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Nearly six months ago in Copenhagen, at the biggest summit ever held on climate change, world leaders failed to come to a comprehensive agreement on greenhouse gas emissions. But what did emerge was an agreement by which the biggest economies – developed and developing – all pledged to curb their emissions, by varying degrees, over the next decade.
This week, officials are meeting again to flesh out some of the details and to try to formalise the accord further. If governments are serious about fulfilling the promises they made in Copenhagen, much more investment into green technology will be required.
In the energy sector alone, the International Energy Agency says $10,000bn of investment will be needed globally over the next 20 years, though it estimates that $8,600bn of this will be recouped in fuel savings and other benefits.
Like any other industry, however, the green technology sector is fighting for funds in a harsh climate. Would-be borrowers report that little money is available, and where there is, it comes with onerous conditions.
In the aftermath of the financial crisis, many politicians – including US President Barack Obama, Angela Merkel of Germany, and Gordon Brown, then UK prime minister – heralded the prospect of “green” economic growth and “green” jobs.
Governments around the world decided to devote a large tranche of their stimulus spending to environmental projects, such as insulating homes and offices, investments in renewable energy, and a mass of new rail projects – the latter particularly in China.
In all, according to HSBC bank, governments promised about $521bn in spending. By the bank’s calculations in March, only 16 per cent – about $82bn – of these funds had so far been spent. Nick Robins, head of the HSBC climate change centre, says that if the remaining funds are not spent quickly, they could be lost or diverted.
Most renewable energy is still more expensive than fossil fuels on the open market, so green energy companies are calling for special treatment for their industry, including tax breaks on the US model, or subsidy schemes such as the “feed-in tariffs” popular in Europe.
In the US, green companies are lobbying heavily for the passage of a proposed new American Power Act. “Passage of comprehensive clean energy and climate legislation will allow the US to be a worldwide leader in the next great global industry: green technologies,” says John Doerr, partner at Kleiner Perkins Caufield & Byers, the venture capital company.
There is more to the low-carbon market than lots of expensive, large-scale infrastructure projects.
At a smaller scale, there are scores of new products vying for attention, from low-energy lightbulbs to more efficient boilers, electric cars, enhanced air-conditioning and insulation.
There is some evidence that, despite the recession, some companies are continuing to cut greenhouse gas output, which analysts say may help sustain interest in these products.
Some business leaders have continued to trumpet their environmental efforts throughout the recession. Sir Terry Leahy, chief executive of Tesco, told the Financial Times: “We see this as a core part of what we do. We haven’t changed our minds on this.” The company continues to open flagship “green” stores, and embark on programmes such as reducing the greenhouse gases that come from its refrigerators.
Jeremy Darroch, chief executive of BSkyB, also told the FT that the company was pressing ahead with its environmental programmes because “that is what our customers expect of us”.
Another attraction, he adds, is the cost savings from improving energy efficiency and using fewer resources.
Vincent Neate, head of sustainability at the consultancy KPMG, says these experiences are mirrored elsewhere. “Over the past two years, we’ve not seen significant cutbacks in the environmental programmes of our clients,” he says.
“If there is a perception that these environmental programmes have been eclipsed, this may be simply due to organisations switching to promoting their cost-saving potential.”
David Symons, director at WSP Environment & Energy, a global environmental consultancy, agrees. He says that customers increasingly expect their suppliers to have environmental programmes.
But Tim Lawrence, head of supply chain and procurement at PA Consulting Group, paints a different picture. He points to a survey the company undertook with large organisations about their green agenda. Half had invested less than €1m ($1.2m) in the past two years, equating to less than 0.1 per cent of their turnover.
“The same is true for the level of investment over the next couple of years, with only minor increases planned,” he says. “Whatever the reason, it is clear that the environmental awareness and intentions of companies are not being translated into action.”
If investment in green technology does continue, that would mean new questions over intellectual property, says Mark Esper, executive vice-president of the US Chamber of Commerce’s Global Intellectual Property Centre.
“Many green technologies are very IP-intensive,” he says. “A significant amount of research and development is put into turning an idea into a product that will improve energy efficiency, reduce harmful emissions, and help us preserve our environment.”
This is good news for jobs, Mr Esper says. The US Chamber of Commerce released a study in April showing that IP-intensive industries “create jobs, pay their workers higher wages, generate more exports, help reduce the deficit, and drive economic growth in a variety of sectors compared with non-IP-intensive industries”.
It also found “IP-intensive industries employ workers of all educational backgrounds and skill levels, creating white- and blue-collar jobs that pay better and are growing faster”.
But one of the crucial conditions for such industries is a strong legal framework to protect IP, says Mr Esper. “Without the protections that patents provide, many of these entrepreneurs – and the investors who support them – would not commit the time, effort, and capital to pursue their ideas if others are free to steal their inventions.”
This is particularly important in relation to climate change, because a key sticking point in long-running international negotiations has been over IP. For years developing countries including China and India have sought access to IP from the developed world as part of a deal. Developed countries refused.
In the run-up to the Copenhagen summit, developing countries seemed to be softening these demands, downgrading “technology transfer” to “technology collaboration”. In other words, instead of free access to patents, a commitment to helping private companies from the industrialised world invest in developing countries.
But as the talks floundered, developing countries were less willing to compromise. As the talks resume, developed-country negotiators are hoping the old argument is not reopened.
Mr Esper said a study from his organisation last year had found that, if green IP rights were weakened to accommodate demands from some developing countries, companies would be reluctant to invest and the US could lose up to 1m jobs by 2020. As investors look beyond the recession, he concludes: “Strong IP rights are essential.”