Billionaires To Save The World, Not!
Wednesday, November 1, 2017 at 3:15PM
Bill Barclay

Here is the laterst from the Dino Grandoni (Energy 202) file, just to cheer you up as we start to get some decent weather:

Shortly after the United States elected President Trump, Bill Gates, the richest man in the world, organized a group of fellow billionaires to commit to funding clean energy technology.

With Trump promising to distance himself from policies to reduce atmosphere-warming emissions, the high-profile executives announced they had started a fund of more than $1 billion to go toward low-emissions energy.

But a new report finds that such sums from the private sector aren't sufficient to prevent dire climate warming — not by a long shot.

According to the analysis from the Precourt Institute for Energy at Stanford, to keep the planet under 2 degrees Celsius warmer compared to pre-industrial levels, the global economy needs to triple its annual investment in low-emissions technology — from $750 billion per year between 2010 and 2015 to $2.3 trillion per year going forward until 2040.

That’s trillion — with a “t.”

“The magnitude is just enormous,” said Jeffrey Brown, a lecturer at Stanford and co-writer of the paper.

Maintaining the planet's temperature under that threshold is an aim of the Paris climate accord, an international emissions-reduction agreement between nearly every nation in the world. Though brokered by the United States under President Obama, his successor has vowed to withdraw the country from the accord. 

Although the cost of alternative energy technologies — in particular, solar panels — has plummeted in recent years, another crucial resource needed to deploy renewables — financial capital — has proven to be, unlike sunlight, exhaustible.

"This work is within the mainstream," said Mark Muro, a senior fellow at the Brookings Institution, who was not involved in the analysis. To decarbonize the world economy, Muro said, "on all kinds of measures there needs to be an astronomical increase" in investment.

In the first half of the decade, private institutional investors — which include pension, mutual and sovereign wealth funds alongside billionaires — invested a total of $3.4 trillion in the world economy per year, the analysis found. That means at current investment levels, two out of every three dollars invested per year would need to go toward clean energy to halt catastrophic warming — a tall order investors for which they seem to have little appetitie.

The arithmetic is not the only issue. Not every investable dollar is created equally. Pension and mutual funds, which together held more than half of all assets among institutional investors in 2015, tend to invest money conservatively because they, unlike high-net-worth individuals, aim to protect the retirement accounts of middle-class workers.

“It’s their view of their fiduciary duty,” said Chris Davis, senior director of the Ceres Investor Network on Climate Risk and Sustainability. “Their mission is not to save the world from climate change.”

There are, of course, exceptions among those risk-averse funds, such as the pension funds for public employees in Washington state and for teachers in California that have chosen to put their retirement portfolios toward low-emissions energy sources. “Unfortunately, it’s not happening so much in the red states,” Davis added.

The categories of "clean energy" technology requiring investment include not just wind, solar and nuclear power, but less high-profile work like making the electric grid and buildings move and use electricity more efficiently.

Energy efficiency is "not as exciting -- it's not as covered in the media," said Dan Reicher of Stanford, one of the co-authors of the analysis. "People are a lot more intrigued by solar panels on the roof than by an efficient furnace in the basement."

Another issue is geography. Unsurprisingly, much of the investable money globally comes from developed countries that are already weaning themselves off coal, the most carbon-intensive fossil fuel.

Investing U.S. and European capital in foreign developing energy markets is not frictionless. For example, wild currency fluctuations relative to the U.S. dollar, such as changes in the rupee in India, make calculating the return on investment even more difficult for investors.

The Stanford researchers released their report over the weekend in the hopes that climate negotiators gathering in Bonn, Germany next month — facing a leadership vacuum after the United States announced its withdrawal from the Paris accord — consider addressing the international financing problem for clean energy projects.

"These dynamics should be front-and-center for ministers meeting soon in Bonn," Reicher said.

There you are - I told you it would cheer you up!




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