Energy and Climate

Between 2001 and 2006, production of compact fluorescent lamps (CFLs) in China-which accounts for roughly 85 percent of global output-tripled from 750 million to 2.4 billion units.¹ (See Figure 1.) The total number of CFLs in use globally nearly doubled between 2001 and 2003 alone, growing from an esti­mated 1.8 billion to 3.5 billion units.²

Reliable global data on CFL use since 2003 do not exist, but sales growth in individual countries strongly indicates that total usage continues to increase at a fast pace. Between 2000 and 2004, for example, estimated sales in the United States grew 343 percent-from 21 million to 93 million-and by 2007 they reached 397 million.³ CFL sales in Western Europe grew 34 percent between 2000 and 2004, from 173 million to 232 million units, and in Eastern Europe they rose 143 percent, from 23 million to 56 million units.⁴ (See Figure 2 and Table 1.)

The lightbulb market share for CFLs varies widely among leading industrial nations. In the United States, CFLs accounted for more than 20 percent of sales in 2007, a strong growth from less than 1 percent before 2001.⁵ But other wealthy nations have shown much higher CFL use rates for quite some time, including 80 percent of households in Japan and 50 percent in Germany (in 1996 in both cases).⁶ Many developing countries have shown strong CFL market share in recent years as well: 14 percent of sales in China in 2003, for instance, and 17 percent in Brazil in 2002.⁷

CFLs are far more efficient than traditional incandescent lightbulbs because they produce less heat to create light, using about 75 percent less energy to produce the same amount of light and lasting up to 10 times longer.⁸ These energy savings translate into monetary savings. For example, a single CFL bulb can save up to $30 in energy costs in the United States over its lifetime; savings can be even greater where electricity costs are higher.⁹ Incandescent bulbs burn out after around 1,000 hours of use while CFLs can last for up to 10,000 hours, lowering their cost even without taking energy savings into account.¹⁰

Energy savings also mean a reduction in greenhouse gases. Electric lighting consumes 19 percent of total electricity grid production and is responsible for more than 1,500 million tons of carbon dioxide (CO₂) per year, the equivalent of the emissions from more than half of the world's light passenger vehicles.¹¹ Replacing
all the inefficient incandescent lightbulbs with CFLs in the United States alone could prevent 158 million tons of CO₂ emissions according to one lighting company, the equivalent of taking more than 30 million cars off the road.¹² Sub­stituting CFLs under a global scenario that ­minimizes costs would reduce lighting energy demand by nearly 40 percent and save 900 million tons of CO₂ a year by 2030, with a cumu­lative savings by then totaling 16.6 billion tons-more than twice the carbon dioxide released in the United States in 2006.¹³

A large part of the increase in CFL sales has been due to government action. In 2007, Aus­tralia became the first country to ban the sale of incandescent bulbs, and sales there will be phased out entirely by 2009.¹⁴ The European Union, Ireland, and Canada have since announced plans to ban incandescent bulbs.¹⁵ The United States has also passed legislation increasing the efficiency standard required for lightbulbs, which will effectively phase out incandes­cents.¹⁶ In total, more than 40 countries have announced plans to follow suit.¹⁷

Retail giant Wal-Mart has also promoted the use of CFLs by raising awareness, and the company's action is driving down prices. In November 2006 Wal-Mart announced a goal of selling 100 million CFL units by the end of 2007-which it accomplished by October that year.¹⁸

Despite their many benefits, CFLs have some problems, including quality control at factories in developing countries. To address this issue, the Efficient Lighting Initiative (ELI), launched in 1999 by the International Finance Corporation and the Global Environment Facility, created a certification mechanism for high-­quality products.¹⁹ ELI allows manufacturers ­to voluntarily have their products tested to see if they meet a technical standard for quality. Those that pass receive ELI's "seal of approval," a well-known international standard, and can qualify for promotions and procurement programs.²⁰

Modern CFLs also contain about 4 milli­grams of mercury, a dangerous neurotoxin.²¹ This is less than 1 percent as much mercury as found in old thermometers, but it still means broken bulbs should be treated with care and discarded bulbs should be recycled instead of thrown out.²² And for consumers who rely on coal-fired electricity, one of the largest sources of mercury emissions, the increased energy efficiency of these bulbs means that over its lifetime a CFL-even if it is broken or thrown away-will release significantly less mercury into the environment than an incandescent bulb would.²³

Because of these issues with CFLs, many scientists and consumers have looked toward light-emitting diodes (LEDs) as a better source of energy-efficient lighting. LEDs are semiconductor pinpoint lights that when clustered together can function as a lightbulb. They are more than twice as efficient as CFLs and can last five times as long.²⁴ However, LEDs also have several drawbacks, such as high cost (up to $60 per bulb), a harsh white light that con­sumers find unappealing, and a more focused light stream that is not well suited for ambient lighting.²⁵ These problems have prevented LEDs from catching on with consumers. But as they are improved through new research and development, LEDs could become the next genera­tion of energy-efficient lighting.²⁶ Recent market projections indicate that LEDs could become cost-competitive with CFLs in as little as five years.²⁷

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In 2007, there were 874 weather-related disas­ters worldwide, a 13-percent increase over 2006 and the highest number since the systematic recording of natural perils began in 1974.¹ Weather-related disasters around the world have been on the rise for decades (see Figure 1): on average, 300 events were recorded every year in the 1980s, 480 events in the 1990s, and 620 events in the last 10 years.²

Weather-related disasters can be divided into meteorological, hydrological, and climatological events.³ The category of meteorological events includes tropical cyclones (hurricanes, typhoons, cyclones), extratropical cyclones (winter storms), and local storms (severe storms, thunderstorms, hailstorms, snow­storms, and tornadoes). Hydrological events include floods (general floods, flash floods, storm surges/coastal floods) and wet mass movements (rockfalls, landslides, avalanches, subsidence). And climatological events include extreme temperatures (heat waves, cold waves, extreme winter conditions), droughts, and wildfires (forest fires, bush/brush fires, scrub/grassland fires, urban fires).⁴

In 2007, weather-related disasters accounted for 91 percent of all natural disasters, a broader classification that also includes earthquakes, tsunamis, volcanic eruptions, and dry mass movements.⁵ About 81 percent of economic losses from natural catastrophes and 97 percent of insured losses resulted from weather-related disasters.⁶ And all six "great natural disasters" in 2007-three storms and three floods-were weather-related.⁷ A "great natural disaster" occurs if the affected region's ability to help itself is overstretched and supraregional or international assistance is required. As a rule, this is the case when there are thousands of fatalities, when hundreds of thousands of people are made homeless, or when the overall losses or the insured losses reach exceptional orders of magnitude.

