CCS is actually an umbrella term for a number of complex processes all designed to ‘clean coal’. This can involve chemically washing coal or turning it into a gas before removing minerals and impurities, or chemicals can be used in the flue (big chimney stack) of a power plant to separate the carbon dioxide. Whatever the method, the result is the same – electricity from coal with fewer harmful emissions. The separated CO2 can then be transported through pipes or in containers and pumped into old oil wells or deep under the ocean floor where it can’t leak into the atmosphere and heat our planet. This process transforms the most damaging fuel into one of the cleanest.

There’s certainly no doubt that the world needs to tackle emissions from coal, and soon. The United States produces half of its electricity burning coal and China a staggering 80%; it’s no coincidence that they are the world’s two biggest polluters. Coal is abundant and relatively cheap to extract and as a result the Independent Energy Agency predict a heavy rise in coal use over the next twenty years – China is building new coal-fired power plants at a rate of two a week. The problem of emissions will only get worse unless coal can be cleaned up.

But, whilst the energy production of the United States and China is alarming, it doesn’t explain why Britain is pursuing a ‘clean coal’ future. Having announced a CCS competition in 2007, with a potential prize of £1 billion to fully-fund a demonstration CCS plant, Gordon Brown went further in his latest, and probably final, energy bill by including a fund of £9.5 billion (levied from our electricity bills) to encourage CCS in the UK.

Although coal has long been marginalised on these shores in favour of cheaper and cleaner gas, there hasn’t been a new coal-fired power station built here for thirty years. Why return to the dark arts of coal energy now?

David Kidney, Parliamentary Undersecretary of State for the Department of Energy and Climate Change (DECC) tells me that aside from being in the international community’s best interests, “Virtually all of the expert advice available suggests that CCS will be necessary as an option for electricity generation if carbon dioxide emission targets are to be met.” So the Government insists it’s acting on advice, no doubt from the energy corporations like Scottish Power and E.On who are leading the drive for CCS in the UK.

Jonathan Smith, E.On’s Media Relations Manager, told me that to ensure the lights stay on we will need some coal energy. With gas and oil prices becoming increasingly volatile the UK is aiming for a third of its electricity to come from renewables by 2020 and Labour recently announced plans for 10 new nuclear power stations. But, there’s still a problem when the wind doesn’t blow and what to do if the substantial investment for 10 nuclear plants fails to materialise, which is where CCS comes in to play; “It’s not about putting all of our eggs into a coal basket… our aim is to ensure we provide cleaner and more secure energy supplies,” Smith tells me.

Let’s not kid ourselves though, companies like E.On are not only concerned about securing a clean energy future for the UK, and Smith revealed an ulterior motive: “There’s undoubtedly money to be made from clean coal, if it was perfected by (E.On) then clearly we would be the experts in CCS.”

But it’s not just the energy companies who could profit either, and the scale of CCS could mean new opportunities for the UK economy. Jeff Hardy, from the UK Energy Research Centre, explains: “The supply chain to deliver [CCS] is a very broad one… there will be opportunities for all players, large and small, [in] engineering, chemical, oil and gas companies, compression specialists, gas and fluid specialists, pipeline companies and research expertise.” AEA, an independent energy research group, submitted a report to the DECC in December last year stating that the UK could benefit by £1 billion to £2 billion a year from CCS and other capture technologies from now until 2030, with CCS creating nearly 30,000 jobs in the process. New business and possibly new jobs is the kind of positive economic news the Government has been desperate to hear since last year.

So, it appears CCS solves the problem of coal. We can reduce emissions, provide everyone with enough electricity and create new jobs and business as well; great, let’s all go home and sit in front of a roaring (coal) fire.

Of course, it isn’t that simple. Joss Garman, nemesis to the aviation industry and now a Greenpeace spokesperson, has a very different view; “‘Clean coal’ doesn’t exist. CCS technology is often presented as a silver bullet to the problem of emissions from fossil fuel plants. Yet CCS has never been proven at a commercial scale anywhere in the world.”

The Government launched a CCS competition in 2007 offering full-funding for a 300MW clean coal plant by 2014 to encourage development; the idea being that as technology and efficiency improve, CCS will be commercially viable by 2020. They have tried to allay environmental fears by insisting that any new coal plants must be built ‘capture ready’ with at least a quarter of emissions captured from day one. This isn’t enough for most environmental groups, who claim that the Government’s plans are too not strict enough. Martin Cullen from Friends of the Earth says: “Proposals to approve new coal stations that are ‘capture ready’ are a dangerous distraction. The emissions from new coal plants would lock the UK into a high carbon pathway for many decades.”

