Financial crisis threatens climate-change momentum

A slowing in economic activity might look like an environmental blessing. Slowing demand generally means lower energy usage. Car sales and gasoline demand have been falling sharply. Projections for flights out of Europe’s busiest airport, Heathrow, show a 2 percent decline – equivalent to around 10,000 fewer flights a year.

But the green lobby warns this is just a momentary blip. A few quarters of slowdown may bear down temporarily on the growth in greenhouse gas emissions, but will not shift the world onto a low-carbon path. Scientists are calling for an 80 percent cut in carbon emissions by 2050.

“It will only take us back toward the trend line,” says Burke. “Anyone who thinks this will rescue us or buy more time has misunderstood where we are.”

Green technology has benefited enormously from the sky-high cost of crude in recent years, which has made renewable energy like wind, wave, solar, tidal, and biomass power generation cheaper by comparison. The collapse in crude prices to $60 a barrel represents a threat to the renewables industry, and already there are signs of go-slow in the sector.

Last week, the Danish group Vestas, the world’s biggest wind-turbine maker, indicated it would be slowing operations “until we see how the financial problems affect the wider picture.” A leading British scientist, speaking off the record at an informal recent event, says R&D for green technology will take a hit. British energy giants BP and Shell have signaled a pullback from renewable projects in Britain.

Such projects are highly capital intensive, and raising cash now is challenging. “All big investment projects are increasingly uncertain in this environment,” says Julian Lee, a senior energy analyst at the Centre for Global Energy Studies. “People are holding off from investment decisions in oil and gas projects, and I’m sure the same reasoning will apply to big renewable projects like wind farms.”

Some optimists argue that the renewable-energy sector could help power the world out of recession. President-elect Barack Obama has spoken of creating millions of “green-collar” jobs through a massive investment in renewable projects. “If you look at renewable technology, it’s very employment intensive,” says Andrew Simms, at the new economics foundation, a London-based think tank. “The game of
massive environmental transformation of economies is the way we can tackle recession.”

One silver lining of the financial crisis is that investment decisions may not be as short-term as they have been. A UN climate-change official, speaking on condition of anonymity, argues that this will mean the investment community will have to factor in the climate-change risk. “As soon as you start lengthening the period of risk that you take into consideration and you take in account what will happen in 10 to 15 years, then climate change is on the table,” says the UN official. “People who really do control large amounts of assets and money are starting to think like this.”

Dr. Singer agrees. At a recent meeting of bankers he attended, representatives of financial institutions were actually considering clean technology investments as an attractive, long-term, less risky proposition. After all, he says, few people expect oil prices to stay low for a long time. And against that backdrop, green investment starts to look like a good hedge against future energy shocks.

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