http://www.nytimes.com/2008/06/02/business/02trade.html?pagewanted=print
June 2, 2008
Industries Allied to Cap Carbon Differ on the Details
By JAD MOUAWAD
Some of the most powerful corporate leaders in America have been meeting regularly with leading environmental groups in a conference room in downtown Washington for over two years to work on proposals for a national policy to limit carbon emissions.
The discussions have often been tense. Pinned on a wall, a large handmade poster with Rolling Stones lyrics reminds everyone, “You can’t always get what you want.”
What unites these two groups — business executives from Duke Energy, the Ford Motor Company and ConocoPhillips, as well as heads of environmental organizations like the Natural Resources Defense Council — is a desire to deal with climate change. They have broken with much of corporate America to declare that it is time for the federal government to act and set mandatory limits on emissions.
What divides them is that dealing with climate change will almost certainly hurt some industries and enrich others. Billions of dollars are at stake. Depending on how the nation decides to tackle the problem, electricity bills in some states could rise 50 percent, and gasoline prices could go up 50 cents a gallon.
“It’s really now a battle over the economics,” said James E. Rogers, chief executive of Duke Energy, who has long advocated curbing carbon emissions. “The debate is not about the climate problem. Everybody could agree on the principles and still get the economics wrong.”
The Senate is to vote Monday to kick off a weeklong discussion on carbon limits. But the intense debates under way already illustrate just how hard it will be for Congress to satisfy conflicting business interests while coming up with a global-warming plan that works.
Opposition from corporate interests, including oil, gas and power companies, prompted the Bush administration to opt out of the Kyoto Protocol, a treaty that called on developed countries to limit their emissions.
But the political winds have shifted. All three presidential candidates have said they favor mandatory curbs on emissions, and the Democratic majority in Congress wants a strong climate policy. The Senate debate could help set parameters of future legislation, which many experts expect to see within two years.
Congress is considering a complicated approach that would set a limit, or cap, on emissions that would be reduced each year. It would also create emissions permits that large industrial companies, like oil refineries or power plants, would be required to use.
By putting a value on carbon dioxide, this cap-and-trade system would provide incentives for companies to reduce emissions. Experts say it could turn into one of the biggest markets in the world, estimated to be worth over $200 billion a year.
Thus far, climate policy has been slowly shaped by states like California and Massachusetts, with others following. The resulting patchwork of policies has created uncertainty for companies, some of which have recognized that federal system to limit carbon is ultimately unavoidable.
“If they are not at the table, they will not have a hand in the making of the regulation,” said Robert N. Stavins, director of the environmental economics program at Harvard University.
That recognition led to the Climate Action Partnership, the Washington group, in which corporate behemoths and environmental groups have been debating climate policy for over two years, sometimes meeting every week, in order to force the issue.
In January 2007, the eclectic group endorsed a bold national policy that called for reduction in carbon dioxide emissions of 60 percent to 80 percent by 2050, an aggressive target that is in line with recommendations from an international panel of scientists. But the group, which now has 33 members, has failed to reach consensus on a variety of issues, including how to allocate carbon permits and whether to include a price cap for carbon credits.
“They helped crystallize the concerns about climate,” said David G. Victor, the director of the energy and sustainable development program at Stanford University and an expert on climate policy who has been closely following the debates. “But the moment the coalition starts to focus on the details, it starts breaking apart. It’s a litmus test for the debate in the country.”
The sharpest battle lines have been drawn over the structure of a cap-and-trade system. This mostly centers on whether carbon allocations — or pollution permits, as some see them — should be granted to companies or auctioned off.
Under one proposal, Congress would give away about half the allowances to businesses like power plants and oil companies, but also to states and farmers, in order to give time for them to adapt to lower-carbon technologies. Over time, it would gradually sell the rest to the highest bidder, raising money for developing alternative energy sources.
The bill, sponsored by Senators Joseph I. Lieberman, an independent, and John W. Warner, a Republican, passed a crucial vote in a committee last December and will be debated on the Senate floor this week.
Under a similar emissions-trading system in Europe, carbon currently trades at around 26.45 euros a ton, or about $41. At that price, the value of the carbon credits would be about $220 billion in the first year alone.
The debate over who gets carbon credits is particularly intense in the power sector, which creates 40 percent of the nation’s carbon emissions.
Companies that rely on coal to generate power say that allowances should be free so that customers in the Midwest and the Great Plains, where coal is mostly used, are not disproportionately penalized. Coal accounts for half the nation’s power generation, and executives like Mr. Rogers of Duke say these customers should not have to bear the brunt of a national climate policy.
But not everyone wants to see allowances doled out free, especially among power producers that are less dependent on coal than Duke. Lewis Hay III, chairman of FPL Group, a Florida power company, says carbon emitters should have to pay for their emissions.
“There is just going to be a giant fight over the free allowances,” he said.
Oil companies are also unhappy with the Senate plan. Although the transportation sector represents around 35 percent of the nation’s carbon emissions, oil companies and refiners — which fuel that sector — would be granted just 4 percent of total allowances. That would force them to buy carbon credits, which would drive up the price of gasoline and diesel fuels.
At a time of sharply rising prices, oil executives say this is not the best way to reduce carbon emissions. Better, they argue, to raise fuel efficiency requirements directly or set up a low-carbon fuel standard.
The other big fight splitting corporations and environmental groups is whether to set a maximum price on carbon credits.
Many environmental groups oppose this, fearing it might jeopardize the ultimate goal, which is to reduce emissions. They say that if the price is artificially kept too low, companies would have fewer incentives to cut emissions.
But business groups say a ceiling would keep prices from skyrocketing. Some fear that higher energy costs would reduce companies’ ability to compete globally and could drive jobs to countries that do not limit carbon. John Engler, president of the National Association of Manufacturers, said the climate bill amounted to “economic disarmament.”
As the fight escalates, trade groups are planning ad campaigns to make their case against a climate policy. One ad, produced by the United States Chamber of Commerce, shows a man cooking breakfast over candles in a cold, darkened house, then jogging to work on empty highways, asking: “Is it really how Americans want to live?”
Setting a price for carbon will raise energy costs throughout the economy, experts said. The Environmental Protection Agency estimated recently that a cap-and-trade bill could reduce gross domestic product by 0.9 percent to 3.8 percent by 2050.
“The reality is that cutting emissions is going to cost money,” said Peter C. Fusaro, chairman of Global Change Associates, an energy and environmental consulting firm.
Tuesday, June 3, 2008
Troubled Oceans - 053108 NY Times
http://www.nytimes.com/2008/05/31/opinion/31sat1.html?pagewanted=print
May 31, 2008
Editorial
Troubled Oceans
Five years have elapsed since the Pew Oceans Commission’s seminal report urging prompt action to arrest the alarming decline of this country’s ocean resources. Four years have elapsed since a blue-ribbon presidential commission said much the same thing, urging special attention to problems like overfishing and the deterioration of coastal wetlands and estuaries. Despite an occasional burst of energy, however, the Bush administration and Congress have left much to be done. And time is running out.
As is true with many environmental issues — climate change comes immediately to mind — the states have done a better job. New York, New Jersey and Massachusetts have either passed legislation or established a regulatory structure to better manage their coastal waters (states control the first three miles, the federal government controls the rest until international waters begin 200 miles offshore). California, always at the leading edge, has begun setting up a network of fully protected zones where fish can flourish with minimal commercial intrusion.
These actions show that progress is possible and challenge the White House and Congress to do better.
President Bush has expressed interest in leaving a positive “blue legacy.” Last year, he created one of the biggest protected marine reserves in the world — 138,000 square miles of largely unspoiled reefs and shoals near Hawaii. He should create at least one and possibly more such reserves elsewhere in American waters before he leaves office — and should persuade other world leaders to do the same.
The president must also give teeth to the Magnuson-Stevens Act, the basic law governing fishing in federal waters. Congress reauthorized and strengthened the law in 2006, establishing more ambitious timetables for rebuilding depleted fish species and giving scientists greater say over how many fish can be taken from the sea. Everything depends on whether the National Marine Fisheries Service buttresses good law with strong rules and does not let the commercial fisherman hijack the process.
For its part, Congress must give ocean issues greater priority, in part by reorganizing the way the federal government deals with them. America’s waters are managed under 140 different laws spread across 20 different government agencies. A bill known as Oceans 21 seeks to bring order out of chaos and give ocean protection the prominence it deserves. The bill is slowly gaining traction in the House but could use a strong push from Senate Democrats and the White House.
Many experts believe that the biggest long-term threat to the oceans may be global warming, which could disrupt ocean chemistry in ways that cause havoc with the food chain. The science on this issue is still unclear, however, and in any case, global warming is best addressed in broad legislation like the climate change bill now before the Senate. In the meantime, there is much that Washington can do to strengthen the resilience of the ocean and its inhabitants so they can withstand whatever stresses the future may bring.
May 31, 2008
Editorial
Troubled Oceans
Five years have elapsed since the Pew Oceans Commission’s seminal report urging prompt action to arrest the alarming decline of this country’s ocean resources. Four years have elapsed since a blue-ribbon presidential commission said much the same thing, urging special attention to problems like overfishing and the deterioration of coastal wetlands and estuaries. Despite an occasional burst of energy, however, the Bush administration and Congress have left much to be done. And time is running out.
As is true with many environmental issues — climate change comes immediately to mind — the states have done a better job. New York, New Jersey and Massachusetts have either passed legislation or established a regulatory structure to better manage their coastal waters (states control the first three miles, the federal government controls the rest until international waters begin 200 miles offshore). California, always at the leading edge, has begun setting up a network of fully protected zones where fish can flourish with minimal commercial intrusion.
These actions show that progress is possible and challenge the White House and Congress to do better.
President Bush has expressed interest in leaving a positive “blue legacy.” Last year, he created one of the biggest protected marine reserves in the world — 138,000 square miles of largely unspoiled reefs and shoals near Hawaii. He should create at least one and possibly more such reserves elsewhere in American waters before he leaves office — and should persuade other world leaders to do the same.
The president must also give teeth to the Magnuson-Stevens Act, the basic law governing fishing in federal waters. Congress reauthorized and strengthened the law in 2006, establishing more ambitious timetables for rebuilding depleted fish species and giving scientists greater say over how many fish can be taken from the sea. Everything depends on whether the National Marine Fisheries Service buttresses good law with strong rules and does not let the commercial fisherman hijack the process.
For its part, Congress must give ocean issues greater priority, in part by reorganizing the way the federal government deals with them. America’s waters are managed under 140 different laws spread across 20 different government agencies. A bill known as Oceans 21 seeks to bring order out of chaos and give ocean protection the prominence it deserves. The bill is slowly gaining traction in the House but could use a strong push from Senate Democrats and the White House.
Many experts believe that the biggest long-term threat to the oceans may be global warming, which could disrupt ocean chemistry in ways that cause havoc with the food chain. The science on this issue is still unclear, however, and in any case, global warming is best addressed in broad legislation like the climate change bill now before the Senate. In the meantime, there is much that Washington can do to strengthen the resilience of the ocean and its inhabitants so they can withstand whatever stresses the future may bring.
Hotels Struggle to Find the Right Eco-Message - 060308 NY Times
Just too ironic. RK
http://www.nytimes.com/2008/06/03/business/03road.html?pagewanted=print
June 3, 2008
On the Road
Hotels Struggle to Find the Right Eco-Message
By JOE SHARKEY
MARCO ISLAND, Fla.
I woke up in the middle of the night in a big hotel overlooking the beach and the Gulf of Mexico. My red message light was flashing.
Oh, no, I thought. Somebody had needed to reach me urgently, and I hadn’t heard the phone. I turned on the light, groped for the phone and tapped at the message button.
A recorded female voice said: “Good evening and welcome to the Marco Island Marriott Beach Resort. As a friendly reminder, it is turtle season in Southwest Florida.”
What? The message went on to say that baby sea turtles were hatching on the beach. “Please assist in the preservation of these hatchlings by closing your blackout curtains by 9 p.m.”
Blackout curtains? Before going to bed around midnight, I had turned off the lights and the air conditioner, and propped open my balcony door with a chair to let in the sea breeze — a good thing, right? But I hadn’t seen any light on the phone or heard anything before this about blackout curtains and hatchlings.
Sure, I wanted to save the little baby sea turtles! But it was 3 o’clock in the morning. I didn’t know what to do except go back to sleep.
The hotel experience, as all business travelers know, has become partly a lecture hall experience about saving the planet. Green marketing is big, especially in hotels, many of which have deftly combined real environmental concerns (more efficient energy use, a better awareness of one’s footprint in environmentally fragile areas) with clever marketing.
Here, the save the sea turtle campaign is accompanied by a promotional offer that the hotel calls its “Fertile Turtle Package aimed at couples looking to conceive” so that “lovebirds have the opportunity to watch the sea turtles hatch.”
Hotels that care about the environment often have a delicate balancing act. They want to offer guests the opportunity to stay, without guilt, in a pristine environment. Yet their very existence there is an intrusion. So a good option is to leave the message that drawing your room curtain helps keep the baby turtles from getting disoriented by artificial light on their fledgling crawl to the sea.
Who, then, would be so churlish as to point out that turtle protocols are actually enforced by law? Several hotels in nearby Naples, for example, were cited last year for violations that included failure to shield the beach from the glow of their lights during sea turtle nesting season, from May through October.
Whatever works, I say. In travel, where the footprint is often literal, every step toward sharper environmental awareness is important. And the hotel industry knows that guests are increasingly aware of that.
Last fall, Deloitte & Touche USA did a study of “green” attitudes by travelers and found that 41 percent said they actively consider environmental issues when choosing a hotel. Of those, 13 percent said they looked into a hotel’s environmental policies before booking.
“More and more business travelers, and especially the younger ones, are discussing these things,” said Adam F. Weissenberg, who heads the Deloitte USA hospitality division. “This is not a passing fad. And for the younger generation, this is huge stuff.”
Smart hotels are working out sensible approaches. Better communication between guest, management and employee, it seems to me, is a good way to start.
For example, no business traveler I know thinks that changing bed sheets every day is a necessary amenity. And most of us see no need to expend all that energy on laundering all those towels every day. But we and the industry have not yet worked out signals to indicate what we want.
After a short stay on Marco Island, I headed up the coast to Cape Coral, where I stayed at a Hampton Inn, a midprice Hilton brand. On the bed was a door hanger notice that solved one small communications problem simply: how to signal to guests that the hotel is happy to change the sheets every night, and how guests can clearly signal to the housekeeper that there really is no need today, thank you.
“If you would like your linens changed, place this hanger on your bathroom door and housekeeping will be sure to honor your request,” it said.
E-mail: jsharkey@nytimes.com
http://www.nytimes.com/2008/06/03/business/03road.html?pagewanted=print
June 3, 2008
On the Road
Hotels Struggle to Find the Right Eco-Message
By JOE SHARKEY
MARCO ISLAND, Fla.
I woke up in the middle of the night in a big hotel overlooking the beach and the Gulf of Mexico. My red message light was flashing.
Oh, no, I thought. Somebody had needed to reach me urgently, and I hadn’t heard the phone. I turned on the light, groped for the phone and tapped at the message button.
A recorded female voice said: “Good evening and welcome to the Marco Island Marriott Beach Resort. As a friendly reminder, it is turtle season in Southwest Florida.”
What? The message went on to say that baby sea turtles were hatching on the beach. “Please assist in the preservation of these hatchlings by closing your blackout curtains by 9 p.m.”
Blackout curtains? Before going to bed around midnight, I had turned off the lights and the air conditioner, and propped open my balcony door with a chair to let in the sea breeze — a good thing, right? But I hadn’t seen any light on the phone or heard anything before this about blackout curtains and hatchlings.
Sure, I wanted to save the little baby sea turtles! But it was 3 o’clock in the morning. I didn’t know what to do except go back to sleep.