The Government’s position wasn’t helped when Stuart Haszeldine, a geologist at Edinburgh University and a leader in carbon capture research, said the CCS competition was “dead on its feet.” Two of four original competitors have quit; BP pulled out of the competition last November because it couldn’t find a ‘power generator’ to partner with, whilst RWE npower cited ‘timetabling’ problems ruling them out of the race. Of the remaining two competitors, E.On’s controversial Kingsnorth plans have been fiercely challenged by environmental groups since day one, halting any meaningful progress. The aforementioned £9.5 billion levy announced a few days after Haszeldine’s outburst was designed to allay fears and reignite the UK’s CCS investment – but if the 2014 target for a working plant is missed, it’s unlikely that CCS will be considered ‘viable’ by anyone come 2020. Only Scottish Power’s Longannet bid is currently still in the competition; the episode shows how prohibitively expensive CCS infrastructure can be.

A 200MW clean coal plant in Tianjin, China is due to be completed next year at the cost of US $1 billion – a standard coal plant of 800MW, producing four times the energy, only costs around $1.4 billion. It’s not just building expenses either; because of the energy intensive ‘cleaning’ processes, CCS plants use more coal to produce the same amount of energy as their dirty counterparts. E.On estimates that even with a carbon tax of €40 per tonne, like that of Norway (the highest in Europe), CCS would still be more expensive than nuclear power and only slightly cheaper than onshore wind power. ‘Clean coal’ requires large corporate and state investment to become a reality and, as BP found, finding partners wealthy enough to support you isn’t easy.

And with no plans for a UK carbon tax, prepare to shell out a few more pennies for your energy bills: “The costs will be passed on to consumers. A low-carbon energy system is not a cheap energy system in the short-term, but it’s cheaper in the long term when the costs of climate change are built in”, Hardy explains.

The business opportunities for ‘all players large and small’ might be some way off too, despite the fact that CCS will rely on collaboration between industries. Let’s take Scottish Power’s partnerships for example: they fund CCS research at Edinburgh University and are trying to secure a similar relationship with Imperial College in London which is great from an academic perspective but does little in the short-term for the economy. Its consortium partners for the Longannet bid include Shell, National Grid and the Norwegian-based engineering firm, Aker Clean Carbon. These companies are global leaders and none could be described as ‘small’ players. Yet, these corporate powerhouses still need financial backing to make CCS a reality. The new jobs and economic benefits of CCS promised in the AEA report, rely on the UK being a leader in the field and doing it quickly – which will mean more pressure on our wallets for some time yet. Environmentalists say that subsidies and investment would be better spent on developing proven renewable technologies and could also provide new jobs and industry immediately – the recently unemployed workers from Vestas would probably agree with them.

With Britain committed to a carbon captured future, environmentalists have asked, what happens if the new coal fired power plants fail to meet expectations and never live up to the ‘clean coal’ billing? You can’t simply turn the power station off if CCS turns out to be an expensive mistake. David Kidney told me that there were various contingency plans being considered including an annual cap on emissions or running coal plants for a limited number of hours but went on to add that “[these] measures should be determined following an independent review to be completed by 2020.” Or, a problem to be dealt with by the next Government. 

Everyone, including environmental groups, recognises the need to tackle the problem of dirty coal. Aside from the potential environmental benefits CCS carries the prospect of employment and could invigorate the UK’s burgeoning Greentech economy. For others, including our electricity producers, the issue is more prosaic; without coal we won’t keep the lights on. But, there are a lot of uncertainties; not least that nobody knows how successful ‘clean coal’ will be, or how quickly it will become cost-effective. The Government has sided with the prospect of economic benefits in the long term and has wrapped it up in a need for a global solution for coal as soon as possible. With nearly £10 billion of our money invested in the experiment already, and time running to make the UK a leader in carbon capture and, more importantly, to avert catastrophic climate change, the hope is that CCS turns out to be the solution and not a costly, carbon-belching mistake.

Two months on and it appears salvation will have to wait a little bit longer.

The major 2009 climate talks in Bonn, Bangkok and most recently Barcelona were blighted by a reluctance to compromise on all sides. Tensions reached a tipping-point when the G77 staged a walk out at the Barcelona talks, blaming the developed nations for setting feeble emissions targets.

Bargaining positions have been clearly defined all year – the poorest nations, most vulnerable to the consequences of climate change despite contributing least to the problem, want money for development and technology to ‘green’ their economies. They reckon US $400 billion a year should cover it, a figure baulked at by richer nations during these difficult economic times. Most EU nations agree on a minimum 20% reduction of emissions on 1990 levels by 2020, but this can’t become a global target until the US passes a climate bill of its own, which won’t happen until after Copenhagen. Without the US on board, the emerging superpower (and now world’s largest polluter), China, has argued that before the People’s Republic commits to anything that might curb its rampant economic growth and growing market dominance, the US has got to get its act together.

