GWPF | 27 Oct 2014
Heavy Industry Moves Investment Abroad
“We shift investment money from Europe into the U.S. as a consequence of the less competitive environment in Europe,” Harald Schwager, a senior member of BASF’s executive board, said in an interview. “Many European companies which are energy-intensive are finding out that the benefits of shifting investment from Europe to the U.S. are significant.” –Stanley Reed and Melissa Eddy, The New York Times, 25 October 2014
BASF executives say that German and European Union policies toward industry, particularly when it comes to energy, are forcing big companies to look elsewhere as they seek to expand. Especially in Germany, energy prices have jumped as a result of the government’s big push for renewable energy sources — a policy that the government of Chancellor Angela Merkel has labeled the Energiewende, or energy transition. And nearly a quarter of all companies in heavy industry are considering reducing production in Germany, according to a survey by the German Chambers of Commerce. –Stanley Reed and Melissa Eddy, The New York Times, 25 October 2014
Last week’s European summit on climate change failed to address the hard reality that current policies are not working. The EU’s energy policy was grounded on the broad acceptance of four cornerstone propositions, which over time have turned to dust. The inconvenient truth is that none of these beliefs have proved to be true. Small wonder, then, that the political consensus that enabled the 2008 policy to go ahead has broken. Beyond accepting failure, it is important now to start again and to put in place a set of policies that have a better chance of working. –Nick Butler, Financial Times, 27 October 2014
With a 2015 deadline looming large for a global pact on curbing climate change, six days of UN talks closed in Bonn on Saturday with delegates and observers deflated over a lack of progress. Rifts over responsibilities for galloping emissions of Earth-warming fossil fuels remain deeply entrenched, they said, preventing detailed negotiations on a new agreement. Many said the Bonn meeting merely restated well-known country positions on how responsibility for climate action must be shared, instead of discussing details like funding to help poor countries shift to less polluting fuels and adapt to change that can no longer be avoided. –Mariette Le Roux, AFP, 25 October 2014
Investigations by the Mail on Sunday reveal the Green Blob is not just an abstract concept. We have found that innocuous-sounding bodies such as the Dutch National Postcode Lottery, the American William and Flora Hewlett Foundation and the Swiss Oak Foundation are channelling tens of millions of pounds each year to climate change lobbyists in Britain, including Greenpeace and Friends of the Earth. According to leading energy analyst Peter Atherton of Liberum Capital, current UK energy policies shaped by the Green Blob will cost between £360 billion and £400 billion to implement by 2030. He said this will see bills rise by at least a third in real terms – on top of the increases already seen over the past ten years. –David Rose, Mail on Sunday, 26 October 2014
Meanwhile, it is clear that the sheer scale of this lavishly funded lobbying effort dwarfs that of its opponents. The Global Warming Policy Forum in London, Europe’s only think-tank which is sceptical about climate science and energy policy, has an annual budget of £300,000 and employs just three people. Its director, Dr Benny Peiser, said yesterday: ‘At the end of the day, someone will have to be held accountable for us committing economic suicide. We are the only organisation that does what we do – against hundreds on the other side, all saying the same thing.’ –David Rose, Mail on Sunday, 26 October 2014
1) Europe’s Green Suicide: Heavy Industry Moves Investment Abroad – The New York Times, 25 October 2014
2) Nick Butler: EU Energy Policy Isn’t Working: Time To Start Again – Financial Times, 27 October 2014
3) UN Climate Talks End In Deadlock – AFP, 25 October 2014
4) Exposed: The Shadowy Green Network That Is Making UK Energy Bills Soar – Mail on Sunday, 26 October 2014
1) Europe’s Green Suicide: Heavy Industry Moves Investment Abroad
The New York Times, 25 October 2014
Stanley Reed and Melissa Eddy
“We shift investment money from Europe into the U.S. as a consequence of the less competitive environment in Europe,” Harald Schwager, a senior member of BASF’s executive board, said in an interview.
In the 1860s an entrepreneur named Friedrich Engelhorn started a firm here to produce dyes for Europe’s booming textile industry. Almost 150 years later, that company, Badische Anilin & Soda Fabrik — or BASF — is the world’s largest maker of chemicals.
Despite its growth into a global company, BASF has remained an integral part of the industrial base that has helped Germany grow into Europe’s largest economy. And Ludwigshafen remains the company’s hometown. The BASF site, spread over four square miles along the Rhine River, resembles a small city, with 33,000 employees working in 2,000 buildings, crisscrossed by roads and railways.
Lately, though, BASF has been investing more of its money and management energy outside Germany, especially in the United States. And the company’s reasons for doing that help illustrate why the German industrial economy has been losing momentum — and why Germany risks tipping back into recession.