Economic losses from weather-related disasters totaled about $69 billion in 2007, an increase of 36 percent over the figure in 2006.⁸ It is worth noting, however, that losses in 2006 were unusually low in comparison with losses in 2004 ($108 billion) and 2005 ($214 billion), when the hurricane seasons caused extraor­din­arily high economic and insured losses.⁹ (See Figure 2.)

Fatalities due to weather-related disasters in 2007 (at 15,295) accounted for 95 percent of the deaths in all natural disasters.¹⁰ This was an increase of 14 percent over fatalities in 2006.¹¹ More than half of the fatalities worldwide were caused by floods, 3 percent were from wet mass movements, 39 percent occurred in storm events, and 5 percent were during climatological events like extreme temperatures and wildfires.¹² (See Figure 3.)

The catastrophes with the greatest human tolls in 2007 occurred in developing and emerging countries. Storms, floods, and landslides in various parts of Asia caused more than 11,000 deaths, with some 3,300 attributable just to Cyclone Sidr, which struck Bangladesh in November.¹³ In June, Cyclone Gonu crossed the Arabian Sea to Oman. It was the most intense storm ever recorded in the Arabian Sea and the heaviest tropical cyclone with a track leading into the Gulf of Oman.¹⁴

The number of named storms in the 2007 hurricane season (15) was much higher than the long-term climatological average of 10.6 named storms in 1950-2006 and roughly equal to the average of the current Atlantic warm phases.¹⁵ Nevertheless, as only two of last year's hurricanes (Dean and Felix) were classified as intense storms, the intensity of the 2007 season was below the long-term average. At $60 mil­lion, economic losses in the United States for this hurricane season were far below average.¹⁶

But the United States suffered particularly from forest fires and heat waves in 2007. In California, hundreds of destructive wildland fires occurred from late October to early Novem­ber.¹⁷ Economic losses rose to $2.7 billion, while insured losses totaled $2.3 billion.¹⁸ In August, central and southeastern parts of the United States were hit by a severe heat wave. It was the second warmest August since recording began 113 years ago.¹⁹

In November, the Mexican state of Tabasco and large parts of Chiapas suffered their most devastating floods in 50 years.²⁰ The Mexican authorities declared a state of emergency. About a million people were made homeless and lost all their possessions.²¹

Europe was also hit by natural catastrophes. Winter Storm Kyrill in January and two flood events in the United Kingdom in the summer were classified as "great natural disasters." Economic losses for these events were $18 billion and insured losses $12 billion.²² Very high temperatures of up to 45 degrees Celsius (113 degrees Fahrenheit) and dryness for several months occurred in western Russia and southeastern Europe during the summer. Greece was hit particularly hard by forest fires. Economic losses there reached $2 billion, the highest figure in Europe for decades.²³

The main drivers for the recent increase in weather-related disasters and related global losses are socioeconomic factors and the changing patterns of extreme events.²⁴ The socioeconomic factors are tied to the rise in population, a better standard of living, the concentration of people and values in large urban settings, and the settlement and industrialization of regions with extremely high exposure levels.²⁵ Cities, metropolitan areas, and mega­cities are very vulnerable to natural catas­trophes and especially to weather-related disasters. More than half of the world will be living in urban areas by the end of 2008.²⁶ And the urban population of developing and emerging countries is rising at an unprecedented rate. This is particularly noteworthy in Africa and Asia, where the urban population is expected to double between 2000 and 2030.²⁷

The Fourth Assessment Report of the Intergovernmental Panel on Climate Change emphasizes the link between global warming and the significant likelihood of an increasing frequency and intensity of extreme weather events.²⁸ It is expected, with a more than 66 percent proba­bility, that climate change will lead to warmer (and fewer cold) days and nights over land areas, more heat waves, heavier precipitation, and more areas affected by droughts and more-intense tropical cyclones-all of which could help increase the number of catastrophic weather events.²⁹

Distribution of the impacts of weather-related disasters depends to a large degree on economic development in a country. Between 1980 and 2007, some 46 percent of all natural catastrophes but only 8 percent of the fatalities occurred in high-income countries.³⁰ Thus, 54 percent of the events hit middle-income and low-income countries, which suffered 92 per­cent of the fatalities.³¹ Insurance penetration also depends on the development of the econ­omy. Countries with a very low insurance penetration per capita are often low-income or lower-middle-income countries.³² When weather-related disasters occur, international aid must be funded in an appropriate way for the countries involved. Protection against losses caused by disasters can be realized by such mechanisms as public-private partnerships for governments and micro-insurance solutions for private households.

The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is one example of a public-private partnership that has proved highly successful. Founded in 2006 as an initiative of the World Bank, CCRIF offers 16 Caribbean countries financial assistance in the event of hurri­canes and earthquakes.³³ Its purpose is to provide governments with index-based insurance against the losses caused by natural disasters. Private households can benefit from the implementation of micro-insurance solutions-one of several instruments designed to help people handle their personal risks a little better.

Petra Löw is a geographer and a NatCat analyst at the Munich Reinsurance Company.

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In 2007, carbon emissions from fossil fuel combustion worldwide reached an estimated 8.2 billion tons, which was 2.8 percent more than in 2006-and 22 percent above the total in 2000.¹ The United States and Europe accounted for roughly 4 and 3 percent, respectively, of the growth during this decade.² India contributed 8 percent, and China, a staggering 57 percent.³ Despite the rapid increase, China's 18.3 share of global fossil fuel emissions remained slightly behind the U.S. share (19.5 percent).⁴ Per capita emissions in the developing world remain well below those in industrial countries.⁵ (See Figure 1 and Table 1.)

Coal, oil, and natural gas are burned to produce electricity, to power engines, and to feed industrial processes. When burned, the carbon contained in these fuels is converted to carbon dioxide (CO2), which is a natural component of Earth's atmosphere. CO2 traps heat that would otherwise radiate into outer space, thereby keeping Earth's temperature within a habitable range.⁶ But emissions from human activities have greatly increased the stock of carbon dioxide in the atmosphere. The additional gas is trapping more heat, raising the average global temperature and changing the climate.⁷ Fossil fuels account for about 74 percent of all CO2 emissions and for roughly 57 percent of all greenhouse gas emissions.⁸ (See Figure 2.)

