| Private Sector Pumping Hundreds of Billions into Cleantech|
February 21, 2008
The private sector is "pumping hundreds of billions of dollars" into
cleaner and renewable energies, says a new publication released yesterday
by the United Nations Environment Programme (UNEP).
The report, The UNEP Year Book 2008, says that concerns over climate
change are driving the trend.
"Increasingly, combating climate change is being perceived as an
opportunity rather than a burden and a path to a new kind of prosperity as
opposed to a brake on profits and employment," said the report, which
credits the emerging ‘green' economy with "driving invention and
innovation on a scale not seen since perhaps the industrial revolution."
"Hundreds of billions of dollars are now flowing into renewable and clean
energy technologies and trillions more dollars are waiting in the wings
looking to governments for a new and decisive climate regime post 2012
alongside the creative market mechanisms necessary to achieve this," said
UNEP Executive Director Achim Steiner, speaking at the 10th Special
Session of UNEP's Governing Council/Global Ministerial Environment Forum
meeting from February 20-22 in Monaco. "Formidable hurdles remain as to
whether these funds will ultimately seek out new, climate-friendly
investments for the future or whether they will seek the lowest common
denominator by flowing into the polluting technologies of the past," he said.
Breaking Down the Barriers to a Green Economy
An emerging Green Economy is glimpsed in the latest United Nations
Environment Programme's (UNEP) Year Book as growing numbers of companies
embrace environmental policies and investors pump hundreds of billions of
dollars into cleaner and renewable energies.
Climate change, as documented in the Year Book, is increasingly changing
the global environment from the melting of permafrost and glaciers to
extreme weather events.
$1 trillion carbon market in the U.S. by 2020 says study -- 02/14/2008
The U.S. carbon emission trading market will top $1 trillion by 2020
if policymakers continue on their current path towards a
comprehensive "cap-and-trade" program, estimates an analysis
released at climate roundtable discussions at the UN General
Assembly in New York.
$100 billion invested in renewable energy in 2006 -- 06/20/2007
$100 billion poured into renewable energy and energy efficiency in
2006, a 25 percent jump from 2005, reports a new analysis by the UN
Environment Programme (UNEP). UNEP anticipates the trend will slow
to $85 billion this year.
UN warns on dangers of bioenergy -- 05/09/2007
Biofuels offer "an extraordinary opportunity" to reduce greenhouse
gas emissions but could make "substantial demands on the world's
land and water resources at a time when demand for both food and
forest products is also rising rapidly," said the U.N. in its first
assessment on the growing bioenergy industry.
Cleantech investment booms, but energy tech bubble looms --
Investors are pouring money into clean technology, with spending on
R&D rising to $48 billion in 2006, up 9 percent from 2005, reports a
new study by Lux Research, an emerging technology research and
advisory firm. However, the report warns that the energy technology
sector is showing signs of a bubble, with initial public offering
(IPO) values and venture capital deployments more than doubling last year.
But it is also beginning to change the mind-sets, policies and actions of
corporate heads, financiers and entrepreneurs as well as leaders of
organized labour, governments and the United Nations itself.
Increasingly, combating climate change is being perceived as an
opportunity rather than a burden and a path to a new kind of prosperity as
opposed to a brake on profits and employment, the new report shows.
The UNEP Year Book 2008 says the emerging green economy is also driving
invention, innovation and the imagination of engineers on a scale perhaps
not witnessed since the industrial revolution of more than two centuries
It includes the growing interest in novel 'geo-engineering' projects such
as giant carbon dioxide (C02) collectors that absorb greenhouse gases from
the air rather like trees do during photosynthesis.
"Based on technology used in fish tank filters and developed by scientists
from Colombia University's Earth Institute, this method called 'air
capture'.can collect the C02 at the location of the ideal geological
deposits for storage," says the report.
Meanwhile scientists in Iceland and elsewhere are looking at injecting C02
into that country's abundant basalt rocks where it is claimed the
pollutant reacts to form inert limestone.
Similar "sequestration rocks" exist in geological formations across much
of the world and may provide a safe and long term disposal option for the
main greenhouse gas emissions.
Elsewhere, scientists are helping to unravel both the uncertainties and
the opportunities posed by the enormous quantities of methane trapped in
the sea bed and in arctic permafrost.
