The main obstacles for OECD governments in the transition to a low-carbon economy are to decide 1) how their politicians can generate enough political capital to make decisions that will have an impact 2) decide where the money will come from to fund those decisions 3) and then spend the money in a timely manner. The added challenge is that this must occur on a global basis and will require careful negotiation among OECD and non-OECD countries, each of whom have an agenda at stake.
Generating political capital for a subject that is in competition with so many other priorities is a Damascian task not least when the public is being confused by contradictory messages. In a recent Guardian article it was noted that America’s oil, gas and coal industry has increased its lobbying budget by 50%, with key players spending USD44.5m in the first three months of this year in an intense effort to cut off support for Barack Obama’s plan to build a clean energy economy. The spoiler campaign involves industry front groups, lobbying firms, television, print and radio advertising, and donations to pivotal members of Congress. Its intention is to water down or kill off plans by the Democratic leadership to pass “cap and trade” legislation this year, which would place limits on greenhouse gas emissions. A defeat for the bill would have global consequences. The international community is depending on America, as the world’s biggest per capita polluter, to set out a firm plan before crucial UN negotiations in Copenhagen in December.
It has been estimated that the cost to the global economy for the low carbon transition would be USD1trillion a year. Government aid flow has been insufficient in the past and the private sector will only invest where there is profit to be made particularly in the context of the current market turbulence and paucity of credit. Ambitious carbon dioxide reduction targets have been set by both the European Union and the United States but where will the funds come from to help meet those targets and will it be sufficient to have an impact?
HSBC recently published a report comparing the ‘greenness’ of 20 different stimulus plans worldwide in February. They have also done some analysis overall in terms of when they think the money will be spent which according to government response is mostly in 2010 but it must be ensured that it will indeed be spent. According to the report, governments have allocated more than USD430bn in fiscal stimulus to key climate change investment themes with China and the US leading the way. In China for example, the State Council put a nationwide ban on plastic bags. The cabinet has demanded all stores (from major supermarkets to small shops) go plastic bag-free which would save an estimated 37 million barrels of crude oil on plastic bag production every year.
As for the private sector, according to the National Venture Capital Association, despite a fall in venture capital investment in 2008 for the first time in five years, going from USD30.8bn in 2007 to USD28.3bn in 2008, there was growth in funding of green projects, in particular solar. Nanosolar, a San Jose solar company, took the top spot for 2008 with USD299 million in financing. Of the ten biggest investments made last year, seven were energy companies and the top four were solar companies. Overall, clean tech investment jumped 50% for 2008. So there is a lot of good will that can be further leveraged. The priority should be on building political capital as change is inspired through people.
Rob Challis is global head of Corporate Responsibility at Man Group plc