12/11/2017

Coal-Fired Plant Shifted $1bn Offshore While Pocketing $117m From Australian Taxpayers

The Guardian -  |

Payment to owner of Loy Yang B – one of country’s dirtiest plants – was compensation for short-lived carbon tax
The Loy Yang power plants in Victoria. The Paradise Papers revelation has prompted renewed criticism of Australia’s climate policy. Photograph: Bloomberg via Getty Images
The owner of one of Australia’s dirtiest coal-fired power plants quietly moved $1bn offshore within days of pocketing $117m from taxpayers in compensation for Labor’s now-defunct carbon tax.
The revelation, contained in the Paradise Papers, has prompted renewed criticism of the “chronic failure” of Australian climate policy and warnings against future cash handouts to multinational polluters.
It also comes in the final stages of the looming sale of the plant, Loy Yang B, one of the last remaining brown coal-fired generators in Victoria’s Latrobe valley.
In 2012, fearing an industry backlash, Julia Gillard’s government created a $5.5bn compensation scheme to accompany its carbon tax, which Tony Abbott scrapped two years later.
The $5.5bn energy security fund was dubbed by the shadow environment minister, Greg Hunt, as “the biggest cash handouts in Australian history” made to the companies thought to be the country’s “biggest polluters”.
One of the big winners was the owner of Loy Yang B, the British-listed company International Power, which in turn was owned by the French multinational GDF Suez – now known as Engie.
Loy Yang B’s owner received $116.9m in carbon tax compensation from the government’s energy security fund on 22 June 2012, money it had been anticipating since it was first announced in March.
It was also promised 4.87m free carbon units – in effect a permission to emit – each year for four years.
Within days of the $116.9m payment from taxpayers, Loy Yang B’s owner upstreamed $1bn out of its Australian operations
The compensation package was met with derision from energy and climate experts. Chief among its critics was the Australian energy market analyst Bruce Mountain, who warned that the compensation would simply be treated by polluters as windfall profit.
Mountain’s firm, CME, published analysis in 2013 showing generators were passing on the carbon tax’s costs to consumers and keeping the compensation as profit.
New revelations about the movement of wealth from Loy Yang B’s Australian entities have now been made in the Paradise Papers, based on millions of documents from two offshore service providers and the company registries of 19 tax havens. The material was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with partners including the Guardian.
The documents reveal that within days of receiving the compensation, Loy Yang B’s owner upstreamed $1bn in dividends out of its Australian operations as part of its aptly named “Project Salmon”.
Mountain is far from surprised. He said it was simply further evidence that the policy of polluter compensation was a “chronic failure”.
“That they would have such largesse to dispatch back to their parent, it doesn’t surprise me at all,” Mountain told Guardian Australia. “It was a pure windfall, that compensation. The compensation scheme was very badly designed.”
The Australian companies behind Loy Yang B had used internal loans to give large amounts of money back to their British parent companies in the lead-up to 2012.
Project Salmon involved restructuring the debt, so the Australian entities could use the $1bn in dividend payments to cancel the loans.
Engie said in a statement that the dividends did not involve the distribution of any cash outside of Australia. It also flatly denied sending any of the carbon tax compensation back to its offshore owners.
“No cash was distributed out of Australia as a consequence of these dividends,” the company said.
“Where dividends were paid in cash they did not include compensation received from the government. Further, carbon tax compensation was not permitted to be distributed overseas under the project finance restrictions and was used to meet the future carbon tax liabilities of Loy Yang B.”
The $1bn dividend payments appear to be at odds with the company’s public statements at the time.
In 2011 it warned that the carbon tax had the potential to send power plants in the Latrobe valley broke.
It is unclear what tax benefit, if any, International Power achieved through Project Salmon. Photograph: The Age/Fairfax Media via Getty Images
When details of the compensation were announced in March 2012, International Power issued a statement saying it was not enough.
The taxpayer assistance would only provide “some level of compensation for the impact of the introduction of a carbon tax”, but was “significantly less than the actual impact on its business”.
“Compensation through the Energy Security Fund is essential to ensure investors do not lose faith in the Australian energy market, and to ensure the secure operation of the National Electricity Market,” it said.
International Power first approached the Cayman Islands offices of an offshore law firm, Appleby, in April 2012, to seek help with part of Project Salmon. Their initial emails are among the 6.8m Appleby records exposed as part of the Paradise Papers.
“We are acting for International Power in connection with a proposed internal restructuring involving the companies in the chain of ownership relating to the Loy Yang B power station in Australia,” International Power’s lawyers told Appleby.
“The intention is for the proposed internal restructuring to be implemented shortly after the refinancing for the Loy Yang B power station is completion [sic] (targeted for mid-end June 2012).”
It is unclear what was done with the $1bn in dividend payments once they reached the top companies.
Not long after the dividend payments, the Australian subsidiaries came under some financial pressure. In late 2014 Loy Yang’s main Australian entity, Loy Yang Holdings Pty Ltd, reported it was at risk of breaching the conditions of its loans.
Engie denied that had anything to do with the $1bn dividends.
“The risk of breach of covenants on the project finance highlighted in the 2015 accounts of the Loy Yang B entities was due to low energy prices and the performance of the business after the 2012 refinancing,” the company said.
“This related to market factors outside of the control of Loy Yang B and coincided with the introduction of the carbon tax, which negatively impacted the business, despite compensation received from the government.”
The Loy Yang B power station in the Latrobe valley. Photograph: Paul Crock/AFP/Getty Images
It is unclear what tax benefit, if any, was achieved through Project Salmon.
Many of the dividend payments were made to a company first incorporated in the Netherlands, but managed from the UK.
Other parts of Loy Yang’s ownership structure were incorporated in the tax havens of the Cayman Islands, Cyprus and Guernsey.
Engie said all of the Loy Yang entities situated in “so-called tax haven countries” were managed in either the UK or Australia, meaning they were subject to the tax laws in both nations.
“As a matter of principle, Engie avoids investments in so-called tax haven countries and such investments can only be made if supported by strong economic reasons, other than tax savings,” it said.
The main entity in Australia, Loy Yang Holdings, paid no tax in 2014-15, despite recording $452m in revenue, according to the tax office’s corporate transparency report. The year before it paid $26.4m in tax on $760m total income.
The Guardian is not suggesting the company acted unlawfully or sought to avoid its tax obligations.
The Loy Yang dividends were paid through retained earnings, meaning they were made from profits that were already taxed in Australia.
This government can’t square the wheel on keeping its coal generators in business and meeting the Paris agreement.
Bruce Mountain, energy market analyst
The Project Salmon documents suggest the company’s chief concern in Australia was the imposition of dividend withholding tax. But it said the Australian Taxation Office had already made “favourable determinations” that such a withholding tax would not apply on the payments.
Engie is in the final stages of selling Loy Yang B. Three bidders – Delta Electricity, Alinta Energy, owned by Chow Tai Fook Enterprises, and China Resources Power Holdings – are thought to be left in the race.
Mountain said the failure of the compensation scheme served as a lesson for future policy.
He said the current government would be inclined to again offer compensation to polluters for climate policies. The experience of the past, he said, showed this was simply bad policy.
“This government can’t square the wheel on keeping its coal generators in business and meeting the Paris agreement,” Mountain said.
“If they ever do anything they’ll be inclined towards bailing out the coal generators to make them good. And I think to the extent to which you can say: ‘But we’ve already done that, and then some, when there was no good reason at all’ – I think it’s important. It’s important for the public policy debate and where it all ends up. So that, for me, is a critical lesson.”