BASF executives say that German and European Union policies toward industry, particularly when it comes to energy, are forcing big companies to look elsewhere as they seek to expand.
Energy is perhaps BASF’s biggest cost. Tremendous amounts of electricity are required to produce chemical raw materials like ethylene, propylene and butadiene for a range of products like plastics, pharmaceuticals and rubber. And oil or natural gas are the basic feedstocks from which these chemicals are produced.
Especially in Germany, energy prices have jumped as a result of the government’s big push for renewable energy sources — a policy that the government of Chancellor Angela Merkel has labeled the Energiewende, or energy transition.
At the same time, surging production of natural gas from shale rock in the United States is creating cheap and ever more abundant energy, giving American chemical plants and manufacturing sites a new competitive edge over facilities in Europe.
That is a big reason BASF is expanding some of its plants in the United States and looking to build others.
Already, BASF has doubled its annual investment in the United States to about $1 billion a year. With its French partner Total, it recently completed an estimated $400 million expansion and upgrade of their petrochemical plant in Port Arthur, Tex., which employs about 250 people.
As a result of the modifications, the plant’s main production engine, an installation known as a steam cracker — which was first fired up in 2001 and previously used feedstock derived from oil — can now make its chemicals from shale gases, allowing for potentially huge savings.
“We shift investment money from Europe into the U.S. as a consequence of the less competitive environment in Europe,” Harald Schwager, a senior member of BASF’s executive board, said in an interview here.
It is a major strategic shift for the company, which had 74 billion euros, or about $94 billion, in revenue last year.
Over the next five years, BASF plans to pump a quarter of its planned €20 billion in investments into North America. For the first time, the company plans to trim its spending in Germany from its traditional level of at least a third of investment to only a quarter.
And slightly fewer than half of the company’s approximately 113,000 employees are now in Germany. These days, about 17,000 of them are in North America and about the same number work in Asia. […]
BASF is not alone in looking beyond the country’s borders. Since 2011, the chemical industry over all — Germany’s third-largest industrial sector after automobiles and machinery — has not increased production or investment in the country, according to VCI, an industry association.
And nearly a quarter of all companies in heavy industry are considering reducing production in Germany, according to a survey by the German Chambers of Commerce. […]
“The bad thing from a European perspective, not from a company perspective but for the region Europe, is it’s not only BASF,” Mr. Schwager said. “It is many European companies which are energy-intensive. They are finding out that the benefits of shifting investment from Europe to the U.S. are significant.”
2) Nick Butler: EU Energy Policy Isn’t Working: Time To Start Again
Financial Times, 27 October 2014
The inconvenient truth is that none of the EU core beliefs on which energy policy was grounded have proved to be true.
The deal reached at last week’s European summit on climate change will satisfy no one. The non-binding Europe-wide targets place no responsibility on national governments and provide none of the confidence necessary for the essential investments in supply and infrastructure that are yet to be made. Poland may be the short-term winner – reflecting a clear shift in European decision-making to the east – but the summit failed to address the hard reality that current policies are not working. A new approach is needed.
The fractious debate which led up to the summit should be understood as marking the end of the “consensus” on energy policy established in 2008. Anyone wanting to understand the details of the debate should read the excellent summary produced by Energy Collective which spells out the positions of the key states on major issues.
Although not a total consensus, the 2008 policy was grounded on the broad acceptance of four cornerstone propositions, which over time have turned to dust.
These core beliefs were:
- fossil fuel prices would rise inexorably as global demand exceeded supply;
- Europe could gain a material competitive advantage by being the first major region in the world to develop a low-carbon economy based on renewables;
- a gradually rising carbon price would increase the cost of externalities including air pollution and climate change, until renewables became fully competitive;
- the negative effects of higher energy costs on competitiveness would be mitigated by a global deal with all the world’s major economies making progress towards the common goal of reducing emissions.
The inconvenient truth is that none of these beliefs have proved to be true.
Fossil fuel prices are falling, including the prices of gas, coal and oil. Technology has pushed up recovery factors and reduced production costs. Technology has also created a shale gas revolution which has already transformed the US energy market and looks set to do the same elsewhere, even if it does not reach Europe.
The move to renewables has not given Europe any competitive advantage. Energy costs have risen but the main research and development advances have been made in the US and China. The attempt to establish a carbon price has failed with the result that coal, which as the most carbon-intensive fuel was supposed to be priced out of the market, is back.
Most important of all, there has been no global deal, and while some agreement could be reached at the 2015 UN Climate Change Conference in Paris, the chances of a comprehensive and deliverable agreement are minimal.
