Chinese walker

The January 31 deadline set in Copenhagen for nations to submit national plans to reduce greenhouse-gas emissions to the United Nations under the newly formed Copenhagen Accord has been and gone. By February 1, 55 countries had made pledges to either cut or limit their emissions. Despite this positive news, it is unclear where international negotiations go from here.

The voluntary pledges submitted to the United Nations in association with the accord vary noticeably in form and substance, with a range of baseline years and commitment levels. Norway, for instance, is committed to reducing its emissions by at least 30% on 1990 levels by 2020, while the United States will probably seek to cut its emissions by 17% on 2005 levels %26ndash; although, as made clear in their very brief submission, US action is dependent on securing domestic legislation, the prospects of which have dimmed significantly in the last month since the Democrat party lost the Massachusetts by-election, bringing an end to the party%26rsquo;s senate supermajority. China and other members of the newly formed BASIC block of countries %26ndash; Brazil, India and South Africa %26ndash; have re-affirmed their pre-conference pledges to limit the rise of their emissions.

No one is yet sure how the accord fits in with the existing framework of global climate governance and negotiation. Yvo De Boer, who coordinates the United Nations negotiating process, hailed the submissions as %26ldquo;an important invigoration of the UN climate-change talks%26rdquo;. China%26rsquo;s prime minister, Wen Jiabao, meanwhile, is one of many who have expressed hope that the accord will set the stage for the agreement of a binding global climate deal at negotiations in Mexico this year that expands on the institutions and mechanisms of the Kyoto Protocol, with binding targets for industrialised nations.

But economists Ted Nordhaus and Michael Shellenberger of the Breakthrough Institute, a California-based think tank, recently argued that %26ldquo;the entire Kyoto framework for reducing carbon emissions died with the UN climate negotiations at Copenhagen.%26rdquo; In its place, they suggest the Copenhagen Accord may be a step towards a more fractured series of national- and regional- policy measures and a non-binding, bottom-up international system. %26ldquo;The real international action will involve bilateral and multilateral negotiations to develop and deploy clean-energy technologies,%26rdquo; they say.

Such an approach presents new dangers and may be insufficient to meet the specifically global challenges presented by climate change. Put simply, a more voluntary approach may be less successful in reducing emissions. The Intergovernmental Panel on Climate Change has recommended that developed-country emissions drop by 25% to 40% on 1990 levels by 2020. According to the World Resources Institute, the voluntary targets pledged in association with the accord are likely to result in developed-country emissions decreasing by between 12% to 19% on 1990 levels by 2020.

Recent reports from the UN Environment Programme, Project Catalyst and Ecofys have suggested that current pledges are not sufficient to prevent a rise of two degrees Celsius or more. Janos Pasztor, a climate advisor to UN secretary-general, Ban Ki-moon, reaffirmed this after reviewing pledges made in association with the accord. An analysis by Climate Interactive goes a step further, suggesting that %26ldquo;if current proposals were fully implemented, average global temperature would overshoot the two degrees goal and would in fact increase by approximately 3.9 degrees Celsius by 2100.%26rdquo;

In the past, international negotiations have acted as a catalyst for ambitious national commitments that push countries beyond domestic constraints. A voluntary, non-binding system may instead promote an unfortunate race-to-the-bottom scenario, where nations renege on the voluntary commitments they make. We are already seeing examples of this: Canada submitted a weaker target to the United Nations on January 31 than it was committed to at the start of Copenhagen. Feeble targets, coupled with an absence of measures to enforce compliance, will most likely result in a larger rise in temperatures.

Progress on securing finance was one of the few areas where the Copenhagen summit may be judged a success. Developed countries pledged US$30 billion (205 billion yuan) over the three years from 2010 to 2013 and US$100 billion (683 billion yuan) a year from 2020 for developing countries to mitigate and adapt to climate change. But as a recent report from the International Institute for Environment and Development highlights, crucial questions remain about where this funding will come from and how it will be distributed. Billionaire philanthropist Bill Gates also recently expressed concern that climate-change finance would not be additional and may eat into existing aid budgets. These concerns seem justified %26ndash; the Guardian newspaper reported that some of the United Kingdom%26rsquo;s initial commitment would be recycled from existing government-aid budgets.

The accord also lacks supporting legal architecture and institutions to facilitate international finance for low-carbon development. In the short term, countries like Brazil, which is reliant on international finance to support efforts to reduce deforestation, are likely to face difficulties in implementing national climate-change policies.

Without binding commitments and strong institutions, a new regime would rely more heavily on trust between nations. At some point, it is likely that this trust would break down, triggering new threats to trade and financial flows between nations. The United States and France have already openly discussed the possibility of placing tariffs on carbon-intensive imports from countries seen to be failing to do their share. Such tariffs would likely be implemented unevenly, creating further international friction and possible retaliation.

Faced with these serious challenges it might seem logical for countries to renew attempts to secure a deal in Mexico that builds on the Kyoto Protocol and the twin-track negotiating process begun in Bali in 2007. But the problems with these institutions create political impediments to a deal that are not likely simply to disappear.

A degree of pragmatism is therefore required when assessing the Copenhagen Accord. It is still possible that the agreement, combined with more progress on key issues mentioned briefly in its text %26ndash; avoiding deforestation, providing finance for low-carbon development and adaptation in the developing world and monitoring efforts to reduce emissions %26ndash; can form the basis of a new international architecture for dealing with climate change.

On the evidence of the past month, this architecture may well be messy, incomplete and inefficient. But it is still preferable to international anarchy. Climate change is a global challenge that cannot be dealt with by nations acting in isolation. At this particularly difficult moment, we should welcome any moves towards international cooperation and recognition of interdependence.

Tan Copsey is development manager at chinadialogue.

Homepage image by Tattooed JJ

Last August, dozens of cars filed out of a gated housing compound in a northern Beijing suburb and paraded through the surrounding streets. Slogans plastered on the vehicles read: %26ldquo;Resolutely oppose garbage incineration.%26rdquo; Just a few days before, the protesters found out that the government had decided to build a waste-to-power plant at A Su Wei three kilometres west of their homes.

Both sides of the debate over China%26rsquo;s rubbish incinerators %26ndash; discussed previously on chinadialogue by Ma Jun (see %26ldquo;Solving the incinerator uproar%26rdquo;) %26ndash; agree that sorting and waste reduction have to feature much more prominently in garbage management, but many questions remain. Slashing the creation of waste is a goal that everyone can applaud. After that, the agreement breaks down. Some argue that thorough sorting and recycling can turn most trash into resources. Others say that the majority is unusable rubbish, and that burning waste for electricity is the best way to reduce the amount of solid waste.

Wei Panming, deputy director in charge of Beijing%26rsquo;s cityscape, said that the city%26rsquo;s garbage output will stop growing by 2015. The districts that exceed growth limits will see their waste-processing fees soar. %26ldquo;You can pay if you are rich,%26rdquo; he said, %26ldquo;or you can reduce the amount of your waste.%26rdquo; Beijing will build more waste-fired power plants, Wei added, and the city will do everything %26ldquo;to maximally protect the interests of neighboring residents.%26rdquo;

However, some city dwellers, such as those near A Su Wei, are not convinced. In addition to public demonstrations, the residents compiled a well-researched report arguing against garbage incineration and sent it to government officials and reporters. %26ldquo;We want to defeat incineration on the policy level,%26rdquo; said Bai Fuqin, a chief organiser of the protest, who asked to use an alias.

Burning trash out in the open or in small furnaces is a practice with a long history in China. In 1985, the southern city of Shenzhen built the country%26rsquo;s first garbage incinerator that converts the heat into electricity. Since then, the government implemented a series of policies, including tax credits and subsidies, to encourage waste-to-power projects. By the end of 2008, there were over 70 incinerators across China. The current number is not known, but certainly many more are in the planning stages.

But protests have spread with the incinerators. Last October, thousands of people blockaded a newly-built incinerator near Wujiang, a city on the eastern seaboard, and forced the government to halt its operation. In November, public demonstrations near the southern metropolis of Guangzhou saw the government delay a waste-to-power plant for further environmental study. In December, residents near Shenzhen, also in the south, protested the building of a third incinerator near their community.

