Friday, January 30, 2009

Does carbon trading risk becoming the new sub-prime?

This is a largely irrelevant question but one that the Guardian considers anyway. There is something inherently distasteful about speculators piling into or indeed selling short the price of carbon as the implications for the climate are very real.

This is an issue worth keeping an eye on.

Carbon trading may be the new sub-prime, says energy boss [Guardian]

The row over the working of the European Union's emissions trading scheme intensified last night when EDF Energy warned that speculators risked turning carbon into a new category of sub-prime investment.

Vincent de Rivaz, the chief executive of the UK arm of the French-owned gas and electricity group, said politicians and regulators needed to revisit the way the ETS was working and whether it was bringing the results they wanted. "We like certainty about a carbon price," he said. "[But] the carbon price has to become simple and not become a new type of sub-prime tool which will be diverted from what is its initial purpose: to encourage real investment in real low-carbon technology."

Green campaigners have long been critical of the way the emissions trading scheme was set up, but it is unusual for a leading industry figure to cast doubt on it, as power companies lobbied hard for a market mechanism to deal with global warming.

"We are at the tipping point where we ... should wonder if we have in place the right balance between government policy, regulator responsibility and the market mechanism which will deliver the carbon price," said de Rivaz.

De Rivaz's comments came as Tony Hayward, chief executive of BP, emphasised that a predictable global carbon price was important because it would make "vast numbers of alternative energy sources competitive". He told the World Economic Forum in Davos that certainty over carbon emissions would help "solve the world's energy problems".

Their comments came days after the Guardian revealed that steelmakers and hedge funds were cashing in ETS carbon credits obtained for free, causing the price of carbon to plunge. The price of carbon has slumped from €30 a tonne to below €12, leading to a tail-off in clean-technology offset projects in the developing world.


De Rivaz said an over-reliance on markets without tougher safeguards was responsible for the financial turmoil that has sent banks into administration or forced sale. He believed there had been a "lost sense of values" and he was anxious that this should not extend into the energy sector, but was not prepared yet to call for a carbon tax to replace the ETS.

Point Carbon, an information provider and consultancy, claims the sell-offs are only one of a number of factors influencing carbon prices and argues it is "rational" for them to be selling off credits.

"Recession in Europe is bringing a slowdown in manufacturing, meaning less production and less emissions," said Henrik Hasselknippe, global head of carbon at Point Carbon. "Companies are doing exactly the rational thing in these circumstances, which is to sell if they are long on credits. If they are emitting less then they do not need the credits so much and the price of carbon will fall."

However, Bryony Worthington, an expert on climate change and founder of, said: "What should have been a way to kick-start investment in much needed low-carbon, efficient technologies is now a cash redistribution exercise." A study commissioned by the WWF environmental organisation from Point Carbon, published in March last year, estimated that "windfall profits" of between €23bn and €71bn (£20.9bn-£64.4bn) would be made under the ETS between 2008 and 2012, on the basis that the price of carbon would be between €21 and €32. Up to €15bn could be made by British companies that were given credits they did not need.


Institutionalized pollution havens

Hot off the press - a plug for two previous co-authors new paper just out in Ecological Economics.

Institutionalized pollution havens

Matthew A. Cole
Per G. Fredriksson


A multiple-principal, multiple-agent lobby group model suggests that the effect of foreign direct investment (FDI) on environmental policies is conditional on the structure of host countries' political institutions such as the number of legislative units (veto players). The model also yields the novel concept of “aggregate honesty” which combines veto players and corruption. FDI raises environmental policy stringency where the number of legislative units are many (aggregate honesty is high), but reduces it where the legislative units are few (aggregate honesty is low). Our panel data evidence is fully consistent with these predictions. An additional contribution is to show the empirical importance of endogenizing environmental policy in Pollution Haven Hypothesis studies. Only when treated as endogenous does environmental policy have a significant negative effect on FDI.

Keywords: Political economy; Political institutions; Veto players; Pollution Haven Hypothesis; FDI

JEL classification codes: Q28; D72; D73; F18; F21

Tuesday, January 27, 2009

The Smart Globalist

Interesting new blog aggregation and news site.

Globalization Central - News and Views From Outside the Box

The Smart Globalist is an online magazine that covers economics, finance, public policy and international relations. Our aim is to educate and inform public opinion across a range of issues related to globalization - from international trade and investment to the financial markets, foreign policy and global development.

The Smart Globalist publishes a diverse array of contributors hailing from academia, print journalism, finance and the public policy community. Our original editorial content includes both short, timely commentary on the latest news and current events, as well as longer analytic pieces exploring the complex issues surrounding international trade, investment and foreign policy. We hope that our coverage and analysis of these issues will eventually lead to practical, pragmatic solutions to the challenges and opportunities presented by globalization.

The Smart Globalist also aggregates content from some of the best blogs and media outlets on the internet. By syndicating content from established and emerging bloggers, The Smart Globalist hopes to draw attention to important perspectives often missing from the mainstream media, while taking advantage of the new ways of organizing and distributing information afforded by new technologies.

Our editorial staff reviews all of the syndicated content appearing on the site to ensure that it is timely, relevant, insightful and of interest to our readers. We publish the headline, a brief lede, and any image that comes embedded in the RSS feed, and provide a link to the original content. We never change or edit any of the syndicated content itself, we do not archive any syndicated content for more than two weeks, and we do not allow our readers to comment on this material. We encourage you to visit the websites of the original authors of this material and leave comments there, where the authors can respond, either by clicking through the links available with each post, or else by perusing our blogroll. We believe that this constitutes 'fair use' of the syndicated materials.

In short, we hope to fulfill a public service by helping everyone to form thoughtful, well-informed, reality based opinions and perspectives on global economic and political issues.

The Smart Globalist is run on a not-for-profit basis by the Economic Strategy Institute, a non partisan, non-profit public policy research organization based in Washington DC. The website is funded in part through a generous grant from the Alfred P. Sloan Foundation.


KOF index of globalization

A useful index of globalisation.

KOF Index of Globalization

This link gives information on where to get the data and how it is constructed.

Watching UK's newsnight is rather frustrating when they talk about "de-globalisation".

Globalisation is slowing but not reversing. Barriers to trade remain low and are still falling.

Falling trade does not mean globalisation has reversed.


What Environmentalists Need to Know About Economics

A new online book that will of use to many environmental management students or environmental scientists taking economics courses.

Jason Scorse: "What Environmentalists Need to Know About Economics"

"Academic disciplines are often separated by gulfs of mutual incomprehension, but the deepest and widest may be the one that separates most economists from most environmentalists...What underlies this is not so much disagreements about facts as disagreement about how to think."
~ Never The Twain Shall Meet. (2002, January 31). The Economist.

