Navigating the labyrinthine machinations of Republican Party climate change policy has always been a bizarre and disorientating experience, but I think it may have just hit a new surrealist high so defiant of rational thought that Kafka and Dali would be proud.

Environmentalists and green business may have despaired of Republican efforts to derail climate change legislation and undermine climate science, but at least there is a certain logical consistency to their obstructionist position. They either do not believe that climate change is man made and therefore think action to tackle it is irrelevant, as is the case with the notorious James Inhofe. Or they believe it is an issue, but reckon current proposals to tackle carbon emissions are ill thought out and run the risk of crippling the economy, as appears to be the case with Lisa Murkowski and John McCain.

You may think they are either scientifically illiterate or tragically short-sighted and catastrophically wrong on both counts, but at least you can understand the reasoning behind their various attacks on the administration's climate change policy.

However, recent attempts to reverse official Securities and Exchange Commission (SEC) guidance advising firms on how climate-related risks could qualify as "material risks" that should be reported to shareholders resolutely defies any attempt to uncover the logic that inspired them.

Late last month, Wyoming Republican senator John Barrasso tabled a bill that would block the SEC requirement that firms assess whether climate change qualifies as a material risk to their business, arguing "it's clear that the SEC should focus on its core mission of protecting American investors and maintaining fair markets". He added that "instead, the SEC now wants to devote time and resources to climate change. This is absurd."

Well, something is absurd here, but I'm not sure it is the SEC.

The sole purpose of the SEC's guidance is to protect American investors and was developed at the behest of institutional investors concerned that they did not have enough insight into how firms are preparing to address climate change and related carbon regulations.

If you are an investor in an insurance company or an oil firm would you feel more or less protected knowing that the company has assessed the potential long term impacts of climate change or carbon pricing mechanisms?

What is so bizarre about Barrasso's intervention is this is one of those rare instances where the acceptance or otherwise of climate change science is irrelevant.

As an investor you can privately believe that global warming is the biggest hoax perpetrated on humanity since the moon landings, but that won't change the view of the vast majority of global leaders and the liklihood that we will see more environmental regulations in the coming years. As a result I'm betting you still want to know whether or not the coal-fired power plant you are investing in has bothered to work out whether it will still be economically viable if a carbon tax is introduced.

Similarly, you may think that new health and safety regulations are entirely unnecessary and part of a silent socialist revolution, but that does not stop them being a potential material risk to a business that should at least be acknowledged in its market filings.

Moreover, the SEC guidance is exactly that, guidance. A firm could produce an annual report in which it states that it has investigated potential climate risks and found that it faces no potential opportunities or risks as a result of climate change and related regulations and incentives. It could even state the board has looked at the science and concluded climate change is not happening.

How could anyone argue that an investor has no right to know where a firm stands on one of the defining corporate issues of the age, even if that same investor believes the issue in question will ultimately fall back down the agenda?

Republicans can oppose climate change regulations and spread misinformation about climate change science as much as they like - after all that is their democratic right and it is what they believe they were elected to do. But knee jerk opposition to anything and everything with the words climate change in the title will only serve to damage US investors and further highlight the dangerous rejection of scientific thought and rational risk management that is at the heart of the Grand Old Party's climate change policy.

Posted by James Murray on March 8, 2010 | Permalink | Comments (4)

I am always wary of making predictions, particularly when my recent attempts at crystal ball gazing include such classics as, "this Twitter nonsense will never take off", "Brown will be gone by the summer", and "Newcastle United are gonna get relegated". Actually, I got that last one right, but then again it was never in much doubt.

However, my patchy soothsaying record aside, it looks increasingly safe to say that the clean tech sector has already put the worst of the recession behind it.

Hailing the presence of green shoots is a high risk art and it should be noted that any number of variables could yet blow the fragile recovery off course. The Copenhagen talks could still collapse, undermining much of the political certainty many clean tech businesses have been built on; as yet unidentified banking scandals could kill off any signs of encouraging activity in the wider economy; and the chances are the price of carbon in the European Emission Trading Scheme could get worse before it gets better. But let us not be in any doubt - for the global clean tech sector the recovery is now underway.

The most compelling evidence for this optimistic outlook comes in the form of the recent figures from Dow Jones VentureSource showing that global venture capital investment in clean technology rose 73 per cent during the second quarter of the year, to $572m across 48 deals.

