Gas Field Blow-out: Niko sued for Tk 746cr over Tengratilla loss

The Daily Star, June 18, 2008. Dhaka, Bangladesh

The government yesterday filed a damage suit with a Dhaka court against Niko Resources Bangladesh Ltd, claiming Tk 746.50 crore in compensation for destroying properties and gas reserves in and around the Tengratilla Gas Field in Sunamganj.

The secretary of the Ministry of Energy and Mineral Resources filed the case on behalf of the government and Bangladesh Oil, Gas and Mineral Corporation (Petrobangla).

The defendants are Qasim Sharif, president of Niko Resources Bangladesh Ltd, Brian J Adolph, vice-president and country manager of Niko, Peter Mercier, vice-president (Bangladesh Operation) of GSM Inc–a worldwide company represented by its President Robert D Grace–and GSM Drilling Manager George M Lattimore.

After the hearing, Judge Abu Mohammad Aminul Ehsan (Central Filing) of Joint District Judge’s Court, Dhaka fixed July 31 for the next hearing on the suit and directed the authorities concerned to serve summons upon the defendants to appear before the court on the scheduled date.

In the case, the energy secretary said under Article 143 of the constitution, the government is the owner of natural resources including gas that was destroyed and damaged by Niko’s gross negligence and lack of skills and efficiency.

Niko entered into a joint venture agreement with Bapex on October 16, 2003 for development and production of petroleum from Chhatak and Feni gas fields. Niko started drilling the Chhatak-2 well on December 31, 2004 with the plan to drill three development wells in Chhatak West and one exploratory well in Chhatak East.

Niko drilled the first well Chhatak-2 without the approval of the Joint Management Committee under the agreement, the secretary noted. But this well met with the first blowout on January 7, 2005 in Tengratilla of Doarabazar of Sunamganj. This prompted the energy ministry to form an enquiry committee to determine the cause of fire and damage caused by the blowout.

In the enquiry, the committee found that the blowout had resulted from operational failure and inappropriate casing design and it held Niko responsible for the blowout.

“Niko took up a programme for drilling a relief well to contain the blowout in Chhatak-2,” the secretary stated. On May 30, 2005, Niko started drilling a relief well about 91 metres west of the blown out well. While the drilling was in progress, another blowout occurred on June 24, 2005.

“Niko did not have experience of its own in respect of designing and implementing relief well and Niko engaged GSM Inc to design and supervise the relief well operation,” the secretary pointed out, adding that the GSM then provided consultancy, relief well design, plans and drilling procedures which Niko approved before implementing.

“Mr Brian J Adolph, Country Manager of Niko having BSC Engg (Civil), held the management positions but he had no experience in the above field,” he stated, adding that GSM Well Control Specialist Robert D Grace had experience in blowout control but no experience in drilling relief well in shallow gas sand like that of Tengratilla.

GSM Drilling Manager George M Lattimore had no experience as a drilling manager while the drilling supervisor of Niko and GSM also had no experience in their respective fields.

The second blowout took place due to their lack of experience. So, the responsibility goes to Niko, said the energy secretary.

Article 3 of the Niko-Bapex agreement says the development and production of petroleum from the marginal gas fields at Chhatak and Feni is at the sole risk, responsibility and expense of Niko which is the exclusive operator of these fields. Under article 27.2 of the agreement, Niko is obliged to conduct all operations in a “diligent, conscientious and workmanlike manner and bear responsibility in accordance with the laws applicable for any loss or damage to third parties caused by the wrongful or negligent acts or omissions of the Operator”.

The secretary added that the enquiry committee found that the Chhatak-2 blowout took place due to the well’s becoming “under-balanced by swabbing during first wiper trip in open whole section. The well Chhatak 2 did not encounter unexpected gas pressure while drilling down to 807 metres.”

The committee also observed that Niko’s well casing was the result of both technical lapses and gross negligence. The technical drilling personnel were reasonably experienced but not all of them could communicate in English.

The enquiry committee observed that the volume of gas actually lost due to the blowout can somewhat be estimated according to Niko’s log report. The initial gas loss was in the range was 100 million cubic feet. This figure could be even higher. The gas loss in the first seven days could be around 500 mmcf. By the time a relief well was being drilled, the Chhatak field might have lost roughly about 1 billion cubic feet of gas.

The secretary added that the committee submitted its report on the first blowout on February 7, 2005, blaming Niko’s operation failure and inappropriate casing design for the blowout and accused Niko of gross negligence. The payment of compensation relating to the loss of recoverable gas reserve and the damage to property and environment becomes the responsibility of Niko. But unfortunately the defendants have shown unwillingness and non-cooperation in all cases, which have compelled the government to take shelter of the court.

The secretary then referred to a third committee that also observed and assessed the damage caused to the environment by the first blowout. That committee held meetings participated by representatives of Niko and Bapex, Dr Ainun Nishat, Dr Atique Rahman and Md Reazuddin and several officials of different government agencies. This committee put the figure of environmental damage at Tk 35.44 crore.

After the second blowout another committee assessed a fresh environmental damage at Tk 84.55 crore. This committee submitted its report on September 14, 2005. Another committee headed by Buet Professor M Tamim was assigned to assess the gas loss.

On December 6, 2005, the government formally demanded from Niko the payment of compensation for the damage either by amicable settlement or by way of arbitration. But Niko resorted to dilatory tactics to avoid its responsibility.