"This book was inspired by the warm reception I received from a short essay I wrote back in 2005 entitled, 'Why Environmentalists Should Embrace Economics.' The target audience is those interested in environmental issues with an eye towards actually solving them: students, citizens, policy‐makers, and activists. No economics background is required for this text, although some basic microeconomics knowledge is helpful. Even those with more advanced training in economics may find some new perspectives in this volume that they may have not considered before."
~ Jason Scorse

Download the Book

What Environmentalists Need to Know about Economics - Entire Book [PDF]

Table of Contents and Introduction

Part I: How Economists Approach Environmental Issues

Chapter 1 - The Root Causes of Environmental Problems

Chapter 2 - Determining the "Optimum" Amount of Pollution

Chapter 3 - Valuing Ecosystems

Chapter 4 - Putting Monetary Values on the Environment and Living Things

Chapter 5 - Valuing Future Generations

Chapter 6 - Tools to Address Environmental Problems: Taxes, Property Rights, Information, and Psychological Insights

Part II: Putting Economic Analysis to Work

Chapter 7 - Climate Change

Chapter 8 - Conservation and Biodiversity Preservation

Chapter 9 - Agriculture

Chapter 10 - Chemical Pollution

Chapter 11 - Fisheries

Chapter 12 - Deforestation

Chapter 13 - Population Growth & Technological Change

Chapter 14 - Demand-Side Interventions

Final Thoughts & Additional Resources

Comments and constructive criticism are welcome at:


Monday, January 26, 2009

International Trade in Used Durable Goods: The Environmental Consequences of NAFTA"

A paper fit for any "globalisation and the environment" blog. This paper has everything as well as being written by fellow green economics blogger Matthew Kahn.

The results of this paper are exactly as I would have guessed which is always reassuring. What is more the conclusion is;

"trade is good for the environment".

Always a good result as a trade and environmental economist but one that the general public find trouble believing.

"International Trade in Used Durable Goods: The Environmental Consequences of NAFTA"

NBER Working Paper No. w14565
LUCAS W. DAVIS, University of Michigan at Ann Arbor - Department of Economics, National Bureau of Economic Research (NBER)
MATTHEW E. KAHN, University of California, Los Angeles (UCLA)

Previous studies of trade and the environment overwhelmingly focus on how trade affects where goods are produced. However, trade also affects where goods are consumed. In this paper we describe a model of trade with durable goods and non-homothetic preferences. In autarky, low-quality (used) goods are relatively inexpensive in high-income countries and free trade causes these goods to be exported to low-income countries. We then evaluate the environmental consequences of this pattern of trade using evidence from the North American Free Trade Agreement. Since trade restrictions were eliminated for used cars in 2005, over 2.5 million used cars have been exported from the United States to Mexico. Using a unique, vehicle-level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so trade leads average vehicle emissions to decrease in both countries. Total greenhouse gas emissions increase, primarily because trade gives new life to vehicles that otherwise would have been scrapped.


Friday, January 23, 2009

Pollution and life expectancy

In one of my papers we look at the relationship between wages and pollution making the obvious link to the value of statistical life.

In a recent study for the US the cost of pollution appears to be 21 weeks.

Is that more or less than I would have guessed? Hmmmm. More I suppose. This has two implications

(1) The average Chinese citizen is not going to live as long as they might have thought.

(2) The current recession and global crisis might extend the lives of some in the West as what is left of heavy industry moves to China (see point 1).

Cleaner Air Equals 21 More Weeks Of Life [PlanetArk]

BOSTON - Dramatic improvements in U.S. air quality over the last two decades have added 21 weeks to the life of the average American, researchers reported on Wednesday.

Reducing fine particles given off by automobiles, diesel engines, steel mills and coal-fired power plants have added as much as 15 percent of the 2.72 years of extra longevity seen in the United States since the early 1980s, they wrote in the New England Journal of Medicine.

Changes in smoking habits are the biggest reason why Americans are living longer, said Arden Pope, an epidemiologist at Brigham Young University in Utah who led the study.

Improved socioeconomic conditions, judged partly by the proportion of high school graduates living in an area, rank next. But cleaner air was a big factor.

"It's stunning that the air pollution effect seems to be as robust as it is after controlling for these other things," Pope said in a telephone interview.

Using life expectancy, economic, demographic and pollution data from 51 metropolitan areas, Pope and his colleagues found when fine-particle air pollution dropped by 10 micrograms per cubic meter, life expectancy rose by 31 weeks.

Areas such a Akron, Ohio, and Philadelphia showed that kind of drop in air pollution.

The bigger the decline, the longer people began living.

In some areas where fine-particle counts dropped by 13 to 14 micrograms -- such as Buffalo, New York and Pittsburgh -- people typically started living about 43 weeks longer.

The findings show there has been a real dividend from the efforts since the 1970s to improve air quality, said Pope.

In a commentary, Daniel Krewski of the University of Ottawa said the study "provides direct confirmation of the population health benefits of mitigating air pollution and greatly strengthens the foundation of the argument for air-quality management."

Based on earlier research, the World Health Organization has estimated that 1.4 percent of all deaths around the world are caused by air pollution particles.


Thursday, January 22, 2009

Carbon crash, the downturn and windfalls

There is no doubt that a global slow down has benefits for the environment - less production equals less waste and less pollution.

Another benefit to EU firms that are part of the ETS is that they may have a large surplus of permits to sell on the open market. The problem is that this oversupply will lead to a fall in the price of permits.

Whilst power generation will also benefit, the big winners will be cement and steel manufacturers.

Shorting the permit price would surely be a profitable trade. The price of carbon is sure to fall further. Another hit for the banks.

Ultimately this is another example of the failure of the ETS. The ETS was NOT designed to subsidise heavy industry during recessions. These windfalls are not coming from increased efficiency but a simple fall in output.

EU Climate Cash Windfall For Industry In Downturn [PlanetArk]

LONDON - European factories are cashing in on an unexpected benefit from wilting output, selling surplus carbon emissions permits worth about 1 billion euros ($1.29 billion) to raise funds on the carbon market.

A recession in Europe will dent industrial output this year and this will sap energy demand and carbon emissions, leading to a surplus of permits among big polluters including steel and cement makers.

Companies from some of the European Union's most polluting industries are now raising funds on the carbon market to help them weather the credit crisis.

That has raised some uncomfortable questions about a scheme meant to fight climate change rather than subsidize companies during a downturn.

"This was not designed as a scheme to give corporates cheap short-term funding options in the face of a credit crunch meltdown where banks are not lending," said Mark Lewis, Deutsche Bank carbon analyst. "But that appears to be what's happening."

The EU trading scheme is meant to limit greenhouse gases by giving industry a fixed quota of carbon permits that can be traded.

The sell-off has sparked a collapse in carbon prices, which have fallen by up to a third this month and could drop as low as 5 euros from a peak of 31 euros last summer, analysts say.

The carbon price adds to the cost of burning high-carbon fossil fuels and a lower price undermines incentives for companies to cut emissions.

The price falls do not yet match a rout in 2006, when it emerged that EU states had given industry too many carbon permits, creating a glut that made them worthless.

The present surplus has arisen from recession and companies have been able to raise cash because they get their quota for free rather than have to buy these through state-run auctions.

EU leaders last month agreed emissions quotas through 2020 based on assumptions of economic growth, and backed concessions to industry that could allow companies to continue to get free allowances for a decade or more.


The present sell-off started in December and the main winners are cement makers, steel, paper mills and glass factories, carbon traders say.