Small wonder, then, that the political consensus that enabled the 2008 policy to go ahead has broken. Consumers, including business, are focused on reducing costs. Many governments especially in eastern Europe are concentrating instead on energy security. Predictably policy is reverting to the national level with every likelihood of fragmentation. Investors are in limbo without the clarity necessary to justify long-term investments requiring hundreds of millions of euros.
3) UN Climate Talks End In Deadlock
AFP, 25 October 2014
Mariette Le Roux
With a 2015 deadline looming large for a global pact on curbing climate change, six days of UN talks closed in Bonn on Saturday with delegates and observers deflated over a lack of progress.
Rifts over responsibilities for galloping emissions of Earth-warming fossil fuels remain deeply entrenched, they said, preventing detailed negotiations on a new agreement.
The meeting of senior officials in the former West German capital was meant to lay the groundwork for December’s round of ministerial-level UN talks in Lima, where a draft of the deal must be outlined for adoption in Paris a year later.
It was also intended to start identifying what information countries will be required to submit when they lodge their pledges for curbing emissions.
A long list of speakers complained at Saturday’s closing session of an opportunity lost.
Ecuador’s negotiator Walter Schuldt, on behalf of a group of 30-odd Like-Minded Developing Countries that include major polluters India and China, said they were “thoroughly dissatisfied” with the outcome.
“We lost valuable negotiating time this week with open-ended discussions,” he said — a sentiment echoed by African and Arab countries, among others that had hoped for more detailed bartering.
Countries remain divided on such fundamentals as the legal form that the 2015 agreement will take, whether there will be different levels of obligation for rich and poor nations, and how to assess whether national carbon curbing pledges are enough, combined, to avoid the worst climate change scenarios.
Many said the Bonn meeting merely restated well-known country positions on how responsibility for climate action must be shared, instead of discussing details like funding to help poor countries shift to less polluting fuels and adapt to change that can no longer be avoided.
“We will clearly have our work cut out for us in Lima,” said Ronald Jumeau, spokesman for the Alliance of Small Island States (AOSIS) — countries at high risk from rising sea levels induced by climate change.
And he warned “there won’t be an adequate deal unless” developed countries give details soon of financial and expert support.
4) Exposed: The Shadowy Green Network That Is Making UK Energy Bills Soar
Mail on Sunday, 26 October 2014
David Rose
The Mail on Sunday today exposes how a ‘Green Blob’ financed by a shadowy group of hugely wealthy foreign donors is driving Britain towards economically ruinous eco targets.
The ‘Green Blob’, a phrase first coined by former Environment Secretary Owen Paterson, is a group of pro-green lobbyists working at every level of the British Establishment
The phrase the ‘Green Blob’ was coined by former Environment Secretary Owen Paterson after he was sacked from the Cabinet in July.
He was referring to a network of pro-green lobbyists working at every level of the British Establishment, who have helped shape the eco policies sending household energy bills soaring.
But investigations by this newspaper reveal the Blob is not just an abstract concept.
We have found that innocuous-sounding bodies such as the Dutch National Postcode Lottery, the American William and Flora Hewlett Foundation and the Swiss Oak Foundation are channelling tens of millions of pounds each year to climate change lobbyists in Britain, including Greenpeace and Friends of the Earth.
They have publicly congratulated themselves on their ability to create green Government policy in the UK – most notably after Ed Miliband steered through aggressive CO2 reduction targets in his 2008 Climate Change Act, and announced there would be no more coal power stations.
Yet the consequences of their continuing success are certain: further eye-watering rises in energy costs for millions of Britons and an increasing risk of blackouts.
According to leading energy analyst Peter Atherton of Liberum Capital, current UK energy policies shaped by the Blob will cost between £360 billion and £400 billion to implement by 2030. He said this will see bills rise by at least a third in real terms – on top of the increases already seen over the past ten years.
This bill dwarfs the EU’s £1.7 billion demand from Britain last week.
Lobbying by the Blob helped lead to a new European Union emissions deal announced on Friday, when EU leaders including the Prime Minister agreed to triple the current pace of emissions cuts.
Following earlier deals, EU-wide emissions of CO2 are supposed to fall 20 per cent over the 30-year period 1990 to 2020.
Under the new agreement, this reduction must be doubled in just a decade, reaching ‘at least’ 40 per cent by 2030 – a goal that could only be accomplished through further massive investment in wind and nuclear energy.
At the heart of the Blob is a single institution – the European Climate Foundation (ECF) – which has offices in London, Brussels, The Hague, Berlin and Warsaw.
Every year it receives about £20 million from ‘philanthropic’ foundations in America, Holland and Switzerland, and channels most of it to green campaign and lobby groups.
It refuses to disclose how much it gives to each recipient, and does not publish its accounts. But it admits that the purpose of these grants is to influence British and EU climate and energy policy across a broad front.
