carbon tax and arena, page-2

* According to the International Energy Agency, around $40 trillion is needed to be invested across the globe in energy and energy infrastructure over next 25 years, to cope with the world’s growing energy demand.
** at least $20 trillion of that needs to be committed to clean energy generation, or the world will miss its climate goals.
** a group of 258 institutional investors who happen to have $20 trillion of funds under management have gotten together to produce an investment scorecard on clean energy policies across the world.
** these institutions have deep enough pockets to help out if the investment climate is right
** They say they are worried about the potential of climate change to have major negative impacts on the economic systems they operate in
** The message is pretty simple:
--- governments need to use the power of the markets,
--- have long-term policy settings, align with wider policy goals,
--- recognise that scale is important,
--- provide appropriate incentives for low carbon investment, and
--- have clear short-, medium- and long-term greenhouse gas emission reduction targets.

* The investment funds note that money will only be deployed at the scale and the pace necessary if it is supported by clear, credible and long-term policy frameworks that incentivise investments in low-carbon technologies, rather than continuing to favour carbon-intensive energy sources.
* “Those countries that succeed in attracting private capital into low-carbon growth areas such as cleaner and renewable energy, energy efficiency and decarbonisation, will enjoy multiple benefits, including new jobs, new businesses, new research and technology innovation, more resilient and secure energy systems and, ultimately, more sustainable economies...
** this is a timely reminder of what is at stake here: not just the ability to transform the country to a low-carbon economy, but to tap into a massive investment opportunity probably the greatest that exists over the coming decades.
* The report, prepared on behalf of the Investor Group on Climate Change and its European and north American equivalents, delivers an appraisal of some of the clean energy policies of some nations:
** Australia is applauded for its Clean Energy Package, and is rated “investment grade” across virtually all aspects, but for two significant risks
--– political, and
--- from industry, hungry for more generous allocations of permits.
** China is also considered “investment grade” and
--- already attracting the most investment, and
--- remains compelling by its soaring energy demand and
--- its growing emphasis on renewables and energy efficiency in its five-year plans. However,
----- uncertainty remains over its ability to embrace market mechanisms and the lack of of progress on electricity market reform.
**Germany, the major developed economy most committed to renewables, is also considered investment grade.
--- despite criticism of the cost of its early incentives,
--- its scheme has been designed so that the the level of support reduces as technology costs decline, and have delivered wider economic benefits.
** India is also becoming more attractive
--– thanks to a new renewable energy market and other clean energy schemes funded by a tax on coal – and
--- is seen as the market with the greatest potential after China. But
----- its policies need to be further developed.
** The UK has excellent broader policy objectives, but
--- investment has been slower than expected because of constant changes and delays to specific policy instruments.



(from "Pssst. Got a spare $20 trillion? " by Giles Parkinson)

The US is the biggest disappointment, once again because
- of the lack of bipartisan support for energy policies.
- The US should be the preferred location for investment, given its
--- economic scale,
--- natural resources, and
--- stability, but
----- the political divide over climate change and clean energy means it will lag further behind China and other nations with clear, comprehensive policies, that are competing for investment dollars in this space.

The report makes some interesting observations about risk and returns that will be informative to Jillian Broadbent’s team putting together a framework on how the CEFC should operate.

It gives an indicative ranking on technology risk, and the payback they require to make the investment. Interestingly,
-- solar PV ranks on the same line as conventional power generation and run-of-river hydro;
-- new-build nuclear is considered a significantly higher risk than onshore wind, and about the same as biomass;
-- while CCS, applied to either coal or gas, is considered the riskiest – apart from floating wave energy devices (some of which have suffered serious submersion).
----- Coping with that risk is critical if funds are to be deployed. This is where mechanisms such as loan guarantees are critical. The CEFC can play an important role because it can cope with a lower level of return than a private investor. Uncertainty over policy simply adds to the risk, and the cost of capital.