Most public concern is about a family of toxic chemicals called dioxins, which can be generated through combustion. The toxins can damage human immune systems, as well as nervous systems. Some studies show chronic exposure to high levels of dioxins can dramatically increase the risk of cancer among humans. %26ldquo;I have a one-year-old child,%26rdquo; said Tan Sitong, another A Su Wei anti-incinerator activist, and who also uses an alias. %26ldquo;Taking in such toxins will have the most impact on him when he%26rsquo;s growing.%26rdquo;

Advocates for incineration say the public%26rsquo;s fear of dioxins is often based on misleading information from sensational media reports. Dioxins can be reduced to a level that is safe to human health, said Xu Haiyun, chief engineer at the China Research Society of Urban Development. %26ldquo;Technologically there%26rsquo;s no problem. There are many mature cases in the United States and Europe to prove that%26hellip; Taiwan and Macau also have successful examples.%26rdquo;

According to the World Health Organisation, there is a level of exposure to dioxins below which cancer risk would be negligible. China requires that incinerators discharge no more than one nanogram of dioxin per cubic metre. The European Union sets a standard that is one-tenth of that amount.

Beijing officials say that waste-to-power plants will be built according to EU standards.

But that does not placate incineration opponents. %26ldquo;So what if they can reach the EU benchmark?%26rdquo; asked Zhao Zhangyuan, a researcher on environmental protection at the Chinese Academy of Sciences. He has emerged as a leader of China%26rsquo;s anti-incineration movement. Dioxin can stay in the environment for hundreds of years and accumulate in human bodies, therefore, %26ldquo;no one can guarantee that the EU standard won%26rsquo;t be harmful to human health.%26rdquo; And to meet the requirement, %26ldquo;the prescribed procedure has to be strictly followed,%26rdquo; said Zhao. %26ldquo;But in our country, abnormal practices often happen in such a complicated operation.%26rdquo;

Certainly in a number of fields, there are documented examples of companies cutting corners and government officials turning their heads the other way. Even supporters of incineration admit that it is not enough just to import western technology.

Two-thirds of Beijing%26rsquo;s rubbish, said Wei Panming, the city planning official, is kitchen waste. That means the garbage is moist and generates less heat than other types of solid waste. To minimize dioxin, it is critical to keep the temperature in the incinerator above 850 degrees Celsius. Companies therefore often add coal or diesel for extra heat, which costs more and generates more greenhouse-gas emissions. Critics of incineration say there is no trusted body in China to make sure companies are doing the right thing.

The fierce debates on incineration have sometimes turned personal. Some supporters of incineration call Zhao a hoax. Opponents dub scholars like Xu %26ldquo;unscrupulous experts%26rdquo; bought off by business. %26ldquo;Their interests are connected,%26rdquo; said Bai, the activist at A Su Wei, referring to what he considers expert-industry collusion. %26ldquo;There%26rsquo;s no-one to counterbalance them other than the public. And the information available to the public bears no comparison to theirs.%26rdquo;

Public opposition makes it difficult for companies and investors to plan for the long term. %26ldquo;Those in the industry feel confused,%26rdquo; said Wen Yibo, CEO of Beijing Sound Group, which runs the A Su Wei garbage-processing facility. %26ldquo;The government hasn%26rsquo;t stood up and spoken about garbage incineration. Is waste-to-power good or bad? When problems arise, the government seems to be speechless.%26rdquo;

Each side of the debate is looking to the central government for support. Those in the pro-incineration camp are calling for more efforts in a propaganda campaign to inform and educate the public. The opposition wants the government to stop giving financial incentives to waste-fired power plants.

But so far, dramatic policy changes look unlikely. %26ldquo;Turning garbage into a resource and using it is a good thing for sure,%26rdquo; said Xue Huifeng, director of the legislative office of the National People%26rsquo;s Congress. At a Beijing conference on solid waste processing, he said problems surrounding incineration mostly come from the enforcement of the policies, rather than the policies themselves. He affirmed that the government will continue to support waste-to-power. %26ldquo;But I%26rsquo;m talking about giving support according to the law,%26rdquo; he said. %26ldquo;Companies that don%26rsquo;t follow the law certainly won%26rsquo;t receive support.%26rdquo;

That may explain why, at a recent meeting, Beijing officials told A Su Wei residents that they will %26ldquo;resolutely%26rdquo; continue pushing for the building of the incinerator. Hence the struggle continues. %26ldquo;You can talk about governing by law,%26rdquo; said Bai Fuqin. %26ldquo;We can fight for our rights by law.%26rdquo;

Xie Yanmei is a Beijing-based freelance reporter

Homepage image from longquanzs.com

On returning from the climate conference at Copenhagen, the Vanke Group chairman, Wang Shi, posted a picture of himself pushing an old bike through the streets of the city on his blog. On December 7, the head of the largest property company in China %26ndash; who climbs an 8,000-metre high mountain every year %26ndash; had joined a group of Chinese businessmen on a week-long cycling tour around the city, after which he announced the saving of 115 kilograms of carbon.

The trip was quickly branded a mere stunt. But Wang did not seem to mind, saying that, unlike actors, the businessmen were playing themselves and that he hoped to see more, and better, such events in the future. Afterwards, he and his companions made numerous appearances in the Chinese media, talking about Copenhagen and advocating low-carbon ideas.

On December 5, Wang and Feng Lun, chairman of Beijing Vantone Real Estate, were chosen to board the %26ldquo;Climate Express%26rdquo;, a special train from Brussels to Copenhagen organised by the United Nations Environment Program, the International Union of Railways and the World Wildlife Fund. Another group of %26ldquo;green entrepreneurs%26rdquo;, including Marjorie Yang, chairwoman of textile manufacturer Esquel Group; Zhang Yue, chairman of Broad Air-conditioning; Zhang Zaidong, chairman of Beijing Fengshang Real Estate; Song Jun, president of hotel and travel investment firm Beijing Jiuhan Tiancheng and Huang Ming, chairman of Himin Solar Energy Group travelled north from Germany with Lu Zhi, Peking University professor and head of the Shanshui Conservation Centre. They met with Deutsche Bank%26rsquo;s climate finance team in Frankfurt, visited Europe%26rsquo;s solar-power %26ldquo;capital%26rdquo;, Freiburg, and then joined the property group in Copenhagen.

This was the first time Chinese entrepreneurs had attended a UN climate-change conference as observers and a rare high-profile appearance at an international climate-change event. Hopes were high for these enlightened businessmen, both in China and overseas. So what did they actually do?

At a small ceremony to mark the start of the trip held at Beijing%26rsquo;s exclusive Chang%26rsquo;an Club, they said they wanted to put forward the Chinese business world%26rsquo;s stance on climate change, and learn about the business risks and opportunities it will bring. On December 8, they set out this stance at their first appearance in Copenhagen. This took place away from the Bella Center, the main conference facility, at the five-star Radisson hotel, where Chinese premier Wen Jiabao would later stay. Unfortunately very few foreign reporters were present and almost all the attendees were Chinese. So why, those present wondered, couldn%26rsquo;t they just have held the press conference in China?

On December 11, these business leaders were not present at the Business Day event, hosted by the World Business Council for Sustainable Development (WBSCD) and the International Chamber of Commerce (ICC).

The WBCSD has 200 members, including Shell, Duke Energy, E.ON, BP and Rio Tinto. At Copenhagen the WBCSD advocated a global carbon market and a voluntary industrial code, covering industry, agricultural oil use, nuclear power and carbon capture and storage. The ICC, a similar organisation whose members include several major polluters such as Areva, Exxon Mobil and Vattenfall, continued to tell political leaders that business is part of the solution and that economic growth and free trade should be given priority.

The reason the Chinese group was absent was simpler than many thought. The head of the delegation, Wang Shi, had already left Copenhagen due to a prior engagement and the other members, for the most part having poor English and little experience of international events, were not too keen to attend %26ndash; and so they didn%26rsquo;t.

As head of one of the world%26rsquo;s largest property firms, Wang Shi was undoubtedly the most prominent member of the delegation. In 2007, Vanke started to use reusable steel frames in buildings, rather than the traditional wood. Over the past three years, this method has been applied to 600,000 square metres of building space and, after Copenhagen, Wang set a new target of two million square metres. His ambitions do not stop there, however. Wang wants to lead China%26rsquo;s property sector in making a contribution of more than 10% to China%26rsquo;s 2020 emissions target.

Wang told all of this to the Wall Street Journal and Daily Telegraph newspapers while he was on the Climate Express, to widespread acclaim. And so his early departure, to a certain extent, reduced the voice of Chinese business at Copenhagen. More disappointing was the fact that, although the Business Day was on the agenda provided at the pre-departure press conference and was widely reported in both Chinese and western media, not a single Chinese businessperson was seen at the actual event.

However, the Business Day, which brought together chief executives of giant multinationals, was also lacking attendees from South Africa, Brazil and India. Moreover, those who did attend did not gain much. As Yvo de Boer, executive secretary of the United Nations Framework Convention on Climate Change told them, the negotiations going on at the Bella Center were inter-governmental and the participants temporarily had to put business to one side.

