How to solve funding problem

OPPORTUNITIES abound for integrating climate change in economic policies.

One example is factoring in climate change in business cycles. In developed economies, while new infrastructure opportunities may be relatively limited, those for the renewal of existing ones may be higher.

Because of the long life time of energy plants and other capital stock, future energy infrastructure investment decisions, expected to total over $20 trillion between now and 2030, will have long-term impacts on greenhouse gases emissions.

Since the total investment in new physical assets is projected to triple between 2000 and 2030, this provides a window of opportunity to direct the financial and investment flows into few facilities that are more climate-friendly and resilient.

Initial estimates show that returning global energy-related carbon dioxide emissions to 2005 levels by 2030 would require a large shift in the pattern of investment, although the new additional investment required ranges from negligible to 5 percent to 10 percent.

Another example is to integrate climate change into mainstream development. By 2015, fully half of China’s urban residential and commercial buildings will have been built after 2000, and that stock will remain in use for another 50 to 100 years.

Asia and the Pacific will need up to $6.4 trillion in new energy infrastructure by 2030, which provides enormous potential for mainstrea­ming climate change into development policy.

It is crucial to ensure a conscious effort on the part of policy-makers to maximize and utilize these “policy windows” before it becomes too late, that is, economically unviable.

This includes looking beyond large-scale investments that are relative carbon-intensive, including power plants that have long lifetimes.

According to the Intergovernmental Panel on Climate Change (IPCC), studies suggest that mitigation opportunities with net negative costs have the potential to reduce emissions by about 6 gigatons of carbon dioxide equivalent each year by 2030.

There have been some positive developments with regard to the availability of financial resources to address climate change. Private equity investments in clean energy (excluding energy efficiency) have increased dramatically over the last half decade, from $760 million in 2001 to more than $7 billion in 2005.

For technology R&D and deployment, additional investment and financial flows requirements are estimated by the IPCC at about $35 billion to $45 billion.

Renewable energy companies are also attracting venture capital. In this case, the attraction is due in part to future global market projections, some of which show solar photo­voltaics and wind industries each growing to $40 billion to $50 billion per year during 2010 to 2014.

To date, most mitigation practices have been observed in the insurance sector. Climate change is increasing the potential for property damage at a rate of between 2 percent and 4 percent a year.

As a result of climate change, demand for insurance products is expected to increase while climate change impacts could also reduce insurability and threaten insurance schemes.

Risk management regarding low-carbon technologies along with integrating climate risk in insurance are two key developments with high potential for increasing availability of financing for climate change mitigation and adaptation.

Some examples of such initiatives include multi-peril cover for renewable technologies, loss of revenue cover for renewable technologies, identifying potential new liabilities from carbon emissions or using environmental due diligence screening of a company.

An appropriate price on carbon would be a crucial step toward ensuring financing sources for mitigation, and would provide a market mechanism towards ensuring action.

The global market was worth about $116 billion at the end of 2008, rising 84 percent from the previous year due to higher trading volumes and prices.

Research by New Carbon Finance predicts that the market’s value could rise to $150 billion in 2009, in spite of the gloomy backdrop of a global recession, and to $550 billion by 2012.

In a carbon market, developing countries face sellers’ side carbon prices, and the developed countries, buyers’ prices.

However, the incentive effects for a­dop­tion of clean technologies are iden­tical on both sides of the market. –Manila Times