The combustion of coal typically releases 1.8 times as much carbon dioxide per unit of energy as natural gas does and 1.3 times as much as oil.⁹ But since more oil than coal is used, total emissions from these two fossil fuels are similar.¹⁰

Carbon-to-energy ratios vary dramatically, depending on the methods used to produce the fuels. Liquid fuels derived from coal have nearly twice the global warming impact as equivalent fuels derived from petroleum.¹¹ Similarly, producing oil from Canada's tar sands emits up to three times as much carbon as producing conventional oil, due to the energy-intensive extraction and refinement.¹² As conventional fossil fuels become scarcer, use of these carbon-intensive fuels is growing. Production of oil from Canada's tar sands reached 1 million barrels a day in 2004 and may reach 3-4 million barrels a day by 2015.¹³

Consumption of fossil fuels by the world's wealthiest countries is largely responsible for elevating atmospheric CO2 levels to the current 384 parts per million, an increase of 37 percent over the pre-industrial level.¹⁴ But today the rapid, coal-dependent development of China and India is the most important driver of growth in global carbon dioxide emissions. Coal pro­vides 70 percent of commercial energy in China and 56 percent in India.¹⁵ Recent trends suggest that most of the growth in emissions from human activities will come from the developing world. In fact, based on the average growth rates for the past five years (see Figure 3), China's emissions from fossil fuels will surpass those of the United States sometime in 2008.¹⁶ Thus the key to stabilizing the global climate will be moving industrial nations to a low-carbon energy economy while ensuring that developing countries can leapfrog to cleaner development paths.

The potential for de-carbonizing modern economies is huge. Energy efficiency, wind, solar, and hydro power are carbon-free energy alternatives that are available today.¹⁷ Germany, for example, already gets 14 percent of its electricity from renewable sources and hopes to increase this to 45 percent by 2030.¹⁸ A 2007 study by McKinsey & Company suggested that by 2030 the United States could affordably reduce greenhouse gas emissions to 28 percent below 2005 levels using a mix of measures, including energy efficiency, renewable energy, and carbon capture and storage.¹⁹

Action at the diplomatic and national policy levels to limit carbon emissions continues to advance. In December 2007, the 192 parties to the United Nations Framework Convention on Climate Change agreed to establish a new global climate change agreement by 2009.²⁰ This will build on the existing Kyoto Protocol, which commits industrial countries to reduce green­house gas emissions to 6-8 percent below their 1990 levels.²¹ Under the existing agreement, emission targets have not been adopted by dev­eloping countries or the United States, and the initial commitment period is set to expire in 2012.²² These issues need to be addressed before the conclusion of the negotiations in 2009.

To meet its commitments in the most cost-effective manner, the European Union (EU) established a carbon market known as the Emissions Trading Scheme (ETS). By establishing a carbon cap and associated carbon price, the ETS has succeeded in reducing emissions by some 5 percent.²³ The cap has been lowered to nearly 6 percent below 2005 levels for the 2008-12 period.²⁴ And last year the EU committed to reducing greenhouse gas emissions to 20 per­cent below 1990 levels by 2020.²⁵ If pursued by the most cost-effective policy approaches (including the ETS), these goals could be achieved at an estimated cost of about 0.6 percent of gross regional product in 2020.²⁶

The U.S. Congress has struggled to formulate a similar nationwide climate change policy, and the country will not see climate change legislation before 2009, under a new administration.²⁷ Despite the delay at the national level, 19 states now have greenhouse gas emission reduction targets.²⁸ California plans to cut its emissions to 1990 levels by 2020 through sharp increases in energy efficiency and by using renewable sources to supply 33 percent of the state's electricity by 2030.²⁹

In spite of relatively low emissions per per­son, the developing world has also begun to act to mitigate climate change. China's current Five-Year Plan includes a target of reducing the energy intensity of gross domestic product 20 percent below the 2005 level by 2010.³⁰ China has also adopted a plan to satisfy 10 percent of energy demand through renewables by 2010 and then 15 percent by 2020.³¹ Costa Rica has joined Iceland, Norway, and New Zealand in a pledge to achieve zero net carbon emissions.³² Although Costa Rica's emissions are only a tiny fraction of the global total, its commitment to carbon neutrality may serve as a wake-up call to wealthier countries.

According to a 2007 U.N. report, getting emissions back to today's levels by 2030 would require a global investment of about $200 billion annually, or 0.3-0.5 percent of the gross world product (GWP).³³ But achieving the reductions that scientists estimate are needed to limit global warming to 2 degrees Celsius will require bringing global emissions at least 50 percent below 2000 levels by 2050.³⁴ Economist Nicholas Stern has recently suggested that the dangers of climate change warrant an even greater investment-2 percent of GWP.³⁵ Though this is a massive sum, Stern's 2007 report, The Economics of Climate Change, concludes that the price of doing nothing to stop runaway carbon emis­sions could be as much as 5-20 percent of GWP.³⁶

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Global demand for oil reached 85.7 million barrels per day in 2007, a modest 1-percent increase over the 84.9 million barrels consumed daily in 2006.¹ (See Figure 1.) This marked the third straight year in which oil demand grew at an annual rate of less than 2 percent.² Despite the slow growth in demand, oil prices rose from just above $50 in January to near $100 at year’s end—close to the all-time inflation-adjusted price record that was reached in the early 1980s.³

The United States continued unchallenged as the world’s single largest oil-consuming nation in 2007, using almost one fourth of the global total at a rate of 20.7 million barrels daily.⁴ But U.S. oil consumption was virtually unchanged for the third year in a row, as rising oil prices discouraged demand despite three years of steady economic growth.⁵

China increased its petroleum consumption by 5.5 percent in 2007, up from 7.3 million barrels per day in 2006 to 7.7 million barrels.⁶ It now accounts for nearly 9 percent of the world’s total oil use.⁷ Over the past decade China has nearly doubled its oil consumption, and the share of global oil used by all nations that do not belong to the Organisation for Economic Co-operation and Development (OECD) has increased from 37 percent in 1997 to almost 43 percent in 2007.⁸ Other top consumers in 2007 were OECD-Europe at 15.4 million barrels and Japan at 5 million barrels daily.⁹ (See Figure 2.)