The hotel experience, as all business travelers know, has become partly a lecture hall experience about saving the planet. Green marketing is big, especially in hotels, many of which have deftly combined real environmental concerns (more efficient energy use, a better awareness of one’s footprint in environmentally fragile areas) with clever marketing.
Here, the save the sea turtle campaign is accompanied by a promotional offer that the hotel calls its “Fertile Turtle Package aimed at couples looking to conceive” so that “lovebirds have the opportunity to watch the sea turtles hatch.”
Hotels that care about the environment often have a delicate balancing act. They want to offer guests the opportunity to stay, without guilt, in a pristine environment. Yet their very existence there is an intrusion. So a good option is to leave the message that drawing your room curtain helps keep the baby turtles from getting disoriented by artificial light on their fledgling crawl to the sea.
Who, then, would be so churlish as to point out that turtle protocols are actually enforced by law? Several hotels in nearby Naples, for example, were cited last year for violations that included failure to shield the beach from the glow of their lights during sea turtle nesting season, from May through October.
Whatever works, I say. In travel, where the footprint is often literal, every step toward sharper environmental awareness is important. And the hotel industry knows that guests are increasingly aware of that.
Last fall, Deloitte & Touche USA did a study of “green” attitudes by travelers and found that 41 percent said they actively consider environmental issues when choosing a hotel. Of those, 13 percent said they looked into a hotel’s environmental policies before booking.
“More and more business travelers, and especially the younger ones, are discussing these things,” said Adam F. Weissenberg, who heads the Deloitte USA hospitality division. “This is not a passing fad. And for the younger generation, this is huge stuff.”
Smart hotels are working out sensible approaches. Better communication between guest, management and employee, it seems to me, is a good way to start.
For example, no business traveler I know thinks that changing bed sheets every day is a necessary amenity. And most of us see no need to expend all that energy on laundering all those towels every day. But we and the industry have not yet worked out signals to indicate what we want.
After a short stay on Marco Island, I headed up the coast to Cape Coral, where I stayed at a Hampton Inn, a midprice Hilton brand. On the bed was a door hanger notice that solved one small communications problem simply: how to signal to guests that the hotel is happy to change the sheets every night, and how guests can clearly signal to the housekeeper that there really is no need today, thank you.
“If you would like your linens changed, place this hanger on your bathroom door and housekeeping will be sure to honor your request,” it said.
E-mail: jsharkey@nytimes.com
Downgrade of 3 Banks Revives Credit Fears - 060308 NY Times
http://www.nytimes.com/2008/06/03/business/03stox.html?pagewanted=print
June 3, 2008
Downgrade of 3 Banks Revives Credit Fears
By MICHAEL M. GRYNBAUM
Stocks markets dropped on Monday after three of Wall Street’s biggest banks were hit with a harsh ratings downgrade, sending the Dow Jones industrials down 134 points and leaving some investors worried about additional losses.
Shares of Lehman Brothers, Merrill Lynch and Morgan Stanley — marquee names in the investment banking world — sank after a major ratings agency, Standard & Poor’s, said it had lost some confidence in the banks’ ability to meet financial obligations.
Lehman shares fell 8.1 percent, Merrill dropped 3 percent, and Morgan Stanley declined 2.6 percent. Other banks, along with lenders and financial services firms, watched their stocks fall in tandem, dragging the Standard & Poor’s 500-stock index down about 1 percent for the day.
The discouraging news twinned with a shake-up at another bank, Wachovia, which ousted its chief executive, G. Kennedy Thompson, after a string of losses on mortgage-related assets. Wachovia’s stock dipped 1.7 percent, to $23.40.
Some analysts, though, said that they had been hearing about credit woes at investment banks for months.
“There are a number of investors out there who say, ‘Look, what did we just learn that we didn’t know before?’ ” said Brian Gendreau, a strategist at ING Investment Management in New York. “The fact that the market only went down 134 points suggests to me that a lot of the bad news was already anticipated.”
Russ Koesterich, who heads investment strategy at Barclays Global Investors in San Francisco, put it bluntly: “The reality was, there was no new news” on Monday.
But, he acknowledged, the developments revived fears that the tight credit market, which has led to the virtual collapse of billions of dollars of assets, would continue to bedevil banks.
The S.& P. report cited a fragile outlook for financial markets as a cause for the ratings downgrade.
“Write-downs will likely continue to depress earnings,” the report said. S.& P. also said that banks had not sufficiently calculated the risk of some of their investments and that it expected banking revenues to decline.
In addition, the ratings agency imposed negative outlooks onto two other investment firms, Bank of America and JPMorgan Chase. Shares of JPMorgan dropped 2 percent, and Bank of America declined 1.3 percent.
The S.& P. 500 index closed at 1,385.67, down 14.7 points. The Dow settled at 12,503.82, down 1.1 percent, and the Nasdaq composite index fell 1.2 percent, to 2,491.53.
Crude oil prices rose to $127.76, up 41 cents, while the euro fell against the dollar. The benchmark 10-year Treasury note rose 26/32, to 99 10/32. Its yield, which moves in the opposite direction, fell to 3.96 percent, from 4.06 percent.
Following are the results of Monday’s Treasury auction of three- and six-month bills:
June 3, 2008
Downgrade of 3 Banks Revives Credit Fears
By MICHAEL M. GRYNBAUM
Stocks markets dropped on Monday after three of Wall Street’s biggest banks were hit with a harsh ratings downgrade, sending the Dow Jones industrials down 134 points and leaving some investors worried about additional losses.
Shares of Lehman Brothers, Merrill Lynch and Morgan Stanley — marquee names in the investment banking world — sank after a major ratings agency, Standard & Poor’s, said it had lost some confidence in the banks’ ability to meet financial obligations.
Lehman shares fell 8.1 percent, Merrill dropped 3 percent, and Morgan Stanley declined 2.6 percent. Other banks, along with lenders and financial services firms, watched their stocks fall in tandem, dragging the Standard & Poor’s 500-stock index down about 1 percent for the day.
The discouraging news twinned with a shake-up at another bank, Wachovia, which ousted its chief executive, G. Kennedy Thompson, after a string of losses on mortgage-related assets. Wachovia’s stock dipped 1.7 percent, to $23.40.
Some analysts, though, said that they had been hearing about credit woes at investment banks for months.
“There are a number of investors out there who say, ‘Look, what did we just learn that we didn’t know before?’ ” said Brian Gendreau, a strategist at ING Investment Management in New York. “The fact that the market only went down 134 points suggests to me that a lot of the bad news was already anticipated.”
Russ Koesterich, who heads investment strategy at Barclays Global Investors in San Francisco, put it bluntly: “The reality was, there was no new news” on Monday.
But, he acknowledged, the developments revived fears that the tight credit market, which has led to the virtual collapse of billions of dollars of assets, would continue to bedevil banks.
The S.& P. report cited a fragile outlook for financial markets as a cause for the ratings downgrade.
“Write-downs will likely continue to depress earnings,” the report said. S.& P. also said that banks had not sufficiently calculated the risk of some of their investments and that it expected banking revenues to decline.
In addition, the ratings agency imposed negative outlooks onto two other investment firms, Bank of America and JPMorgan Chase. Shares of JPMorgan dropped 2 percent, and Bank of America declined 1.3 percent.
The S.& P. 500 index closed at 1,385.67, down 14.7 points. The Dow settled at 12,503.82, down 1.1 percent, and the Nasdaq composite index fell 1.2 percent, to 2,491.53.
Crude oil prices rose to $127.76, up 41 cents, while the euro fell against the dollar. The benchmark 10-year Treasury note rose 26/32, to 99 10/32. Its yield, which moves in the opposite direction, fell to 3.96 percent, from 4.06 percent.
Following are the results of Monday’s Treasury auction of three- and six-month bills:
U.S. Manufacturing Slips as Inflation Gauge Surges - 060308
http://www.nytimes.com/2008/06/03/business/03econ.html?pagewanted=print
June 3, 2008
U.S. Manufacturing Slips as Inflation Gauge Surges
By REUTERS
United States manufacturing declined in May for the fourth consecutive month while inflation surged to the highest in four years, heightening fears of stagflation.
Combined with data on inflation, the manufacturing report fed concerns about rising prices in a weak economy, especially after the price of oil hit a record high last month above $135 a barrel.
The Institute for Supply Management said its index of national factory activity rose to 49.6 in May, from April’s 48.6. That was slightly above market expectations, but the index remained below the level of 50 that signals contraction.
“These are mildly contractionary readings on manufacturing activity, rather than outright recession signals, although they are accompanied by ugly readings on cost inflation pressures,” analysts at Bear Stearns said in a note to clients.
The institute report showed a worrying trend for inflation in the United States. Its index of prices paid jumped to 87.0 — the highest since April 2004 — from 84.5 in April.
This year’s manufacturing downturn is the worst since the February-to-June period in 2003, and comes as the deepest housing slump since the Depression has weakened the broader economy.
A separate report showed that construction spending fell less than expected in April. This added weight to the argument that the economy is weak but may not be in recession.
The contraction in the May supply management index was the fifth in six months, but the weak dollar has bolstered exports, helping to ease damage to the factory sector.
The index of new export orders rose to 59.5, up from April’s 57.5 and the highest since May 2004, when it was at 60.0.
Construction spending fell 0.4 percent in April on continued deterioration in the residential sector, but outside of home building, private spending rose for the third month in a row.
Economists polled by Reuters ahead of the Commerce Department’s report were expecting a 0.6 percent decrease in construction spending, after a 0.6 percent decrease in March that was first reported as a much bigger 1.1 percent decline.
The factory sector also struggled abroad. Manufacturing in the euro zone cooled more in May as output remained near a three-year low.
The RBS/NTC Eurozone Purchasing Managers Index for the manufacturing sector eased to 50.6 in May, down from April’s 50.7 but above the earlier estimate of 50.5, which was also the median number forecast by economists.
June 3, 2008
U.S. Manufacturing Slips as Inflation Gauge Surges
By REUTERS
United States manufacturing declined in May for the fourth consecutive month while inflation surged to the highest in four years, heightening fears of stagflation.
Combined with data on inflation, the manufacturing report fed concerns about rising prices in a weak economy, especially after the price of oil hit a record high last month above $135 a barrel.
The Institute for Supply Management said its index of national factory activity rose to 49.6 in May, from April’s 48.6. That was slightly above market expectations, but the index remained below the level of 50 that signals contraction.
“These are mildly contractionary readings on manufacturing activity, rather than outright recession signals, although they are accompanied by ugly readings on cost inflation pressures,” analysts at Bear Stearns said in a note to clients.
The institute report showed a worrying trend for inflation in the United States. Its index of prices paid jumped to 87.0 — the highest since April 2004 — from 84.5 in April.
This year’s manufacturing downturn is the worst since the February-to-June period in 2003, and comes as the deepest housing slump since the Depression has weakened the broader economy.
A separate report showed that construction spending fell less than expected in April. This added weight to the argument that the economy is weak but may not be in recession.
The contraction in the May supply management index was the fifth in six months, but the weak dollar has bolstered exports, helping to ease damage to the factory sector.
The index of new export orders rose to 59.5, up from April’s 57.5 and the highest since May 2004, when it was at 60.0.
Construction spending fell 0.4 percent in April on continued deterioration in the residential sector, but outside of home building, private spending rose for the third month in a row.
Economists polled by Reuters ahead of the Commerce Department’s report were expecting a 0.6 percent decrease in construction spending, after a 0.6 percent decrease in March that was first reported as a much bigger 1.1 percent decline.
The factory sector also struggled abroad. Manufacturing in the euro zone cooled more in May as output remained near a three-year low.
The RBS/NTC Eurozone Purchasing Managers Index for the manufacturing sector eased to 50.6 in May, down from April’s 50.7 but above the earlier estimate of 50.5, which was also the median number forecast by economists.
In Mideast, Paulson Offers Reassurances on Dollar - 060308 NY Times
http://www.nytimes.com/2008/06/03/business/03treasury.html?pagewanted=print
June 3, 2008
In Mideast, Paulson Offers Reassurances on Dollar
By REUTERS
ABU DHABI (Reuters) — Treasury Secretary Henry M. Paulson Jr. defended the dollar’s status as the world’s reserve currency and said on Monday that its recent decline was only a small factor behind a surge in oil prices.
“The U.S. dollar has been the world’s reserve currency since World War II and there is a good reason for that,” Mr. Paulson told a business group in the United Arab Emirates.
“The United States has the largest, most open economy in the world, and our capital markets are the deepest and most liquid.”
His comments marked a slight strengthening of his recent language on the dollar and could resonate with gulf oil producing states that are struggling with soaring inflation and might be re-evaluating their dollar currency pegs.
Mr. Paulson is on the final day of a four-day tour to Saudi Arabia, Qatar and the United Arab Emirates to discuss currency and economic issues with regional leaders and reassure them that the United States remains receptive to their investments.
In his remarks, he pledged to deal with problems in the American economy that have hurt the dollar’s value. “I am committed to promoting policies that enhance the underlying competitiveness of the U.S. economy and ensure that the dollar remains the world’s reserve currency,” he said.
He said these include advocating open investment and trade and working to stave off a recession and return capital markets to health. He said the dollar’s value would ultimately be reflected in strong long-term fundamentals, which “compare favorably to any advanced economy in the world.”
Mr. Paulson said speculation and dollar weakness were not to blame for soaring oil prices and the only way to relieve oil market pressure was to better balance supply and demand.
He called for more international investment in both oil production and alternative fuels, while “market distorting” fuel-price subsidies in many countries should be abandoned.
Mr. Paulson also said opening up the gulf economies to foreign investment and trade would make them more prosperous and stable.
“Remaining closed to investment will have the opposite effect, by inhibiting growth and magnifying domestic economic vulnerabilities,” he said.
June 3, 2008
In Mideast, Paulson Offers Reassurances on Dollar
By REUTERS
ABU DHABI (Reuters) — Treasury Secretary Henry M. Paulson Jr. defended the dollar’s status as the world’s reserve currency and said on Monday that its recent decline was only a small factor behind a surge in oil prices.
“The U.S. dollar has been the world’s reserve currency since World War II and there is a good reason for that,” Mr. Paulson told a business group in the United Arab Emirates.
“The United States has the largest, most open economy in the world, and our capital markets are the deepest and most liquid.”
His comments marked a slight strengthening of his recent language on the dollar and could resonate with gulf oil producing states that are struggling with soaring inflation and might be re-evaluating their dollar currency pegs.
Mr. Paulson is on the final day of a four-day tour to Saudi Arabia, Qatar and the United Arab Emirates to discuss currency and economic issues with regional leaders and reassure them that the United States remains receptive to their investments.
In his remarks, he pledged to deal with problems in the American economy that have hurt the dollar’s value. “I am committed to promoting policies that enhance the underlying competitiveness of the U.S. economy and ensure that the dollar remains the world’s reserve currency,” he said.
He said these include advocating open investment and trade and working to stave off a recession and return capital markets to health. He said the dollar’s value would ultimately be reflected in strong long-term fundamentals, which “compare favorably to any advanced economy in the world.”
Mr. Paulson said speculation and dollar weakness were not to blame for soaring oil prices and the only way to relieve oil market pressure was to better balance supply and demand.
He called for more international investment in both oil production and alternative fuels, while “market distorting” fuel-price subsidies in many countries should be abandoned.
Mr. Paulson also said opening up the gulf economies to foreign investment and trade would make them more prosperous and stable.
“Remaining closed to investment will have the opposite effect, by inhibiting growth and magnifying domestic economic vulnerabilities,” he said.
Commodity Regulation to Toughen - NY Times 060308
http://www.nytimes.com/2008/06/03/business/03cftc.html?pagewanted=print
June 3, 2008
Commodity Regulation to Toughen
By DIANA B. HENRIQUES, NY Times
Regulators of the nation’s commodity markets will demand more information about investors to determine whether they are evading market limits on speculation and artificially driving up world food prices.