As a greenhouse gas methane is 25 times more potent than CO2 so the
possibility of dramatic increases in methane emissions from these deposits
is a global warming 'wildcard' - a growing source of concern.
At the same time methane hydrates are a potentially large stockpile of
clean-burning fuel, if ways can be found of mining them safely and
Despite a great deal of activity and action, formidable challenges remain
if all these fledgling transformations are to be sustained and embedded in
the global economy over the coming years and decades.
Barriers include subsidies that favour fossil fuels over cleaner energies;
tariff and trade regimes that make cleaner technologies more expensive and
the risk-averse lending patterns of banks and other financial institutions
when it comes to solar and wind power loans for poorer communities, the
new report says.
The Year Book's findings were presented today at the opening of the
largest gathering of environment ministers since the climate convention
meeting in Indonesia late last year which gave birth to the Bali Road Map.
The Road Map is the climate negotiation agreement scheduled to be
completed by the climate convention meeting in Copenhagen in 2009 in order
to deliver a post 2012 climate regime.
The ministers, joined by senior figures from the worlds of business,
organized labour, science and civil society, are attending UNEP's
Governing Council/Global Ministerial Environment Forum under the theme
"Mobilizing Finance for the Climate Challenge".
Achim Steiner, UN Under-Secretary General and UNEP Executive Director,
said: "Hundreds of billions of dollars are now flowing into renewable and
clean energy technologies and trillions more dollars are waiting in the
wings looking to governments for a new and decisive climate regime post
2012 alongside the creative market mechanisms necessary to achieve this."
"Formidable hurdles remain as to whether these funds will ultimately seek
out new, climate-friendly investments for the future or whether they will
seek the lowest common denominator by flowing into the polluting
technologies of the past," he said.
"Designing an attractive, creative and equitable investment landscape
which rewards those willing to invest in tomorrow's economy today is the
challenge before ministers here in Monaco and the challenge for the
international community over the next two years in the run up to
Copenhagen," said Mr Steiner.
"However I am optimistic that we can shift gears to a Green Economy. If
humans can go to the Moon; submarines sent under the Arctic; liver and
heart transplants perfected; the mysteries of the human genome deciphered
and tiny nano-machines designed then managing a transition to a low carbon
society must be within humanity's grasp and intellect," he added.
Some Key Findings
The findings here are based on the UNEP Year Book 2008 with some
additional supporting facts and figures from documents prepared by UNEP
for the GC/GMEF
Responsible Investing Takes Off
The UNEP Year Book, an annual report requested by ministers, underlines
some of the elements of a Green Economy which are already falling into
Corporate Social Responsibility (CSR) reporting including environmental
concerns is now found among corporations in over 90 countries with the
number of such statements mushrooming from virtually zero in the early
1990s to well over 2,000 now.
The Investor Network on Climate Change, launched in November 2003, now has
some 50 institutional investors with assets of over $3 trillion.
The Principles for Responsible Investment, jointly facilitated by UNEP's
Finance Initiative and the UN Global Compact in 2006, now has 275
institutions with $13 trillion of assets.
Many companies now perceive that 'going' Green also improves their bottom
line. The Year Book 2008 underlines a study by the investment bank Goldman
A survey of companies in six sectors-ranging from mining and energy to
food and media-indicates that those with pioneering environmental, social
and governance strategies are out-performing the general stock market by
25 per cent.
Over 70 per cent out-perform their peers in similar sectors, the Year Book
Meanwhile a survey of some 150 companies with CSR strategies in the United
States as well as France, Germany and the United Kingdom underlines
corporations' growing environmental priorities.
Cutting greenhouse gas emissions and boosting energy efficiency ranked
number one among 54 per cent of those questioned followed by recycling, 52
per cent and waste reduction, 27 per cent.
Bottom of the list are 'making shipping and transport more efficient and
eco-friendly, eight per cent; environmental education and research, seven
per cent and supporting employees use of alternative transportation, six
Industrial Emission Reductions Remain Mixed
Meanwhile, some of the globe's most carbon-intensive industries are
leading the way in publicly disclosing their carbon footprint under an
eight year-old initiative called the Carbon Disclosure Project.
Disclosure is seen as one powerful route towards companies taking
responsibility and acting to reduce their emissions.