When Petrobangla served legal notices on May 27 this year, asking Niko to settle the matter out of court, Niko remained silent and demonstrated unwillingness to settle the matter.

The government then submitted a schedule of claim. Schedule-A demands Tk 36.85 crore worth of gas of 3 billion cubic feet. Schedule-B demands Tk 72.35 crore worth of 5.89 billion cubic feet gas burnt at sub-surface. Schedule-C claims additional sub-surface loss of Tk 552.75 crore worth of 45 billion cubic feet gas and Schedule-D adds environmental loss worth of Tk 84.55 crore.

‘Need for a new social alliance’: Interview with Susan George

Transnational Institute, June 4, 2008

The market ideology works to separate people on a competition basis, and our task is to bring people together and build alliances to defend their interests, says Susan George.

FLORENCE, Jun 3 (IPS) – A global alliance of human rights activists, environmentalists and ethically run small enterprises is needed to save the planet from self-destruction, says Susan George, chair of the Board of the Transnational Institute in Amsterdam. The institute works “to contribute to social justice.”

Susan George, author of several books on development, now focuses on neo-liberal globalisation mirrored in the World Trade Organisation talks, international financial institutions and in North-South relations. 

“Even if committed to the social and environmental challenges, none of these groups individually will be able to save our future, which is dominated by powerful economic forces that have a short-term view and, if allowed, will continue exploiting and destroying the planet,” George says. 

We must recognise, she says, that change does not happen at an individual level. “Yes, I can change my light bulbs or reduce my carbon footprint, but we need a radical revolution that cannot be achieved individually.” 

IPS Italy correspondent Sabina Zaccaro spoke with Susan George at Terra Futura, an exhibition of ‘good practices’ in social, economic and environmental sustainability held yearly in Florence. In its fifth year, Terra Futura was dedicated to strengthening social alliances — and trying some audacious ones such as alliances among private citizens and financial institutions. 

IPS: Will the political-economic system really allow these alliances to happen? 

Susan George: The market ideology works to separate people, it is a model that separates people on a competition basis. Social contact is the only response to economy that works all the time to prevent this. 

People do not have to abandon their own field and commitment, but become used to working together. We are free agents, and if we understand that there’s an interest, that the vast majority of people can often no longer see where their interests lie — and that is part of the political fight that we have — then it is possible. 

If you show to people that they have an interest in alliances, and this is true for farmers, trade unionists, small medium enterprises…then yes, I think it possible to make those alliances. 

IPS: And who sets the rules? 

SG: It is hard to get binding rules, it could be easier at the level of the regions. In many places this is not possible because of corruption, or because the will of the government is to prevent this kind of thing and allow transnational corporations to do whatever they like. I would say that that’s what the European Commission is there for — to allow finance capitals and transnational capitals to operate as freely as possible. 

IPS: Can the ethical argument alone convince business? 

SG: No, not at all. They say how green they are, how caring they are, but it’s rubbish to believe it…Corporations and transnational organisations preach self-green regulation; ‘we will bring the proper solution’, they say, but it is totally illusive. 

IPS: So, what can be a convincing argument? 

SG: The right arguments are the arguments of force you cannot argue with, you don’t discuss; you don’t say ‘please’. When you are in a position where you are able to dictate. 

IPS: How? 

SG: Well, through alliances! At a much larger scale, at a big scale…the problem is scale. Alliances must be as broad as possible. Economic power is way ahead of us, so to me the problem is, can we go fast enough, become important enough in order to put a stop to that, to escape the current impasse. 

IPS: Does politics have a role in that? 

SG: If it would be just politics, I would not be that worried, since things due over centuries sort themselves out; but with the environment we don’t have that kind of time. I don’t say it often in public, because I don’t want people be in despair, but I am often in despair. 

IPS: Are you totally pessimistic? 

SG: I am hopeful; the only thing you can work on is hope. Generally, politicians are the last to move, but we need to make alliance with them. 

When politicians have an interest in something, they show that they are able to listen. Look at what happens with prices…and scarcity. Politicians and business do listen to that, they listen to the price of oil — they bring the wrong solutions, but they listen to price signals. 

IPS: Can oil be replaced with agro-fuels? 

SG: It’s criminal. There’s a lot of talk about using plants that are bio — but any plant is bio. I’ve just read that some of the species they’re intending to use are invasive species, they take over, and then will spread all over and take all the water out of the ground, and so on. 

So, it’s always the same thing — you cannot have just a techno solution because there’s the entire environment that you have to consider. I am not an agronomist, but I would refuse any introduction, any crop until the impact of that crop on the rest of the environment has been studied. You cannot just say ‘Ok, this is good, we will harvest it, and we will do ethanol out of it’, because you don’t know. 

That’s also what’s wrong with GMO (genetically modified organisms) seeds. They only look at the plant and what that plant is supposed to do, to repulse insects or whatever, but they don’t look at the whole of the environment, it’s not their task. 

Scientists are perfectly able to make a plant that can repulse insects, but they have no knowledge at all of how the birds, the butterflies, the worms, the bacteria, will react. (END/2008)

Susan George is a Fellow and Chair of the Board of the Transnational Institute. Her latest books are La Pensée enchaînée: Comment les droites laïque et religieuse se sont emparées de l’Amérique [Fayard, 2007], to be published in English as: Hijacking America: How the Religious and Secular Right Changed What Americans Think [Forthcoming, Polity Press 2008], and We the peoples of Europe [Pluto Press, 2008].