The crude oil spot price in the United States averaged $72 per barrel in 2007, a 9.5-percent increase over the 2006 average of $66 and nearly triple the average price in 2002.¹⁰ The price of oil averaged over $90 a barrel in the final two months of 2007 and the first two months of 2008, nearing real dollar prices not seen since April 1980. On March 3rd, prices closed at $102.42, having set a new inflation-adjusted record high earlier during intra-day trading.¹¹ (See Figure 3.) The U.S. Energy Information Administration (EIA) projects an average of $87 a barrel for 2008 as a whole.¹²

These high prices in the face of slowing demand growth have contributed to increasing recognition that limited spare oil production capacity has fundamentally changed world oil markets over the last several years.¹³ World crude oil production (without the natural gas liquids included in the consumption figures cited earlier) actually fell from 73.8 million barrels per day in 2005 to 73.2 million barrels a day in the first 10 months of 2007, according to EIA.¹⁴ This makes 2005 the peak year for world oil production so far, though it is too early to know if this will turn out to be the all-time high.¹⁵

In 2007, crude oil production declined in some of the world’s largest producers—including Indonesia, Mexico, Nigeria, Norway, the United Kingdom, and Venezuela—due to a combina­tion of geological and political factors.¹⁶ Saudi oil production continued to fall in 2007—a voluntary pullback to accommodate a softening market, according to Saudi officials.¹⁷ By late 2007, however, Saudi production was 8 percent below the peak level reached in 2005, despite the fact that oil prices had risen roughly $20 per barrel since then.¹⁸ Uncertainty over the condition of Saudi oil fields and their ability to increase or perhaps even sustain current pro­duc­tion levels is the single largest unknown facing world oil markets.

Meanwhile, crude oil production rose in 2007 in Angola, Brazil, Canada (mainly from tar sands), China, and Russia, which surpassed Saudi Arabia to become the largest producer.¹⁹ But production growth continues to slow in Russia, an ominous sign since that nation has been the most important source of production gains over the past decade.²⁰

The fact that the world is having a hard time expanding oil supply fast enough to keep up with even modest growth in demand is begin­ning to be accepted in some corners of the oil industry. The CEO of Royal Dutch Shell and the U.S. industry–dominated National Petroleum Council have both stated that supply con­straints are likely to put continued pressure on world oil markets in the years ahead.²¹ Although the dreaded phrase “peak oil” is still used mainly by oil industry mavericks like Matthew Simmons and T. Boone Pickens when discussing what lies ahead, their views—if not their language—do appear to be spreading to the mainstream.²²

Political instability contributed to supply disruptions and price volatility throughout many of the world’s oil-producing regions in 2007. Iraq reached its highest level of oil production since the U.S.-led invasion in 2003, but this still remains below prewar production levels.²³ In 2007, Iraq raised its production 5 percent over the 2006 figure, with gains in the latter half of the year coinciding with the 2007 “troop surge.”²⁴ Overall, though, tensions in the Middle East remain highly charged and continue to factor heavily into world supply and price activity.

In Nigeria, despite a ceasefire signed by the government and eight rebel groups in Decem­ber, the Movement for the Emancipation of the Niger Delta and other factions continue to wreak havoc on oil operations in the oil-rich southern delta.²⁵ As a result of pipeline sabo­tage, kidnappings of foreign workers, and other risks, Nigerian oil production has decreased 15 percent from its summer 2005 peak to an average production of 2.1 million barrels per day in 2007.²⁶ In Algeria, terrorist attacks targeting, among other sites, a United Nations office have also affected world markets and sparked con­cern among foreign oil companies operating in North Africa—a region considered crucial to future oil production.²⁷

Thanks to skyrocketing oil prices, many oil companies again enjoyed record profits in 2007. Chevron Corporation posted a company-best $18.7 billion in profit, while Royal Dutch Shell PLC reported a near-best $31.3 billion.²⁸ Exxon­Mobil Corporation, the world’s largest publicly traded oil company, posted a 2007 net income of $40.6 billion, the single largest annual profit in U.S. corporate history.²⁹

The long-term future of oil companies may not be so bright, however. ExxonMobil reported a decline in oil and natural gas production in 2007, and many companies are finding it hard to replace their reserves.³⁰ Not only have the largest oil fields already been developed, most of the promising prospect areas are controlled by state-owned oil companies, which hold 80 percent of the world’s proven oil reserves.³¹

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The year 2007 tied with 1998 as the second warmest year on record, with an average global temperature of 14.57 degrees Celsius (see Figure 1), according to NASA's Goddard Institute for Space Studies.¹ The average global temperature in 2007 was nearly 0.6 degrees Celsius greater than the average between 1951 and 1980 and more than 0.8 degrees Celsius above the average recorded from 1881 to 1910.² The World Meteorological Association ranks 1998–2007 as the warmest decade on record.³

That 2007 was so warm is particularly significant because throughout the year important cooling influences prevailed. These included low solar irradiance (the energy Earth receives from the Sun) and a strong La Niña in the Pacific. These natural processes were counter­acted by the build-up of greenhouse gases caused principally by the combustion of fossil fuels, with other important contributions from agriculture, land use change, and industrial gases.⁴ (See Figure 2.) In 2007, the concentra­tion of atmos­pheric carbon dioxide (CO₂) climbed to a new high of 383.6 parts per million.⁵ (See Figure 3.)

The Intergovernmental Panel on Climate Change (IPCC) released its Fourth Assessment Report in 2007, in which it concluded with greater than 90 percent certainty that emissions of CO₂ and other greenhouse gases from human activities are driving climate change.⁶ The report, which represents the work of thousands of experts and scientists, describes a litany of impacts to natural and managed systems that are already happening or are likely to occur if we continue with business as usual.⁷

Even if emissions stopped rising today, additional warming is inevitable due to the large inertia in the climate system. CO₂ persists in the atmosphere for 50–200 years, which means that current emissions will exert a warming influ­ence for decades to come.⁸ Meanwhile, the ocean, which acts as a vast heat sink, will continue to warm. As it does, air temperatures will likely rise to double the warming already witnessed.⁹

Current trends suggest that we may experience even more than this amount of warming. As anthropogenic emissions are rising, the effici­ency of natural carbon sinks is in decline. A 2007 study led by the Global Carbon Project concluded with high confidence that the share of emissions absorbed by ocean and terrestrial sinks is falling; this, in turn, is accelerating the rise in atmospheric CO₂ concentration beyond the rate of emissions increase.¹⁰

While climate change is a global challenge, many global indicators—like average temperature—overlook the dramatic changes occurring at regional and local levels. The World Meteorological Organization reports that parts of Europe experienced winter and spring temperatures more than 4 degrees Celsius above average in 2007, and extreme drought struck North America and China.¹¹ Massive floods caused devastation in England, South Asia, and many South American countries.¹² While causal links cannot be made between climate change and specific weather events, more extreme weather is consistent with expectations for a warmer globe.

