$515 BILLION A YEAR TO STOP CLIMATE CHANGE— WORLD ECONOMIC FORUM REPORT

With the most recently-emerging scientific evidence, the debate on global climate change has at last shifted almost entirely to the search for answers. The dinosauric deniers who have been so vocal over the last 8 years have finally begun falling into dark age oblivion.

Green Investing: Towards a Clean Energy Infrastructure, presented to the participants in the World Economic Forum (WEF) by its Global Agenda Council on Climate Change, proposes answers. In keeping with the more immediate financial concerns of the WEF this year, the report presents its anawers in terms of very specific costs and benefits.

The report: “…[A $515 billon yearly] investment in energy infrastructure is required to address the twin threats of energy insecurity and climate change. In light of the global financial crisis, it is crucial that every dollar is made to ‘multi-task’ to create a sustainable low-carbon economy.”

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The good news: Nothing generates a better return on investment than New Energy. Even after the downward financial spiral in the last part of 2008, an index of the world’s 90 leading New Energy companies had a ~10% five-year (compounded) return, a better performance than any of the world’s major stock indices.

2 items the report’s authors especially highlighted were that (1) New Energy investment worldwide increased almost 500% from 2004 to 2008, and that (2) New Energy investment is spreading around the world, with almost twice as much activity in developing countires in 2007 than there was in 2004.

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4 essentials the authors believe necessary to successfully stop greenhouse gas emissions and reverse global climate change are (1) R&D support for innovation, (2) development of markets that drive New Energy investing, (3) international energy efficiency standards and (4) straightforward, stable public policy.

4 areas in which the report’s authors believe breakthroughs will be necessary to enable the shift to New Energy are (1) energy efficiencies, (2) smart grids, (3) energy storage, and (4) carbon capture and storage.

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The report is unequivocally hopeful on the subject of emissions trading: “Although it may sometimes not seem to be the case, we are moving inexorably towards a world in which every major economy puts a price on greenhouse gas emissions. Currently the most liquid markets are the European Union Greenhouse Gas Emission Trading Scheme (EU-ETS) and the global Kyoto compliance markets. Others are following in their footsteps in Australia, Japan, the US’s Regional Greenhouse Gas Initiative (RGGI), California and the Western Climate Alliance. Then there is the voluntary market, rapidly taking shape and increasing in volume. These may soon be joined by a US Federal carbon market and a strengthened global scheme may emerge from the negotiations in Copenhagen in 2009.”

The report's prediction is not for a single, universal trading scheme but a worldwide market system with a very favorable result.

From the report: “What we are seeing is the emergence of a system of interlinked policy-led financial markets, similar to currency markets. A single price for carbon everywhere in the world is probably not achievable, but neither is it necessary. As each of these carbon markets grows in liquidity, its rules firm up and become well-understood, and it is linked to other markets via project-based and other mechanisms, arbitrage will reveal a global carbon price range – and it will be one that drives significant behavioural change.”

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Anticipating the pivotal Copenhagen summit scheduled for December at which the world will come together to finalize the international climate change program to succeed the Kyoto Protocol, the release of the WEF report was accompanied by urgent calls to regard 2009 as a year of opportunity in which diplomacy can design “win-win” projects and public policies on which the nations of the world can collaborate with unanimity of purpose.

From the report’s conclusion: “Policy-makers need to build frameworks which enable corporations and investors to make good returns by squeezing carbon out of the world’s economy. And investors need to understand the scale and nature of the investment opportunity presented by the world’s one-time shift to low-carbon energy…2009 is a critical year to bring these players together and start the transition toward a clean world energy infrastructure…”

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World Economic Forum Report: US $ 515 Billion needed in Green Investments
29 January 2009 (World Economic Forum)
and
Clean energy spend needs to more than triple – report
January 29, 2009 (Reuters via UK Guardian)
and
WEF report calls for massive green investment
January 29, 2009 (Xinhua via China Daily)

WHO
Report authors Max von Bismarck, Director and Head of Investors Industries, World
Economic Forum and Anuradha Gurung, Associate Director, Investors Industries and
Global Leadership Fellow, World Economic Forum; Chris Greenwood, Head of Research, New Energy Finance and Michael Liebreich, Chairman and Chief Executive, New Energy Finance; Expert Committee; Alice Hohler, New Energy Finance, Writer; Helena Hallden, World Economic Forum, and Nancy Tranchet, World Economic Forum, Ediotors; Kamal Kimaoui, World Economic Forum, Design

WHAT
Green Investing: Towards a Clean Energy Infrastructure concluded it will require a minimum world investment of U.S.$515 billion yearly through 2030 to adequately control greenhouse gas emissions and avoid the worst consequences of global climate change. Shaping an Opportunity Out of Crisis; A message to participants in the World Economic Forum Annual Meeting 2009 from Members of the Global Agenda Council on Climate Change is based on the report.

