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Tag: policy and finance

How big finance can scale up sustainability

Posted on by dishanth
How big finance can scale up sustainability

Addressing the ever-worsening climate crisis will require the largest sustained movement of capital in history. At least $100 trillion must be invested over the next 20-30 years to shift to a low-carbon economy, and $3-4 trillion of additional annual investment is needed to achieve the Sustainable Development Goals by 2030 and stabilise the world’s oceans.

Mobilising these huge sums and investing them efficiently is well within the capacity of the global economy and existing financial markets, but it will require fundamental changes to how these markets work. In particular, traditional financial institutions will need help in sourcing the right projects, simplifying the design and negotiation of transactions, and raising the capital to fund them.

Many sustainability ideas are small-scale, which partly reflects the nature of innovation, whereby ideas are developed, tested, and, if successful, eventually copied. But the disconnect between those developing sustainability projects and the world of traditional finance means that scaling such initiatives is not straightforward.

At the risk of oversimplifying, sustainability advocates may be suspicious of “Big Finance” and its history of funding unsustainable industries. Investors, on the other hand, may be wary of idealistic approaches that ignore bottom-line realities, and might not be interested in small-scale transactions.

Given this disconnect, how do we scale up sustainable projects from small investments to the $100 million-plus range that begins to attract Big Finance and thus the trillions of dollars needed to make a global difference?

 

The disconnect between those developing sustainability projects and the world of traditional finance means that scaling such initiatives is not straightforward.

 

Three steps, in particular, are necessary. First, securitisation techniques should be employed to aggregate many smaller projects into one that has enough critical mass to be relevant. Securitisation got a bad name in 2007-08 for its role in fueling the subprime mortgage crisis that brought the developed world to the brink of financial ruin.

But when properly managed, joint financing of many projects reduces risk, because the likelihood that all will have similar financial and operational issues simultaneously is low. For the resulting whole to interest investors, however, the numerous smaller projects need to have common characteristics so that they can be aggregated. This cannot be done after the fact.

For example, we need to develop common terms and conditions for pools of similar assets, as is already happening in the US residential solar market. Then, we need to explain the fundamentals of securitisation to more potential grassroots innovators through regional conferences that bring together financiers and sustainable-project developers.

Second, we must reduce the complexity of key transaction terms and make it easier to design and negotiate the specifics of instruments used to invest in sustainable projects. In established financial markets, replicating significant parts of previous successful deals is much easier than starting from scratch for each transaction. This approach works because many of the terms and conditions for subsequent deals have already been accepted by key financial players.

Making successful innovations more visible to investors is therefore crucial. To that end, we should establish a high-profile, open-source clearinghouse of previous sustainable projects, including those that have been successfully funded and those that failed. This would be similar to many existing financial-sector databases but freely available, with reputable third-party oversight to ensure accuracy.

Third, the range of funding sources for sustainable projects needs to be expanded and made more transparent. Because sustainability investments may offer lower returns according to historic financial-market metrics, traditional asset-allocation practices, against the backdrop of “efficient markets,” would imply reduced attractiveness.

But historic benchmarks do not sufficiently factor in the exploding field of impact investing, which embraces different return and time thresholds and now accounts for about $2.5 trillion of assets. Securitising tranches of different kinds of impact investing could prove to be a game changer for sustainability financing.

It would thus make sense to create an open-source database of investor appetite – similar to the project database mentioned above – that is searchable by innovators and designers of new sustainable projects. This would make it easier to identify investors – equity, credit, or some hybrid – who might commit funding. The database could be housed in an organization such as the International Finance Corporation, the United Nations, or the Global Impact Investing Network.

There are encouraging precedents. The green bond market started just over a decade ago, and total issuance already could reach $1 trillion this year. And a critical mass of the financial world attended the UN Climate Change Conference (COP26) in Glasgow last November. Under the leadership of UN Special Envoy Mark Carney, the Glasgow Financial Alliance for Net Zero (GFANZ) has made $130 trillion in climate-finance commitments.

In 1983, Muhammad Yunus founded Grameen Bank in order to provide banking services, and especially loans, to individuals (primarily women) previously considered to be “un-bankable.” By the time Yunus won the Nobel Peace Prize in 2006, “micro-lending” had become a global phenomenon, with traditional financial institutions involved in securitizing these loans.

The financial revolution that Yunus started transformed retail lending, streamlined how such transactions are structured, and tapped a new source of scaled investment capital. To help address today’s existential sustainability challenges, capital markets and their major players need to be more innovative still and open the door to non-traditional, even disruptive, voices and ideas.

J. David Stewart, a former managing director at JPMorgan, is a sustainable-finance consultant. Henry P. Huntington is an Arctic researcher and conservationist.
© Project Syndicate 1995–2022

 

 

Source Eco-Business

Invest in green jobs in parts of Britain worst hit by pandemic, report urges

Posted on by dishanth
Invest in green jobs in parts of Britain worst hit by pandemic, report urges

Green Alliance says 16,000 jobs could be created in areas facing most severe employment challenges.