It might still be well down on the bumper investment levels recorded during 2008, but it still marks a dramatic recovery on the first three months of the year and provides a good gauge of the confidence flowing back into the sector.

It's worth remembering that venture capitalists are not exactly well known for their refined sense of sentiment. These guys (and they are almost invariably guys, but that's a whole other story) are all about making money and the fact that after a chastening year they are flocking back to the clean tech sector rather than more established industries suggests the optimistic predictions for the industry that were commonplace prior to last summer have not lost any of their resonance during the downturn.

Meanwhile, the green shoots in the investment sector are being mirrored in other parts of the clean tech ecosystem.

The Obama administration's approval ratings might be enduring the inevitable journey back from deity to mere mortal, but the president still deserves considerable kudos for the breakneck speed with which the multi billion dollar stimulus package has been pumped into the low carbon economy. While on this side of the Atlantic the government has finally backed up its always impressive rhetoric with some workable financial support mechanisms, not least in the form of the £1bn in new financing now on offer to wind farm developers.

Even some of the potential dark clouds that dot the horizon for the wider economy could provide a boost to the clean tech sector.

Fears that oil prices will soar as demand increases might spell bad news for motorists and carbon intensive businesses, but it is only good news for low carbon technologies that look ever more attractive each time the price of a barrel of oil rises.

Similarly, each time Republicans in the US argue that climate change legislation and the shift to renewables will lead to higher energy costs they only serve to remind astute business executives that the best way to insulate yourself against rising energy bills and volatile fossil fuel prices is to cut energy use and identify a diverse mix of fuel supplies.

Even concerns that the recovery will be undermined by future high levels of national debt and public sector spending cuts are unlikely to bother clean tech execs. In the UK, the current political debate is dominated by talk of government spending cuts, and yet proposals for electrified and high speed rail links, the world's largest tidal energy project, increased support for electric cars, and a huge expansion in offshore wind energy are still gaining support across the political spectrum. The transition to a low carbon is a top priority for most governments and as such clean tech firms know that spending on green infrastructure projects will be protected almost regardless of how tight public finances get.

Unfortunately, the clean tech recovery will not be a case of a rising tide lifting all ships. It might not seem like it given this week's announcements of multi-billion pound bankers' bonuses, but the world has changed in the past year. Investors and customers will increasingly demand technically proven, commercially viable green products, and it is the more mature firms that have already made the transition from development to delivery who are most likely to prosper during the recovery.

Equally, with any recovery in consumer confidence still six months off at best those clean tech firms focused on the low carbon infrastructure projects beloved of governments are more likely to lead the recovery than the firms with the latest green gadgets.

But all in all the outlook for the global clean tech sector during the second half of 2009 and the whole of 2010 looks pretty bright. Or at the very least, it looks a damn sight brighter than it does for Newcastle United.

Posted by James Murray on August 6, 2009 | Permalink | Comments (0)

Anyone familiar with the two steps forward, one and three quarter steps back world of the UK's renewable energy industry is unlikely to have been surprised by the past week, but that does not stop it being teeth-gnashingly frustrating.

Just a fortnight on from the release of the government's much-vaunted Low Carbon Industrial Plan and the familiar pattern of wind farm objections, Nimby protests, planning difficulties, and investment setbacks has returned.

The most high-profile slap in the face for the sector comes in the form of Vestas' plans to close its wind turbine factory on the Isle of Wight, despite the brave efforts of staff to oppose the decision by staging a sit-in at the plant, jeopardising any chance of redundancy payments in the process.

There have been plenty of suggestions that Vestas' decision to close the plant is shortsighted and that the government should step in to nationalise the facility. But while the issuing of dismissal letters inside a food parcel sent to the protestors was crass in the extreme, it is much harder to fault the commercial logic behind the decision to close the plant.

The factory was building blades that were being exported to the US. At the same time, the company has a plant in the US capable of delivering the same blades at lower cost. It makes sense from both a commercial, and indeed an environmental perspective for turbines for the US market to be built in the US.

Vestas did look at converting the Isle of Wight factory to produce blades for the UK market, but decided that the risk that demand for the new turbines would not be forthcoming was too high. Was this an unreasonable decision?

Well, the British Wind Energy Association is right to point out that up to 2,700 new wind turbines are expected to be erected by 2012 with more than 700 under construction and nearly 2,000 having secured planning permission. Meanwhile, the additional £1bn of financing announced by the government this week should ensure that those projects that have planning permission are indeed built.