The Project, aimed also at empowering shareholders to better understand
the current and future economic risks facing the companies they support,
Close to 80 per cent of the Financial Times 500 corporations are
disclosing their carbon performance.
Over three quarters of those who are disclosing such information are now
also implementing greenhouse gas reductions via direct emissions
reductions or via the emerging carbon markets. This is up from nearly half
the year before.
Interestingly the highest rate of achievement in terms of carbon
disclosure is among the carbon-intensive industries such as metals, mining
and steel sectors alongside oil and gas and the power sector.
However the Year Book 2008 indicates that despite these promising steps,
more needs to be achieved.
A survey by Innovest, a research company whose findings are in the report,
shows that some sectors are making in-roads into greenhouse gas emissions.
These include electric power companies in North America; international
automobile manufacturers and metals and mining companies.
But other sectors appear to be either treading water or seeing emissions
continue to rise including oil and gas and chemicals.
The best known carbon markets are those established under the Kyoto
Protocol of the UN Framework Convention on Climate Change (UNFCCC).
These include International Emissions Trading; Joint Implementation and
the Clean Development Mechanism (CDM).
The CDM allows industrialized countries to offset some of their domestic
emissions via cleaner and renewable energy schemes alongside afforestation
and reforestation projects in developing countries.
As of November 2007, over 850 projects had been registered in close to 50
countries worth just over $1 billion in what are known as certified
A further $1.4 billion are in the pipeline and the CDM could, if fully
exploited eventually trigger investment flows for some $100 billion from
North to South.
A recent survey of the CDM, published in the Year Book, indicates that
close to 30 per cent of such projects are currently aimed at tackling the
refrigerant by-product HFC-23 followed by:-
Reductions in the nitrous oxide gas adipic acid, 10 per cent
Waste methane from landfills into electricity, 11 per cent
Biomass fuels, seven per cent
Wind power, installation of combined gas turbines and hydro-power six per
Emissions reductions from oil-fields and coal mining, four per cent each.
The Year Book also chronicles the rise of voluntary emission reduction
markets such as the Chicago Climate Exchange and the Over the Counter
The Chicago exchange now has over 330 companies, cities, states and other
participants despite the decision of the United States not to ratify the
Kyoto Protocol. And while it is deemed a voluntary exchange, those
involved are required to sign legally-binding contracts.
Since 2003, the volume of carbon traded has risen from zero to around 20
million tonnes of carbon dioxide equivalent by 2006. The exchange is also
involved in a wider suite of offsets when compared with the formal
For example, participants in the Chicago exchange can invest in reducing
emissions from livestock and animal wastes including biogas; agricultural
soil carbon sequestration and grass planting; urban tree planting and
forest conservation projects.
The voluntary Over the Counter offsets market is also evolving after
suffering a measure of criticism and concern that some projects were
flawed, counter-productive or even environmentally and socially-damaging.
"Schemes are emerging to guarantee to purchasers that carbon offsets
represent genuine emission reductions, without harmful environmental side
effects," says the Year Book.
The Voluntary Carbon Standard was introduced in November 2007 and is
endorsed by the International Organization for Standards under its ISO
14064 and ISO 14065 series.
The latest figures indicates that the total voluntary carbon market was,
in 2006, worth around $90 million with most projects in North America and
dominated by forestry schemes, followed by Asia where the lion's share of
projects are for renewable energies.
This compares with close to $30 billion from the formal Kyoto markets and
mechanisms in the same year.
Payments for Ecosystem Services
The formal and voluntary carbon markets are triggering new market
mechanisms for including the carbon removing value of forests alongside
other benefits such as water management, biodiversity conservation and the
preservation of traditional livelihoods.
Some countries and communities are already pursuing these multiple goals
under the voluntary markets by finding buyers interested in more than just
The Year Book cites the case of the Grupo Ecologico Sierra Gorda and the
organization Bosque Sustentable of Mexico. In 2006, they completed a sale
of land to the United Nations Foundation which was keen to reduce its
carbon footprint via a project that will also alleviate poverty.
A similar sale is the final stages to the World Land Trust, a UK-based
organization who will be selling the Sierra Gorda Carbon and Environmental
Offsets to a range of European buyers.
These developments are also underlined by a project funded by the
Government of the Netherlands in Tanzania called Kyoto: Think Global, Act
The project has involved training people on hand-held Geographic
Information Systems in order to assist local forest communities estimate
the amount of carbon being sequestered by their trees.
