Tag Archives: carbon
Carbon’s Unburnable Truth
21/03/13 The coal industry has made a feeble attempt to pop the concept of the carbon bubble and its investment consequences. The Australian Coal Association commissioned Alan Oxley to examine The Climate Institute and Carbon Tracker’s recent research into Australia’s Unburnable Carbon. Oxley attacked the carbon bubble concept in the AFR yesterday. If you accept the science of climate change, the carbon bubble concept is based on a simple unburnable truth. There is a limited budget for the heat trapping greenhouse gases we can put in the atmosphere to avoid global warming goals. Our research, and that of the International Energy Agency amongst others, examines the budget in terms of the goal that Australia, China and the US amongst over 190 other countries have agreed upon, of avoiding global warming of two degrees. This research is not the realm of radicals or “extremists” as the Minerals Council of Australia would have it. Two years ago the now CEO of Anglo American Mark Cutifani said “… the global carbon budget makes simple logical sense.” Investors like Warren Buffett and Jeremy Grantham have embraced the concept and begun applying it. Just last week investors representing $22.5 trillion held an historic summit in Hong Kong focused on their role in avoiding the economic costs of dangerous climate change and launched a new global low carbon investment register. Central to Oxley’s arguments is that national governments are unable or incapable of organising to avoid two degree warming and that investors should stick to their knitting and avoid public interest goals not supported by policy. In Oxley’s report he makes the old short-termist argument that the job of business is to maximise profits within current policy. This ignores the very real interest that investors such as superannuation and insurance funds should have, and are beginning to take, in the consequence of their investments. These funds are both legally obliged to manage funds for long term outcomes and invest in a range of asset classes that will take, and arguably are already taking, climate hits. They are awaking to the fact that their old ways of investing actually add to the risks they are now attempting to manage. Limiting average global warming to two degrees above pre-industrial levels is an extremely challenging task especially as there is already almost one degree warming with 1.4 degrees locked in by lag effects. There are however a number of social, political and technological scenarios where effective action to avoid two degrees warming will be taken. We don’t pretend to predict the exact course, but the International Monetary Fund and the World Bank – hardly a bunch of left-wing greenie extremists – are warning of the economic consequences if we don’t. Global leaders at the G8 concluded its meeting two days ago with a communique restating their commitment to this goal noting “climate change is one of the foremost challenges for our future economic growth and wellbeing.” The history of financial bubbles, such as the dot.com and sub-prime mortgage bubbles, is based on the assumption of never ending demand. History has shown those assumptions to be high risk indeed. All bubbles are theories until they crash. This bubble rests on very solid foundations of basic carbon physics and budgets. Contrary to Oxley’s claim yesterday, nowhere does the IEA say there is “little risk” of stranded assets for the coal industry. The IEA report does say that, for its two degree scenario, “more than two thirds of current proven fossil-fuel reserves are not commercialised unless carbon capture and storage is widely deployed.” The prospects of that are not good at the moment – the prospects of a bubble are therefore real, exposing as bizarre the report’s claims that a mining company’s reserves of fossil fuels are disconnected to its valuation by the market. It should be noted that The Climate Institute can hardly by labelled as ignoring the importance of carbon capture and storage. We have repeatedly called on industry and government to speed up the technology’s deployment, and have been public on why Australia and the world should pursue it. The ACA on the other hand appears in retreat, turning its billion dollar Coal21 fund, previously focused on low emissions technology into a vast slush fund now also able to “promote the use of coal.” Finally, our analysis challenges current valuation methods but does not, as Oxley’s report falsely asserts, call for full divestment. Our call is for far greater consideration and disclosure of carbon and climate risks from investors, as well as greater investment in low carbon solutions. In that we are joining and being joined by a swelling rank of NGOs investors and regulators. Denying the concept of the carbon budget is like denying climate science. That is carbon’s unburnable truth. This article was originally published in The Australian Financial Review (online). Republished with permission of the author. John Connor is CEO of The Climate Institute. Read more: http://www.businesss…h#ixzz2WrSQmCwt Continue reading
UN Carbon Market Health Depends On Global Ambition – JI Chair
20 June 2013, 3:49 pm By John Parnell – See more at: http://www.rtcc.org/…h.60MVdq16.dpuf Fixing carbon markets and mechanisms will do nothing to reduce emissions without ambitious climate policies from governments a senior climate diplomat has warned. Derrick Oderson, chair of the Joint Implementation Supervisory Committee (JISC), said fixing the Joint Implementation (JI) programme was not the real long term goal. “The JI will be put to good use only when countries do what’s needed with respect to commitments to reduce. This is an extremely urgent matter, not to save the JI, but to avoid calamity,” he told RTCC in an emailed interview. The JI, part of the Kyoto Protocol, allows industrialised nations to invest in low carbon projects in economies in transition. Low carbon prices, partly a result of low greenhouse gas reduction targets, have damaged the scheme’s health. Oderson has been overseeing a review of the JI to get it back on its feet and is confident it will have a role to play when a new, global treaty replaces Kyoto in 2020. Read the full interview with Oderson below: Derrick Oderson, chair of the Joint Implementation Supervisory Committee (Source: UNFCCC) What effect has the new extended but streamlined Kyoto Protocol had on the JI in the 6 months since Doha finished? Agreeing a second commitment period to the Kyoto Protocol was a key success of Doha. In the six months since COP 18, the JI Supervisory Committee has been working to fine-tune its recommendations to the Parties on how to improve the JI for a stronger future. This JISC is hopeful that these recommendations will be adopted in Warsaw at the end of the year. That said, without increased ambition to reduce greenhouse gas emissions, mechanisms like JI have a limited role. With ambitious targets, mechanisms like JI become indispensable. It’s as simple as that. Low carbon prices and imbalances in supply and demand are being addressed in carbon markets, what is the best course of action in your opinion to address low prices in offset mechanisms? Again, countries need to increase their level of ambition to reduce greenhouse gas emissions. If countries committed to the level of