Author: Sean Kidney

> Did you see yesterday’s spat between the US and China: US negotiator Todd Stern “says no way US public money is going to go to China”- an expected domestic political position, eyes averted from the fact that once the US has a cap and trade scheme millions of private money will be buying carbon credits from Chinese clean energy projects. China then says it’s “shocked” at the comments, and that developed countries had a legal and moral obligation to deliver, based on their history of high emissions. Worth remembering that two days ago China was wrongfooted by Tuvalu, leading to headlines about a split in the G77. Nothing like pushing attention back on a common enemy to try and get the troops back in line.

> HSBC’s Nick Robins at last night’s Carbon Disclosure Project panel: “The market for low carbon services is now around $530 billion a year. By 2020 it will be $2 trillion a year. This is a big, exciting opportunity for people to get into, now.”

> Wandered around the main, vast, negotiating hall yesterday with two friends, taking pictures of the hallowed ground where an agreement to avert disaster (we hope) is being worked out. Countries sit in strictly alphabetical order; the US is way up the back, very noticeable because its sign is in white, while every other one you can see is in black. They’re the odd ones out because they haven’t ratified the Kyoto Protocol; nice.

> Even the tiny hilltop cafe town of San Marino has a seat, albeit observer. Look it up on Wikipedia. But of course Taiwan was nowhere to be seen.

> Bonds gossip:
– Last week’s green bond issue by SEB for the World Bank sold very quickly; it was their third. Expect a fourth tranche in quick time.
– RE manager for a major London-based bank told me, in the corridor, that they were working on a green bonds issue for renewable energy, which would make it asset-backed. Couldn’t provide issuer details – yet. Perhaps we’re seeing the beginning of a green debt capital market?

> Stockholm Environment Institute briefing: a 2°C target only gives us a 50/50 chance of avoiding runaway climate change; target needs to be 1.5°C and no more than 350ppm. Tough stuff in the context of what the negotiators are looking at, and supports Tuvalu’s proposal a few days ago. What was especially interesting about this was that the session was presented by Sweden in its capacity as EU president. Hopefully this is getting through to the EU negotiating team. See research article at http://tinyurl.com/msapes

> Interesting aside about their (SEI’s) improved understanding of biodiversity inter-connectedeness: if Amazon basin forests dry out to savannah, as many models forecast for 3°+, it triggers an extra 3° warming in northern China to Mongolia, and a 2° cooling in North Africa. Buy real estate in Algiers as a hedge?

> At an meeting today of Public Finance agencies around the world working on climate, the UK Carbon Trust presented a great story about technology transfer. I’d heard the bones before, but it was pointed when explained in the milieu of slow-moving public finance agencies. Last year they were approached by China Energy Conservation Investment Corporation, who wanted to set up a joint venture. They’ve set up a £10 million pound venture capital fund. One of the first investments was in a small UK company that had developed a low-energy, money and emission saving air-conditioning solution for mobile phone towers. These typically rely on high-emission diesel-fuel generated air-conditioners. The company was selling into the UK market, which has 20,000 mobile phone towers. China is building 600,000 in the coming year; they now have contracts to roll out a good chunk of those. That’s technology transfer!

> At that same session the Mexico Energy Ministry person told of research they’d done into how to encourage bicycle use. It showed that the main driver for Mexican men using bicycles was the number of women using bicycles. They’re still trying to figure out what to do with the results.

> Amazing scenes in the negotiator’s Plenary today, with Tuvalu rep arguing and China resisting – both politely but in a very determined way – that a treaty has to limit global temperature increases to 1.5 degrees and to reduce CO2 in the atmosphere to 350ppm. No resolution yet.

> You may have seen news of “leaked Danish PM text” suggesting rich nations sort out climate change via the World Bank rather than the UN and pretty well tell developing nations what to do; quite a controversy at COP, as you can imagine. Gossip here is that a Danish Cabinet Minister colleague leaked it; seems the PM has been pushing it against lots of opposition, and the opposition hasn’t given up.

> Hot news: Indonesia announced it’s proposing a feed-in tariff for geo-thermal energy. Apparently they have 40% of the world’s hot rock resources! See http://tinyurl.com/y9pm6t6

> Russia announced it would cut emissions by 25% by 2020 (from 1990 levels) if other countries agreed to do the same; they had been saying 10-15%; the EU is saying “we convinced them”. EBRD at a seminar today explained that Russia’s energy intensity is incredibly bad; they have enormous potential to cut emissions from energy efficiency measures. Hopefully the high returns will entice energy efficiency investors despite political and crime risks. EBRD aims to help de-risk.

> Outlook for a “good” Copenhagen Agreement seems to be improving. Insiders are saying that having so many world leaders (more than 100) turning up, and Obama now coming for the end of the Conference, is forcing a better outcome.