The regulatory agency, the Commodity Futures Trading Commission, also plans to initiate talks with bank regulators to ensure that adequate credit is available for the farm economy.
In addition, the commission intends to strengthen a program aimed at lowering the cost for farmers of hedging crop prices, which has grown more expensive with the increasing volatility in the markets, according to a draft of the proposals obtained by The New York Times. The commission is expected to announce the proposals Tuesday.
Finally, in an unusual departure from the secrecy that usually cloaks its enforcement actions, the commission will confirm that it is investigating the price spike that hit the cotton futures market in late February, a step demanded by cotton industry executives at a commission hearing on April 22.
The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.
But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market — from pension funds, endowments and a host of other institutional investors — through the new conduit of commodity index funds.
Billions more have come in from investment banks that are hedging the risk of complex bets, called swaps, that these same investors have made in the unregulated international swaps market, which dwarfs the regulated markets supervised by the C.F.T.C.
The commission has come under fire, most recently at a hearing on May 20 before the Senate Committee on Homeland Security and Governmental Affairs, for not doing enough to monitor the impact of these investors on markets that have such influence on family budgets nationwide.
The proposals are being presented as an initial, but not final, response to those concerns, which echoed complaints made at a C.F.T.C. hearing in April by farm industry officials. They believe this flood of new money from swaps and index funds is undermining confidence in the market’s role in setting prices and managing risk.
“The commission recognizes that — although no single solution exists — there are several steps it can take to improve oversight of the futures markets and bring greater transparency and scrutiny to the types of traders in the marketplace,” according to a draft statement introducing the plan.
Specifically, the commission will start requiring more information about index funds and, more significantly, about the clients on the other side of the unregulated swaps deals that are being hedged on the regulated futures exchanges.
The swaps market has traditionally be seen as off limits for federal commodity regulators, but the commission clearly is responding to Congressional concern that investors may be using swaps dealers to evade rules that limit the size of their speculative role in regulated markets.
Besides collecting more information about these new players, the commission is revising its monthly trading reports, starting in July, to present the expanded data in a way that will be clearer and more comprehensible to the public.
The commission is also putting the brakes on granting waivers that have exempted some commodity index funds from speculative limits, and is formally dropping proposed rule changes that would have extended a blanket exemption to all index funds.
In recent years, more than a dozen commodity index fund companies have been granted individual waivers, after successfully arguing that they were using the futures markets exclusively to hedge their obligations to the people who have invested in their index funds. But the commission now intends to “be cautious and guarded before granting additional exemptions in the area,” according to the draft proposal.
The proposal also outlines the commission’s plan to coordinate with the Farm Credit Administration and banking authorities, including the Federal Reserve Banks in Chicago and Kansas City, Mo., to help insure a reliable supply of credit to the farm economy.
Bank regulators testified at the commission hearing in April that farm-belt banks were financially sound and could handle the credit demands of farmers and grain elevators trying to meet margin calls on their hedged positions in the futures markets.
But the commissioners are apparently not satisfied that this ability to lend is being matched by a willingness to lend and are trying to head off a credit crisis that could wipe out farmers and grain elevators before they can profit from higher crop prices at harvest.
The proposals also include steps to strengthen an existing alternative to futures contracts — an over-the-counter product called agricultural trade options that farmers grain-elevator operators could use to hedge crop prices. The existing product has not gained acceptance as a hedging tool, and the commission is directing its staff to find ways to make it more useful to hedgers and more visible to regulators.
Today’s initiative comes less than a week after the commission announced steps to expand its information and oversight of energy traders in the futures markets, and confirmed that it has been investigating possible manipulation of energy futures prices for six months.
June 3, 2008
Commodity Regulation to Toughen
By DIANA B. HENRIQUES, NY Times
Regulators of the nation’s commodity markets will demand more information about investors to determine whether they are evading market limits on speculation and artificially driving up world food prices.
The regulatory agency, the Commodity Futures Trading Commission, also plans to initiate talks with bank regulators to ensure that adequate credit is available for the farm economy.
In addition, the commission intends to strengthen a program aimed at lowering the cost for farmers of hedging crop prices, which has grown more expensive with the increasing volatility in the markets, according to a draft of the proposals obtained by The New York Times. The commission is expected to announce the proposals Tuesday.
Finally, in an unusual departure from the secrecy that usually cloaks its enforcement actions, the commission will confirm that it is investigating the price spike that hit the cotton futures market in late February, a step demanded by cotton industry executives at a commission hearing on April 22.
The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.
But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market — from pension funds, endowments and a host of other institutional investors — through the new conduit of commodity index funds.
Billions more have come in from investment banks that are hedging the risk of complex bets, called swaps, that these same investors have made in the unregulated international swaps market, which dwarfs the regulated markets supervised by the C.F.T.C.
The commission has come under fire, most recently at a hearing on May 20 before the Senate Committee on Homeland Security and Governmental Affairs, for not doing enough to monitor the impact of these investors on markets that have such influence on family budgets nationwide.
The proposals are being presented as an initial, but not final, response to those concerns, which echoed complaints made at a C.F.T.C. hearing in April by farm industry officials. They believe this flood of new money from swaps and index funds is undermining confidence in the market’s role in setting prices and managing risk.
“The commission recognizes that — although no single solution exists — there are several steps it can take to improve oversight of the futures markets and bring greater transparency and scrutiny to the types of traders in the marketplace,” according to a draft statement introducing the plan.
Specifically, the commission will start requiring more information about index funds and, more significantly, about the clients on the other side of the unregulated swaps deals that are being hedged on the regulated futures exchanges.
The swaps market has traditionally be seen as off limits for federal commodity regulators, but the commission clearly is responding to Congressional concern that investors may be using swaps dealers to evade rules that limit the size of their speculative role in regulated markets.
Besides collecting more information about these new players, the commission is revising its monthly trading reports, starting in July, to present the expanded data in a way that will be clearer and more comprehensible to the public.
The commission is also putting the brakes on granting waivers that have exempted some commodity index funds from speculative limits, and is formally dropping proposed rule changes that would have extended a blanket exemption to all index funds.
In recent years, more than a dozen commodity index fund companies have been granted individual waivers, after successfully arguing that they were using the futures markets exclusively to hedge their obligations to the people who have invested in their index funds. But the commission now intends to “be cautious and guarded before granting additional exemptions in the area,” according to the draft proposal.
The proposal also outlines the commission’s plan to coordinate with the Farm Credit Administration and banking authorities, including the Federal Reserve Banks in Chicago and Kansas City, Mo., to help insure a reliable supply of credit to the farm economy.
Bank regulators testified at the commission hearing in April that farm-belt banks were financially sound and could handle the credit demands of farmers and grain elevators trying to meet margin calls on their hedged positions in the futures markets.
But the commissioners are apparently not satisfied that this ability to lend is being matched by a willingness to lend and are trying to head off a credit crisis that could wipe out farmers and grain elevators before they can profit from higher crop prices at harvest.
The proposals also include steps to strengthen an existing alternative to futures contracts — an over-the-counter product called agricultural trade options that farmers grain-elevator operators could use to hedge crop prices. The existing product has not gained acceptance as a hedging tool, and the commission is directing its staff to find ways to make it more useful to hedgers and more visible to regulators.
Today’s initiative comes less than a week after the commission announced steps to expand its information and oversight of energy traders in the futures markets, and confirmed that it has been investigating possible manipulation of energy futures prices for six months.
NASA Office Is Criticized on Climate Reports - 060308 NY Times
http://www.nytimes.com/2008/06/03/science/earth/03nasa.html?pagewanted=print
June 3, 2008
NASA Office Is Criticized on Climate Reports
By ANDREW C. REVKIN
Two years after James E. Hansen, the leading climate scientist at NASA, and other agency employees described a pattern of distortion and suppression of climate science by political appointees, the agency’s inspector general has concluded that such activities occurred and were “inconsistent” with the law that established the space program 50 years ago.
In a 48-page report issued on Monday as a result of a request in 2006 by 14 senators, the internal investigative office said the activities appeared limited to the headquarters press office.
No evidence was found showing that officials higher at NASA or in the Bush administration were involved in interfering with the release of climate science information, the report said.
It also credited Michael Griffin, the agency administrator, for swiftly ordering a review and policy changes when the pattern came to light after articles in The New York Times early in 2006.
The report, signed by Kevin H. Winters, assistant inspector general for investigations, criticized what it said was a sustained pattern of activities, largely supervised by senior political appointees, that included muting or withholding news releases on global warming and, at least in Dr. Hansen’s case, limiting a scientist’s interactions with reporters.
“Our investigation,” the report said, “found that during the fall of 2004 through early 2006, the NASA Headquarters Office of Public Affairs managed the topic of climate change in a manner that reduced, marginalized or mischaracterized climate change science made available to the general public.”
The report said most evidence supported contentions that politics was “inextricably interwoven” into operations at the public affairs office in that period and that the pattern was inconsistent with the statutory responsibility to communicate findings widely, “especially on a topic that has worldwide scientific interest.”
A NASA spokesman, Michael Cabbage, said: “The issues mentioned in the inspector general’s report are more than two years old, and after learning of those issues, NASA revised the agency’s policy for disseminating science information.”
Dean Acosta, who was deputy assistant administrator for public affairs at the agency when the problems surfaced, sharply attacked the credibility of the report. Mr. Acosta was appointed by President Bush in 2003 and resigned in 2007.
“My entire career has been dedicated to open and honest communications,” Mr. Acosta, who now is director of communications for the Boeing space-exploration business, wrote in an e-mail message. “The inspector general’s assertions are patently false. The report itself does nothing but raise questions about a three-year investigation that has yielded nothing but flimsy allegations aimed at hard-working public servants.”
Senator Frank R. Lautenberg, the New Jersey Democrat who wrote the request for the inquiry, had a markedly different reaction.
“Global warming is the most serious environmental threat we face, but this report is more evidence that the Bush administration’s appointees have put political ideology ahead of science,” Mr. Lautenberg said in an e-mailed statement. “Our government’s response to global warming must be based on science, and the Bush administration’s manipulation of that information violates the public trust.”
John Schwartz contributed reporting.
June 3, 2008
NASA Office Is Criticized on Climate Reports
By ANDREW C. REVKIN
Two years after James E. Hansen, the leading climate scientist at NASA, and other agency employees described a pattern of distortion and suppression of climate science by political appointees, the agency’s inspector general has concluded that such activities occurred and were “inconsistent” with the law that established the space program 50 years ago.
In a 48-page report issued on Monday as a result of a request in 2006 by 14 senators, the internal investigative office said the activities appeared limited to the headquarters press office.
No evidence was found showing that officials higher at NASA or in the Bush administration were involved in interfering with the release of climate science information, the report said.
It also credited Michael Griffin, the agency administrator, for swiftly ordering a review and policy changes when the pattern came to light after articles in The New York Times early in 2006.
The report, signed by Kevin H. Winters, assistant inspector general for investigations, criticized what it said was a sustained pattern of activities, largely supervised by senior political appointees, that included muting or withholding news releases on global warming and, at least in Dr. Hansen’s case, limiting a scientist’s interactions with reporters.
“Our investigation,” the report said, “found that during the fall of 2004 through early 2006, the NASA Headquarters Office of Public Affairs managed the topic of climate change in a manner that reduced, marginalized or mischaracterized climate change science made available to the general public.”
The report said most evidence supported contentions that politics was “inextricably interwoven” into operations at the public affairs office in that period and that the pattern was inconsistent with the statutory responsibility to communicate findings widely, “especially on a topic that has worldwide scientific interest.”
A NASA spokesman, Michael Cabbage, said: “The issues mentioned in the inspector general’s report are more than two years old, and after learning of those issues, NASA revised the agency’s policy for disseminating science information.”
Dean Acosta, who was deputy assistant administrator for public affairs at the agency when the problems surfaced, sharply attacked the credibility of the report. Mr. Acosta was appointed by President Bush in 2003 and resigned in 2007.
“My entire career has been dedicated to open and honest communications,” Mr. Acosta, who now is director of communications for the Boeing space-exploration business, wrote in an e-mail message. “The inspector general’s assertions are patently false. The report itself does nothing but raise questions about a three-year investigation that has yielded nothing but flimsy allegations aimed at hard-working public servants.”
Senator Frank R. Lautenberg, the New Jersey Democrat who wrote the request for the inquiry, had a markedly different reaction.
“Global warming is the most serious environmental threat we face, but this report is more evidence that the Bush administration’s appointees have put political ideology ahead of science,” Mr. Lautenberg said in an e-mailed statement. “Our government’s response to global warming must be based on science, and the Bush administration’s manipulation of that information violates the public trust.”
John Schwartz contributed reporting.
Senate Opens Debate on Politically Risky Bill Addressing Global Warming - 060308 NY Times
http://www.nytimes.com/2008/06/03/washington/03climate.html?pagewanted=print
June 3, 2008
Senate Opens Debate on Politically Risky Bill Addressing Global Warming
By JOHN M. BRODER, NY Times
WASHINGTON — The Senate on Monday opened a raucous debate over climate change legislation even though it will put supporters of the bill, including all three presidential candidates, on the spot — essentially forcing them to come out in favor of high energy costs at a time when American consumers are paying record fuel prices.
While the three candidates are on record favoring legislative action on global warming, the Bush administration opposes a far-reaching bill.
The measure’s sponsors say the nation must take immediate action to reduce dependence on fossil fuels and cut carbon emissions, but many senators in both parties see the legislation as an expensive long-term plan that would do little to solve today’s energy supply and price problems. In fact, the legislation is not expected to pass in the Senate this year.
The debate, which could last all week, will force senators to take a stand on some of the most difficult, expensive and potentially life-altering questions the world will face in coming decades.
And lawmakers on Monday embraced the challenge, voting 74 to 14 in favor of the first of several procedural steps needed to bring the bill to the Senate floor.
Thirteen Republicans, including the minority leader, Mitch McConnell of Kentucky, voted in opposition as did one Democrat, Robert C. Byrd, from the coal-producing state of West Virginia.
Proponents say the nation cannot afford to wait until fuel prices come down to begin to deal with these problems. Opponents argue that the bill would direct the largest changes in the American economy since the 1930s and should not be rushed through without painstaking debate.
“There’s a great feeling all across America by people in small villages and towns to large cities to state legislatures and others: we must move and move now,” Senator John W. Warner, Republican of Virginia and a co-sponsor of the bill, said as debate opened on the floor. “Do something. Doing nothing is not an option. Let us do something.”
But critics of the bill said it would do more harm than good.
“Any action has to provide real protections for the American economy and jobs, and we must protect the American families,” said Senator James M. Inhofe, Republican of Oklahoma. “Any action should not raise the cost of gasoline or energy to American families, particularly the low-income and elderly who are most susceptible to energy costs.”
The debate is shaping up as both a landmark moment and an opportunity for both sides to score political points. Opponents could pay a price for voting to block legislation that is intended to slow and ultimately reverse production of greenhouse gases that scientists warn are exacting an increasingly heavy environmental toll.
Even though high energy prices and an overheated political climate pose serious obstacles to such a far-reaching bill this year, whatever the Senate does will set the terms of the debate when a new Congress and president take office next January.
The heart of the bill is a plan to cap the production of greenhouse gases that scientists blame for the warming and, for the first time, force polluters to buy permits to emit carbon dioxide. For better or worse, putting a price on those emissions could be a wrenching change.
All three major presidential candidates have expressed support for the cap-and-trade concept that underlies this legislation, but all have said they would like to see changes in the current bill. The Democratic candidates, Senators Hillary Rodham Clinton and Barack Obama, would like to see its pollution targets strengthened, while Senator John McCain, a Republican, is demanding that it provide more help for the nuclear power industry.
All three candidates said that their schedules for the week were in flux but that they would participate in debates and votes if they were in Washington.