Solutions

This is the trailer of a new Friends of the Earth International film presenting options and solutions for the climate and energy crises. Available soon!

Magurchhara Blowout: No compensation even after a decade

The Daily Star, June 14 2008. Dhaka, Bangladesh

Today is the 11th anniversary of Magurchhara gas-well explosion. On the night of this day in 1997, a massive blowout torn apart the Magurchhaqra gas field in Moulvibazar’s Kamalganj upazila while US energy company Occidental was drilling a well there.

The massive blaze that the blowout triggered wiped out property worth crores of taka. The US company was widely blamed for the devastation, but compensation for the damage remains still a far reach.

Different organisations have been observing the ‘Magurchhara Day’ on June 14 every year with various programmes: meetings, rallies, human chains, etc. 

Sayed Abu Zafar Ahmed of the ‘Committee for Oil, Gas and Port Protection in the National Interest’ said their organisation has chalked out programmes to observe the day.

At Magurchhara, the affected people expressed their dissatisfaction to this correspondent over the role of the successive governments in realising the damages. They wanted to know the mystery behind the long government silence when it comes to settling the compensation claims.

The flora and fauna of the Lawachhara Reserve Forest adjoining the exploded well took the brunt of the explosion. The inferno destroyed a teak grove raised between 1944 and 1950, bamboo shacks created between 1993 and 1995, and a strip of plantation established in 1994.

About 96 acres of Lawachhara forest was completely burnt. Fifty percent of the forest resources on 111.15 acres of land and 30 percent resources on 106.21 acres of land were also damaged. 

Experts said the loss is irrecoverable. Since the fire, wild animals stray into households on the outskirts of the forest in search of food.

The then Awami League government formed a committee headed by the then additional secretary to the ministry of energy and mineral resources to assess the loss of the resources. The committee submitted a report to the ministry’s secretary on July 30, 1997. 

The parliamentary standing committee on energy and mineral resources ministry formed another investigation committee comprising three lawmakers. Besides, the forest department had also conducted a survey on June 16 and 17, 1997.

According to the committee reports, the damage to forest resources amounted to Tk 9,858 crore while 29 tea gardens of the area suffered a loss of about Tk 46.07 crore. 

The railway suffered a loss of Tk 21 crore, Jalalabad Gas Company Tk 43 lakh, the electricity department about Tk 4.35 crore. Indigenous Khasia people lost betel leaf plantations worth Tk 18 lakh. 

The reports said the ecology is unlikely to bounce back to normal within the next 50 years. 

Locals are yet to receive compensation while energy company Occidental already made a safe exit from Magurchhara. After the accident, another US company Unocal took over the operations of Magurchhara gas field and later yet another US company, Chevron, bought out Unocal. 

According Chevron, Moulvibazar gas field at Magurchhara has been operating safely since its re-inception in March 2005. The company drilled through sand twice where the accident had taken place in 1997. One well is currently producing natural gas.

Developing Countries Ask For New UNFCCC Financial Architecture

By Martin Khor, Third World Network, , 6 June 2008

Developing countries have put forward concrete proposals for establishing a new financial mechanism and “architecture” under the UN Framework Convention on Climate Change (UNFCCC) to take charge of the transfer of financial resources to assist the developing countries to address the climate change challenge.

Many countries, including Bangladesh (for the LDCs), China, India, Barbados (for small island developing states), Argentina, the Philippines, Malaysia and Saudi Arabia, called for a new financial mechanism and new funds relating to various areas (adaptation, technology, mitigation, etc), which would be under the authority and guidance of the UNFCCC’s Conference of Parties (COP).

It was the first time in recent years that so many developing countries and their groupings had put forward such concrete and systemic proposals on the Convention’s financial mechanism, said a long-time participant of the UNFCCC process.

Several of the countries referred to the large amounts of funds which are being planned for organisations outside the UNFCCC, particularly the World Bank, and said that these funds should instead by placed under the Convention, which is the body in charge of cleat change negotiations and the implementation of the outcomes.

China notably stated that funds provided to organizations outside the Convention would not be counted as being in fulfilment of the developed countries’ commitments under the UNFCCC to provide financial resources to developing countries to help them take action on climate issues. India concurred with this view.

The Philippines said climate-related funds should be placed in the Convention and not other institutions, and if we are not serious (in making outside funds comply with the Convention’s principles and priorities) it did not see what future there would be for the Bali Action Plan.

The proposals of developing countries were made on 5 June at a workshop on investment and financial flows, which is an official part of the meeting of the ad hoc working group on long-term cooperative action (AWG-LCA) under the Convention. The group is tasked with implementing the Bali Action Plan and coming up with a decision by the end of 2009.

Besides the members of the G77 and China, other countries providing proposals included Mexico, South Korea and Switzerland, while Japan, the EU and US also spoke.

The first workshop presentation was by Bernaditas Muller of the Philippines, on behalf of the G77 and China. She said the G77 and China had identified basic principles under which they would like to work in the context of enhancing financial resources (a major element of the Bali Action Plan).

Muller (who is coordinator of the G77 and China in the AWG-LCA) said that at the first AWG-LCA meeting in Bangkok, members of the group had spoken about establishing various funds, such as an adaptation fund, a technology fund and a risk insurance fund. The G77 and China believed that this enhanced action should be guided by the following principles:

* Operate under the authority and guidance of and by fully accountable to the Conference of Parties of the UNFCCC.