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  • Paradise Papers: who's who in the leak of offshore secrets
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    A Photographer Selects Images That Visualize The Impact Of Climate Change

    Washington Post - Chloe Coleman

    The next installment of In Sight’s series “PHOTOGRAPHERS edit PHOTOGRAPHERS” pairs NOOR photographers Andrea Bruce and Kadir van Lohuizen. In this installment, American photographer Andrea Bruce made selections from the work of Dutch photographer Kadir van Lohuizen.
    Van Lohuizen worked as a conflict photographer but is perhaps best known for his projects on environmental issues, including rising sea levels in relation to climate change and the resulting human rights implications. Here’s what Bruce had to say about her colleague’s work:
    “Kadir’s work on rising sea levels and the environment touches on what will most likely be the world’s most dramatic, life-threatening problem. With his research and thorough coverage, we see how the slow creep of land-water issues could easily be missed, mislabeled or ignored. People have only begun to feel the weight of waves on our over-populated, shrinking land and the decreasing availability of safe, fresh drinking water. His work also visits, with a lyrical sense of place, communities where renewable energy sources — like wind farms — are the answer for energy needs.”
    To see more of van Lohuizen’s work, visit here. Below is Bruce’s selection of van Lohuizen’s photos:
    Icebergs in a channel between Greenland’s Eqip Sermia glacier and the Sermeq Kujalleq glacier, the most active glacier in the northern hemisphere. (Kadir van Lohuizen/Noor) 