The delegation was more influenced by events not on the agenda; namely, the civil society activities they attended as private individuals, such as marches organised by non-governmental organisations (NGOs). Song Jun of the Jiuhan Tiancheng, commented that the range of protests by NGO members gave him more to think about than the disorganised negotiations and dull reports and made him more determined than ever to keep his business on a green path. This entrepeneur, often criticised for being too idealistic, has always tried to persuade more people to accept traditional Chinese ideas of conservation, calling for a limit on human demands rather than technical solutions to environmental and climate issues.

In 2002, Song started investing in the Moonlight Lake eco-tourism project in the deserts of Inner Mongolia, in northern China. But it is hard to stick to environmental ideals in today%26rsquo;s China and he has suffered a number of financial setbacks, only making a profit after five or six years. Next he plans to implement his new grasslands conservation plan in Xilin Gol, which aims to bring back herders forced to leave by environmental problems. The plan won support from Wang Shi and Zhang Zaidong at Copenhagen %26ndash; perhaps the most concrete result Song got from the summit.

Regardless, many people were left disappointed by the performance of these entrepreneurs at Copenhagen. Like the Chinese government, the Chinese business world has, over the last few years, been striving to improve communications and keep up with the global response to climate change and environmental protection. But getting that message across fully and accurately still needs work.

However, some are doing better than others. The story of how Zhang Yue of Broad Air-conditioning gave up his private jet is well known. And Broad’s non-electric air-conditioners were the focus of the only corporate case study in a report presented to G8 leaders by former UK prime minister Tony Blair in 2008. Zhang came and went at Copenhagen, clutching his own document, Measures to Reduce CO2 Emissions. He believes that there is huge potential for emissions reductions to be made by the Chinese public, though nobody knows how he has worked this out.

Many are also familiar with the story of Huang Ming%26rsquo;s solar empire and he was one of the delegation%26rsquo;s most active speakers. He also organised a football match to urge countries not to pass the buck on climate change and, on returning to China, called for COP18, the UN-sponsored climate summit scheduled for 2012, to be held in China. Shi Zhengrong of solar firm Suntech Power is even better known internationally. In May 2009, he was the only Chinese entrepreneur from the private sector to appear at the World Business Summit on Climate Change in Copenhagen. Unfortunately he was not able to be present at COP15.

But, for these business personalities, whether they come across well or badly is not the important thing. Wang Shi, Zhang Yue and Song Jun are more concerned about the weak message sent out by Copenhagen. Without a clear, strong and long signal, it is hard for businesses to make investment decisions %26ndash; even for these pioneers who have not hestitated in going with the green flow.

Feng Jie is a journalist at Southern Weekend and was formerly a reporter at the China Economic Herald.

Homepage image from hudong.com shows (left to right) Song Jun, Feng Lun, Wang Shi, Zhang Yue and Zhang Zaidong.

On Commander Ebi%26rsquo;s baseball cap, the logo reads: %26ldquo;Alaska%26rdquo;. Little else connects the 42-year-old %26ndash; who has spent the past five years in a militant camp deep in the tropical creeks of the Niger Delta %26ndash; with the prosperity and polar bears of the northernmost US state.

Except, that is, for oil. But while petroleum has made Alaskans among the wealthiest people in the world%26rsquo;s wealthiest country, Nigeria%26rsquo;s oil province %26ndash; on which the United States depends for nearly one in every 10 barrels of crude it imports %26ndash; has known little but conflict, corruption and misery in the half-century since the first barrel was shipped.

Yet Nigeria%26rsquo;s rulers are hoping a new policy to deliver the benefits of oil to the local population %26ndash; as Alaska does with its pioneering approach of distributing petrodollars in cash to citizens %26ndash; might help placate an insurgency that has cut production by as much as 40%.

That puts them at the frontier of new ideas for solving the problems that oil brings. %26ldquo;Countries that have managed natural resources well are those with powerful constituencies that can stop the government from feeding at the trough [of oil money],%26rdquo; says Todd Moss from the Washington-based Center for Global Development and an advocate of cash distributions. He favours Alaska-style pay-outs, which he says %26ldquo;are a way to manufacture such a constituency%26rdquo;.

Where civil society or non-resource business is weak, Moss points out, natural resources do not put a country on a fast track to development. %26ldquo;Look at Nigeria %26ndash; [US]$300 billion [in oil revenues] over the past three decades, but the average Nigerian has got poorer.%26rdquo;

So thoroughly has crude corroded the contract between government and citizens that most of Nigeria%26rsquo;s 150 million people regard the state more as predator than benefactor. In the delta, thousands of jobless young men extort, kidnap and blow up pipelines under the banner of resistance to a state that has failed them, and oil companies that have despoiled their lands.

A recent amnesty has lured them to surrender their arms for the present. Under government proposals designed to keep the delta from re-arming, the state would hand over 10% stakes in the joint ventures that run Nigeria%26rsquo;s biggest energy industry to %26ldquo;host communities%26rdquo;.

While the proposals could face stiff opposition from elsewhere in the country, they have been approved by ministers and a presidential implementation committee has been created, according to the architect of the plans, Emmanuel Egbogah, special adviser to president Umaru Yar%26rsquo;Adua on petroleum matters. The initiative, he says, is %26ldquo;revolutionary%26rdquo; and will mean that %26ldquo;every community %26ndash; whether blind or deaf or dumb, every citizen %26ndash; will say: %26lsquo;I own a part of this business.%26rsquo; %26rdquo;

Direct cash distributions are perhaps the most radical idea that has emerged from a decade-and-a-half-old movement to transform the way poor states manage their natural resources. That movement sprang from a growing realisation of a %26ldquo;paradox of plenty%26rdquo;: life in resource-rich countries often remains miserable.

Part of the reason is economic. Volatile commodity prices, and the built-in revenue bust inherent in depletable resources, complicate planning. Even in good times, resource economies can suffer from 1970s-style %26ldquo;Dutch disease%26rdquo;: the hard currency a country earns from its oil, gas or minerals distorts its economy, crowding out agriculture or manufacturing.

The other problem is political. States flush with resource revenues have a strong incentive for patronage and outright corruption. Entrepreneurship becomes an effort to %26ldquo;feed at the trough%26rdquo; in rent-seeking that at best fritters away productivity and at worst breaks down the rule of law.

There are exceptions. Norway, Botswana and Chile have harnessed oil, diamonds and copper for national development, giving hope that other countries too may succeed. In 2002 Tony Blair, then the British prime minister, announced the Extractive Industries Transparency Initiative (EITI), with dozens of governments, mining companies and oil groups pledging to declare payments and revenues. But neither such pledges, nor even the strictures of Washington%26rsquo;s multilateral institutions, can ensure countries keep to the straight and narrow.

Under fire from critics claiming resource extraction harmed the poor, the World Bank in 2000 placed conditions on financing an oil pipeline from Chad to the coast of Cameroon. It required that Chad%26rsquo;s royalties went into a special account rather than the national budget and that all payments were published. A share would be saved for future generations. Withdrawals had to go towards health, education or other social needs.

%26ldquo;It was a beautiful plan on paper %26ndash; but there was nothing to stop the government from reneging on the deal,%26rdquo; says Moss. Chad soon diverted money to military spending. In 2008 the World Bank withdrew from the project. Still, an international consensus emerged on policy for commodity-dependent countries: channel revenues into funds to insulate national budgets; increase transparency of payments; include checks and balances in spending.

Yet not even countries that have adopted such policies may succeed where Chad failed. East Timor%26rsquo;s government raided its savings fund by withdrawing more than the prescribed maximum. Such cases suggest the standard recipe is not enough to end the cycle of corruption. Advocates say only giving the people a direct stake in the resources will mend the bond between state and citizens.

%26ldquo;If every citizen [of Chad] had been entitled to cash payments … the political dynamic would have been very different,%26rdquo; says Moss. %26ldquo;Cash distribution is complementary to transparency efforts; in fact, it would help. If the amount paid out to citizens is different from what the government receives from oil companies, or if this year%26rsquo;s distribution is $52 while last year%26rsquo;s was $58, the government would have to explain that to people.%26rdquo;

The idea is gaining interest. When she was in the US Senate, Hillary Clinton, now secretary of state, sponsored a resolution recommending that Iraq set up a trust fund to distribute part of its oil revenues to the people. Presidential candidates in Iran and Venezuela have mooted the idea too, as has Muammar Gaddafi, Libya%26rsquo;s leader. According to proponents, the scheme could make about US$555 million annually available %26ndash; about $20 a year for every man, woman and child of the delta%26rsquo;s 28 million people, a significant amount in a region where 70% live on less than $1.50 a day.