* Have an equitable and balanced representation of all Parties within a transparent system of governance.

* Enable direct access to funding by the recipients.

* Ensure recipient countries’ involvement during the definition, identification and implication of the actions.

Muller said Group is developing a proposal based on the above principles, which take into account various provisions of the Convention, including Articles 4.3, 4.4., 4.7, 4.9 and in accordance with article 11.

Bangladesh on behalf of the LDCs, said the investments of today determine the extent of climate change tomorrow. It put forward “principles and an architecture of a future funding mechanism.” These included: (1) Adequacy of funds, to meet the needs of adaptation, mitigation, and technology transfer; (2) The equity principle; (3) Likely sources of funding should be from developed countries in implementing their commitment under Article 4.3, and other possible sources include a levy on airline travel, an international fuel levy, an extension of the Adaptation Fund’s levy to other mechanisms, venture capital and the carbon market.

Barbados, on behalf of the small island developing states (SIDS), represented by Selwin Hart, said the funds for adaptation were inadequate. Any resources must be additional to traditional ODA. Referring to financing that is market-based, it said that markets don’t work well in small economies. Financing for mitigation is more readily available and easier to access than for adaptation (for example the private sector is not interested to build a seawall or restore coral reefs).

Barbados put forward a shared vision on adaptation financing in the UNFCCC: (1) New and additional funds above the current commitments on ODA and 0.7% target; (2) Predictability: and stability in funding, which should be sourced from assessed contributions from developed countries and levies of carbon markets; (3) The funds should be in the form of grants rather than loans (as SIDS have to adapt to climate problems caused by emissions and lifestyles of other countries). This should also be consistent with the polluter pays principle; (4) Priority access should be given to the most vulnerable countries; (5) The governance should be under the UNFCCC.

The SIDS also advanced these specific proposals: (1) Establish a Convention adaptation fund. The aim is to implement Convention articles including 4.3 and 4.4, in line with the polluter pays principle. Access to recipients should be direct. Governance should be under the authority of the COP; (2) Establish an insurance mechanism; (3) Set up a Technology Fund; (4) We also support a Mitigation Fund.

The SIDS also stated that there are many bilateral and other instruments, but they
are not under UNFCCC. These should be channelled through Convention process.

China made a formal presentation, putting forward a proposal on the elements and
structure of multilateral funds operating under the Convention.

Represented by Ms. Huang Wenhang of the Finance Ministry, China said the Convention and the Bali Action plan require developed countries to commit to give financial resources that are new and include grants. Existing funding is very limited, with $3.3 billion by the GEF in 1991-2010, $90 million in the Convention’s special climate change fund, $180 million in the Convention’s LDC fund including new pledges and an estimated $37 million in the Kyoto Protocol Adaptation Fund.

These compare with the estimates of finance needs, including $65 billion in 2030 for mitigation estimated by the UNFCCC secretariat, and an Oxfam estimate of $50 billion per year for adaptation. There is a huge gap between needs and available resources, said China.

China added that scaling up of funding is needed. If it remains at the same level, it will not meet the future requirements for adaptation and mitigation.

China then proposed the establishment of a set of new funds under the UNFCCC. The new financing would have the following elements: (1) The source of funding is the implementation of developed countries’ commitments under UNFCCC; (2) The scale of funding should be a certain percentage of the GDP of developed countries, for example 0.5% of GDP, in addition to existing ODA; (3) The funds would be used to enhance mitigation, adaptation, R&D in technology, and technology transfer; (4) Any funding pledged outside the UNFCCC shall not be regarded as being in fulfilment of commitments by developed countries under article 4.3 of the Convention.

China also proposed the following coordinated funding arrangements: (1) In the design, there would be the establishment of a number of specialized funds, including an Adaptation Fund and a Multilateral Technology Acquisition Fund; (2) On Governance, (a) The Fund would be established under the authority and guidance of and fully accountable to the COP, (b) There would be equitable and balanced representation of all parties in the governance, (c) There would be easy access and low management costs.

Japan asked China to explain its statement that any funds outside the UNFCCC cannot be counted as part of developed countries’ implementation of their Article 4.3 commitment. Would this mean China wants to make UNFCCC an aid agency?

China responded that the UNFCCC is not an aid agency, but it is the most appropriate forum to discuss climate change. The developed countries have an obligation to developing countries in the Convention. If Japan wants to pledge its money outside the Convention, that should not be counted as fulfilling part of its commitment under the UNFCCC.”

India, represented by Mr.Surya Sethi, presented a comprehensive analysis of the status of climate financing, which he showed fell far short of financing needs, such as the Stern estimate of 1% of world GDP which in 2007 translates to $540 billion.

He said the World Bank group is not in a position to handle the funds required. Any funding structure of the international financial institutions will remain outside of the UNFCCC. The funding mandate of the IFIs is economic development and the capacity of these should not divert to climate change. The IBRD disbursement in 2007 is minus $6.2 billion, which means they receive more than they disburse. No wonder the World Bank wants to expand to climate change, he said.

India said that alternative means for predictable resource flows is needed. We need a new global fund, capitalised by developed countries at a level of 0.3% to 1% of GDP, said India.

India proposed the establishment of a new financial architecture in the UNFCCC. It should have the following elements:

* It must operate under the guidance and must be accountable to the COP.