Back in October, the US Climate Change Envoy, Todd Stern, issued a portentous statement on Channel 4 News, saying it was “certainly possible that there won’t be a deal” in Copenhagen. The US has been dithering on climate change since the Kyoto Protocol and the eight years of denial and damaging environmental policy has not abated in the post-Bush era. Obama’s manifesto of change has forced the main parties further apart than ever; the GOP continues to bury its head in the tar-sands and block climate change legislature, making environmental reform impossible until next year.

So it came as little surprise when the day after talks broke down in Barcelona, Stern issued a statement that a legally binding deal at Copenhagen wasn’t “on the cards.” The UK followed suit as Ed Miliband, Secretary of State for Energy and Climate Change, moved the UK’s position from securing a legally binding deal to laying the ground work for one in 2010. APEC leaders appeared to deal the final blow in Singapore a couple of weeks ago as they issued a joint statement, that time had run out to obtain global consensus.

So far, so depressing. But it isn’t all doom and gloom for Copenhagen; in the past couple of weeks there have been some serious reasons to be cheerful.

Talks between Obama and Jintao in Beijing week sparked hopes of “green tech-sharing” between the world’s two biggest polluters, and both said that Copenhagen should be the start of a deal to “rally the world.” China was already one step ahead of the US having announced a “carbon intensity” target which was rumoured to curb emissions’ intensity by around 40% by 2020. Last week the figure was made public, confirming the speculation. China’s target isn’t legally binding and “will be dealt with internally” – which essentially means it’s up to them whether they they fulfill their promises. But, in recent years China has reduced 1.5 giga-tonnes of CO2 through voluntary green initiatives. If they deliver on their 2020 target a further 4 giga-tonnes of planet warming gas will be contained.

As a result of the talks and not wanting to lose the moral and political high-ground to China, Obama was ready to announce targets of his own; 17% reduction of emissions on 2005 levels in ten years, incrementally going up to 83% by 2050. The 2050 target is a 70% reduction on 1990 levels, which is still short of what most scientists say is required, but suggests the US might finally be taking responsibility for being historically the worst carbon offender. The initial target is low but that’s because Obama needs to get a bill through a hostile House and Senate.

Pressure on the US political elite isn’t only coming from Asia though; Brazil recently pledged emissions cuts of at least 36% and a dramatic reduction of deforestation by 80% over the next 10 years, which has environmentalists and the Amazon rainforest sighing with relief. There’s never been more pressure on the US’s cumbersome political system to deliver a ‘Carbon Bill’ as soon as possible, if they want to avoid looking more sheepish than a lamb wearing a Christmas woollen.

A delay in a global deal is definitely unwelcome but not surprising after a year of frustrated and failed negotiations. After the debacle in Barcelona the Chair for the Group of the Least Developed Countries, Bruno Sekoli said, “We do not want a compromise deal. A bad deal is not good for… vulnerable countries.” That from the man who represents those with the most to lose if climate change continues unabated – and it’s important his richer peers take note. But although nothing will be signed, and Obama won’t be there for crucial final days,  the Copenhagen conference could still be a game-changer.

The next summit is starting today in Pittsburgh, and with the recession technically coming to an end, expect a lot of handshaking, backslapping, and sombre guff about there still being a lot of work to do. Some of the measures laid out at the London summit have been met, like the creation of the Financial Stability Board (though the oxygen-starving level of bureaucracy it seems to be inviting may render it ultimately useless). Others, like the stimulus packages, are in theory working but in reality have only had a fraction of their total amounts released. With the recent domestic handwringing over cuts indicative of a growing resistance to further Keynesian intervention, surely one of the big aims of the Pittsburgh summit should be the stronger enforcement of stimulus plans.

But as David Smick mused on Associated Press yesterday: “They’re going to have a nice discussion, in which they come up with side issues to fixate on – bankers salaries”. Alastair Darling is duly setting this stall out already, saying “the party has got to be over” for bankers, who must start to “behave sensibly”. Tough words indeed. Of course, received wisdom states that appearing tough on pay is a fast-track to public adulation, hence these high-profile quotes. But to be fair, once remuneration gets unilaterally sorted, more progress can be made on regulating the activities of hedge funds and investment banks – creating a competitive disadvantage by lowering pay may disrupt proceedings. It’s a question of sorting the genuine concerns from the latent self-interests of business lobbyists and banking chiefs.

Meanwhile Nicolas Sarkozy is threatening to walk out of the summit if an agreement on remuneration isn’t made, though his finance minster, Christine Lagarde said (with more than a hint of weariness): “I hope that we will save [Mr Sarkozy] the trouble of having to walk out”. He’s recently shown that he’s a world leader when it comes to pay reform, ruthlessly enforcing a series of pay rules for French banks the likes of which the UK regulators pussied out of. Still, this whole “do it or I walk” routine is getting a bit wearying – he threatened to walk during the last summit, and then didn’t, so the whole thing has a touch of “the boy who cried wolf” about it.