Nigeria%26rsquo;s oil producing states already receive an extra slice of oil proceeds %26ndash; but much of the money vanishes. Dimieari Von Kemedi, an activist recently drafted into the government of oil-rich Bayelsa state, says his audit of state finances found contracts had been inflated to the tune of 17 billion naira (US$114 million).

Whether the new scheme can avoid such problems is critical to its success. %26ldquo;It will not be like the Alaskan case, when each individual gets his money,%26rdquo; Egbogah says. The intended option is a system of trust funds administered at the behest of each community %26ndash; bypassing the delta%26rsquo;s state and local governments.

By receiving a share in the proceeds of an oil industry they have long resented, delta dwellers would have an incentive to facilitate production, Egbogah reasons. But even so, critics warn that trusts risk replicating what they say is oil companies%26rsquo; practice of allocating funds to some communities in order to safeguard their own facilities, generating resentment in less favoured settlements.

A heated debate one recent morning in the royal hut of the Edagberi clan suggests the tensions that could emerge. %26ldquo;Some communities, they only have a pipeline or access road,%26rdquo; says Anigbo Williams, 52, chief of one of the clan%26rsquo;s six communities. %26ldquo;If you give him with his one well [a payment] and come and give me with 44 wells the same, you have a problem: we will feel we have been cheated.%26rdquo;

The proposals come at a critical moment not just for the delta. Tensions and a sense of paralysis are mounting with each day that the ailing Yar%26rsquo;Adua remains in the Saudi hospital to which he was rushed in November. The government is in the thick of oil industry reforms. It wants to incorporate the state oil company %26ndash; long regarded as a vessel of patronage %26ndash; and formalise loose joint ventures.

Oil companies are fighting tougher terms and negotiating renewals of 40-year leases on prime oil blocks. Adding the 10% plan into the mix heightens what was already a sense of make or break ahead of elections due in 2011.

All the while, the delta holds its breath. %26ldquo;It is left to [the government] to do something that will be favourable to each and every one of us in this part of the country,%26rdquo; says the Alaska-capped Ebi. But he warns that a badly executed plan would have harsh consequences, bringing new vigour to the guerrilla campaign to disrupt oil production. %26ldquo;If we are not developed, we will bounce back to the creeks. We are not afraid.%26rdquo;

Delta proposals

Can the centre hold together an oil fund handout?

The title of Nigeria%26rsquo;s most famous novel, Chinua Achebe%26rsquo;s Things Fall Apart, hangs like a perpetual warning over a country of 150 million disparate people stitched together under British rule, writes Tom Burgis. Predictions of imminent unravelling are often alarmist but the tension %26ndash; broadly between the mainly Muslim north and mainly Christian south %26ndash; is real, particularly over the distribution of oil wealth.

Another rift between the 28 million people of the crude-producing Niger delta and the rest has been sharpened by proposals to grant delta residents 10% stakes in oil ventures, to be taken from the national oil company%26rsquo;s holdings.

The proposals%26rsquo; architects hope to give people who have long resented the oil industry an incentive to support it. Others fear that acknowledging the delta%26rsquo;s rights to %26ldquo;ownership%26rdquo; could increase discord. After a string of initiatives to placate the volatile region, one northern legislator speaks for many when he says the delta has already been offered %26ldquo;too many carrots%26rdquo;. To which many Ijaw, the delta%26rsquo;s biggest ethnic group, retort: give us our due or let us go our own way.

When civil war broke out in 1967, the central government, terrified of losing the delta%26rsquo;s newly drilled oilfields to secessionists, declared all natural resources state property. Today, however, the delta oil-producing states, where poverty is often less acute than in the north, receive 13% of oil proceeds before the remainder is shared out among all 36 states. Once the proceeds of a multibillion-dollar trade in stolen crude are included, the delta looks awash with cash. But, with graft and mismanagement, little reaches its inhabitants, even if oil spills do.

Nonetheless, delta leaders demand that the extra share is raised to 50%, arguing that the same principle could be applied to the barely exploited natural resources of other regions.

Privately, at least one minister expresses willingness to concede to delta demands if it would end militant attacks on the oil industry. The proposals%26rsquo; authors calculate that, with a restructuring of the national oil company, the treasury would lose only about 2% of oil revenues.

Yet striking such a bargain would be delicate %26ndash; especially for president Umaru Yar%26rsquo;Adua, who draws much of his political capital from his northern home city. By diverting oil revenues directly to deltans, he might break the hold of militant commanders. But by bypassing the state authorities, he risks alienating the delta barons of the ruling party ahead of 2011 elections. Everyone else will be left to ponder whether there is more prising them apart than holding them together.

http://www.ft.com/home/uk

Copyright The Financial Times Limited 2010

Homepage image from City of Refuge Africa

Welcome to the International Year of Biodiversity. Throughout 2010, countless initiatives will promote the protection of biodiversity and encourage businesses, governments and individuals to take action to reduce the constant loss of biological diversity worldwide. And not before time.

Biodiversity has long been the Cinderella, the overlooked topic, among environmental issues, with even the chief executives of some of the world%26rsquo;s biggest corporations comfortably confident it has little, if anything, to do with their day-to-day preoccupations %26ndash; except, of course, where their operations directly impact rainforests, temperate wetlands or coral reefs, as in the case of a food company using palm oil whose production has involved the clearance of virgin forest.

Most business leaders assume that the protection of species and genetic diversity is a matter for governments. And they are not wrong in making that assumption. But, as the evidence of biodiversity erosion mounts and the sense of government failure in many parts of the world begins to press in, the risk grows that business will be called to account.

The International Year of Biodiversity will focus on corporations and their supply chains as agents of biodiversity destruction. But it will also, and perhaps more importantly, treat them as one of the few agents of change with the capacity to come up with innovative new solutions to a challenge that has undermined so many past civilisations. So it is worth reviewing why biodiversity is a legitimate concern both for corporations and those who regulate them and why it is unlikely to remain the Cinderella for much longer.

The evidence suggests that biodiversity is declining severely across the board. Forests, for example, have been shrinking at the rate of 60,000 square kilometres a year since 2000; average hard coral cover in the Caribbean has declined from 50% of the sea floor to 10% within the last three decades; and 35% of mangroves have disappeared in the last 20 years. A survey of 3,000 wild species from 1970 to 2000 showed a consistent decline of 40% in average species abundance, with a 50% reduction of inland water species and a 30% decline in inland and marine species.

Were there such a thing as the Board of Earth Inc., it would be facing a reduction in biodiversity and related forms of natural capital at a pace 1,000 times greater than background rates typical of the planet%26rsquo;s past. Even a world that allowed the sub-prime version of capitalism to run riot ought to be more than a little concerned when faced with such trends. Indeed, there is an increasingly urgent imperative to mainstream biodiversity into the policies, plans and budgets of both the public and private sectors.

Although there have been positive private-sector contributions, the response from the business world to these trends and calls to action, over time, has been decidedly mixed. Industries with large footprints, such as oil and gas and mining, were early movers on the biodiversity agenda, due to a visibly direct impact on landscapes and their need to secure a licence to operate. As a consequence, companies like Shell have invested in biodiversity assessments and, more recently, biodiversity offsets.

Likewise, the relationship between the food-production sector and biodiversity came into focus in a high-profile way with campaigns against McDonald%26rsquo;s for purchasing beef raised on former rain forest land and, more recently, feeding chickens with soya grown on deforested Amazon terrain. These and other cases have helped spur the development of better agricultural-management practices to reduce environmental impacts, though they are not spreading nearly fast enough.

In the run-up to last December%26rsquo;s climate change conference in Copenhagen, some government and business leaders acknowledged the ways in which the climate-change agenda could drive a re-evaluation of the services that natural habitats play in regulating carbon cycles and building ecological and economic resilience. However, while sustainability experts agree that biodiversity conservation is a top priority %26ndash; as seen most recently in a 2009 survey from consultancies SustainAbility and Globescan of nearly 1,700 experts across multiple sectors, with 82% agreeing that it is very or somewhat urgent %26ndash; generally business does not appear to rank it as a significant concern.

More specifically, of the 50 leading businesses reporting on sustainability in 2006, we found that only three made an explicit mention of biodiversity as a financially significant concern. The US health-care company Johnson %26amp; Johnson is a notable exception, having committed to enhancing biodiversity conservation across all of its facilities by this year and having worked with Harvard University to make the case for the dependence of human health on biodiversity.