"It's between 75-80 million to 150 million euros a day," said Jean-Francois Cauvet, a trader at Sagacarbon, subsidiary of French bank Caisse des Depots, referring to buying and selling in return for immediate cash on spot markets.

"I don't know why industrials would miss this opportunity," he added. "They're using it to compensate for the tightening of credit and the slowdown, to pay for redundancies."

A global carbon market has been growing fast, nearly doubling in value last year to about $120 billion.

Now the economic slump is doing the market's job, by limiting economic growth and emissions. Analysts say that the EU emissions cap will bite when economies grow again from 2010 or 2011, and stress that a lower carbon price has not changed the effectiveness of the carbon cap.

For some, however, the price collapse demonstrates that the EU scheme was too soft all along.

"It demonstrates that the targets after 2012 (to 2020) are too lax, especially in combination with a large use of carbon offsets," said Cambridge University's Karsten Neuhoff, referring to an option for companies to offset their emissions by investing in green projects in the developing world.

The potential for raising cash now is large.

The steel and cement sectors have a quota of EU allowances (EUAs) approximately matching their forecast output and emissions.

But West European iron and steel output will fall by about 14 percent this year compared to 2008 and EU cement production by 20-25 percent, analysts estimate.

That implies an EUA surplus this year of 66 million tons for those two sectors alone, worth about 750 million euros at Wednesday's carbon prices.

The EU executive Commission rejected the idea that selling surpluses hurt the integrity of the scheme.

"We are sure at the end of the day the price will ... provoke emissions reductions," said Barbara Helfferich, EU Commission environment spokeswoman. "If those companies were smart they would take those profits ... and invest them into greener technology."

While industrial companies are cashing in, some banks and carbon specialists are hurting.

EUAs are one of the worst investments so far in 2009, falling more than almost any other energy commodity or index of global stocks, compressing margins for companies which generate carbon offsets in the South for sale to companies and countries facing emissions limits in the North.


Wednesday, January 21, 2009

Modern Management: Good for the Environment or Just Hot Air?

This paper is closely related to a body of work currently ongoing at the University of Birmingham. This is clearly an excellent paper on this subject.

Modern Management: Good for the Environment or Just Hot Air?

Nicholas Bloom, Christos Genakos, Ralf Martin and Raffaella Sadun


We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. They use less energy per unit of output, and also in relation to other factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile of
management practices is associated with a 17.4% reduction in energy intensity. This negative relationship is robust to a variety of controls for industry, location, technology and other factor inputs. Better managed firms are also significantly more productive. One interpretation of these results is that well managed firms are adopting modern lean manufacturing practices, which allows them to increase
productivity by using energy more efficiently. This suggests that improving the management practices of manufacturing firms may help to reduce greenhouse gas emissions. Keywords: management, energy efficiency, energy intensity and productivity

JEL Classifications: L2, M2, O32, O33, Q40, Q50

Auctioning of CO2 Emission Allowances in Phase 3 of the ETS

Whether the ETS is a deemed a success or not depends in part on how the permits are allocated in phase 2 and 3 of the ETS.

This paper by Eva Benz, Andreas Löschel, and Bodo Sturm does a good job of summarising the main issues. This is a non-technical paper and accessible to all.

Auctioning of CO2 Emission Allowances in Phase 3 of the EU Emissions Trading Scheme [PDF]

Eva Benz, Andreas Löschel, and Bodo Sturm

October 2008


The “Climate action and renewable energy package” proposed by the European Commission
in the beginning of 2008 suggests auctioning as basic principle for allocation for the upcoming third trading phase of the EU Emissions Trading Scheme that runs from 2013 to 2020. Overall, it is estimated that at least two third of the total quantity of allowances will be auctioned in 2013, to be increased to 100 % by 2020. In this paper, we emphasize the importance of a properly chosen auction design as the significantly higher auction share, compared to the past and current trading phase, is expected to yield a thin secondary market for CO2 allowances. We elaborate main criteria that a viable auction design is supposed to fulfil and propose a specific auction design for the third trading phase. The auction we recommend is a simultaneous dynamic uniform double auction.


Tradable Permits in Developing Countries

I have fallen behind with my reading. I will be posting some academic abstracts in the next few days that will look at papers that I need to read but are (usually) related to "globalisation and the environment".

This first paper is related to the ETS and looks at how such a scheme can work in a developing country. Given the rise of China and India there are possible lessons to be learnt.

Tradable Permits in Developing Countries: Evidence from Air Pollution in Santiago, Chile [PDF]

Jessica Coria and Thomas Sterner


Santiago was one of the first cities outside the OECD to implement a tradable permit program to control air pollution. This paper looks closely at the program’s performance over the past ten years, stressing its similarities and discrepancies with trading programs implemented in developed countries, and analyzing how it has reacted to regulatory adjustments and market shocks. Studying Santiago’s experience allows us to discuss the drawbacks and advantages of applying tradable permits in less developed countries.

Key Words: Air pollution, environmental policy, tradable permits, developing countries

JEL Classification Numbers: Q53, Q58

Obama and the inevitable cooling on warming

Obama talks a good climate change story. However, his hands are increasing tied on this issue as a result of the current financial crisis. The FT looks more closely.

I was going to write at length on this subject but the FT have fortunately beaten me to it. The environmental bits are in bold.

Ambition redefined by financial wreckage [FT]

Every now and then something unexpected transforms the political environment. For George W. Bush it was the September 11 terrorist attacks. For Barack Obama it took place even before he was sworn in. And it came from an unlikely quarter.

Last week’s report by the normally sub-radar Congressional Budget Office projecting a $1,200bn deficit for 2009 and $1,000bn fiscal deficits as far as the eye can see, sent shock waves through Washington, which look set to redefine what is possible for most of Mr Obama’s first term.

Just a few weeks earlier – and even amid the growing wreckage of the deepening US recession – Mr Obama’s transition team still felt confident enough to signal that they saw the financial meltdown as an opportunity to push through a “big bang” package of election promises.

These included a decisive move towards universal healthcare, enactment of a “cap and trade” system to tackle global warming and big new investments in education, infrastructure, scientific research, and expanding the size of the US military. Then the CBO dropped its fiscal bombshell.

Suddenly the crisis threatened to overwhelm everything. “Do not underestimate the deep psychological impact the CBO numbers have had on Washington,” says Bill Galston, a leading scholar of US politics and former Clinton White House official. “All of a sudden, it has become the gatekeeper of what is possible. If something fails the fiscal test, then it doesn’t look very possible any more.”

Even as Mr Obama was drafting and redrafting the most awaited inaugural address in a generation, the spread of red ink across Washington threatened to bring his honeymoon to a close before it had formally begun. In the absence of George W Bush, who all but relinquished his presidency many weeks ago, Mr Obama has been forced to take the heat in negotiations with Congress to push through an historic $800bn-plus fiscal stimulus to kick-start the economy.

More importantly, however, the deteriorating fiscal outlook has prompted an early and sobering reappraisal of what is now politically possible – an art in which aspiring great statesmen require no lessons. “There is one overriding measure that President Obama will apply to his first two years and that is whether he can get the economy going again,” says an adviser to the Obama transition team.