It sounds like there’s going to be repeat of the utterly incoherent protests we saw in London too. From the Guardian: “a group called the Pittsburgh G20 Resistance Project plans a mass march today, gathering people with anti-capitalist, environmental, union-driven and economic concerns. ‘We’re an anti-authoritarian group,’ said a spokesman, Noah Williams. ‘We reject all forms of hierarchy and repression.’”. Way to engage with the issues on their own terms, guys. Pass the alfalfa.

Still, they’re not the only ones with an agenda so broad it’s destined for impotence. Obama is using the summit to press for a reduction in tax breaks for fossil fuel energy producers – it’s hard to decide whether this is creating important momentum ahead of the Copenhagen climate conference, or unnecessarily diluting the economy-heavy agenda of the G20 summit. Probably more important to the G20 is discussion of the aforementioned points, plus reminding everyone of the dangers of the creeping protectionism that was emerging at the start of the year – this looks like being the idea that Brown brings to the table most forcefully.

We’ll be back tomorrow to look at whether they did talk about any of this, or just chucked some soundbites around.

Osborne went considerably off the leash with his claims, saying that Labour secretly planned to raise income tax, and implying that civil servants had, in allowing the plans to be forged, given up something of their political impartiality. Stung, the servants told Osborne to drop the Hardy Boys schtick – the “secret plans” were actually in the public domain as part of the Budget, and the increase in income tax was tied to the ongoing growth in the economy.

He’s set in motion the kind of political Pokemon battle we get every election cycle, where each side fires its rhetorical magic at the other in turn, until one of them emerges the victor – so much for Osborne’s recent condemnation of electioneering. But with his vicious fireball deflected by the backroom staff, he was left dangerously exposed over the weekend. Mandelson, I choose you!

The business secretary and veteran political warhorse described Osborne thus: ”Like a boy in a man’s job”. Saucer of milk, etc etc, but while we wait for the homophobic reaction that dogs Mandy’s every move (let alone when he’s talking about boys and men) David Miliband has also slagged Osborne, describing him as “not a serious person”. He described the Tories’ tactics as “juvenile and student politics…the politics of the big lie and the big smear”. Treasury Chief Secretary Liam Byrne added: “this truth problem for Mr Osborne is becoming a pattern of behaviour”. Vince Cable meanwhile has managed to get mileage out of both his opponents in a single sentence, saying: “The public doesn’t need George Osborne’s imaginary secret documents or conspiracy theories to work out that the public finances are in a bad shape”. 

The Tories were also hurt by the Lib Dems rooting through their post-election plans and finding over £50bn of spending pledges that don’t really chime with Osborne’s prudence – new-school policies like high-speed rail sit next to classic Tory stances like cutting inheritance tax.

While it’s all good fun to see the internecine bitchery of The Hills get transplanted onto the UK’s political scene, this all seems like a case of electioneering distorting the genuinely necessary action. Cuts will be an inevitable part of the next government, whoever it is – the public discomfort at a rocketing deficit can’t be ignored. But the need to score points off and differentiate themselves from Labour has drawn the Conservatives, and to an even greater extent the Lib Dems, towards a economic model based on arch prudence. This is framed for maximum gain as brave and wise, positioned opposite Labour’s supposed recklessness with the public balance sheet.

But it’s too soon to make cuts, and using them as such a hot political topic is dangerous; fiscal stimulus needs to carry on for some time yet. Keynesian economists like Robert Skidelsky and William Keegan have written over the weekend about the importance of letting fiscal stimulus continue, Skidelsky with a simplicity that is either charmingly optimistic or dangerously reductive depending on your leanings: “Had the Government given everyone a spending voucher of £500 last Christmas, the chances are we would have had no output gap and full employment today!”

But for all the weirdly mechanistic and presumptive nature of Keynes, his ideas are still valid, and to ignore them for brief political gain would be disastrous. The recent crowing about the end of the recession, along with the City-minded political economists, means that talk of cuts might not seem too premature, but if the stimulus is cut back before much of the country has had time to feel it, then any future government could find itself with a hole where its income tax should be. Once the economy is genuinely growing again, with consumer spending steady, then we can start worrying about the deficit. At the moment, all the talk of cuts is only benefitting political strategists.

The first wave of hesitant calling of the end came in May, with Jean-Claude Trichet, George Soros and others saying an inflection point had been reached, with the economy heading back upwards. A quarter later, and people are saying that the recession is genuinely, officially over (there needs to be two quarters of consecutive GDP growth for it to be semantically, if not realistically, laid to rest). Ben Bernanke, US Fed chairman and recent receiver of mad love and props, said yesterday it is “very likely over”, with a reported rise in consumer spending seeming to underline his soothsaying.

