"US Mulls Climate Policy" - TCE Today/the Chemical Engineer (iChemE, UK)

8/8/2019 "US Mulls Climate Policy" - TCE Today/the Chemical Engineer (iChemE, UK)

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analysis

DETAILS OF THE future US climate policy are still hard to come by, but industry and regulators

are preparing for a dramatic change in direction, which will have implications for North

American and global carbon markets. For the first time in years, environmentalists have reason

to hope: While George Bush refused to sign the Kyoto Protocol, his successor Barack Obama is

far more climate-friendly.

Thus, in December, 2009 at the Climate

Conference in Copenhagen – where Kyoto Protocol

participants meet to decide upon how to extend

the original agreement beyond 2012 – Obama

could ratify US participation. He could of course

sign on beforehand, but that’s considered

unlikely, given the current US financial crisis and

subsequent world economic fallout.

Obama’s environmental advisor

“I can tell you I am absolutely firm in the

commitment to tell you nothing firm,” quipped

Jason Grumet, one of Obama’s environmental

advisors at a recent conference on US carbon

markets. Yet, he said the new administration is

committed to hitting the ground running on 21

January, adding that the Obama team is anxious

to reverse the present US federal policy, which

has worked counter to environmental interests.

“He [Obama] comes with a tremendous depth of

information to draw from. He will move quickly on

climate change,” Grumet said.

While the advisor would not commit to being

more substantive, others could and were more

forthcoming.

For example, Senator Jeff Bingaman, who

chairs the Senate Energy and Natural Resources

Committee, said: “We need to make every effort

to enact major energy change and climate

change. [We will] begin with energy legislation…

a renewable portfolio standard.” He went on to

discuss increased efficiency. “I believe we’ve

demonstrated in Congress that we can get

together [on this cause].”

When tce asked Bingaman to comment

on the upcoming administration’s nuclear

policies – a hot button topic with many of the

environmentalists who elected Obama – Bingamanpointed to the Energy Policy Act of 2005, which

he co-authored and which includes a stipulation

to expand nuclear capacity. The Energy Policy

Act of 2005 authorises loan guarantees for

revolutionary technologies, such as advanced

www.tcetoday.com dec 2008/ jan 2009 tce

nuclear reactor designs, clean coal and renewable

energy.

“President Elect Obama is not opposed to

expansion. Whether he’d embrace additional

expansion, I just don’t know,” said Bingaman.

Meeting moderator Eileen Claussen, president

of the global climate change organisation PEW

Center, was even more specific. She said that

61% of US voters, according to PEW statistics,

are concerned about capping carbon emissions.

Claussen is a member of the Council on ForeignRelations and is former director of the US

Environmental Protection Agency’s (EPA’s)

atmospheric programme.

“Building a new green economy must be a

top three priority for the new administration, ”

Claussen said. Then she highlighted five reasons

to believe that change is imminent: “Americans

support action on climate [change] – there is a

growing public understanding that the climate is

in crisis, that it’s reached a tipping point.”

Secondly, there is growing pressure on

corporations and states to mandate more

stringent carbon emissions controls. 44companies, she said, approve mandatory

requirements for the US, and there is a growing

movement for strong national legislation to put

this forward. 24 states involved in regulatory

cap-and-trade schemes are presently onboard,

Claussen cited, pointing to the Regional

Greenhouse Gas Initiative (RGGI, called

“Reggie” colloquially) as an example. RGGI is

the first initiative in the US that would make

the reduction of greenhouse gas emissions

mandatory. Ten Northeastern and Mid-Atlantic

states are on target to cap and then reduce CO2

emissions from the power sector 10% by 2018.Thirdly, there are very high expectations

around the world for the US to step it up. “The

global community has been very frustrated. If

Obama wants to start off on [the right] foot, it

is imperative to craft environmental policy.”

Fourthly, the Supreme Court decision

Massachusetts v EPA, which proved that “inaction

is no option,” demonstrated that reducing

greenhouse gas emissions fell under the scope of

the Clean Air Act .

