Reuter’s Berlin

Germany must push for change in how European countries share the financial burdens of tighter carbon trading rules after 2012, or face prohibitive rises in carbon avoidance costs, energy users’ group VIK said on Monday.

“Germany’s carbon trading position has to become top of the political agenda as we get closer to elections in 2009, the ball is in Chancellor Angela Merkel’s court to avert disaster,” said Alfred Richmann, managing director of the Essen-based group. “The EU plans in their current shape will not lead to any more CO2 emissions savings, as those are capped, but bring sky-high new carbon taxes,” he said at a conference in Berlin.

“On top of that, there will be a tsunami of power price hikes as a consequence, which could threaten investment plans, our industry’s competitiveness, and jobs.” Richmann’s remarks came days after the European Parliament’s industry committee endorsed plans for CO2 emitters to buy permits for their greenhouse gas emissions from 2013 at auction, while ignoring German pleas for a raft of exemptions.

VIK has calculated that the auctions will bring the government 15 billion euros ($21 billion) of additional annual income which would have to be borne by consumers in the sectors it represents, including steel, paper, aluminum and cement.

Power prices would increase by 50 percent after 2012.

By Richard Rahn, Washington Times

How much in additional taxes are you willing to pay now in order to ensure that the Earth would not be 3 degrees warmer 100 years from now (assuming the science is even possible) - $100 or $1,000 or $10,000 or more? Should the government prevent us from selling some of our body parts to allow others to live or have better lives?

This was one of the subjects of learned discussion at the 60th anniversary meeting of the Mont Pelerin Society (MPS) that just concluded here in Tokyo. Members come from many countries and include notable economists (including many Nobel prize winners) and other scholars representing the humanities, the law, and the natural sciences, as well as a few business people, high ranking government officials, and journalists.

As an example, global warning is an issue where members have different beliefs as to how real a threat it is or is not. The Czech president and MPS member, Dr. Vaclav Klaus, presented a paper in which he argued his very well-known public position (he has written a book on the matter) that the science behind global warming is highly suspect, and that many of those who propose expensive solutions for what he believes is a nonproblem are self-interested individuals who hope to share in the government booty spent on global warming. Others had some disagreement with his views, but engaged in a lively discussion of how much should be spent, if any, on a problem whose negative effects are likely to be experienced by future generations. For instance, assume you believe global warming is both real and man-made, but you also understand that expensive actions taken now to deal with a future problem may not be cost-effective.

Technologies are improving rapidly so it might be far cheaper to wait until the new technologies become available before taking action. It also might be less expensive to find ways to adapt to climate change (either cooler or warmer) than try to change the climate - people in Minnesota adapt to cooler climates and do not suffer lower incomes than those in warmer Florida.

Finally, people living 100 years from now are likely to be perhaps 10 times richer than those living now (which was roughly the experience of the last 100 years in many parts of the globe). Therefore, does it make sense to tax the poor (those living today) to benefit the rich (those living 100 years from now)? In sum, when the issue of global warming is looked at dispassionately, both those who see it as a problem and those who do not might conclude it makes sense to wait before taking any expensive action, when normal discount rates - e.g. the cost of capital - are properly taken into account. Read more here.

The Daily Telegraph

During the Cold War, Moscow’s leverage depended on its military might. Today, vast reserves of oil and gas, lying between the hungry markets of Europe and East Asia, have taken over that role.

The importance that Russia attaches to hydrocarbon diplomacy was underlined yesterday by President Dmitry Medvedev’s call for a formal demarcation of the territory that it claims under the Arctic Ocean. Its aggressive policy towards a region whose melting icecap offers access to possibly huge energy and mineral deposits was dramatically illustrated last year by the planting of a Russian flag on the seabed at the North Pole.

Any unilateral action by Moscow will be contested by America, Canada, Denmark and Norway, in particular with regard to the Lomonosov Ridge, which runs under the pole. The four should co-ordinate their policies before the deadline next year for submitting claims to the UN Commission on the Limits of the Continental Shelf. And it is high time that America ratified the UN Convention on the Law of the Sea.

EU members likewise need to integrate their energy markets in order to discourage Russia from using its gas exports as a political weapon, as a report from the think tank Chatham House argues today. The front line of the confrontation between Russia and the West has shifted from the North German Plain to the fossil fuel deposits that lie beneath Siberia and the Arctic. Read story here.

Also here in the UK Times Online, Tony Halpin in Moscow wrote: Russia triggered a fresh scramble for the oil wealth of the Arctic yesterday when President Medvedev called on his security chiefs to establish a formal border in the region.

Mr Medvedev laid claim to a vast tranche of the Arctic, telling his National Security Council that it had “strategic importance” for Russia. The US Geological Survey estimates that the region contains 90 billion barrels of oil, as well as gas reserves - all of it increasingly accessible as global warming shrinks the ice cap.

“We must wrap up all the formalities for drawing the external border in the continental shelf. This is our direct responsibility to future generations,” Mr Medvedev told the Kremlin meeting.

Nikolai Patrushev, the director of the council, said that Russia would defend its interests in the Arctic against rival claims from the United States, Canada, Norway and Denmark. “We must define the borders in the north of our country, where the Arctic lies. Our estimate is that it makes up 18 per cent of our territory. And we are saying that 20,000km of the state border runs in this region.”

Icecap Note: While politicans and environmentalists argue about preserving the pristine nature of ANWR although the area we want to drill is a small coastal section, the Russians realize the huge potential of the arctic energy and plan to capilatize. See Russian Energy history here.