070509_SEFI_Investment_report

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  • I’m here to address the very important issue of equity and climate change . I personally would like to thank ___ and his staff for recognizing this critical issue within climate change by hosting this international meeting, and focusing much of the dialogue on developing countries. Climate change, unlike any other environmental problem, has the potential to undermine social welfare and equity in an unprecedented manner. Our IPCC report particularly demonstrates the plight of poorer nations and disadvantaged groups within nations that are especially vulnerable to climate related disasters. In this respect we face a dual challenge . First, to promote those actions that minimize adverse changes in climate. Secondly, to ensure that while doing so we do not worsen the existing inequity , globally and within nations -- though climate change policy cannot be expected to address all prevailing equity issues. Achieving this important, though ambitious aim requires a decision-making framework that ensures internalization of equity concerns . This primarily requires: (a) the establishment of an equitable and participative global framework for making and implementing collective decisions about climate change; and (b) reducing the potential for social disruption and conflicts arising from climate change impacts.
  • This sharply brings out the question of equity at two different levels . Firstly poor countries fear a prospect of getting their low per capita GHG emissions frozen to protect the atmosphere . Secondly, the plight of countries vulnerable to adverse impact of climate change , such as small island nations, least developed countries, is serious, but they have little say in deciding their future.
  • Poverty and Climate Change: Klause Topfer often says that ‘Poverty is the worst source of environmental degradation.’ However, on the CC issue, poverty is a two edged sword. The current projections of carbon emissions in developing countries reflect their low per capita emissions compared to industrialized countries. However, if the current growth in existing per capita emissions continue and human population increases, then developing country contribution to local pollution and atmospheric concentrations of carbon will be very significant in the future. The need for economic growth to eradicate poverty by poor countries is universally acknowledged. But the energy path to achieve the economic growth needs to be considered to avoid climate catastrophe in the future. Poverty eradication policies until now have largely been based on the recognition of only the use value of a resource when it contributes to a productive process.
  • Since industrialized countries have used a significant share of the waste assimilative capacity of the global atmosphere, it is in their interest to provide incentives to poorer countries to regulate their resource use to get a breathing space for themselves. This calls for new forms of investment in developing countries, which increases production without taking from the environment and the ecological processes that maintain it. Decoupling GHG emissions from human activities is an important step in mitigating climate change.
  • The manner in which Kyoto mechanisms are implemented globally and nationally will determine its real impact on equity . Therefore, it is necessary that before the implementation of these mechanisms, each user's rights, entitlements and obligations are as fully specified as possible. It should be clear who pays , who can profit , who can pollute , who can degrade and who can control . This means that rights and obligation systems need to be coupled in preparation for the use of these mechanisms. The implementation of the Kyoto mechanisms requires strong incentives to change investment patterns and stimulate technological innovation , maximise real GHG emission reductions and not focus narrowly on minimising short-term costs. The mechanisms need to take into account capacity building of the poorest and most vulnerable peoples in adapting to climate change while providing investments required in these countries to move to a climate-friendly development path.
  • 070509_SEFI_Investment_report

