Looking for gold in water investments

By Manuela Badawy

Mon Dec 12, 2011 10:13am EST

n">(Reuters) - Money manager Bill Brennan spends most of his waking hours thinking about something most Americans take for granted: water.

It may be the most essential of all commodities because without it none of us would be alive. But as an investment, water has had neither the glitter of gold nor the allure of oil.

But Brennan, a 49-year-old mechanical and biomedical engineer, is one of a small group of investors who are increasingly seeing an opportunity to make money from water.

"We look at water 100 percent all the time," said Brennan, a portfolio manager of the San Diego-based Summit Global Management, a 12-year-old hedge fund established by John Dickerson.

Summit, which Brennan says has about $500 million in assets under management, is one of a handful of U.S. funds that specialize in investing almost solely in stocks of water companies, reservoirs, land sitting atop aquifers and pipelines.

It is a niche corner of the investment world with about $6 billion in assets. There are fewer than a dozen of pure-play water-investment funds globally, a drop in the bucket compared with other commodity-based funds.

But the sector is one that some see as an opportunity to make money as fresh water becomes scarcer in parts of the globe due to population growth, farming and industry.

They say water funds are poised to reap the rewards of the need to replace aging and crumbling water and sewer systems. Infrastructure needs in the United States alone will require at least $500 billion over the next 20 years, according to the U.S. Environmental Protection Agency.

But skeptics say water investing carries a good deal of risk and the market's small size is an indication that many money managers are not sold on the growth potential. Others note pure-play water funds are often heavily invested in illiquid assets -- like water rights -- which can be hard to value or trade.

"We typically wait for a disaster to give us a wake-up call to invest in change -- or if we take a big hit in the wallet." said Dawn Van Zant, president and founder of Water-stocks.com.

THE MAN BEHIND WATER

For a water bull like Brennan, the absence of competition is an opening. He says he regularly looks at about 400 companies that derive at least one-third of their revenue from water-related businesses. Some of the businesses on his potential shopping list include pump or filter companies, as well as engineering and construction.

Among Summit's top stock picks are American Water Works, Brazilian company Companhia de Saneamento Basico and ITT Corporation.

About half of Summit's money is invested in stocks, says Brennan. The firm's most recent 13-F filing with the U.S. Securities and Exchange Commission reports that its funds hold $96 million in U.S. stocks, and Brennan said the fund also holds foreign securities for a total of some $250 million worth in equity holdings.

Summit Global also owns $250 million in water rights, or entitlements to access water sitting beneath working farms in the western United States and southeast Australia, where acute water scarcity and open markets allow for the development of water trade.

"For some people it may be boring and may not be fast enough," Brennan said. "The water business is an ideal investment for endowments, family offices and people that have a long-term horizon and understand the underlying growth metrics in the business and are looking for those expected returns of 6, 8 or 10 percent a year."

The compounded annual return for one of Summit's main funds is 9.4 percent since its launch in 1999, according to an October 31 marketing document seen by Reuters. Over that same period, the Russell 2000 small cap has returned 5.8 percent.

The marketing documents show that some of Summit's best returns came from 1999 to 2006, when it averaged high double-digit gains. But since then, returns have come back down to earth. In 2010, the fund returned 7.76 percent and through October this year it was down 1.3 percent.

"Our underperformance the last few years versus the S&P is correlated to our value approach. The risk trade from March 2009 has been a difficult time for many institutional value investors," Brennan said, adding that the large exposure to utilities capped gains, as they did not participate in the market rally.

"Since we look at five- and 10-year performance vs. quarter-to-quarter or year-to-year, our approach is suited for a patient and prudent investor with a longer horizon as an investor and not a trader."

One of Summit's few U.S. competitors is hedge fund Water Asset Management, which has been around since 2006 and is fully invested in water, with some $300 million in assets.

Competition also comes from mutual funds that are eyeing the space. The best-known U.S.-based actively managed mutual funds are Allianz RCM Global Water Fund with $72 million in assets, PFW Water Fund with $17 million, and Kinetics Water Infrastructure Fund with $16 million.

The largest funds are in Europe, led by Geneva-based Pictet Global Water Fund with $3.4 billion in assets, SAM Sustainable Water Fund based in Zurich with $1.3 billion in assets, and Kleinwort Benson Investors, the adviser for the Ireland-based Calvert Global Water Fund with $62 million.

Todd Petzel, chief investment officer at Offit Capital Advisors, which manages $6 billion for wealthy families and non-profit institutions, says it is difficult to find a pure-water play. He quips that many so-called water funds "are polluted" with other non-water investments.

Petzel's says his strategy for clients looking to invest in water is to find specific projects via a private equity deal where clients have a long-term stake in water rights in an aquifer.

PICKENS TRADE

Maybe one of the best-known water investors is Texas billionaire T. Boone Pickens, more commonly known as an oil man. He is the largest individual water owner in America, with rights over the Ogallala Aquifer in the Texas panhandle, the third-largest underground aquifer in the world.

It supplies 27 percent of all irrigation in the United States and 70 percent to 90 percent of the irrigation water in Kansas, Texas and Nebraska, three of the most important grain producers in the country, according to industry data.

Another way to play water is to invest in desalination technology, which produces fresh water from sea water.

Companies such as California-based Energy Recovery Inc, which through its high-efficiency devices has reduced the high cost of desalination, could benefit from clean water demand. The company has more than 80 percent of the global market share in energy-saving pressure exchangers for desalination, but just 8 percent of its business comes from the United States, its CEO Thomas Rooney told Reuters.

Although the United States is the largest single water market, most of the companies in the water-funds derive their revenues from emerging markets, especially from Asia. China alone has 21 percent of the world's population but only 7 percent of the renewable water resources.

"Water is at the heart of everything you do. You can't manufacture or grow anything without the availability of water," said Neil Berlant, head of the water group at Crowell, Weedon & Co, managing about $70 million.

(Reporting by Manuela Badawy; editing by Jennifer Ablan, Matthew Goldstein and Maureen Bavdek)

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Congress cannot accelerate Keystone decision: State Department

WASHINGTON | Mon Dec 12, 2011 7:33pm EST

WASHINGTON (Reuters) - The U.S. State Department warned on Monday that a plan by congressional Republicans to fast track the Canada-to-Texas Keystone XL pipeline decision would violate environmental laws and force it to withhold approval.

"Should Congress impose an arbitrary deadline for the permit decision ... the department would be unable to make a determination to issue a permit for this project," the State Department said in a statement.

Republicans in the House of Representatives have said they plan to include approval of the TransCanada Corp's Keystone XL in a payroll tax cut bill, raising the political stakes on the issue.

President Barack Obama has warned he would veto any bill that linked quick approval of the Keystone pipeline to extending a tax cut for American workers that is due to expire on December 31.

Both Republicans and Democrats want to pass an extension of the payroll tax cut in the next two weeks, but they are divided on how best to do it.

The Keystone measure helped Republican leaders secure support for their bill, but it still needs to pass the Democratic-led Senate, where some lawmakers have already urged Majority Leader Harry Reid to reject it.

Approval of the pipeline, which would carry 700,000 barrels per day of crude oil from Canada's tar sands, now rests with the State Department. The Republican measure seeks to take the decision out of Obama's hands and accelerate approval in part to create U.S. jobs.

Obama directed the State Department last month to conduct an additional environmental review of the $7 billion pipeline. That would punt the decision on whether to approve the project until after next year's presidential election.

The State Department underscored it had long-standing authority to supervise permitting for cross-border pipelines and had led a "a rigorous, thorough and transparent process" that must run its course.

A short-cut pushed through by Congress "would not only compromise the process, it would prohibit the department from acting consistently with National Environmental Policy Act requirements by not allowing sufficient time for the development of this information," it said.

Environmentalists say the pipeline would threaten Nebraska's Sand Hills region and lead to higher greenhouse gas emissions, and had threatened to hold back on campaigning for Obama in the election.

The State Department is now obtaining additional information on possible alternate routes that avoid the Sand Hills in Nebraska, and believes this review could be completed in time for a decision to be made in first quarter 2013, it said.

(Reporting By Andrew Quinn; editing by Christopher Wilson)

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New U.N. climate deal struck, critics say gains modest

1 of 5. United Nations (UN) Framework Convention on Climate Change Executive Secretary Christiana Figueres speaks with Brazil's Minister of Environment Izabella Teixeira (L) and chief climate envoy Luiz alberto Figueiredo during a plenary session at the United Nations Climate Change Conference (COP17) in Durban December 10, 2011. The conference has gone an extra day in an attempt to iron out an agreement on climate change policies.

Credit: Reuters/Rogan Ward

By Nina Chestney and Jon Herskovitz

DURBAN | Sun Dec 11, 2011 2:57pm EST

DURBAN (Reuters) - Countries from around the globe agreed on Sunday to forge a new deal forcing all the biggest polluters for the first time to limit greenhouse gas emissions, but critics said the plan was too timid to slow global warming.