* There would be balanced representation in the governance.

* Direct access by parties to the funds.

* It should be demand driven, with recipients involved in definition of needs.

* It should be funded by developed countries and may accept other resources from the market and other sources.

* It should be organized in functional windows for technology, venture capital for emerging technologies, and a fund for research and development.

* Other funds should be integrated under the Convention.

* A Board would govern, and there should be a professional secretariat, aided by technical committees. This design was achieved under the Montreal Protocol, and under the Kyoto Protocol’s adaptation fund.

* The unifying force of the various funds to be set up is a common governing architecture which is under the control of COP. Each window will grow under this architecture.

Argentina proposed the establishment of a multilateral fund, as a framework and an umbrella system. It can cover various areas including adaptation and technology. It will develop financial resources of existing funds that exist and that may come up in future. It can include elements mentioned by China and other countries.

Malaysia welcomed the idea of establishing a new funding mechanism. It should be under COP. It should also enable direct access by recipients. This mechanism will be assisted by expert or technical panels. Funding will be by Annex I parties to fulfil their commitment in accordance with Article 4.3, and additional sources can be determined. The fund should complement the existing funds. Competing mechanisms outside the UNFCCC poses a serious challenge to the Convention and this is cause for concern.

Philippines said the finance commitment was not being implemented, there has been inadequate funding and the agreed full incremental cost has not been given to developing countries. The Convention’s parties had also decided that consistency must be ensured between the principles and priorities of the COP with bilateral and other funds on climate operating outside the Convention and that they must not impose new conditionalities.

Referring to recent initiatives outside the Convention to set up new climate funds, she remarked that if we are not serious about this issue, she did not see what future there would be for the Bali Action Plan. There are funds out there. They should not be put in bodies that impose conditionality on developing countries. They should be put in the hands of the parties of the Convention.

South Africa, on behalf of the Africa Group, emphasized the group’s support for the G77 and China’s principles presented by Philippines. The scale of funding for adaptation must be scaled up 2 or 3 times. There is need for assessing costs, planning, NAPAs, implementation for adaptation, mitigation technologies, wider deployment of existing technologies and R and D for new technologies.

Brazil said there was a need for funds to be in compliance with UNFCCC. It stressed the need for a fund with a governance structure that is fair and transparent and reinforces the COP’s capacity to guide climate change.

Saudi Arabia said there was a need to bring all the ideas of the funds together. There is need for a solid structure in UNFCCC where all the initiatives can be put together in a structure, as laid out by the G77/China principles. The goal is to bring under one umbrella a solid new architecture. It would operate under the authority and guidance of the Convention and be fully accountable to the COP.

Mexico pointed to the unpredictability of current funding and the need to overcome the atomization of current financing in many funds. The current financial system is totally insufficient to sustain the scale of actions needed.

It proposed a World Climate Change Fund covering mitigation, adaptation, and technology. All countries would contribute to it, with contributions to be agreed multilaterally and could be determined by criteria like Greenhouse gas emissions, population and GDP size, as well as the polluter pay principle, equity and efficiency and each country’s capacity. The Fund should mobilize no less than $10 billion a year, with $200 billion by 2030.

Mitigation activities to be supported should yield measurable, reportable and verifiable mitigation results. Activities to be funded include forest, agricultural soils, biofuels, energy, green buildings, lower-emission vehicles.

Korea, represented by Raekwon Chung, advanced a proposal on carbon credit for NAMA (nationally appropriate mitigation actions) by developing countries, supported by finance that is measurable, reportable and verifiable. In this scheme, mitigation can be initiated by developing countries even without finance and technology, similar to a unilateral CDM.

He suggested that Annex I countries undertake a deeper emission reduction target to facilitate more funds. Instead of developed countries offering to contribute to funds, they could instead buy credits for NAMA.

Switzerland presented a proposal on a “funding scheme for Bali Action Plan”. It proposed a global carbon dioxide levy of $2 per ton of carbon dioxide, in accordance with common but differentiated responsibilities. There would be three pillars in the scheme. Overall revenues would be $48.5 billion, with $18.4 billion to a multilateral adaptation fund or MAF (with a $9.2 billion prevention pillar and a $9.2 billion insurance pillar), and $30.1 billion going to national climate change funds.

High income countries will transfer 60% of their levy to the MAF, medium income countries 35% and low income countries 15%. Countries with below 1.5 ton of carbon dioxide emission are exempted from payment; Switzerland said these would mainly be LDCs.

Brazil commented that the Swiss proposal had taken current emission rather than historical responsibility on board when choosing who to tax. Switzerland replied historical responsibility was counted if the future emissions is counted but not so in relation to past emissions.

Germany, for the European Union, said the challenge is to stabilize greenhouse gases at 450 ppm, restrict temperature rise to 2 degrees and to reduce emissions. Finance is required for a transition to a low carbon economy. Most funds for mitigation will be from the private sector and this won’t change in future, but pubic funds are still needed to catalyze and leverage private investments.

In mobilizing financial flows, the main tool is the price of carbon as the carbon market is delivering a significant part of the flows. On innovative financing, the EU can discuss auctioning of carbon allowances and a levy on bunker fuel.

Norway proposed a scheme for “financing adaptation by auctioning” in which a small percentage of asset value can be auctioned or sold to finance adaptation. The task can be given to an international bank.

