The race to green
One of the striking things about the response to the global financial crisis is the extent to which governments focused their fiscal stimulus packages on expanding environmental infrastructure.
Normally, when such crises strike, green ambitions are placed on the political backburner. And when you throw in the overall failure of the 2009 Copenhagen Summit, as well as the loss of confidence in climate science that followed the so-called ‘climategate’ saga – although independent reviews have cleared the scientists and institutions involved of allegations of malpractice, while the evidence for climate change has actually grown – this might certainly have been the case. Instead, however, since the end of 2008 HSBC estimates that $US521 billion in ‘green stimulus’ was allocated by governments around the world.
China led the way in terms of scale, with $US220 billion focused mostly on rail, grids and environmental protection, while South Korea dedicated 78 per cent of its Green New Deal on environmental measures. By contrast, the USA allocated $US120 billion – or 11 per cent of a total sum – to a broader range of issues including renewables and building efficiency. Australia dedicated 23 per cent and the EU 10 per cent.
These measures have been critical to sustain investment in a range of climate change industries, which had initially been hard hit by the financial crisis. The world’s installed wind power capacity, for example, grew by 31 per cent in 2009, with record growth in China, Europe and the USA, according to the Global Wind Energy Council.
Now, however, with the first shocks of the global financial crisis behind us, many governments are seeking to rein in the stimulus. Mounting concerns over sovereign debts in the European Union, for example, have spilled over into the clean energy sectors, with governments in Italy and Spain taking steps to reduce the tax burden of renewable incentives.
This mood of ‘green austerity’ is also contributing to the continuing legislative impasse in the USA – which was one of major contributors to Copenhagen’s failure to deliver a global deal on climate change. A basket of federal measures to promote renewable energy, nuclear power, building efficiency and electric vehicles is still possible this year. But a cap and trade system looks increasingly unlikely.
One upside to ‘green austerity’, however, is the increasing use of environmental taxes as a means to fill the fiscal deficit. Furthermore, key emerging markets do not face the same budgetary constraints.
In China, environmental spending is projected to increase by 20 per cent this year, compared with an overall spending increase of 6 per cent. In India, the government has introduced a new ‘carbon tax’ on coal which is set to raise $US550 million per annum for clean energy investments – a step that many industrialised countries have yet to take.
Beyond the short-term travails of the current crisis, a new economic approach to climate change is starting to emerge – one which focuses on the long-run opportunities flowing from a transformation of energy systems.
In its latest Energy Technology Perspectives report, for example, the International Energy Agency forecasts that a low carbon energy future could deliver $US112 trillion in savings by 2050 at a cost of $US46 trillion in additional investment. This is a prize worth seizing for purely commercial as well as environmental reasons.
The 20th century assumption that industrialised countries will lead this shift is no longer valid. China is already the world’s largest manufacturer of solar PV and the largest market for wind; Brazil is poised to become a bio-energy superpower.
For countries, corporations and their investors, the question for the coming decade is where they want to be positioned in the new climate economy.
Nick Robins is head of HSBC Climate Change Centre of Excellence
Comments on this article
Lake Eyre
Nuclear pumping stations on the Spencer Gulf? A full Lake Eyre? Employment problem solved for the indefinite future? Central Australia opened up? The desert will bloom? People moving to the shores of the new permanent inland sea? Eastern Australian climate altered for the better?
Is it really all so difficult? After all, it's only the Snowy scheme raised a couple of orders.
Well, yes, because none of the above is feasible in the eyes of the sort of administrations we are forced to endure.
Population panic? Really?
The next demographic challenge for the developed world is population decline. Most first world nations are already at or below replacement birth levels sustained only by net immigration.
It's up to this site's administrators if they want it to be a green portal with its attendant anti-capitalist, anti-business misanthropy but there seems a great opportunity to go with reality and business opportunity.
How about, instead of "woe, we must do less", we look at reality?
Australia has resources literally to burn and vast water availability compared with say the Middle East and a tiny population too. China is undertaking massive works redirecting water from the wet south to the arid north, why isn't Australia looking more closely at something like the Bradfield Scheme or some subset thereof?
How about some vision and development rather than "Ooh, we mustn't! We must do and use less!"
Rather than woosie sometimes available and always far too expensive "green power" how about we look at putting in huge generating capacity to sell energy to our electricity-starved neighbours in Southern Asia? The transmission difficulties are no worse than Europe is looking at to import North African energy.
Gosh guys, what's with the hand wringing and fear of people? People are markets and we have ample room and resources to supply them.
If carbon dioxide is a problem then Australia is in no position to make any measurable difference through austerity but we can supply the fuel and the energy people will need, regardless of what the climate might do.
If carbon is such a problem let's move the water to the arid interior and turn it green, using carbon dioxide as it grows.
Instead of trading indulgences and simply redistributing previously created wealth through hot air certificates why don't we get on with actually creating new wealth?
What's the problem?
Maybe a large part of the problem is a 'people plague' and that while reducing carbon emissions is a part of any solution, so too is an acknowledgement that we need to reign in population increase. This argumet wont get a lot of traction from the business sector because the easiest way to grow the market is to grow the population.
I like horses but...
... that doesn't mean I don't prefer modern transport or progress of any sort. That said I do want it to be progress.
Think Australia has wind power potential because Norway claims it can do well with 20% generation? That would be great if we had the immediate adjacent neighbours with massive hydro resources who can adjust fluctuating generation on an integrated grid and absorb the basically redundant nighttime generation. Dispersed, low-density power is actually not very useful.
Want to talk about actually generating nuclear power rather than simply exporting yellowcake -- sounds great to me.
How about we look at things which have real potential rather than nice warm & fuzzy "feel goods"? "Save the world" sounds nice but how about showing how these schemes can actually achieve something (anything) worthwhile?
Horse and Cart
I am sure that there were the Barrys of the world saying that we should stick with the horse and cart for transport back in 19th century or that aviation in the early 20th is just a gimmick.
And wasn't it a spectacular failure?
By what measure does anyone think throwing money at subsidy farmers and "green" anything actually delivered any value? Want to follow Spain's example and throw away several real jobs for every "green" one created? Why?
Governments around the world threw away vast sums in a Keynesian orgy to what end? Turn a downturn into a major recession? If that's "helping" then how about they don't ever help again, eh?
HSBC wants to profit from trading hot air certificates, which is fair enough but can they show that this activity will do humanity or the environment the slightest bit of good?