A package of accords agreed after marathon U.N. talks in South Africa extended the 1997 Kyoto Protocol - the only global pact enforcing carbon cuts - allowing five more years to finalize a wider pact which has so far eluded negotiators.

Kyoto's first phase - due to expire at the end of next year but now extended until 2017 - imposed limits only on developed countries, not emerging giants like China and India. The United States never ratified it.

Those three countries and the EU held a last-ditch huddle in the conference centre before finally agreeing to wording that commits them to a pact with legal force, although exactly what form it will take was left vague.

Countries also agreed the format of a fund to help poor nations tackle climate change.

But many small island states and developing nations at risk of being swamped by rising sea levels and extreme weather said the deal marked the lowest common denominator possible and lacked the ambition needed to ensure their survival.

Agreement on the package, reached in the early hours of Sunday, avoided a collapse of two weeks of climate talks and spared the blushes of host South Africa, whose stewardship of the fractious negotiations came under fire from rich and poor nations.

"We came here with plan A, and we have concluded this meeting with plan A to save one planet for the future of our children and our grandchildren to come," said South African Foreign Minister Maite Nkoana-Mashabane, who chaired the talks.

"We have made history," she said, bringing the hammer down on the Durban conference, the longest in two decades of U.N. climate negotiations.

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Link to final text unfccc.int/2860.php

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Delegates agreed to start work next year on a new, legally binding accord to cut greenhouse gases, to be decided by 2015 and to come into force by 2020.

The process for doing so, called the Durban Platform for Enhanced Action, would "develop a new protocol, another legal instrument or agreed outcome with legal force" that would be applicable under the U.N. climate convention.

That phrasing was used by all parties to claim victory.

Britain's Energy and Climate Secretary Chris Huhne said the result was "a great success for European diplomacy."

"We've managed to bring the major emitters like the U.S., India and China into a roadmap which will secure an overarching global deal," he said.

U.S. climate envoy Todd Stern said Washington was satisfied with the outcome: "We got the kind of symmetry that we had been focused on since the beginning of the Obama administration. This had all the elements that we were looking for."

Yet U.N. climate chief Christiana Figueres acknowledged the final wording on the legal form a future deal was ambiguous: "What that means has yet to be decided."

Environmentalists said governments wasted valuable time by focusing on a handful of specific words in the negotiating text, and failed to raise emissions cuts to a level high enough to reduce global warming.

Sunday's deal follows years of failed attempts to impose legally-binding, international cuts on emerging polluters, such as China and India, as well as rich nations. Poor countries argue they should deserve leeway to catch up in development.

Sunday's deal extends Kyoto until the end of 2017, ensuring there is no gap between commitment periods. EU delegates said lawyers would have to reconcile those dates with existing EU legislation.

LEAST-BAD OPTION

India's Environment Minister Jayanthi Natarajan, who gave an impassioned speech to the conference denouncing what she said was unfair pressure on Delhi to compromise, said her country had only reluctantly agreed to the accord.

"We've had very intense discussions. We were not happy with reopening the text but in the spirit of flexibility and accommodation shown by all, we have shown our flexibility... we agree to adopt it," she said.

Small island states in the front line of climate change, said they had gone along with a deal but only because a collapse of the talks was of no help to their vulnerable nations.

"I would have wanted to get more, but at least we have something to work with. All is not lost yet," said Selwin Hart, chief negotiator on finance for the coalition of small states.

Tosi Mpanu-Mpanu, head of the Africa Group, added: "It's a middle ground, we meet mid-way. Of course we are not completely happy about the outcome, it lacks balance, but we believe it is starting to go into the right direction."

U.N. reports released in the last month said delays on a global agreement to cut greenhouse gas emissions will make it harder to keep the average rise to within 2 degrees Celsius over the next century.

"It's certainly not the deal the planet needs - such a deal would have delivered much greater ambition on both emissions reductions and finance," said Alden Meyer of the Union of Concerned Scientists.

"Producing a new treaty by 2015 that is both ambitious and fair will take a mix of tough bargaining and a more collaborative spirit than we saw in the Durban conference centre these past two weeks."

(Additional reporting by Barbara Lewis, Agnieszka Flak, Andrew Allan, Michael Szabo and Stian Reklev; editing by Jon Boyle and Peter Graff)

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Psychedelic gecko, "Elvis" monkey in new Mekong finds

n">(Reuters) - A wildly-colored gecko, a fish that looks like a gherkin, and a monkey with an Elvis-like hairstyle are among the more than 200 new species discovered in the Greater Mekong region last year, environmental group WWF said on Monday.

The area's diversity is so astonishing that a new species is found every two days, but regional cooperation and decision-making must take centre stage to preserve its richness, the group added.

The dangers posed to local wildlife were highlighted earlier this year, when WWF said that Vietnam's Javan rhinos have been poached into extinction.

"While the 2010 discoveries are new to science, many are already destined for the dinner table, struggling to survive in shrinking habitats and at risk of extinction," said Stuart Chapman, Conservation Director of WWF Greater Mekong, in a statement.

Among the new species highlighted in the report "Wild Mekong" is a gecko with bright orange legs, a yellow neck, and a blue-gray body with yellow bars on its bright orange sides, discovered on an island in southern Vietnam.

Then there is a black and white snub-nosed monkey whose head sports an Elvis-like hairstyle, found in Myanmar's mountainous Kachin state. Locals say the animal can be spotted with its head between its knees in rainy weather as it tries to keep rain from running into its upturned nose.

Other featured creatures among the 208 new finds include a lizard that reproduces via cloning without the need for male lizards, a fish that resembles a gherkin, and five species of carnivorous pitcher plant, some of which lure in and consume rats and even birds.

"Mekong governments have to stop thinking about biodiversity protection as a cost and recognise it as an investment to ensure long-term stability," Chapman said.

"The region's treasure trove of biodiversity will be lost if governments fail to invest in the conservation and maintenance of biodiversity, which is so fundamental to ensuring long-term sustainability in the face of global environmental change."

Despite restrictions, trade in wildlife remains an active threat to a range of endangered animals in the region, with some hunted because body parts -- such as rhinoceros horns -- are coveted ingredients in traditional Asian medicine.

Others, such as Mekong dolphins, face threats from fishing gear such as gill nets and illegal fishing methods, prompting the WWF in August to warn that one dolphin population in the river was at high risk of extinction.

The Greater Mekong region covers Cambodia, Laos, Myanmar, Thailand, Vietnam and the southern Chinese province of Yunnan.

(Reporting by Elaine Lies; Editing by Yoko Nishikawa)

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Canada first nation to pull out of Kyoto protocol

Environmental activists wearing masks with the faces of Canadian Prime Minister Stephen Harper (R) and European Commission President Jose Manuel Barroso (L) demonstrate outside a meeting of the World Business Council on Sustainable Development in Durban, December 5, 2011.

Credit: Reuters/Mike Hutchings

By David Ljunggren and Randall Palmer

OTTAWA | Mon Dec 12, 2011 7:20pm EST

OTTAWA (Reuters) - Canada on Monday became the first country to announce it would withdraw from the Kyoto protocol on climate change, dealing a symbolic blow to the already troubled global treaty.

Environment Minister Peter Kent broke the news on his return from talks in Durban, where countries agreed to extend Kyoto for five years and hammer out a new deal forcing all big polluters for the first time to limit greenhouse gas emissions.

Canada, a major energy producer which critics complain is becoming a climate renegade, has long complained Kyoto is unworkable precisely because it excludes so many significant emitters.

"As we've said, Kyoto for Canada is in the past ... We are invoking our legal right to formally withdraw from Kyoto," Kent told reporters.

The right-of-center Conservative government of Prime Minister Stephen Harper, which has close ties to the energy sector, says Canada would be subject to penalties equivalent to C$14 billion ($13.6 billion) under the terms of the treaty for not cutting emissions by the required amount by 2012.

"To meet the targets under Kyoto for 2012 would be the equivalent of either removing every car truck, all-terrain vehicle, tractor, ambulance, police car and vehicle off every kind of Canadian road," said Kent.

Environmentalists quickly blasted Kent for his comments.

"It's a national disgrace. Prime Minister Harper just spat in the faces of people around the world for whom climate change is increasingly a life and death issue," said Graham Saul of Climate Action Network Canada.

Kent did not give details on when Ottawa would pull out of a treaty he said could not work. Canada kept quiet during the Durban talks so as not to be a distraction, he added.

"The writing on the wall for Kyoto has been recognized by even those countries which are engaging in a second commitment," he said. Kyoto's first phase was due to expire at the end of 2012 but has now been extended until 2017.

Kent said Canada would work toward a new global deal obliging all major nations to cut output of greenhouse gases China and India are not bound by Kyoto's current targets.

The Conservatives took power in 2006 and quickly made clear they would not stick to Canada's Kyoto commitments on the grounds it would cripple the economy and the energy sector.

The announcement will do little to help Canada's international reputation. Green groups awarded the country their Fossil of the Year award for its performance in Durban.