And finally, the Obama advisors and Congress

understand the connection between economic,

climate and energy policy, Claussen said.

putting policy into actionWhile the carbon market is a profitable one for

companies cashing in on others’ compliance

needs – and could possibly account for why this

particular conference was so heavily attended,

as banks and other businesses struggle to

meet regulatory standards for a new, more pro-

environment administration – how it will all play

out is unclear. If Grumet keeps mum at this stage,

it’s to be expected; but if Obama does not meet

the world’s, let alone most Americans’ expectations

for curbing CO2emissions, it’s hard to imagine his

popularity continuing its ascent.

In no industry are policies of the new

administration being more carefully monitored

than in the energy and chemical sectors, while

companies such as Dow Chemical and Pacific Gas

& Electric (PG&E), are already adapting business

strategies to meet environmental demands and

future mandates. Melissa Lavinson, director

of federal environmental affairs and corporate

responsibility at PG&E, said that the utility

is pursuing new infrastructure and innovative

technology investment. She added that electricity

and energy companies should play a role beyond

the power plant and take a more ‘holistic’ approach

that encompasses delivery, consumption and

infrastructure support.

what’s at stake?

According to the 2007 report issued by the

Intergovernmental Panel on Climate Change (IPCC)

global atmospheric concentrations of carbon

dioxide, nitrous oxide and methane emissions have

increased dramatically since 1750.

One state leading the way in reversing climate

change is California, as famously represented

by its headline-grabbing governor, Arnold

Schwarzenegger. Speaking at a session on evolving

regional and world markets, Margret Kim of the

Air Resources Defense Board in Sacramento talked

about how the governor’s Global Warming SolutionsAct paved the way for other states to follow.

The legislation established the first statewide

greenhouse gas regulation in the US, mandating

emission cuts to the 1990 level by 2020, with a

clear view that that is not the end point.

Kim told tce after the event that California will

continue to implement the Act “and we are starting

our rule making.” As for unconditional support

of the new administration, she said California is

supportive but it would be premature to offer more

details before Obama even takes office.

Perhaps, but the new president might want

to heed an example set by the Golden State: arecent National Resources Defense Council study

points out that if the US were to follow California’s

example, this alone would ensure that Kyoto

guidelines are met.

Laurie Wiegler is a US-based science writer

States and industry plan for carbon caps

US mulls climate policy

World hopes for climate policy change



analysis

tce dec 2008/ jan 2009 www.tcetoday.com

BHP withdraws Rio

Tinto takeover offerBHP BILLITON has called off its hostile

takeover of mining rival Rio Tinto, saying

the immediate financial outlook, falling

commodity prices, and possible divestmentdemands from regulatory competition

authorities risk shareholder value.

BHP chairman Don Argus says: “While

we have not changed our view of the basic

industrial logic of the combination [...]

we have concerns about the continued

deterioration of near-term global economic

conditions, the lack of any certainty as

to the time it will take for conditions to

improve and the risks that these issues

imply for shareholder value.”

In February, BHP offered 3.4 BHP shares

for every Rio share in an offer worth $147b.Subsequent falls in available capital,

commodity demand and prices, and the

resultant loss in shareprice has eroded the

offer’s value to below $70b.

BHP ceo Marius Kloppers says that

antitrust rulings also forced the company’s

hand as the European Commission would

require divestments in iron ore and

metallurgical coal. Other fears include the

size of the deal’s inherited debt; Rio has

$40b on its balance sheet compared to

BHP’s $6.5b; and Rio’s failure to divest

non-core assets including Rio Tinto AlcanPackaging and Rio Tinto Alcan Engineered

Products. Kloppers is sceptical of selling

these units in the current economic

environment.

Glass cartel smashes

price-fixing recordAN automotive glass cartel has been

slapped with a €1.38b ($1.7b) fine – the

EU’s largest ever price-fixing penalty.

