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Clean energy investors abandon Australia, head overseas
By Giles Parkinson on 10 March 2014
Clean energy and low-carbon investors are abandoning Australia as the new Federal government, and its conservative colleagues at state level, turn their interests and policies away from renewables and long-term abatement incentives.
Several key players in the clean energy finance industry have told the Senate hearings into the proposed Direct Action policy that investors are looking to Europe, the US and some South American countries to find low-carbon opportunities.
“My members are looking at the United Kingdom, Ireland, the United States, France and some South American countries as having more stable investment environments for low-carbon opportunities,” said Nathan Fabian, the head of the Investor Group on Climate Change.
“Direct action is not an investment grade policy,” he said, noting that investors viewed it more like a short-term grants scheme. Banks were likely to take a similar view.
He also proposed review of the RET “appears to be another very clear signal that Australia will not be a market for low-carbon investing for the next few years.”
Tim Buckley, a former Citigroup analyst, funds manager, and now with the US-based Institute for Energy Economics and Financial Analysis, said the Australian clean energy industry is regressing because of the lack of clarity on policy.
“We are worse than stalling; we are actually investing in assets that I think will become stranded as a result. Internationally, companies and economies are building industry capacity to transition for the long term. We should be building capacity as well and we are not doing so.”
He said Australia was currently missing out on hundreds of billions of dollars that being invested every year in renewables, in energy efficiency and in development of these new technologies, and the hundreds of thousands of jobs being created in China, in Germany and in America.
Numerous other parties hav
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Stock markets are inflating a "carbon bubble" by overvaluing companies that produce fossil fuels and greenhouse gases, and this poses a serious threat to the economy, an influential committee of UK MPs has warned.
The idea of a carbon bubble – meaning that the true costs of carbon dioxide in intensifying climate change are not taken into account in a company's stock market valuation – has been gaining currency in recent years, but this is the first time that MPs have addressed the question head-on.
Much of the world's fossil fuel resource will have to be left unburned if the world is to avoid dangerous levels of global warming, the environmental audit committee warned.
To avoid the carbon bubble, the report says the Bank of England's financial policy experts should take advice from the Committee on Climate Change to monitor the risks to financial stability – a controversial recommendation that is likely to ruffle feathers in the Treasury. Equally as contentious is the committee's call for the government to support binding national renewable energy targets for European Union member states, a move that the coalition has strongly resisted, preferring instead to rely solely on an emissions reduction target.
Companies should also be forced by law to report on their greenhouse gas emissions and assess the risk this could pose to their future financial performance, the MPs urged.
The committee said there was a substantial gap between the investments that are being made to take carbon out of the economy – for instance by building more low-carbon power generation capacity – and the investments that will be needed if emissions reduction targets are to be met and global warming halted. Current investments in "green finance" only run to about half of the amount needed to meet emissions reduction targets.
Joan Walley, chair of the committee, said: "The government and Bank of England must not be complacent about the risks of carbon exposure in the world economy. Financial
The Regional Greenhouse Gas Initiative had its first auction this week since lowering its cap — and the results suggest the system is once again effectively reducing carbon emissions.
Encompassing nine states in the northeast, RGGI is a cap-and-trade system that started operating in 2008. It sets an overall cap on the amount of carbon dioxide that can be emitted by the participating states. Then it breaks that amount into permits — each allowing for one ton of emissions in a given year — and auctions them off to the firms subject to the system.
The idea is that emitters will have an economic incentive to cut emissions, because then they’ll have to buy fewer permits — or they can sell permits they don’t need to other emitters. How emissions are cut is left up to the market and the individual firms to decide. They just have to adhere to the amount of permits they have.
So RGGI is just a market in carbon emissions. And the higher the price of the permits, the bigger the incentive to cut emissions.
That’s where the problem lay: starting in 2010, the cost of the permits in RGGI’s auctions flatlined at just under $2 per ton. At such a low price, the incentive to cut was low-to-non-existent — a sign that RGGI’s cap was so high it wasn’t reducing carbon emissions beyond what business-as-usual would’ve done.
So the states under RGGI got together and decided to lower the cap. They dropped it from 165 million tons in 2013 to 91 million tons in 2014. And it will drop 2.5 percent every following year until 2020.
This past Wednesday was the first permit auction since the cap was lowered. The clearing price for the permits jumped to $4, the highest it’s ever been at since the auctions and trading started in 2008. Furthermore, the auction not only sold out all the permits allocated this time around, it sold out all of its backup permits as well. So demand for the permits is high, indicating the new cap is ramping the incentive to cut emissions back up
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