Warming in the northern hemisphere is more pronounced than the global average. Much of the Arctic experienced an average 2007 temperature that was greater than 2 degrees Celsius above the 1951–80 mean.¹³ Arctic sea ice coverage reached a record low by September 1 (summer's end)—39 percent below the September 1 average over the 1979–2000 period and 23 percent below the coverage just two years earlier, in 2005—prompting scientists to predict a complete disappearance of summer sea ice by 2030.¹⁴ Loss of sea ice creates a positive feed­back in the climate system, as open water absorbs far more solar energy than ice and snow do, driving further warming.

Land-based ice melt is also increasing, with serious implications for coastal communities, wildlife, and ecosystems. Two major glaciers in southeast Greenland have lost approximately 122 cubic kilometers of ice each year since 2001, and scientists estimate that Greenland's contribution to sea level rise is now about 0.6 milli­meters annually.¹⁵ A recent study of Ant­arc­tica concluded that the continent is also experiencing a net ice loss and that the pace of ice melt accelerated 75 percent over the past decade.¹⁶ According to the IPCC, land-based ice melt and thermal expansion caused sea levels to rise 3 millimeters per year between 1993 and 2003.¹⁷

The rapid pace of global environmental change is likely to exceed the capacities of many species to adapt. Coral reefs—vital in natural, cultural, and economic terms—appear particularly vulnerable to even the most modest cli­mate change scenarios, as they are unable to adapt to rapid changes in temperature and ocean acidity.¹⁸ A 2007 report to the U.S. Congress concluded that while some species could thrive in response to projected climate change, impacts on many others "may include extinc­tions, changes in species' ranges, mismatches in their phenologies (timing of pollination, flowering, etc.), and population declines."¹⁹ Further, "climate change acts in concert with other variables to effect changes in species," according to several studies cited in the report, and it is uncertain how wildlife will adapt.²⁰

All this new information brought a sense of heightened urgency to the global discourse on climate change in 2007. In April, for the first time, the U.N. Security Council took up the issue of climate change and its potential impacts on peace and security.²¹ Climate change was also addressed at the June meeting of the G8 in Germany, at a high-level U.N. summit in New York in September, and at a U.S.-hosted gathering of the world's major economies, also in September.²² The year concluded with the 192 parties to the U.N. Framework Convention on Climate Change agreeing in Bali to negotiate by 2009 a new global climate pact that will include plans for mitigation, adaptation, technology transfer, and financing.²³

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The global carbon market has expanded quickly over the past two years, buoyed by new and continued interest among national and regional governments in curbing carbon emissions. Worldwide, carbon trading reached a total value of $59.2 billion in 2007, up 80 percent over 2006, according to initial estimates from the market research group Point Carbon.¹ Earlier estimates indicated that the volume of carbon permits and credits traded in 2006 was more than double the amount traded in the previous year.² (See Table 1.)

Carbon markets are designed to combat climate change by putting a price on carbon dioxide (CO2) and other greenhouse gases. Companies and other entities can trade the right to emit these gases through permits, credits, or allowances. The overall amount of emissions in a state or country is often limited by legislation. If a company emits more than allowed by law, it can buy permits from another company that has reduced its emissions to below its allocation.

In the past, large emitters (such as factories or power plants) had little financial incentive to limit carbon dioxide emissions because there were no costs directly associated with greenhouse gas emissions. Carbon markets are helping to internalize the true environmental costs of emitting CO2 and other gases that contribute to climate change.

Mandatory carbon markets are underpinned by national or regional legislation. The European Union, for example, established the European Union Emissions Trading Scheme (EU-ETS) as part of its strategy to meet its Kyoto Protocol-mandated emissions targets.³ With the EU-ETS, the European Union expects to meet its Kyoto targets for $4.3 billion–5.4 billion annually, an amount equivalent to less than 0.1 percent of the region’s gross domestic product.⁴ Without the EU-ETS, compliance costs would be about twice as high.⁵

The EU-ETS is the world’s largest carbon trading platform. (See Figure 1.) Its test trading period began in 2005 and finished in 2007. During this time about 11,500 large emitters—such as power plants, heat generators, and energyintensive factories—were included in the trading scheme. In 2006, the EU-ETS more than tripled the volume traded during the previous year, from 321 million tons of carbon dioxide equivalent to 1.1 billion tons.⁶ (Carbon credits are measured in terms of CO2 equivalent to account for the varying potential of carbon dioxide and other greenhouse gases to contribute to climate change.) The value of the traded carbon also tripled over the same time period, from $8.4 billion in 2005 to $24.9 billion in 2006 (in 2007 dollars).⁷

The EU-ETS entered its second trading phase in 2008. This phase, which lasts until 2012, corresponds to the Kyoto Protocol’s first emissions reductions commitment period. New emissions sources, such as aviation, will be added, as will other types of greenhouse gases beyond carbon dioxide.⁸ More stringent emissions caps during this period mean that there are fewer permits to be traded, and this is—so far—keeping prices higher than at the end of the first trading period. During 2007 there was an oversupply of permits, as too many had been initially allocated, and the price per permit crashed to nearly zero.⁹ (See Figure 2.)

Other carbon credits can also be traded on the EU-ETS: those created through the Kyoto Protocol’s “flexibility mechanisms.” These are known as the Clean Development Mechanism (CDM) and Joint Implementation (JI). The CDM— which allows industrial countries to meet their Kyoto targets in part by investing in clean development projects in developing countries—produced 475 million tons of certified emissions reductions in 2006 alone.¹⁰ These credits were valued at more than $5 billion.¹¹ JI, which has projects primarily in Eastern Europe, has been slower to start, with 16 million tons of credits traded in 2006, at a value of $144 million.¹²

Some observers are concerned that several important sources of greenhouse gases are not adequately addressed by the existing mechanisms. One area that has been especially controversial is known as Reducing Emissions from Deforestation in Developing Countries. With deforestation accounting for 20 percent of global emissions, including 70 percent of Brazil’s emissions and 80 percent of Indonesia’s, forest protection is an essential part of the efforts needed to combat climate change.¹³ At climate negotiations in Bali in December 2007, the World Bank announced the creation of a Forest Carbon Partnership Facility.¹⁴ This financial instrument is intended to compensate countries for costs they incur to keep existing forests intact.¹⁵