The United States, commenting on other countries’ remarks on the World Bank climate funds, said that the clean technology fund under this is not meant for unmet contributions under the Convention. It will be supportive of the objectives of the Convention. It is hosted at the World Bank as it will provide rapid disbursement of funds and leverage other funds.

As the private sector gives most investments, the issue is how governments can encourage private sector flows to clean technologies. Countries with an enabling environment, open markets and respect for IPRs will attract more clean technologies.

Surya Sethi of India, responding to Japan and US relating to the World Bank climate funds, said that the funds to developing countries for climate must come in the form of resource transfer or grant. “If I borrow money I have to return it and it is not funding my full additional cost,” said India. “Any mechanism must ensure the full incremental cost must be met and it won’t be met by loans even if these are concessional.”

The Chair of the AWG-LCA, Luiz Machado of Brazil, said the discussion had been rich, there were some areas of convergence and some new and innovative ideas. This was a very valuable brainstorming, which could be used for discussing future work. A contact group of the AWG LCA will further take up the finance issue.

What the ADB needs to do to keep it’s Asia Clean Energy Forum clean

By Renato Redentor Constantino*, Executive Director, NGO Forum on ADB, June 2008

The Asian Clean Energy Forum(ACEF) 2008 will be remembered as the event where the ADB finally decided to drop the term ‘clean coal’, after years of getting pilloried for its patronage of the thoroughly dishonest label. “Let us stop using clean coal or cleaner coal and just call it what it is – more efficient coal,” said ADB Vice President Bindu Lohani in one short sentence, which unequivocally recognized the validity of what many environmental and community NGOs have long insisted on – that there is no such thing as clean coal.

Unfortunately, however important the step, correctionary labeling is all that the ADB’s ACEF has done thus far. Since 2006, three ACEF annual events have by now come and gone and none of the events, whether singly or cumulatively, have made developing Asia feel more secure or safe against the anticipated consequences of blind, fossil-fueled economic growth. In fact, as of this writing, the ADB continues to put together massive financial plans geared towards the rapid expansion of what the bank still recognizes as the cheapest, most affordable source of energy.

And here is where the absurd irony lies. It was de rigeur for virtually every speaker in ACEF 2008 to start their speeches with the reminder that “it was time to act,” in reference to the climate crisis, which today constitutes the most gargantuan cost to the public that coal companies – and institutions such as the ADB – have in effect been passing on to the public.

ACEF occured in the midst of negotiations surrounding the future of our planet’s climate in Bonn, Germany. At stake – the possibility of a future international climate regime that would, many hope, call for more dramatic global greenhouse gas emissions starting with the developed world and the particularly rich, together with compensation for climatic impacts that can no longer be prevented.

It is an ambitious goal, and nowhere is it preordained that the talks will succeed. But more and more are taking hope in the fact that more and more have begun to realize that there are really no alternative pathways to drastic emissions cuts, save for more extreme ecological and economic crises.

Bonn constitutes an interesting backdrop, particularly for events such as the Asia Clean Energy Forum (ACEF) organized by the Asian Development Bank. Initiated in 2006 in response to campaign broadsides from civil society, which exposed the naked climate hypocrisy of the Bank’s transactional programs, the ACEF has since taken place every first week of June.

In partnership with USAID – the lead co-organizer, ACEF is a platform for “investing in solutions that address climate change and energy security.” ACEF attracts sustainable energy advocates and institutes as well as carbon brokers, dirty energy charlatans and leading members of the global consultancy industry. What the ACEF actually does for the ADB, however, is that it serves as a stage by which to demonstrate that the bank is doing something about climate change, instead of funding it. Apart from funding humongous coal giants such as the 4,000-MW Mundra Ultra Mega project of corporate giant Tata, the ADB also boasted of its increasingly smaller carbon footprint, given the way it has aggressively pursued energy efficiency in the ADB’s headquarters. But why measure only the ADB building? What about the cumulative greenhouse gas emissions of the coal plants it has financed and the large hydro projects it has supported? What about the overwhelmingly fossil fuel-biased financing that it has extended throughout Asia of road building, and road building, and even more building of highways and freeways?

There was notably no mention throughout the event of the stalled new ADB Energy Strategy, which was ridiculed by civil society as mediocre and of poor quality. Neither was there mention of the ADB’s still operational Energy Policy, which was approved in 1995, particularly the provisions that have demanded of the ADB and its member countries for the last 13 years the full quantification of all externality costs related to coal and destructive energy projects such as large hydro in order to genuinely level the project playing field.

Stratos Tavoulareas, representing USAID, actually epitomized the way discussions were skewed towards talking about straw men and pipe dreams. According to the official, there were only three options that Asia was facing today. The first was “to stop using coal.” The second was to improve efficiency. And the third was “to use carbon capture and sequestration technology.” But what about dramatically reducing dependence on coal? And what about utilizing decentralized energy systems instead, which prioritize efficiency and renewables and combined heat and power?

In the end, so many questions were left unasked and unanswered. This should come as no surprise to anyone who has monitored the previous ACEFs, and it is disturbing.

The truth is simple and straightforward and it makes the ADB seem so irrelevant.