“It is ‘the economy, stupid’ squared. If he can persuade the American people this is his overriding priority and that he is making progress towards achieving it, then the American people will go along with him even if they are still hurting.”

Does this mean that Mr Obama must now shelve all the hope and promise that helped propel him to victory? Amid the relentless hammer blows of ever worsening economic news, Mr Obama’s all-star team of appointees have had little time to plan through the dynamic consequences of what is happening around them.

The internal debates over what is now do-able are nowhere near reaching conclusion. But it seems clear that some things, most notably any serious steps to tackle global warming and sharp increases in long-term public investment, will have to be postponed for at least a year and possibly much longer.

For “cap and trade”, the writing was already on the wall last October when the Senate voted heavily against the relatively modest Lieberman-Warner bill to control emissions. A few months earlier and it could well have passed.

Given the short-term contractionary effects of imposing an indirect tax on carbon, it will now almost certainly be shelved.

At a cost of at least $100bn a year, enacting universal healthcare may start to look increasingly difficult, given the rising alarm among the politically powerful centrist Democrats on Capitol Hill over the budget deficit. Even an essential move to release the second $350bn tranche of funds to revive the financial sector looked last week to be in jeopardy.

“Perhaps the best we can do in this environment is to ask Obama’s supporters to see the fiscal stimulus as a down payment on future domestic reforms and to appeal to people to understand that nothing big can get done unless the economy is thriving again,” says the adviser.

All of which puts a high and growing premium on delivering the kind of “change” that comes without a large price tag. Of these, closing Guantanamo Bay, proclaiming an end to torture and signalling a new approach to foreign policy – opening direct talks with Iran? – look more likely to top the political agenda than they were just a few weeks ago. As Mr Obama’s secretary of state, Hillary Clinton is likely to take a lot of limelight early on.

Even here, however, Mr Obama is already managing down expectations. In an interview with ABC last week, the president-elect sounded pessimistic about the possibility of closing Guantanamo Bay in the near future.

“It is more difficult than I think a lot of people realise,” he said. Yet Mr Obama will still probably telegraph his desire to close Guantanamo within his first few days in office.

Mr Obama can deliver significant changes within his first few weeks simply by issuing executive orders, as he is likely to do in a number of areas, including restoring federal stem cell research and rescinding Mr Bush’s recent flurry of “midnight” steps to dilute environmental regulations.

These have the advantage of costing nothing as well as leaving the increasingly irritable new Congress to concentrate on the overriding goal of passing a fiscal stimulus.

Even then, though, Mr Obama’s fiscal challenges will only just have begun. “His first priority is getting the fiscal stimulus passed, then there’s the budget which must be delivered to Congress by mid-February,” says Tom Gallagher, head of the Washington office of ISI, a boutique investment bank.

The new president, Mr Gallagher adds, will have to square the circle of reviving the economy while also setting down markers of how he will restore fiscal discipline in the medium term.

Not only will that threaten to swamp everything else but it could also force Mr Obama to confront the one issue that he – and virtually every other politician in Washington – has been studiously ignoring for years: the need to tackle the exploding costs of US entitlements.

These include social security, the hitherto untouchable highly charged “third rail” of US politics, and the Medicare and Medicaid programmes. Indeed, the more bleak the short-term fiscal outlook, the less Mr Obama will be able to avoid tackling rising entitlement costs, which are projected to start engulfing the budget before he has concluded a potential second term.

“Entitlement reform has gone within a few short months from being impossible to being inescapable,” says Mr Galston.

“Mr Obama will still have every opportunity to aim for his place in history. It just might not be in the way he was expecting it.”


The great carbon crash

My environmental economics students will now be acutely aware of the price of carbon after writing a term paper on the European Trading Scheme.

The inevitable decline in the price of carbon will come as no surprise. I for one would not be happy going long on carbon.

Updated: Sell-off forces EU carbon to record lows [Business Green]

The price of carbon credits in the EU's emissions trading scheme reached a record low for the current phase of the scheme of just €11.60 as many of the large scale emitters covered by the scheme continued to offload their EUA carbon credits.

The price of EUAs has been on a steady slide since the start of the year when they stood just shy of €16 a tonne and market watchers are concerned that the price of carbon is no longer tracking oil prices.

Rising oil prices typically lead to an increase in the price of carbon, as they tend to result in energy producers switching from gas to more carbon intensive coal – a scenario that leads to increased demand for carbon credits.

However, the price of carbon has failed to track recent fluctuations in the oil price, prompting fears that any increase in demand for credits from energy companies arising from changes in the oil price is being outweighed by the on-going sell off of credits amongst heavy industries fearful that the recession will lead to reduced production levels.

"The carbon and oil price has become to some extent detached, just because of the sheer scale of the selling pressure," said Henrik Hasselknippe, head of carbon analysis at research firm Point Carbon. "Companies used to sell off credits if they saw that production levels had been down in the previous quarter, but now they are selling based on predictions that production levels will be down for the coming quarters."

He added that there were also early signs that the low price of EUAs was impacting investment in the UN-backed Clean Development Mechanism offsetting scheme.

"If you want to buy CDM credits [CERs] from a good emission reduction project in China it can now cost more than EUAs," he explained. "As a result we are already seeing reduced demands for CERs and are hearing rumours of people renegotiating prices with CDM projects."

The bearish market will undermine recent predictions that the outlook for the carbon market during 2009 remains largely positive.

However, Hasselknippe insisted that the long term outlook for the market remained good and predicted that prices of both EUAs and CERs could recover very rapidly once production levels amongst heavy industries begin to rise again.

"If we see people begin to hold off of CDM projects then once production levels rise the increase in demand for credits will be far quicker than the rise in the supply of credits, as you can't just turn these projects on and off overnight" he explained. "Prices could well triple by the end of the 2008 to 2012 [ETS] period."

The net result is that with the supply of CERs likely to remain constrained and carbon caps within the ETS to be lowered from 2013 there are opportunities for investors to buy credits at the currently low price and make good returns over the next two to five years.

However, Hasselknippe said that while all traders were aware that the three to five year outlook for the market remained bullish there were relatively few with the "deep pockets" necessary to make long term bets.


Monday, January 19, 2009

Water Economics Conference

17th Annual Conference of the European Association of Environmental and Resource Economists
24-27 June 2009, Amsterdam, The Netherlands

24 June 2009, Amsterdam, The Netherlands

The "Preconference on Water Economics" will take place in Amsterdam, The Netherlands, on the 24th of June, immediately before the 17th EAERE Annual Conference and in the same venue. The workshop is organized with the support of EAERE. This one-day meeting will be organized with the aim to present and discuss recent developments in and state-of-the art of European Water Economics. Water has important economic characteristics. Policy demand for information about the economic value of water and the economic consequences of water policy has grown exponentially over the past decades. Since 2000, the Water Framework Directive (WFD) is an important driving force behind the current European Water Economics research agenda. Please find below more information on the Water Framework Directive. During the pre-conference, progress and state-of-the-art of different methodological approaches will be highlighted, addressing a wide variety of surface and groundwater resource management problems, including water pollution, water scarcity, water allocation, ecological restoration of water bodies, and flooding.