"Our government is abdicating its international responsibilities. It's like where the kid in school who knows he's going to fail the class, so he drops it before that happens," said Megan Leslie of the opposition New Democrats.

Canada is the largest supplier of oil and natural gas to the United States and is keen to boost output of crude from Alberta's oil sands, which requires large amounts of energy to extract.

The Canadian Association of Petroleum Producers (CAPP) said all major emitters had to agree to cuts so that Canada did not put itself at a disadvantage.

Canada's former Liberal government signed up to Kyoto, which dictated a cut in emissions to 6 percent below 1990 levels by 2012. By 2009 emissions were 17 percent above the 1990 levels, in part because of the expanding tar sands development.

Kent said the Liberals should not have signed up to a treaty they had no intention of respecting.

The Conservatives say emissions should fall by 17 percent of 2005 levels by 2020, a target that CAPP president David Collyer said would oblige the energy sector to make sacrifices.

"It's a stretch and we'd be kidding ourselves if we said it wasn't," he told Reuters.

($1 = 1.03 Canadian dollars)

(Additional reporting by Louise Egan in Ottawa and Jeffrey Jones in Calgary; editing by Christopher Wilson)

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Analysis:Carbon markets still on life support after climate deal

By Nina Chestney and Jeff Coelho

LONDON | Mon Dec 12, 2011 12:05pm EST

LONDON (Reuters) - Carbon markets are still on life support after a U.N. climate deal agreed in South Africa on Sunday put off some big decisions until next year and failed to deliver any hope for a needed boost in carbon permit demand.

A package of accords agreed after marathon U.N. talks in Durban extended the 1997 Kyoto Protocol, the only global pact enforcing carbon cuts, allowing five more years to finalize a wider deal which has so far eluded negotiators.

Kyoto's first phase, which is due to expire at the end of next year but now will extend until 2017, imposed limits only on developed countries, not emerging giants like China and India. The United States never ratified it.

Many traders and analysts said the agreement will do little for carbon prices which are at record lows, as the two main European Union and U.N.-backed markets are stricken by flagging investments, an oversupply of emissions permits and worries about an economic slowdown.

"It's a sedative situation, in which a sick market needs a cure and instead of deciding which cure to use, the doctors keep using pain relief to gain more time to make the final prognosis," said Jacopo Visetti, carbon trader at AitherCO2.

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Graphic on carbon prices: link.reuters.com/fuk55s

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POSITIVE SIGNAL

The deal gave a positive signal to investors uncertain about the fate of Kyoto's Clean Development Mechanism (CDM), which gives developed nations and firms carbon offsets in return for investing in carbon-cutting projects in poor nations.

New investment in the CDM fell last year to just a fifth of its record high in 2007 of $7.4 billion as many clean energy project developers and traders scaled back their activities.

"We are more encouraged than we were last week," said Ian Simm, chief executive at Impax Asset Management, which has just over 2 billion pounds under management and invests in environmental markets.

"It confirms that there will be parts of the world that will continue to accelerate the development of markets for cleaner technology," he said.

But carbon offsets under the CDM, so-called certified emission reductions, were trading just above 5 euros a tonne on Monday, near record lows.

Many observers are doubtful of a rebound in demand for the permits.

"Thanks to Durban, the CDM will live to see another day, but demand for credits for these projects is lackluster," said Jonathan Grant, director of carbon markets and climate policy at PricewaterhouseCoopers.

DOLDRUMS

"Carbon markets are expected to stay in the doldrums, because of oversupply in the (European carbon) market as a result of the recession," Grant said.

The world's biggest carbon market, the EU's emissions trading scheme, caps the emissions of some 11,000 polluting power firms and industrial plants in 30 countries.

EU carbon prices have lost over half their value since June mainly due to economic growth concerns and over-supply, trading around record low levels below 8 euros a tonne on Monday.

Durban's deferral of some key decisions on new market mechanisms until next year left many frustrated.

"(It's) impossible to take any longer-term decisions," said Per Lekander, an analyst at Swiss bank UBS. "You don't know what to do and what (is the) validity of different instruments."

Without major emitting nations spelling out their emission reduction targets, the deal will do little to spur demand in carbon markets, already oversupplied with hundreds of millions of permits and international credits.

"It's an agreement between parties to arrange another agreement. It is more or less like a mother that tells her child 'ok, we will do it,'" said Matteo Mazzoni, carbon analyst at Nomisma Energia in Italy.

Instead, carbon prices are expected to be driven more by European growth prospects.

"It's possible that carbon prices have seen their floor. But the positive momentum given by Durban can only be sustained if the resolution on the European debt crisis continues on the right path," analyst Emmanuel Fages at Societe Generale said. "The uncertainty remains."

Trevor Sikorski, head of carbon research at Barclays Capital, said: "Supply is still the fundamental problem." He estimated a surplus of over a billion EU and international carbon credits during the period 2008-2012.

He expects the EU carbon market to be oversupplied through 2020, though sees some chance of carbon prices bouncing when big European utilities start hedging their sales of carbon-intensive power generation for 2013.

"A sustained increase in prices is probably not going to happen until the end of next year," Sikorski said.

(Editing by Jason Neely)

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Analysis: Durban deal may do little to cool heating planet

Greenpeace activists hold a mock party opposite the venue where the United Nations Climate Change Conference (COP17) is being held, in Durban December 10, 2011.

Credit: Reuters/Rogan Ward

By Jon Herskovitz

DURBAN | Mon Dec 12, 2011 10:03am EST

DURBAN (Reuters) - The world is forecast to grow hotter, sea levels to rise, intense weather to wreak even more destruction and the new deal struck by governments in Durban to cut greenhouse gas emissions will do little to lessen that damage.

Climate data from U.N. agencies indicates that the accumulation of heat-trapping gases will rise to such levels over the next eight years - before the newly agreed regime of cuts in emissions is supposed to be in place - that the planet is on a collision course with permanent environmental change.

Countries around the globe agreed on Sunday to forge a new deal forcing all the biggest polluters for the first time to limit greenhouse gas emissions by 2020. But critics said the plan was too timid to slow global warming.

For a reduction plan to have a major impact, analysts say, the world's largest emitter, China, needs to be weaned from coal-intensive power sources that are choking the planet with carbon dioxide (CO2) and developed countries must spend heavily to change the mix of sources from which they draw their energy.

But they see little political will to implement these costly plans and argue that the U.N. process showed, in two weeks of talks in the South African city of Durban, that it is bloated, broken and largely incapable of effecting sweeping change.

"The challenge is that we begin the talks from the lowest common denominator of every party's aspirations," said Jennifer Haverkamp, director of the international climate program for Environmental Defense Fund, a U.S. group which campaigns against pollution.

"For this effort to be successful, countries need to be ambitious in their commitments and to refuse to use these negotiations as just another stalling tool," she said.

Domestic political constraints make it unlikely that pledges in Durban for more green projects in the developed world and stepped up aid for developing countries will come to fruition given problems for government funding in Europe, the United States and Japan.

PROTOCOL ON LIFE SUPPORT

In about 20 years of negotiations, the U.N. process has produced one binding deal on emissions cuts, the 1997 Kyoto Protocol. It is seen as a fading accord affecting a handful of developed states that now account for only 25 percent of global emissions, and was kept on life-support by the Durban deal.

The latest agreement extends limits on advanced countries that would otherwise expire next year. But it is widely seen as not doing nearly enough to make a dent in emissions.

The pact, known as the "Durban Platform," produced the promise of a new legally binding deal by 2020 and set out a road map to get there. The worry is that by the time any new provisions take effect, they will have been diluted in negotiation to the point of being meaningless, analysts said.

China, the United States and India, the world's three biggest emitters accounting now for about half of all global CO2 emissions, are not bound by Kyoto and would not be bound to any legally enforceable numbers until at least 2020.

The three have been accused by environmental lobby groups for years of blocking tough measures, and all three cite domestic priorities in their defense. The U.S. Senate needs a supermajority to approve global treaties and does not have a broad enough coalition to sign off on a global climate deal.

India and China said curbing their emissions would hurt their fast-growing economies and put hundreds of millions of their people at risk as they try to escape poverty.

RISK OF PERMANENT DAMAGE

But those calling for tighter curbs on emissions say that those populations are being put at greater risk by climate change: "The people of the world are the biggest losers because the governments are kowtowing more to the corporate interests than the interests of the people for more aggressive action," said Alden Meyer of the Union of Concerned Scientists.

Myer, a veteran of the U.N. climate talks, called for greater ambition on emissions cuts and financial support for industrial change and for "a more collaborative spirit than we saw in the Durban conference centre these past two weeks."

National envoys to the U.N. climate process and scientists who brief them see a need to limit the global average temperature rise to at least 2 degrees Celsius over pre-industrial times to prevent the most serious climate change. Environmental groups have said even that is not enough.

The United Nations Environment Programme said in a report last month that emissions were on track to grow above what is needed to limit global warming to the 2-degree mark, with analysts warning that delays in cuts for developed states and curbing the furious pace of emissions growth in major developing countries increasingly put the planet at risk.

