase. Chinese coal imports to total approximately 17.25 million this month, which leaps ahead of the previous import record of 16.38 million tons set in December of 2009. The majority of this imported coal will be used for heating and electricity generation. Although it consumes approximately 47% of all global coal, it is estimated China only holds 14% of coal reserves. Over the past decade, coal demand has risen about 10% a year, which many experts are calling “unsustainable.” China is expanding its domestic coal mining operations, but is quickly finding it necessary to supplement these resources with foreign imports from other resource-rich nations around the world. However, it is not the only economy ramping up coal demand. India and other developing Asian nations are also seeking coal imports from abroad, which may translate into price increases across the board.
CLIMATE POLICY NEWS
“A Step Forward” in Cancun Climate Talks
The United Nations climate talks in Cancun began without much fanfare, at least compared with the much-hyped and ultimately disappointing Copenhagen convention held last year, but may in fact have been a more successful conference than its more news-worthy predecessor. Although no definitive deal was reached to reduce greenhouse gases and set binding emissions regulation, many analysts and observers are reporting at least moderate success from the conference, which concluded this month. Most notably, delegates reported progress in bridging the divide between rich and poor nations, which has long plagued these negotiations. Christina Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), praised both industrialized and developing nations for coming together to agree to commit to reducing emissions. The agreement reached at Cancun represented the first time all major global economies agreed to reduce emissions, however the text is not a binding document, nor did it go as far as stipulating an acceptable temperature rise of 2 degrees Celcius. Of the 193 nations gathered at the conference, only Bolivia rejected the agreement for not going far enough. “The agreement is not a legally binding treaty, but it allows the process to continue to seek stronger steps in the coming year, and perhaps, a more robust accord at next year’s climate conference in Durban,” said Figueres. Negotiators also agreed to deploy funding and share technology in order to help vulnerable developing nations mitigate and adapt to the effects of climate change. Countries also agreed to take concrete steps to protect forestland in the developing world and reduce emissions caused by deforestation. Expanding the scope of the Kyoto agreement and its binding targets has been no easy task. Developing nations are demanding aid from the industrialized world, which carries most of the historical responsibility for carbon already in the atmosphere. Countering that claim, many industrialized nations do not believe a viable agreement can exist without imposing limits on the emissions of fast growing nations like China, now the largest emitter of carbon dioxide in the world. The results of Cancun appear to be a step in the right direction, but much more work remains to be done. Nations now have one more year in which to decide to extend the existing Kyoto Protocol on emission reductions before it is set to expire in 2012.
World Bank Lends Support to Carbon Markets in Developing Nations
Energy regulator says UK needs energy reform
Source: Daily Mail
The World Bank announced a multi-million dollar new initiative to establish carbon trading systems in developing nations which are particularly vulnerable to the effects of climate change. The carbon trading systems have a twofold purpose – first, to put a “price tag” on carbon to spur clean energy projects within the participating nations, and second, to reduce destruction of tropical forest land and slow deforestation. Deforestation is one of the leading sources of greenhouse gas emissions in the world. “We know that the poorest countries will suffer the earliest and the most from climate change,” said World Bank president Robert B. Zoellick in a statement at the U.N. climate talks in Cancun this week, remarking that the perils of climate change were moving faster than global negotiations. “We also know that, while these countries would like to see a comprehensive global accord on climate change, they are not waiting for one. They are acting now and acting differently to shift from being climate vulnerable to being climate smart.” The World Bank is aiming to provide as much as $100 million to help establish these new carbon exchanges in countries such as China, Mexico, Indonesia and Chile. More countries may join the initiative as funding grows.
NUCLEAR ENERGY NEWS
France Signs $20 Billion Nuclear Energy Deal with India
President Nicolas Sarkozy of France and Prime Minister Manmohan Singh of India signed a substantial civil nuclear energy deal during a recent state visit to India by Mr. Sarkozy. Under the terms of the agreement, India will build two French reactors, each worth $10 billion, in Maharashtra, one of its most industrialized states. India already has 22 reactors in use and has ambitious plans to expand its nuclear energy sector. Over the next 15 years, the Indian nuclear market is estimated to reach $150 billion. After the United States, France is the world’s second largest producer of nuclear energy. It is competing with the United States and Russia to become the premier provider of nuclear energy technology to developing markets in India and China. As fossil fuel prices rise and supply constraint concerns grow, France is predicting a “resurgence” in the use of nuclear power for energy production.
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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