    Downtown Miami seen from a helicopter. It’s been predicted that by 2060, Miami Beach and the bay area will need to be evacuated, and by 2100, 60 percent of the city, including the downtown area, will also need to be evacuated. (Kadir van Lohuizen/Noor) 

    A stranded ferry in the lagoon of Tarawa. (Kadir van Lohuizen/Noor for the New York Times) 

    Residents protect their homes from rising sea levels with sandbags at Betio. Due to rising sea levels and a higher frequency of storms, the reef is not the natural protection that it used to be. Betio island is the most populated part of Tarawa, and due to sea water intrusion and the large population, there is a serious lack of drinking water and agricultural land. (Kadir van Lohuizen/Noor for the New York Times)  

    The shoreline of Vunidoloa is heavily eroded due to rising waters. Vunidoloa is on Natewa Bay on Viti Levu, Fiji’s main island. Vunidoloa has 140 inhabitants and frequently floods because of rising waters. The situation became so precarious that the government decided to relocate the village. Unfortunately, the site was poorly designed and was eroding before anyone moved there. (Kadir van Lohuizen/Noor for the New York Times)

    Tarawa island seen from the air. (Kadir van Lohuizen/Noor for the New York Times)

    Temaiku is one of the most vulnerable areas on Tarawa. At high tide, the waves erode the shore line. (Kadir van Lohuizen/Noor for the New York Times)  

    Since China has committed to a low-carbon development path, it is now the second-biggest producer of wind energy after the United States, with wind power capacity at 25.8 gigawatts. With capacity on a sharp increase they will be No. 1 in 2021. Zhao Shoushan is a herdsman in Wulanyiligen. Nowadays, herders live between the windmills. They have 600 sheep and goats. He herds them by motorcycle. (Kadir van Lohuizen/Noor)  

    An increase in cattle made Brazil the largest meat exporter in the world. The cattle, fires and the production of charcoal has made Brazil the third-largest polluter in the world, and it contributes to 18 percent of the greenhouse effect. Workers and their families at the charcoal ovens at Kilometer 95 outside Rondon do Para. They live in barracks on the property. (Kadir van Lohuizen/Noor)  

    Workers carry charcoal to trucks, which will take it to smelters in Maraba. Each basket weighs 50 kilograms. Charcoal ovens owned by Enio Jugue Barbosa, son of Antoninho Barbosa, are using illegally logged wood. The 47 ovens here will be increased to 200 in the near future. The charcoal will be used in the Sidepar smelter in Maraba. (Kadir van Lohuizen/Noor)


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    What’s At Stake In The Bonn Climate Talks?

    New York Times - Brad Plumer

    An art installation at the United Nations climate change conference in Bonn, Germany.  Philipp Guelland/European Pressphoto Agency
    The Paris climate agreement of 2015 was a key moment in the battle against climate change: 195 countries vowed to help limit the rise in global temperatures since the industrial revolution to “well below” 2 degrees Celsius (3.6 degrees Fahrenheit).
    But the Paris deal was just the start of a long, arduous process. The world’s nations are still struggling to translate their lofty promises into meaningful cuts in greenhouse gas emissions. Which explains why diplomats are now meeting for yet another round of climate talks in Bonn, Germany, which began on Nov. 6 and continue through Friday.
    Much of the attention at these talks will be on the Trump administration, which has vowed to withdraw the United States from the Paris deal by 2020. In response, a gaggle of world leaders, American governors, major corporations and advocacy groups will make a big show of insisting that global action on climate change is still trundling forward, with or without President Trump.
    Yet much of the crucial work at Bonn will happen behind closed doors as diplomats try to build on the initial Paris agreement, crafting new rules and guidelines that, they hope, will help turn hazy national promises into concrete action. Here’s what to watch for.