The bill’s chief promoter, Senator Barbara Boxer, Democrat of California, said that the Bush administration had failed to address either energy costs or global warming and that Congress had to step into the breach now.
“There were a lot of voices saying, ‘Why do this now? Why do we have to do this now?’ ” Mrs. Boxer said, opening the Democrats’ argument for the bill. “Because it is, in fact, one of the greatest challenges of our generation and we have to respond with a landmark bill, and it will take us awhile and we must get started.”
The bill is a revision of a plan proposed last year by Mr. Warner and Senator Joseph I. Lieberman, independent of Connecticut.
The measure would reduce American production of climate-altering gases by nearly 70 percent from current levels by 2050. It would provide billions of dollars in subsidies for energy conservation and environmentally clean technologies, creating millions of jobs, proponents say.
The sale of the permits would raise more than $5 trillion for the government in the coming decades, money that the bill proposes to distribute to affected industries, consumers and local governments in one of the biggest programs of redistribution of American wealth in history. The bill’s proponents say the money would help pay for a technological leap that would create millions of new jobs while cleaning the atmosphere.
Given the timing and the range of opposition, it appears unlikely that the bill will pass the Senate. (Similar efforts are under way in the House.) President Bush has stated opposition to the mandatory emissions limits and numerous other provisions.
But history shows that far-reaching environmental legislation often gets off to a slow start, then passes both houses of Congress and is signed into law when the political time is ripe. “If we get a majority or even close, we will be that much closer to addressing global warming and passing legislation in the next Congress, whoever the president is,” said David Doniger, director of climate policy at the Natural Resources Defense Council. “We may not get it done this year, but if not we start next year just a few steps from the finish line.”
Senator Bob Corker, a freshman Republican from Tennessee, said in an interview that he favored a cap-and-trade program in theory but found serious flaws in the bill. He will be among those seeking to derail it.
“This bill is not going to become law,” Mr. Corker said. “It has no chance, none.”
Mr. Corker is proposing a string of amendments that Democrats characterize as “poison pills” that would undermine the purpose of the legislation. His amendments would return more of the receipts from the carbon permits directly to taxpayers, eliminate the issuance of free permits and do away with the ability of American companies to meet their emissions targets by buying offsets overseas.
One of the major points of contention arises from the bill’s treatment of goods from developing countries that are among the world’s biggest carbon emitters, including China, India, Brazil and Mexico.
The measure directs the president to negotiate agreements with those countries to ensure they are imposing binding limits on carbon emissions on their own industries. If they fail to do so, the United States will impose unspecified tariffs on carbon-intensive products like steel, paper, concrete and glass from those countries. The provision was included at the behest of labor unions and American companies in those industries who would not support the bill without such a cost equalizer.
In a speech on global warming in mid-May, Mr. McCain endorsed a similar carbon tariff, then backed away from it because of objections from the free-trade wing of the Republican Party. Mrs. Clinton and Mr. Obama, courting labor support, favor tough carbon-based tariffs.
Frank Ackerman, an economist at the Global Development and Environment Institute at Tufts University, said that the nation had lost crucial time in not addressing climate change and that other nations were bypassing the United States in the development of alternative energy technologies. Mr. Ackerman acknowledged that the conversion to a low-carbon economy will be costly for many industries and consumers, but said that the cost of inaction is many times greater.
“How do you price the increased deaths, the losses of endangered species and unique habitats, the increased damages from hurricanes that are becoming more intense?” he asked. “Those numbers dwarf any reasonable estimate of the cost of doing something about climate change. The choice is a no-brainer.”
David M. Herszenhorn contributed reporting
June 3, 2008
Senate Opens Debate on Politically Risky Bill Addressing Global Warming
By JOHN M. BRODER, NY Times
WASHINGTON — The Senate on Monday opened a raucous debate over climate change legislation even though it will put supporters of the bill, including all three presidential candidates, on the spot — essentially forcing them to come out in favor of high energy costs at a time when American consumers are paying record fuel prices.
While the three candidates are on record favoring legislative action on global warming, the Bush administration opposes a far-reaching bill.
The measure’s sponsors say the nation must take immediate action to reduce dependence on fossil fuels and cut carbon emissions, but many senators in both parties see the legislation as an expensive long-term plan that would do little to solve today’s energy supply and price problems. In fact, the legislation is not expected to pass in the Senate this year.
The debate, which could last all week, will force senators to take a stand on some of the most difficult, expensive and potentially life-altering questions the world will face in coming decades.
And lawmakers on Monday embraced the challenge, voting 74 to 14 in favor of the first of several procedural steps needed to bring the bill to the Senate floor.
Thirteen Republicans, including the minority leader, Mitch McConnell of Kentucky, voted in opposition as did one Democrat, Robert C. Byrd, from the coal-producing state of West Virginia.
Proponents say the nation cannot afford to wait until fuel prices come down to begin to deal with these problems. Opponents argue that the bill would direct the largest changes in the American economy since the 1930s and should not be rushed through without painstaking debate.
“There’s a great feeling all across America by people in small villages and towns to large cities to state legislatures and others: we must move and move now,” Senator John W. Warner, Republican of Virginia and a co-sponsor of the bill, said as debate opened on the floor. “Do something. Doing nothing is not an option. Let us do something.”
But critics of the bill said it would do more harm than good.
“Any action has to provide real protections for the American economy and jobs, and we must protect the American families,” said Senator James M. Inhofe, Republican of Oklahoma. “Any action should not raise the cost of gasoline or energy to American families, particularly the low-income and elderly who are most susceptible to energy costs.”
The debate is shaping up as both a landmark moment and an opportunity for both sides to score political points. Opponents could pay a price for voting to block legislation that is intended to slow and ultimately reverse production of greenhouse gases that scientists warn are exacting an increasingly heavy environmental toll.
Even though high energy prices and an overheated political climate pose serious obstacles to such a far-reaching bill this year, whatever the Senate does will set the terms of the debate when a new Congress and president take office next January.
The heart of the bill is a plan to cap the production of greenhouse gases that scientists blame for the warming and, for the first time, force polluters to buy permits to emit carbon dioxide. For better or worse, putting a price on those emissions could be a wrenching change.
All three major presidential candidates have expressed support for the cap-and-trade concept that underlies this legislation, but all have said they would like to see changes in the current bill. The Democratic candidates, Senators Hillary Rodham Clinton and Barack Obama, would like to see its pollution targets strengthened, while Senator John McCain, a Republican, is demanding that it provide more help for the nuclear power industry.
All three candidates said that their schedules for the week were in flux but that they would participate in debates and votes if they were in Washington.
The bill’s chief promoter, Senator Barbara Boxer, Democrat of California, said that the Bush administration had failed to address either energy costs or global warming and that Congress had to step into the breach now.
“There were a lot of voices saying, ‘Why do this now? Why do we have to do this now?’ ” Mrs. Boxer said, opening the Democrats’ argument for the bill. “Because it is, in fact, one of the greatest challenges of our generation and we have to respond with a landmark bill, and it will take us awhile and we must get started.”
The bill is a revision of a plan proposed last year by Mr. Warner and Senator Joseph I. Lieberman, independent of Connecticut.
The measure would reduce American production of climate-altering gases by nearly 70 percent from current levels by 2050. It would provide billions of dollars in subsidies for energy conservation and environmentally clean technologies, creating millions of jobs, proponents say.
The sale of the permits would raise more than $5 trillion for the government in the coming decades, money that the bill proposes to distribute to affected industries, consumers and local governments in one of the biggest programs of redistribution of American wealth in history. The bill’s proponents say the money would help pay for a technological leap that would create millions of new jobs while cleaning the atmosphere.
Given the timing and the range of opposition, it appears unlikely that the bill will pass the Senate. (Similar efforts are under way in the House.) President Bush has stated opposition to the mandatory emissions limits and numerous other provisions.
But history shows that far-reaching environmental legislation often gets off to a slow start, then passes both houses of Congress and is signed into law when the political time is ripe. “If we get a majority or even close, we will be that much closer to addressing global warming and passing legislation in the next Congress, whoever the president is,” said David Doniger, director of climate policy at the Natural Resources Defense Council. “We may not get it done this year, but if not we start next year just a few steps from the finish line.”
Senator Bob Corker, a freshman Republican from Tennessee, said in an interview that he favored a cap-and-trade program in theory but found serious flaws in the bill. He will be among those seeking to derail it.
“This bill is not going to become law,” Mr. Corker said. “It has no chance, none.”
Mr. Corker is proposing a string of amendments that Democrats characterize as “poison pills” that would undermine the purpose of the legislation. His amendments would return more of the receipts from the carbon permits directly to taxpayers, eliminate the issuance of free permits and do away with the ability of American companies to meet their emissions targets by buying offsets overseas.
One of the major points of contention arises from the bill’s treatment of goods from developing countries that are among the world’s biggest carbon emitters, including China, India, Brazil and Mexico.
The measure directs the president to negotiate agreements with those countries to ensure they are imposing binding limits on carbon emissions on their own industries. If they fail to do so, the United States will impose unspecified tariffs on carbon-intensive products like steel, paper, concrete and glass from those countries. The provision was included at the behest of labor unions and American companies in those industries who would not support the bill without such a cost equalizer.
In a speech on global warming in mid-May, Mr. McCain endorsed a similar carbon tariff, then backed away from it because of objections from the free-trade wing of the Republican Party. Mrs. Clinton and Mr. Obama, courting labor support, favor tough carbon-based tariffs.
Frank Ackerman, an economist at the Global Development and Environment Institute at Tufts University, said that the nation had lost crucial time in not addressing climate change and that other nations were bypassing the United States in the development of alternative energy technologies. Mr. Ackerman acknowledged that the conversion to a low-carbon economy will be costly for many industries and consumers, but said that the cost of inaction is many times greater.
“How do you price the increased deaths, the losses of endangered species and unique habitats, the increased damages from hurricanes that are becoming more intense?” he asked. “Those numbers dwarf any reasonable estimate of the cost of doing something about climate change. The choice is a no-brainer.”
David M. Herszenhorn contributed reporting
Forest Disappearing in Papua New Guinea - 060308 NY Times
http://www.nytimes.com/2008/06/03/science/earth/03fore.html?pagewanted=print
June 3, 2008
Forest Disappearing in Papua New Guinea
By ANDREW C. REVKIN
A new satellite analysis of logging in Papua New Guinea shows that the country has been losing about 1,400 square miles of rain forest, or about 1.4 percent of its total forest cover, each year.
At that pace, by 2021 more than 80 percent of the country’s accessible forest, and more than half of its total forest area, would be badly degraded or cleared, according to the study. It was conducted by scientists at the University of Papua New Guinea and Australian National University.
Logging and road building are already leading to erosion and fragmentation of ecosystems harboring some of the world’s most varied, and least-studied, wildlife, said Phil Shearman, the lead author and director of the Remote Sensing Center of the University of Papua New Guinea. The study is available online at gis.mortonblacketer.com.au/upngis/.
In an e-mail message, Mr. Shearman said there was still plenty of potential for cut areas to regenerate, but only if policies were changed to end what is essentially uncontrolled “timber mining.” He added that more would also have to be done to help fast-growing communities shift from continually clearing new forest areas for cropland to using less damaging farming methods.
The study was released Monday in Port Moresby at a conference on climate and forests. In international climate talks, New Guinea has been pushing for wealthy countries worried about global warming to pay forested countries to shift from cutting to conservation. Mr. Shearman said he was worried that all the accessible forests would be gone by the time such initiatives were worked out.
(For more images and background, and to comment, visit nytimes.com/dotearth.)
In a written introduction to the report, Belden Namah, New Guinea’s minister for forests and an owner of timber holdings, endorsed it as a necessary “bitter pill that we need to swallow to ensure that we maintain our forests into the foreseeable future.”
“If in 50 years, PNG is left only with scraps of forest inside national parks,” he wrote, “then we have failed.”
June 3, 2008
Forest Disappearing in Papua New Guinea
By ANDREW C. REVKIN
A new satellite analysis of logging in Papua New Guinea shows that the country has been losing about 1,400 square miles of rain forest, or about 1.4 percent of its total forest cover, each year.
At that pace, by 2021 more than 80 percent of the country’s accessible forest, and more than half of its total forest area, would be badly degraded or cleared, according to the study. It was conducted by scientists at the University of Papua New Guinea and Australian National University.
Logging and road building are already leading to erosion and fragmentation of ecosystems harboring some of the world’s most varied, and least-studied, wildlife, said Phil Shearman, the lead author and director of the Remote Sensing Center of the University of Papua New Guinea. The study is available online at gis.mortonblacketer.com.au/upngis/.
In an e-mail message, Mr. Shearman said there was still plenty of potential for cut areas to regenerate, but only if policies were changed to end what is essentially uncontrolled “timber mining.” He added that more would also have to be done to help fast-growing communities shift from continually clearing new forest areas for cropland to using less damaging farming methods.
The study was released Monday in Port Moresby at a conference on climate and forests. In international climate talks, New Guinea has been pushing for wealthy countries worried about global warming to pay forested countries to shift from cutting to conservation. Mr. Shearman said he was worried that all the accessible forests would be gone by the time such initiatives were worked out.
(For more images and background, and to comment, visit nytimes.com/dotearth.)
In a written introduction to the report, Belden Namah, New Guinea’s minister for forests and an owner of timber holdings, endorsed it as a necessary “bitter pill that we need to swallow to ensure that we maintain our forests into the foreseeable future.”
“If in 50 years, PNG is left only with scraps of forest inside national parks,” he wrote, “then we have failed.”
Ban Says Food Production Must Rise - 060308 NY Times
http://www.nytimes.com/aponline/world/AP-UN-Food-Crisis.html?pagewanted=print
June 3, 2008
U.N. Chief Warns on Food Production
By THE ASSOCIATED PRESS
Filed at 7:54 a.m. ET
ROME (AP) -- World food production must rise by 50 percent by 2030 to meet increasing demand, U.N. chief Ban Ki-moon told world leaders Tuesday at a summit grappling with hunger and civil unrest caused by food price hikes.
The secretary-general told the Rome summit that nations must minimize export restrictions and import tariffs during the food price crisis and quickly resolve world trade talks.
''The world needs to produce more food,'' Ban said.
The Rome-based U.N. Food and Agriculture Organization is hosting the three-day summit to try to solve the short-term emergency of increased hunger caused by soaring prices and to help poor countries grow enough food to feed their own.
In a message read to the delegates, Pope Benedict XVI said ''hunger and malnutrition are unacceptable in a world which, in reality, has sufficient production levels, the resources, and the know-how to put an end to these tragedies and their consequences.''
The Pope told the world leaders that millions of people at threat in countries with security concerns were looking to them for solutions.
Ban said a U.N. task force he set up to deal with the crisis is recommending the nations ''improve vulnerable people's access to food and take immediate steps to increase food availability in their communities.''
That means increasing food aid, supplying small farmers with seed and fertilizer in time for this year's planting seasons, and reducing trade restrictions to help the free flow of agricultural goods.
''Some countries have taken action by limiting exports or by imposing price controls,'' Ban said. ''They only distort markets and force prices even higher.''
The increasing diversion of food and animal feed to produce biofuel, and sharply higher fuel costs have also helped to shoot prices upward, experts say.
The United Nations is encouraging summit participants to start undoing a decades-long legacy of agricultural and trade policies that many blame for the failure of small farmers in poor countries to feed their own people.
Wealthy nations' subsidizing their own farmers makes it harder for small farmers in poor countries to compete in global markets, critics of such subsidies say. Jim Butler, the FAO's deputy director-general, said in an interview ahead of the gathering that a draft document that could be the basis for a final summit declaration doesn't promise to overhaul subsidy policy.
Congress last month passed a five-year farm bill heavy on subsidies, bucking White House objections that such aid in the middle of a global food crisis wasn't warranted.
The head of the summit's U.S. delegation, Agriculture Secretary Ed Schafer, insisted on Monday that biofuels will contribute only 2 or 3 percent to a predicted 43 percent rise in prices this year.