Meanwhile, “arc of insolvency” members Scotland are saying they’re on the way up too, Lloyds Scotland’s chief economist Donald MacRae claims; Mervyn King says all’s well south of the border too, claiming “there are now signs that growth has resumed in the third quarter”; Mandy gave his optimistic two cents last week in China; these folks that the Guardian memorably interviewed at the beginning of the year seem to be on the up; and Wachovia’s senior economist Mark Vitner has said that we’re firmly in recovery mode though added, while upholding the tradition of dodgy meteorological metaphors beloved of economists: “Technically, it’s not freezing but it’s still pretty darn cold outside and you see ice everywhere”.

Yes, that’s the ice of real-term economic misery he’s clumsily referring to – while all this is pretty impressive given the dire straits we were in this time last year, unemployment is still a major inhibitor on quality of life and consumer spending. While the City is looking at the GDP growth, the likes of Next are looking at the high street: “we anticipate that the public sector deficit will become the dominant influence on the economy, bringing with it the combined downside risks of further increases in taxation and cuts in government expenditure”. Brown’s use of the c-word yesterday means that things like tax credits and general welfare could be cut, and taxes brought up to fight the massive deficit, thus impacting on people’s spending power. Meanwhile Chris Dodd, head of the US Senate banking committee, bluntly burst Bernanke’s balloon, saying “I don’t think it’s over”.

So basically until you see banks are overleveraging themselves into multinational deals, and people blithely acquiring 110% mortgages and living on credit cards, you can assume we’re still in the “bust” bit of the cycle.

Brown, as the Labour government has been doing to a worrying degree recently, is all mouth and no trousers – there seems to be a belief that if enough hot air is spouted about the creative industries, then somehow they’ll lift Britain out of the recession. The lack of detail in Brown’s statement, and apparently in the report that’s being published this afternoon, suggests a lack of willingness to contribute funds, either directly or through tax breaks.

“A fast internet connection is now seen by most of the public as an essential service, as indispensable as electricity, gas and water”, Brown says. True dat, but currently most people’s internet connection is like having water that judders unpredictably out of the taps, and is sometimes muddy. Rather than focus on the frankly fairly crappy universal 2Mb broadband (which you can’t really describe as “fast”), Brown instead tries to bathe in the glow of fibre optics. “In our fibre optic and cable networks, which will provide the next generation of superfast broadband, the Government must also complement and assist the private sector to move farther and faster”. Could that be any less committal?

The Times says that this is going to translate into a few mild tax breaks for BT and Virgin to help roll out their fibre optic networks. Is this really going to be enough to encourage the kind of investment in the creative industries that Darling spoke about in his Budget speech? Once again the government wants the kudos of a creative Britain without directly investing in it, and the carrots they’re offering private investment aren’t looking that tempting. If they can’t even sort out the infrastructure, then we can expect the creative brain drain that’s happening in the video games industry to start being replicated across the entire industry.

Join us tomorrow for full analysis of the Digital Britain paper.

Of course, it’s not just jubilation at Blank leaving that prompted the faith in Lloyds. They also announced plans to raise £4bn that will pay off the preference shares bought by the government back in the excrement-fan days of last October – an investment opportunity that has sent the share price up. It’s also a sign that the government is beginning to retreat from its investments in banks – they’d originally pledged to take on all the shares from this issue, effectively swapping around preference shares for common shares, but now they’re only taking up 43% of them, and letting other investors in on the action. Lloyds is doing all this because it wants to stop paying the government the interest on preference shares, as it’s costing them £480m a year. 

Blank resigned because everyone was realising that no heads had rolled for the HBOS merger that saw Lloyds saddled with defaulting loans and toxic assets – they announced in February that HBOS lost £10.8bn last year. Rather than get slaughtered at the annual shareholder meeting, Blank stepped down, avoiding an ugly end to his career at Lloyds and also sparing Gordon Brown, relatively speaking, from any blushes – Brown had allowed the Lloyds/HBOS merger to go ahead without impediment from competition law after Blank schmoozed him at a Whitehall cocktail party.

As the FT notes today, UKFI, the Treasury body managing government stakes in banks, has not sided with Brown but instead has been listening to hesitance from investors over the quality of Lloyds’s leadership. But rather than publicly side with those investors, tantamount to “an open insult” to Brown, they diplomatically nudged Blank towards the edge and suggested that jumping might be an awfully fun thing to do.