Myer said: "We are on a path to 3-3.5 degree Celsius increase if we don't make aggressive cuts by 2020.

"And there is nothing to suggest this deal will alter that."

As temperatures rise, so does the damage, which includes crop failures, increasing ocean acidity that would wipe out species and rising sea levels that will erase island states, U.N. reports said.

The Organisation for Economic Cooperation and Development said global average temperatures could rise by 3-6 degrees by the end of the century if governments failed to contain emissions, bringing permanent destruction to ecosystems.

The International Federation of Red Cross and Red Crescent Societies, the world's largest disaster relief network, saw the Durban deal as a collective failure to stem the destruction caused by climate change on the world's most vulnerable people.

"It is frankly unacceptable we cannot all agree when so many lives are at stake," Bekele Geleta, the group's secretary general said in a statement.

Selwin Hart, chief negotiator for an alliance of small island states, took some heart, however, that at least there was agreement to keep on talking: "I would have wanted to get more, but at least we have something to work with," he said.

"All is not lost yet."

(Additional reporting by Nina Chestney, Barbara Lewis and Agnieszka Flak in Durban; Editing by Alastair Macdonald)

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Analysis: Coal's bridge to future might lie in the past

Two men take a break from loading coal onto trucks near the town of Dangcheng, in Quyang county, located 250 km (155 miles) southwest of Beijing December 7, 2011.

Credit: Reuters/David Gray

By Timothy Gardner

WASHINGTON | Sun Dec 11, 2011 5:06pm EST

WASHINGTON (Reuters) - As futuristic projects designed to capture carbon from coal-burning industries and store it underground have failed, the two largest consumers of the fuel, the United States and China, hope answers to limiting emissions blamed for global warming lie in the past.

Power-generators, coal miners and policy makers had put faith in projects to capture carbon dioxide from coal-fired plants and pump it directly underground into geologic formations for permanent storage. The great hope was that the technology would prevent much of the world's largest source of greenhouse gas emissions from reaching the atmosphere.

But so-called carbon capture and storage projects have collapsed like a row of dominoes this year in West Virginia, Scotland and Germany. The stumbling blocks have been high costs for the technology and bleak prospects the world will put a high price on emitting greenhouse gases.

Fortunately for those seeking to cut emissions from coal, one industry has profited for nearly four decades from socking away carbon dioxide emissions. That industry, enhanced oil recovery, is hungry for more of the gas.

Companies including Denbury Resources and Kinder Morgan have piped carbon dioxide from naturally occurring sources into aging oil fields to push out crude that traditional drilling is unable to reach.

As natural sources of carbon dioxide run dry, many of these companies are looking to industrial sources of the gas. Power utilities and other coal-burning companies may find it wiser to link up with this mature industry than to plunge ahead with their own versions of carbon capture and storage.

Originally, enhanced oil recovery specialists thought aging oil fields could store about 100 billion metric tons of carbon dioxide, or about 5 percent of what would be needed to reduce the threat of climate change.

But as researchers learn more about the storage potential of old oil zones, in both China and the United States, they say much more carbon could potentially be stored in these places.

"We've realized if EOR is going to be a bridge to steep carbon reductions ... that bridge is both wider and longer than originally realized," said Julio Friedmann, the technical program manager at the U.S.-China Clean Energy Research Center, formed in 2009 by U.S. President Barack Obama and China's President Hu Jintao.

Experts say success with enhanced oil recovery could give new life to the entire field of carbon capture by enlarging the market for man-made carbon, helping to build out a pipeline network to move it to market, and helping the business become more efficient in shooting the gas underground.

"Without commercial transactions, no one knows the price," said Deborah Seligsohn, an energy expert based in Beijing with the research group the World Resources Institute. She said enhanced oil recovery "would cause the price discovery and all the other commercial relationships that would need to get developed."

If the world does not widely deploy carbon capture and storage by the 2020s, the cost of limiting global temperatures would rise by $1.1 trillion, the International Energy Agency said last month in its annual outlook. This would put an "extraordinary burden" on other low-carbon technologies including wind and solar power, the IEA said.

Experts believe carbon dioxide used in enhanced oil recovery can be stored permanently underground because over time it is absorbed in brine and eventually mineralizes into a more stable form.

But there are risks, including pushing up water that contains heavy metals and other pollutants. Still, backers say the water can be re-injected underground.

An added benefit of enhanced oil recovery is the extra oil that could be produced in areas that have not traditionally been big petroleum centers such as Ohio, Indiana, and Illinois in the United States and Inner Mongolia in China.

As China scours the world in search of new oil supplies, one hope is that the country's old oilfields in the Bohai Gulf, which also happen to be near chemical plants that burn large amounts of coal, could see a second life.

China currently pumps its old oilfields with water, which is scarce, or polymers, which can be expensive.

After an initial investment in pipelines and other infrastructure, using carbon dioxide to push out China's oil could be a viable option.

So far, the United States leads China in enhanced oil recovery partly because small U.S. technology companies have been more nimble than China's big oil companies.

"It's smaller guys that do this cutting edge, creative stuff, and China doesn't have independent oil companies," said WRI's Seligsohn.

But China's Science and Technology Minister Wan Gang recently hosted an international conference on using emissions for coal plants, signaling the government is serious about moving into this industry.

And China boasts at least one advantage that even its huge state oil companies are finding hard to ignore: Its fleet of chemical plants that run on coal provide a far purer stream of carbon dioxide than coal-fired power plants do.

That type of discovery has made researchers more hopeful the United States and China can work together. "The more we've studied it, the better it works," said CERC's Friedmann. "The question is how to create a social legal regulatory framework to enable this technology."

(Reporting by Timothy Gardner; Editing by David Gregorio)

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Analysis: World still in arrears on climate change pledges

Delegates continue debating into the night during the United Nations Climate Change Conference (COP17) in Durban December 9, 2011.

Credit: Reuters/Rogan Ward

By Barbara Lewis

DURBAN, South Africa | Sun Dec 11, 2011 8:22am EST

DURBAN, South Africa (Reuters) - When the Kyoto Protocol, the world's only legally-binding pact to tackle climate change was adopted in the economically-booming 1990s, it was meant to be a down payment.

Sunday's tentative promise, thrashed out over days of talks, that all the big emitters will eventually join an international scheme of carbon reduction targets is the latest small installment and allows U.N. law to retain some value in trying to stop the planet from overheating.

Environmentalists want much more.

But persuading major emitters China and India, who were not part of the original Kyoto carbon cuts, and the United States, which signed but did not ratify the Kyoto Protocol, to agree to any kind of a global, legal deal is still a small step previous climate summits failed to manage.

"International targets do two things. They motivate and reinforce national policy and they give confidence to countries and investors that policy will last," said Michael Jacobs, visiting professor of climate change and the environment at the London School of Economics.

"In the end what drives emissions reduction is national policy, not international targets. Durban can only provide the basis for this."

The European Union, which has enshrined Kyoto principles into its own law, led the charge for an agreement that would eventually produce a top-down deal with legal strength, rather than the bottom-up approach as favored by the United States and others, involving only domestic legislation and voluntary pledges.

"We think you need a multilateral system," said Environment Minister Marcin Korolec of Poland, current holder of the EU presidency. He went so far as to compare the success of Sunday's deal with climate talks in 1995, which led to the Kyoto Protocol two years later.

EU Climate Commissioner Connie Hedegaard has repeatedly said the EU's own experience proves top-down, binding targets are the way to guarantee action.

In addition to its commitment under the first phase of the Kyoto Protocol, the European Union has its own set of three 2020 green goals, two of which are binding and one of which is not binding.

It is on track to meet the mandatory goals of a 20 percent drop in emissions and a 20 percent rise in renewable energy, but is only expected to half-meet a third, non-binding aim of a 20 percent improvement in energy efficiency through measures such as insulation and better building design.

The Kyoto Protocol inspired the EU's own legislation and for the treaty's supporters, it can continue to motivate positive change.

Even the extremely lengthy debates, especially in Durban, where the conference broke records in terms of running over time, have intrinsic value.

"Smaller countries have really been the conscience of the conference," said Jason Anderson, head of European climate and energy policy at WWF.

He cited the impact of impassioned pleas from small island nations who fear they could sink under rising sea levels without a strong global pact.

But he also said climate change talks were only one very complex forum for moving to a greener future.

In parallel, a green technology race, driven by business momentum, has accelerated and the business community argues it is far more likely than U.N. talks to deliver on time.

GREEN TECH RACE

China and the United States, as well as being the two biggest carbon emitters, are at the helm of the contest to adopt greener energy sources.

They had to be heavily-persuaded to agree to any kind of wording in Durban that would imply legally binding carbon emissions cuts, but they have adopted green technology with enthusiasm.

In 2010, China invested $54 billion in low carbon energy technology, compared to the United States' $34 billion, the U.S. Pew Environment Group said.

India, the world's third biggest carbon emitter behind China and the United States, is also nervous that binding emissions targets might hobble its economic growth, but it too has also begun moving towards green development.