The four-company cartel met at hotels

and airports across Europe and controlled

90% of the European automotive glass

market for five years.

Of the fine, Saint-Gobain will pay

€896m, Pilkington €370m, Asahi Glass

€113.5m, and Soliver €4.4m.

Saint Gobain’s fine is the largest single

company fine in the EU’s history and well

above the €560m the company had set

aside to cover a worst-case ruling. The

EU increased its fine by 60% for previous

cartel activity. Saint Gobain says it will

appeal. Asahi co-operated with the cartel

investigation so its fine was reduced by

50%.

Neelie Kroes, EU competition

commissioner, says: “[They] cheated the car

industry and car-buyers for five years in a

market worth €2b in the last year.”

Five face Buncefield prosecution

Kashagan dispute endsKazMunaiGas doubles its equity, eyes 2013 startup

AFTER 15 months of taut negotiations the

Kashagan oil field dispute has concluded with

Kazakhstan arranging an early production

agreement and its state-oil company

KazMunaiGas doubling its equity.

Kashagan’s production delays and increasingcosts threatened to shelve the project, which

is billed as the world’s largest and most

complex oil project. Production at the

1.6m bbl/d project was originally scheduled to

begin in 2005. Under the latest agreement the

earliest possible start is now pencilled in for

October 2013.

To date the project consortium, including

ConocoPhillips, Eni, ExxonMobil, Inpex, Shell,

and Total, has invested $12b and, keen to

resolve the conflict, the consortium settled for

a reduced share. As a result KazMunaiGas will

double its equity share to 16.81% (at a costof $1.78b, to be paid once production begins),

the same as the major project partners.

Additionally, Kazakhstan will take 12.5%

of Kashagan oil production even before the

consortium recovers its costs.

The negotiations have given the major

partners new responsibilities in an effort

to speed up and optimise Kashagan’sdevelopment. ExxonMobil will manage the

drilling of oil containing high volumes of

sulphur that is under huge pressure in waters

that freeze; Shell will oversee offshore

construction; Eni will take on onshore

construction; and Total will be responsible for

coordinating oil transport.

Eni will continue to operate phase one of

the project. A committee of representatives

from all the companies will operate the next

two phases.

Despite reaching an agreement, Kazakhstan

is not resting on its laurels and warns theconsortium that further delays will result in

heavy penalties.

FIVE companies face criminal charges over the

2005 explosion of an oil depot at Buncefield,

UK. The December 2005 accident – the biggest

explosion in Europe since the end of World War

II – was caused by an overflowing fuel tank

leaking 300 t of fuel and forming a vapour

cloud which then ignited.

Total UK, Hertfordshire Oil Storage, the

British Pipeline Agency, TAV Engineering, and

Motherwell Control Systems will all stand trial

at West Hertfordshire Magistrates Court in

Watford from 23 January 2009.

Hertfordshire Oil Storage is the site’s

operating company, a 60:40 joint venture

between Total and Chevron. It faces

prosecution on two charges, including failing

to take all measures necessary to prevent

major accidents. Total UK, as the site’s

operator, is also separately named in the

lawsuit, because it “failed to ensure, so far asis reasonably practicable, that persons not in

their employment were not exposed to risks

to their health or safety”. It is also charged

with failing to ensure the safety of people

it did not employ, and of causing ground

pollution as a result of fuel and chemicals

used by the firefighters leaking through the

bunds at the site – a charge also levelled

against Hertforshire Oil Storage and the British

Pipeline Agency.

TAV Engineering, which provided the

alarm switches which failed to automatically

shut down the pipeline when the tank was

overflowing, is charged with failing to

adequately protect the health and safety

of members of the public, as is Motherwell

Control Systems 2003, which fitted TAV’s

control switch and connected it to the

monitoring system at Buncefield.

The prosecution is jointly brought by the

Environment Agency and the Health and

Safety Executive after what they describe

as a “thorough and complex” criminal

investigation.Total and Hertfordshire Oil Storage are

also facing a separate civil lawsuit over the

blast, brought by local residents, businesses

and insurance companies, which are seeking

damages totalling £700m ($1.1b).