Yesterday the FT’s Lex column suggested that Eric Daniels, Lloyds’s chief exec, “should not delay in preparing his own exit”, the suggestion being that a shareholder revolt against him would be inevitable as he and Blank are “inextricably linked” over the HBOS deal. But today there are suggestions from sources that Daniels could be safe: “Eric has some serious supporters out there”; “Eric is the right guy to make a success of this”; “Eric’s Sino-Germanic heritage suggests mystic power combined with ruthless efficacy, while looking like an exceptionally wise ape – this will surely be enough to survive”. That last one was me, but it’s true! Anyway, even Blank probably won’t leave for a good few months – posting a new chairman won’t be a quick task, and certainly won’t want to be seen to be rushed.

But just as we’ve seen with Goldman Sachs et al recently, a less competitive banking sector has thus far meant massive profits for the ones who have survived. As Pesto suggests on his blog, the sheer amount of assets that Lloyds now has as a result of the HBOS deal will eventually help it turn some massive profits once people stop defaulting and they’re not tied to the government any more. Some are calling the merger “the worst deal in British corporate history”, but thanks to that deeply irregular Brown-sanctioned waiving of competition rules, Blank gave Lloyds a once-in-a-lifetime opportunity to amass a huge chunk of assets, which could go on to make them (and therefore the taxpayer) a lot of money.

And while the cocktail party decision smacks of Labour being in thrall to the private sector, as well as being quite simply rash, the government is getting a healthy return on its investment. Whether a contracted banking sector starts to mean a less competitive atmosphere, it’s too early to say, but right now the government’s exit strategy is looking strong.

Gordon Brown said last year that he wants all British vehicles to be hybrid or electric by 2020, and the announcement comes as various major car manufacturers outline their plans for electric cars. Nissan CEO Carlos Ghosn was talking up his company’s prospects yesterday: ”Somebody’s got to invest massively and bring to the market zero emission cars, and we think we can do it”, he said, before slagging off GM’s Chevy Volt for being, at $40,000, way too expensive. Chrysler is developing the Dodge Circuit, an electric sports car, to be the first of five electric or hybrid models to be out by 2012 (that’s if it can negotiate a deal with Fiat to manufacture them). Mitsubishi have recently been showing off the i-Miev, a tiny car that looks like a cheerful robotic hamster storing food in its cheeks, and plans to launch it in 2010. Then there’s the adorably happy little gentleman pictured above, the Peapod, who can only go at 25mph and is designed as a “neighbourhood” vehicle, but which is so goshdarned cute I could just eat it all up.

This month’s Fortune magazine features Warren Buffett alongside the Chinese electric car company he’s invested in, BYD. Don’t underestimate the power of the Oracle – his slavish followers will be on the BYD waiting list before you know it. It only costs $22,000, and looks like a Saab if you squint hard enough, but does have its limitations – its 60-mile range is only good if you’re pootling along at 30mph, while lack of demand in China might be a stumbling block to expansion.

Vauxhall have announced the Ampera, which looks totally evil, the sort of thing the Terminator would take his kids to football practice in. Encouragingly though, it could be built at Ellesmere Port, helping the UK, as Boris Johnson potentially sees it, to be the “electric car capital of Europe”. Ah, and therein lies the rub.

£250m is a drop in the ocean in terms of the investment in infrastructure needed for electric cars to be feasible UK-wide. George Osbourne has  described the plans as “fantasy”, highlighting the lack of preparation for charging points and no mention of a grid to deal with the extra electricity demands created by a nation of electric car drivers. And as John Sauven, chief exec of Greenpeace, told the Telegraph: “electric cars are only as green as the electricity they run on”.

The recent fails concerning renewable energy funding means these cars aren’t going to be running on wind or waves; it looks like Ed Miliband’s next generation of nuclear power plants is going to be sorting out energy in the medium term, but until they’re operational the UK is going to running on carbon-rich gas, right when the electric car revolution is meant to begin.

I scraped a B at GCSE, but let’s do some maths anyway. Assuming you charge your 25kWh car battery from a gas-fired power station emitting 400g of carbon per kilowatt hour, you’ll create 10,000g of carbon dioxide to charge an electric car for a day. An electric car like the Ampera or Volt can generally go about 64km on a charge. A 1.4l diesel Ford Fiesta generates 119g of CO2 per km, or 7616g over 64km; that’s 2,384g less carbon than the electric car, right? (Please tell me in the comments if I’ve really dropped the ball here). OK, so a diesel Fiesta has very low emissions compared with most vehicles, and this doesn’t take into account the carbon created by manufacturing the diesel, but even so, electric cars charged off gas-fired power stations (which aren’t even as bad as coal ones) can’t really claim to be cutting Britain’s carbon emissions substantially. And the above scenario doesn’t take into account the strain that fast-charging batteries will have on a power grid.