It has to tackle issues, including the potentially huge capital investment costs of green energy, which are only cheaper in the long run. And it remains to be seen whether it can catch up with China and the United States.

Equally, internationally binding agreements provide no guarantees of change.

Canada, whose huge deposits of oil sands make it a financial challenge to reduce its carbon emissions growth, was theoretically bound by the first phase of Kyoto, but in practice had made clear it has no intention of meeting its targets.

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Indonesia says Sumatra, Kalimantan at risk of floods

JAKARTA | Sun Dec 11, 2011 11:29pm EST

JAKARTA (Reuters) - Indonesia's commodity-rich Sumatra and Kalimantan regions are among areas at high risk of flooding in December, the state weather agency said on Monday.

The agency said the country's rainy season is expected to peak in December and January.

The rainy season can impact output in Indonesia's agricultural and mineral sectors. A prolonged wet season last year hurt crops such as coffee and flooded coal mines.

"Parts of Indonesia has begun their rainy season in November (and) most of Indonesia's territory may have normal rain," said Sri Woro Hariyono, head of the Meteorology, Climatology and Geophysics Agency. "At coastal areas, there are higher potential for flood when sea water enters coastal areas.

"There are 21 provinces with flood potential, of which 16 provinces have high flood potential."

In recent weeks, many Indonesian palm oil producers have said that while the wet weather has arrived on plantations, there has been no flooding and rains are not comparable with last year.

Australia's weather bureau said last week that La Nina, a weather phenomenon usually linked to heavy rains and flooding in the Asia-Pacific and South America and drought in Africa, has strengthened, adding that the condition will persist until the end of the Southern Hemisphere summer.

(Reporting by Yayat Supriatna, writing by Michael Taylor; Editing by Ramthan Hussain)

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Tepco: radiation from Fukushima plant declines further

Members of the International Atomic Energy Agency (IAEA) International Remediation Expert Mission to Japan examine No.3 reactor at the tsunami-crippled Fukushima Daiichi Nuclear Power Plant in Fukushima prefecture October 11, 2011. Picture taken October 11, 2011.

Credit: Reuters/IAEA/Handout

By Shinichi Saoshiro

TOKYO | Mon Oct 17, 2011 5:54am EDT

TOKYO (Reuters) - The operator of Japan's tsunami-hit Fukushima nuclear power plant Monday said the amount of radiation being emitted from the complex has halved from a month ago, in the latest sign that efforts to bring the plant under control are progressing.

The Fukushima Daiichi plant, 240 kilometers (150 miles) northeast of Tokyo, was damaged in March by a devastating earthquake and tsunami in the world's worst nuclear accident since the Chernobyl disaster 25 years ago.

"Our latest measurements show that radiation from the damaged reactors is 100 million becquerels per hour, which is one eight-millionth of the amount measured soon after the accident," Tokyo Electric Power's (Tepco) vice president Zengo Aizawa told reporters during a monthly review.

Aizawa said that this translates to about 0.2 millisievert per year of radiation measured at the fringes of the plant, below the 1 millisievert safety limit according to government guidelines.

The amount is half of what Tepco announced at its review a month ago.

In light of the progress being made in cooling its damaged reactors, which suffered nuclear fuel meltdowns in the first days of the crisis, Tepco formally brought forward its plan to bring the plant to a state of "cold shutdown" within this year, instead of by January as initially planned.

It had said last month it was hoping to achieve a cold shutdown within the year but had not made a formal declaration.

Technically, a cold shutdown is a state in which water used to cool nuclear fuel rods remains below 100 degrees Celsius, preventing the fuel from reheating.

With the help of newly built cooling systems, Tepco's efforts to cool the reactors have progressed steadily, with temperatures at all three of the damaged reactors falling below 100 degrees late in September.

But despite this development, Tepco and the government have been cautious about immediately declaring a cold shutdown.

"We still need to proceed with care. We need to continue monitoring whether the temperatures of the reactors and radiation levels being emitted remain stable going forward," Yoshinori Moriyama, deputy director-general of the government watchdog Nuclear Industrial and Safety Agency, told the same news conference.

Declaring a cold shutdown will have repercussions well beyond the plant as it is one of the criteria the government said must be met before it begins allowing about 80,000 residents evacuated from within a 20 km (12 mile) radius of the plant to go home.

Japan faces a massive cleanup task if these residents are to be returned home -- the environmental ministry says about 2,400 square km (930 square miles) of land surrounding Daiichi may need decontamination, an area roughly the size of Luxembourg.

Even if a cold shutdown is declared Tepco has acknowledged that it may not be able to remove the fuel from the reactors for another 10 years and that the cleanup at the plant could take several decades.

It also has to decontaminate tens of thousands of tonnes of contaminated water pooled at the plant, a result of its efforts to cool the reactors early in the crisis by pumping in vast amounts of water, much of it from the ocean.

(Reporting by Shinichi Saoshiro; Editing by Sanjeev Miglani)

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Turning wood into oil, in two simple steps

By Ernest Scheyder

ORONO, Maine | Tue Oct 18, 2011 4:11pm EDT

ORONO, Maine (Reuters) - Efficiency and simplicity have long eluded renewable-fuel researchers, but a Maine scientist has developed a two-step process he says can make oil from the cellulose in wood fiber.

This process, far less complex than competing methods, creates an oil that can be refined into gasoline, jet fuel or diesel and removes nearly all oxygen -- the enemy of fuel efficiency.

"It's unique and it's simple," said Clay Wheeler, the University of Maine chemical engineering professor who discovered the process last year with two undergraduates. "This is important because the more complex the technology, the more expensive it's going to be."

In heavily wooded Maine, logging produces a lot of scrap tree stumps, tops and branches that are unusable for making lumber or paper.

While additional research is needed, if Wheeler's process is ultimately able to be commercially developed, it could help forest-rich states generate their own fuel from that scrap.

For a video on the process, click on: link.reuters.com/vak54s

In the first step of Wheeler's process, wood is bathed in sulfuric acid, isolating the sugars in cellulose and producing an energy-intense organic acid mixture.

That mixture is then heated with calcium hydroxide in a reactor to 450 degrees Celsius (840 Fahrenheit), a step that removes oxygen.

What drips out is a hydrocarbon liquid that chemically mimics crude oil.

For every ton of cellulose processed, Wheeler is able to make about 1.25 barrels of oil equivalent, a unit of energy comparable to the amount of energy produced by burning one barrel of crude oil.

The acids and calcium hydroxide are recycled at the end of the process, cutting costs, he said.

The most expensive part is the wood itself, Wheeler said. At current wood biomass prices, he acknowledged his process is not economically competitive with traditional crude oil refining.

"But we anticipate that the value of the fuel will continue to increase as petroleum becomes more scarce," he said.

The economic viability of the project is a source of concern, said Andrew Soare, an analyst who tracks alternative fuel technologies at Lux Research, a technology advisory firm.

"Further understanding of costs is key to this reaction," Soare said. "I think this process certainly does have a chance to go somewhere."

Paul Bryan, program manager at the U.S. Department of Energy's Biomass Program, said a project's economics are a key factor for any future funding support.

"If the outputs are a lot more valuable than the inputs, that's the first step to success," he said.

The journal Green Chemistry plans to publish a study later this year on Wheeler's process, which does not use catalysts or bacteria as most other alternative fuel methods do.

Wheeler is now studying just what makes his process tick. He accidentally stumbled upon it 11 months ago while trying different reactions with biomass and acids.

He does not know exactly what happens inside the reactor during the second phase, when the oil is actually produced, but he knows what he can make with it.

During a recent tour of his Maine laboratory, Wheeler refined his fuel into gasoline that can be used in existing engines.

"We've had independent laboratories test this, and without any upgrading, it was 82-octane gasoline," Wheeler said.

That is a lower octane rating than you find at gas stations -- most are at least 87 -- but traditional crude oil refining uses several steps to reach that mark.

"We think we can get there," Wheeler said of the higher octane rating.

NEW INNOVATIONS AND PRODUCTS

Even though the United States has 10 percent of the world's forest land, its pulp and paper industry has slowly declined in the past 50 years due to shrinking paper demand.

In August, paper shipments fell 6.4 percent from the same month last year and box production slipped 2.7 percent, according to the American Forest and Paper Association.

Wheeler's process could entice the paper industry to take a second look at Maine, Oregon and other timber-rich states.

"This is the kind of stuff you could do in a pulp and paper mill," Wheeler said. "Paper plants are already used to high temperatures."

University of Maine officials are hoping Wheeler's process creates jobs in a state with a 7.6 percent unemployment rate.

"These mills are the heart of communities in Maine and they need new innovations and products," said Renee Kelly, director of economic development initiatives at the university. "Pulp and paper are very cyclical, commodity businesses."