    1. 1. <ul><li>Global Investment in 2007 in the Sustainable Energy Markets </li></ul>Virginia Sonntag-O’Brien REN 21 / UNEP SEFI CSD 15, 9 May 2007
    2. 2. Overall RE investment growing quickly, <ul><li>Investment has more than doubled in last two years. Further 20% increase forecast for 2007, taking global investment to $85 billion. </li></ul><ul><li>Drivers go beyond the big three (oil prices, energy security, climate change) to include many more environmental mainstreaming issues. </li></ul>Figure 1: Global Investment in Clean Energy, 2004 - 2006
    3. 3. All types of investment are growing Figure 2. Global Investment in Clean Energy, 2006 Source: New Energy Finance $7.1bn $10.3bn $9.1bn $7.2bn $33.7bn VC/PE Public Markets Corp RD&D Gov't R&D Technology & Equipment Asset Finance Small-scale projects Total Investment M&A/MBO Total Deals Technologies and Companies <ul><li>In 2006 ‘new renewables’ accounted for </li></ul><ul><ul><li>just over 2% of global energy supply, and yet </li></ul></ul><ul><ul><li>nearly 10% of global energy investment . </li></ul></ul><ul><li>International Energy Agency predictions of renewables growing only at the same pace as other energy supply options may be conservative . </li></ul>Exits $27.9bn $9.3bn $70.9bn Projects $29.5bn $100.4bn Refinance Explosive Growth
    4. 4. VC/PE Investment Soaring <ul><li>Venture Capital/Private Equity up 163% in one year. </li></ul><ul><li>Biofuels edged out solar and wind to raise the most risk capital in 2006. </li></ul><ul><li>Most investment in wind has been in manufacturing capacity , not new technology. </li></ul><ul><li>VCs shifting more to larger, later stage deals . </li></ul><ul><li>US dominates VC transactions. Clean tech in the US now ranks 5 th in VC at 9.1%. </li></ul><ul><li>After the US, China was the second largest recipient of Venture Capital. </li></ul>Figure 3: 2006 Venture Capital and Private Equity Investment by Sector Source: New Energy Finance $804m $746m $664m $272m $163m $134m $127m $105m $93m $36m $35m $31m $4m Carbon Markets Marine Hydrogen Efficiency : Supply Side Biomass and Waste Fuel Cells Services & Support (Clean Energy ) Power Storage Smart Distribution Efficiency : Demand Side Wind Solar Biofuels Mfc. Capacity Technology figures are up until mid - December Source: New Energy Finance
    5. 5. Public stock markets have opened to RE <ul><li>Public markets up 140% in one year. </li></ul><ul><li>Solar PV is the big winner on public capital markets. </li></ul><ul><li>European stock markets are the main destination for IPOs. </li></ul>Figure 4: Public Market Investment by Sector
    6. 6. Figure 5. WilderHill New Energy Global Innovation Index (NEX) Source: New Energy Finance, AMEX 75 125 175 225 275 325 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 AMEX Oil NASDAQ S&P 500 NEX AMEX Oil, NASDAQ, and S&P 500 rebased – 30 December 2002 =100 Clean energy stocks volatile , but doing well <ul><li>More corrections are expected , as happened in May 2006, but few predict crash. </li></ul>RE confused as only technology stocks Technologies and projects Continued growth uncorrelated to other sectors
    7. 7. Figure 6. 2006 Asset Financing by Sector Source: New Energy Finance $1.3bn $15.2bn $1.4bn $3.6bn $6.4bn Biofuels Biomass & Waste Solar Wind Other Renewables Financing for projects is still mostly for wind <ul><li>Wind is still the big winner at raising asset financing for projects. </li></ul><ul><li>China the third largest location for asset financing, after US and Spain. </li></ul>
    8. 9. Market Observations <ul><li>Measured by capital investment, renewable energy is already a much larger sector than current energy production figures indicate. </li></ul><ul><li>Sector is diversified and in different stages of development , attracting different forms of capital </li></ul><ul><ul><li>Asset finance for wind, Public Markets for solar, VC for biofuels and beyond; </li></ul></ul><ul><ul><li>Capital is now mobilizing quickly and unseating energy sector incumbents. </li></ul></ul><ul><li>Increased competition amongst capital providers is </li></ul><ul><ul><li>Leading to financial innovation within mature mkts (wind); </li></ul></ul><ul><ul><li>Extending conventional financing beyond wind (solar, biofuels, ….); </li></ul></ul><ul><ul><li>Shift in regional focus to emerging markets (China, India, Brazil). </li></ul></ul>
    9. 10. Foster a sustainable energy finance community that brings together financiers and catalyses public-private alliances to share costs and lower barriers to investment. Provide Information • Facilitate Networks • Develop Partnerships http://sefi.unep.org The UNEP Sustainable Energy Finance Initiative

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