And yet Vestas would be forgiven for arguing that it has seen such predictions in the past, only for the pipeline of new projects to be blocked time and again by local objections to planning applications, followed by long, winding appeals that in many cases ended in disappointment.

It could point to Greenpeace's recent report showing that between December 2005 and November 2008 Tory councils blocked 158.2MW of wind energy projects, approving just 44.7MW, while Labour councils fared only a bit better, rejecting 62.6MW and approving just 68.3MW.

If it wanted more timely examples, it could highlight the news today that the RSPB is to formally oppose plans for the UK's largest onshore wind farm on the Shetland Islands, after previously indicating it would support the proposal. Or the decision by RES to cut the number of turbines at its planned Minnygap wind farm in Scotland from 15 to 10 in an attempt to win planning approval. Or Ecotricity's recent appeal against a decision that saw plans for a 12MW wind farm in North Dorset rejected despite planning authorities recommending to councillors that the proposals should be approved. The list goes on and on.

It is horrible for the workers involved, but you can understand why Vestas has decided that it has had enough of operating in an environment where the market it serves is at the whim of a small minority of locally fixated Nimby protestors and popularity-courting councillors. If staff, trade unions and green groups want to protest against Vestas' decision, it is the government, and in particular wind farm-blocking councils, that should be the target.

The fact is Nimbyism is at the root of most of the clean tech industry's problems, and what's more, it will only get worse. The conservationist campaign against the proposed Severn Barrage is already gathering momentum, the anti-wind lobby is if anything getting more vocal and has substantial support on the back benches of a Conservative party that looks destined to form the next government, objections to biomass and waste-to-energy plants are increasingly common, and if the recent opposition to planned carbon capture and storage plants in Germany and the Netherlands is anything to go by, even this technology could be hamstrung by people worried about living above carbon sinks.

Thus far the response from the renewables industry has tended to be one of impotent rage. Talk to anyone involved in trying to gain planning approval for a wind farm opposed by local parish worthies and they are often engaged in a scarcely concealed internal battle to resist an attack of apoplexy.

They can't understand why - when surveys have shown the vast majority of people like wind turbines, when the reality of climate change means they are trying to invest in a project that is essential to the continuation of our way of life, when the government is pretty unstinting in its support for low carbon technologies, when the latest turbines are ghostly quiet and governed by stringent planning rules that keep them a good distance from buildings - small numbers of people complaining about changes to their view can effectively torpedo an entire industrial revolution.

But while it is always fun to have a bit of rant, it will never solve the problem - in fact, it tends to exacerbate it by making local opponents to wind farms feel bullied.

So what is the answer?

The first step has to be to understand the origin of the opposition to these developments. Opponents of wind farms like to dress up their objections in vaguely technical (and easily countered) arguments about the efficacy of wind and the damage turbines can do to bird life, but in most cases the root of the opposition comes down to visual impact.

The government recently undertook a major survey which found that the vast majority of people like the look of turbines, and almost everyone agrees they have more architectural value than a coal-fired power plant. But the vocal minority's opposition to wind farms is based not so much on aesthetic judgements but a deep-rooted conservative, with a small c, mentality (although given their councillors' record, maybe that should be with a capital C too). My guess is that opponents to wind farms simply don't like change, pure and simple.

So how do you win them round? The rigours of democracy quite rightly ensure that the totalitarian approach of telling them to lump it and evicting anyone who protests too loudly is out of the question. As a result, the renewables sector needs to get much better at the gentle art of persuasion.

Those who manage to secure approval for a wind farm tend to engage in genuine and lengthy consultation and engagement exercises with residents, while the practice of donating funds to local community projects has become increasingly prevalent. But such engagement exercises are only going to have limited success when faced with a deep-rooted fear of change.

Perhaps the answer is to be found in one of the few mechanisms proven throughout history to help people get over their fears: money.

My godfather lives near Sellafield. Not near enough to see it, but close enough to know that if anything ever goes badly wrong, his health insurance claim would make for interesting reading. As a teacher with impeccable left-leaning, anti-nuclear credentials and a life-long love of the surrounding countryside, he always said that he did not like having a power plant in the back yard, but he was fully aware that without it he would most likely be out of a job and an area with an already pretty precarious economy would be tipped over the edge.