Forestry is often mentioned in conjunction with yet another type of carbon market: the voluntary market. This market is used by businesses, organizations, and individuals who voluntarily purchase carbon credits (often referred to as carbon offsets in this context) to mitigate their greenhouse gas emissions. The credits are usually exchanged over the counter—not through a formal market—or through an established trading mechanism such as the Chicago Climate Exchange (CCX). Ecosystem Marketplace, a U.S.-based organization that tracks environmental markets, estimated that in 2006 at least 23.7 million tons of CO2 equivalent were exchanged on the voluntary market, including about 10.3 million tons exchanged through CCX.¹⁶ The Chicago Climate Exchange reports that its trading volume doubled to 22.9 million tons during 2007.¹⁷

While carbon markets continue to grow, several key questions remain. One very important issue is whether and how the United States will establish a national carbon cap and will institute mandatory carbon trading. As the world’s largest CO2 emitter and the only industrial nation that has not ratified the Kyoto Protocol, the U.S. government’s inaction threatens to mute the concerted efforts of the 176 other countries, and the European Union, that have ratified the protocol.¹⁸

In the meantime, several state and regional initiatives in the United States and Canada are gaining momentum. The Regional Greenhouse Gas Initiative (RGGI), which is set to begin in 2009, is a commitment by at least 10 northeastern states to cap regional CO2 emissions at 1990 levels by 2014 and to reduce them by 10 percent below that level by 2018.¹⁹ In 2006, California passed legislation requiring a 25-percent reduction in CO2 emissions by 2020.²⁰ Carbon trading to meet this goal is likely to begin in 2012, and most reductions are expected to come from major emitters in-state.²¹ And the Western Climate Initiative, modeled after RGGI, has set a goal of bringing regional emissions to 15 percent below 2005 levels by 2020 by establishing a market mechanism.²² Currently, California, six other western states, and two Canadian provinces have signed on, with six other western states in the United States, one Mexican state, and three provinces joining as observers.²³

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In 2006, coal accounted for 25 percent of world primary energy supply.¹ (See Figure 1.) Due to its high carbon content, coal was responsible for approximately 40 percent of the carbon dioxide (CO2) emissions from fossil fuels, despite supplying only 32 percent of fossil fuel energy.² Management of this plentiful but heavily polluting energy resource has tremendous implications for human welfare, the health of ecosystems, and the stability of the global climate.

World coal consumption reached a record 3,090 million tons of oil equivalent (Mtoe) in 2006, an increase of 4.5 percent over 2005.³ (See Figure 2.) China led world coal use with 39 percent of the total. The United States followed with 18 percent. The European Union and India accounted for 10 percent and 8 percent, respectively.⁴ (See Figure 3.)

In terms of growth, China is even more dominant. The increase in China's coal consumption accounted for more than 70 percent of global growth in 2006 and more than 60 percent of the increase in world coal use over the past decade. India, responsible for just over 10 percent of the growth in the last 10 years, ranks a distant second.⁵

According to preliminary data, five new coalfired generators with a combined capacity of 600 megawatts came online in the United States in 2006, while India added 930 megawatts of capacity.⁶ In startling contrast, China brought online about as much coal power capacity each week as the United States and India together did over the entire year, adding an unprecedented 90 gigawatts in 2006.⁷ Several studies have highlighted the uncertainty of China's energy statistics, however.⁸ For example, some of the capacity reportedly added is likely to have been unauthorized projects completed earlier that were retroactively approved in 2006.⁹ Nonetheless, the magnitude and trend of China's capacity additions and associated appetite for energy from coal are certain.

Worldwide, the extraction and combustion of coal have severe health and environmental impacts. In the United States, 47 workers were killed in coal mine accidents in 2006, while China's State Work Safety Supervision Administration reported a staggering 4,746 deaths.¹⁰ And the pollution emitted by coal-burning power plants and factories affects the health of millions of people. A recent World Bank study identified coal combustion as China's largest source of outdoor air pollution, to which it attributed 350,000–400,000 premature deaths a year.¹¹ Though these numbers were censored by Chinese authorities, at other times officials have acknowledged that coal power plants often do not comply with environmental regulations.¹²

Even in the United States, which is far ahead of China in terms of pollution control, the struggle to control hazardous emissions from coal power plants continues. In October, American Electric Power agreed to a record environmental enforcement settlement that requires the company to reduce annual sulfur dioxide and nitrogen oxide emissions by over 800,000 tons. The resulting improvement to air quality is expected to produce health benefits worth $32 billion per year.¹³

The longevity of coal-fired power plants and the abundance of coal suggest that decisions on new capacity made today will have enduring consequences. The average age of currently operating U.S. plants is 47 years, indicating that plants built today are likely to remain in operation for many decades.¹⁴ Coal's abundance is apparent in reserve-to-production ratios, which based on current extraction rates exceed 200 years in the United States and India.¹⁵ The figure in China is roughly 50–70 years, with an estimated total coal resource that allows room for plenty of reserve growth.¹⁶

Recent forecasts of world coal consumption in 2050 range from 2,900 Mtoe in a scenario published by the International Energy Agency (IEA), which assumes adoption of a stringent, worldwide carbon policy, to 10,700 Mtoe in a business-as-usual scenario published by the Massachusetts Institute of Technology (MIT).¹⁷ Meeting any climate stabilization target will require control of coal emissions.¹⁸ Nicholas Stern, who led an influential study on the economics of climate change, says that "unless we get coal under control, we're not going to be able to solve this problem."¹⁹ After reaching this same conclusion, numerous studies identify carbon capture and sequestration (CCS) as a way to reconcile coals importance as an energy resource with its role as a major contributor of CO2 emissions.²⁰

Carbon capture and sequestration from a coal-fired power plant involves four key steps: isolate a relatively pure stream of CO2 from the combustion source, pressurize the captured gas and transport to the storage site, inject the CO2 into the storage reservoir, and monitor the storage reservoir for stability and leakage.²¹ Each of these steps is already used in some commercial applications, mostly in oil and natural gas production and processing operations.

One project stands out for having successfully integrated all four steps, albeit not on a power plant. The Great Plains Synfuels plant in North Dakota produces synthetic natural gas from lignite coal. Since 2000, the facility also captures CO2 from the "synthesis gas," an intermediate product, compresses that CO2, and transports it 300 kilometers by pipeline to the Weyburn oil field. There the flow of CO2, currently about 8,000 tons per day, is injected into the oil field to enhance oil production. A measurement study headed by the IEA concluded that the CO2 injected at Weyburn will be sequestered there for thousands of years.²²

The overall climate benefit of this particular project is marred by the fact that the extra oil production it enables, an estimated 130 million barrels, will itself release over 50 million tons of carbon dioxide when burned.²³ Future CCS aquifers rather than active oil fields in order to provide the scale of benefit required. The technology needed is not significantly different, but the project economics are currently much more challenging.

