Financial meltdown slams corn ethanol and threatens mass transit, but Big Oil still riding high

(Photo of ethanol plant from Flickr and and photographer freddthompson, actor, senator and presidential candidate)

Weekly Angst: Because of the financial meltdown, ethanol companies are struggling and some are going under. Caught between corn contracts signed last summer when prices were sky-high and lower fuel prices, and with credit hard to come by, businesses are seeing the ethanol bubble of the past year burst. Investors have lost billions. VeraSun Energy, for example, expects to lose up to $103 million this quarter. Its stock is down 90% from its peak earlier this year. And ethanol companies in Kansas and Ohio declared bankruptcy last week. The Agriculture Department is considering loan guarantees to keep ethanol businesses afloat.

Mass transit hits trouble
Mass Transit agencies are also caught in the crunch. They face having to pay banks billions as old financing deals fall apart. The problem was triggered by the failure of insurance giant AIG, which guaranteed deals between the agencies and banks. Because of long-standing agreements to give banks tax shelters by selling them rail cars and then leasing them back, some 30 mass transit agencies around the country are now in danger of having to pay back their loans all at once. Washington, D.C.’s Metropolitan Area Transit Authority is the first to be hit. KBC Group of Belgium wants $43 million by next week. The feds may have to get in the middle of this one too – to keep the trains running.

Other repercussions include cancellation of a coal-to-liquid joint venture between Consolidated Energy and Synthetic Energy Systems and the delay of a SunCor Energy oil sands project in Canada. (No tears shed over those).

Major oil companies in good shape
So how is the meltdown affecting Big Oil? With prices dropping rapidly you might think they’re feeling the pain. But apparently not. With record profits last year, they have reduced their debt and are cash fat. So now they can buy up distressed smaller rivals and make deals with resource-heavy countries. Production may be down, but refining should be profitable this year. And they expect less pressure to pass windfall profits taxes. So lower prices and lower demand don’t really bother them. (No one ever said life is fair.)

On the bright side
The economic downturn could benefit green technology, though. It could give government a historic opportunity to climate-proof its infrastructure as part of a public works effort to generate jobs. This may translate into an investment opportunity, says a recent report from Deutsche Bank. The International Energy Agency has called for a $45 trillion investment in climate related technology by 2050. And Deutsche Bank says renewable energy investments have more promise in the long term than tradition energy sources.

At the same time, venture capital continues to flow into Silicon Valley and California in general. VC investments in energy and utilities were up in the 3rd quarter 90% over the same period last year, as investors pulled back from other sectors like information technology, media and financial services. Clean tech reported a record $1.08 billion in investments, most of it going to solar. In the Bay Area, which includes Silicon Valley, overall VC was up 22%, the highest single-quarter total since 2001. One benefit of green technology is most of it is tied to government policy so it’s not as vulnerable to swings in the market.
Observers are waiting to see the results of this quarter, however, anticipating that falling oil and carbon prices could have an impact. VC fell in the third quarter in other parts of the country.

And Neal Dikeman, of Jane Capital Partners, warned that a prolonged financial crisis could have an adverse effect on a 2012 post-Kyoto international agreement to fight global warming, by either delaying or weakening it.

For additional comments on the financial crisis’ impact on climate change see my earlier post.

(Sources: Greenwire, Washington Post, Wall Street Journal)

10 reasons why Obama is best on global warming

(Photo of Barack Obama by Peter Holderness/Medill News Service)

Weekly Angst: Saving the planet is taking a back seat to the financial crisis right now. But to many of us, climate change remains the top concern for the next president of the United States, because we’re running out of time to stop the catastrophic results of a warming planet. It’s getting so bad that Al Gore, a former vice president, is suggesting civil disobedience.

Unfortunately, when climate change does come up these days, it has morphed into talk about offshore drilling and achieving independence from foreign oil, which is the way John McCain has framed it. The maverick who championed climate change legislation with his buddy Joe Lieberman in 2003 and 2005 has, in this campaign, shifted from concern about greenhouse gases to concern about high gas prices and getting off foreign oil. That means American oil is just fine with him. In fact, the more the better.

The League of Conservation Voters, Sierra Club and Environment America, the three major environmental organizations that endorse candidates, all jumped on the Barack Obama bandwagon early on, because he so clearly will lead the nation to a better place on global warming. As Environment America said, McCain is not the right president to reverse 8 years of the anti-environment Bush Administration.

Talking points
Here are 10 top reasons why Obama is the better candidate on global warming:

1. Obama favors cutting greenhouse gases as much as scientists say we should. His goal is an 80% reduction (from 1990 levels) by 2050. He doesn’t try to second-guess science. McCain’s goal is 60%.
2. Obama has a much better voting record. On the League of Conservation Voters scorecard, Obama’s lifetime record is 86%. McCain’s is 24. During the last 2 years, McCain has missed every important environmental vote, including 2 on renewable energy where a yea vote from him could have made the difference. He deliberately missed all 8 tries to extend the renewable energy tax credits.
3. Obama favors an RES and subsidies for renewable energy. He has called for a renewable electricity standard of 25% by 2025 and for investing $150 billion in renewable energy. McCain opposes RES, as well as subsidies to alternative energies like solar and wind, preferring to let the market work unfettered. Though he seems to favor incentives for nuclear power.
4. Obama is much more cautious about nuclear power. He says it may need to be part of the mix, but safety and waste storage problems must be resolved first. McCain, on the other hand, makes nuclear power a major part of his energy portfolio, calling for 45 new nuclear plants by 2030, and 100 eventually.
5. Obama wants all credits in a cap-and-trade system to be auctioned. In other words, polluters must pay for their allowances. McCain says permits would eventually be auctioned, but should mostly be given free at first, and he favors polluters being able to bank or borrow credits based on the economy.
6. Obama wants to double the fuel efficiency of autos in 18 years. McCain, who missed the corporate average fuel economy (CAFE) vote of 2007, says he would enforce the new standard of 35 mpg by 2020 but isn’t looking to increase it. Obama voted for the CAFE bill.
7. Obama says offshore drilling will do little to help gasoline prices and was for the ban. He’s since softened his stance, saying he might accept some offshore drilling if it would help get other things he wants, like RES. McCain strongly favors drilling offshore, saying it will help solve the problems of high gas prices and dependence on foreign oil. After McCain announced this new position favoring offshore drilling, and became a cheerleader for the cause, campaign donations from oil and gas went up more than double, or by more than a million dollars.
8. Obama took a stand against a summer repeal of the gas tax, when McCain and Hillary Clinton called for one. Obama called it a gimmick that would not help lower prices.
9. Obama favors a windfall profits tax on big oil companies. He would like to see that money go to people who are struggling to pay for gas. McCain is against a windfall profits tax.
10. Obama picked Sen. Joe Biden as is running mate. Biden has an 83% lifetime score with LCV and proposed a bill in 1986 to deal with global warming. McCain picked Alaska Gov. Sarah Palin, who has expressed doubt about the human role in causing climate change, filed suit to de-list the polar bear as endangered, and favors drilling in ANWR.
For more on the candidates' environmental views, go to News21 Politics and the Environment, and click on Charging Up the Elections. News 21 is a summer project of Carnegie-Knight fellows at Northwestern University. (In the interest of full disclosure, I was one of the faculty members on the project.)

(Sources: League of Conservation Voters, Sierra Club, Environment America, barackobama.com, johnmccain.com, news21project.org, New York Times, salon.com)