Unfortunately, this economic rationalism will not work quite so well with wind farms, when you consider that once they are built, the employment prospects are pretty minimal. Consequently, the onus has to be on developers to make the economic case more explicit, and if that means paying local residents some form of reparations or annual stipend then so be it.

The financial rewards might still not be sufficient to convince those with an irrational hatred of wind farms, but I'm guessing their opposition would soon be drowned out by those who quite fancied the idea of the local wind farm paying for their holiday each year.

Posted by James Murray on July 29, 2009 | Permalink | Comments (7)

I know that in terms of unpopular public statements sympathising with politicians is currently right up there with suggesting the music of Michael Jackson was a tad derivative, but I can't help feeling a bit sorry for ministers at the Department of Energy and Climate Change.

As the countdown towards its long anticipated renewable energy strategy enters its final days, the battle for supremacy between the various factions in the UK energy industry has escalated from its usual rats-in-a-sack level of viciousness to something closer to full scale warfare.

The CBI, ever quick to do the bidding of the traditional energy firms, has called on the government to downgrade wind energy targets and step up its focus on nuclear and carbon capture and storage, while the wind lobby has hit back with a series of reports suggesting the UK grid will cope just fine with a huge increase in wind energy. The solar and micro-renewables sector, meanwhile, was last spotted over in the corner of the room bellowing "don't forget about us" as loud as its little lungs could manage. The biomass and waste-to-energy guys would like to do a bit of shouting too, but sadly they don't like to draw too much attention to a technology that many green groups still equate with incineration.

The net result is that everyone will be disappointed by the government's renewable energy strategy when it is finally announced on Wednesday. All the various energy tribes will complain that there is not enough support for them, or that where there is enough support, as is likely to be the case for wind and nuclear, there is still not enough effort being put into streamlining planning decisions. The green groups for their part will once again claim, with some justification, that we do not need yet another renewable energy report - we need concerted action now.

Of course, energy and climate change secretary Ed Miliband and his ministers fully expect this reaction and will not be asking for any sympathy as long as they get a fair hearing. But nor will they get that fair hearing. In fact, if the tenor of the reporting over the weekend is anything to go by they will get the exact opposite.

Various reports over the weekend trailing Wednesday's announcements led on the fact that the planned increase in renewable energy capacity will result in a rise in average energy bills of between £200 and £230 a year. My immediate assumption was that the government had once again leaked the key figures ahead of the report, but according to DECC this was not the case and the projected bill increase of £200 bears no resemblance to anything to be found in the forthcoming report.

Leaving aside the question of where the £200 figure came from (and personally, I would not rule out a back of an envelope calculation), DECC knows that regardless of what Wednesday's report contains the main focus from the press will be on this issue of how much renewable energy will cost the average punter. The government will likely pander to the calls from Fleet Street with its own figures, despite the reality that such figures are all but meaningless.

The fact is that any attempt to second guess the impact of renewable energy investment on energy bills is couched in so many caveats and assumptions to be meaningless.

The suggestion that investment in renewables will lead to bill increases of over £200 by 2020 implies that we know what energy prices will be by that date if we don't invest in renewables. But this is an absolute fallacy. We do not know with any real confidence how energy prices will behave next year, let alone in ten years time.

If those who reckon oil supplies will peak some time around 2015 are proved right then by 2020 soaring oil and gas prices could easily mean that average energy bills would be far higher had we not invested to increase our renewable energy capacity. Or what price the 2020 Kremlin turning off the taps and blocking gas imports to Europe, sending fossil fuel prices through the roof. Similarly, breakthroughs in solar energy technology or a spike in the price of carbon could manipulate the price of energy up or down in ways that no one yet fully understands. Or the government's proposals for green home loans could actually work, leading to a huge reduction in energy demand and a commensurate fall in average bills.

We do not know with any confidence how much a renewables based energy mix will cost by 2020, just as we do not know how much a fossil fuel based energy mix will cost. Anyone who says otherwise is lying.

What we do know is that all households and businesses would be wise to invest in energy efficiency as a matter of urgency, on the grounds that energy bills will rise under both a do-nothing scenario and a renewables investment scenario. The difference between the two scenarios is that under the do-nothing scenario the planet cooks and energy costs will eventually rise indefinitely as fossil fuel supplies dwindle, while under the renewables scenario not only will energy prices eventually plateau (the wind and sun are, after all, free) but we will also realise many associated economic and environmental benefits, such as reduced carbon emissions, increased job creation and improved energy security.