There’s also a huge shortfall in Hoon’s proposal in terms of allowing the UK to reap the benefits of the electric car. Sure, the Ampera might be built in the North West, but the batteries will be coming from China. If oil-producing nations were the beneficiaries of the internal combustion engine, then battery-producing nations are set to be richly rewarded in the electric car age – the market for lithium-ion batteries to be used in cars could reach $17bn by just 2012. To say, as Labour are, that your electric car plans are to merely subsidise people to buy them, rather than even attempting to tap into the revenue-generating potential they have, is pretty pathetic.

Obviously the government championing electric cars is a good thing, but they have to be powered by renewables, they have to involve British industry, and they have to have a supporting infrastructure that will stay in place for decades to come. Concentrating on the consumers should be the last on this list of priorities; Labour is currently putting it up at the top.

The Glass-Steagall Act was passed in 1933, and split apart investment banking from commercial banking, so that the speculations of investment bankers wouldn’t harm the public’s commercial banks if they went wrong. And so the American banking system stayed until 1999, when Phil Gramm introduced a repeal of the Act that was eventually passed with an overwhelming majority in the Senate.

The repeal meant that large commercial banks like Citigroup and Bank Of America could indulge in investment banking, leading to a more widespread use of instruments so complex even the heads of banks couldn’t understand them, like structured investment vehicles. People started defaulting on the mortgages that these investment strategies afforded them, and because they were so widespread after the repeal of Glass-Steagall, the world went plughole-wards.

Hence Paul Krugman accusing Phil Gramm of being the chief architect of the financial crisis behind Alan Greenspan (though it should be noted that Democrat heavyweights including Kerry, Biden and Daschle all voted in favour, and Larry Summers supported it too), and the momentum for reinstating the act is gathering. Paul Volcker, who heads Obama’s Economic Recovery Board, said last week: “Maybe we ought to have a kind of two-tier financial system”. Sheila Bair, one-time possible Treasury Secretary and head of the FDIC, said that the size of banks should be limited so that they couldn’t get so big that they need to be bailed out by the taxpayer, hinting support for the splitting of investment and commercial banking, which would break down megabanks into smaller separate parts.

Even Guy Hands, bane of Lily Allen’s existence, expressed support for the act in his annual review: “The Glass-Steagall Act was a sensible reaction to the 1930s depression, and it is a tragedy that the hubris of bankers, regulators and politicians resulted in its repeal. It needs to be reinstated globally as soon as possible”. And Barack Obama, in a March 2008 speech, suggested his discomfort with the 1999 repeal: “by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework”.

In the UK too, there’s been banter about installing a similar system, something we’ve never had before. Gordon Brown ruled it out last month, saying: “We do not envisage, as some have advocated, a rigid divide in future between “narrow banking” – retail and corporate deposit taking – and investment banking and trading conducted at an international level”. But George Osbourne said it’s “something worth considering”, and Sir James Sassoon, a former managing director at the Treasury, said the idea “deserves more thorough scrutiny”, but would need to be matched with other new regulatory measures.

So should it just be brought back in unchanged? The FT’s John Gapper doesn’t think so. “Even if it were possible to split bank lending from securities underwriting…it is useful to have banks, to buy insolvent investment banks”. And the newspaper’s Lex column opined yesterday: “A new Glass-Steagall would be no panacea”, pointing out that purely commercial banks like Northern Rock and Germany’s IKB were the first to go down during this crisis, and that “the real problem lies in the fuzzy relationship between banks and the opaque world of the shadow financial system”, not in banks with both commercial and investment interests. And don’t underestimate the lobbying power that Obama mentioned – as former Bear Stearns chief Alan Greenberg said, with colossal understatement, a reinstatement of the act “will run into a little bit of opposition from the same people who fought so hard for the death of Glass- Steagall”.

But Gapper does suggest a modulation of Glass-Steagall, to reduce risks, reduce size (as Bair suggested was necessary), and prevent conflicts of interest. What it will end up looking like will be the result of a long battle between House, Senate, executive and lobbyist, but we can definitely be sure that money, created through complex and risky means, is something that will stay in investment banking for a long time, and will be very hard to breed out. Let’s try and keep it away from the rest of us somehow.

A quick further explanation of shorting first. Normal share trading, or selling “long”, is buying shares at a low price and selling them for a higher price, and pocketing the difference; a short-seller however looks to profit from lower prices.

They borrow high-priced shares and sell them to someone else, and makes some money from that trade. Then when the price of those shares goes down, the short-seller uses that money to buy them back at the lower price and returns them to whoever they borrowed them from. In so doing, they pocket the difference between the high price they sold them for and the low price they bought them back for. Comprenday? Don’t worry if you don’t, all you need to know is that it’s about as far from an honest day’s graft as you can get.

John Paulson, now £300m richer.