Report highlights

pollution problems

A TOP ten of the world’s most damaging

sources of pollution finds that many of the

most damaging industrial activities around the

world are fairly small-scale.

The listing was compiled by the US

Blacksmith Institute – which has already

made headlines for its compilation of the

most seriously-polluted places in the world

– and Swiss environmental group Green Cross.

It lists, in no particular order, artisanal gold

mining, contaminated surface water, indoor

air pollution, industrial mining activities,

groundwater contamination, metals smelting

and processing, radioactive waste and uranium

mining, untreated sewage, urban air quality,

and the recycling of used lead acid batteries.

Small-scale operations are often the

most polluting because they lack the filters

and safeguards routinely installed at large

facilities. For example, the BlacksmithInstitute cites mercury released by small-scale

gold mining, which affects up to 15m miners

worldwide, including 4.5m women and 600,000

children.

Miners combine gold-carrying silt with

mercury to form a hard amalgam that absorbs

the gold from the silt. The amalgam is then

heated with blow torches to evaporate the

mercury, to leave the gold. Because this

is often done near the miners’ homes, the

evaporated mercury is not only inhaled by

the miners, but their families too. Mercury

that isn’t inhaled settles in the surrounding

environment, where it is absorbed by various

plants and bacteria.

“As much as 95%of all mercury used

in small-scale mines is released into the

environment. Hundreds of pounds are used

every day. It only requires less than one

microgramme per cubic metre to cause serious

health effects,” the report states.

Small-scale gold mining also appears on a

sub-list of the report detailing the “four least-

addressed pollution problems in the world”,

listing pollution problems that are rarely seen

on public health policy radar. The other three

are lead battery recycling, chromium, and old

and abandoned chemical weapons.The report points out that pollution plays

a major role in making people susceptible to

illnesses and is directly responsible for millions

of deaths each year, yet its role in disease is

poorly understood and the problem is often

overlooked in favour of more immediate causes

such as hunger and diseases like AIDS and

Malaria.

analysis

www.tcetoday.com dec 2008/ jan2009 tce

THE European Council has formally adopted a

directive to incorporate the aviation industry

into the European Union Emission Trading

Scheme (EU ETS) from 2012.

Carriers taking off or landing at European

airports from 1 January 2012 will purchase

permits to cover their emissions regardless of

their nationality. The move is seen as the first

step in reducing emissions from the global

aviation sector which is projected to emit

2% of total anthropogenic carbon dioxide

emissions (1999).

In 2012, the aviation scheme aims tocap emissions at 97% of the sector’s output

between 2006–2008. In 2013 this cap will

lower to 95%, with 85% of permits issued

free of charge and 15% auctioned off. Airline

industries say the cap-and-trade system will

only compound the sector’s financial troubles.

Carriers are reporting falling profits and a

heightened susceptibility to the global credit

crisis.

However, other news may lift their spirits.

General Electric Aviation and Rolls Royce

are developing open rotor technology for

the engines of the aircraft being developed

by Airbus and Boeing to replace their A320

and 747 respectively. Wind tunnel trials are

announced and GE predicts it will increase fuel

efficiency and reduce emissions on commercial

flights by 18% by 2018.Virgin Atlantic, Airbus and Air New Zealand

are all investigating aircraft biofuels (see also

p9), while BASF says it plans to trial a high-

temperature polymer electrolyte membrane

fuel cell in an Airbus A320.

Aviation permits in EU ETS from 2012

Additives “threaten

research results”USING plastic lab equipment can skew

experimental results because plastic

additives sometimes leach into solutions,

Canadian researchers have found.

Andy Holt, professor of pharmacology

at the University of Alberta’s Faculty

of Medicine & Dentistry, says that

quaternary ammonium biocides and

oleamides – commonly used as slip agents

and lubricants – can leach from plastic

laboratory equipment into experimental

solutions and give false test results.

