Alarming energy headlines mask good news

In Davos, Switzerland the confabbing tycoons at the World Economic Forum spent their Friday fretting over climate change.  The irony of the super-wealthy flying in their private jets to hang out in a luxurious resort and talk about reducing carbon emissions is, apparently, lost on the attendees.  There’s no question, though, that we are have reached a turning point in the struggle to limit global climate change over the next 40 years.

Headlines out of Brussels this week shouted that the European Union is essentially abandoning its ambitious clean energy targets. “The EU’s reputation as a model of environmental responsibility may soon be history,” lamented the German newsweekly Der Spiegel, under the headline “Europe to Ditch Climate Protection Goals.” “The European Commission wants to forgo ambitious climate protection goals and pave the way for fracking, jeopardizing Germany’s touted energy revolution in the process.”

“A deep and lasting economic slowdown, persistently high prices for renewable energy sources and years of inconclusive international negotiations are giving European officials second thoughts about how aggressively to remake the Continent’s energy-production industries,” reported The New York Times.

The European Commission, the EU’s executive branch, “has lost its moral courage,” Brook Riley, a campaigner at Friends of the Earth, told Reuters.

Funding Funk

Meanwhile, cleantech investment fell in 2013 for the second straight year.  Reports from Bloomberg New Energy Finance, Cleantech Group, and Clean Energy Pipeline all trace the decline, with Bloomberg saying that total investment in smart and renewable energy companies for the year was $254 billion worldwide, down 12% from 2012.  If you were thinking of manning the lifeboats on the clean energy ship, now would seem like a good time.

Luckily that’s not really the case.  In fact, the alarmist headlines are contradicted by underlying trends, and may in fact wind up being good news.  The EU, for instance, has almost achieved its carbons-emissions reduction goal, set in 2007 as part of the “20-20-20” mandates, of a 20% reduction from 1990 levels by 2020.  Emissions on the Continent today are 18% lower than in 1990 – a remarkable achievement by any measure (though reached, to be sure, partly thanks to the flagging economy).

What’s more, the current talks are not about scrapping the 20-20-20 targets (which call, in addition to the emissions reductions, for renewables’ share of EU energy consumption to reach 20%, and a 20% improvement in continent-wide energy efficiency, both by 2020).  The argument is over what happens after 2020; and the question is not whether to institute new targets through 2030, but how ambitious and how binding they should be.

In January the European Parliament passed, with a strong majority, a measure to reduce carbon emissions EU-wide by 40% (per 1990) by 2030.  That figure might be reduced to, say, 35%.  And countries may be given more leeway as to how to get there, with France (which gets most of its power from nuclear plants) and Germany (still determined to achieve its ambitious Energiewende, or energy revolution) making deep cuts while, say, Poland and Bulgaria, which are still heavily dependent on coal, progress more slowly.

The Three-Legged Stool

It’s important to remember that the 20-20-20 tripod includes two legs – energy efficiency and renewables – that are really just avenues to the primary goal: reducing carbon emissions.  If that can be accomplished by shifting more of Europe’s coal plants to burn natural gas, then absolute targets for renewables’ share of the energy mix, for instance, can be more fluid.

Even the cleantech investment slowdown has a silver lining, as the industry matures and major technology players such as Google GOOG -3.1%, which just paid $3.2 billion for Nest, place large bets on established companies with existing markets for their products.  Corporate America is rapidly waking up to not only the economic and financial risks of climate change, but also the potential upsides of energy efficiency and cleantech businesses.

Fortune 500 CEOs increasingly “see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk,” reports The New York Times – a position “at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change.”

At the widest view, the shift to a less carbon-based economy is happening more and more in boardrooms, in city council meetings, and on Main Street, and less in the gilded chambers of diplomats – or the posh watering holes of the super-rich, for that matter.  That’s a good thing.  If the plutocrats in Davos can reach some consensus on how to simultaneously promote broad prosperity, advance technology, reduce global inequality, and limit climate change, good for them.  Maybe they could save all that jet fuel and just hold next year’s WEF by teleconference.

http://www.forbes.com/sites/pikeresearch/2014/01/24/alarming-energy-headlines-mask-good-news/?ss=business%3Aenergy