    What is being done at Bonn?
    The overarching task is the same as ever: figuring out how to limit severe global warming in the decades ahead.
    Under the Paris agreement, each country submitted a voluntary pledge to tackle its greenhouse gas emissions and then agreed to meet every five years to review their collective progress and prod one another to ratchet up their efforts.
    But so far, those pledges have proved inadequate. Most industrialized countries — from Europe to Japan to the United States — aren’t on track to meet their emissions goals. And even if they were, the current pledges put the world on course to heat up 3 degrees Celsius or more, an outcome with a far greater risk of destabilizing ice sheets in Greenland and Antarctica, drastic sea-level rise and more destructive heat waves and droughts. To stay well below 2 degrees, countries would need to cut back fossil-fuel emissions far more rapidly than they’ve promised so far.
    In 2018, leaders plan to assess their efforts to date and discuss what further action could help lessen the odds of drastic global warming — with the goal of crafting newer, stronger national pledges by 2020. But before they can do any of that, they need to agree to formal ground rules for that exercise. That “rule book” will be a focus at Bonn.

    How do countries plan to make progress on climate change?
    One widely recognized problem with the current Paris pledges is that they’re fairly vague.
    China promised that its emissions would peak around 2030, but the country’s energy data is notoriously murky, so it’s hard to tell how much progress it’s actually making. Similarly, the European Union vowed to cut emissions 40 percent below 1990 levels by 2030, but offered few specifics on how to achieve that goal — making it hard to gauge whether European policymakers could realistically be doing much more.
    At Bonn, negotiators will be discussing how to make these pledges more rigorous and transparent, so that countries can more readily be held accountable for their actions. That means tackling questions like: What’s the best way to track nations’ progress, to see if they’re doing what they said they would do? Is there a way to tell if a country’s pledge could be made more ambitious? Which specific policies are working well and which aren’t?
    Because the Paris pledges are largely voluntary — world leaders would have never agreed to a deal otherwise — no one can force governments to take additional action. But, the idea goes, if pledges and policies are made more transparent, world leaders will be better able to pressure and help each other to do more.
    The final draft of this “rule book” is not due until next year, and it may not actually get finished at Bonn, but negotiators are hoping to make significant progress on a long list of items at these talks. As always, diplomacy tends to proceed fitfully.

    What role will the U.S. play?

    Even though the Trump administration has vowed to withdraw from the Paris agreement, the United States can’t formally exit the climate talks until 2020. So the State Department is sending a small team of negotiators to discuss some of the details of the pact.
    A performance by a Fijian cultural group on Monday, the opening day of the conference. The government of Fiji is presiding over the conference, in part to emphasize the question of whether wealthy nations should compensate island nations for calamities of climate change that their emissions are causing. Andreas Rentz/Getty Images 
    The United States and China will still preside over a working group on transparency, though it remains to be seen how much influence American officials can wield.
    The administration will also hold an event in Bonn with representatives from energy companies to promote coal, natural gas and nuclear power as solutions to global warming. Other countries are expected to view the American push to promote fossil fuels with a wary eye.
    In the meantime, a coalition of pro-Paris governors and other officials plan to attend the conference to tout efforts that states, cities and businesses are making to reduce emissions despite the Trump administration’s stance — highlighting the country’s deep divide over climate policy.

    Any disagreements expected?
    Discussions around the “rule book” for assessing and ratcheting up pledges could prove contentious. In the past, for instance, the United States has insisted that developing countries be held to the same strict monitoring standards as wealthy countries, while China and India have pushed for a bifurcated system.
    Developing countries have also argued that they need financial aid from wealthier nations to expand clean energy and adapt to the ravages of climate change.
    The government of Fiji is presiding over the Bonn conference, which will put the spotlight on issues like “loss and damage” — that is, whether wealthy nations should compensate island nations and other poorer countries for the droughts, storms and rising sea levels that their emissions are causing. The Paris agreement broached this issue only briefly, and industrialized nations have resisted calls to be held legally liable for their role in warming the planet.

    What’s the best-case scenario from Bonn? What’s the worst?
    Some climate advocates are hoping for a relatively low-key conference that makes modest progress on issues like transparency and climate finance. In this scenario, American officials would play a quietly constructive role in helping craft the rule book for ratcheting up pledges. And nonstate actors, including cities and businesses, would continue to press forward on efforts to tackle climate change outside of the formal United Nations process.
    Conversely, it’s entirely possible that the Trump administration’s rejection of the Paris deal could lead other countries to disengage from global efforts to address climate change. Or the talks could get bogged down by the traditional rifts between richer and poorer nations. That, in turn, could stall momentum right before the next big round of climate talks in 2018 — when countries are supposed to get down to the details of what’s needed to step up their climate policies going forward.

