SRI English

Copenhagen - low expectations mean no disappointment

by Martina Jung

We had not expected a global climate treaty – or anything close to it – to emerge from the Copenhagen Climate Change Conference 2009, and we had not been optimistic that emission reduction commitments would be made, in particular by China. So, we were not especially disappointed with the content of the Copenhagen Accord.

In contrast, the wider consensus view appears to be that Copenhagen failed to meet its goal: To reach binding agreements among the participating states to tackle global warming, which would serve as the basis for a global climate treaty to be signed in 2010. Indeed, participating countries have done little more than to take note of the Copenhagen Accord, without committing to accept it. The minimal compromise achieved does not include precise emission reduction targets or control mechanisms, nor is it legally binding or unanimous.

However, there are two points in the Copenhagen Accord which give us reason for optimism. The first is the recognition among UN member states that the increase in average global surface temperatures by 2050 must be limited to 2 degrees Celsius or less. This is the first time that scientific evidence of global warming has entered political documentation, applicable to 193 states. Looking ahead, this targeted restriction will serve as a universally accepted cap against which developments can be measured. The second is the pledge by industrialised nations to provide USD 30 billion to developing countries for the next 3 years. The pledge is aimed to step up action against climate change, and may be scaled up to USD 100 billion annually by 2020. This cash should accelerate installation of renewable energy capacity.

Achievements such as these are just a first step towards a global climate treaty. For now, they will have little immediate impact on the fundamentals of renewables stocks. But the need for continuing negotiations, and the growing pressure to achieve legally binding agreements, provides room for a positive mid- and long-term effect on renewables.

In the short-term, we do expect more ambitious action on a national level. In the course of the Copenhagen conference, China and the US presented various measures that they are prepared to implement in order to reduce their carbon emissions. All of them include the increase of renewable energy capacity, implying the potential for creating new jobs and reducing their countries’ dependence on foreign resources. The statements released by the world’s two largest emitters after the conference confirm their commitment to address the climate change problem and their willingness to further promote renewable energy technologies. We believe there will be more countries that follow this path now that 193 states are involved, at least politically.

Electric cars on the horizon

By Florian Sommer

While hybrids are already on the move, electric cars are firmly on the rise. The debate has now moved on from whether electric cars will be a feasible solution to when they are going to enter the mass market.

This year’s government stimulus programmes have accelerated this process. Obama announced in August a grant of US$ 2.4 billion for the development of electric vehicles (EV) and the batteries to be used in EVs. The EU and several national European governments have also made significant funds available to make the shift. China has set a goal of producing half a million electric cars annually by 2011 and has committed US$ 1.4 billion for R&D. 

A major part of the funding is earmarked for making advances in battery technology. This is a serious bottleneck for electric cars. Batteries need to become more powerful, longer lasting, and most of all, much cheaper. Current progress looks promising. The cost of batteries has been declining by 6 to 8 percent annually and most analysts predict they will continue to do so over the next 10 years with rising production volumes. The market potential is huge. McKinsey estimates that the market for batteries will be US$ 60 billion assuming six to eight million electric vehicles sold per year.

Markets have realised that batteries are a very promising technology. Our battery / energy storage index has risen by 97.5% since the beginning of this year. This is the strongest performance amongst our 30 different indices, each addressing a different sustainable technology area. 

Another area where we need to see a radical change is in the development of a reliable energy infrastructure for charging up cars. China, pushed by its urban air pollution problems, has announced some ambitious plans. It seeks to build a network of charging facilities in at least three of the country’s largest cities by 2011. Hawaii has also announced plans to build up to 100,000 charging stations for electric vehicles by 2012.

Finally, the electric car lobby needs to stay firmly focussed on winning the carbon argument. It is not a given that electric cars are necessarily more carbon efficient. Studies have shown that an electric car using pure coal-based energy would be less carbon efficient than a car with a petrol or diesel motor. However, the electric car is superior when using the current energy mix of the EU.

Ultimately, only a strong green argument for electric cars will convince governments to create the required incentives that will enable mass market roll-out of electric cars.

Green cars and red herrings

By Florian Sommer

Auto manufacturer bailouts have been a major focus of public attention and criticism. The populist cry ‘never again’ for unregulated hedge funds and bumper bonuses in the aftermath of the financial crisis is also loud on tax payer support for failing industries. How governments soothe the overburdened tax payer and prop up ailing automakers without promoting an unsustainable model is posing a difficult challenge.

Crucial to their response is whether governments perceive sustainability to be integral of their policy or whether they are just looking for a quick-fix to the global recession.

Japan and US are ahead of the class in dedicating stimulus packages for the ‘greening’ of the auto sector. Japan has scrapped acquisition taxes on hybrids, while reducing those on small vehicles. The stimulus funding can also accelerate a technological shift. For example, the EU has earmarked EUR 1 billion of research and development funding for green cars. The US is also funding research and development into advanced batteries and green autos to the tune of USD 2 billion.

The scrap credits offered by Italy, Germany, France and the UK leave much to be desired. These stimulus measures offer credits of between EUR 1000 and EUR 2500 for purchasing a new vehicle while offering an older model to be scrapped. In Germany it has been a runaway success. In the run-up to October elections, the government has even increased the funding from 1.5 billion to 5 billion after the scheme sold out in only a few months.

While such policies will remove a large number of inefficient vehicles from the roads, these one-off measures fail to demonstrate a vision for sustainable transport.