Figures by other international organizations, including the International Monetary Fund, show that the increased demand for biofuels is contributing by 15-30 percent to food price increases, said Frederic Mousseau, a policy adviser at Oxfam, a British aid group.
''Food stocks are at their lowest in 25 years, so the market is very vulnerable to any policy changes'' such as U.S. or European Union subsidizing biofuels or mandating greater use of this energy source, Mousseau said.
Brazil is another large exporter of biofuels, and President Luiz Ignacio Lula da Silva was expected to defend biofuels at the summit.
Several participants won't even be talking to each other at the summit.
Australia's foreign minister decried as ''obscene'' Zimbabwean President Robert Mugabe's participation in the summit. The longtime African leader has presided over the virtual transformation of his country from former breadbasket to agricultural basket case.
Zimbabweans increasingly are unable to afford food and other essentials with agriculture paralyzed by land reform and the world's highest rate of inflation.
The Dutch ministry for overseas development pledged to ''ignore'' Mugabe during the summit.
EU sanctions against Mugabe because of Zimbabwe's poor human rights record forbid him from setting foot in the bloc's 27 nations, but those restrictions don't apply to U.N. forums.
Jewish leaders and some Italian politicians were among those denouncing Iranian President Mahmoud Ahmadinejad's attendance at the meeting. On Monday, Ahmadinejad repeated his call for the destruction of Israel, which is also participating in the summit.
Ahmadinejad was scheduled to give a summit news conference Tuesday afternoon.
Schafer, asked about the presence of the Zimbabwean and Iranian leaders, told reporters in Rome that the two were welcome to attend the summit, but that U.S. delegates would not be meeting with them.
June 3, 2008
U.N. Chief Warns on Food Production
By THE ASSOCIATED PRESS
Filed at 7:54 a.m. ET
ROME (AP) -- World food production must rise by 50 percent by 2030 to meet increasing demand, U.N. chief Ban Ki-moon told world leaders Tuesday at a summit grappling with hunger and civil unrest caused by food price hikes.
The secretary-general told the Rome summit that nations must minimize export restrictions and import tariffs during the food price crisis and quickly resolve world trade talks.
''The world needs to produce more food,'' Ban said.
The Rome-based U.N. Food and Agriculture Organization is hosting the three-day summit to try to solve the short-term emergency of increased hunger caused by soaring prices and to help poor countries grow enough food to feed their own.
In a message read to the delegates, Pope Benedict XVI said ''hunger and malnutrition are unacceptable in a world which, in reality, has sufficient production levels, the resources, and the know-how to put an end to these tragedies and their consequences.''
The Pope told the world leaders that millions of people at threat in countries with security concerns were looking to them for solutions.
Ban said a U.N. task force he set up to deal with the crisis is recommending the nations ''improve vulnerable people's access to food and take immediate steps to increase food availability in their communities.''
That means increasing food aid, supplying small farmers with seed and fertilizer in time for this year's planting seasons, and reducing trade restrictions to help the free flow of agricultural goods.
''Some countries have taken action by limiting exports or by imposing price controls,'' Ban said. ''They only distort markets and force prices even higher.''
The increasing diversion of food and animal feed to produce biofuel, and sharply higher fuel costs have also helped to shoot prices upward, experts say.
The United Nations is encouraging summit participants to start undoing a decades-long legacy of agricultural and trade policies that many blame for the failure of small farmers in poor countries to feed their own people.
Wealthy nations' subsidizing their own farmers makes it harder for small farmers in poor countries to compete in global markets, critics of such subsidies say. Jim Butler, the FAO's deputy director-general, said in an interview ahead of the gathering that a draft document that could be the basis for a final summit declaration doesn't promise to overhaul subsidy policy.
Congress last month passed a five-year farm bill heavy on subsidies, bucking White House objections that such aid in the middle of a global food crisis wasn't warranted.
The head of the summit's U.S. delegation, Agriculture Secretary Ed Schafer, insisted on Monday that biofuels will contribute only 2 or 3 percent to a predicted 43 percent rise in prices this year.
Figures by other international organizations, including the International Monetary Fund, show that the increased demand for biofuels is contributing by 15-30 percent to food price increases, said Frederic Mousseau, a policy adviser at Oxfam, a British aid group.
''Food stocks are at their lowest in 25 years, so the market is very vulnerable to any policy changes'' such as U.S. or European Union subsidizing biofuels or mandating greater use of this energy source, Mousseau said.
Brazil is another large exporter of biofuels, and President Luiz Ignacio Lula da Silva was expected to defend biofuels at the summit.
Several participants won't even be talking to each other at the summit.
Australia's foreign minister decried as ''obscene'' Zimbabwean President Robert Mugabe's participation in the summit. The longtime African leader has presided over the virtual transformation of his country from former breadbasket to agricultural basket case.
Zimbabweans increasingly are unable to afford food and other essentials with agriculture paralyzed by land reform and the world's highest rate of inflation.
The Dutch ministry for overseas development pledged to ''ignore'' Mugabe during the summit.
EU sanctions against Mugabe because of Zimbabwe's poor human rights record forbid him from setting foot in the bloc's 27 nations, but those restrictions don't apply to U.N. forums.
Jewish leaders and some Italian politicians were among those denouncing Iranian President Mahmoud Ahmadinejad's attendance at the meeting. On Monday, Ahmadinejad repeated his call for the destruction of Israel, which is also participating in the summit.
Ahmadinejad was scheduled to give a summit news conference Tuesday afternoon.
Schafer, asked about the presence of the Zimbabwean and Iranian leaders, told reporters in Rome that the two were welcome to attend the summit, but that U.S. delegates would not be meeting with them.
In Spain, Water Is a New Battleground - 060308 NY Times
http://www.nytimes.com/2008/06/03/world/europe/03dry.html?pagewanted=print
In Spain, Water Is a New Battleground
By ELISABETH ROSENTHAL, NY Times
FORTUNA, Spain — Lush fields of lettuce and hothouses of tomatoes line the roads. Verdant new developments of plush pastel vacation homes beckon buyers from Britain and Germany. Golf courses — dozens of them, all recently built — give way to the beach. At last, this hardscrabble corner of southeast Spain is thriving.
There is only one problem with the picture of bounty: this province, Murcia, is running out of water. Swaths of southeast Spain are steadily turning into desert, a process spurred on by global warming and poorly planned development.
Murcia, traditionally a poor farming region, has undergone a resort-building boom in recent years, even as many of its farmers have switched to more thirsty crops, encouraged by water transfer plans, which have become increasingly untenable. The combination has put new pressures on the land and its dwindling supply of water.
This year, farmers are fighting developers over water rights. They are fighting one another over who gets to water their crops. And in a sign of their mounting desperation, they are buying and selling water like gold on a rapidly growing black market, mostly from illegal wells.
Southern Spain has long been plagued by cyclical droughts, but the current crisis, scientists say, probably reflects a more permanent climate change brought on by global warming. And it is a harbinger of a new kind of conflict.
The battles of yesterday were fought over land, they warn. Those of the present center on oil. But those of the future — a future made hotter and drier by climate change in much of the world — seem likely to focus on water, they say.
“Water will be the environmental issue this year — the problem is urgent and immediate,” said Barbara Helferrich, a spokeswoman for the European Union’s Environment Directorate. “If you already have water shortages in spring, you know it’s going to be a really bad summer.”
Dozens of world leaders will be meeting at the United Nations Food and Agriculture Organization headquarters in Rome starting Tuesday to address a global food crisis caused in part by water shortages in Africa, Australia and here in southern Spain.
Climate change means that creeping deserts may eventually drive 135 million people off their land, the United Nations estimates. Most of them are in the developing world. But Southern Europe is experiencing the problem now, its climate drying to the point that it is becoming more like Africa’s, scientists say.
For Murcia, the arrival of the water crisis has been accelerated by developers and farmers who have hewed to water-hungry ventures highly unsuited to a drier, warmer climate: crops like lettuce that need ample irrigation, resorts that promise a swimming pool in the yard, acres of freshly sodded golf courses that sop up millions of gallons a day.
“I come under a lot of pressure to release water from farmers and also from developers,” said Antonio Pérez Gracia, the water manager here in Fortuna, sipping coffee with farmers in a bar in the town’s dusty square. He rued the fact that he could provide each property owner with only 30 percent of its government-determined water allotment.
“I’m not sure what we’ll do this summer,” he added, noting that the local aquifer was sinking so quickly that the pumps would not reach it soon. “I come under a lot of pressure to release water, from farmers and also from developers. They can complain as much as they want, but if there’s no more water, there’s no more water.”
Rubén Vives, a farmer who relies on Mr. Pérez Gracia’s largess, said he could not afford the black market water prices. “This year, my livelihood is in danger,” said Mr. Vives, who has farmed low-water crops like lemons here for nearly two decades.
The hundreds of thousands of wells — most of them illegal — that have in the past provided a temporary reprieve from thirst have depleted underground water to the point of no return. Water from northern Spain that was once transferred here has also slowed to a trickle, as wetter northern provinces are drying up, too.
The scramble for water has set off scandals. Local officials are in prison for taking payoffs to grant building permits in places where there is not adequate water. Chema Gil, a journalist who exposed one such scheme, has been subject to death threats, carries pepper spray and is guarded day and night by the Guardia Civil, a police force with military and civilian functions.
“The model of Murcia is completely unsustainable,” Mr. Gil said. “We consume two and a half times more water than the system can recover. So where do you get it? Import it from elsewhere? Dry up the aquifer? With climate change we’re heading into a cul-de-sac. All the water we’re using to water lettuce and golf courses will be needed just to drink.”
Facing a national crisis, Spain has become something of an unwitting laboratory, sponsoring a European conference on water issues this summer and announcing a national action plan this year to fight desertification. That plan includes a shift to more efficient methods of irrigation, as well as an extensive program of desalinization plants to provide the fresh water that nature does not.
The Spanish Environment Ministry estimates that one-third of the county is at risk of turning into desert from a combination of climate change and poor land use.
Still, national officials visibly stiffen when asked about the “Africanization” of Spain’s climate — a term now common among scientists.
“We are in much better shape than Africa, but within the E.U. our situation is serious,” said Antonio Serrano Rodríguez, the secretary general for land and biodiversity at Spain’s Environment Ministry.
Still, Mr. Serrano and others acknowledge the broad outlines of the problem. “There will be places that can’t be farmed any more, that were marginal and are now useless,” Mr. Serrano said. “We have parts of the country that are close to the limit.”
While southern Spain has always been dry and plagued by cyclical droughts, the average surface temperature in Spain has risen 2.7 degrees compared with about 1.4 degrees globally since 1880, records show.
Rainfall here is predicted to fall 20 percent from this year to 2020, and 40 percent by 2070, according to United Nations projections.
The changes on the Almarcha family farm in Albanilla over the past three decades are a testament to that hotter, drier climate here. Until two decades ago, the farm grew wheat and barley, watered only by rain. As rainfall dropped, Carlo Almarcha, 51, switched to growing almonds.
About 10 years ago, he quit almonds and changed to organic peaches and pears, “since they need less water,” he explained. Recently he took up olives and figs, “which resist drought and are less sensitive to weather.”
Mr. Almarcha participates in a government water trading system, started last year, in which farmers pay three times the normal price — 33 cents instead of 12 per cubic meter — to get extra water. The black market rate is even higher. Still, his outlook is bleak.
“You used to know that this week in spring there will be rain,” he said, standing in his work boots on parched soil of an olive grove that was once a wheat field. “Now you never know when or if it will come. Also, there’s no winter any more and plants need cold to rest. So there’s less growth. Sometimes none. Even plants all seem confused.”
While Mr. Almarcha has gradually moved toward less thirsty crops, the government’s previous water transfer plans have moved many farmers in the opposite direction. The farmers have shifted to producing a wide range of water-hungry fruits and vegetables that had never been grown in the south. Murcia is traditionally known for figs and date palms.
“You can’t grow strawberries naturally in Huelva — it’s too hot,” said Raquel Montón, a climate specialist at Greenpeace in Madrid, referring to the nearby strawberry capital of Spain. “In Sarragosa, which is a desert, we grow corn, the most water-thirsty crop. It’s insane. The only thing that would be more insane is putting up casinos and golf courses.” Which, of course, Murcia has.
In 2001, a new land use law in Murcia made it far easier for residents to sell land for resort development. Though southern Spain has long had elaborate systems for managing its relatively scarce water, today everyone, it seems, has found ways to get around them.
Grass on golf courses or surrounding villas is sometimes labeled a “crop,” making owners eligible for water that would not be allocated to keep leisure space green. Foreign investors plant a few trees and call their vacation homes “farms” so they are eligible for irrigation water, Mr. Pérez Gracia said.
“Once a property owner’s got a water allotment, he asks for a change of land use,” he explained. “Then he’s got his property and he’s got his water. It’s supposed to be for irrigation, but people use it for what they want. No one knows if it goes to a swimming pool.”
While he said his “heart goes out to the real farmers,” he did not have the personnel to monitor how people use their allotments.
With so much money to be made, officials set aside laws and policies that might encourage sustainable development, Mr. Gil, the journalist, said. At first, he was vilified in the community when he wrote articles critical of the developments. Recently, as people are discovering that the water is running out, the attitude is shifting.
But even so, people and politicians tend to regard water as a limitless resource. “Politicians think in four-year blocks, so it’s O.K. as long as it doesn’t run out on their watch,” said Ms. Montón of Greenpeace. “People think about it, but they don’t really think about what happens tomorrow. They don’t worry until they turn on the tap and nothing flows.”
In Spain, Water Is a New Battleground
By ELISABETH ROSENTHAL, NY Times
FORTUNA, Spain — Lush fields of lettuce and hothouses of tomatoes line the roads. Verdant new developments of plush pastel vacation homes beckon buyers from Britain and Germany. Golf courses — dozens of them, all recently built — give way to the beach. At last, this hardscrabble corner of southeast Spain is thriving.
There is only one problem with the picture of bounty: this province, Murcia, is running out of water. Swaths of southeast Spain are steadily turning into desert, a process spurred on by global warming and poorly planned development.
Murcia, traditionally a poor farming region, has undergone a resort-building boom in recent years, even as many of its farmers have switched to more thirsty crops, encouraged by water transfer plans, which have become increasingly untenable. The combination has put new pressures on the land and its dwindling supply of water.
This year, farmers are fighting developers over water rights. They are fighting one another over who gets to water their crops. And in a sign of their mounting desperation, they are buying and selling water like gold on a rapidly growing black market, mostly from illegal wells.
Southern Spain has long been plagued by cyclical droughts, but the current crisis, scientists say, probably reflects a more permanent climate change brought on by global warming. And it is a harbinger of a new kind of conflict.
The battles of yesterday were fought over land, they warn. Those of the present center on oil. But those of the future — a future made hotter and drier by climate change in much of the world — seem likely to focus on water, they say.
“Water will be the environmental issue this year — the problem is urgent and immediate,” said Barbara Helferrich, a spokeswoman for the European Union’s Environment Directorate. “If you already have water shortages in spring, you know it’s going to be a really bad summer.”
Dozens of world leaders will be meeting at the United Nations Food and Agriculture Organization headquarters in Rome starting Tuesday to address a global food crisis caused in part by water shortages in Africa, Australia and here in southern Spain.
Climate change means that creeping deserts may eventually drive 135 million people off their land, the United Nations estimates. Most of them are in the developing world. But Southern Europe is experiencing the problem now, its climate drying to the point that it is becoming more like Africa’s, scientists say.
For Murcia, the arrival of the water crisis has been accelerated by developers and farmers who have hewed to water-hungry ventures highly unsuited to a drier, warmer climate: crops like lettuce that need ample irrigation, resorts that promise a swimming pool in the yard, acres of freshly sodded golf courses that sop up millions of gallons a day.
