Clean Energy Investments Hit By Global Financial Woes

The analysts presented findings of their new report, Global Futures 2009, to senior investors, industry executives and policy makers in clean energy and the carbon markets at the second New Energy Finance Summit in London. Summit participation is by invitation only and is limited to 200 people.

Although lower economic activity due to the financial crisis will reduce carbon dioixide emissions, the analysts said, in the longer term the drying up of funding for lower-carbon energy solutions is likely to have far greater adverse impact on emissions.

Michael Liebreich, chairman and chief executive of New Energy Finance, said, "This should be a real wake-up call. New Energy Finance is generally on the optimistic side of the debate. Even with the current recession we are more bullish on the shift to clean energy than most mainstream analysts."

A wind turbine is installed at Belgium's new Thornton Bank offshore wind farm in the North Sea connected to the grid by undersea cables. (Photo courtesy REPower Systems)

"However, it is no longer possible to say we are on track to achieve peak CO2 by 2020," Liebreich said. "Something has to happen, either in terms of restoring credit to clean energy projects, or in terms of a surprisingly substantial outcome in Copenhagen."

This is a crucial year in the international effort to address climate change, culminating in the United Nations Climate Change Conference in Copenhagen, set for December 7-18.

There, world governments are expected to agree on an ambitious and effective climate change deal to follow on the first phase of the UN’s Kyoto Protocol, which expires in 2012.

The Copenhagen agreed outcome need not resolve all details, say UN officials, but it must provide clarity on key issues - the emission reduction targets that industrialized countries will commit to; mitigation actions in developing countries; and stable and predictable financing to help the developing world reduce greenhouse gas emissions and adapt to the effects of climate change that are already inevitable.

Finally, the Copenhagen deal must identify institutions that will allow technology and finance to be deployed in a way that treats the developing countries as equal partners in the decision-making process, according to the UN office in charge of the negotiations.

At the New Energy Finance meeting today, Guy Turner, director of the company's New Carbon Finance Division, said the company's latest report, Global Futures 2009, shows cap-and-trade systems to limit greenhouse gas emissions are driving the adoption of low carbon technologies - but more rapid progress is needed.

"Our work at New Carbon Finance indicates that climate change policies and specifically carbon cap-and-trade systems are making a material difference to shifting from high-carbon to low-carbon energy. However, the Global Futures 2009 work is sobering: it shows that it just is not happening fast enough."

Concentrating solar arrays at Nevada Solar One operated by Acciona Solar Power Inc. (Photo courtesy Acciona Energia)

Global investment in clean energy - renewables, energy efficiency and carbon capture and storage - increased from $34 billion in 2004 to around $150 billion in each of 2007 and 2008.

The new Global Futures report finds that investment needs to reach $500 billion a year by 2020 if carbon dioxide emissions from the world's energy system are to peak before 2020.

Scientific experts fear that continued growth of greenhouse gas emissions beyond 2015, or 2020 at the latest, would create the strongest risks of severe and irreversible climate change.

The New Energy Finance analysis shows that a peak much before 2020 currently looks "highly unlikely."

New Energy Finance expects investment in clean energy to hold steady at around $150 billion a year through the economic downturn and resume growth thereafter.

In the Global Futures 2009 Base Scenario, this level of investment is insufficient to drive down carbon dioxide, CO2, emissions from the energy system this side of 2030.

The Dalate coal-fired power plant in Inner Mongolia (Photo by Roger Yin)

Total investment is set to reach $270 billion a year by 2015 and $350 billion by 2020.

However, the report projects that CO2 emissions from burning coal, oil and gas will continue to rise from 28 gigatonnes of carbon dioxide today to nearly 36 gigatonnes by 2030.

According to the Intergovernmental Panel on Climate Change fourth Assessment Report in 2007, limiting likely average global temperature to 2.0 to 2.4°C - thought to be the highest "safe" level - means stabilizing CO2 equivalent concentrations at 445 to 490 parts per million, which in turn requires reaching peak CO2 emissions by 2015.

Reaching peak CO2 by 2020, followed by a cut in emissions of 50 percent by 2050, should limit global average temperature increase to 2.4 to 2.8°C.

Poland's coal-fired Laziska power plant (Photo courtesy PKE Elektrownia)

In 2007, the Group of 8 industrialized nations acknowledged the need for carbon emissions "to peak within 10 to 15 years," or between 2017 and 2022.

With many major CO2-emitting countries so dependent on coal, and the coal industry being such a large provider of jobs in China, the United States, and elsewhere, New Energy Finance projects that it will be extremely hard to achieve peak CO2 emissions by 2015 without large-scale deployment of carbon capture and storage.

In a recent study, New Energy Finance identified 184 active carbon capture and storage pilot projects, being developed by 153 consortia involving over 900 participating organizations in 28 countries.

Uncertainties remain about the ultimate technology choice for carbon capture, but New Energy Finance believes that with long-term carbon prices set to rise, investment in carbon capture and storage is on track to reach $5.1 billion by 2020.

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