It would be nice to read a headline in the papers on Thursday morning explaining how new wind farms could actually help lower energy bills and improve energy security, but sadly there is more chance of Ed Miliband announcing the new strategy in the Commons with Michael Jackson's Earth Song playing as an inspiring backing track. Now that would definitely get reported.

Posted by James Murray on July 13, 2009 | Permalink | Comments (2)

The one good thing about a log jam of any persuasion is that when it breaks it tends to be pretty spectacular.

That will certainly be the hope for growing numbers of clean tech firms, who after 18 months staring at an IPO window that has been frozen firmly shut are beginning to wonder if floatation may once again represent a good way of financing expansion plans.

According to figures from the Cleantech Group, globally there were just four clean tech IPOs during the first quarter of this year, but since then there have been definite signs that the IPO market could be warming up once more.

As reported today, Canada-based geothermal specialist Magma Energy has raised double the C$50m it originally anticipated through its Toronto IPO, while energy efficient lighting outfit CRS Electronics also completed an IPO on the increasingly popular Toronto Exchange back in May.

SolarWinds, the US-based networking software specialist with sizable smart grid interests, also raised over $150m with an IPO on the New York Stock Exchange in May, and The Clean Tech Group has reported that a further 11 clean tech firms are currently undertaking IPO application processes on Canadian exchanges.

Meanwhile, across all industry sectors Morgan Stanley has predicted up to 40 firms could float in Europe over the next two years, Thomson Reuters reckons there are nearly 150 IPOs now being planned globally, and everyone is anticipating a surge in IPO activity in emerging markets such as China and Brazil.

It is as safe bet as Andy Murray choking in the Wimbledon final, that there are plenty of clean tech firms amongst those companies preparing to be in the first wave of IPOs that will mark the true onset of economic recovery.

The recession may have dealt a major blow to clean tech firms looking to scale up their operations, but for those planning an IPO the recovery could yet come at the perfect time.

It is easy to envisage a (perhaps optimistic) scenario where the IPO markets start to really hot up early next year, just as clean tech firms are in the perfect position to release compelling prospectuses detailing increased demand for low carbon technologies and the roll out of tough new environmental legislation in the wake of an international climate change agreement.

Given how long it can take to plan a well executed stock market floatation, any firm interested in following the IPO route would be wise to get their skates.

Posted by James Murray on June 30, 2009 | Permalink | Comments (0)

So, was it green enough for you?

Was the budget's support for green businesses "timid" and "inadequate", as Adrian Wilkes of the Environmental Industries Commission argued, or was it, as Solar Century's Jeremy Leggett observed, a pretty good deal given the context of significant tightening elsewhere in the budget?

The answer, as is so often the case, contains both points of view.

The sad reality of the climate crisis is that we are already locked in to pretty dangerous levels of global warming over the next few decades. The most sensible course of action from a purely climatic perspective is to turn everything off and stop emitting greenhouse gases right now. Consequently, governments and businesses will never be able to secure unconditional praise from some green groups - the need to decarbonise the economy is so urgent means that whatever they do they could, and some will argue should, do much more.

Even measured against more pragmatic goals of cutting carbon emissions 34 per cent by 2020 and 80 per cent by 2050, the budget is a big disappointment.

Lord Stern has said that at least a fifth of countries' recovery packages should be earmarked for environmental spending, but even with the additional £1.4bn in funding announced in the budget yesterday the UK still fails this test. As Wilkes observes, other countries such as the USA and South Korea are investing far greater sums in clean tech and are threatening to leave the UK at a competitive disadvantage as new low carbon industries emerge.

Ministers claim time and time again that the UK has a leadership position in sectors such as offshore wind and CCS, but despite timely boosts for both technologies yesterday we still import all our offshore wind turbines and have no idea where our first CCS demonstration plant will be built. Other countries are forging ahead and there is a real chance that the UK will look back in ten years time and ask why the billions of pounds invested in renewable energy has been sunk into the pockets of European and US firms.

The commitments to deliver three quarters of a billion pounds for emerging technologies, over £400m each for energy efficiency and green manufacturing, £525m for offshore wind, £4bn from the European Investment Bank, and fresh funding for CCS, look impressive. But in a world where a single CCS demonstration project will cost £1bn and experts reckon we need £37bn to upgrade the grid, this new money is not going to stretch very far.