“I come under a lot of pressure to release water from farmers and also from developers,” said Antonio Pérez Gracia, the water manager here in Fortuna, sipping coffee with farmers in a bar in the town’s dusty square. He rued the fact that he could provide each property owner with only 30 percent of its government-determined water allotment.
“I’m not sure what we’ll do this summer,” he added, noting that the local aquifer was sinking so quickly that the pumps would not reach it soon. “I come under a lot of pressure to release water, from farmers and also from developers. They can complain as much as they want, but if there’s no more water, there’s no more water.”
Rubén Vives, a farmer who relies on Mr. Pérez Gracia’s largess, said he could not afford the black market water prices. “This year, my livelihood is in danger,” said Mr. Vives, who has farmed low-water crops like lemons here for nearly two decades.
The hundreds of thousands of wells — most of them illegal — that have in the past provided a temporary reprieve from thirst have depleted underground water to the point of no return. Water from northern Spain that was once transferred here has also slowed to a trickle, as wetter northern provinces are drying up, too.
The scramble for water has set off scandals. Local officials are in prison for taking payoffs to grant building permits in places where there is not adequate water. Chema Gil, a journalist who exposed one such scheme, has been subject to death threats, carries pepper spray and is guarded day and night by the Guardia Civil, a police force with military and civilian functions.
“The model of Murcia is completely unsustainable,” Mr. Gil said. “We consume two and a half times more water than the system can recover. So where do you get it? Import it from elsewhere? Dry up the aquifer? With climate change we’re heading into a cul-de-sac. All the water we’re using to water lettuce and golf courses will be needed just to drink.”
Facing a national crisis, Spain has become something of an unwitting laboratory, sponsoring a European conference on water issues this summer and announcing a national action plan this year to fight desertification. That plan includes a shift to more efficient methods of irrigation, as well as an extensive program of desalinization plants to provide the fresh water that nature does not.
The Spanish Environment Ministry estimates that one-third of the county is at risk of turning into desert from a combination of climate change and poor land use.
Still, national officials visibly stiffen when asked about the “Africanization” of Spain’s climate — a term now common among scientists.
“We are in much better shape than Africa, but within the E.U. our situation is serious,” said Antonio Serrano Rodríguez, the secretary general for land and biodiversity at Spain’s Environment Ministry.
Still, Mr. Serrano and others acknowledge the broad outlines of the problem. “There will be places that can’t be farmed any more, that were marginal and are now useless,” Mr. Serrano said. “We have parts of the country that are close to the limit.”
While southern Spain has always been dry and plagued by cyclical droughts, the average surface temperature in Spain has risen 2.7 degrees compared with about 1.4 degrees globally since 1880, records show.
Rainfall here is predicted to fall 20 percent from this year to 2020, and 40 percent by 2070, according to United Nations projections.
The changes on the Almarcha family farm in Albanilla over the past three decades are a testament to that hotter, drier climate here. Until two decades ago, the farm grew wheat and barley, watered only by rain. As rainfall dropped, Carlo Almarcha, 51, switched to growing almonds.
About 10 years ago, he quit almonds and changed to organic peaches and pears, “since they need less water,” he explained. Recently he took up olives and figs, “which resist drought and are less sensitive to weather.”
Mr. Almarcha participates in a government water trading system, started last year, in which farmers pay three times the normal price — 33 cents instead of 12 per cubic meter — to get extra water. The black market rate is even higher. Still, his outlook is bleak.
“You used to know that this week in spring there will be rain,” he said, standing in his work boots on parched soil of an olive grove that was once a wheat field. “Now you never know when or if it will come. Also, there’s no winter any more and plants need cold to rest. So there’s less growth. Sometimes none. Even plants all seem confused.”
While Mr. Almarcha has gradually moved toward less thirsty crops, the government’s previous water transfer plans have moved many farmers in the opposite direction. The farmers have shifted to producing a wide range of water-hungry fruits and vegetables that had never been grown in the south. Murcia is traditionally known for figs and date palms.
“You can’t grow strawberries naturally in Huelva — it’s too hot,” said Raquel Montón, a climate specialist at Greenpeace in Madrid, referring to the nearby strawberry capital of Spain. “In Sarragosa, which is a desert, we grow corn, the most water-thirsty crop. It’s insane. The only thing that would be more insane is putting up casinos and golf courses.” Which, of course, Murcia has.
In 2001, a new land use law in Murcia made it far easier for residents to sell land for resort development. Though southern Spain has long had elaborate systems for managing its relatively scarce water, today everyone, it seems, has found ways to get around them.
Grass on golf courses or surrounding villas is sometimes labeled a “crop,” making owners eligible for water that would not be allocated to keep leisure space green. Foreign investors plant a few trees and call their vacation homes “farms” so they are eligible for irrigation water, Mr. Pérez Gracia said.
“Once a property owner’s got a water allotment, he asks for a change of land use,” he explained. “Then he’s got his property and he’s got his water. It’s supposed to be for irrigation, but people use it for what they want. No one knows if it goes to a swimming pool.”
While he said his “heart goes out to the real farmers,” he did not have the personnel to monitor how people use their allotments.
With so much money to be made, officials set aside laws and policies that might encourage sustainable development, Mr. Gil, the journalist, said. At first, he was vilified in the community when he wrote articles critical of the developments. Recently, as people are discovering that the water is running out, the attitude is shifting.
But even so, people and politicians tend to regard water as a limitless resource. “Politicians think in four-year blocks, so it’s O.K. as long as it doesn’t run out on their watch,” said Ms. Montón of Greenpeace. “People think about it, but they don’t really think about what happens tomorrow. They don’t worry until they turn on the tap and nothing flows.”
Monday, June 2, 2008
Think the Economy Is Bad? Wait Till the States Cut Back - 060108 NY Times
This of course will knock out most local plans for relocalization as there simply will be no available funds. It will also do a job on "enviornmentally friendly" infastructure upgrades. RK
http://www.nytimes.com/2008/06/01/weekinreview/01uchitelle.html?pagewanted=print
June 1, 2008
Think the Economy Is Bad? Wait Till the States Cut Back
By LOUIS UCHITELLE
Struggling as we are with the housing bust, the credit crunch, shrinking consumption, rising unemployment and faltering business investment, we can be forgiven for thinking that all the big shoes have dropped. There is another one up there, however, and it is about to come down.
State and city governments have yet to shrink the economy; indeed, they have even managed to prop it up. They have quietly maintained their spending at pre-crisis levels even as they warn of numerous cutbacks forced on them by declining tax revenues. The cutbacks, however, are written into budgets for a fiscal year that begins on July 1, a month away. In the meantime the states and cities, often drawing on rainy-day savings, have carried their share of the load for the national economy.
That share is gigantic. At $1.8 trillion annually in a $14 trillion economy, the states and municipalities spend almost twice as much as the federal government, including the cost of the Iraq war. When librarians, lifeguards, teachers, transit workers, road repair crews and health care workers disappear, or airport and school construction is halted, the economy trembles. None of that, or very little, has happened so far, not even in California, despite a significant decline in tax revenue.
“We are looking at a $4 billion cut to public schools and deep cuts that will result in thousands of Californians losing their health care,” said Jean Ross, executive director of the California Budget Project, offering a preview of coming hardships. “But the reality is we have not pulled money off the streets yet.”
Quite the opposite, the states and municipalities have increased their spending in recent quarters, bolstering the nation’s meager economic growth. Over the past year, they have added $40 billion to their outlays, even allowing for scattered spending freezes and a few cutbacks in advance of July 1. Total employment has also risen. But when the current fiscal year ends in 30 days (or in the fall for many municipalities), state and city spending will fall, along with employment — slowly at first and then quite noticeably after the next president takes office.
Sometime next year, the decline will reach an annual rate of $50 billion, Goldman Sachs estimates. “It is a big reason to expect a weak economy in 2009,” said Jan Hatzius, chief domestic economist at the firm.
The $90 billion swing — from more spending to less — could be enough to push down a weak economy to zero growth or less, because state and city spending has accounted for as much as half of total economic growth since last fall. (A robust economy has a growth rate of 3 percent to 4 percent, compared with the 0.9 percent or less of the last two quarters.) The $90 billion would certainly offset most of the $107 billion stimulus package now going out from the federal government to millions of Americans in the form of tax rebate checks. The hope is they will spend this windfall on consumption and in doing so sustain the economy. That might happen — for a while. But with the cutbacks in state and city outlays canceling out the consumption, the next president, struggling to revive a weak economy, will almost certainly have to consider a second stimulus package.
But what should it be? Should it be a reprise of the checks, relying again on private-sector spending for rejuvenation? Or should Washington channel extra federal money to city and state governments so they can sustain their outlays for the numerous programs that otherwise would be shrunk? The answer, even on Wall Street, is often: subsidize the states and cities.
“If you want to make sure that federal money gets spent, and jobs are created, you give it to them,” said Nigel Gault, chief domestic economist at Global Insight, a forecasting firm.
Like many others, Mr. Gault contends that more than 50 percent of the $107 billion in stimulus checks now going to households is likely to produce no stimulus at all. Instead, it will be used to pay down debt or buy imported goods and services. Imports bolster production in other countries; not in the United States.
Still, rebate checks have been a standard tool for years in efforts to revive the American economy. So have tax cuts and — the most popular tool of all — the Federal Reserve’s lowering of interest rates. Each tool assumes that people will respond to the incentive with more spending and investment, and markets will then work their magic. Not since the 1970s, when politicians still paid attention to the teachings of John Maynard Keynes, has public spending — government spending — surfaced in mainstream political debate as a potentially effective means of counteracting a downturn.
Government has to step in, Keynesians argue, when private spending is not enough to lift the economy, despite the nudge from tax cuts or lower interest rates or rebate checks. This downturn might be one of those moments, involving as it does the bursting of a huge housing bubble. That has precipitated sharp declines in various tax revenues on which the states and cities depend, forcing them into extraordinary spending cuts — not yet, of course, but after July 1.
The issue barely dents the presidential election campaign. The Republicans in particular are less than enthusiastic about Keynesian economics, with its use of government to rescue markets. They, and many mainstream economists, for that matter, argue that government is inefficient, bureaucratic, wasteful and unable to spend fast enough to counteract a downturn. The two Democratic candidates, in contrast, argue that a second stimulus package, if one is needed, should include federal subsidies to the states and municipalities, not to start new projects but to prevent cutbacks in existing ones.
No state seems more vulnerable than Florida, with its plunging home prices and slashed property-tax assessments, not yet on the books but soon to be. In anticipation, the legislature in May approved a $66.5 billion budget for the coming fiscal year, down from $72 billion in the current one.
Schools are a target, said Michael Sittig, executive director of the Florida League of Cities, “but none has been hurt yet. Nevertheless, everyone is scared. Everyone is in the mode of trying to figure out how to get through next year” — starting 30 days from now.
http://www.nytimes.com/2008/06/01/weekinreview/01uchitelle.html?pagewanted=print
June 1, 2008
Think the Economy Is Bad? Wait Till the States Cut Back
By LOUIS UCHITELLE
Struggling as we are with the housing bust, the credit crunch, shrinking consumption, rising unemployment and faltering business investment, we can be forgiven for thinking that all the big shoes have dropped. There is another one up there, however, and it is about to come down.
State and city governments have yet to shrink the economy; indeed, they have even managed to prop it up. They have quietly maintained their spending at pre-crisis levels even as they warn of numerous cutbacks forced on them by declining tax revenues. The cutbacks, however, are written into budgets for a fiscal year that begins on July 1, a month away. In the meantime the states and cities, often drawing on rainy-day savings, have carried their share of the load for the national economy.
That share is gigantic. At $1.8 trillion annually in a $14 trillion economy, the states and municipalities spend almost twice as much as the federal government, including the cost of the Iraq war. When librarians, lifeguards, teachers, transit workers, road repair crews and health care workers disappear, or airport and school construction is halted, the economy trembles. None of that, or very little, has happened so far, not even in California, despite a significant decline in tax revenue.
“We are looking at a $4 billion cut to public schools and deep cuts that will result in thousands of Californians losing their health care,” said Jean Ross, executive director of the California Budget Project, offering a preview of coming hardships. “But the reality is we have not pulled money off the streets yet.”
Quite the opposite, the states and municipalities have increased their spending in recent quarters, bolstering the nation’s meager economic growth. Over the past year, they have added $40 billion to their outlays, even allowing for scattered spending freezes and a few cutbacks in advance of July 1. Total employment has also risen. But when the current fiscal year ends in 30 days (or in the fall for many municipalities), state and city spending will fall, along with employment — slowly at first and then quite noticeably after the next president takes office.
Sometime next year, the decline will reach an annual rate of $50 billion, Goldman Sachs estimates. “It is a big reason to expect a weak economy in 2009,” said Jan Hatzius, chief domestic economist at the firm.
The $90 billion swing — from more spending to less — could be enough to push down a weak economy to zero growth or less, because state and city spending has accounted for as much as half of total economic growth since last fall. (A robust economy has a growth rate of 3 percent to 4 percent, compared with the 0.9 percent or less of the last two quarters.) The $90 billion would certainly offset most of the $107 billion stimulus package now going out from the federal government to millions of Americans in the form of tax rebate checks. The hope is they will spend this windfall on consumption and in doing so sustain the economy. That might happen — for a while. But with the cutbacks in state and city outlays canceling out the consumption, the next president, struggling to revive a weak economy, will almost certainly have to consider a second stimulus package.
But what should it be? Should it be a reprise of the checks, relying again on private-sector spending for rejuvenation? Or should Washington channel extra federal money to city and state governments so they can sustain their outlays for the numerous programs that otherwise would be shrunk? The answer, even on Wall Street, is often: subsidize the states and cities.
“If you want to make sure that federal money gets spent, and jobs are created, you give it to them,” said Nigel Gault, chief domestic economist at Global Insight, a forecasting firm.
Like many others, Mr. Gault contends that more than 50 percent of the $107 billion in stimulus checks now going to households is likely to produce no stimulus at all. Instead, it will be used to pay down debt or buy imported goods and services. Imports bolster production in other countries; not in the United States.
Still, rebate checks have been a standard tool for years in efforts to revive the American economy. So have tax cuts and — the most popular tool of all — the Federal Reserve’s lowering of interest rates. Each tool assumes that people will respond to the incentive with more spending and investment, and markets will then work their magic. Not since the 1970s, when politicians still paid attention to the teachings of John Maynard Keynes, has public spending — government spending — surfaced in mainstream political debate as a potentially effective means of counteracting a downturn.
Government has to step in, Keynesians argue, when private spending is not enough to lift the economy, despite the nudge from tax cuts or lower interest rates or rebate checks. This downturn might be one of those moments, involving as it does the bursting of a huge housing bubble. That has precipitated sharp declines in various tax revenues on which the states and cities depend, forcing them into extraordinary spending cuts — not yet, of course, but after July 1.
The issue barely dents the presidential election campaign. The Republicans in particular are less than enthusiastic about Keynesian economics, with its use of government to rescue markets. They, and many mainstream economists, for that matter, argue that government is inefficient, bureaucratic, wasteful and unable to spend fast enough to counteract a downturn. The two Democratic candidates, in contrast, argue that a second stimulus package, if one is needed, should include federal subsidies to the states and municipalities, not to start new projects but to prevent cutbacks in existing ones.
No state seems more vulnerable than Florida, with its plunging home prices and slashed property-tax assessments, not yet on the books but soon to be. In anticipation, the legislature in May approved a $66.5 billion budget for the coming fiscal year, down from $72 billion in the current one.
Schools are a target, said Michael Sittig, executive director of the Florida League of Cities, “but none has been hurt yet. Nevertheless, everyone is scared. Everyone is in the mode of trying to figure out how to get through next year” — starting 30 days from now.