It is not politics but science that dictates that all countries must contribute in the end — the industrialized nations, arising primarily from their undeniable historic responsibility, including developing countries in the pursuit of real, not rhetorical, sustainable and equitable development — a path of development that avoids the worst excesses of the wealthy nations of today who, once upon a time, thought they could afford to live as if there were no limits — or deadly consequences — to their avarice. #

* Renato Redentor Constantino is the Executive Director of NGO Forum on ADB, an international network of civil society and community organization critically monitoring the Asian Development Bank (ADB). Contact: red@forum-adb.org

Small Is Bountiful

Peasant farmers offer the best chance of feeding the world. So why do we treat them with contempt?

By George Monbiot. 10th June 2008

I suggest you sit down before you read this. Robert Mugabe is right. At last week’s global food summit he was the only leader to speak of “the importance … of land in agricultural production and food security”.(1) Countries should follow Zimbabwe’s lead, he said, in democratising ownership.

Of course the old bastard has done just the opposite. He has evicted his opponents and given land to his supporters. He has failed to support the new settlements with credit or expertise, with the result that farming in Zimbabwe has collapsed. The country was in desperate need of land reform when Mugabe became president. It remains in desperate need of land reform today.

But he is right in theory. Though the rich world’s governments won’t hear it, the issue of whether or not the world will be fed is partly a function of ownership. This reflects an unexpected discovery. It was first made in 1962 by the Nobel economist Amartya Sen(2), and has since been confirmed by dozens of further studies. There is an inverse relationship between the size of farms and the amount of crops they produce per hectare. The smaller they are, the greater the yield.

In some cases, the difference is enormous. A recent study of farming in Turkey, for example, found that farms of less than one hectare are twenty times as productive as farms of over ten hectares(3). Sen’s observation has been tested in India, Pakistan, Nepal, Malaysia, Thailand, Java, the Phillippines, Brazil, Colombia and Paraguay. It appears to hold almost everywhere.

The finding would be surprising in any industry, as we have come to associate efficiency with scale. In farming, it seems particularly odd, because small producers are less likely to own machinery, less likely to have capital or access to credit, and less likely to know about the latest techniques.

There’s a good deal of controversy about why this relationship exists. Some researchers argued that it was the result of a statistical artefact: fertile soils support higher populations than barren lands, so farm size could be a result of productivity, rather than the other way around. But further studies have shown that the inverse relationship holds across an area of fertile land. Moreover, it works even in countries like Brazil, where the biggest farmers have grabbed the best land(4).

The most plausible explanation is that small farmers use more labour per hectare than big farmers(5). Their workforce largely consists of members of their own families, which means that labour costs are lower than on large farms (they don’t have to spend money recruiting or supervising workers), while the quality of the work is higher. With more labour, farmers can cultivate their land more intensively: they spend more time terracing and building irrigation systems; they sow again immediately after the harvest; they might grow several different crops in the same field.

In the early days of the Green Revolution, this relationship seemed to go into reverse: the bigger farms, with access to credit, were able to invest in new varieties and boost their yields. But as the new varieties have spread to smaller farmers, the inverse relationship has reasserted itself(6). If governments are serious about feeding the world, they should be breaking up large landholdings, redistributing them to the poor and concentrating their research and their funding on supporting small farms.

There are plenty of other reasons for defending small farmers in poor countries. The economic miracles in South Korea, Taiwan and Japan arose from their land reform programmes. Peasant farmers used the cash they made to build small businesses. The same thing seems to have happened in China, though it was delayed for 40 years by collectivisation and the Great Leap Backwards: the economic benefits of the redistribution that began in 1949 were not felt until the early 80s(7). Growth based on small farms tends to be more equitable than growth built around capital-intensive industries(8). Though their land is used intensively, the total ecological impact of smallholdings is lower. When small farms are bought up by big ones, the displaced workers move into new land to try to scratch out a living. I once followed evicted peasants from the Brazilian state of Maranhao 2000 miles across the Amazon to the land of the Yanomami Indians, then watched them rip it apart.

But the prejudice against small farmers is unshakeable. It gives rise to the oddest insult in the English language: when you call someone a peasant, you are accusing them of being self-reliant and productive. Peasants are detested by capitalists and communists alike. Both have sought to seize their land, and have a powerful vested interest in demeaning and demonising them. In its profile of Turkey, the country whose small farmers are 20 times more productive than its large ones, the UN’s Food and Agriculture Organisation states that, as a result of small landholdings, “farm output … remains low.”(9) The OECD states that “stopping land fragmentation” in Turkey “and consolidating the highly fragmented land is indispensable for raising agricultural productivity.”(10) Neither body provides any supporting evidence. A rootless, half-starved labouring class suits capital very well.

Like Mugabe, the donor countries and the big international bodies loudly demand that small farmers be supported, while quietly shafting them. Last week’s food summit agreed “to help farmers, particularly small-scale producers, increase production and integrate with local, regional, and international markets.”(11) But when, earlier this year, the International Assessment of Agricultural Knowledge proposed a means of doing just this, the US, Australia and Canada refused to endorse it as it offended big business(12), while the United Kingdom remains the only country that won’t reveal whether or not it supports the study(13).

Big business is killing small farming. By extending intellectual property rights over every aspect of production; by developing plants which either won’t breed true or which don’t reproduce at all(14), it ensures that only those with access to capital can cultivate. As it captures both the wholesale and retail markets, it seeks to reduce its transaction costs by engaging only with major sellers. If you think that supermarkets are giving farmers in the UK a hard time, you should see what they are doing to growers in the poor world. As developing countries sweep away street markets and hawkers’ stalls and replace them with superstores and glossy malls, the most productive farmers lose their customers and are forced to sell up. The rich nations support this process by demanding access for their companies. Their agricultural subsidies still help their own, large farmers to compete unfairly with the small producers of the poor world.