We see some cause for optimism in initiatives like the Corporate Ecosystem Services Review, which was launched by Geneva-based business coalition the World Business Council on Sustainable Development (WBCSD) and the US think tank World Resources Institute (WRI) in 2008 to provide business managers with a means of identifying and managing risks and opportunities arising from dependence and impact on ecosystems. A variety of tools also has been developed in recent years, the most recent being WBCSD%26rsquo;s Ecosystem Valuation Initiative, which enables the quantification of ecosystem risks and opportunities in order to further embed biodiversity values into existing financial and business-planning tools. This tool is being road-tested by 10 to 15 WBCSD member companies, with results due to be reported during the year ahead.

In the longer term, we are hopeful that a new breed of scientists, innovators, entrepreneurs and investors will emerge to drive forward new technologies, new business models and, crucially, a new market paradigm. Consider, for example, US biologist Craig Venter%26rsquo;s trawling of the oceans for new genes for such applications as hydrogen production and synthetic biology, made even more interesting by his US$600-million (4.1 billion yuan) deal with ExxonMobil on algal biofuels. And then there is Janine Benyus%26rsquo;s work on biomimicry, which is worth a chapter in its own right as a source of novel, potentially revolutionary, ideas on materials, products, processes and management systems.

So while the biodiversity glass may seem half empty to some %26ndash; and in danger of draining at an even faster rate as the world%26rsquo;s population pushes towards nine billion by mid-century %26ndash; we choose to see it as still, more or less, half full.

John Elkington is co-founder of SustainAbility and of Volans. Jennifer Biringer is director of client services at SustainAbility and was previously manager of WWF%26rsquo;s North America Forest %26amp; Trade Network.

Homepage image by Dorn Dada

Welcome to the International Year of Biodiversity. Throughout 2010, countless initiatives will promote the protection of biodiversity and encourage businesses, governments and individuals to take action to reduce the constant loss of biological diversity worldwide. And not before time.

Biodiversity has long been the Cinderella, the overlooked topic, among environmental issues, with even the chief executives of some of the world%26rsquo;s biggest corporations comfortably confident it has little, if anything, to do with their day-to-day preoccupations %26ndash; except, of course, where their operations directly impact rainforests, temperate wetlands or coral reefs, as in the case of a food company using palm oil whose production has involved the clearance of virgin forest.

Most business leaders assume that the protection of species and genetic diversity is a matter for governments. And they are not wrong in making that assumption. But, as the evidence of biodiversity erosion mounts and the sense of government failure in many parts of the world begins to press in, the risk grows that business will be called to account.

The International Year of Biodiversity will focus on corporations and their supply chains as agents of biodiversity destruction. But it will also, and perhaps more importantly, treat them as one of the few agents of change with the capacity to come up with innovative new solutions to a challenge that has undermined so many past civilisations. So it is worth reviewing why biodiversity is a legitimate concern both for corporations and those who regulate them and why it is unlikely to remain the Cinderella for much longer.

The evidence suggests that biodiversity is declining severely across the board. Forests, for example, have been shrinking at the rate of 60,000 square kilometres a year since 2000; average hard coral cover in the Caribbean has declined from 50% of the sea floor to 10% within the last three decades; and 35% of mangroves have disappeared in the last 20 years. A survey of 3,000 wild species from 1970 to 2000 showed a consistent decline of 40% in average species abundance, with a 50% reduction of inland water species and a 30% decline in inland and marine species.

Were there such a thing as the Board of Earth Inc., it would be facing a reduction in biodiversity and related forms of natural capital at a pace 1,000 times greater than background rates typical of the planet%26rsquo;s past. Even a world that allowed the sub-prime version of capitalism to run riot ought to be more than a little concerned when faced with such trends. Indeed, there is an increasingly urgent imperative to mainstream biodiversity into the policies, plans and budgets of both the public and private sectors.

Although there have been positive private-sector contributions, the response from the business world to these trends and calls to action, over time, has been decidedly mixed. Industries with large footprints, such as oil and gas and mining, were early movers on the biodiversity agenda, due to a visibly direct impact on landscapes and their need to secure a licence to operate. As a consequence, companies like Shell have invested in biodiversity assessments and, more recently, biodiversity offsets.

Likewise, the relationship between the food-production sector and biodiversity came into focus in a high-profile way with campaigns against McDonald%26rsquo;s for purchasing beef raised on former rain forest land and, more recently, feeding chickens with soya grown on deforested Amazon terrain. These and other cases have helped spur the development of better agricultural-management practices to reduce environmental impacts, though they are not spreading nearly fast enough.

In the run-up to last December%26rsquo;s climate change conference in Copenhagen, some government and business leaders acknowledged the ways in which the climate-change agenda could drive a re-evaluation of the services that natural habitats play in regulating carbon cycles and building ecological and economic resilience. However, while sustainability experts agree that biodiversity conservation is a top priority %26ndash; as seen most recently in a 2009 survey from consultancies SustainAbility and Globescan of nearly 1,700 experts across multiple sectors, with 82% agreeing that it is very or somewhat urgent %26ndash; generally business does not appear to rank it as a significant concern.

More specifically, of the 50 leading businesses reporting on sustainability in 2006, we found that only three made an explicit mention of biodiversity as a financially significant concern. The US health-care company Johnson %26amp; Johnson is a notable exception, having committed to enhancing biodiversity conservation across all of its facilities by this year and having worked with Harvard University to make the case for the dependence of human health on biodiversity.

We see some cause for optimism in initiatives like the Corporate Ecosystem Services Review, which was launched by Geneva-based business coalition the World Business Council on Sustainable Development (WBCSD) and the US think tank World Resources Institute (WRI) in 2008 to provide business managers with a means of identifying and managing risks and opportunities arising from dependence and impact on ecosystems. A variety of tools also has been developed in recent years, the most recent being WBCSD%26rsquo;s Ecosystem Valuation Initiative, which enables the quantification of ecosystem risks and opportunities in order to further embed biodiversity values into existing financial and business-planning tools. This tool is being road-tested by 10 to 15 WBCSD member companies, with results due to be reported during the year ahead.

In the longer term, we are hopeful that a new breed of scientists, innovators, entrepreneurs and investors will emerge to drive forward new technologies, new business models and, crucially, a new market paradigm. Consider, for example, US biologist Craig Venter%26rsquo;s trawling of the oceans for new genes for such applications as hydrogen production and synthetic biology, made even more interesting by his US$600-million (4.1 billion yuan) deal with ExxonMobil on algal biofuels. And then there is Janine Benyus%26rsquo;s work on biomimicry, which is worth a chapter in its own right as a source of novel, potentially revolutionary, ideas on materials, products, processes and management systems.

So while the biodiversity glass may seem half empty to some %26ndash; and in danger of draining at an even faster rate as the world%26rsquo;s population pushes towards nine billion by mid-century %26ndash; we choose to see it as still, more or less, half full.

John Elkington is co-founder of SustainAbility and of Volans. Jennifer Biringer is director of client services at SustainAbility and was previously manager of WWF%26rsquo;s North America Forest %26amp; Trade Network.

Homepage image by Dorn Dada

Hans-Martin Schulz, a German geologist, is co-founder of Gas Shales in Europe, a project funded by the oil and gas industry to explore the potential for development in Europe. %26ldquo;We are making the first steps in research,%26rdquo; he says. %26ldquo;It%26rsquo;s hard to estimate, at this point, what will happen.%26rdquo;

National and international energy policies will dictate how much gas is extracted, but there is no doubt that countries from Poland to China want to get in on the act. On November 17, 2009, US president Barack Obama and China%26rsquo;s president Hu Jintao launched the US-China Shale Gas Resource Initiative, which aims to use experience from the US to assess China%26rsquo;s shale gas potential.

But gas has its critics. It is about 30% less carbon intensive than oil and 50% less than coal, but it still emits carbon, which makes it less desirable than renewable energy resources. Fracturing the rock requires large quantities of water laced with chemicals, which critics fear could leak into groundwater and aquifers. Shale developments have been blamed for contaminating wells and the death of livestock exposed to potassium chloride in the water used to fracture the rock; this has led regulators to consider buffer zones around reservoirs and aquifers.

There has been no outcry in places such as the American states of Texas and Louisiana, where lawmakers have long supported the oil and gas industry. Indeed, Louisiana is offering tax incentives for people to install fuelling equipment that will allow vehicles to run on compressed natural gas. But in the north-eastern states, where the mood is less welcoming, Chesapeake Energy recently abandoned plans to drill in the New York watershed, which supplies unfiltered water to nine million people. %26ldquo;Why go through the brain damage of that, when we have so many other opportunities?%26rdquo; says Aubrey McClendon, its chief executive.

The Riverkeeper, a New York environmental group, has called for a permanent ban on drilling in ecologically sensitive areas such as the state%26rsquo;s Catskills region. But local governments are torn, given the number of jobs shale developments create at a time of high unemployment. A study by IHS Global Insight reported that gas contributed $385 billion to the US economy in 2008 and more than $180 billion in labour income alone; by comparison, the coal industry contributed $79.9 billion. More than 30 US states boasted at least 10,000 jobs directly or indirectly attributable to the gas industry.

