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Will the environment survive the economic downturn?

Will the environment survive the economic downturn?

Saving PV film producer Heliantos

The past weeks the news from the renewable front has not been good. Today the first ray of sunshine in a while was that Vattenfall might have found a buyer for its solar film factory, Heliantos. It would be great news if true, giving Heliantos and its new owner a chance to continue building on the knowledge and expertise that Nuon/Vattemfall have invested in so heavily over the past 8 or so years.

A call to revive the Green Agenda

An article in the Financial Times of the 7th of May brings together some of the news items of the past weeks. Lord Smith to call for a green agenda revival.

In the UK as in other countries (for Germany the subsidies for solar were cut on the 23rd of Februray 2012) the government is cutting back on subsidies for renewable power. Austerity bites everywhere and thus also into the subsidies for renewables. This makes logical sense as there is no strong political reason why renewables should be excluded from the cut backs.

The Greens are being overshadowed by left and right wing populists

There is still strong supporters for green politics in Europe; in the quoted article Lord Smith refers to the success some of the green parties have had in UK by-elections, and he could have quoted the strong performance of the Greens is Schleswik Holstein, but this support is substantially smaller than the main voter’s sentiment, which is against reform and change and in support of maintaining existing welfare support and job security. In the Netherlands the no-change/anti reform parties (the SP on the left and the PVV on the right) are predicted to get a third of the seats in parliament. Their no change mantra could well lead to inertia in politics.

A lack of funds due to the economic slowdown and policies paralised by populist movements in or outside government do not bode well for the renewables industry and the environment.

The price for CO2 emission rights

It will be very interesting to see what the European Parliament and the European Council will decide in June on the CO2 emission rights. Will they again be over generous when allocating emission rights or will they “set a side” some rights, creating a true market for CO2 emission rights? It is telling that currently CO2 emission rights in the EU (@ less than €7 per ton) are cheaper than in Australia (@ 23 Australian dollars per ton). The UK has been leading the way with their carbon floor price.

It is obvious that a EU carbon tax could lead to carbon leakage. This is a very gradual process, it does not happen overnight. But a carbon tax will influence investment decisions and those decisions will not be in favour of investment in the EU. The compensation and opt outs offered by Chancellor Osbourne will not stop the leakage, it will only give international firms higher profits before the decide to invest in the US or Asia.


The only way out of the inertia, providing the development of the green economy a much needed boost is the introduction of a carbon footprint tax. This is not a carbon tax on energy producers or other major users of fossil fuels. It is a tax on the carbon used developing, producing, transporting an selling a product or service.

It is a fact that we can measure the carbon footprint of a product, from raw material to shop shelve. Let us take these measurements and use them to base a tax on. Products with a high carbon footprint will be taxed higher, giving producers an incentive to compete on carbon footprint. Suddenly the incentive would be to preserve forests, reduce the use of fossil fuel, invest in the bio based economy.

Better still for all the politicians looking for a way out: the carbon tax will provide much needed revenue and, for Lord Smith, it will revive the green agenda.

Felix Gruijters

Leadership on sustainability

Urgency breads leadership

A great Daily Chart from the Economist published on the 2nd of May shows the relationship between carbon dioxide and the temperature of the earth. Because the rise in temperature of the atmosphere is influenced by, for instance, the number of particles reflecting sun light  back up before it can heat the earth, the temperature of the oceans is a better guideline. In the chart below a steady rise can be seen in the heat content of the oceans. 

Leadership is not expected from governments
With the above in mind I read the results from the survey done by SustainAbility among 642 sustainability experts from 77 countries. 72% of them agreed that the green economy is the right theme for Rio+20. It is clear that the leaders in business see the importance of reducing their carbon footprint. From the survey it is also clear that change will have to come bottom-up. Consumers, producers of A-brands and investors are pushing sustainability, governments are staring into the headlights of an approaching car unable to react. The survey reflects this: only 13% of the respondents expect Rio+20 to contribute to sustainable development.
Leadership will be rewarded.
For those leaders seeking inspiration I refer to the McKinsey ‘s publication: Solar power: darkest before dawn. McKinsey draws a picture of a bright solar future, expecting between 400 – 600 GW of new installed solar power by 2020 (up form 65 GW now). McKinsey continues by giving advise to leaders of companies operating down stream from the PV panel producers:
1. Develop targeted customer offerings,
2. Minimize acquisition and installation costs,
3. Provide low cost financing.
This is sound advise but not easily implemented. It makes sense to state that those who will find a business model that answers the three requirements, will be favoured by the market.
Solar and Gas will lead the way
The rise of solar is also predicted in the publication by The Economist, The world in 2050, Megachange. Matt Ridley predicts that gas and solar will be the dominant and cheap sources of energy in 2050.
The influence of low gas prices can already be felt as it directly impacts the price of thermal coal, which according to the FT dropped on the 1st of May for the first time in 18 months below $ 100 per tonne. This might encourage the use of coal, which in turn increase carbon emissions. This can only be curbed by strong government regulation, taxing the carbon footprint of products, punishing those that were produced with energy generated by coal fired power plants.

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