“Chinese Shake Up Aluminum” – Wall Street Journal, 12 February 2015

In order to prevent Chinese aluminum from leaving the country, China’s government has imposed a 15% export tax on every ton of the metal that is bought by foreign buyers. However, Chinese aluminum manufacturers have found a way around the government’s tax, by producing semifinished products, or “semis.” While primary aluminum is usually shipped in blocks, semis are manufactured as door frames or hubcaps, which can then be liquefied and molded into other products. Because China’s need for aluminum at home is low — need for metals in the country’s infrastructure has decreased — Chinese manufacturers must sell abroad.

Chinese aluminum manufacturers actually profit from creating semifinished aluminum products: they get a 13% tax rebate on semis. It’s difficult to differentiate how much of China’s aluminum exports are semis; in December, the country’s overseas sales added up to 488,000 tons, a 136% surge from January 2014. China’s output also increased to combat rising prices.

The increase in aluminum exports from China is also reshaping the aluminum market: growth of Chinese exports in Asia has caused buyers’ urgent delivery premiums to decline. Because of the influx of Chinese aluminum, Malaysian and Australian aluminum manufacturers have redirected their aluminum exports to other regions Australia is one of the biggest exporters to Asia, but China is producing and exporting aluminum at a rapid rate. While countries like the US might benefit from China’s oversupply, China’s output is becoming a hindrance to aluminum premiums. It might take worldwide aluminum supplies a decade to recover from the flood of Chinese aluminum.

Will China ever play by fair market rules? We suppose not, as long as it doesn’t benefit them.

(From Wall Street Journal)

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 16, 2015

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“A Climate Accord Based on Global Peer Pressure” – New York Times, 14 December 2014

Last month, almost 200 nations gathered in Lima, Peru to agree on a global pact to reduce fossil fuel emissions, one of the primary causes of climate change. The deal — called the Lima Accord — shows huge progress in global effort to fight the effects of climate change: it’s the first time that these nations will make a unilateral effort to curb the use of oil, gas, and coal.

However, the Lima Accord is not lawfully mandatory. If it were legally binding, then the nearly 200 nations wouldn’t have agreed to the deal — not even the US. Instead, the hope is that global peer pressure will be the impetus to move the accord forward. At this point, every nation has agreed to place limits on its carbon emissions.

According to the accord, each nation will have to introduce carbon-cutting domestic legislation by either March or June. Laws will delineate how each country will curb emissions after 2020. These proposals are known to the UN as “Intended Nationally Determined Contributions,” which will be included in an upcoming climate deal in Paris in 2015.

But because the Lima Accord has no requirements, countries could conceive of feeble plans that wouldn’t drastically combat the effects of climate change. Countries also have the choice of not even offering a plan — and if they don’t submit a plan, there are no fines or retribution.

Again, the accord relies on peer pressure and a method called “name-and-shame.” Each countries’ plan will be posted to the UN’s site as public information. If the countries’ plans are made public and some are found to be weak in comparison, then the shame of such a weakness will hopefully push that country to strengthen its plan.

The biggest worry comes with the top three polluters: the US, China, and India. While President Obama has tried to make climate change a vital element of his second term, his legacy really depends on what happens after his term is over. He has vowed to reduce emissions by at least 28 percent by 2025, which can be attained if tailpipe and power plant emissions regulations are passed. Unfortunately, most Republican White House contenders are staunch opponents of Obama’s climate change policies and likely don’t care about global urgencies.

China has been pushed to seek methods of reducing emissions due to discord among its citizens, as citizens disapproved of China’s worsening air quality. The country has now eclipsed the US as the number one polluter — President Xi Jinping has promised that China’s emissions will spike in 2030 and then fall. In order to ensure that target, the country is enacting a national cap-and-trade structure where polluters will have to purchase greenhouse gas emissions.

Because curbing emissions can be costly, it is a difficult burden for developing nations. India Prime Minister Narendra Modi has cast aside any efforts towards reversing climate change, instead focusing on economic growth and poverty, which could mean building new coal power plants. However, India’s Environment Minister Prakash Javadekar has stated that the country will offer a plan in June.

Other countries that climate change policy observers are following are Russia and Australia. Russian President Vladimir V. Putin doesn’t believe that humans cause climate change, and Australia has phased out its Department of Climate Change, and also revoked a carbon tax.

While we have a majority of the countries on board with the deal, there are a few important strays that will determine whether or not the Lima Accord is indeed productive.

(From New York Times)

Developed and Written by Dr. Subodh Das and Tara Mahadevan

December 15, 2014

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“Imagining Coal Without Air Pollution” – Wall Street Journal, 8 January 2014

While many countries have been working together to reach global environmental goals—such as reducing emissions and increasing use of renewable energies—it often seems like China hasn’t gotten the memo. Due to a growing population, and thus a growing demand for energy, China is the world’s largest emitter of carbon dioxide emissions. Over the last few months, many of China’s major cities have had issues with smog—a product of coal-burning power plants—and citizens have been forced to wear face masks.

The US faced similar problems with smog in the late 1960′s and 1970′s, which inspired the formation of the EPA and passed the Clean Air Act. Since then, US electricity utilities reduced sulfur dioxide emissions by over 80% and nitrogen oxides by over 75%, using lower-sulfur coal found in Wyoming’s Powder River Basin. Now that the government and utilities have successfully kept those emission levels down, they are tackling mercury and greenhouse gas emissions, which means new environmental regulations. As a result, many of the US’s coal-burning power plants will close, since upgrading the plants’ equipment isn’t profitable. Moreover, natural gas releases half the carbon dioxide emissions of coal, and natural gas costs have plunged since 2009.

New regulations on mercury has the potential to reduce emissions by almost 90% and cause more power plants to shut their doors. The EPA is handling greenhouse gas emissions, like carbon dioxide, by introducing regulations that will more or less disallow utilities to build new coal-burning power plants. The EPA is set to propose new standards for existing power plants and guidelines on greenhouse gas emission levels.

Scientists are trying to find a way to prevent carbon dioxide emissions from burning coal, as well as studying the method of cleaning coal prior to combustion. Both have proved costly, though countries with more access to coal and less to natural gas—like China, Pakistan, Indonesia and Australia—have expressed interest in these technologies.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

March 21, 2014

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