The pre-conference meeting is sponsored by the European Commission’s DG Research project AquaMoney and the Dutch Government funded program ‘Leven met Water’ (

Dr. Roy Brouwer, IVM, Department of Environmental Economics, VU University Amsterdam

Relevant topics include:
- integrated hydro-economic river basin modeling
- climate change and flood damage modeling
- non-market water resource valuation
- water pricing, water markets and market based instruments
- payments for watershed ecosystem services
- cost recovery of water services
- international river basin games, cooperation and conflict resolution

Prof. Ian Bateman, University of East Anglia, UK - Water Resource Valuation
Dr. Ines Dombrowsky, Helmholtz Centre for Environmental Research, Germany - The Economics of International River Basin Conflict and Cooperation
Prof. John Rolfe, Central Queensland University, Australia - Water Pricing and Water Markets
Prof. Richard Tol, VU University Amsterdam, the Netherlands - Climate Change Economics and Integrated Hydro-Economic Modelling
During the pre-conference, also the AquaMoney guidelines will be presented. These guidelines have been developed for the WFD by a European research consortium of water economics experts, focusing on a variety of water resource valuation issues in different European river basins (

Information on how to submit and register can be found on .


Are topless protests the future for environmental activism?

The flash mob protests over at Heathrow are becoming more flash and less protest.

Today's topless flash mob reverts to the age old method of garnering publicity. There are worse ways of protesting although using the phrase "stop the slaughter" seems to be a little over the top given the majority of losers will be middle class residents who will have to suffer the great pain of their house price falling.

Clearly it would be inappropriate for images to be shown on this blog so click below for the full story:

Heathrow chaos as runway activists stage airport 'flash mob' protest [Mailonline]

Hundreds of activists opposed to a third runway at Heathrow today staged a 'flash mob' protest at Terminal Five.

The action, which saw environmentalists gather with local residents and climate change groups at the airport, was the first major demonstration since the Government controversially gave the go-ahead for the expansion.


Bangladesh and the $100 Million World Bank Loan

The World Bank continues to invest heavily in environmental projects. This is controversial as some suggest the World Bank should still to poverty alleviation.

I have just started a project looking at the environmental issues in Bangladesh and the World Bank and big players. This intervention is to be welcomed.

Is solar power in Bangladesh the answer? What is for sure is that of all the countries that will be badly affected by climate change and rising sea levels you can bet that Bangladesh will get the worst of it.

It should be the West and China/India that need more solar panels if Bangladesh is to be saved. The $100 solar power plant would surely be more efficient if it were set up in a different country although the energy shortages are real and need to be addressed somehow.

Bangladesh To Receive $100 Million Loan From World Bank [PlanetArk]

DHAKA - The World Bank plans to lend Bangladesh $100 million by June to promote renewable sources of energy, particularly solar power, officials said.

A delegation from the World Bank visited Bangladesh last week to explore the possibility of renewable energy development.

"Bangladesh has sought a $100 million loan to set up a solar power plant and to explore other sources of alternative energy in the country," an official of the World Bank told Reuters on Saturday.

"It may take couple of months to reach an agreement with the new government to promote renewable energy as the country's natural energy (gas) is depleting gradually," said the official, who declined to be named.

Bangladesh's main source of energy, natural gas, is depleting fast and its recoverable gas reserve will meet demand only up to 2012, the state-run oil, gas and mineral corporation, or Petrobangla, has said.

Bangladesh now faces a shortage of over 250 million cubic feet of gas per day (mmcfd) against demand for over 2000 mmcfd.

Compounding problems, power generation has been hampered over the last few years as nearly 80 percent of the country's electricity is produced using gas.

The government has formulated a renewable energy policy to encourage the private and public sectors to develop alternative sources of energy, with the aim of meeting up to 10 percent of total electricity demand through renewable energy.

Also on Saturday, Japan said it had pledged to lend Bangladesh nearly $440 million for power generation and bridge construction projects.

Prime Minister Sheikh Hasina, who is also in charge of ministry of power, energy and mineral resources, has asked that taxes and duties on the import of solar energy systems such as solar panels be waived.

"It will be done very soon and is a only matter of processing," government energy secretary Mohammad Mohsin said on Saturday.

At present, importers pay around 3 percent duty and 15 percent value-added tax to import solar panels.

The importers, mostly non-governmental organizations, have been urging the government to forego all taxes to promote the use of renewable energy.

Mohsin said the prime minister felt that solar energy systems had not made much progress in the country despite their huge potential.

Officials say that around 300,000 solar panels have been installed by different NGOs in the country.


Sunday, January 11, 2009

Deforestation and cows - Amazon update from Live Science

National Science Foundation and Live Science comment on the state of the Amazon rainforest.

It is journalistic in style - hooking first paragraph eventually getting to the meat so to speak.

This article seems to suggest that the demand for burgers is killing the earth. I tend to agree. Americans per capita beef consumption (and increasingly the UKs) is truly scary.

Other facts and figures are fairly well known but this is a useful reminder article.

Amazon Deforestation: Earth's Heart and Lungs Dismembered [Live Science]


Such scenes are becoming increasingly common as large swaths of the Brazilian Amazon are being bulldozed and burned to accommodate expanding cattle ranches. Deforestation, which is dismembering the Earth’s functional heart and lungs, is largely resulting from cattle ranching driven by economic incentives and demand for Brazilian beef, according to the Center for International Forestry Research.

"Probably 80 to 90 percent of all cleared land in the region (the Brazilian Amazon) is attributable to some form of pasture or ranching," said Robert Walker, a geography professor at Michigan State University and an expert on land-use change in the Brazilian Amazon.

Deforestation is accelerating

Brazil has historically had the distinction of serving as the world's leader of deforestation. According to Walker, during the last three decades, an annual average of 6,500 square miles of the Brazilian Amazon — an area that is greater than the size of Connecticut — has been deforested.

Satellite data indicates that the rate of Amazonian deforestation is accelerating; in some areas, the rate increased by 50 percent since last year. And with over 20 million people and 70 million cattle now inhabiting the Amazon, about a 600 percent increase in the last 60 years, more trees are being razed to make room for cattle ranches, said Walker.

Small-scale ranchers — including poor, subsistence farmers — encroach on forests gradually, felling trees and creating modestly sized pastures in a piecemeal fashion. By contrast, larger land owners use tractors and bulldozers to quickly mow down vast tracts of forest, and then burn remaining vegetation to establish huge ranches. Either way, the landscape ends up fragmented and ecologically devastated.

Ground zero for global extinction

As the world's largest tropical rainforest, the Amazon houses the world's largest collection of living species of plants and animals. It also plays a significant role in stabilizing local climate and may provide the raw materials to cures for some of the world’s deadliest diseases.

But deforestation has transformed the Amazon into ground zero for global extinction. In addition, burning and rotting trees release carbon dioxide, which contributes greatly to climate change.

"Brazil overall is the fifth or sixth largest emitter of carbon dioxide and by far the most important source is deforestation," said Eugenio Arima, an assistant professor of environmental studies at Hobart and William Smith Colleges and a former conservation and development researcher at the Brazilian nonprofit institute Imazon.