abatement that is required to address climate change, then demand for tools like JI – and the clean development mechanism, and other mechanisms and approaches – would be immediate and substantial. Given the types of projects that JI invests in, energy efficiency for example, do you think it can argue more than others that participation has economic advantages? I think the strength of JI is that it can be used by countries to focus investment on whatever sector makes sense. However, the mechanism’s value is tied to countries’ efforts to reduce emissions. With prices for units so low, and emission reduction ambition well below what is needed to address climate change, the incentive is just not there. How important is ambitious climate action by governments in making tools like the JI effective? JI will be put to good use only when countries do what’s needed with respect to commitments to reduce. This is an extremely urgent matter, not to save the JI, but to avoid calamity. The JI exists, above all, as a mechanism to support least-cost options for climate change mitigation. Climate change is not going away. It is the JISC’s job to ensure that JI is there for countries when they do turn to reach for it. With the benefit of hindsight, what would change about the JI if you could redesign it? Joint implementation is a fully functioning tool that countries took a great deal of trouble to create. JI has shown that it works, but it has also shown that it could be improved. The JISC has invested a lot of effort into developing recommendations to do just that. The key feature of our recommendations is creating a single track for the oversight of JI projects, administered by an international body. Only then will people have the level of comfort in the mechanism that is required, with respect to the reliability of oversight and the quality of the emission reductions produced. The recommendations also include creating an aligned or unified accreditation process with the CDM, an appeals procedure and clear additionality requirements amongst other things. The full recommendations are on the UNFCCC website (JISC 30, Annex 1). How do you see the future of the JI in the new climate regime? National governments and the private sector see value in the JI mechanism. It works, helping countries to focus and incentivize investment. Parties could quite easily agree to the needed improvements in JI – these have already been before them for consideration – and they could (and should) come up with the bridging decisions that would carry JI to the next phase of international action. The challenge in coming up with recommendations for the future has been to devise a mechanism that has the benefits of flexibility and strong national involvement, but which can ensure a healthy, useful measure of broad, independent oversight. The JISC thinks it has done this in its recommendations for revisions to the JI guidelines. Continue reading
[Invest Korea] New Tax Rules Beneficial for Foreign Investors
Friday, June 14th, 2013 KOREA IT TIMES (INFO@KOREAITTIMES.COM) This month we present Part II of our two-part series on Korea’s amended Presidential Decree under the Law for Coordination of International Tax Affairs and other relevant tax laws. Below we look at important tax regulation changes providing foreign investors with advantageous effects. Background In order to provide better conditions for investing in Korea, the Korean government amended some provisions of the Enforcement Decree of Corporate Income Tax Act and the Enforcement Decree of Special Tax Treatment Control Law early this year. Related tax incentives encompass those relating to not only foreign direct investment but also investments through domestic funds or foreign funds, considering that the portion of foreign investment through an investment fund or a private equity fund is ever growing. 1. An Exception to the General Tax Treatment Toward a Limited Partner’s Income of a Domestic Private Equity Fund Prior to the amendment, if foreign investors invested in Korean shares through a Korean private equity fund (PEF), all income allocated to limited partners (including the foreign pension fund) by the Korean PEF was classified as dividends; therefore, regardless of the character of the underlying income, all distributed income by the Korean PEF was subject to withholding at 22 percent for dividends (or a reduced rate under an applicable tax treaty). Because foreign private equity investors, including foreign pension funds, usually realized investment profits in the form of capital gains, rather than dividends, such taxation had the effect of depriving investors investing through a Korean PEF of the opportunity to claim a capital gains tax exemption under an applicable treaty. Effective 2013, however, the amended tax law allows look-through treatment to determine the character of income of a Korean PEF allocated to certain foreign pension funds, thereby affording them the opportunity to claim tax treaty exemptions. As a result of the amended rule, such income allocated to eligible foreign pension funds will be classified as interest, dividends or capital gains from alienation of shares depending on the character of the underlying income recognized by the PEF. 2. Special Tax Treatment for Foreign Investment Entities Under the past tax regulation, certain domestic joint investment entities such as domestic private equity funds can elect to be treated as a partnership, which is a quasi pass-through entity subject to no entitylevel tax. On the other hand, the permanent establishment of foreign corporations is not entitled to this partnership election and was subject to corporate income tax of maximum 24.2 percent at the entity level. To eliminate this tax inequity and attract foreign investments, the lawmakers expanded the special partnership taxation election regime to include foreign eligible entities carrying on a business in Korea through a permanent establishment. According to the new rule, there is no partnership-level tax if the eligible foreign entity with a Korean permanent establishment elects to be treated as the partnership. Instead, limited partners, as passive investors in such foreign entity, are subject to Korean withholding tax with respect to their share of Korean income as dividend at the rate of 22 percent. However, a reduced treaty rate ranging from 5 percent to 16.5 percent should be available depending on the residency of the limited partner. After a one-year grace period, the proposed change will be applicable to taxable years commencing on or after January 1, 2014. 3. Amendments to Foreign Direct Investment Incentive Regime The foreign investment zone regime’s prescription of eligible businesses was expanded to include information technology services from February 15. Until the end of last year, the following businesses were eligible for the incentives: (i) manufacturing with a minimum investment amount of USD 30 million; (ii) tourism with USD 20 million; (iii) logistics services with USD 10 million; and (iv) research and development with USD 2 million. However, the amended rules include computer programming, system integration and management services, data processing/ hosting services and other related information services with a minimum investment amount of USD 30 million. Source : Invest Korea Continue reading