Some of the areas of Britain worst hit by the jobs crisis brought on by the pandemic are also those with the highest potential for green job creation, a report says.

About 16,000 new jobs could be created in restoring nature and planting trees in areas where unemployment is set to soar when the government’s furlough schemes end, according to the report from the Green Alliance thinktank. These include urban areas where people have little access to green space, as well as coastal areas and “red wall” areas that were Labour strongholds in the north of England.

Sam Alvis, the head of green renewal at Green Alliance, said the government should invest in nature-based jobs as lockdowns are eased, using money from the £4.8bn fund earmarked for “levelling up”.

Research suggests that for every £1 invested in peatland, local areas receive about £4.60 in economic benefits, while similar investment in woodland areas and salt marshes produces returns of £2.80 and £1.30 respectively.

The future parks accelerator, a project to promote green spaces, has calculated that investing £5.5bn in greening urban areas in the UK would produce £20bn in economic benefits. However, nature restoration is almost entirely missing from the levelling-up fund.

Alvis said: “The opportunity is there for the chancellor of the exchequer to create a legacy of new, high-quality jobs across Britain. Supporting innovation in green jobs will put nature at the heart of the government’s levelling-up agenda and help local communities build back better and greener.”

The report’s authors examined the fifth of parliamentary constituencies in Britain with the most severe employment challenges. They found many in the north of England were close to peatlands that could be restored to carbon sinks, helping the UK to meet its target of net zero greenhouse gas emissions.

The authors also mapped the potential for some widely available “nature-based solutions” to the climate crisis, including tree-planting, restoration of degraded landscapes and the restoration of marine ecosystems, across Britain. Two-thirds of the land most suitable for tree-planting was found to be in constituencies with “worse than average labour market challenges”. The government is falling behind on tree-planting targets.

Darren Moorcroft, the chief executive of the Woodland Trust charity, said: “Increasing native tree cover is a key part of the levelling-up agenda, shaping places people will want to live, visit and invest in. This will help increase employment opportunities as well as leading to happier, healthier communities.”

Many of the coastal constituencies where seagrass could be grown are areas of high job need, with a higher proportion of people on furlough and a lower-than-average increase in employment expected when the pandemic eases. Seagrass is an underwater flowering plant that can act as a carbon sink and nurtures young fish and other vital parts of the marine ecosystem, but which is under threat around the UK coast as 90% of seagrass meadows have been destroyed by overfishing and neglect.

In urban areas, thousands of jobs could be generated by investing in parks and green spaces for health and leisure. A growing body of research suggests that access to green areas has multiple benefits for people’s physical and mental health and wellbeing. Improving such areas in neighbourhoods currently without green space could create 10,800 jobs in areas with the worst post-pandemic jobs prospects, the report says.

Patrick Begg, the director of natural resources at the National Trust, said the pandemic and lockdowns had revealed the benefits of access to green space. “A greener recovery which increases access to nature is within our reach, [offering] massive social and environmental benefits as well as economic growth,” he said. “By investing in projects that make a greener recovery a priority, the government could generate green jobs for the communities that need them most.”

The potential jobs identified in the report range from entry-level roles in “shovel-ready” projects to graduate positions, for instance in research and development into nature restoration projects. Entry-level jobs can also help in the development of highly transferable skills such as machine operation, the report says.

 

 

Source The Guardian

Solar panels, cooler summer drive power prices into negative territory in South Australia

Posted on by dishanth
Solar panels, cooler summer drive power prices into negative territory in South Australia

South Australia’s high uptake of renewables has led to another national energy milestone, with record low daytime wholesale prices in the first three months of the year.

The Australian Energy Market Operator (AEMO) has released its latest quarterly report, which also found that negative spot prices reduced South Australia’s average quarterly price by $10 per megawatt-hour.

For the first time, the average cost of power per megawatt-hour during the 10:00am–3:30pm off-peak was regularly into negative territory in South Australia, at negative $12.

Wholesale prices reflect the price of power paid by electricity retailers to generators, and eventually have an impact on household bills.

“National Energy Market (NEM) quarterly average wholesale electricity prices fell sharply compared to recent first quarters,” the report stated.

 

Key points:

  • Daytime wholesale prices were consistently in negative territory in SA
  • That was driven by renewable energy, but gas generators were needed to help stabilise the grid
  • Wholesale prices across the country dropped in the March quarter

 

“This represents the first quarter – anywhere in the NEM – when the daytime average has fallen below zero on a consistent basis.”

Wholesale prices across the country fell, helped by a milder summer and increasing amounts of renewable energy generation.

 

South Australia’s energy mix includes significant generation from rooftop solar.

 

Despite prolonged periods of negative spot prices in Victoria, there was less trickle-through impact on average quarterly prices in that state.

