Policymakers have settled on 'emissions trading' as their favorite global-warming fix. But it isn't working.

March 12, 2007 issue - Global warming isn't the only debate that may be over. Governments and policymakers around the world also seem to have settled on a solution. "A responsible approach to solving this crisis," Al Gore said recently at New York University's Law School, would be "to authorize the trading of emissions ... globally." Emissions trading, also called carbon trading, is being expanded in the European Union and Japan. And in many places where it's yet to take hold, like Sacramento, Sydney and Beijing, politicians are embracing it. Nicholas Stern, former chief economist of the World Bank and Europe's foremost political expert on global warming, predicts that the value of carbon credits in circulation, now about $28 billion, will climb to $40 billion by 2010.

This should be great news for the environment, but many experts have their doubts. The notion that emissions trading is going to make a significant dent in global warming is deeply flawed, they say. Current emissions-trading schemes have proved to be little more than a shell game, allowing polluters in the developed world to shift the burden of making cuts onto factories in the developing world.

The United States has pushed Spain out of the top spot as the number one country worldwide to invest in renewable energy, according to the latest “Ernst & Young Renewable Energy Country Attractiveness Indices ” for the third quarter of 2006. India, the UK and Germany remain 3rd, 4th and 5th respectively. The US scored 71 in the ‘all renewables index’, with individual scores per renewable technology of 72 for wind, 75 for solar and 64 for investment in biomass energy. Spain scored 68 for investment in ‘all renewables’, coming in just below the US which moves up from second place.

Since the oil shocks of the 1970s, governments around the world have paid plenty of lip service to renewable energies such as wind and solar power. But only a few governments have been able to engineer policies that have begun to bring alternative energies into wider use. Renewable fuels provided 18% of the world’s total electricity supply in 2004, according to figures from the International Energy Agency, a Paris-based intergovernmental organization. Almost all of that, though, came from hydropower, a source with limited growth potential because of geographic constraints. The use of wind and solar power is growing, but they still generated only 1% of global electricity production in 2004, the latest year for which figures are available.

Making solar panels on the cloudy Welsh coast may seem an odd choice for a politician turned investor like Robert Hertzberg, who hails from a sunny and environmentally aware state, California, and hobnobs with Governor Arnold Schwarzenegger. But a commitment by European governments to budding clean-energy entrepreneurs is creating a more welcoming environment than in America, where erratic support and onerous financial rules have given pause to some start-ups and investors.

“There's legitimate debate about a couple of segments,” says Keith Raab, boss of Cleantech Venture Network. In some instances, valuations accorded to firms with no profits—and little chance of making any soon—were reminiscent of the excesses of the dotcom bubble. As Douglas Lloyd, of Venture Business Research, puts it, “There's too much money chasing too few opportunities. How is it possible that this many solar companies are going to succeed? They're not.”

A U.N. conference working to fix long-term rules to fight global warming beyond 2012 "as soon as possible" was split on Tuesday over whether that meant an accord should be struck in 2008, 2009 or even 2010. Industrial investors, weighing options ranging from coal-fired power plants to wind energy, are frustrated at the possibility of years of uncertainty about rules for fossil fuel emissions upon which carbon markets depend.

On the occasion of the 5th World Wind Energy Conference taking place from 6-8 November 2006 in New Delhi/India, the International Association for Wind Engineering IAWE and the World Wind Energy Association WWEA signed today a Memorandum of Agreement on closer cooperation and coordination.

FINANCIAL TIMES: There has been some recent legislation on Co2 reduction. I wonder if you see that as one of the big developments of late, and what its significance is.

JEFFREY IMMELT: Yes. I think if you look at what some of the states are doing, California for instance, or even what's happening around the world, what's talked about in the UK, I think that's going to change the way people look at technology and it's going to change the way people look at energy policy in the future. It tends to be the way change starts. I would say in many ways some of the things that have happened in Europe over time have tended to drive technology. For instance, when Europe said it was going to have 10 per cent renewables that's what really opened up the world of wind energy and solar and things like that, so I think it's very meaningful.

Spain’s second-biggest power company Iberdrola said on Wednesday that it had bought two small U.S. wind power companies and foresaw spending $2 billion to develop their 1,600 megawatt project portfolio.