Holt and his team used mass

spectrometry to analyse experimental

solutions at the molecular level, and found

quaternary ammonium, oleamides and

related chemicals present. The oleamides

used as plastic additives are very similar tooleamides that occur naturally in the body

and therefore can lead to very misleading

results, Holt says. The team traced the

problem back to plastic tubes they had

used to prepare reaction solutions. In

a different experiment, which had been

prepared using similar tubes, additives

leaching from the plastic pipes affected

the behaviour of brain receptors in a

pharmacological experiment

Holt’s team tested pipette tips,

Eppendorf tubes and Multiwell plates from

several manufacturers. The contaminantsleached from all of these items in the

majority of cases. But the specific

contaminants, and the degree to which

they leached out, varied across different

products.

The news could have “significant and

far-reaching implications for the integrity

of scientific work,” Holt says. The research

was published in a recent edition of

Science.

Pfizer plans stem cell

research centresPFIZER HAS SET up a research unit to

develop pharmaceuticals based on adult and

embryonic stem cells, supported by two new

research labs to be built in the UK and the

US at a total cost of $100m.

The Global Regenerative Medicine

Research unit will be the first of several

small independent research units emulating

the innovativeness of small biotechnology

companies. The unit will work with leading

academic, biotech and pharmaceutical

partners around the world.

It will operate from two bases, GrantaPark in Cambridge, UK, and Pfizer’s Research

Technology Centre in Massachusetts in

the US. In total it will employ around 70

researchers working in small, flexible teams.

Lists top ten activities most urgently in need of cleanup



analysis

tce dec 2008/ jan 2009 www.tcetoday.com

THE ongoing financial crisis and resulting

decline in customer demand is forcing

companies to close facilities, slow production,

shelve construction plans, and lay off staff.

BASF, the world’s largest chemical company

by chemical sales, announced in mid-November

that it was embarking on a two-month cost-

saving exercise cutting worldwide output by

25% and reducing the working hours of 20,000

of its 95,000 employees.

BASF ceo Jürgen Hambrecht warns that

customer demand is drying up and orders has

been cancelled, particularly in the automotive

sector. In response, 20,000 employees adopted

flexible working time arrangements as the

company idled 80 plants and reduced output

at 100.

“[There is] a massive decline in demandin key sectors,” says Hambrecht. Aside from

automotive, the construction and textile

industries are also suffering, impacting

demand for ammonia, styrene, and nylon for

plastics, coatings and fibres.

In Ludwigshafen, Germany, BASF reduced

working hours for 5000 employees as it

temporarily closed its number one steam

cracker and idled cyclohexane, styrene, and

plastic polymerisation and compounding units.

It temporarily closed ammonia plants

(Ludwigshafen and Antwerp, Belgium);

toluene diisocyanate production (Freeport and

Geismar, US); and ethylene glycol and low-

density polyethylene units (Nanjing, China). It

reduced cracker output (Antwerp and Nanjing),

caprolactam (Ludwigshafen, Antwerp, Freeport,

and Geismar); nylon (Antwerp, Freeport,

and Geismar); acetylene and methanol

(Ludwighafen); acrylonitrile butadiene styrene,

methylene di-para-phenylene isocyanate, and

nitric acid output (Antwerp); and oxo-alcohols

(Kuantan, Malaysia).

The €3.8b ($4.7b) takeover of specialty

chemicals producer Ciba continues unaffected

and is billed as an opportunity to further

optimise BASF’s businesses.Analysts expect rival chemical businesses

to follow suit with more drastic cost-

cutting because BASF’s streamlined and

well-integrated operations give it lower

manufacturing costs than many of its rivals.

BASF’s closest global rival, US-based Dow

Chemical, says a restructuring programme will

be announced by the close of 2009 but not

before tce went to press.