At the end of 2008, the US department of energy (DoE) says domestic proven gas reserves rose by 3% to reach their highest level since the US Energy Information Administration (EIA) first reported them in 1977. Discoveries of 29.5 trillion cubic feet (835.3 billion cubic metres) of gas during 2008 represented the sixth consecutive annual increase, with reserves from shale reservoirs up 51% over 2007.

%26ldquo;It is very significant,%26rdquo; says Richard Newell of the EIA. Under most scenarios of future energy and climate legislation, US natural-gas production will increase during the next 20 years. But further ahead, the picture becomes less clear. By 2050, if the United States built more nuclear and wind-generating capacity and managed to capture and store the carbon emitted from coal-fired power stations, then it would be cheaper to use those technologies than to burn more gas and capture its carbon emissions, Newell says. %26ldquo;The size of the role natural gas would play depends on the availability of those other options.%26rdquo;

In its favour, he notes, gas-fired power stations can be built faster and more cheaply than coal equivalents and offer a better fit with renewable sources because they are easier to turn on and off to supplement wind and solar when the wind drops and the sun doesn%26rsquo;t shine. %26ldquo;Price is the main impediment,%26rdquo; Newell says.

And natural gas prices are unpredictable. In recent months, when gas fell below US$3 per million British thermal units (mBtu) %26ndash; a seven-and-a-half-year low %26ndash; that hardly seemed a cause for concern. But as recently as 2008, US gas prices reached a record US$13.69 per mBtu. Even at US$3.20 per mBtu, however, developing shale gas is profitable.

%26ldquo;Every square inch of my district has natural gas under it,%26rdquo; says Tim Murphy, a US congressman, referring to Pennsylvania%26rsquo;s Marcellus Shale, which runs from New York to Tennessee. %26ldquo;It%26rsquo;s going to have an impact on the whole nation.%26rdquo; T Boone Pickens, the 81-year-old oilman who has become a spokesman for the natural-gas industry, told the US congress in October that the United States has more natural gas than all the oil in Saudi Arabia. If the country converted 6.5 million of its heavy trucks to run on that gas, it could reduce its oil imports from OPEC producers by 2.5 million barrels a day.

To make that happen, Murphy says the United States must create incentives for public gas refuelling stations, or in-home gas refuelling, and plug-in vehicles. This can be funded, he argues, from the additional revenues the government will receive from gas producers if they have incentives to increase output. %26ldquo;It%26rsquo;s a solution that grows upon itself.%26rdquo;

The biggest believers are in the Haynesville Shale formation of Louisiana, where last year gas projects produced US$3.9 billion in household earnings and accounted for 33,000 new jobs, according to Loren C Scott %26amp; Associates, an economic consultancy. It estimates state and local tax revenues increased by at least $153.3 million in 2008 as a result. %26ldquo;It%26rsquo;s going to turn this parish upside down over the next five to 10 years,%26rsquo;%26rsquo; says Tommy Craig, of the Community Bank of Louisiana. Deposits are already up 25% from late 2007.

Mike Smith is one of the few spending his windfall. Whereas others have run only to a new pick-up truck, he does not have a wife or children, so the money is his to spend. He has bought a couple of large-screen televisions and invested some of his payout, buying stock in Ford Motor Company when it hit $2 a share %26ndash; %26ldquo;I have a bunch of it,%26rdquo; he says. But after years of thrift, even he has mostly held on to the money, using it for necessities such as medical bills. He was able to pay upfront to have a cancerous growth removed from the side of his nose, rather than cover the costs in instalments.

Other big winners from the shale rush remain cautious about spending their signing bonuses, despite the promise of royalty cheques once production begins. The Marshburn family, who own some 160 hectares, including a share in the most productive Haynesville well to date, are one example. Mike Marshburn, a 59-year-old former rodeo star in a black cowboy hat and a shiny silver buckle he won as a rider in the 1970s, has already banked his bonus but continues to work on the gas fields as a contract welder, while raising bucking bulls on the side.

His wife, Celia, a retired schoolteacher, lifts up her boots to reveal holes in the soles. And their daughter, Mila, 25, is working her way through 14-hour days in nursing school, despite her family%26rsquo;s sudden wealth. %26ldquo;I just tell my friends, %26lsquo;Hey, that%26rsquo;s my parents%26rsquo; money. I%26rsquo;m going to make my own way.%26rsquo;%26rdquo; Her mother wants to create a beach on the lake their home overlooks, while her father has his eye on a new bull. But they are biding their time. %26ldquo;If these royalty cheques are big enough, I might retire,%26rdquo; Mike says.

Smith%26rsquo;s bonus will carry him through retirement, regardless of how big his royalty cheques turn out to be. His contract guarantees him 20 to 25% of what the company receives for gas under his land, and production is due to begin within months. He has a twinkle in his blue eyes when he talks of the dreams he can now afford to live out %26ndash; hunting bears in Alaska; golfing at the Masters in Augusta, Georgia; seeing the vast expanses of Wyoming and Montana; building a new home amid the pine trees on his acreage. %26ldquo;I%26rsquo;m more or less a homebody,%26rdquo; he says. %26ldquo;I think it%26rsquo;s time I get out.%26rdquo;

In the meantime, he is training his nephew to take over the business so that he can retire next year. And on the weekends, he still heads out of town, to hunt on his land, among the pine trees and the well pads.

Shale oil next?

US energy companies may be able to use technologies they acquired in the hunt for shale gas to tap oil trapped in dense rock formations.

Oil is often harder to extract, given its viscosity and bigger molecules, so engineers are tweaking the process. %26ldquo;We believe this is going to be game-changing technology,%26rdquo; said Mark Papa, chairman of EOG Resources. %26ldquo;We believe there is enough oil in rock across the US and Canada to be of significant impact.%26rdquo;

While increasing the size of the world%26rsquo;s third-largest oil production base would be difficult, success could slow the decline in US oil output that has continued since the 1970s. Papa believes the process will prove economic with oil prices at US$45 to $50 a barrel, compared with around $80 today.

While nobody knows how much oil might be freed by the new techniques, Edward van den Heuvel, commercial opportunity manager for Shell Chemicals, said that on average about a third of the oil in a field is recovered. With two-thirds of the oil left in the ground, it makes sense to revisit reserves once believed to be trapped in impermeable rock.

The biggest success so far has been in the Bakken Formation of Montana and North Dakota, where there are an estimated 3.65 billion barrels of recoverable oil. Bill Albrecht, vice-president of Occidental Petroleum, the biggest US independent, says: %26ldquo;There is a huge resource here.%26rdquo; But the technique needs refining before it will win widespread adoption. %26ldquo;Relative to gas, it%26rsquo;s still an emerging technology,%26rdquo; he admits.

Sheila McNulty is the Financial Times%26rsquo;s US energy correspondent.

http://www.ft.com/home/uk

Copyright The Financial Times Limited 2010

Homepage image from Chesapeake Energy

After their father died 15 years ago, Mike Smith%26rsquo;s six siblings wanted nothing to do with the tract of land the old man had gradually acquired from his income as a pipeline welder. The land, 365 acres %26ndash; 148 hectares — of it, lay in a quiet and sparsely populated corner of Louisiana: nothing but pine trees for miles around. In a county so poor that about a fifth of the population lives below the poverty line, the bequest wasn%26rsquo;t good for much.

But for Smith, a tall, slim man of 61 with a kindly face, DeSoto parish was home. %26ldquo;That%26rsquo;s where my roots are. I wanted the land,%26rdquo; he says. Smith paid US$300 an acre (less than half a hectare) %26ndash;$109,500 in total %26ndash; to his siblings. And while he kept his home in Shreveport, 65 kilometres to the north, he travelled down to DeSoto regularly to walk his acres, or hunt squirrel and deer. His plan was to sell the trees for lumber one day, and use the income to fund his retirement. Until then, he would pass the years frugally, making a living as a property valuer and sharing his 50-year-old house with two dogs and a cat.

All the while, the DeSoto county seat, Mansfield, home to 5,500 people, withered. With only coal and timber to support it, the parish could not even repair its roads. Across from the courthouse are telltale signs of the desperation that began to claw at the area %26ndash; the dusty, vacant windows of the hardware shop and cinema, and beyond them the Community Bank of Louisiana. It opened its doors in 1901 but is now so run down that the visitor struggles to make out what colour the wallpaper would once have been. The phones are from another age and an old standard lamp in an upstairs office blinks fitfully into life and then goes dark again.

