Investments In Low-carbon Technologies Research Articles

Green Stimulus and Pink Batts: The Environmental Politics of AustraliaaS Response to the Financial Crisis

It is widely accepted that limiting climate change to an average temperature rise of 2[degrees]C will require substantial and sustained investments in low-carbon technologies and infrastructure (OECD, n.d.). While a significant amount of investment will have to come from the private sector, the scale of the problem of climate change and the time frames involved demand that public finance also play an important role in mitigation efforts. However, the dominance of neoliberalism for the past three decades has meant that governments have generally viewed large spending programs as politically undesirable. The focus has instead been on the development of market mechanisms, such as emissions trading schemes that put a price on carbon and other programs to spur private sector investment. In this context, the Global Financial Crisis (GFC) represented what historical institutionalists call a 'critical juncture'. In a critical juncture, the structural (i.e. economic, cultural, ideological, organizational) constraints on political actors are 'significantly relaxed for a relatively short period' (Capoccia and Kelemen, 2007:343). As a result, political actors have a greater range of options for action and leaders have 'greater latitude in shaping policy than might be available in more stable periods' (Peters, 2011: 76). The GFC was a critical juncture in two respects. First, there was a need for governments to quickly respond to the crisis. Deficit-funded public spending became not only politically acceptable but also popular in many countries and was even promoted by international financial institutions like the International Monetary Fund (IMF, 2009). Second, the economic orthodoxy of market fundamentalism was implicated in creating the crisis and was, therefore, to a large extent discredited. There was a sense, at least in the early days of the GFC, that neoliberalism was 'dead' and that it needed to be replaced with a new economic model or paradigm. This created an opening for environmentalists to propose a 'green economy' as the way forward (Spies-Butcher and Stilwell 2009). Harris (2013: 71) has suggested that the GFC represented 'a major opportunity for a new kind of macroeconomics to emerge--one that is 'old' in that it returns to some traditional Keynesian principles, but 'new' in that it incorporates the ecological realities of the twenty-first century. ' The return to Keynesian fiscal policy and the push for a green economy were combined in a number of proposals for Green Keynesianism from think tanks and NGOs (e.g. Green New Deal Group, 2008; Bowen et al., 2009). Proponents argued that green fiscal stimulus measures made economic and environmental sense. One of the most common claims made was that more jobs can be created through stimulus to green industries, such as solar energy, because they are more labour-intensive than traditional fossil-fuel based industries (Pollin et al., 2008). Others pointed out that many green sectors have better returns on capital than traditional or 'brown' sectors (UNEP, 2009a). It was also argued that investment in certain green sectors (e.g. building retrofitting, wind and solar power generation, public transportation) will bring about considerable economic savings to individuals and businesses through lower fuel bills, reduced health costs (less air pollution) and less congestion in cities (Australian Conservation Foundation et al., 2008; Houser et al., 2009). The Global Research Department of HSBC put out a report in May 2009 that estimated that governments had allocated US$470 billion in stimulus to projects that fit in the 'investment themes' in the HSBC Climate Change Index (e.g. energy efficiency, renewables, etc.) (Robins et al., 2009). However, there has been no follow-up study to assess what was actually spent by governments, nor any close examination of the actual environmental impacts of funded projects. This article examines Australia's experience with green stimulus. …

The clean development mechanism

Purpose – Since the registration of the first clean development mechanism (CDM) project in 2004, the CDM has seen a dynamic expansion: the CDM pipeline currently comprises 6,725 projects generating 2.73 billion certified emission reductions (CERs) up to 2012. These CERs result in a substantial financial flow from Annex I to Non-Annex I countries. But CDM projects also result in investments in low carbon technologies, a substantial share of which is focused on the energy sector. The total installed capacity of all CDM projects amounts to 288,944 MW. However, the CDM is not widely taken up in Africa. This holds true for Africa's share in the CDM project pipeline (2.62 per cent), for Africa's share in CERs generated up to 2012 (3.58 per cent) and for the normalized CERs per capita, per country. Two hypothesizes are commonly discussed: first, the continent features low per capita emissions and low abatement potentials. Second, African countries may be hampered by weak institutional frameworks. This article reviews both hypotheses and presents new empirical data. The paper aims to discuss these issues. Design/methodology/approach – Investigating the greenhouse gas (GHS) abatement potential of 16 energy-related sectors for 11 selected least developed countries in sub-Saharan Africa shows a total theoretical CDM potential of 128.6 million CERs per year. Analyzing investment indicators confirms that most countries are impeded by below average investment conditions. Findings – It is concluded that Africa offers a considerable range of substantial abatement potentials. However, the weak institutional framework is limiting the uptake of the CDM in Africa. This is underpinned by an analysis which shows if a CDM sector has high investment cost, Africa will have a low share in the sector. If the sector has low investment needs per CER, Africa's share in the CDM sector will be bigger. Investment needs and Africa's share in the pipeline feature a negative correlation. Research limitations/implications – Supporting CDM development in Africa should not be constraint to technical assistance. It will be crucial to develop an integrated financing approach, comprising the CDM as a co-financing mechanism, to overcome the institutional challenges. Originality/value – Until today, there are few empirical studies that use concrete criteria and indicators to show why the CDM is underrepresented in Africa. The work presented here contributes to filling this gap.