Each village forest was found to be sequestering 1,300 tonnes of carbon
per year-equivalent to an income of $6,500 per village per year at the
then prevailing market price for carbon.
By bundling in the added value of water and biodiversity conservation, the
actual incomes could be even higher.
The chance to realize such incomes is becoming a growing possibility. Late
last year, the World Bank announced the Forest Carbon Partnership Facility
to conserve standing forests and to begin avoiding the estimated 20 per
cent of global greenhouse gas emissions from deforestation.
A further development emerged at the Bali climate convention in December
2007 when Norway announced $2.7 billion of funding for Reduced Emissions
from Deforestation and Degradation (REDD).
Adapting Insurance to Vulnerability
Creative market mechanisms are also emerging to try and deal with
adaptation to climate change.
Extreme weather events are on the rise and are likely to become more
prevalent in a climate constrained world. Yet many of those at risk have
little access to formal insurance markets.
The Year Book cites a new study by Munich Re, one of the world's leading
re-insurance companies. This estimates that cover for catastrophic events
such as hurricanes and storm surges, is virtually non-existent for
billions of people in Africa, Asia and Latin America and the Caribbean.
"Of the 2.5 billion people world-wide who have less than two dollars a day
at their disposal, it has been estimated that only ten million are able to
purchase insurance," says the report.
Some developments are underway however including micro-insurance. In
Africa, pilot projects that pay out to farmers when rainfall drops below a
key threshold, are being tested.
For example the UN's World Food Programme have partnered with the
re-insurer AXA to develop weather derivatives that pay out to Ethiopian
farmers in the event of severe drought.
Swiss Re, a member of the UNEP Finance Initiative, has launched a Climate
Adaptation Development Programme to provide financial protection to up to
400,000 people in 10 countries in Africa from drought.
The UNEP Year Book 2008 concludes that "for new developments to reach the
scale and scope that is needed, governments must play a stronger
stimulation and facilitation role".
Some of the measures that governments might wish to consider include
Removing fossil fuel subsidies could reduce C02 emissions by five to six
per cent annually. Currently, fossil fuel subsidies amount up to $200
billion a year versus support for low-carbon technologies of an estimated
$33 billion annually.
Research and Development (R+D)
Boosting research and development. The International Energy Agency
estimates that R+D for low emission innovations such as renewables and
energy savings declined by 50 per cent between 1980 and 2004.
In order to achieve a C02 stabilization target of 550 parts per million,
support for innovation needs to rise from just over $30 billion to $90
billion by 2015 and to $160 billion by 2025 according to some experts.
Increase global targets for energy efficiency improvements to 2.5 per cent
These should be supported by policies including stronger energy savings
building codes for new and existing structures; penalties or disincentives
for builders to choose the cheapest, least energy efficient designs,
materials and gadgets; policies that promote mass transit especially rail
and international minimum performance standards for industrial and
Other measures include the promotion of utility pricing that favours
energy efficiency; promotes combined heat and power and improves energy
savings in existing power plants and electricity transmission
Policies that increase the uptake of renewables may include 'feed-in laws'
that guarantee a fixed price for each unit of renewable electricity
generated; regulations that boost access to the Grid; incentives for
second generation biofuels and ones that address other barriers including
resource mapping-UNEP/GEF's Solar and Wind Energy Resource Assessment is a
good example of the latter.
Government agencies and donors need to develop and deploy new forms of
'end-user' credit schemes to assist consumers to purchase climate
mitigation technologies and systems.
New approaches are needed to assist small to medium-sized enterprises
innovate including enterprise development services and seed capital.
Attention needs to be paid to new financial and regulatory solutions that
address the lack of local currency financing in least developed
economies-this is effectively shutting out such economies from low C02
emitting infrastructure developments.
Harnessing the 'green procurement' potential of local authorities through
financial incentives that stimulate voluntary low carbon investments.
Public investments are needed to mobilize finance for adaptation given
that market mechanisms are in their infancy.
Other actions for adaptation include regulations to limit the
vulnerability of new investments and infrastructure such as bans on
building in flood prone areas and new, labour intensive, programme to
'climate proof' rural areas that improve resilience of local populations;
address poverty; boost incomes and increase the skills base.