But while the problems faced on either side of the Atlantic are much the same, America and Europe have taken different paths toward finding solutions. Neither side can claim victory. Despite a host of initiatives, new technologies and regulations, alternative energy remains a patchwork affair that has done little to offset needs. Increasingly, both sides are looking to the other to see what can be learned. The guiding principal in Europe has been government mandates. European Union member states are led by ambitious long-term targets to reduce greenhouse gas emissions. Rules also require they develop increased energy capacity from renewable sources. By comparison, Washington, D.C. still prefers to let technology be the driving force in the quest for low cost alternatives to fossil fuels. While some tax incentives do exist (for ethanol and wind energy), there are no federal energy mandates besides a meager Renewable Fuel Standard passed last year by Congress to boost production of ethanol and biodiesel. Mostly it’s left up to the individual states.

Carbon offset schemes are designed to neutralise the effects of the carbon dioxide our activities produce by investing in projects that cut emissions elsewhere. They work through the rapidly growing trade in carbon credits, each worth the equivalent of a tonne of carbon. Offset companies typically buy carbon credits from projects that plant trees or encourage a switch from fossil fuels to renewable energy. They sell credits to individuals and companies who want to go "carbon neutral". Some climate experts say offsets are dangerous because they dissuade people from changing their behaviour.

Green consumers and businesses who want to neutralise their carbon emissions face being ripped off by unscrupulous operators who exploit the growing market in carbon offset schemes, a Guardian investigation has revealed. The surge in interest in such schemes, which invest millions of pounds in forestry and clean energy projects in the developing world, has created a lucrative market in carbon, which is unregulated and subject to little scrutiny. Campaigners and analysts say independent standards are urgently needed to protect consumers and to ensure the promised carbon savings are delivered. Francis Sullivan, a carbon offset expert who led attempts by banking group HSBC to neutralise its emissions, said: “There will be individuals and companies out there who think they’re doing the right thing but they’re not. I am sure that people are buying offsets in this unregulated market that are not credible. I am sure there are people buying nothing more than hot air.”

MADRID, Oct 3 (Reuters) - Spanish wind power company Gamesa (GAM.MC: Quote, Profile, Research) said on Tuesday it has sold wind power assets to Spanish utility Iberdrola (IBE.MC: Quote, Profile, Research), including wind parks in the United States, for a maximum of 3.3 billion euros ($4.19 billion).

The third annual Euromoney and Ernst and Young Global Renewable Energy Awards were announced earlier this week at the Renewable Energy Finance Forum (REFF) in London. Winners included some household names not usually associated with renewable energy, such as Goldman Sachs (ticker: GS) and John Deere (DE). Also honored were the likes of BP (BP), whose Alternative Energy arm has helped define the field, and Allianz Group (ALVG), the global insurer.

MILAN, Sept 26 (Reuters) - Italy's biggest utility Enel (ENEI.MI: Quote, Profile, Research) said on Tuesday it has struck a deal to buy a stake in a U.S. wind energy company which would allow it to develop more than 1,000 megawatt worth of wind projects in the United States. Enel said in a statement it has signed equity purchase and strategic partnership agreements with the U.S. wind power developer TradeWind Energy, LLC (TradeWind), which has projects worth more than 1,000 MW in the pipeline.

OSLO, Sept 20 (Reuters) - Wind power could generate almost 30 percent of the world's electricity by 2030 and is growing faster than any other clean energy source, a wind business group and environmental lobby Greenpeace said on Wednesday.

Canadian manufacturer of solar cells and modules Photowatt (PHWT) filed to go public last week; its prospectus contains an overview of the renewable energy industry, and trends in solar energy. The excerpt below is from the company's F-1 filing:

Barclays, Credit Suisse, Goldman Sachs, and Swiss Re have all committed themselves to it. Not to mention Leonardo DiCaprio, Dido and Pearl Jam. Carbon neutrality is the latest game in town, and carbon offsets are becoming the "it" commodity.

The most important findings of this report highlight studies that raise critical concerns challenging some of the claims made for wind power. Badly needed evidence is now available after three years of large scale operation of wind turbines in five countries..... These studies are the first real evidence showing how wind actually works, as opposed to what has been claimed, and come from some of the most authoritative voices on energy in the world......ABS Energy Research’s report does not relegate wind power to the dustbin. But it does show how essential proper analysis is to establish what renewable energy can and cannot deliver and how it must be accommodated within a total electricity generation system. Objective analysis is essential. Nearly every one of the points described in the study has been labelled a "myth" by a lobby group.

Environmentalism is no longer the province of the left. Conservative politicians and big business have both jumped on the bandwagon.