With the technical feasibility of CCS largely proved by Great Plains Synfuels and other demonstration projects, cost is the largest single factor preventing the deployment of this technology. Initial interest focused on applying CCS to advanced power plants known as an integrated gasification combined-cycle (IGCC) plants in anticipation of a lower overall project cost. An IGCC plant converts solid coal into a synthetic gas, from which CO2 can be more easily extracted, and then uses that gas to produce electricity with relatively high efficiency. It is estimated that electricity produced by an IGCC power plant equipped with carbon capture will cost 35 percent more than electricity from a conventional plant. Adding CCS to a conventional power plant could increase the cost of electricity by upwards of 60 percent.²⁴ Transport, injection, and monitoring of the CO2 will push these price premiums even higher. Thus without a sizable cost applied to carbon emissions, CCS is prohibitively expensive.

At present, cost estimates for coal-fired power plants equipped with CCS include a high degree of uncertainty, however. If and when the various CCS processes are commercialized, the technology that offers the lowest cost option will almost certainly vary from one project to the next, depending on many factors, including the quality of coal and whether the plant is new construction or a retrofit.²⁵

Numerous research and development projects are working to reduce costs, and demonstration projects have been proposed in Europe, North America, Australia, and China.²⁶ The U.S. Department of Energy suggests that large-scale units may be completed around 2020, but an MIT study published this year finds current programs to commercialize carbon sequestration to be "completely inadequate," highlighting the need for further demonstration "at-scale" and advanced measurement, monitoring, and verification of storage.²⁷ Pilot operations scheduled to come online in 2007/08 may validate certain capture technologies, but the most aggressive proposals for at-scale applications of integrated CCS to coal-fired power plants target 2011/12.²⁸ In the meantime, each new coal plant will be a major source of additional CO2 emissions.

Growing acknowledgement of the climate, health, and environmental consequences of coal use have led to mounting political opposition to new coal plants in the United States and Europe. A European Union commitment to reduce CO2 emissions at least 20 percent by 2020 presents a formidable obstacle to any new coal power there that does not incorporate CCS.²⁹ Though a similar U.S. commitment has not been made, Senate majority leader Harry Reid recently took a stand against new coal power plants, and the state of California effectively banned state utilities from building new plants without CCS.³⁰ In mid-2007, the uncertain outlook for coal power resulting from burgeoning anti-coal activism was cited by Citigroup analysts in their decision to downgrade the stocks of all coal companies.³¹

On a global scale, the declining fortune of coal in industrial countries is overshadowed by its dominance in the energy mix of large developing economies. In China and India, coal maintains a preeminent role in plans to meet sustained, rapid growth of energy demand.³² A true reconciliation of the coal resource and the climate risk that it presents must soon confront coal power on its new home turf.

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In 2006, atmospheric carbon dioxide (CO2) concentrations reached 381.84 parts per million by volume, an increase of 0.6 percent over the record set in 2005.1 (See Figure 1.) Average CO2 concentrations have risen 20.8 percent since measurements began in 1959 and are now more than 100 parts per million higher than in pre-industrial times.2

Fossil fuel burning represents about 80 percent of this increase.3 In 2005, the last year with relevant data, carbon emissions from this source increased 3 percent to 7.56 billion tons—more than one ton for every person on Earth.4 Annual emissions from fossil fuels have risen 17 percent just since 2000.5 (See Figure 2.)

The United States remains the world’s top emitter, accounting for over 21 percent of carbon emissions from fossil fuel burning in 2005.6 U.S. carbon emissions are still on the rise, but growth rates slowed in 2005 to 0.8 percent, down from a 1.7-percent increase in 2004.7 The largest increases occurred in Asia.8 China’s emissions rose by 9.1 percent in 2005 and experts predict that before 2010 China will emit more carbon from fossil fuel use than the United States does.9

In early 2007, the Intergovernmental Panel on Climate Change released its strongest statement yet linking rising CO2 emissions and increasing global temperatures.10 Some 2,500 experts concluded with at least 90 percent certainty that the observed warming over the last 50 years has been caused by human activities and that discernible human influences are now apparent in changed precipitation and storm intensity and in other instances of extreme weather worldwide.11 Heatwaves, floods, and droughts could cause hunger for millions of people and water shortages for billions, with the world’s poor hit hardest.12

The average global temperature in 2006 was 14.54 degrees Celsius—the fifth warmest year on record, according to NASA’s Goddard Institute of Space Studies.13 (See Figure 3.) Temperatures far above normal were recorded around the globe—from Australia and China to the United Kingdom.14 Over the past century, average global temperatures have risen nearly 0.06 degrees Celsius a decade, but the rate of increase has tripled since 1976.15 Eight of the last 10 years rank among the 12 warmest on record.16

The climate is warming most rapidly at the poles.17 Over the past century, Arctic temperatures rose at almost twice the global average rate.18 For the first time, Inuits now use air conditioners as Arctic summers grow longer and warmer.19 Nearly 9 percent of the September sea ice in the northern hemisphere is being lost each decade.20 One model projects that Arctic summers could be ice-free by 2040.21 In late 2006, the U.S. Interior Department proposed adding polar bears to the list of threatened species as accelerating ice loss threatens their habitat.22

A 2006 report compiled for the U.K. government estimated that under business as usual the economic costs of climate change could equal the loss of 5–20 percent of gross world product each year, whereas the cost of efforts to avoid the worst impacts can be limited to about 1 percent of that figure.23 In early 2007, U.N. Secretary- General Ban Ki-moon warned that upheavals resulting from climate change impacts “from droughts to inundated coastal areas and loss of arable land are likely to become a major driver of war and conflict.”24

As economic and security concerns intensi- fied in 2006, the general public, businesses, and politicians stepped up their responses. The European Union (EU) carbon market—the world’s largest—traded an estimated 1 billion tons of CO2 emissions, worth more than $19 billion.25 Carbon prices fell sharply after the release of EU emissions data in May but soon rebounded.26 In the first nine months of 2006, the global carbon market exceeded $21 billion, more than double the $10 billion traded in 2005, and included countries not bound by the Kyoto Protocol, such as China and India.27

In March 2007, EU members agreed to reduce emissions 20 percent below 1990 levels by 2020.28 At least 12 states in the United States have set emissions targets, and U.S. institutional investors joined 10 leading corporations in calling for a national policy to reduce U.S. emissions.29