(Reporting by Ernest Scheyder and David Fazekas; editing by Andre Grenon)

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New Finnish reactor town counts blessings, fears

By Terhi Kinnunen

PYHAJOKI, Finland | Mon Oct 17, 2011 4:40am EDT

PYHAJOKI, Finland (Reuters) - Matti Pahkala braces from the chilly winds blowing from the Gulf of Bothnia as he surveys a map of the Hanhikivi peninsula in northern Finland, an area he first visited as a child.

As then, the shore is lined with rocky beaches and vegetation, much of it untouched. Nearby, birch and aspen trees rustle, scattering yellow autumn leaves.

That landscape is about to change after Finnish nuclear consortium Fennovoima announced on October 5 that it will build a reactor here, the first nuclear reactor site to be announced since the March nuclear plant disaster in Fukushima, Japan.

While environmentalists worry about damage to the area's natural habitat, Pahkala, who is chairman of the local Pyhajoki municipal board, couldn't be more excited.

He expects Fennovoima's investment of 4-6 billion euros ($5.4-8.0 billon) will bring more jobs and new business, meaning more tax revenue, to an area that sees youngsters leave for bigger towns each year in search of jobs and education.

Pahkala and his colleague Matti Soronen cheered when they received the news from Helsinki that Pyhajoki had been chosen over Simo, another shortlisted municipality.

"From the municipality's point of view this is like winning a lottery," said Soronen, a municipal manager.

Around 3,400 people live in Pyhajoki, with many working at steel maker Rautaruukki in Raahe some 30 km (20 miles) away, and the rest working in small local business and farming.

Local student Heini Mattila said the reactor could help Pyhajoki avoid merging with neighboring towns as many small Finnish municipalities have been forced to do to cut costs.

"It will bring more jobs and life to this village. Otherwise we might have to soon consider joining the town of Raahe," Mattila said.

The unemployment rate in Pyhajoki is around 6 percent, not much different to the country's average.

But local unemployment shot to around 15 percent as recently as early 2010 as a nationwide recession prompted lay-offs. Some fear this could happen again, with economists predicting Finland could tip into recession next year as Europe's debt crisis hits exports such as metals, paper products and ships.

CHEAP ELECTRICITY

Finland sees nuclear energy as a means to cut greenhouse gas emissions while supplying a steady source of energy for industry. It is also trying to curb dependence on energy from Russia on fears that economic growth could push up prices and impact deliveries.

Its four nuclear reactors produced 25 percent of electricity used in Finland last year, while 12 percent was imported, mostly

from Russia.

Fennovoima was set up in 2007 to produce electricity for its consortium members at cost. Members include steel makers Outokumpu and Rautaruukki, although its biggest single shareholder is German utility E.ON's Finnish subsidiary.

In 2010, it and Teollisuuden Voima (TVO) won parliament's approval to construct new nuclear reactors, which are expected to come on line by around 2020 and raise the number of reactors in Finland to seven.

The forest businesses and steel makers depend on cheap electricity, and those sectors are vital to Finland's economy, particularly now that Nokia is no longer the growth driver it once was.

While Finland launched a review of nuclear safety after the Fukushima disaster, caused by an earthquake and tsunami, authorities found no need for changes at the reactors in operation, although they asked TVO and Fortum for more information on back-up plans for extraordinary events. There was no talk of halting Fennovoima's project.

The position contrasts sharply with others in Europe. Following Fukushima, Germany decided to phase out nuclear power, and Italy has shelved plans to build new plants.

Protests by the anti-nuclear movement have gained little political traction in Finland. Although the Greens party has been against nuclear energy and voted against allowing new reactors, it is part of a coalition government that includes nuclear advocates.

Economy Affairs Minister Jyri Hakamies, who is responsible for energy issues, said Finland's decision to stay on course with its nuclear plan reflected the "rational, pragmatic" nature of its people.

"BOMB IN THE BACKYARD"

But critics say Finland may be underestimating the risks and overestimating the benefits of nuclear power. Many point to construction delays and ballooning costs at Olkiluoto 3, Finland's fifth reactor, as proof that nuclear energy doesn't always go as planned.

The promise of more jobs means little for pensioner Tuula Wallin, who has lived for 20 years just 5 km from the planned site.

"It is like a bomb in the backyard," she said, her voice trembling.

"How come these people planning this have not come to their senses, despite Chernobyl and Fukushima? My child and grandchildren live here in Pyhajoki, and I'm scared thinking about their future."

Environmentalists say the nuclear plant will disrupt the area's natural habitat, including diverse plants, birds and marine life.

There are few signs of human activity on the peninsula -- a road and some cottages, most of them wooden cabins without electricity or modern plumbing and used only in the summer.

Local environmental association Pro Hanhikivi, which is cooperating with other conservation groups as well as Greenpeace to oppose the reactor, says the peninsula is home to a variety of threatened and protected wildlife like the Siberian primrose, moor frogs and a bird called the black-tail godwit. The area is also a resting and feeding place for migrating arctic birds.

There are some nature conservation sites near the planned plant, including some areas designated in an EU program aimed at protecting threatened species and habitats. Some of the area's streams, springs and rocks are part of Finnish biodiversity programs.

While the reactor will avoid most of these areas, critics say they are so close that the impact is unavoidable.

EXCITEMENT IN SLEEPY TOWN

Fennovoima will have to negotiate with some landowners over the 80 hectares of the 450-hectare site it does not already control, and some of those are residents of the neighboring village of Parhalahti who are likely to put up a fight, said Pro Hanhikivi Vice Chairwoman Hanna Halmeenpaa.

Pro Hanhikivi has also complained to the European Commission and a European Parliament petition committee that Finland is not obeying directives on protecting threatened species and habitats.

"The question is can this area of various threatened habitats be split up for industrial use, or should it be protected," Halmeenpaa said. "We are prepared for a long battle."

When news of the site selection broke it created a rare buzz in Pyhajoki's normally sleepy village center, bringing local politicians, business leaders and media to Fennovoima's small office to hear Chief Executive Tapio Saarenpaa's plans for construction work due to begin in 2015.

"Our home has been announced and it is here," Saarenpaa said.

($1 = 0.746 Euros)

(Editing by Sonya Hepinstall)

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No "big bang" expected from Durban climate talks: EU

By David Stanway

BEIJING | Tue Oct 18, 2011 8:32am EDT

BEIJING (Reuters) - Global climate talks in South Africa next month will not produce a "big bang" capable of producing a new and binding pact to slash greenhouse gases, but steady progress could be made, a senior European climate official said on Tuesday.

Jos Delbeke, director general for climate action at the European Commission, told a news briefing in Beijing that he had no illusions about the challenges facing negotiators during the next round of talks in Durban, but said he was optimistic that a "step by step" approach could seal a global compact by 2014-5.

"I think if people are expecting a big bang, that is not on the cards," he said.

"Even if we do not have a big bang at Durban, we have the opportunity to make operational steps that are going to turn out to be very important for the elaboration of a new comprehensive regime."

After the disappointments of Copenhagen in 2009 and Cancun in 2010, the latest round of discussions to extend the Kyoto Protocol will take place in November, and Delbeke said negotiators had already shed the illusion that a deal could be sealed in one easy step.

The first phase of the Kyoto agreement will expire at the end of 2012, but with most of the world preoccupied with reviving the economy and handling the European sovereign debt crisis, few expect any breakthroughs.

Media reports have suggested that big greenhouse gas producers like Japan and Canada would not even participate in the second phase of Kyoto, which Delbeke said he "deplored."

"I think in reality what may happen is that the Europeans will pronounce themselves politically in favor of the Kyoto Protocol but that they will only go for ratification of the agreement if other parties join the club and undertake action."

Delbeke said beyond the challenges of signing a new global deal, incremental progress was likely to be seen on technological cooperation, as well as issues like adaptation to climate change and monitoring emissions.

BILATERAL DEAL?

China has been the biggest beneficiary of the Clean Development Mechanism (CDM), a Kyoto Protocol scheme that allows industrialized countries to meet their CO2 reduction targets by purchasing "certified emission reductions" or CERs from low-carbon projects launched in developing nations.

But the EU, the biggest buyer of CERs, has said it will not accept CERs generated by Chinese projects once the current phase of its Emissions Trading Scheme ends in 2012, though projects already registered will remain valid.

"Our ministers last week came together and they said they remain open to continue the Kyoto Protocol but there are a number of conditions attached to it," said Delbeke.

"One of them is the environmental integrity of the Kyoto Protocol needs to be improved. Another is that many more players have to join in."

With the EU committed to bringing the benefits of the mechanism to least developed countries, China will need to negotiate a separate bilateral deal with Europe if it wants to continue supplying carbon credits to Europe after 2012.

But that is likely to need stronger commitments to reduce absolute levels of greenhouse gas, including "sectoral" programmes that will force entire industries rather than individual projects to cut their emissions.

China, for its part, is still committed to the Kyoto principle of "common but differentiated responsibilities" which puts most of the responsibility for cutting emissions on the shoulders of developed nations.

The EU has been in discussions with potential partner countries but Delbeke wouldn't be drawn on whether talks with China were making progress.

"We have had quite a number of discussions -- it is about improving the CDM and, as far as we are concerned, opening up a new sector-based mechanism," said Delbeke.