Moreover, new investment for clean technologies is undermined by the government's refusal to call an end to its love affair with carbon intensive industries. Money for green technologies is all well and good, but the attempt to pass off the £300m scrappage scheme for the car industry as an environmental initiative is simply cringe-worthy. It is a bail out pure and simple and the carbon savings will be somewhere between negligible and non existent.

And yet, despite its myriad failings, I'd argue that the environmental commentators lining up to knock the budget should also accept that there are a fair few positives to be found.

The green spending commitments may be insufficient, but given the woeful state of public finances they are still far greater than expected.

There are sweeping cuts (sorry, efficiency savings) on the horizon for large sections of the public sector, and as such it is encouraging that the Chancellor has ring fenced clean tech, health and education as a sheltered triumvirate, protected from the cost cutters. It is a case of being grateful for small mercies, but the fact that green businesses managed to wring any new money out of the Treasury in the current climate provides more evidence of the government's commitment to the sector than a hundred ministerial speeches on "green collar jobs" and "industries of the future".

The focus of the spending is also encouraging. The £45m earmarked for onsite renewable technologies through the Low Carbon Building Programme is hardly an earth shattering sum, but it shows that the government listened (albeit belatedly) to the industry's concerns about a funding gap and acted appropriately. Equally, the increased subsidy for offshore wind farms through the Renewables Obligation and new financing from the European Investment Bank, reveal that the government accepted the concerns of the wind energy sector and moved to avoid a potential crisis.

The government faced calls from thousands of vested interests in the run up to the budget and it is encouraging that the renewables industry appears to have the ear of at least some of Whitehall's power brokers.

Finally, and most importantly, the combination of the fiscal and carbon budget once again serve to hammer home the direction of travel for the UK's climate change strategy.

We may have to wait until the summer to find out exactly how the government plans to meet its target of a 34 per cent cut in emissions by 2020, but we know that the target is legally binding and will be used to inform all future policy and regulations, just as we know it could well be tightened further.

Equally, we know from the increase in the subsidy mechanism for offshore wind and the new proposal to support CCS plants through a feed in tariff that energy bills will inevitably continue their upward trend over the next decade. Just as we know that the planned increase in landfill tax will make recycling and waste-to-energy plants more financially attractive.

All of this means that firms are once again left in no doubt that efforts to enhance energy efficiency, tackle waste and curb carbon emissions will deliver long term returns, and make as much sense from a financial and risk mitigation perspective as they do from a purely environmental outlook.

Yes, it would be great to have seen plans for high speed rail and a commitment to ditch the third runway at Heathrow. Yes, it would have been nice to hear the government was willing to do something about the low price of carbon and limited availability of credit for green projects. And yes, it would have been fantastic to have seen a hand out to the auto industry replaced by a genuine green vehicle incentive scheme.

But all in all, this budget was greener than expected and proved once again that it is environmentally sustainable businesses that will prosper the most when the recovery eventually materialises.

Posted by James Murray on April 23, 2009 | Permalink | Comments (0)

Every year it's the same. A motley crew of applicants turn up, deliver their best performance in front of a dismissive panel of ill-tempered judges, and wait to see if they have secured the opportunity to have a minor impact on the national consciousness.

No, I'm not talking about the Apprentice, but the run up to the budget.

For Sir Alan, Nick and Margaret, read Gordon Brown, Alistair Darling, and Mervyn King (I'll let you decide which is which). And for the wannabe apprentices, read the army of lobby groups that stalk Westminster.

This year the show seemed to start even earlier than normal with countless groups pleading their case and promising to deliver 110 per cent if only Chancellor Darling (Nick/Margaret?) and Prime Minister Brown (Sir Alan, surely?) would give them their big chance.

In the environmenal sector alone, we've seen car firms propose a "green" scrappage scheme, electric car firms call for the immediate introduction of planned incentives; the construction sector demand further financing for green building makeovers; the wind industry request urgent assistance to ensure expansion does not stall; energy firms make the case for more funding for carbon capture and storage; the microgeneration sector warn immediate action is required to plug a potentially catastrophic short term funding gap; and various environmental, business and political groups recommend everything from the launch of a national green infrastructure bank to the development of a high speed rail network.