This leads to an interesting conclusion. For many years, well-meaning liberals have supported the fair trade movement because of the benefits it delivers directly to the people it buys from. But the structure of the global food market is changing so rapidly that fair trade is now becoming one of the few means by which small farmers in poor nations might survive. A shift from small to large farms will cause a major decline in global production, just as food supplies become tight. Fair trade might now be necessary not only as a means of redistributing income, but also to feed the world.

References:

1. http://www.fao.org/fileadmin/user_upload/foodclimate/statements/zwe_mugabe.pdf

2. Amartya Sen, 1962. An Aspect of Indian Agriculture. Economic Weekly, Vol. 14.

3. Fatma Gül Ünal, October 2006. Small Is Beautiful: Evidence Of Inverse Size Yield
Relationship In Rural Turkey. Policy Innovations. 

4. Giovanni Cornia, 1985. Farm Size, Land Yields and the Agricultural Production function: an
analysis for fifteen Developing Countries. World Development. Vol. 13, pp. 513-34.

5. Eg Peter Hazell, January 2005. Is there a future for small farms? Agricultural Economics, Vol. 32, pp93-101. doi:10.1111/j.0169-5150.2004.00016.x

6. Rasmus Heltberg, October 1998. Rural market imperfections and the farm size— productivity relationship: Evidence from Pakistan. World Development. Vol 26, pp 1807-1826. doi:10.1016/S0305-750X(98)00084-9

7. See Shenggen Fan and Connie Chan-Kang , 2005. Is Small Beautiful?: Farm Size, Productivity and Poverty in Asian Agriculture. Agricultural Economics, Vol. 32, pp135-146.

8. Peter Hazell, ibid.

9. http://www.new-agri.co.uk/00-3/countryp.html

10. OECD Economic Surveys: Turkey – Volume 2006 Issue 15, p186.
This is available online as a Google book.

I was led to refs 9 and 10 via Fatma Gül Ünal, ibid.

11. http://www.fao.org/fileadmin/user_upload/foodclimate/HLCdocs/declaration-E.pdf

12. International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD), 2008. Global Summary for Decision Makers. www.agassessment.org

13. IAASTD, viewed 9th June 2008. Frequently Asked Questions. www.agassessment.org

14. Eg Terminator seeds.

Hunger in the wake of climate change

TheRealNews, June 9, 2008

Bangladesh faces a food crisis compounded by extreme weather and environmental decline.

World Bank Called ‘Unqualified’ to Run Climate Fund

By Alison Raphael, June 6, 2008. OneWorld.Net

WASHINGTON – Organizations from 40 countries called on leaders of the developing world yesterday to oppose World Bank plans to establish a “Clean Technology Fund” that they fear will have little or no impact on halting global warming.

“The Clean Technology Fund [includes] no definition of clean technology,” said Kenny Bruno, international program director for Oil Change International, one of the signatory groups.

By leaving definitions of key terms hazy, the groups argue, the World Bank leaves the door open to use scarce resources in support of energy initiatives likely to have only a minor impact on climate change.

“What they are really proposing is a ’slightly less dirty’ technology fund, which will include financing of coal plants that are somewhat less polluting than the dirtiest plants out there,” Bruno charged.

More than 120 environment, human rights, faith-based, and indigenous rights groups from countries as diverse as Argentina, Belarus, Sweden, and Togo issued a joint statement urging developing country governments to reject the World Bank plan until several major issues are resolved.

At the 2005 Gleneagles meeting of the “G-8″ industrialized countries, the World Bank was tasked with designing a plan to boost investment in clean energy worldwide. But instead of supporting the development of innovative, forward-thinking technologies the Bank has plowed more money than ever into fossil fuel extraction, according to its own statistics.

“The World Bank is spectacularly unqualified to manage climate funds due to their long-term practice of financing carbon emissions from oil and gas,” said Brent Blackwelder, president of the U.S. division of Friends of the Earth, a global environmental advocacy group.

Blackwelder will testify today at a Congressional hearing, pointing out that investing in more coal production in India and China, even if new plants are marginally cleaner than existing plants, represents a health risk for local populations and will “significantly increase the total load of carbon emissions to the atmosphere.”

The groups also expressed concern that putting the World Bank in charge of a new lending mechanism will undermine existing agreements made at a global climate change meeting in Bali in late 2007, diverting money away from the globally agreed “Adaptation Fund” intended to support the transfer of clean energy technology to the developing world.

Instead, the Bank plan foresees new Climate Investment Funds (CIFs), loans to developing countries for technology transfer and to help them adapt to changes brought about by global warming.

This is “inappropriate,” say the groups, since the bulk of emissions contributing to climate change come from industrialized countries. In other words, they argue, CIFs would increase the debt of poor countries trying to mitigate the impact of emissions by rich countries.

Instead, funding for technology transfer should be channeled through the established UN Framework Convention on Climate Change, the groups say, agreeing with Blackwelder that, “as an institution that manages development assistance, not climate change, the World Bank is the wrong home for a Clean Technology Fund.”

 

Summit on food big on talk, short on answers

TheRealNews, June 8, 2008

World leaders fail to agree on key issues to secure food supply.