Many more millions are fed directly to British and European lobby groups from the same overseas foundations which also fund ECF.
In its last annual report, ECF said working towards a 2030 deal was ‘a big focus area for ECF as a whole’.
ECF managing director Tom Brookes told The Mail on Sunday he provides ‘a fact-base’ to help policy-makers make the ‘many complex decisions that are necessary to move towards a high-innovation, prosperous and low-carbon future’. He added: ‘The UK is a leader in many of these fields.’
The Blob and Red Ed
Friday’s EU deal contains a get-out clause: if the rest of the world fails to agree a binding global emissions treaty at a UN conference in Paris next year, then Europe’s targets can be ‘reviewed’ – or in other words, abandoned.
Giants such as China, India and Australia have insisted they will not sign such a treaty. It is also unlikely to be approved by the US Congress, which is Republican-controlled.
However, thanks to Ed Miliband and his 2008 Climate Change Act, the get-out will make no difference for Britain. The UK is the only country which already has a binding target for 2050. By then, the law says, UK emissions must be 80 per cent down on 1990.
Mr Miliband’s Act also created a mechanism for ensuring the country sticks to a path that achieves this target – the so-called ‘carbon budget’. The scale of the challenge that its latest version poses is not widely realised.
Over the next 15 years, the electricity industry has to cut the CO2 it emits for every kilowatt it generates by 90 per cent – an unprecedented transformation.
But the carbon budget also means the total amount of power generating capacity has to more than double. In order to meet the 2050 target, there has to be a massive shift towards electric vehicles and heating. While fossil fuel power plants will close, both their replacements and this vast additional capacity will have to be wind or nuclear – by far the most expensive types of power.
Remarkably, green lobby group Friends of the Earth not only conceived the Climate Change Act, but Bryony Worthington, the FoE official who came up with the idea and lobbied MPs to support it, later actually drafted it.
‘When you’re on the outside lobbying, you kind of hope that you are going to have an impact, [but] you’re never really very sure,’ she told a green seminar three years ago.
But she hit the jackpot. Her proposal was taken up first by the new Tory leader, David Cameron, and followed by the then-Labour Government. Worthington, who was seconded into the civil service, was asked to rewrite her lobbyist’s memo, this time as a law.
Once it was safely on the statute book, she left the civil service to form a new green campaign group, Sandbag, which presses the Government to adopt more stringent forms of carbon taxes. Like her previous employer FoE, it is now funded by ECF. Ed Miliband made her a Labour peer in 2011.
While the Act was going through Parliament, the ECF, which was launched in 2007-8, was giving money to Greenpeace UK, FoE, Christian Aid and the WWF to mount a campaign against coal-fired power plants. Also funded was Client Earth, a group of lawyers who secured court acquittals for ‘direct action’ protesters who broke into the Kingsnorth plant in Kent, climbed its chimneys and occupied it.
The campaign persuaded Mr Miliband to announce the cancellation of a planned new generating unit at Kingsnorth – and that there would be no new coal plants built in Britain.
Afterwards, the ECF president, Jules Kortenhorst, boasted that Miliband had acted in response to ‘a complex, multifaceted effort over a year and a half, with grass-roots mobilisation campaigns [and] behind the scenes lobbying’.
He added: ‘All of this work, backed by substantial philanthropic investment, resulted in UK Climate Change Secretary Ed Miliband announcing that no new coal-fired power plants would be built… This is an example of a policy that can be replicated, increasing its impact.’ […]
To ECF’s dismay, however, the supposed UK ‘consensus’ on climate and energy is now in jeopardy: ‘Household energy bills have shot to the top of the political agenda, and progress on decarbonisation is tangled in competing visions of the country’s energy future… A growing number of media and political voices are casting doubt on the climate science and the economic case for action.’
Against this opposition, ECF’s 2013 report says it intends to work with British greens to ‘rebuild confidence in the low-carbon transition’, by ‘fact-checking the UK media’s coverage of climate and energy issues’.
It says it will ‘establish a new unit that will promote evidence-based discussions in the media and mobilise authoritative voices on the low-carbon economy’.
Since the report was published, this unit has come into being, run by former BBC environment correspondent Richard Black. How effective it will be remains to be seen.
Meanwhile, it is clear that the sheer scale of this lavishly funded lobbying effort dwarfs that of its opponents.
The Global Warming Policy Forum in London, Europe’s only think-tank which is sceptical about climate science and energy policy, has an annual budget of £300,000 and employs just three people.
Its director, Dr Benny Peiser, said yesterday: ‘At the end of the day, someone will have to be held accountable for us committing economic suicide. We are the only organisation that does what we do – against hundreds on the other side, all saying the same thing.’