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WHEN
- 2004 world New Energy invesment: US$ 30 billion
- 2008 world New Energy invesment: ~US$ 155 billion

WHERE
- Developing countries 2004 percent of New Energy investment: 13% (US$ 1.8 billion).
- Developing countries 2007 percent of New Energy investment: 23% (US$ 26 billion).
- The 8 New Energy sectors that can turn global climate change around: onshore wind, offshore wind, solar photovoltaic, solar thermal electricity generation, municipal solar waste-to-energy, sugar-based ethanol, cellulosic and next generation biofuels, geothermal power.
- The World Economic Forum meets yealy in Davos-Klosters, Switzerland.

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WHY
- World renowned research group New Energy Finance collaborated on the report.
- 9 summary points from the statement of the report’s authors:
(1) Few other challenges are as serious for the future of humanity as climate change.
> Assumed by the report: Not keeping temperature increase to 2°Celsius (3.6° Fahrenheit) above pre-industrial levels means it would be impossible to avoid potentially irreversible
changes to the Earth’s ability to sustain human development. Chances are 5 in 6 of holding it off if GhGs are cut 80% from 1990 levels by 2050
(2) The need to begin the transition to a low-carbon global economy has become far more urgent.
> emissions must peak and decline in the next 10-15 years
> recession is not an answer
> Developed countries must show leadership, esp w/R&D&D
> demand for energy will again grow, oil prices will rise, and energy security issues will again emerge… low-carbon technologies must come to market…the 2025 to 2050 period is crucial
(3) We must innovate as we rebuild our economies during 2009.
>Despite the recession, low carbon technologies must get continued financing
(4) Let us shape an opportunity out of this economic crisis.
>stimulus money must be used to address solutions
(5) There are real opportunities to stimulate jobs and growth today from investments in the low-carbon economy.
>There are big opportunities in New Energy development
>Policy can spur investment that exploit the opportunities

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(6) At the same time, a foundation for the longer term can be built, if some of this money is also used to catalyse longer-term strategies such as
>Boosting innovative public-private investment;
>Provoking a step change in research, development and demonstration efforts;
>Stimulating deployment;
>Finding new investment and financing to reduce deforestation and forest degradation and adding economic development and capacity building programmes;
>Restructuring, expanding or creating international markets and capital flows to boost public and private sector activities in low-carbon goods and services with a clear price
on emissions though international levies, taxes or quotas, trading schemes or cutting off
subsidies for carbon based energy sources without hurting the energy poor;
>Mobilizing human and financial resources;
>Strengthening and creating regional or sector based institutions;
>Boosting global capacity for data collection and reporting and the enforcement of commitments.
(7) We believe that unprecedented multistakeholder collaboration is needed for 2009 to link the climate and economic agendas.
> international commitments, multilateral institutional arrangements and the mobilization of public-private collaboration of governments, international business and civil society with environmental economists, trade and climate experts to design policy instruments, market incentives, investment vehicles, stimulus packages and innovative plans.
(8) We also believe that climate change now presents a diplomatic opportunity.
> Development of an international narrative and agenda
(9) We look forward to the discussions at this year’s World Economic Forum Annual Meeting in Davos-Klosters.
>To lay the foundations for major government-civil society-business and expert collaboration…

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QUOTES
- Recommended expression of a global shared narrative and agenda: “…the shared desire to deliver climate security, energy, food and water security, economic security, equity between rich and poor through enhanced capital and technology flows, all through the creation of a package that promotes economic growth by decarbonizing the world economy.”
- From the report’s preface: “It is crucial that the environmental challenges are not left aside when focusing on stabilizing the global financial system and reviving global economic growth. Waiting for economic recovery, rather than taking decisive action now, will make the future climate challenge far greater. To this end, we hope that this report
will stimulate informed dialogue among stakeholders on the opportunities that will emerge from a move towards a resilient and sustained low-carbon economy.”
- From the report: “…whichever policies are adopted, the overarching requirement is for policy stability – the impact of policy uncertainty on cost of capital must be better understood – and simplicity, so that the industry is not burdened with unnecessary bureaucratic costs.”