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Can the Climate Change Train be Derailed?

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In the past 10 years there has been an unprecedented period of positive growth with regards to climate change. Lately however, a number of international disruptive forces have brought increased scrutiny on the likelihood of achieving the collective 1.5-2°C limit on global temperature increases that is seen as the benchmark for avoiding catastrophic global climate change. The recent US presidential election and the Trump administration is seen as a causative factor and the appointment of resolute climate change denier Myron Ebell to the Environmental Protection Agency could be seen as a portent for his much touted deregulation of the US energy markets. Meanwhile in Europe, the legacy of progressive policy making over the past decade is still holding sway despite examples from the UK and Denmark, previously seen as climate change leaders with favourable investment frameworks for example appear to be pulling back on agreed targets and incentives.

Whilst individual governments may be reducing commitments in the more developed countries there is positive progression from independent intergovernmental agencies and a massive increase in renewable energy buy-in from developing countries. The UN continues to drive change and apply pressure to the worse offenders

"I urge you to instruct your negotiators to choose the path of compromise and consensus. Bold climate action is in the national interest of every single country
represented at this conference. The time for brinksmanship is over"
UN Secretary General Ban Ki Moon

The Chinese, controversial for their role in the production of greenhouse gases, can be also be credited with a massive indirect contribution as they drive down the price of manufacture for solar PV modules. Meanwhile developing markets in LATAM and India are recording remarkable growth levels, with major financial institutions identifying the attractiveness of these as long-term investments with favourable returns.

The climate change performance network recently released their rankings for 2017; for the past 12 years this has been a great benchmark for highlighting the heroes and villains in the international arena:

  • The UK dropped one place in the overall scores, arguably holding onto a top 10 position off the back of past performance; whilst the UK commitment to offshore wind is a positive there is a very unclear framework from 2017.The prediction for a continued slip down the ratings can only be interceded by a strong long term position statement from the current government.
  • Denmark suffered a greater fall slipping to 13 after traditionally being a very strong player. Again government policy plays a large role backtracking on former engagements to phase out coal and cut greenhouse gases by 40% have brought long term implications into question.
  • Meanwhile Argentina jumped 13 places pulling itself out of the very poor group of performers with robust developments in the renewable sector, a recurring theme in the report though is that short term transitions are consistently undermined in policy changes. A new change in government leaves the future of Argentina’s admirable adaptations in an uncertain state.
  • In India one of the most cohesive large scale adoptions of renewable energy has driven capacity through record levels of development, a healthy appetite for investment in one of the world’s boom economies backed up by decent policy helps with a 3 point climb to 20 in the rankings. However the burgeoning economy is driving demand for energy higher and higher, emissions are rising rapidly despite 25% of new energy coming from renewable sources.

The key output from these results is the importance of government buy in to accelerate change. Repeatedly we see evidence of one progressive government making strong changes only to be dampened by an administration change and an ideological shift. Polarising views on the nature of climate change encourage aggressive peaks and troughs as ideological standpoints trump the core scientific data. Non-binding agreements like Kyoto and the current Paris Agreement fail to secure the changes needed, a lack of real recourse to failure to comply mitigates the success of these ventures. Strong leadership from developed countries can affect stronger change but recent policy shifts in America and the UK could be portents of increasing apathy towards real sustained progress.

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Arguably the new champion of climate change leadership comes from the capital markets, where previously the boom of oil and its associated implications on our effect on the planet stemmed ultimately from economic interests; now the lure of dollars and cents brings increased weight to renewable technology. Reduced costs through more efficient development practices and the remarkable drop in equipment costs render renewable energy one of the most attractive prospects for long term investments. As the Levelised Cost of Energy (LCOE) continues to drop for all renewable production achieving parity or superiority with traditional fossil fuel production the lure of a self-sustaining energy source generates increasing attractiveness from a purely fiscal point of view. Devoid of the need for subjective rhetoric from self-serving politicians and the associated cyclical shifts in policy business will drive the clean energy revolution forward, large utilities like RWE and DONG have announced their recent commitments to this moving forward. Innogy, the renewable energy arm of RWE defied even the most optimistic expectations in their recent IPO signalling their intent to drive global development across several new geographies.

The future is unknown and the depth and breadth of issues affecting the industry cover a scope far greater than my ability to draw insights. Broadly though, I see two areas of strength:

  • Firstly, private industry is driving the renewable revolution at a rate of development that 20 years ago would have been a fevered dream of even the most ardent climate change champion.
  • Secondly, intergovernmental initiatives like the Green Climate Fund (the UNs climate change adaptation fund targeted at $100BN by 2020) signify an international appetite for change. These are backed up by the Paris agreement and its predecessor the much maligned Kyoto draft.
  • However individual governmental responsibility is still comparatively weak, a lack of responsibility and follow up to commitments made at the international level damage the possibility for cohesive long term change.

As recruitment partners for some of the largest and most progressive developers and financial institutions we see the industry from a tangent and we continue to see remarkable growth and appetite for development. This is not just in established industries like wind and solar but also within developing technologies like storage and grid efficiency/integration models are developing traction and will bridge the gap in terms of consistent demand side fulfillment. In the quest to present the renewable energy as a full scale full life-cycle alternative to fossil fuel production, this is the last piece of the puzzle.

We are always eager to speak with industry professionals, so if you are seeking to develop your career in the renewable energy sector or require industry experts to join your team please contact us on:


02031427810

keith@pangea-resourcing.com

I am particularly focused on Business and Project Developers in the USA who have successfully transacted and originated across a minimum of 4 utility scale Solar or Wind Projects as well as Finance professionals with an in depth knowledge of the US Tax Equity Market.

Thanks for reading

Keith Barlow