%26ldquo;When I came in, the town was dead. There was no sign of economic growth here,%26rdquo; remembers Curtis McCoy, mayor for the past seven years.

All that changed in 2008, when oil and gas companies began knocking on doors, offering locals a couple of hundred dollars an acre if they would lease their land for prospecting. Some, like Jim May, executive director of the DeSoto Chamber of Commerce, jumped at the offer and signed a three-year lease on his 100 acres for a total of $25,000. Nobody had shown any interest in the land in decades, he reasoned. Six months later, the gold rush was at its height and prices leapt to $25,000 or even $30,000 an acre. %26ldquo;I lost $2.5 million,%26rdquo; says May with a wistful smile.

%26ldquo;People went to bed one night and woke up the next morning to find themselves rich,%26rdquo; says McCoy. That included Mike Smith, whose land was so sought after that in May 2008, PetroHawk Energy, a small, independent oil and gas company, handed him a $1.4-million signing bonus in return for permission to drill for natural gas on his late father%26rsquo;s property. %26ldquo;It changed my whole life,%26rdquo; he says. %26ldquo;I don%26rsquo;t have to cut my trees anymore.%26rdquo;

Smith is sitting behind the wheel of a new gold Cadillac, parked outside this year%26rsquo;s Haynesville Shale Expo in Shreveport, an event that has attracted 5,000 people, most of them landowners who missed the leasing frenzy and are eager to see whether they still have time to cash in. It was Smith%26rsquo;s dream since he was a boy to own a new Cadillac, like the one his father always made sure his mother drove. He paid $52,000 cash for the car. %26ldquo;That was the first investment. It kind of hurt a little bit,%26rdquo; he smiles. A small wooden cross dangles from the rear-view mirror.

. . .

The prize that drew companies such as PetroHawk to Smith%26rsquo;s impoverished corner of Louisiana is known as shale gas. Smith%26rsquo;s acres sit on top of the Haynesville Shale, named after the town near which the prospect was discovered %26ndash; a seam of black rock between 150 and 300 feet thick (45 to 90 metres thick) that lies hundreds of metres underground and extends across 3,400 square miles (8,800 square kilometers) of Louisiana and Texas. Trapped inside this rock are vast quantities of natural gas %26ndash; estimated at between 112 and 245 trillion cubic feet (roughly between three and seven trillion cubic metres). At the upper end of this range, Haynesville gas could meet the energy needs of the United States for about 12 years.

This isn%26rsquo;t the most extensive prospect of its kind in the United States; that distinction belongs to the Marcellus Shale in Pennsylvania and neighbouring states, which is reckoned to cover 65,000 square miles (nearly 170,000 square kilometres), an area larger than Greece. But based on the wells drilled so far, the Haynesville may well turn out to be one of the most productive. %26ldquo;It was the Haynesville that turned the tide on how big shale could be for US supply,%26rdquo; says Jeff Fisher, senior vice-president of production at another US company, Chesapeake Energy.

Indeed, the impact is expected to extend well beyond America%26rsquo;s borders. Industry consultants at PFC Energy in Washington, DC, believe that developing supplies trapped in shale deposits could more than quadruple the world%26rsquo;s known gas reserves. %26ldquo;This is a transformational event,%26rdquo; says its chairman, Robin West. His consultancy puts global reserves of natural gas from %26ldquo;unconventional%26rdquo; sources such as shale beds at 3,250 trillion cubic feet (92 trillion cubic metres), a total based on 1997 geological estimates that he believes will rise as the techniques available to extract the gas improve. By comparison, global reserves of natural gas from %26ldquo;conventional%26rdquo; sources total 620 trillion cubic feet (17.5 trillion cubic metres). Not all of these shale reserves will ever be tapped, but the technology to do so is available and, for the first time, companies are putting it to use.

To extract gas from shale involves drilling down, sometimes thousands of metres, and then sideways as much as 4,500 feet (1,370 metres). Once a well has been drilled, water with fine grains of sand is pumped through at high pressure; this fractures the shale and leaves behind the grains of sand, which prop open the fissures in the rock and allow the gas to escape.

Using this technique, Devon Energy, an Oklahoma-based oil and gas independent, sank a well last autumn in the Texas portion of the Haynesville shale (until then thought to be a low point in the %26ldquo;play%26rdquo;) that produced a flow rate of more than 30 million cubic feet (850,000 cubic metres) of gas per day, the highest ever from that area. This result led others to redraw the borders of the gas field, suggesting it was even more extensive than originally believed. %26ldquo;No one, us included, knows how that play is going to evolve,%26rdquo; says Larry Nichols, Devon%26rsquo;s chief executive. %26ldquo;We did not anticipate it would grow this much. Now we realise there are more opportunities for onshore growth than we ever thought would be possible.%26rdquo;

This realisation marks a volte-face for America%26rsquo;s oil and gas companies. By the 1970s, the majors had decided that onshore reserves of oil and gas in the United States had been tapped, so they sold much of their acreage in order to focus on offshore and international exploration. This left the independent explorers, which drill 90% of onshore wells in the country, to pursue what was left. %26ldquo;For years we have known that the United States holds vast quantities of so-called tight gas or shale gas %26ndash; natural gas locked in formations denser than concrete,%26rdquo; Rex Tillerson, ExxonMobil%26rsquo;s chief executive, said in October. %26ldquo;But we did not have the technology to extract this so-called tight gas in a cost-effective way. Until now.%26rdquo;

Credit for that breakthrough goes to George Mitchell, who at 90 is among the last of the original wildcatters still alive. His breed of oilmen spent their lives searching for the next Spindletop %26ndash; the Texas oil well that in 1901 spouted a thick, black geyser, marking the birth of the US oil industry. Duke R Ligon was senior vice-president at Devon Energy when, in 2002, Mitchell was preparing to sell his company to Devon and retire a billionaire. Few people realised it at the time, but Mitchell had already laid the groundwork for the shale boom by pioneering an effective and economic way to extract the gas. %26ldquo;You had to laugh in the negotiations because, according to him, everything was Spindletop,%26rdquo; Ligon recalls. He pauses, then adds: %26ldquo;He happened to be right.%26rdquo;

The technology and expertise developed by Mitchell Energy and refined by Devon has transformed the industry. In the past three years, estimates of US gas reserves have grown from 30 to 100 years%26rsquo; supply at today%26rsquo;s rates of consumption. %26ldquo;We did all the work,%26rdquo; Mitchell says. %26ldquo;The majors didn%26rsquo;t do it; the independents did it. Now the majors are angling all around.%26rdquo;

Exxon, the biggest of them all, has built up positions in the Marcellus Shale and other fields across Oklahoma, Arkansas and Texas, and in December it took over XTO Energy, a US independent, in a $41-billion deal that will further increase its exposure to onshore US natural gas. Exxon is also looking at making shale an international proposition and has holdings in Canada, Germany, Hungary and Poland.

And all the while competitors from around the world are lining up, hoping to learn from the pioneering US independents and take that expertise with them wherever they can.

NEXT: What lies ahead?

Sheila McNulty is the Financial Times%26rsquo;s US energy correspondent.

Copyright The Financial Times Limited 2010

http://www.ft.com/home/uk

Homepage image from US Energy Information Administration

Figures from China’s first national pollution survey were jointly released by the Ministry of Environmental Protection (MEP), the National Bureau of Statistics (NBS) and the Ministry of Agriculture (MOA) on February 9 %26ndash; the first results of the two-year long undertaking to be made public. The information released on this occasion was an overview of national macro data and the changes seen in some major emission indices have consequences for China’s overall pollution-reduction efforts.

The new figures show that emissions of some pollutants are far above the levels made public in the past. Take Chemical Oxygen Demand (COD), an important measure of the degree of water pollution, as an example. In 2007, the China Environmental Report put overall national COD at 13.818 million tonnes. The new survey, which includes previously omitted sources of pollution such as agriculture, more than doubled this figure to 30.2896 million tonnes. Similar increases were seen in industrial solid wastes, which are particularly hazardous substances. Worryingly, these updated figures put levels of pollution far beyond environmental capacity %26ndash; the amount of pollution the environment is able to absorb.

Research by environmental-planning authorities puts national COD capacity at 7.4 million tonnes. That means that, even accepting the 2007 figures, COD levels would have to be cut by half in order to reach the carrying capacity of the environment. But the new data has calculated total COD at more than four times environmental capacity. The 11th Five Year Plan called for a reduction in COD of 10%, leaving you wondering how many five-year periods it will take to reduce levels to a point at which China’s rivers can flow clean.