And that's just the calls for additional green funding. When you consider that every single sector has a similar number of lobbyists meeting with ministers to set out their own budget wish lists you start to understand why MPs given themselves that three month summer holiday.

So, what can green businesses expect when the Chancellor finally opens his red box tomorrow?

Unfortunately, the answer is not a huge amount.

There will, of course, be the UK's first carbon budgets, setting carbon targets for the next 15 years. But as has been well documented, the public accounts will make for deeply depressing reading and as a result the Chancellor will have his hands tied as he seeks to deliver the investment that will required to ensure the new carbon budgets are met.

While South Korea tucks into its £23bn green new deal and US clean tech firms line up to apply for some of Obama's $100bn in new funding, UK companies can expect significantly less munificence.

The net result is that the really big ticket projects that the government has been mulling for years - high speed rail, smart grids, marine renewables and so on - will once again be kicked into the long grass. The best they can hope for is to be namechecked by the chancellor alongside vague promises for reviews or consultations - but they might not even get that given the necessary focus on the state of the short term economy.

Where progress is more likely is with those proposals that promise to cut emissions and bolster low carbon technologies without recourse to immediate direct government funding.

For example, there is an acceptance amongst ministers that urgent action is required to ensure that wind farm development does not stall as a result of the recession. It is not in a position to hand out grants to improve the viability of projects and, given the current economic climate, it will be reluctant to increase incentives that result in higher energy bills for consumers. But some form of loan guarantee scheme is more likely to gain approval and could help onshore developers' in particular access finance without forcing the Treasury to put its hand in its pocket.

Similarly, a low interest green home loan scheme that could actually make the government money in the long run has a better chance of getting the thumbs up than yet more grants for home insulation.

There could also be some direct funding for a number of sectors.

Darling has reportedly searched behind the sofas and been able to rustle up £500m in additional funding for green initiatives. It amounts to peanuts compared to some of the green stimulus plans proposed by other countries and would not even pay for half a CCS demonstration plant, but it should prove sufficient to keep the grants for onsite renewable technologies in place until a feed in tariff comes into effect next year. The money could also be used to fund some sort of green car incentive scheme or further accelerate the government's green home programme.

However, £500m in new funding is insufficient to resolve the uncertainty swirling around the government's largest and most vexed low carbon projects. Offshore wind and CCS - two of the most important pillars of the government's low carbon strategy - both look dangerously under funded at present and with each passing month the UK's claims that it retains a leadership position in these essential technologies look more and more shaky. The government may be able to keep pushing plans for smart grids and high speed rail ever further into the future, but we need these projects up and running sooner rather than later if there is to be any chance of meeting the UK's carbon targets.

The BWEA reckons somewhere in the region of £2bn in grants, tax breaks or incentives is needed to make increasingly vulnerable offshore wind projects viable, while a further £2bn is likely to be needed to make Ed Miliband's plans for an extra two CCS demonstration plants a reality.

The Treasury simply does not have that kind of money at its disposal, so while tomorrow will inevitably be characterised by the now traditional claims that we are getting a "green budget" the likelihood is that the really ambitious low carbon projects needed to ensure demanding emission reduction targets are met will be left in their current state of limbo.

Unless Darling pulls off some huge surprises, the large scale low carbon projects that the UK needs most urgently are the very projects that are going to get, if not fired exactly, then certainly sent on extended sabbatical.

Posted by James Murray on April 21, 2009 | Permalink | Comments (0)

For much of the past two years one of the most compelling drivers behind green business investments has been the soaring cost of energy. So what happens when those energy costs begin to fall?

As the UK today has its recessionary status officially confirmed, businesses are facing a new energy landscape where bills are falling for the first time in years.

The price of oil has slumped, and even green energy providers such as Good Energy are now lowering their tariffs alongside conventional players such as British Gas. Moreover, the fall in industrial output has pushed the price of carbon to record lows, putting still more downward pressure on energy prices.

For business leaders falling energy bills mean the temptation to push energy efficiency issues back to the bottom of the corporate in-tray will become ever more beguiling. Many will understandably ask why they should fork out for more efficient technologies or buildings when their bills are already falling and capital is unbelievably hard to come by.

And yet there are compelling reasons for businesses to continue to curb energy use that go far beyond the obvious truism that during a recession you should look to control all operational costs as tightly as possible, even if they are already falling.

The fact is that those firms that don't address their energy use now could recover from the credit crunch and find themselves thrown right into an energy crunch characterised by soaring power bills.

