Govts’ green infra spends can help avoid recession, says report

Font Size

Print

Feedback

Email

Discuss

Related Articles

Identify problems for climate funding, India urged

Mumbai, Nov 21: Deutsche Asset Management (DeAM) in its research report on “Investing in Climate Change” has observed that the accelerating pace of global warming will force governments to invest more in climate change mitigation and adaptation despite financial setbacks. An economic downturn offers governments across the developed world a prime opportunity to boost their spending on ‘green’ infrastructure as a stimulus to avoid severe recession.

According to the report, government regulation, including carbon pricing, traditional regulation (mandates and subsidies) and innovation policy (incentive and subsidies) are major drivers of investment opportunities in climate change. Carbon pricing, which prices the externality associated with greenhouse gas emissions, is the key, market related climate change policy.

When it comes to assessing a specific project for investors, a set of complex variables comes into play at a granular level in a specific region and market context. Aggregate level analysis, while useful, needs to be articulated to a project-level. Clean technologies are becoming broader and deeper over time. It is important to understand their stage of development for investment purposes.

For venture capitalists, driving costs down the learning curve is a key focus for any technology investment. In the long run, the most sustainable breakeven point for renewables is when they are commercially viable without subsidies, but with a carbon price regime as a de-risking backstop. The report claimed that there has been a political support for a “low-carbon Industrial Revolution”. Policymakers across the political spectrum have also emphasized the potential for low-carbon prosperity.

In the US, both Presidential candidates have talked about renewable energy in particular as a source of growthand job creation while the UK Prime Minister has stated that a low-carbon economy can be a new engine of productivity and economicgrowth.

Further, the German chancellor has argued that climate change can be a “win-win situation” if Germany invests in growing clean industries and creating new jobs. Chinese officials have underscored the importance of environmental protection in China’s development and the Indian Prime Minister has said that sustainable development can go hand-in-hand with India’s growth objectives. In the very long-term, the underlying climate change sectors have the potential to grow to very large scale - in the multi-trillion dollar energy, automotive and industrial markets.