He said talks were at an early stage and the important issue was ensuring that credits generated from sectoral schemes were recognized by the United Nations.

"I think it is fair to say that before such credits become available, we still will need some time because the clarity on sectoral mechanisms is not yet there, and it has to be implemented, and the credits have to be generated. It is not something that is going to happen on January 1, 2013."

(Editing by Robert Birsel)

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Conservationists seek to halt Idaho, Montana wolf hunt

By Laura Zuckerman

SALMON, Idaho | Mon Oct 17, 2011 8:05pm EDT

SALMON, Idaho (Reuters) - Conservationists asked a federal court on Monday to stop wolf hunts under way in Idaho and Montana until judges rule on an appeal that seeks to restore federal protections to the animals in the two states.

The Alliance for the Wild Rockies and others told the U.S. Ninth Circuit Court of Appeals that more than 200 wolves have been killed in Idaho and Montana so far this year from a population estimated at between 1,300 and 1,600.

They argued that the wolves will suffer irreparable harm now that a hunting season allowing rifles has opened in Idaho and is due to open in Montana, according to legal documents.

The two states have issued nearly 37,000 wolf permits, which Alliance head Michael Garrity said could lead to a "slaughter."

"Nearly 37,000 humans armed with high-powered rifles and long-range scopes will now be trying to kill the wolves in Montana and Idaho," Garrity said in a statement.

The U.S. Fish and Wildlife Service reintroduced fewer than 100 wolves to the Northern Rockies in the mid-1990s after hunting, trapping and poisoning campaigns pushed the creatures to the point of extinction.

The reintroduction happened over the protests of ranchers, who feared wolves would threaten livestock, and commercial outfitters, who blamed wolves for preying on prized game animals like elk.

The states contend wolves are thriving and that they should be hunted like other wildlife. Idaho is seeking to reduce its wolf population by about 80 percent and Montana is seeking to cull roughly 40 percent of its wolves, mostly through hunting.

"The state of Idaho has a well-established track record of proven stewardship in successfully managing other big game predators such as black bears and mountain lions," Jon Hanian, spokesman for Idaho Governor C.L. "Butch" Otter, said in a statement.

"Idaho's plan for wolf management is just as responsible," he added.

The Fish and Wildlife Service and the states sought for years to lift U.S. Endangered Species Act protections from the animals in Idaho and Montana but those efforts - which would clear the way for hunts - were blocked by environmentalists.

Congress passed a measure in April removing wolves in the two states from the threatened and endangered species list. It was the first time federal protections had been lifted from an animal by congressional action rather than scientific review.

Alliance and other groups are appealing an August decision by a federal judge upholding the delisting. Ninth Circuit judges have already denied a previous request by conservationists to stay wolf hunts in Idaho and Montana.

(Editing by Cynthia Johnston)

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Death toll from rain in Central America climbs to 81

1 of 2. A man walks at the banks of the Amatitlan lake, 30 km (19 miles) of Guatemala City, October 16, 2011. Guatemalan authorities on Wednesday declared the country was in ''red alert'' after a tropical storm called 12E hit. Forty-four people have died and thousands are affected by the rains, according to the National Coordination of Disaster Reduction (CONRED).

Credit: Reuters/Jorge Dan Lopez

By Nelson Renteria

SAN SALVADOR | Sun Oct 16, 2011 11:14pm EDT

SAN SALVADOR (Reuters) - The death toll from torrential rains in Central America over the past week has almost doubled since Saturday, with a further 25 lives lost in El Salvador, authorities said on Sunday.

A tropical depression that swept in from the Pacific on Wednesday caused mudslides and chaos on roads and forced thousands of people to abandon their homes in the chain of countries between Mexico and South America, killing 81 so far.

On Saturday, the death toll stood at 45 in the region, home to some of the poorest countries in the Americas. El Salvador, a nation of some 6 million, was the worst affected overnight, with accidents pushing up the number of victims there to 32.

"The situation has got even worse, it's still raining heavily in various parts of the country," El Salvador's president, Mauricio Funes, said in an address late on Sunday,

Many of those killed in the country died in mudslides, an official from local emergency services said.

The rainfall was so strong in the area around the municipality of Ciudad Arce, northwest of San Salvador, that rescue operations had to be suspended for a time.

Guatemala also reported more dead, bringing its death toll to 28, while the total rose to 13 in Honduras. At least eight people have also died in Nicaragua. No deaths were reported in Costa Rica, though dozens of families have been evacuated.

Rain was still falling in parts of the region. The weather has also hit southeastern Mexico, where swollen rivers have affected thousands of people, notably in Tabasco state.

At least four people died in Mexico earlier in the week when Category Two Hurricane Jova struck from the Pacific, forcing the country's busiest port to close.

(Additional reporting by Gustavo Palencia in Tegucigalpa, Mike McDonald in Guatemala City, Ivan Castro in Managua and Alex Leff in San Jose, writing by Dave Graham; editing by Todd Eastham)

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Thais count floods cost, Bangkok warned crisis not over

1 of 11. Workers move goods from their warehouse at a flooded area in Nonthaburi province, on the outskirts of Bangkok October 16, 2011.

Credit: Reuters/Chaiwat Subprasom

By Apornrath Phoonphongphiphat

BANGKOK | Tue Oct 18, 2011 12:32am EDT

BANGKOK (Reuters) - Thailand's cabinet met on Tuesday to discuss the mounting economic cost of floods that have killed 315 people, and residents of Bangkok were told not to drop their guard even if the immediate danger to the capital had passed.

Finance Minister Thirachai Phuvanatnaranubala has said the damage from flooding since July could be as high as 1.7 percent of gross domestic product (GDP) and ministers will discuss relief measures and extra government borrowing to pay for it.

Prime Minister Yingluck Shinawatra said on Monday spending on reconstruction could amount to more than 100 billion baht ($3.3 billion) after the worst floods in half a century damaged large areas of farmland and closed huge industrial estates.

The cabinet was to discuss a proposal to raise the budget deficit by 14 percent to 400 billion baht ($13 billion) for this fiscal year from October 1.

The cost could go far higher if Bangkok, which accounts for 41 percent of GDP, is hit by floods.

Monsoon rain, high tides and water flowing down from reservoirs in northern Thailand had threatened the capital at the weekend but its defensive system of dikes and canals held.

However, Bangkok Governor Sukhumbhand Paribatra warned the danger was not completely over and that districts in the north of the capital may still face problems over the next 48 hours.

"We don't want to cause any panic among Bangkokians," he told a news conference late on Monday. "However, if you want to move valuables or electrical equipment to higher ground for safety reasons, that would be good."

Residents have complained about contradictory noises from city and government officials, including an evacuation warning in a northern suburb last week that proved to be a false alarm.

There have been conflicting signals over the fate of the Nava Nakorn industrial estate north of Bangkok, which has 270 plants and about 270,000 workers, but the government told firms to halt operations on Monday as floodwater breached its walls.

At least six big estates have now closed, most of them in the central province of Ayutthaya.

HIGHER WAGE BILL

The government is pushing ahead with a big increase in the minimum wage despite the huge bill companies face to restart their operations once the waters subside.

Yingluck's Puea Thai Party had promised a minimum of 300 baht ($9.70) a day in its campaign for the July election that swept her to power, a commitment industry said would be ruinous and economists said would fuel inflation.

Government, employer and worker representatives came up with a compromise on Monday, agreeing to a big 40 percent rise that will still leave the minimum below 300 baht in most provinces, including Ayutthaya. The rise has also been pushed back to next April from January because of the flooding.

The 300 baht minimum will apply in Bangkok and six other well-off provinces, including the tourist island of Phuket.

That wage is five times higher than the minimum in Vietnam and 2.5-4.6 times that in Indonesia, according to Kasikorn Research Center. A rice-based meal costs about 37 baht from a Bangkok street-vendor.

The wage rise will add to the central bank's dilemma at its rate review on Wednesday. Core inflation is near 3 percent, the top of its target range, but the economy is under threat from both the floods and a slowdown in Western export markets.

The consensus view is that the Bank of Thailand will hold the policy rate at 3.50 percent.

"Before the floods, our economy was growing close to its potential. We have to look at how far monetary policy can be flexible," Governor Prasarn Trairatvorakul said on Monday after a meeting between officials and business leaders.

(Panarat Thepgumpanat; Writing by Alan Raybould; Editing by Paul Tait)

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BP gets $4 billion from Anadarko for oil spill costs

A shrimp boat trawls near healthy marsh, bayous and water ways east of the mouth of the Atchafalaya River near Morgan City, Louisiana April 20, 2011.

Credit: Reuters/Sean Gardner

By Tom Bergin and Moira Herbst

LONDON | Mon Oct 17, 2011 8:51pm EDT

LONDON (Reuters) - Anadarko Petroleum Corp will pay BP Plc $4 billion toward clean-up and victim compensation for the Gulf of Mexico oil spill. The amount is less than BP might have won in court, but it softens the blow of overall spill-related costs to the British group.