Third largest chemical company Ineos has

cancelled plans to build four biodiesel plants

in Antwerp, Belgium; Lavera, France; an

unnamed site in Germany; and Grangemouth,

Scotland. The facilities were scheduled for

operation over the coming four years with a

combined capacity of 2m t/y. The company

is seeking waivers on its banking covenants

and says it has reduced planned capital

expenditure for 2009 from €650m to €250m

($826m to $318m). Ineos is making serious

losses on oil purchases too – it maintains an

inventory to feed and fuel its operations, but

plummeting oil prices are eroding its margins.Smaller chemical company LyondellBasell

Industries has temporarily shut down 16% of

its US olefins capacity and will cut 15% of

staff, or 2500 jobs, at production facilities

and offices around the world over the next

12–18 months. David Hapole, LyondellBasell

spokesperson, tells tce the olefins capacity is

likely to return in early 2009.

Steelmakers are also losing business as

global metals demand falls on the back of

the shrinking construction sector. Corus has

temporarily closed four UK blast furnaces to

cut steel production by 30%, or 3m t, from

October 2008 to March 2009.

Germany’s ThyssenKrupp has postponed its

long-term financial goals, saying it may not

reach its goal of making €5b/y in pretax profit

by 2012, and possibly not even by 2012/2013.

ThyssenKrupp is somewhat shielded from the

worst of the downturn because of the amount

of business it does via long-term contracts.

The world’s largest steelmaker ArcelorMittal

is much more exposed because it does

the majority of its business on the spot

market, and because of its large presence in

commodity steel goods such as beams. It will

respond to the “unprecedented destocking”in the steel industry by cutting production

back by a third and trimming 2009 capital

expenditure by $1b to $4.5b. It will also lose

up to 9000 jobs – 3% of its global workforce

– primarily among administrative staff.

Altana speciality

chems may go privateALTANA, a German-based producer of

speciality chemicals, could become a fully

privately-owned company if a €910m

($1.16b) buyout bid goes ahead.Susanne Klatten, one of Germany’s

richest women and already owner of a

50.1% stake in Altana, has tabled the

offer for the rest of the company. The bid,

which represents a 38% premium to the

company’s most recent shareprice, was

made as the company cut its forecast for

2008, blaming the weakening economy.

Altana’s ceo Matthias Wolfgruber says

the company is open to the acquisition

offer. He points out that Klatten

has for some time taken an engaged

entrepreneurial interest in the firm, and

that she would have a “strong interest”

in its long-term success. However,

some analysts say that the offer still

undervalues Altana’s true potential.

Mitsubishi Rayon to

buy Lucite for $1.bMITSUBISHI Rayon, a Japanese company

specialising in the production of acrylic

fibre, has agreed to take over UK-based

acrylics company Lucite International for

$1.6b in cash.

Lucite, which was formed in 1993 bythe merger of the acrylics businesses of

DuPont and ICI, is the world’s largest

producer of methyl methacrylate

(MMA). The company also owns the

internationally-known Lucite and Perspex

brands of acrylic plastics. The company

is majority owned by the private equity

company Charterhouse Capital Partners;

Ineos holds a minority stake.

The deal makes Mitsubishi Rayon the

world’s largest supplier of acrylic materials

and lifts the company’s sales from ¥419b

($4.3b) to ¥600b. It will also help the

company secure cheap raw materials as

its greater size will give it more pricing

power and economies of scale and gives

it access to Lucite’s new MMA production

process (see p14).

Cleantech dealQATAR has agreed a clean technology

partnership with the UK. It will found

a £250m ($396m) low carbon clean

technology fund for UK and European

investments.

It will pay £150m, the UK’s CarbonTrust will pay an undisclosed sum, with

private investors providing the remainder.

The agreement includes a feasibility study

for a Qatari low-carbon innovation centre.

Chemicals and steel cut costs, idle capacity to preserve margins

Companies react to crisis

"US Mulls Climate Policy" - TCE Today/the Chemical Engineer (iChemE, UK)

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Transcript of "US Mulls Climate Policy" - TCE Today/the Chemical Engineer (iChemE, UK)