Decarbonising product supply chains: design and development of an integrated evidence-based decision support system – the supply chain environmental analysis tool (SCEnAT)

Based upon an increasing academic and business interest in greening the industrial supply chains, this paper establishes the need for a state-of-the-art decision support system (DSS) for carbon emissions accounting and management, mainly across the product supply chains by identifying methodological shortcomings in existing tools, and proposing a supply chain (SC) framework which provide businesses with a holistic understanding of their supply chains and ensuring partners within supply chain collaborative networks have a shared understanding of their emissions. It describes the design and development of a DSS now known as supply chain environmental analysis tool (SCEnAT) in detail, putting its unique and innovative features into a comparative perspective vis-à-vis existing tools and software of different types. The methodological framework used to design and develop SCEnAT integrates different individual techniques/methods of supply chain (SC) mapping, SC carbon accounting, SC interventions and SC interventions evaluation on a range of key performance indicators (KPIs). These individual methods have been used and applied innovatively to the challenge of designing SCEnAT within the desired framework. Finally, we demonstrate the application of SCEnAT, especially the advantage of using a robust carbon accounting methodology, to a SC case study. The SCEnAT framework pushes the theoretical boundary by addressing the problems of intra-organisational approach in decision making for lowering carbon along the supply chain; with an open innovation, cutting edge, hybridised framework that considers the supply chain as a whole in co-decision making for lowering carbon along the supply chain with the most robust methodology of hybrid life cycle analysis (LCA) that considers direct and indirect emissions and interventional performance evaluation for low carbon technology investment and business case building in order to adapt and mitigate climate change problems. This research has implications for future sustainability research in SC, decisions science, management theory, practice and policy.

Inducing low-carbon investment in the electric power industry through a price floor for emissions trading

Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, this uncertainty increases the cost of capital for investors and might deter investments into new technologies at the company level. We apply a real options-based approach to assess the impact of climate change policy in the form of a constant or growing price floor on investment decisions of a single firm in a competitive environment. This firm has the opportunity to switch from a high-carbon “dirty” technology to a low-carbon “clean” technology. Using Monte Carlo simulation and dynamic programming techniques for real data, we determine the optimal CO2 price floor level and growth rate in order to induce investments into the low-carbon technology. We find that a carbon price floor can be used to induce earlier low-carbon technology investment and show this result to be robust to a large variety of input parameter settings.

Policy Uncertainty and Investment in Low-Carbon Technology

In the context of an Emission Trading Scheme (ETS), we study how uncertainty over the policy parameter affects firms' investment in low carbon technologies. We develop a three period sequential model that combines the two sectors regulated by the scheme and encompasses both irreversible and reversible investment possibilities for the firms. Additionally, we explicitly model the policy uncertainty in the regulator's objective function as well as the market interactions that give rise to an endogenous price of permits. We find that uncertainty reduces irreversible investment and that the availability of both types of technologies partially eliminates the positive effect of policy uncertainty on reversible technology found in previous literature. Furthermore, we provide a framework that allows to clearly identify the effects of the interplay between different features and actors of different ETS such as the European one.

Carbon Capture and Storage, Wind and Nuclear Power, and Technology Learning

Limiting the carbon emissions of electricity generation will require significant investments in low-carbon technologies. Moreover, the phaseout of nuclear power generation induces the need for replacement investments. One of the replacement options is the carbon capture, transport and storage technology (CCTS). We analyze the impact of carbon restrictions on the diffusion of low-carbon technologies. All technologies are characterized by specific costs and CO2 emissions, which need to be covered by constraint emission permits. The fossil fuel-based capacity can be replaced by low-carbon energy technologies which are associated with initially higher costs and, in the case of CCTS, with a lower thermal efficiency. Both parameters improve due to endogenous learning effects if the technology is applied. Using a numerical model for the European Union we show that CCTS plays an important role for the replacement of nuclear power capacities.

WHAT TO EXPECT FROM SECTORAL TRADING: A US-CHINA EXAMPLE

In the recent United Nations Framework Convention on Climate Change (UNFCCC) negotiations, sectoral trading was proposed to encourage early action and spur investment in low carbon technologies in developing countries. This mechanism involves including a sector from one or more nations in an international cap-and-trade system. We analyze trade in carbon permits between the Chinese electricity sector and a US economy-wide cap-and-trade program using the MIT Emissions Prediction and Policy Analysis (EPPA) model. In 2030, the US purchases permits valued at $42 billion from China, which represents 46% of its capped emissions. In China, sectoral trading increases the price of electricity and reduces aggregate electricity generation, especially from coal. However, sectoral trading induces only moderate increases in generation from nuclear and renewables. We also observe increases in emission from other sectors. In the US, the availability of cheap emissions permits reduces the cost of climate policy and increases electricity generation.