There are already signs that a perfect storm is brewing that could well break just as we'd hope to see the economy surging forward again.

The most obvious basis for this prediction is the simple reality of supply and demand. The price of oil may have fallen over a $100 from its peak of around $140 last year, but that collapse in price is the result almost entirely of falling demand, not an increase in capacity.

When demand recovers to pre-recession levels or above - and while it might seem hard to believe at the moment the history of recessions tells us this will happen - then the oil price will soar again. In fact, with many of the oil giants scaling back investments in new capacity as the recession bites the situation will likely be even worse than it was in mid-2008 as supply inevitably struggles to keep pace with rising demand.

Rising oil prices would not only lead to increased transport fuel costs they would also have a knock on impact on wholesale electricity prices that will already be being forced upwards again as a result of the raft of green regulations that are scheduled to converge upon the energy sector between 2010 and 2013.

As a leaked Whitehall memo revealed this week, the UK government is concerned new EU legislation designed to limit air pollution from power stations could add as much as 20 per cent to energy bills. And that is before you even begin to consider that EU targets requiring the UK to cut emissions and generate 15 per cent of energy from renewables by 2020 mean that by the early 2010's work on a huge expansion in renewable and nuclear capacity will be well underway, leading to a predictable impact on energy bills.

Meanwhile, the current low price of carbon in the EU's emissions trading scheme is subject to much the same rules of supply and demand that will impact the oil market once the recovery materialises.

Prices have dropped in recent months because heavy industries are producing less, releasing less carbon into the atmosphere and therefore require fewer emission allowances. The number of carbon credits issued between now and 2013 however remains constant, so as the recovery materialises and production and emissions increase again the price of carbon will also rise placing further cost pressures on energy producers. Again, these pressures will become more pronounced from 2013 when the EU moves to impose still tighter emission caps on heavy polluters.

The net result is that companies that fail to address their energy use could find themselves climbing out of the credit crunch only to find themselves locked into an energy crunch characterised by 100 per cent plus increases in energy costs and fuel bills.

That is why businesses such as Tesco and Sainsbury's this week announced new stores and initiatives that display a continued commitment to addressing energy issues despite tough trading conditions, and why those companies that really want to position themselves to fully exploit the inevitable economic recovery would do well to follow their lead.

Posted by James Murray on January 23, 2009 | Permalink | Comments (4)

With the Stern Review predicting the low-carbon energy product market will be worth at least $500bn a year by 2050, investment management giant Schroders have unveiled a new fund.

Launched last week the Schroder Global Climate Change Fund will invest in companies that create products or offer services which help to mitigate or adapt to the effects of climate change.

Simon Webber, joint fund manager at Schroder, said that there was a growing need for climate change-related investments. "Climate change is set to drive an industrial transformation and is potentially the biggest investment theme of the next 20 years," he observed.  "It is estimated that globally, $20 trillion will need to be spent on new power generation infrastructure by 2030 to meet the rising number of new laws demanding a reduction in the used of carbon-based power."

The fund's investment objective is to provide capital growth primarily through investment in equities and securities of worldwide companies connected with climate change adaptation or mitigation. 

"Across all sectors, climate change will have a broad and lasting impact along the value chain," said Matthew Franklin, joint fund manager. "For the mainstream equity investor, now is the time to adopt a global approach to what will be a major investment theme for the foreseeable future." 

The fund aims to provide long-term out performance of the MSCI World Index from a concentrated portfolio of 50 to 80 stocks comprising the best stock ideas from Webber and Franklin. 

Actively managed, the fund benefits from global exposure and the portfolio has little overlap with other mainstream global equity funds, offering real diversification. It is long term and has exposure to equity risk. 

Schroders' Fund will invest in companies specialising in energy efficiency, environmental resources like biofuels and low carbon fossil fuels.

Sustainable transport manufacturers Toyota and poly-silicon suppliers Wacker Chemie, who provide the raw material needed for solar panels, integral to the delivery of clean energy, are also included in Schroders' fund.

Webber said: "We believe that by following this climate theme, opportunities exist for investors to reap the rewards."

The launch of the new fund provides further evidence that investors are endorsing the Stern Review's conclusion that tackling climate change is a "pro-growth strategy for the longer term".

Sarah Griffiths 

Posted by James Murray on October 3, 2007 | Permalink | Comments (0)