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LONDON, England, November 1, 2006 (Refocus
Weekly)
Climate change has become a major concern among
major financial institutions and companies in the United States,
according to a coalition of global investors with US$32 trillion in
assets.
In February, the Carbon Disclosure Project asked for information
on corporate risks and opportunities associated with climate change
from 2,000 companies around the world, including the 500 largest
publicly-owned companies. Of responding companies, 87% indicated
that climate change represented “commercial risks and/or
opportunities” although only 48% had implemented a reduction program
for GHG emissions.
Many strategies entail domestic ‘cap & trade’ schemes which put a
market price on
emissions, but “widespread uncertainty about the scope of global GHG
regulation after the Kyoto Protocol expires in 2012 is causing a
considerable headache for many FT500 companies,” it notes. The
amount of carbon traded globally increased 44-fold between 2004 and
2005, driven by the rapid expansion of the ETS carbon market in
Europe which affects 6,000 firms.
“Rising fossil fuel prices and concerns over energy security are
rapidly changing the rules of the game for companies operating in
energy-intensive sectors,” it notes. “Discussions about peak oil and
the future of the oil-economy are further incentivizing investments
in renewable energy.”
“The global investment and corporate communities have made great
strides in their understanding of climate change and its competitive
and financial implications, and the measurement of these
implications; however, awareness and measurement are not translating
into sufficient management and activity in the context of the
climate change challenge,” it notes. Clean technologies for energy
and environmental technologies “has become the fifth largest venture
capital investment category in North America” and the market for
clean energy will grow from $39.9 billion now to $167.2 billion by
2015.
“Continued growth in renewable energy projects has provided sector
leaders with opportunities to address climate change through
financing,” it notes. Credit Agricole has participated in the
financing of 200 MW of windfarms while Barclays has provided
long-term financing for 2,500 MW of green power capacity.
“Utilities continue to expand their capacities for less carbon
intensive and carbon neutral electricity generation” and, despite
the lack of federal GHG reduction policy, electric utilities in
North America are establishing “self-imposed emission reduction
targets.”
“Prominent clean tech examples include renewable energy technologies
such as solar panels, wind power and wave/tidal power, fuel cells,
electric/hybrid vehicles, photovoltaics, water purification
processes, bio-based agriculture and nano-technologies,” it
explains. “A variety of market, regulatory and political forces are
helping to drive the clean tech sector” including “rising global
energy costs which, at the margin, make renewable energy solutions
more economically attractive; the increasing volatility of global
energy prices; the ‘enabling’ role that clean technologies play in
helping corporations meet tightening environmental regulatory
requirements in areas such as emissions of pollutants and GHGs,
waste management, etc.; and the capacity of clean tech, but
especially renewable energy, to provide ‘energy security’ by
providing alternative energy solutions.”
“The growth of the clean tech sector - and the renewable or ‘clean
energy’ component in particular - has been nothing short of
remarkable,” it continues. The global market for clean energy
reached a value of $6.7 billion last year, up from $2.8 billion in
2004, and Clean Edge says global wind and solar markets reached
$11.8 billion and $11.2 billion last year (up 47% and 55%,
respectively from a year earlier) and the market will grow at an
average annual growth rate of 32% over the next decade.
The implications of climate change for the electric power generation
in North America will include more emphasis on green power and
Renewable Portfolio Standard requirements, as well as tightening of
national regulatory environment, transmission efficiency that may be
affected by climate change, material increases in operating costs as
coal switches to gas, and potential climate-change related damage to
facilities.
The Carbon Disclosure Project provides a secretariat for the world's
largest institutional investor collaboration on the business
implications of climate change. It is a special project of
Rockefeller Philanthropy Advisers.
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