> Also helping was the US EPA announcement this week to formally classify CO2 as a pollutant. That allows Obama to regulate CO2 without Congress – it dramatically increases his ability to deliver at least the cuts he’s promising.

> The Saudi Arabian representative was being obstructive again this week; at one point he made a speech about the implications of the East Anglia Uni email leaks and how they raised doubts about global warming science. Apparently the speech was met with silence; no other country followed up. Would’ve been different under Bush.

> The Conference is quite a buzz; 15,000 people talking non-stop in the conference centre. Thousands of laptops, lots of coffee, chanting anti-REDD demonstrators in the background. The cloak room is open 18 hours a day this week; it advertises that next week, as negotiations come to then end, it will be open 24 hours a day.

> Had a talk with a couple of big EU pension funds this week to see if they’d join Danish ATP pension fund’s new €1 billion ‘Climate Change Action Fund for Emerging Economies’, reported earlier this week. They think they tackle the issue of investing better by building in relevant criteria across all their asset classes – i.e. in the whole fund. The €1 billion, they think, puts it into a sideline rather than mainstreaming the idea.

There is a real excitement in the air, with some 20 thousand people turning up from every corner of the world and a party atmosphere in the streets. The talk, however, is all climate:
1. Nick Stern in a speech a couple of nights ago talked of the stark choice we face between acting fast or sliding into disaster, and thus how important this Conference was to the future of the planet. Lord Giddens talked of the Copenhagen Conference being, with the sense of pressure for a global agreement and over 100 heads of States turning up, the first real gathering for global governance: an historic event.

2. More practically, Q-Cells, one of the world’s largest photovoltaic solar companies, claims that solar cells have reached grid price parity in key markets, such as Italy and Germany. That means that solar cells are price comparable with fossil fuel energy (gas in Italy’s case) coal and gas for Germany. Big news! Why would you still build coal, let alone high-emission-potency gas?

3. According to the International Energy Authority, 77% of the energy infrastructure that will exist in the world 2050 has not been built. So we have an extraordinary chance to make sure it’s infrastructure for a low-carbon, not a high-carbon, economy.

4. Denmark’s ATP pension fund, one of the largest in the world, announced that they’re setting up
ATP will set up a € 1 billion ‘Institutional Investor Climate Change Action Fund for Emerging Economies‘. The aim is for the Fund to become a joint initiative involving several like-minded institutional investors.  The Fund will operate on private sector conditions and only invest in projects that are expected to deliver relevant risk-adjusted rewards. 

On the eve of the Copenhagen conference, a group of scientists has issued an update on the 2007 report of the Intergovernmental Panel on Climate Change. Their conclusions? Ice at both poles is melting faster than predicted, the claims of recent global cooling are wrong, and world leaders must act fast if steep temperature rises are to be avoided. By Elizabeth Kolbert

I’ve just come from a sobering presentation in Copenhagen by Yuki Tanaka and others of the Japanese Institution of Transport Policy Studies. They have done detailed modeling of global transport emissions and how we can reduce them by 2050.They’ve done different scenarios, and have settled on pushing for keeping emissions at 2000 levels because they believe the lower scenarios are not likely to be achieved. I started off sceptically,
thinking “we’ll need to figure out how to do better than that”. But by the end of the presentation, overwhelmed by the robustness of their research, I can see why they made that decision.
Bear in mind this is in the context of rapidly growing economies in Asia and Latin America.
Key points:
To keep emissions just at 2000 levels will require:
– Cars: an enormous 60% shift of passenger traffic from cars to rail and bus. In cities 80% of remaining cars and 40% of light trucks will be electric by 2050.
– Aviation: half of all sub-1600km trips shift to high-speed rail systems, plus 20-30% fuel saving technology improvements in aviation. They do also include some shifting to technologies like
video-conferencing.
– Shipping: 30% reduction in emissions, largely through large scale engine replacement around 2020, when a disproportionate portion of the world’s fleet comes up for renewal
– Bikes: for short-distance trips there’ll be a substantial increase in non-vehicle transport – e.g. bicycles – helped by congestion charges and other traffic control techniques in all major cities.
– Rail: large scale electrification of railways and various substantial improvements in rail efficiency. There will be a doubling (yes!) of kms of rail lines in the world by 2050. They have also assumed that the power grid shifts largely to clean energy during this period.
The net extra investment needed above “business as usual investment” already expected is just under US$12 trillion, 54% in developing countries. And this just to keep at 2000 level emissions!
On the optimistic side, if we can ensure, with some tough government planning decisions that help ensure these investments pay a good return for pension funds, then it’s a huge financing opportunity.

According to “Global Trends in Sustainable Energy Investment 2009”, prepared for the UN Environment Programme’s, $250 billion was spent globally in 2008 constructing new power generating capacity from all sources.

Of that, $140 billion was for low carbon electricity generation.

That means, for the first time, investment flows into renewables have overtaken flows into fossil fuel power generation.

A big moment!