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World production of biofuels rose some 20 percent to an estimated 54 billion liters in 2007.¹ (See Figure 1.) These gains meant biofuels accounted for 1.5 percent of the global supply of liquid fuels, up just 0.25 percent from the previous year.²

Global production of fuel ethanol-derived primarily from sugar or starch crops-increased 18 percent to 46 billion liters in 2007, marking the sixth consecutive year of double-digit growth.³ Production of biodiesel-made from feedstock such as soy, rape and mustard seed, and palm and waste vegetable oils-rose an estimated 33 percent, to 8 billion liters.⁴

The United States, which produces ethanol primarily from corn, and Brazil, which primarily uses sugarcane, account for 95 percent of the world's ethanol production.⁵ (See Figure 2.) Brazil increased its ethanol production by 21 per­cent in 2007, to 19 billion liters.⁶ But the United States continued to widen its lead over Brazil as the world's leading producer by boosting output 33 percent to 24.5 billion liters in 2007.⁷

The United States now accounts for a little more than half of the world's ethanol produc­tion, and though the industry has encountered some roadblocks, strong growth is still expected, with an estimated 15 billion liters from 68 new or expanding bio-refineries in 2008.⁸ Despite this boom, the United States still imported an esti­mated 1.7 billion liters of ethanol last year, 40 percent of which came from Brazil.⁹ Most gasoline sold in the country in 2007 was blended with ethanol.¹⁰

Germany maintained its lead in biodiesel by increasing production capacity 60 percent in 2007.¹¹ The German biodiesel market has weakened, however, since the government started taxing biodiesel sales in late 2006 and imposed a second round of taxes at the beginning of 2008.¹² These taxes, coupled with soaring feedstock prices, have eliminated biodiesel's price advantage.¹³ Several large producers have announced production cuts, and overall output is now falling well short of available capacity.¹⁴ Other European countries posting bio­diesel produc­tion capacity gains include Austria, Belgium, Greece, Italy, the Netherlands, Poland, and Portugal.¹⁵

Biodiesel production continued to grow rapidly in Southeast Asia, where Malaysia seeks to capture 10 percent of the global biodiesel market by 2010 through expansion of its palm oil plantations. Indonesia aims to expand its palm oil plantations to 1.5 million hectares by 2008.¹⁶

The primary forces underpinning the continued surge in biofuel production and capacity expansion were a combination of blending mandates and tax subsidies in several countries, with strong support from agricultural interests.¹⁷

The U.S. Energy Independence and Security Act of 2007 expanded the U.S. Renewable Fuels Standard, calling for the use of 136 billion liters of biofuels in 2022 (with 60 billion liters of that total mandated for cellulosic ethanol).¹⁸ Other renewable fuels policies enacted in 2007 include the United Kingdom's adoption of a 5-percent target by 2010, Japan's goal to produce 6 billion liters per year by 2030, and China's annual production targets of 13 billion liters of ethanol and 2.3 billion liters of biodiesel by 2020.¹⁹ The European Union (EU) also expanded its previous 2003 Biofuels Directive of 5.75 percent by 2010 to 10 percent by 2020.²⁰ In total, at least 17 countries have enacted mandates for blending biofuels into vehicle fuels, with an addi­tional 36 states and provinces in 21 coun­tries taking similar actions in recent years.²¹

In response to these market signals and policy incentives, worldwide investment in biofuel production capacity continued to expand in 2007.²² The value of biofuel production plants announced or under construction exceeds $4 billion in the United States, $4 billion in Brazil, and $2 billion in France.²³ However, overall investments in biofuels decreased from the record set in 2006 as feedstock prices soared and socio-environmental concerns mounted.²⁴

In the public markets, biofuel companies raised $1 billion in equity, approximately $2 billion less than in 2006.²⁵ Rising commodity prices, deforestation and carbon sink concerns, and uncertain energy content levels all affected investor confidence in biofuel stocks in 2007, and shares in the sector lost 19 percent of their value during the year.²⁶ Venture capital and private equity investments in biofuel firms also decreased slightly from 2006.²⁷

Last year the U.N. Food and Agriculture Organization (FAO) reported that biofuel demand has played a key role in driving 8 percent of food price inflation in China, 13 percent in Indonesia and Pakistan, and 10 percent or more in Latin America, Russia, and India.²⁸ Adding to these concerns, FAO reported that wheat has doubled in price, that global food reserves are at their lowest level in 25 years, and that costly food aid to developing countries has declined.²⁹ While climbing biofuel production and demand represents just one influential factor in this trend, the International Monetary Fund and other multilateral agencies report that using food to produce biofuels will continue to strain already scarce water and arable land resources.³⁰

Soaring biofuels production has also pro­duced a substantial backlash as grain and soybean prices have soared and the environ­mental benefits of biofuels have been called into question. Recent studies conclude that clearing grass and forestlands to produce ethanol and other biofuels could potentially double the output of green­house gas emissions instead of reducing them, as previously thought.³¹

Palm oil, once considered a promising new eco-friendly fuel source, now faces similar questions and is blamed for contributing to massive deforestation and the subsequent loss of enormous tropical carbon sinks.³² With the recent Bali round of international climate negotiations dealing explicitly with deforestation, which accounts for 20-25 percent of all carbon dioxide emissions, it is unclear how the biofuel indus­tries in countries such as the United States, Indo­nesia, and Brazil will react.³³

One outcome of these developments has been a growing number of governmental and non­governmental initiatives aimed at addressing concerns associated with biofuel production. EU countries recently reached an initial agree­ment on sustainability standards for biofuels that would require biofuel energy sources to emit 35 percent less greenhouse gases than the equivalent fossil fuels before 2015 and 50 percent less after 2015.³⁴

California Governor Arnold Schwarzenegger also announced in January 2007 that his state would establish a Low-Carbon Fuel Standard and would begin developing metrics for measuring the "life-cycle carbon intensity" of all transportation fuels.³⁵ This metric will eventually be incorporated into California's implementation plan for alternative fuel use. Industry-led nongovernmental organizations such as the Roundtable on Sustainable Palm Oil have also started investigating sustainable supply chain standards and consumer labels to help distin­guish feedstock products in the market.³⁶

Mounting problems with conventional bio­fuels spurred investment in advanced biofuel feedstocks and technologies in 2007-including cellulosic ethanol that can be produced from waste materials and non-food crops that can be grown on marginal land.³⁷

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