    Links
    Syria Joins Paris Climate Accord, Leaving Only U.S. Opposed
    Trump Team to Promote Fossil Fuels and Nuclear Power at Bonn Climate Talks
    New Talks on Paris Climate Pact Are Set, and That’s Awkward for U.S.
    Here’s How Far the World Is From Meeting Its Climate Goals
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    How Telling The Right Stories Can Make People Act On Climate Change

    The Conversation - Tom van Laer | Ross Gordon

    The disaster narrative is counterproductive. Shutterstock
    The latest UN Climate Change Conference since the 2015 Paris Agreement is taking place in Bonn between November 6-17 – and the world will be watching. The conference will be presided over by the government of Fiji, a country that is no stranger to the devastation that climate change brings.
    At first glance, modern Fiji’s narrative follows a recognisable storyline: vanishing islands, a culture slipping away, and a people unsure of what their future holds. It tells a familiar tale of vulnerable villages in fear of rising tides and residents as victims on the frontline of climate change.
    Stories help us to share facts, knowledge and experiences about the causes and effects of a changing world. Yet they are more than just educational tools, they also shape our lives and help define us. From the news to Game of Thrones, stories hold the immense ability to alter what we do and do not see. They do this by activating and exciting the neural pathways in our brains that form the basis for our actions.
    According to doomsday narratives about climate change, such as the one about Fiji, communities are neither empowered nor resilient, nor do they hold much agency over their future. When we constantly see stories about communities in crisis as sea levels rise and extreme weather events become more frequent, we come away with notions that there is no hope – the future is presented as an ominously uncertain but seemingly inevitable defeat.
    Yet, such doomsday narratives are counterproductive, dangerous … and wrong.
    We can survive climate change. There is something simple and concrete that each of us can do. Telling and sharing stories, from the scientific to the personal, is one of our most important tools. However, they are different stories than the Fijian one.

    A new hope
    Energy+Illawarra is a community-oriented, interdisciplinary, strategic social intervention programme. Engineers, geographers, and marketers work together to improve energy efficiency in the homes of low-income, older people in Illawarra, a region in New South Wales, Australia.
    Ultimately, humankind must rapidly decarbonise the environment to avoid dangerous climate change. Being more efficient with energy is an effective way to do that. This project has that message at its heart.
    First, the energy use and attitudes towards energy efficiency of 830 households in the community were measured. Then, a series of 11 focus groups with 59 participants from the community were carried out to collect their stories relating to energy efficiency. These stories were then used to help develop ten short films that bust participants’ misconceptions and myths about everyday energy use and provide strategies on how to use energy more efficiently.
    Each film features audiovisual footage of real project participants telling their stories and focuses on the energy use of an everyday household appliance, from fridge freezers and lighting to the washer dryer.
    Following the development of these films, we assessed their efficacy. We conducted cognitive neuroscientific research using electroencephalography (EEG) to identify brain wave activity associated with watching these films. The experiment involved people watching the films while they were attached to the EEG equipment that measured their neural response to the stories. Sixteen people from the community participated in the experiment. All the study participants watched the same films in random order, while undergoing the EEG scans.
    At the heart of a good story. Shutterstock
    What we found
    The results showed heightened activity in areas of the brain associated with empathising with the story characters as well as imagination of, attention for, and memorising of the story plot. These mental processes are involved in spurring our brains into action.
    Brain response was especially strong for the fridge freezer film, which featured a real project participant telling stories about his fridge, followed by animations providing technical advice and guidance on energy efficiency.


    This household appliance has been associated with the visceral nervous system and deep inward feelings, because it stores a basic need: food. We already knew that engaging stories can put you in another person’s shoes in a figurative sense. The fridge freezer film suggests that watching an engaging story can also transport you into the “body” of an object.
    The films have been extensively distributed through the project website, social media, and special LCD brochures that were sent to households as well as community and health centres across regional New South Wales, Australia. Afterwards, the energy use and attitudes towards energy efficiency of the same community households as before were measured again. The findings showed that the films have begun to reduce energy use in the community and change the climate change narrative, with meter reading data revealing that energy use dropped by between 0.45% to 22.5%, depending on the type of household.
    Instead of presenting a narrative of helpless climate change victims and an inevitable future of defeat, these films tell stories that bust misconceptions and myths about everyday energy use and provide strategies and support for using energy efficiently. Take a look to see just how easy it is to make a difference. Let’s rewire our brains and act. A better environment starts with us.

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