The cattle economy

With support from the National Science Foundation, Walker and Arima are currently researching Brazil's dynamic cattle economy; their research is exposing links between globalization and deforestation.

According to Walker and Arima's research, reduced transportation costs from the construction of highways in the Amazon, together with the rise in beef prices, provided economic incentives to increase cattle grazing in the region. In addition, the devaluation of the Brazilian real decreased the costs of importing beef from Brazil, and efforts to reduce foot-and-mouth disease — a devastating, contagious virus in cattle — helped open new worldwide markets.

"It was like the perfect storm for demand," said Walker. Responding to resulting increases in demand for beef, slaughterhouses proliferated throughout the Brazilian Amazon. These establishments acquire cattle from ranches, process the meat, and in some cases, export the produce directly to international consumers.

Today, Brazil is the world's biggest beef exporter, said Arima. While only 10 percent of Brazil's beef exports were supplied by the Amazon in 2005, that figure doubled by 2006 and is continuing to increase. Major markets for Brazilian beef currently include Latin America, the European Union, Russia, the Middle East and China. (The United States does not import Brazilian beef because it has its own large domestic cattle herds and because it prohibits the importation of beef from countries where foot-and-mouth disease has not been certified free in all sections, said Walker.)

Like the U.S.'s westward expansion

Cattle ranches will continue to replace forests in Brazil's Amazon as long as global demand for Brazilian beef and the profitability of cattle ranching persist. What's more, ongoing increases in global demand for soy and biofuels may convert former pastures to agriculture, pushing ranchers farther into the forest, explained Arima.

The population and cattle migration into the Brazilian Amazon resembles the westward expansion across the United States in the 19th century; "Brazil's Manifest Destiny," said Walker. The Brazilian government has promoted the development of the Amazon by sponsoring economic development programs, population relocation programs and the construction of dams, highways and a natural gas pipeline in the Brazilian Amazon.

Nevertheless, the Brazilian government is also heeding some of the lessons made apparent by America's destruction of its own forests. During the last ten years, the Brazilian government has pursued aggressive policies on the designation of protected areas and on curbing encroachment in the Brazilian Amazon.

These policies have helped protect vast tracts of land that were previously up for grabs to whoever claimed them. In addition, enforcement of protections, particularly in indigenous reserves, has improved, said Arima.

Domestic and global forces will continue to drive both development and conservation in the Brazilian Amazon. Its now a question of how much of each will occur. "It's a two edge sword in that there is this tremendous ecosystem that is largely intact but underneath that ecosystem and within it there are riches that could be of great benefit to individuals and larger groups," explained Walker. "If you are in Brazil long enough you will see it both ways."


Wednesday, January 07, 2009

Cloudspotters find the UK in the sky

Whilst some may wonder about my web surfing habits, the "cloud appreciation society" has an impressive "map of Britain" cloud. Given clouds are environmentally linked I think I can get away with it.

The question of whether global warming will lead to more or less clouds is still being debated.

For more cloud based photography, please see "The cloud appreciation society" that incidentally has over 13,000 so called cloudspotters.


Tuesday, January 06, 2009

Pollution causes male infertility - says Pope's paper

We all know that global warming is pretty bad - but this latest pollution based news story from the Vatican will worry men around the world and women are to blame (more specifically female urine).

Fortunately or unfortunately this article has been "dismissed" by "several organisations".

Pill link to infertile men, says Vatican [The Age]

The contraceptive pill is polluting the environment and is in part responsible for male infertility, a report in the Vatican newspaper L'Osservatore Romano said on Saturday.

The pill "has for some years had devastating effects on the environment by releasing tonnes of hormones into nature" through female urine, said Pedro Jose Maria Simon Castellvi, president of the International Federation of Catholic Medical Associations, in the report.

"We have sufficient evidence to state that a non-negligible cause of male infertility in the West is the environmental pollution caused by the pill," he said.

The article was promptly dismissed by several organisations.

"Once metabolised, the hormones contained in oral contraceptives no longer have any of the characteristic effects of feminine hormones," said Gianbenedetto Melis, vice-president of a contraceptive research association.

Hormones in the pill, such as oestrogen, "are present everywhere … in plastic, in disinfectants, in meat that we eat," said Flavia Franconi, of the Society of Italian Pharmacology.

In October, Pope Benedict XVI reaffirmed the Roman Catholic Church's condemnation of artificial birth control.

Contraception "means negating the intimate truth of conjugal love, with which the divine gift (of life) is communicated" the leader of the world's 1.1 billion Roman Catholics wrote on the 40th anniversary of a papal encyclical on the topic.

An encyclical is a letter usually treating some aspect of Catholic doctrine and issued occasionally by the pope.

The landmark document, with a translated title in English of On the Regulation of Birth, was published at a time when the development of the pill was giving new sexual freedom to women across the world.

Millions of Catholics distanced themselves from Rome as a result.


Big Oil, Big Promises, the Environment and the Recession

George Monbiot, our favourite environmental journalist, interviews Jeroen van der Veer from Shell about advertising policy and alternative energy.

This article is typical of George and he goes for the jugular. There is a broader issue on "greenwashing" which is important. How much of CSR and "company greening" is merely window dressing? This is something I have covered in a couple of academic papers.

I have also often been amazed at the number of "green" adverts the oil companies put out on TV and in magazines. Given alternative energy is such a small percentage of what Shell actually does why is it given such prominence in the media. We know the answer but George drags it out to fill an excellent comment piece.

Over to Monbiot. I have included the full text as it is all worth reading.

It will take more than goodwill and greenwash to save the biosphere [Guardian]

For a while it seemed that Shell had stopped pretending. The advertisements that filled the newspapers in 2006, featuring technicians with perfect teeth and open-necked shirts explaining how they were saving the world, vanished. After being slated by environmentalists for greenwash, after two adverse rulings by the Advertising Standards Authority, Shell appeared to have accepted the inescapable truth that it was an oil company with a minor sideline in alternative energy, and that there was no point in trying to persuade people otherwise.

The interview I conducted with its chief executive, Jeroen van der Veer, broadcast on the Guardian's website today, contains what appears to be an interesting admission. I asked him whether Shell had stopped producing ads extolling its investments in renewable energy. Van der Veer does not express himself clearly at this point, but he seems to admit that his company's previous advertising was not honest.

"If we are very big in oil and gas and we are so far relatively small in alternative energies, if you then every day only make adverts about your alternative energies and not about 90% of your other activities I don't think that - then I say transparency, honesty to the market, that's nonsense." So, I asked, Shell did not intend to return to that kind of advertising? "Probably not," he told me. "I'm very much: keep your feet on the ground, tell them who you are and explain why you are who you are."

But since the interview was filmed, Shell's messianic tendencies appear to have resurfaced. In December the company ran a series of ads in the Guardian suggesting again that it had come to save the world. "Tackling climate change and providing fuel for a growing population seems like an impossible problem, but at Shell we try to think creatively," one boasted. It features a diagram of a human brain, divided into sections labelled "fuel from algae", "fuel from straw", "fuel from woodchips", "hydrogen fuels", "windfarm", "gas to liquids" and "coal gasification". This suggests progress of a kind, in that the company is acknowledging that it sometimes dabbles in fossil fuels, but its core business - oil - and its massive investments in tar sands extraction are missing from the corporate mind. Could Shell be having a senior moment?