As part of the settlement announced on Monday, Anadarko also said it will no longer pursue allegations of gross negligence against BP. It is unclear what impact this development will have on the remainder of the morass of litigation pending in federal court in New Orleans, legal experts said.

Investors greeted the deal as good news for both companies. BP shares rose 2.2 percent in London and Anadarko shares closed 5.5 percent higher at $74.44 on the New York Stock Exchange.

"We maintain our view that the ultimate cost to BP could fall ... substantially below the cost inferred by the share price fall since the accident," said Richard Griffith, an oil analyst at Evolution Securities.

Anadarko, based in Woodlands, Texas, was a 25 percent partner in the doomed Macondo well. It sued BP in April, claiming that gross negligence by BP caused the blowout and saying that BP is responsible for economic losses from the incident. BP, in turn, invoiced Anadarko $6.1 billion for spill-related costs it calculated Anadarko owed.

The settlement announced on Monday is "favorable for both companies," BP Chief Executive Bob Dudley said.

Without a deal, Anadarko could have been on the hook for 25 percent of the cost of cleanup, compensating those affected, and any government fines. BP has said the total bill for the oil spill, including fines, will be $42 billion. This suggests Anadarko could have faced a total bill well above the $4 billion it agreed to pay.

It could only avoid this responsibility by proving in court that BP had been grossly negligent -- something that could have added around $18 billion to the total amount of fines BP faced. Fines for leaking oil into U.S. waters are assessed at $1,100 per barrel, or $4,300 if gross negligence is proven. The government has said the Macondo well leaked almost 5 million barrels into the sea.

Anadarko would still be liable for its share of any fines payable to the U.S. government, according to the deal.

Anadarko's $4 billion payment will be made in cash and paid into the victims' compensation fund BP established last year, Anadarko spokesman John Christiansen said.

On October 12, the U.S. offshore drilling regulator -- the Bureau of Ocean Energy Management, Regulation and Enforcement -- formally issued violation notices against BP, Transocean and Halliburton for their roles in the oil spill. BP received most of the 15 citations, ranging from failure to protect health and property to failing to keep the well under control. A report the previous month found BP solely responsible for 21 of 35 causes of the disaster.

BP has sued Transocean, the owner and operator of the Deepwater Horizon rig, Halliburton Co, which supplied cement to cap the well, and Cameron International Corp, which designed the blowout preventer, a device that was supposed to stop the surge of oil, to share the cost of the spill and cleanup.

These lawsuits are among hundreds of claims set to go to trial before a federal judge in New Orleans in February.

It is unclear what impact the Anadarko settlement could have on these disputes, legal experts said. "Perhaps (the deal) creates some momentum toward other settlements because it suggests BP is willing to resolve claims," said Howard Erichson, an expert in complex litigation and a professor of law at Fordham University. "But I'm not sure it gives Transocean or Halliburton any particular reason to revise whatever calculations they have made."

A Halliburton spokeswoman did not respond to a request for comment.

Transocean spokesman Lou Colasuonno said: "It is time for BP to step up and make good on its contractual responsibility to defend and indemnify its subcontractors."

If BP recoups cash from Transocean or Halliburton, it will pay a portion of this -- up to $1 billion -- to Anadarko under the terms of the deal announced on Monday.

In May, BP agreed to accept $1.1 billion from a third partner in Macondo, Mitsui & Co, to cover its 10 percent share of cleanup costs. The following month, Weatherford International Ltd, which provided equipment for the Macondo well, agreed to pay BP $75 million.

The case is In re: Oil Spill by the Oil Rig "Deepwater Horizon", U.S. District Court, Eastern District of Louisiana, No. 2:10-md-02179.

(Reporting by Tom Bergin and Moira Herbst; Editing by Andrew Callus, Tim Dobbyn and Matthew Lewis)

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Scarce resources, climate biggest threats to world health

An environmental activist watches a lumberjack saw a tree in Sumava National Park near the village of Modrava July 27, 2011.

Credit: Reuters/Petr Josek

By Nina Chestney

LONDON | Mon Oct 17, 2011 2:47pm EDT

LONDON (Reuters) - The Earth's natural resources like food, water and forests are being depleted at an alarming speed, causing hunger, conflict, social unrest and species extinction, experts at a climate and health conference in London warned Monday.

Increased hunger due to food yield changes will lead to malnutrition; water scarcity will deteriorate hygiene; pollution will weaken immune systems; and displacement and social disorder due to conflicts over water and land will increase the spread of infectious diseases, they said.

By 2050, there could be 70 million additional deaths in sub-Saharan Africa alone, said Tony McMichael, professor of population health at the Australian National University.

As mosquito species spread due to climate change, the transmission rate of diseases like malaria will increase, engulfing countries like Zimbabwe from 2025 to 2050.

An extra 21 million people in China could be at risk from the infectious disease schistosomiasis as global warming increases floods, enabling disease-carrying water snails to travel to new areas.

"Climate change will progressively weaken the Earth's life support mechanism," McMichael said. "Health is not just collateral damage on the side, the risk is central and represents a denouement of all the other effects of climate change."

The world's population is due to exceed 7 billion this month and is forecast to rise to over 10 billion by 2050, putting even more strain on global resources.

The effects of climate change will only exacerbate the problems, putting the health of ecosystems, animal species and humans in danger, the experts said.

EUROPE

Health effects will not just be felt in Africa or Asia -- Europe will also feel the consequences.

"The problem of over-consumption in high income countries has produced an ecological and financial debt," Ian Roberts, professor at the London School of Hygiene and Tropical Medicine, told Reuters.

"The biggest risk to human health is from the rise in fossil fuel use, causing cardiovascular disease, stroke and cancer," he added.

Europe will also be at risk from heat waves, floods and more infectious diseases as pests shift to northern latitudes, said Sari Kovats, lead author of the Europe chapter for the Intergovernmental Panel on Climate Change's (IPCC) fifth assessment report.

"The fact is, there is more evidence that diseases are moving north such as bluetongue," she told Reuters.

The IPCC's next report, which is due out in 2013-2014, will include chapters on human security and livelihoods and poverty for the first time to reflect the new raft of scientific evidence, she added.

Human health is not only at risk. Animal and plant species are also endangered.

"Many species are already facing a raft of pressures and climate change is creating a new range of additional problems," said Paul Pearce-Kelly, senior curator at London's Zoological Society.

Around 15 to 37 percent of over 6,000 species of amphibia are predicted to become extinct by 2100, he said.

In the Earth's history, there have been five mass extinctions, but there is now a 10,000-fold faster extinction rate than at any time on record.

"We are losing three species an hour, and this is before climate change is doing anything," said Hugh Montgomery, director at University College London's institute for human health and performance.

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Court rejects stay on wolf hunts in Idaho, Montana

By Laura Zuckerman

SALMON, Idaho | Tue Oct 18, 2011 8:08pm EDT

SALMON, Idaho (Reuters) - A federal court rejected a bid by conservationists for an immediate halt to wolf hunts in Idaho and Montana on Tuesday, but the judges said they would reconsider the request next month.

The Alliance for the Wild Rockies and others had asked the U.S. Ninth Circuit Court of Appeals for an emergency injunction on wolf hunts pending an appeal that seeks to restore Endangered Species Act protections to wolves in the two states.

Idaho is seeking to reduce its wolf population by about 80 percent and Montana is seeking to cull roughly 40 percent of its wolves, mostly through hunting. Conservationists said 200 wolves have already been killed this year in those states from a population estimated at between 1,300 and 1,600.

The conservationists had argued a stay was urgently needed because the states had sold nearly 37,000 permits for wolf hunts that allow high-powered rifles equipped with long-range scopes.

In an order denying the injunction, the court said it would take up the question of suspending wolf hunts next month during arguments in the appeal.

The U.S. Fish and Wildlife Service reintroduced fewer than 100 wolves to the Northern Rockies in the mid-1990s after hunting, trapping and poisoning campaigns pushed the creatures to the point of extinction.

The reintroduction happened over the protests of ranchers, who feared wolves would threaten livestock, and commercial outfitters, who blamed wolves for preying on prized game animals like elk.

The states say wolves are now thriving and should be hunted like other wildlife, and Congress in April approved a measure removing wolves from the list of threatened and endangered species in Idaho and Montana.

Conservationists are appealing an August decision by a federal judge that upheld that delisting. It was the first time an animal had been stripped of federal safeguards by congressional action rather than scientific review.

Wild Rockies Alliance head Michael Garrity said on Tuesday he was "cautiously optimistic" about the upcoming court hearing.

"But, unfortunately, this means wolves will be hunted and trapped in Idaho and hunted in Montana for at least another three weeks," he said.

Jon Hanian, spokesman for Idaho Governor C.L. "Butch" Otter, had said in an e-mail on Monday that Idaho had a well-established track record of successfully managing big-game predators like mountain lions.

"Idaho's plan for wolf management is just as responsible," he said.

(Editing by Dan Whitcomb and Cynthia Johnston)

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