Inducing Low-Carbon Investment in the Electric Power Industry Through a Price Floor for Emissions Trading

Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, this uncertainty increases the cost of capital for investors and might deter investments into new technologies at the company level. We apply a real options-based approach to assess the impact of climate change policy in the form of a constant or growing price floor on investment decisions of a single firm in a competitive environment. This firm has the opportunity to switch from a high-carbon “dirty” technology to a low-carbon “clean” technology. Using Monte Carlo simulation and dynamic programming techniques for real market data, we determine the optimal CO2 price floor level and growth rate in order to induce investments into the low-carbon technology. We find that a carbon price floor can be used to induce earlier low-carbon technology investment and show this result to be robust to a large variety of input parameter settings.

Integrated modelling of climate control and air pollution: Methodology and results from one-way coupling of an energy–environment–economy (E3MG) and atmospheric chemistry model (p-TOMCAT) in decarbonising scenarios for Mexico to 2050

Abstract This paper reports the methodology and results of an one-way coupling of the E3 Model at the Global level (E3MG) model to the global atmospheric chemistry model, p-TOMCAT, to assess the effects on the concentrations of atmospheric gases over Mexico of a low-GHG scenario compared to an alternative reference case with higher use of fossil fuels. The paper covers the data and methods, changes in atmospheric gas concentrations, the macroeconomic effects of the policies, and the outcome for pollution. The results suggest that in the conditions of underemployment in Mexico, substantial investment in low-carbon technologies, such as electric vehicles, heat pumps and geo-thermal power, could improve employment prospects, maintain growth, as well as reduce some of the risks associated with prospective falls in oil revenues. The concentrations of low-level ozone, both for Mexico-only and global decarbonisation scenarios relative to the original reference case, show appreciable reductions, sufficient to bring concentrations close to the WHO guideline levels. An indication is given of the potential scale of the benefits on human health in Mexico City.

Capturing the low carbon investment

PurposeThe purpose of this paper is to look at developments in the drive for open innovation initiatives.Design/methodology/approachThe paper looks at the business opportunities for low‐carbon innovations and technology.FindingsA recent study predicts that the global market for low carbon technologies could reach £2,000 billion per annum by 2030. The same study has also revealed that the UK may be in a relatively strong position to take advantage of this growing need for low carbon innovation. It highlights that many UK companies in this sector, especially SMEs, are often seen as true innovators who are leading the way in the development of cutting edge technology, and points to the fact that the UK is second only to the USA in terms of attracting Venture capital (VC) and private equity (PE) investment in low carbon technologies. Commissioned by Shell Springboard, the publication of the study coincides with the announcement of the 2009 National Winner of the annual Shell Springboard Awards, which reward the best small business ideas for combating climate change.Originality/valueThe paper provides a useful insight into developments in the drive for open innovation initiatives.

Carbon Markets in North America

This paper outlines some of the highlights and issues surrounding carbon markets in North America. Carbon markets are a new branch of environmental finance. The issues covered include US Federal and State carbon policy, climate change legislation and trading systems. A particular focus will be on the Regional Greenhouse-Gas Initiative, the first mandatory cap-andtrade scheme to be set up in the US, as well as other similar initiatives in the US. The paper will also discuss carbon trading and investments and the growing role of carbon as an impetus for investments in low-carbon technologies. A general overview of carbon finance and Clean Development Mechanism (CDM) projects will be provided, as well as a general review of expert opinion on how the cost of carbon impact will affect other energy resources. Finally, the paper will conclude with a short assessment of the potential role of agriculture and forestry in reducing carbon emissions.

Quantifying the UK’s incentives for low carbon investment

The UK climate change programme has introduced a range of instruments to foster investment in low carbon technologies and markets. We estimate the total value of these interventions, in terms of the redirection of financial flows and directly foregone tax income, to be about £1.3 billion per year (c. Euro or US$ 2 billion per year), as from 2002 to 2003 when the renewable obligation certificates (ROCs) first take effect. About 20% of this consists of direct expenditure, the remaining 80% is in the form of indirect expenditures contained within sectors (ROCs, the energy efficiency commitments), and foregone tax revenues. Most of the energy-efficiency investment is estimated to recoup expenditure within normal life-cycles and may thus be considered profitable; the profitability of the supply-side interventions is predicated mostly upon expected cost reductions associated with the build up of the associated industries.

Quantifying the UK's incentives for low carbon investment

The UK climate change programme has introduced a range of instruments to foster investment in low carbon technologies and markets. We estimate the total value of these interventions, in terms of the redirection of financial flows and directly foregone tax income, to be about £1.3 billion per year (c. Euro or US$ 2 billion per year), as from 2002 to 2003 when the renewable obligation certificates (ROCs) first take effect. About 20% of this consists of direct expenditure, the remaining 80% is in the form of indirect expenditures contained within sectors (ROCs, the energy efficiency commitments), and foregone tax revenues. Most of the energy-efficiency investment is estimated to recoup expenditure within normal life-cycles and may thus be considered profitable; the profitability of the supply-side interventions is predicated mostly upon expected cost reductions associated with the build up of the associated industries.