The confusion deepens when you watch its latest publicity film. It's called Clearing the Air, and it does just the opposite. It is supposed to tell an inspirational tale of discovery, but the script and the acting are so gobsmackingly bad that it inspires you only to rip your clothes off and run screaming down the street. The lasting impression it leaves is that Shell's staff are chaotic and incompetent. Perhaps the clean-cut corporate clones featured in the ads of 2006 put people off.

Jeroen van der Veer is neither an incompetent nor an automaton. He is charming, friendly and smart. But he refused to answer some of the questions I had prepared.

Reading Shell's reports and publicity material, I kept stumbling on an absence. In 2000, the company boasted that it would be investing $1bn in renewable energy between 2001 and 2005. But since then it appears to have produced no figures for its renewables budget. The company now claims that it is "investing significantly in wind energy", but it doesn't say what "significantly" means. Of the 10 windfarms listed on its website, only one appears to be in the planning or development stage: the others are already in operation. Where is the evidence of new money? When Shell pulled out of Britain's biggest windfarm, the London Array, last year, did this represent the end of its major investments?

I asked Van der Veer a simple question - 15 times. (Only a few of these attempts feature in the edited film.) "What is the value of your annual investments in renewable energy?" He waffled, changed the subject, admitted that he knew the figure, then flatly refused to reveal it. Nor could he give me a convincing explanation of why he wouldn't tell me, claiming only that "those figures are misused and people say it is too small", and it "is not the right message to give to the people". It strikes me that there is only one likely reason for these evasions: that Shell's spending on renewables has fallen sharply from the figure it announced in 2000. It's a fair guess that the current investment would look microscopic by comparison to its spending on the Canadian tar sands, and would make a mockery of its new round of advertising. I challenge Shell - for the 16th time - to prove me wrong.

Nor would Van der Veer give me a straight answer to another straight question: "Is there any investment you would not make on ethical grounds?" I asked this six times. He was unable to furnish me with an example. It's not hard to see why. As well as exploiting the tar sands, which means destroying forest and wetlands, polluting great quantities of water and producing more CO2 than conventional petroleum production, Shell is still flaring gas in Nigeria, at great cost to both local people and the global climate. It has been fiercely criticised for its secret negotiations with the Iraqi government, which led last year to the first major access for a western company to Iraq's gas reserves. It is prospecting for oil in some of the Arctic's most sensitive habitats.

All this makes my question difficult to answer. Aside from the greenwash, it is not easy to spot the practical difference between this civilised, progressive company and the Neanderthals at Exxon.

Like all oil companies, Shell simply follows the opportunities. Shut out of the richest fields by state companies, struggling to extract the dregs from its declining reserves, it has been turning to ever more difficult oil extraction, some of which lies beneath rare and fragile ecosystems. When the price of oil was high, it announced massive investments in the tar sands. Now the price has dropped again, it has cancelled further spending. It has even less of an incentive to invest in renewables. Shell does what the market demands.

I don't blame Shell or Van der Veer for this: they are discharging their duty to their shareholders. I do blame them for creating the impression that the company has a different agenda, and I blame governments for allowing them to drift into whatever fields they find profitable, regardless of the consequences for people or the environment.

On this issue Jeroen van der Veer and I agree. Oil companies, he says, should not seek to determine a country's energy mix: that is for the government to decide.

Saving the biosphere, in other words, cannot be left to goodwill and greenwash: the humanity of pleasant men like Van der Veer will always be swept aside by the imperative to maximise returns. Good people in these circumstances do terrible things. Companies like Shell will pour big money into alternative energy only when more lucrative or immediate opportunities are blocked. Where is the government that is brave enough to block them?


Sunday, January 04, 2009

Europe to sue London over pollution levels?

Whilst the UK attempts to position itself at the vanguard of environmental legislation the following article suggests that the UK needs to tidy up its own back yard.

This is traffic related. Those that oppose the combustion charge should take heed.

Europe threatens legal action over London's high pollution [thisislondon]

Britain is being taken to court because of illegal levels of air pollution in London.

Legal action is being prepared by the European Commission because the Government has failed to prevent breaches along 125 miles of roads in the capital.

Confirmation of the court threat was given in a letter from the European Environment Commissioner Stavros Dimas who said six air quality zones were showing higher levels of the pollutant PM10 in the air than allowed under European directives.

"As supplementary assessment indicates, there are PM10 exceedances in London along more than 200 kilometres of roads, which means the abatement task in order to achieve compliance appears very challenging," warned Mr Dimas.

PM10 is a pollutant linked to asthma and cardiovascular disease, particularly affecting the elderly.

An EU air quality directive that came into force in June ordered all member states to meet maximum levels for the toxin, but gave them the chance of appealing for extra time to reduce levels.

However the deadline for requests for an extension expired on 31 October without the British government making a request.

"In view of the serious consequences to public health of high concentrations of PM10, the commission expects the UK to take ambitious measures to ensure a speedy reduction of concentrations," said Mr Dimas.

However, he went on to say that because Britain had not shown any justification for an exemption, "the commission services are now preparing the launch of infringement proceedings against the UK".

Mr Dimas revealed the legal preparations in a letter to the Liberal Democrat foreign affairs spokesman and MP for Kingston and Surbiton, Ed Davey.

Mr Davey said: "If the Government after 10 years cannot even meet air quality standards in the capital city, what credence can we give to its commitment to tackling climate change?

"This Government has failed on the environment and failed to curb emissions year in, year out. It's time they were brought to book."

Air pollution is monitored at a network of recording stations across London.

They keep data about when levels exceed European limits and over what period of time they have.

Most sites are in central London, reflecting the density of buildings and traffic use. So far this year most have exceeded European constraints, according to the Air Quality Network, which is run by King's College.


Global Carbon Trading Index

This post on ETF Innovators, LLP gives a good summary of the performance of various carbon trading companies. The picture is not pretty.

Check out the RED.

A New Index for Carbon Credit Trading

The accompanying table [click to enlarge] includes 19 companies in the ETF Innovators [ETFI] Global Carbon Trading Index along with the prices of seven benchmark commodities and funds. Most of the pure plays on carbon credits are very small, with 12 of the 19 companies having market caps below $100M.


Along with the major declines in oil and natural gas, alternative energy companies have also suffered – with the Market Vectors Global Alternative Energy ETF (GEX) down by 62.2% in the past six months. Companies in the renewable energy and carbon credit industry face the dual headwinds of major energy commodity price declines and the global economic slowdown, which threatens both the funding and viability of many companies which do not generate operating profits and are dependent on external funding from distressed credit and equity markets.


Ocean Economics - 16 page Economist special

On return from a too long Christmas break ;-) 2009 kicks off with essential reading from the Economist.

In this weeks edition there is a 16 page special on the economics of the Oceans. There are a number of different stories and although they only scratch the surface they are impressively doom-laden.