Airline Group Sees ‘Desperate’ Times - 060308 NY Times
It sure was fun while it lasted! RK
"In the next 12 months we could face $99 billion in extra costs from oil.”
http://www.nytimes.com/2008/06/03/business/worldbusiness/03air.html?pagewanted=print
June 3, 2008
Airline Group Sees ‘Desperate’ Times
By CAROLINE BROTHERS and MATTHEW SALTMARSH
ISTANBUL — Citing high oil prices and the slowing economy, the International Air Transport Association on Monday sharply lowered its industry forecast for 2008, saying it now expected a collective loss of $2.3 billion.
In March, the group had forecast a profit of $4.5 billion.
At its annual meeting here, the association urged governments to roll back regulations that they argue are damaging the industry at a time when many carriers are in a “desperate” situation.
If price of oil, which is now just below $130 a barrel, averages $107 over 2008, the aviation industry would lose $2.3 billion for the year, the chief executive of the group, Giovanni Bisignani, said. Should it hold at $135 a barrel for the rest of the year, the industry will lose $6.1 billion.
“After enormous efficiency gains since 2001, there is no fat left and skyrocketing oil prices are changing everything,” Mr. Bisignani said. “The situation is desperate and potentially more destructive than our recent battles with all the Horsemen of the Apocalypse combined.”
Other problems facing the airlines, the group said, include uncertainty about the approach by the European Union and governments toward state aid and airline mergers.
The chief executive of British Airways, William M. Walsh, said: “We’re definitely as an industry in a crisis situation. With a softening in the economic environment, high oil prices, it’s inevitable that fares have to go up.”
Mr. Walsh added that he expected to see additional bankruptcies soon.
John Leahy, chief operating officer of the European plane maker Airbus, said that the sector could adjust to higher fuel prices “but it will take several years, and how many will be left standing?”
Hartmut Moers, an analyst at the bank Sal. Oppenheim in Frankfurt, said “The key short-term question is who is best hedged against the oil rise.”
“And then further out,” Mr. Moers said, “you look for the airlines with robust operations, the flexibility to adjust and the ones that are best capitalized.”
In Europe, that probably means the strongest are the biggest — Air-France-KLM, British Airways and Lufthansa. The situation in the United States appears more complicated given difficulties of integrating different carriers and the weak dollar, which makes oil even more expensive.
Consolidation is the obvious solution, Mr. Moers said, but “there are more obstacles than you might think.”
In the United States, Delta Air Lines and Northwest Airlines said in April that they planned to merge. But last week, United Airlines and US Airways suspended merger talks. In Europe, Air-France back away from acquiring Alitalia of Italy. And in December, long-running talks by a consortium to buy Iberia of Spain collapsed.
Mr. Moers said that government support would be needed if a number of flag carriers are to survive. “It’s very hard for any government to let an airline go bankrupt,” he said, “and that is the scenario if nothing happens.”
One possibility, analysts said, is a resurrection of trans-Atlantic deals, provided antitrust rules are softened.
But Mr. Walsh of British Airways opposed government aid to support struggling flag carriers.
“If they were struggling with $65, $70, $80 dollar oil, I don’t see how they can survive.” Mr. Walsh said.
For its part, British Airways announced in May that it was “exploring opportunities for cooperation” with the two airlines in the United States, leading to suggestions that it would extend its OneWorld alliance with American Airlines to include Continental.
British Airways and American, a unit of the AMR Corporation, have failed to get an exemption from American antitrust laws to work more closely because of their dominance at Heathrow airport in London.
‘Things have changed” Mr. Moers said. “We now have the ‘open skies’ agreement. I’m not sure that we would see the same stringent conditions of such a move as before.”
At the industry conference, Mr. Bisignani said: “Twenty-four airlines have gone bust in the last six months and $130 per barrel oil is reshaping the industry even as we speak. In the next 12 months we could face $99 billion in extra costs from oil.”
He said governments must “stop crazy taxation, regulate monopolies effectively, ensure that the cost of energy reflects its true value, fix the infrastructure and change the rules of the game.”
“Labor must understand that jobs disappear if costs don’t come down,” he added.
In particular, he criticized the European Parliament for imposing 100 amendments an emissions trading proposal.
“We face a bill of 6.4 billion euros for a misguided and unilateral proposal that will inspire international legal battles but do very little for the environment,” he said. “These are reckless decisions when the industry is in crisis and oil prices have changed the game completely.”
Mr. Bisignani called for governments to develop an emissions trading scheme that is fair, voluntary and global. And he urged financing for innovation for biofuels and new generation engines and airframes.
"In the next 12 months we could face $99 billion in extra costs from oil.”
http://www.nytimes.com/2008/06/03/business/worldbusiness/03air.html?pagewanted=print
June 3, 2008
Airline Group Sees ‘Desperate’ Times
By CAROLINE BROTHERS and MATTHEW SALTMARSH
ISTANBUL — Citing high oil prices and the slowing economy, the International Air Transport Association on Monday sharply lowered its industry forecast for 2008, saying it now expected a collective loss of $2.3 billion.
In March, the group had forecast a profit of $4.5 billion.
At its annual meeting here, the association urged governments to roll back regulations that they argue are damaging the industry at a time when many carriers are in a “desperate” situation.
If price of oil, which is now just below $130 a barrel, averages $107 over 2008, the aviation industry would lose $2.3 billion for the year, the chief executive of the group, Giovanni Bisignani, said. Should it hold at $135 a barrel for the rest of the year, the industry will lose $6.1 billion.
“After enormous efficiency gains since 2001, there is no fat left and skyrocketing oil prices are changing everything,” Mr. Bisignani said. “The situation is desperate and potentially more destructive than our recent battles with all the Horsemen of the Apocalypse combined.”
Other problems facing the airlines, the group said, include uncertainty about the approach by the European Union and governments toward state aid and airline mergers.
The chief executive of British Airways, William M. Walsh, said: “We’re definitely as an industry in a crisis situation. With a softening in the economic environment, high oil prices, it’s inevitable that fares have to go up.”
Mr. Walsh added that he expected to see additional bankruptcies soon.
John Leahy, chief operating officer of the European plane maker Airbus, said that the sector could adjust to higher fuel prices “but it will take several years, and how many will be left standing?”
Hartmut Moers, an analyst at the bank Sal. Oppenheim in Frankfurt, said “The key short-term question is who is best hedged against the oil rise.”
“And then further out,” Mr. Moers said, “you look for the airlines with robust operations, the flexibility to adjust and the ones that are best capitalized.”
In Europe, that probably means the strongest are the biggest — Air-France-KLM, British Airways and Lufthansa. The situation in the United States appears more complicated given difficulties of integrating different carriers and the weak dollar, which makes oil even more expensive.
Consolidation is the obvious solution, Mr. Moers said, but “there are more obstacles than you might think.”
In the United States, Delta Air Lines and Northwest Airlines said in April that they planned to merge. But last week, United Airlines and US Airways suspended merger talks. In Europe, Air-France back away from acquiring Alitalia of Italy. And in December, long-running talks by a consortium to buy Iberia of Spain collapsed.
Mr. Moers said that government support would be needed if a number of flag carriers are to survive. “It’s very hard for any government to let an airline go bankrupt,” he said, “and that is the scenario if nothing happens.”
One possibility, analysts said, is a resurrection of trans-Atlantic deals, provided antitrust rules are softened.
But Mr. Walsh of British Airways opposed government aid to support struggling flag carriers.
“If they were struggling with $65, $70, $80 dollar oil, I don’t see how they can survive.” Mr. Walsh said.
For its part, British Airways announced in May that it was “exploring opportunities for cooperation” with the two airlines in the United States, leading to suggestions that it would extend its OneWorld alliance with American Airlines to include Continental.
British Airways and American, a unit of the AMR Corporation, have failed to get an exemption from American antitrust laws to work more closely because of their dominance at Heathrow airport in London.
‘Things have changed” Mr. Moers said. “We now have the ‘open skies’ agreement. I’m not sure that we would see the same stringent conditions of such a move as before.”
At the industry conference, Mr. Bisignani said: “Twenty-four airlines have gone bust in the last six months and $130 per barrel oil is reshaping the industry even as we speak. In the next 12 months we could face $99 billion in extra costs from oil.”
He said governments must “stop crazy taxation, regulate monopolies effectively, ensure that the cost of energy reflects its true value, fix the infrastructure and change the rules of the game.”
“Labor must understand that jobs disappear if costs don’t come down,” he added.
In particular, he criticized the European Parliament for imposing 100 amendments an emissions trading proposal.
“We face a bill of 6.4 billion euros for a misguided and unilateral proposal that will inspire international legal battles but do very little for the environment,” he said. “These are reckless decisions when the industry is in crisis and oil prices have changed the game completely.”
Mr. Bisignani called for governments to develop an emissions trading scheme that is fair, voluntary and global. And he urged financing for innovation for biofuels and new generation engines and airframes.
A Network to Make an Environmental Point - NY Times 060208
"But some of Planet Green’s advertisers could raise eyebrows. General Motors, maker of the Hummer, is the “exclusive automobile sponsor” of the channel, Discovery announced last month. G.M.’s Chevrolet brand is a “premier sponsor” of “Greensburg,” a documentary series about a tornado-damaged town that is rebuilding with an eye to the environment. As part of the deal, G.M. vehicles will be integrated into some programs, and Discovery will produce short-form videos about the company."
What's there to say? RK
http://www.nytimes.com/2008/06/02/business/media/02adcol.html?sq=environmental%20point&st=nyt&scp=1&pagewanted=print
June 2, 2008
Advertising
A Network to Make an Environmental Point
By BRIAN STELTER
CAN the environment make for entertaining TV? Discovery Communications is about to find out.
On Wednesday, Discovery will introduce Planet Green, a new cable brand promoted as the first 24-hour channel dedicated to eco-friendly living. It is the highest-profile cable channel introduction of the year, and an equally risky one. By wrapping itself in the planet, Discovery is betting that “eco-tainment” will appeal to viewers.
Planet Green will replace the Discovery Home Channel in more than 50 million homes. Eyeing the public’s increased interest in environmental issues, Discovery is confident that it can attract more viewers with green-themed programming.
“This is an eco-tainment channel,” said Eileen O’Neill, the general manager of Planet Green. “It’s a lifestyle and entertainment channel that’s designed to activate people in the green space.”
It is also intended to engage advertisers, many of whom have green-themed marketing messages to share with viewers.
“Green is a category companies want to be in,” said Gary Lico, the chief executive of CableU, an online service that analyzes cable networks. “Whether you’re an automaker or a bank or a petroleum company, somewhere in your marketing plan is something referring to the environment.”
But some of Planet Green’s advertisers could raise eyebrows. General Motors, maker of the Hummer, is the “exclusive automobile sponsor” of the channel, Discovery announced last month. G.M.’s Chevrolet brand is a “premier sponsor” of “Greensburg,” a documentary series about a tornado-damaged town that is rebuilding with an eye to the environment. As part of the deal, G.M. vehicles will be integrated into some programs, and Discovery will produce short-form videos about the company.
Ms. O’Neill said the company has “very thoughtful conversations” with any advertiser who shows an interest in the channel.
“We’re thinking about everyone being better — not necessarily perfect,” Ms. O’Neill said, noting that G.M. sells a number of vehicles that address fuel efficiency or feature hybrid technology.
David M. Zaslav, the chief executive of Discovery Communications, added: “If the standard is perfection, we’ll all fail. The journey is to do a little bit better.”
That attitude is in line with the channel’s mission, which is to “take green to the mainstream,” said Tom Carr, the senior vice president for marketing of the channel.
•
Discovery’s research, conducted last year, identified 40 percent to 50 percent of the United States population as “armchair environmentalists.” Mr. Carr calls the channel’s target audience “bright greens,” people who are motivated by the idea that they can help the planet.
Several other cable networks introduced green-themed programming last year. HGTV had the debut of “Living With Ed,” a reality show starring Ed Begley Jr. (It is moving to Planet Green.) The Sundance Channel created “The Green,” a weekly environmental series. And Discovery received wide acclaim for the broadcast of the documentary “Planet Earth.” After that program, the network was inundated with viewer requests for more environmental programming, Mr. Zaslav said.
“We’re pressing on the accelerator here,” he said. “We think it has a real chance to be a flagship brand for us.”
But programs that are promoted as being good for you aren’t always good for ratings, Mr. Lico noted. Perhaps that’s why “Compost Tonight” didn’t find a spot on Planet Green.
The channel’s schedule is star-studded, with the celebrity chef Emeril Lagasse hosting a cooking show featuring organic and locally grown foods, and the “Entourage” star Adrian Grenier living a green life. “Hollywood Green,” a weekly entertainment magazine, will showcase earth-conscious celebrities. The other programs will show every shade of green, from “G Word,” a daily series hosted by two news correspondents, to “Wrecklamation,” billed as “recycling on steroids.”
The channel has almost all original programming — partly because there was not an available vault of entertaining environmental programming to tap into. “It’s been challenging at times,” Ms. O’Neill said, “in part because we’ve been educating the production community that may have had certain expectations of what green content is.”
Namely, that it did not star Ludacris and Tommy Lee, at least not until now. On their new show, “Battleground Earth,” the celebrities participate in an eco-friendly reality competition. They were also the headliners of the channel’s premiere party in Los Angeles last week.
•
Timed to the switch from Discovery Home to Planet Green, Discovery marketers are conducting “Random Acts of Greenness.” At the Indianapolis 500 last month, they handed out T-shirts and beach balls to consumers who exemplified green living, and sponsored the cleanup day after the race. The giveaways will continue in New York this week.
Similar promotions will occur at Major League Baseball games in Milwaukee; Washington; and San Diego, San Francisco and Oakland, Calif., on Wednesday. Mr. Zaslav will throw out the first pitch in Washington, and the stadium’s JumboTron will count down to the channel’s 6 p.m. debut. Also that day, all the Discovery cable networks will show green logos.
The New York Post is going green on Wednesday, too: the newspaper will turn its flag green that day and feature advertisements for the channel all week. The newspaper will also give away 250 bicycles with Planet Green branding.
“This is a new genre,” Ms. O’Neill said. “People don’t have any set expectations of what green media is, and we’re defining it — as really funny, engaging, entertaining and definitely credible.”
What's there to say? RK
http://www.nytimes.com/2008/06/02/business/media/02adcol.html?sq=environmental%20point&st=nyt&scp=1&pagewanted=print
June 2, 2008
Advertising
A Network to Make an Environmental Point
By BRIAN STELTER
CAN the environment make for entertaining TV? Discovery Communications is about to find out.
On Wednesday, Discovery will introduce Planet Green, a new cable brand promoted as the first 24-hour channel dedicated to eco-friendly living. It is the highest-profile cable channel introduction of the year, and an equally risky one. By wrapping itself in the planet, Discovery is betting that “eco-tainment” will appeal to viewers.
Planet Green will replace the Discovery Home Channel in more than 50 million homes. Eyeing the public’s increased interest in environmental issues, Discovery is confident that it can attract more viewers with green-themed programming.
“This is an eco-tainment channel,” said Eileen O’Neill, the general manager of Planet Green. “It’s a lifestyle and entertainment channel that’s designed to activate people in the green space.”
It is also intended to engage advertisers, many of whom have green-themed marketing messages to share with viewers.
“Green is a category companies want to be in,” said Gary Lico, the chief executive of CableU, an online service that analyzes cable networks. “Whether you’re an automaker or a bank or a petroleum company, somewhere in your marketing plan is something referring to the environment.”
But some of Planet Green’s advertisers could raise eyebrows. General Motors, maker of the Hummer, is the “exclusive automobile sponsor” of the channel, Discovery announced last month. G.M.’s Chevrolet brand is a “premier sponsor” of “Greensburg,” a documentary series about a tornado-damaged town that is rebuilding with an eye to the environment. As part of the deal, G.M. vehicles will be integrated into some programs, and Discovery will produce short-form videos about the company.
Ms. O’Neill said the company has “very thoughtful conversations” with any advertiser who shows an interest in the channel.