Although the news is bad, we should not lose confidence in our ability to bring pollution under control. The release of this information is an extension of the government’s commitment to greater environmental openness, a positive trend that started in 2004 and is worthy of affirmation. Facing the problem lays the foundation for solving it and we need an accurate picture of the situation if we are to produce a realistic and practical pollution strategy.

First, we need to reach a consensus. The huge increase in emissions requires greater efforts to cut pollution %26ndash; in particular water contamination and hazardous waste. Next, all levels of government should make good use of this hard-won data.

Central government should use this more comprehensive and reliable information to re-examine the overall policy direction and make major adjustments to future pollution-reduction targets in order to achieve a basic balance between development and protection. Local government should use the data to understand pollution within their jurisdictions, cease the use of unrealistic estimates of environmental capacity to justify the expansion of energy-hungry and polluting industries and protect the land and water.

Meanwhile, this basic data %26ndash; obtained at great public expense %26ndash; should be steadily released to the public rather than restricted to government, particularly information on the release of toxic and harmful substances by industry. These substances are a direct threat to health and safety and the release of this data will assist the public in understanding local environmental risks and better protecting environmental interests. The release of the data will also promote public participation in environmental decision making and management. And developed-nation experiences show that the regular and mandatory publication of data on pollution sources encourages industry to save power and cut emissions.

If releasing the results of this pollution survey can kick start a system where data on emissions from pollution sources is regularly published, it will have a deep and long-lasting impact on future pollution control.

Ma Jun is director of the Institute of Public and Environmental Affairs.

Homepage Image from Greenpeace

In late 2008, reports claimed that pesticide residue in peanuts grown in one county in Shandong, eastern China, were at potentially fatal levels. Official investigations discredited the rumours and peanut-lovers continue to enjoy their snack. But issues in peanut-growing, such as the use of toxic chemicals and agricultural membranes, remain unaddressed.

Peanut farmers know there is a range of factors that can reduce harvests, including pests such as beetle larvae. And, for the majority of farmers, the only way to deal with pests is powerful toxic pesticides, such as the long-banned %26ldquo;666%26rdquo;. In addition, agricultural membranes %26ndash; thin plastic sheets %26ndash; are often laid over fields of peanuts and other crops in order to prevent the evaporation or run-off of water and fertiliser and to reduce weed growth. But these membranes are difficult to gather up after use, and are usually abandoned by the side of fields, polluting the soil.

%26ldquo;Our existing agricultural methods cut off ecological cycles,%26rdquo; says Jiang Gaoming, chief researcher at the Chinese Academy of Sciences’ Institute of Botany and a columnist for chinadialogue. %26ldquo;We need to restore and make use of those natural cycles.%26rdquo;

Since 2007, Jiang’s research team has rented 27,000 square metres of land in Shandong, eastern China, to use as the Hongyi Organic Farm. The project aims to demonstrate organic farming practices, exploring commercially-viable forms of organic agriculture and attempting to grow the most successful organic crops in China.

The idea of organic agriculture originated in Europe and, by the year 2000, it was being used to some degree in 141 nations. But the amount of farmland dedicated to the practice in Asia remains fairly low compared to Europe, where organic methods are relatively widespread.

However, as living standards and awareness of environmental issues have increased in recent years, China has started catching up with the west in enthusiasm for organic farming, although high prices and inconsistent certification have left many consumers unconvinced about organic products and reluctant to buy them.

Jiang explains: %26ldquo;We have stopped all use of pesticides, herbicides, fertilisers, membranes and additives and we don’t use anything genetically modified; we’re testing the role of organic agriculture in maintaining yields and improving profits. In just three years, we have already seen the power of this approach.%26rdquo;

Jiang is no mere follower of fashion. He believes that, if Chinese agriculture fails to move towards organic practices, the nation’s soil will lose its last remnants of fertility. Like so many other commercial operations that have failed to account for environmental factors in business planning, the farming sector has long ignored the vital role of the soil. As a result, agricultural membranes, fertilisers, pesticides and herbicides have turned rich, dark earth pale.

But is it possible just to do away with chemicals in farming? What about their role in fighting disease and pests? China uses 7% of the world’s arable land to feed 20% of the world’s people %26ndash; a miracle made possible by the use of over 1.2 million tonnes of chemicals annually.

%26ldquo;Farmers use 50 yuan (US$7.30) of toxic chemicals for every 667 square metres of peanuts planted but this still doesn’t bring the pests completely under control. Our costs are much lower,%26rdquo; Jiang points out. In one of the team’s small fields, pesticides have been replaced with two lamps that use light of a particular spectrum to attract insects to traps. %26ldquo;It doesn’t catch all of them but it achieves an ecological balance,%26rdquo; says Jiang. %26ldquo;Even if the insects aren’t there, the lights won’t do any harm.%26rdquo;

The lights can attract up to 4.5 kilograms of insects a night. But, due to insect lifecycles, they are only caught on 70 nights of the year. In the last year, the farm has collected over 100 kilograms of insect larvae to use as feed supplements.

The farm also uses manual labour or mowers rather than weed-killer to remove weeds, which are then fed to locusts and freshwater fish. The income from this is enough to employ two farm labourers all year round. A 120-strong herd of cattle is fed using straw and cattle dung is used to produce methane to provide energy for the farm, with the waste products returned to the fields as high quality, organic fertiliser.

According to Jiang Gaoming’s research, up to 70% of fertiliser used in China is wasted and overuse of such chemicals is a serious problem. He believes organic fertiliser could help China’s agriculture move from a sector that is %26ldquo;high cost, high output, high pollution%26rdquo; to one that is %26ldquo;low cost, low output, no pollution%26rdquo;.

Can improving soil fertility and using organic practices result in lower costs than traditional methods? Organic grains and vegetables currently cost three to five times as much as normal equivalents on the market, while leeks and celery from Shandong province sell for 20 yuan (US$2.9) per half kilogram.

One person who believes low costs are feasible is Zhan Peilin, chairman of Rizhao Yikang Organic Technology. His company’s microbial organic fertiliser is made out of sludge waste from kelp processing and bacteria imported from Japan, and trials have shown it is as effective as its chemical equivalents. However, he says state subsidies and preferential policies for chemical fertilisers are reducing the competitiveness of alternatives.

Zhan also believes that Jiang’s farm suffers from a disconnect between production and the market. %26ldquo;As soon as production expands, you’ll find the market is too small, unless you are providing animal proteins for food processors,%26quot; he says, after visiting the locust-feeding hut. He adds that a single farm running a range of operations will incur higher management and business costs than larger ventures. And, with food safety legislation and monitoring still in need of improvement, only corporations %26ndash; with their strong management and concern for corporate reputation %26ndash; can be relied upon to provide accountability.

The farm is currently helping local farmer Jiang Gaoyu raise free-range chickens, using the %26ldquo;organic space%26rdquo; between crops. %26ldquo;In theory, the bigger an organic farm gets, the better the ecological and economic results are; management costs go down and more jobs are created,%26rdquo; says Jiang. His immediate goal is to persuade the villagers to dedicate 67,000 square metres of land to organic agriculture, with a long-term goal of converting the village%26rsquo;s entire 667,000 square kilometres to the practice.

As well as peanuts, the farm grows around 20 types of grain and vegetable, including wheat, corn, soya, green beans, chives, celery, potatoes, onions and garlic. These now carry an %26ldquo;organic%26rdquo; label and are described as high-standard, high-quality products, with no chemicals, fertilisers, additives or artificial compounds used. It seems that, after the excitement of increased yields brought about by such substances, followed by a period of overuse, those at the cutting edge of farming in China have decided to sever links with chemicals after seeing the damage done to the soil.

Despite a disappointing yield from the first crop of corn due to waterlogging, Jiang and his students remain confident. They believe that patience and constant experimentation are essential. It was the urgent quest for immediate results that led the farming industry to ignore soil quality in the first place, and to use fertilisers, chemicals and membranes, creating hard, polluted, infertile and unsustainable soil.

Jiang believes the farm’s role as a demonstration project is more important than commercial success. But farmers need more than faith; they need reliable models and a stable income before they can be persuaded to abandon conventional practices.

Many agricultural experts share Jiang%26rsquo;s views and hope to save the soil %26ndash; and the farming industry %26ndash; through organic practices. For seven years, the Chinese Academy of Agricultural Sciences has been running a project investigating key technologies for new types of multifunctional microbial fertiliser. Yuan Longping, the 79-year-old %26ldquo;father of hybrid rice%26rdquo;, is hopeful he will see 1,000 kilograms of super-hybrid rice produced per 667 square-metre harvest by the time he is 90. But, for now, eating healthily and eating enough remains no easy task for China%26rsquo;s 1.3 billion people.

Meng Si is managing editor at chinadialogue%26rsquo;s Beijing branch