Each story explains how how trouble we are in each from a slightly different direction from dead-zones to overfishing to the switching off of the great ocean conveyor.

Considering that the global economy is in meltdown it is all the more impressive that the economist is willing to devote 16 pages to environmental economic issues.

Troubled waters [Economist]

All of us have in our veins the exact same percentage of salt in our blood that exists in the ocean...And when we go back to the sea...we are going back from whence we came. John Kennedy

HUMAN beings no longer thrive under the water from which their ancestors emerged, but their relationship with the sea remains close. Over half the world’s people live within 100 kilometres (62 miles) of the coast; a tenth are within 10km. On land at least, the sea delights the senses and excites the imagination. The sight and smell of the sea inspire courage and adventure, fear and romance. Though the waves may be rippling or mountainous, the waters angry or calm, the ocean itself is eternal. Its moods pass. Its tides keep to a rhythm. It is unchanging.

Or so it has long seemed. Appearances deceive, though. Large parts of the sea may indeed remain unchanged, but in others, especially in the surface and coastal waters where 90% of marine life is to be found, the impact of man’s activities is increasingly plain. This should hardly be a surprise. Man has changed the landscape and the atmosphere. It would be odd if the seas, which he has for centuries used for food, for transport, for dumping rubbish and, more recently, for recreation, had not also been affected.

The evidence abounds. The fish that once seemed an inexhaustible source of food are now almost everywhere in decline: 90% of large predatory fish (the big ones such as tuna, swordfish and sharks) have gone, according to some scientists. In estuaries and coastal waters, 85% of the large whales have disappeared, and nearly 60% of the small ones. Many of the smaller fish are also in decline. Indeed, most familiar sea creatures, from albatrosses to walruses, from seals to oysters, have suffered huge losses.

All this has happened fairly recently. Cod have been caught off Nova Scotia for centuries, but their systematic slaughter began only after 1852; in terms of their biomass (the aggregate mass of the species), they are now 96% depleted. The killing of turtles in the Caribbean (99% down) started in the 1700s. The hunting of sharks in the Gulf of Mexico (45-99%, depending on the variety) got going only in the 1950s.

The habitats of many of these creatures have also been affected by man’s activities. Cod live in the bottom layer of the ocean. Trawlermen in pursuit of these and other groundfish like pollock and haddock drag steel weights and rollers as well as nets behind their boats, devastating huge areas of the sea floor as they go. In the Gulf of Mexico, trawlers ply back and forth year in year out, hauling vast nets that scarify the seabed and allow no time for plant and animal life to recover. Off New England, off west Africa, in the Sea of Okhotsk north of Japan, off Sri Lanka, wherever fish can still be found, it is much the same story.

Coral reefs, whose profusion of life and diversity of ecosystems make them the rainforests of the sea, have suffered most of all. Once home to prolific concentrations of big fish, they have attracted human hunters prepared to use any means, even dynamite, to kill their prey. Perhaps only 5% of coral reefs can now be considered pristine, a quarter have been lost and all are vulnerable to global warming.

A hotter atmosphere has several effects on the sea. First, it means higher average temperatures for surface waters. One consequence for coral reefs is that the symbiosis between the corals and algae that constitute a living reef is breaking down. As temperatures rise, the algae leave or are expelled, the corals take on a bleached, white appearance and may then die.

Hotter water, slimier slime

Warming also has consequences for ice: it melts. Melting sea ice affects ecosystems and currents. It does not affect sea levels, because floating ice is already displacing water of a weight equal to its own. But melting glaciers and ice sheets on land are bringing quantities of fresh water into the sea, whose level has been rising at an average of nearly 2 millimetres a year for over 40 years, and the pace is getting faster. Recent studies suggest that the sea level may well rise by a total of 80 centimetres this century, though the figure could plausibly be as much as 2 metres.

The burning over the past 100 years or so of fossil fuels that took half a billion years to form has suddenly, in geological terms, put an enormous amount of carbon dioxide into the atmosphere. About a third of this CO2 is taken up by the sea, where it forms carbonic acid. The plants and animals that have evolved over time to thrive in slightly alkaline surface waters—their pH is around 8.3—are now having to adapt to a 30% increase in the acidity of their surroundings. Some will no doubt flourish, but if the trend continues, as it will for at least some decades, clams, mussels, conches and all creatures that grow shells made of calcium carbonate will struggle. So will corals, especially those whose skeletons are composed of aragonite, a particularly unstable form of calcium carbonate.

Man’s interference does not stop with CO2. Knowingly and deliberately, he throws plenty of rubbish into the sea, everything from sewage to rubber tyres and from plastic packaging to toxic waste. Inadvertently, he also lets flame retardants, bunker oil and heavy metals seep into the mighty ocean, and often invasive species too. Much of the harm done by such pollutants is invisible to the eye: it shows up only in the analysis of dead polar bears or in tuna served in New York sushi bars.

Increasingly, though, swimmers, sailors and even those who monitor the sea with the help of satellites are encountering highly visible algal blooms known as red tides. These have always occurred naturally, but they have increased in frequency, number and size in recent years, notably since man-made nitrogen fertilisers came into widespread use in the 1950s. When rainwater contaminated with these fertilisers and other nutrients reaches the sea, as it does where the Mississippi runs into the Gulf of Mexico, an explosion of toxic algae and bacteria takes place, killing fish, absorbing almost all the oxygen and leaving a microbially dominated ecosystem, often based on a carpet of slime.

Each of these phenomena would be bad enough on its own, but all appear to be linked, usually synergistically. Slaughter one species in the food web and you set off a chain of alterations above or below. Thus the near extinction of sea otters in the northern Pacific led to a proliferation of sea urchins, which then laid waste an entire kelp forest that had hitherto sustained its own ecosystem. If acidification kills tiny sea snails known as pteropods, as it is likely to, the Pacific salmon that feed upon these planktonic creatures may also die. Then other fish may move in, preventing the salmon from coming back, just as other species did when cod were all but fished out in Georges Bank, off New England.

Whereas misfortunes that came singly might not prove fatal, those that come in combination often prove overwhelming. The few coral reefs that remain pristine seem able to cope with the warming and acidification that none can escape, but most of the reefs that have also suffered overfishing or pollution have succumbed to bleaching or even death. Biodiversity comes with interdependence, and the shocks administered by mankind in recent decades have been so numerous and so severe that the natural balance of marine life is everywhere disturbed.

Are these changes reversible? Most scientists believe that fisheries, for instance, could be restored to health with the right policies, properly enforced. But many of the changes are speeding up, not slowing down. Some, such as the acidification of the seas, will continue for years to come simply because of events already in train or past. And some, such as the melting of the Arctic ice cap, may be close to the point at which an abrupt, and perhaps irreversible, series of happenings is set in motion.

It is clear, in any event, that man must change his ways. Humans could afford to treat the sea as an infinite resource when they were relatively few in number, capable of only rather inefficient exploitation of the vasty deep and without as yet a taste for fossil fuels. A world of 6.7 billion souls, set to become 9 billion by 2050, can no longer do so. The possibility of widespread catastrophe is simply too great.