“We’re thinking about everyone being better — not necessarily perfect,” Ms. O’Neill said, noting that G.M. sells a number of vehicles that address fuel efficiency or feature hybrid technology.
David M. Zaslav, the chief executive of Discovery Communications, added: “If the standard is perfection, we’ll all fail. The journey is to do a little bit better.”
That attitude is in line with the channel’s mission, which is to “take green to the mainstream,” said Tom Carr, the senior vice president for marketing of the channel.
•
Discovery’s research, conducted last year, identified 40 percent to 50 percent of the United States population as “armchair environmentalists.” Mr. Carr calls the channel’s target audience “bright greens,” people who are motivated by the idea that they can help the planet.
Several other cable networks introduced green-themed programming last year. HGTV had the debut of “Living With Ed,” a reality show starring Ed Begley Jr. (It is moving to Planet Green.) The Sundance Channel created “The Green,” a weekly environmental series. And Discovery received wide acclaim for the broadcast of the documentary “Planet Earth.” After that program, the network was inundated with viewer requests for more environmental programming, Mr. Zaslav said.
“We’re pressing on the accelerator here,” he said. “We think it has a real chance to be a flagship brand for us.”
But programs that are promoted as being good for you aren’t always good for ratings, Mr. Lico noted. Perhaps that’s why “Compost Tonight” didn’t find a spot on Planet Green.
The channel’s schedule is star-studded, with the celebrity chef Emeril Lagasse hosting a cooking show featuring organic and locally grown foods, and the “Entourage” star Adrian Grenier living a green life. “Hollywood Green,” a weekly entertainment magazine, will showcase earth-conscious celebrities. The other programs will show every shade of green, from “G Word,” a daily series hosted by two news correspondents, to “Wrecklamation,” billed as “recycling on steroids.”
The channel has almost all original programming — partly because there was not an available vault of entertaining environmental programming to tap into. “It’s been challenging at times,” Ms. O’Neill said, “in part because we’ve been educating the production community that may have had certain expectations of what green content is.”
Namely, that it did not star Ludacris and Tommy Lee, at least not until now. On their new show, “Battleground Earth,” the celebrities participate in an eco-friendly reality competition. They were also the headliners of the channel’s premiere party in Los Angeles last week.
•
Timed to the switch from Discovery Home to Planet Green, Discovery marketers are conducting “Random Acts of Greenness.” At the Indianapolis 500 last month, they handed out T-shirts and beach balls to consumers who exemplified green living, and sponsored the cleanup day after the race. The giveaways will continue in New York this week.
Similar promotions will occur at Major League Baseball games in Milwaukee; Washington; and San Diego, San Francisco and Oakland, Calif., on Wednesday. Mr. Zaslav will throw out the first pitch in Washington, and the stadium’s JumboTron will count down to the channel’s 6 p.m. debut. Also that day, all the Discovery cable networks will show green logos.
The New York Post is going green on Wednesday, too: the newspaper will turn its flag green that day and feature advertisements for the channel all week. The newspaper will also give away 250 bicycles with Planet Green branding.
“This is a new genre,” Ms. O’Neill said. “People don’t have any set expectations of what green media is, and we’re defining it — as really funny, engaging, entertaining and definitely credible.”
Student Loans Bypass 2-Yr. Colleges - 060208 NY Times
Thanks Dennis B. for this one
http://www.nytimes.com/2008/06/02/business/02loans.html?ref=todayspaper&pagewanted=print
June 2, 2008
Student Loans Start to Bypass 2-Year Colleges
By JONATHAN D. GLATER
Some of the nation’s biggest banks have closed their doors to students at community colleges, for-profit universities and other less competitive institutions, even as they continue to extend federally backed loans to students at the nation’s top universities.
Citibank has been among the most aggressive in paring the list of colleges it serves. JPMorgan Chase, PNC and SunTrust say they have not dropped whole categories, but are cutting colleges as well. Some less-selective four-year colleges, like Eastern Oregon University and William Jessup University in Rocklin, Calif., say they have been summarily dropped by some lenders.
The practice suggests that if the credit crisis and the ensuing turmoil in the student loan business persist, some of the nation’s neediest students will be hurt the most. The difficulty borrowing may deter them from attending school or prompt them to take a semester off. When they get student loans, they will wind up with less attractive terms and may run a greater risk of default if they have to switch lenders in the middle of their college years.
Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder. More than 6.2 million of the nation’s 14.8 million undergraduates — over 40 percent — attend community colleges. According to the most recent data from the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.
“If we put too many hurdles in their way to get a loan, they’ll take a third job or use a credit card,” said Jacqueline K. Bradley, assistant dean for financial aid at Mendocino College in California. “That almost guarantees that they won’t be as successful in their college career.”
So far, financial aid administrators say they have been able to find fallback lenders that students can switch to, but the hurdles are costly to students — in money and time. The maximum interest rate on federal loans, now at 6.8 percent on the most commonly used loans, is set by Congress, but lenders are scrapping benefits, like rate cuts for borrowers who make their payments on time or allow direct withdrawals from bank accounts.
Some loan companies have exited the student loan business entirely, viewing it as unprofitable in the current environment. By splitting out community colleges and less-selective four-year institutions, some remaining lenders seem to be breaking the marketplace into tiers. Students attending elite, expensive, public and private four-year universities can expect loans to remain plentiful. The banks generally say these loans are bigger, more profitable and less risky, in part perhaps because the banks expect the universities’ graduates to earn more.
Lenders will not say how many colleges they have dropped, making it hard to determine just how many institutions have been affected. Although financial aid administrators say the trend is widespread, they are often reluctant to identify which lenders have stopped serving their colleges, for fear that it will complicate matters for current students who have taken out loans from those lenders and still need to deal with them.
Michelle McClain, 40, who is studying to become a teacher, learned on Friday that she would have to find a new lender after Citibank dropped William Jessup University. The news angered her.
“The loan is between me and the lender,” Ms. McClain said. “I’m the one that’s taking out the loan, I’m the one whose credit is in jeopardy if I don’t pay it, I am the one totally responsible for the loan, and as long as I’m going to an accredited college, I don’t understand why it would make one iota of difference where I am going to college.”
The government has been taking additional steps to keep the student loan market operating smoothly. And some lenders’ doors remain wide open. Sallie Mae and Nelnet recently reaffirmed their commitment to federal loans regardless of the institution a student attends. Kristin Shear, director of student financial services at Santa Rosa Junior College, said that days after the school was dropped by Citibank, Wells Fargo called to say it was eager to lend to students there.
The banks that are pulling out say their decisions are based on an analysis of which colleges have higher default rates, low numbers of borrowers and small loan amounts that make the business less profitable. (The average amount borrowed by community college students is about $3,200 a year, according to the College Board.) Still, the cherry-picking strikes some as peculiar; after all, the government is guaranteeing 95 percent of the value of these loans.
Mark C. Rodgers, a spokesman for Citibank, which lends through its Student Loan Corporation unit, said the bank had “temporarily suspended lending at schools which tend to have loans with lower balances and shorter periods over which we earn interest. And, in general, we are suspending lending at certain schools where we anticipate processing minimal loan volume.”
Financial aid officials in California said that Citibank had stopped making loans to students at all community colleges in the state. Mr. Rodgers said the bank would not provide details about which schools were affected.
The financial aid director at William Jessup, Korey Compaan, said he did not understand the bank’s explanation.
“The logic is so flawed, that for us to have volume with them in the future, we have to have had volume with them in the past,” Mr. Compaan said. Simply to cut off students at a college, he continued, “I find it totally and completely unethical.”
The government sets the criteria for college participation in federal loan programs, requiring that colleges be accredited and have low default rates to participate, for example. Now lenders are being more selective than the government.
“There’s been a certain amount of market segmentation going on, but this is the first time we’ve seen a lender, especially as large as Citibank, saying, ‘We don’t want to do business with you,’ ” said Samuel F. Collie, director of financial aid at Eastern Oregon University in La Grande, Ore.
“There’s a fundamental issue of fairness and equity that’s certainly not being addressed in this,” Mr. Collie said. “But short of completely revamping the way that financial aid, especially loans, is being delivered to students in this country, I don’t know that we have any easy answers.”
The credit crisis, which has made it harder for some lenders to raise money, and a reduction in the government’s subsidy to lenders have contributed to the reevaluations by the lenders.
“This is one of those perfect storm situations,” said Susan L. Mead, director of financial aid at Dutchess Community College in New York. She said her institution had been dropped by no less than six lenders: HSBC, Citibank, M&T, Chase, Citizens Bank and Student Loan Xpress.
Christine Holevas, a spokeswoman for Chase, said that the bank considered several factors in deciding whether to lend to a particular college’s students. “The repayment rate, you look at the size and length of the loan,” she said. “We have tightened credit standards, yes, but we haven’t cut off any category of school.”
Hugh Suhr, a spokesman for SunTrust, said it was “stepping away from some relationships” with universities, but that this was “not based on any particular type of school.” Mr. Suhr said the bank continued to lend to students at a range of institutions.
Another danger for students is that as they are forced to find and switch to replacement lenders, they may lose track of some debt obligations and miss a few payments.
“It might put them in default,” said Claudia Martin, director of financial aid at Monterey Peninsula College, a community college in California that was dropped by Citibank and two other lenders. “We always recommend that a student stay with the same lender all through school.”
Commercial colleges, among the first to suffer when lenders withdrew from the market, have been openly critical of the new differentiation.
“From what I can tell from our lawyers, it’s not technically illegal for them to reject schools,” said Harris N. Miller, the president of the Career College Association in Washington, a trade group for commercial colleges. “I just think that’s very objectionable.”
http://www.nytimes.com/2008/06/02/business/02loans.html?ref=todayspaper&pagewanted=print
June 2, 2008
Student Loans Start to Bypass 2-Year Colleges
By JONATHAN D. GLATER
Some of the nation’s biggest banks have closed their doors to students at community colleges, for-profit universities and other less competitive institutions, even as they continue to extend federally backed loans to students at the nation’s top universities.
Citibank has been among the most aggressive in paring the list of colleges it serves. JPMorgan Chase, PNC and SunTrust say they have not dropped whole categories, but are cutting colleges as well. Some less-selective four-year colleges, like Eastern Oregon University and William Jessup University in Rocklin, Calif., say they have been summarily dropped by some lenders.
The practice suggests that if the credit crisis and the ensuing turmoil in the student loan business persist, some of the nation’s neediest students will be hurt the most. The difficulty borrowing may deter them from attending school or prompt them to take a semester off. When they get student loans, they will wind up with less attractive terms and may run a greater risk of default if they have to switch lenders in the middle of their college years.
Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder. More than 6.2 million of the nation’s 14.8 million undergraduates — over 40 percent — attend community colleges. According to the most recent data from the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.
“If we put too many hurdles in their way to get a loan, they’ll take a third job or use a credit card,” said Jacqueline K. Bradley, assistant dean for financial aid at Mendocino College in California. “That almost guarantees that they won’t be as successful in their college career.”
So far, financial aid administrators say they have been able to find fallback lenders that students can switch to, but the hurdles are costly to students — in money and time. The maximum interest rate on federal loans, now at 6.8 percent on the most commonly used loans, is set by Congress, but lenders are scrapping benefits, like rate cuts for borrowers who make their payments on time or allow direct withdrawals from bank accounts.
Some loan companies have exited the student loan business entirely, viewing it as unprofitable in the current environment. By splitting out community colleges and less-selective four-year institutions, some remaining lenders seem to be breaking the marketplace into tiers. Students attending elite, expensive, public and private four-year universities can expect loans to remain plentiful. The banks generally say these loans are bigger, more profitable and less risky, in part perhaps because the banks expect the universities’ graduates to earn more.
Lenders will not say how many colleges they have dropped, making it hard to determine just how many institutions have been affected. Although financial aid administrators say the trend is widespread, they are often reluctant to identify which lenders have stopped serving their colleges, for fear that it will complicate matters for current students who have taken out loans from those lenders and still need to deal with them.
Michelle McClain, 40, who is studying to become a teacher, learned on Friday that she would have to find a new lender after Citibank dropped William Jessup University. The news angered her.
“The loan is between me and the lender,” Ms. McClain said. “I’m the one that’s taking out the loan, I’m the one whose credit is in jeopardy if I don’t pay it, I am the one totally responsible for the loan, and as long as I’m going to an accredited college, I don’t understand why it would make one iota of difference where I am going to college.”
The government has been taking additional steps to keep the student loan market operating smoothly. And some lenders’ doors remain wide open. Sallie Mae and Nelnet recently reaffirmed their commitment to federal loans regardless of the institution a student attends. Kristin Shear, director of student financial services at Santa Rosa Junior College, said that days after the school was dropped by Citibank, Wells Fargo called to say it was eager to lend to students there.
The banks that are pulling out say their decisions are based on an analysis of which colleges have higher default rates, low numbers of borrowers and small loan amounts that make the business less profitable. (The average amount borrowed by community college students is about $3,200 a year, according to the College Board.) Still, the cherry-picking strikes some as peculiar; after all, the government is guaranteeing 95 percent of the value of these loans.
Mark C. Rodgers, a spokesman for Citibank, which lends through its Student Loan Corporation unit, said the bank had “temporarily suspended lending at schools which tend to have loans with lower balances and shorter periods over which we earn interest. And, in general, we are suspending lending at certain schools where we anticipate processing minimal loan volume.”
Financial aid officials in California said that Citibank had stopped making loans to students at all community colleges in the state. Mr. Rodgers said the bank would not provide details about which schools were affected.
The financial aid director at William Jessup, Korey Compaan, said he did not understand the bank’s explanation.
“The logic is so flawed, that for us to have volume with them in the future, we have to have had volume with them in the past,” Mr. Compaan said. Simply to cut off students at a college, he continued, “I find it totally and completely unethical.”
The government sets the criteria for college participation in federal loan programs, requiring that colleges be accredited and have low default rates to participate, for example. Now lenders are being more selective than the government.
“There’s been a certain amount of market segmentation going on, but this is the first time we’ve seen a lender, especially as large as Citibank, saying, ‘We don’t want to do business with you,’ ” said Samuel F. Collie, director of financial aid at Eastern Oregon University in La Grande, Ore.
“There’s a fundamental issue of fairness and equity that’s certainly not being addressed in this,” Mr. Collie said. “But short of completely revamping the way that financial aid, especially loans, is being delivered to students in this country, I don’t know that we have any easy answers.”
The credit crisis, which has made it harder for some lenders to raise money, and a reduction in the government’s subsidy to lenders have contributed to the reevaluations by the lenders.
“This is one of those perfect storm situations,” said Susan L. Mead, director of financial aid at Dutchess Community College in New York. She said her institution had been dropped by no less than six lenders: HSBC, Citibank, M&T, Chase, Citizens Bank and Student Loan Xpress.
Christine Holevas, a spokeswoman for Chase, said that the bank considered several factors in deciding whether to lend to a particular college’s students. “The repayment rate, you look at the size and length of the loan,” she said. “We have tightened credit standards, yes, but we haven’t cut off any category of school.”
Hugh Suhr, a spokesman for SunTrust, said it was “stepping away from some relationships” with universities, but that this was “not based on any particular type of school.” Mr. Suhr said the bank continued to lend to students at a range of institutions.
Another danger for students is that as they are forced to find and switch to replacement lenders, they may lose track of some debt obligations and miss a few payments.
“It might put them in default,” said Claudia Martin, director of financial aid at Monterey Peninsula College, a community college in California that was dropped by Citibank and two other lenders. “We always recommend that a student stay with the same lender all through school.”
Commercial colleges, among the first to suffer when lenders withdrew from the market, have been openly critical of the new differentiation.
“From what I can tell from our lawyers, it’s not technically illegal for them to reject schools,” said Harris N. Miller, the president of the Career College Association in Washington, a trade group for commercial colleges. “I just think that’s very objectionable.”
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