Transcript Slide 1
Financing the Transition to a Low Carbon Economy Peter Young SKM Enviros 2nd February 2010 Environment Business Australia Forum Sydney Aim of Presentation • Set context for need and size of investment to achieve transition to a low carbon economy • Introduce role of Aldersgate Group • Summarise impact of ‘Financing the Transition’ and subsequent UK govt activities • Open up for Q&A session Investment Drivers: Global Population in Billions +..... ...... Observed Global Temperatures and Carbon Dioxide + ... ...Future Carbon Dioxide Emissions to 2100 + ..... .....Global Energy Demand +... .... Global Energy Inefficiency +.... ..... Poor Urban Design... Do the Maths • Currently emit 6 tpa CO2 per capita (EU 8, Aus 19). • Long term stability requires ~1 tpa at 9 billion population if equitably spread • This represents 8 fold change in EU, 20 fold in Australia • UK has mandatory targets of 80% (five fold reduction) = Implications for the whole economy • Not only decarbonising electricity generation • But also to facilitate savings in other energy use emissions categories • Will impact on all sectors of economy Source: CCC Building a Low-Carbon Economy –The UK's Contribution to Tackling Climate Change Investment Needs • Fiscal stimulus response to GFC aimed more at environment (eg US $150bn investment to create 5M green collar jobs by 2020 = 20%) replicated varyingly globally • UK government calculated £200bn to 2020 to meet carbon targets • UK low carbon infrastructure £264bn to 2020 (Dieter Helm et al) ALDERSGATE GROUP Who is Aldersgate Group? • Founded in 2006 • A broad coalition of businesses, NGOs, Profession Bodies, political figures and government agencies • Believe that high environmental standards are vital to future economic growth and competitiveness • Engage actively with government and other key decision makers – and as conduit of business led solutions ALDERSGATE GROUP What we aim to do • Raise awareness in the UK and Europe of the wide ranging (economic and social) benefits of high environmental standards. • Build political support for smarter environmental policymaking based on a thorough assessment of these wider benefits • Develop a broad coalition of stakeholders to encourage policy makers to act early and strongly Tactical Issues Example: EU Car Emissions • • • • • • ALDERSGATE GROUP UK: EU proposals would export 1000s of jobs and ‘drive European car makers to brink of extinction’ Italy: ‘unprecedented high level’ of penalties Germany: ‘hinder innovation, threaten jobs and fail to be an effective instrument of climate protection’ VS Stimulate innovation and reduce cost of compliance US impact of similar proposals calculated to create 241,000 jobs and reduce oil by 1.6m barrels per day Remember catalytic converters – industry priced at £400-£600 but now £30-£50 each and drove fuel efficiencies ALDERSGATE GROUP Current Focus To achieve the required rate of decarbonisation and competitive advantage, early and better action in three critical areas in UK and EU: 1. Skills – ‘Mind the Gap – Skills for the Transition to a Low Carbon Economy’ published in November 2. Resource Efficiency – ‘Beyond Carbon – Towards a Resource Efficient Future’ published yesterday 3. Finance – ‘Financing the Transition – A Strategy to Deliver Carbon Targets’ – published in October Lessons from Writing Report • Amazing response from investors, there is enough capital if confident of returns • ‘City’ and Government in UK don’t understand each other • High consensus that action was needed and that this was an issue of national competitiveness as well as targets Key Recommendations • Policy risks are critical, requires surety in targets, bankability of policy decisions, and public guarantees/bonds linked to performance • Climate bonds or other green investment vehicles will mobilise private capital at scale • Institutional reform required, both in consolidating govt expertise and creating eg a new Green Investment Bank (GIB) Response Since October • Opposition announced interest in establishing new Green Savings vehicle and GIB. • Govt created Infrastructure UK, bringing together PFI, TIFU and DECC teams under Paul Skinner (former chair, Rio Tinto) • 100M euro UK addition to EIB fund • Detailed private meetings on how to construct a GIB – key issue is public balance sheet Investment Programmes around Carbon Abatement Costs... Cost of abatement EUR/tCO2e 40 30 20 10 0 0 102030405060708090100110120130140150160 Forestation Livestock/ soils CCS EOR; New coal Smart transit Small hydro Wind; low pen. Avoid deforestation Asia Coal-to- Industrial feedstock substitution Soil CCS; coal gas shift retrofit Waste Solar Forestation Nuclear Industrial non-CO2 Airplane efficiency Stand-by losses 1 2 3 4 5 6 7 8 9 Cellulose ethanol Sugarcane biofuel Fuel efficient vehicles Water heating Air Conditioning Lighting systems Fuel efficient commercial vehicles Insulation improvements 10 Industrial non-CO2 11 12 13 14 15 Co-firing biomass 16 17 18 19 20 21 22 23 CCS; new coal Avoided deforestation America Industrial motor systems 24 25 26 27 Industrial CCS Abatement GtCO2e/yr ...and around Energy Generation • • • • Marine energy resource key opportunity GIB/EIB to remove risk by offshore grid Infrastructure Planning Commission PE, pension funds and banks all making constructive proposals • Could existing RBS, HSBC portfolios seed corn a renewables development fund? The Emerging Market – Investors are moving ( and Should Australia be in top 6?) Analysis of 53 leading economies: Environmental Goods & Services economy in a global economy worth £3 trillion Rank Country Market Value £bn % of total 1st US 629 21 2nd China 411 13 3rd Japan 191 6 4th India 190 6 5th Germany 127 4 6th UK 106 3 Conclusions • The Low Carbon Economy requires massive mobilisation of capital (24% pa growth) • In spite of GFC the capital is there • Policy risk is a huge barrier to unlocking private finance early enough • In the new low carbon economy new institutional models are required • UK is benefitting from new collaboration on financing – should Australia do the same? Time for Q & As Thank You! [email protected] For reports please see www.aldersgategroup.org.uk