Investment in clean energy, like global economic growth, is shifting from West to East, with China leading the pack. China accounts for 30% of the world’s investment in green energy, outspending the U.S.—the number two market for green energy-- by almost 2:1. That's according to a new report from the The Pew Charitable Trust based on 2012 data.
Green investments in China in 2012 rose 20% to $65 billion while they fell 37% in the U.S. to just under $36 billion.
“Clean energy will be one of the biggest industries of the next 10, 20 years, and we’re handing it to China,” says Ramez Naam, computer scientiss and author of the new book The Infinite Resource: The Power of Ideas on a Finite Planet. Green energy will “become a multi-trillion-dollar industry."
China is not only spending more money on green energy, it’s also writing laws and changing regulations will help attract more of those green dollars in the future. China is launching a cap-and-trade program in two regions this June which will go national in 2015 along with a national carbon tax, says Naam. Such policies have been debated in the U.S. but not enacted into law.
The Obama administration, however, has announced new regulations to limit pollutants from coal plants as well as new vehicle fuel-efficiency standards requiring an average 54.5 miles per gallon in the U.S. auto fleet by 2025. The EPA says the new fuel standards will significantly reduce greenhouse gas emissions by decreasing oil consumption—a trend that’s already begun. Naam says the U.S. currently is consuming 10% less oil than it did 10 years ago.
So how should investors capitalize on these green energy trends?
Naam says they should invest in green energy companies especially solar, but with the understanding that it’s a “Darwinian market” where most companies will fail.” He advises investors to stay away from fossil fuel stocks—coal and big oil-- because of the shift toward green energy and because demand for those –and other commodities—will decline and their prices will fall.
“If you look out over the last 20, 50 -100…[commodity] prices are back to where they were in the ‘80s and they will come down again.” On an inflation-adjusted basis crude oil prices near $87 a barrel today are almost the same as they were in early 1982, according to the U.S. Energy Information Administration.
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