As soon as the FSA allowed shorting again, some were in like a shot, like Lansdowne Partners, who brought an end to their two-year short position on Barclays shares, ending up with £100m. They also bagged £13m short selling stocks in insurance giant Aviva last week. And yesterday, New York hedge fund manager John Paulson added to the £100m he made from short-selling HBOS by scaling back his short position on Lloyds, bagging £200m.

Profits like these are unsettling, and there’s no doubt that short-selling can intensify stock market dips; these stories will no doubt trigger a fresh wave of demands that shorting be banned once more. Gordon Brown originally brought in the ban like a ruthless sheriff in a lawless town, saying he was going to “clean up” and stabilise the City via tighter regulation. Although US Treasury Secretary Tim Geithner said that preventing short-selling wouldn’t be “effective”, the US has announced it’s reinstating the uptick rule, a restriction on short selling, and bans have been recently extended in Australia, and potentially Japan. 

But the reality is that these bans didn’t prevent a fall in bank share prices, and now hedge fund managers are crowing about their “worthless” nature; on the uptick rule, one fund manager told the Wall Street Journal: “I think it’s a feel-good thing so Congress and everybody involved can act like they’re doing something concrete. I don’t think the short-sellers have made it any worse.”

It looks like financial stocks have bottomed out and are on their way up again, with the Nikkei finally hauling itself out of the gutter, and the FTSE rising 5% yesterday off the back of people buying bargain bank shares. Man Group and HSBC were amongst the biggest gainers, the latter jumping 14%, while Barclays managed to fend off speculation about it having to sign up to the government’s asset insurance program and rose 9%. US hedge fund Harbinger Capital must be wondering whether it picked exactly the wrong moment to go short on HSBC, as it revealed yesterday. But with markets this volatile, short-selling won’t end any time soon, and just wait til that inevitable Barclays announcement - the world will come crashing down once more, and hedge funds will get shorty accordingly.

So wha’ gwarn? Lloyds had a busy weekend, signing up to the government’s insurance scheme that Darling set up back in January, which has the government take on banks’ “troubled assets” (still loving that bit of euphemistic psychological terminology). Lloyds needed to do this because of the massive amounts of these assets held by HBOS, whom it bought out last year. So under the scheme, Lloyds pays the government a £15.2bn insurance premium to have it insure its £260bn of potentially bad assets – things like defaulted mortgages – so that if they do turn out to be bad, the government will absorb the losses (after the first £25bn of losses is taken on by Lloyds themselves). The hope is that the confidence given to them by not having to worry about these assets will improve its health – it’ll start lending again (it’s promised £28bn over the next few years), the economy will pick up, not as many of the assets will turn bad, and the ol’ capitalist machine will whirr with renewed vigour. 

Well, let’s hope so, because if it doesn’t then the taxpayer is shouldering the burden. And Gordon Brown must be hoping so too, as the political mileage gained by his rivals will be enough to sink him if it doesn’t work out. Brown allowed the takeover of HBOS by Lloyds last year to pass unheeded by competition rules, and with five times less due diligence – this will come to be seen as rash and clumsy if it doesn’t work out. Michael Fallon, the Tory chairman of the Treasury sub-committee has already waded in, calling the soiree where chairman Sir Victor Blank persuaded Brown to waive the rules “the most expensive cocktail party in history”, adding: “Brown should never have egged Victor Blank on by offering to waive the competition rules. The law is there for a good reason”. Expect a lot more of this in the next few days.

But while we should wait until we actually take on assets before we get angry with them (though The Times isn’t bothering), shareholders are already mad at Blank and chief exec Eric “Fat Dr. No” Daniels. Considering 83% of the assets insured by the government came from HBOS, shareholders can’t believe that their investment has been dragged down by Lloyds chasing cheap acquisitions. The deal cut by Lloyds is less favourable than the insurance package for RBS, who paid £6.5bn to the government for insuring against £325bn of its assets. Daniels can’t seem to please anyone, having “pissed the Treasury off” during the hashing out of the deal, according to a source quoted by the FT. Still, they’ve both got Brown’s support, who said: “When we rescued RBS last year, we removed the chief executive and chairman. That is not happening at Lloyds”.

Elsewhere, the papers are gamely encouraging us to get all riled up at the news that 40,000 junior Lloyds employees are still set to get bonuses of around £1000 each, not really the story that “Lloyds bankers in line for £80m bonuses” promises. Don’t worry – Daniels et al are still not getting any bonus action this year (though Daniels is getting a £3m pension).

So while the shareholder revolt foments, hopefully resulting in the trashing of Blank’s pathetic attempt at a car and fresh tears from Daniels, another one is brewing over at Barclays. Despite them taking on tons of Middle Eastern investment to avoid a government bailout, they might need to sign up to the insurance scheme anyway. Alastair “Don” Darling is clearly making everyone offers they can’t refuse – fingers crossed it all works out.