According to AEMO, the biggest drivers of negative prices were high output from renewables and low daytime demand.

The reduction in South Australia’s wholesale prices came despite a small fire at the Torrens Island power station in March which caused a brief but significant surge in trading prices.

 

There was a fire at the Torrens Island power station in March.(ABC News)

 

The fire limited energy export capacity and contributed $14 per megawatt-hour to the quarterly average of $41.

“This sudden drop in gas-powered generation (GPG) output and availability, coupled with restricted transfers on the Heywood Interconnector, as well as low wind and solar output, contributed to the trading price spiking above $5,000/MWh for three hours,” the report said.

With the output of the Barket Inlet and Torrens Island power stations reduced as a result of the fire on March 12, batteries stepped in to dispatch power.

 

 

South Australia has been at the forefront of solar uptake, but the growth of renewable energy sources in South Australia has placed pressure on gas-powered generators to stabilise the grid.

“Persistently low electricity prices below their cost of generation required AEMO to direct South Australian gas-powered generations on for system security for a record 70 per cent of the quarter,” chief markets officer Violette Mouchaileh said.

 

Violette Mouchaileh says gas generators have had to stabilise the system. (AEMO)

 

Big generators are compensated when the cost of generation is greater than the price being offered by the market.

On Tuesday, the Australian Energy Regulator slashed the Default Market Offer (DMO) for customers in states, including South Australia.

The DMO is “the maximum price an electricity retailer can charge a standing offer customer each year” and is intended to protect consumers from price gouging.

In South Australia, the DMO will be cut by $116 for the upcoming financial year.

 

 

Source ABC

Personnel changes at RSPO as Dan Strechay moves to Mars

Posted on by dishanth
Personnel changes at RSPO as Dan Strechay moves to Mars

The palm oil certifier, which is soon to unveil a new five-year strategy, has experienced a number of staff changes.

Dan Strechay, the global director of outreach and engagement for the Roundtable on Sustainable Palm Oil (RSPO), the palm oil industry’s largest eco certifier, has switched to consumer goods giant Mars.

Strechay moves on after close to five years with the Kuala Lumpur-headquartered organisation to take on a role as director of sustainability communications and engagement at the maker of M&M’s, Snickers, and the Mars bar, based in the United States.

Also leaving RSPO is head of human resources Shailaja Sharma at a period of transition for the organisation. Fay Richards is currently acting head of marketing and communications, based in London, while Preethi Jain is Asia Pacific head of outreach and engagement, based in India. Sara Cowling, global head of communications, is on maternity leave.

 

The RSPO logo on Cabbage brand vegetable oil in NTUC Fairprice supermarket in Singapore. Image: Robin Hicks/Eco-Business

 

Beverley Postma was appointed chief executive of RSPO a year ago, replacing outgoing CEO Darrel Webber. Postma, who will soon to unveil a new five-year strategy for the certifier, is still based in Singapore ahead of a move to KL.

RSPO said that while it has experienced staff changes in the past few months, the organisation is expanding personnel in the region, especially in Malaysia and Indonesia. “We are confident in our five-year strategy which details ambitious milestones and how we will achieve them,” a spokesperson said.

In 2018, RSPO unveiled new standards that ruled out deforestation and growing on peat for its members. A report by Greenpeace last month found that while RSPO had strong standards and a solid approach to stakeholder engagement and transparency, implementation was an issue. RSPO emerged as the strongest of the certification bodies in the study.

 

By Robin Hicks
Source Eco Business

A cool new energy-efficiency policy

Posted on by dishanth
A cool new energy-efficiency policy

A single change in our approach to energy efficiency can enable more people around the world to stay cool, benefit consumers, and flatten the curve on cooling-related energy demand and emissions.

Air conditioning (AC) may be cooling us, but it’s cooking our planet.

Countries around the world have experienced scorching temperatures this summer. This August was the second hottest on record. Global warming and more intense summer heat waves, coupled with increased urbanisation and rising incomes, are driving a dramatic increase in demand for AC units.

The International Energy Agency (IEA) predicts that the number of ACs in operation globally will increase from 1.6 billion today to 5.6 billion by 2050. Over the next 30 years, ten air conditioners will be sold every second.

Air conditioners contribute significantly to the greenhouse-gas emissions fueling climate change, both directly, owing to the hydrofluorocarbon (HFC)-based refrigerants they contain, and indirectly, given the energy they consume.

 

Over the next 30 years, ten air conditioners will be sold every second.

 

A recent report by the IEA and the United Nations Environment Program is the latest to highlight the threat, describing it as “one of the most critical and often neglected climate and development issues of our time.”

The 2016 Kigali Amendment to the Montreal Protocol on Substances that Destroy the Ozone Layer aims to reduce HFC production and consumption by over 80 per cent by 2047. If implemented, this could avoid 0.4°C of global warming this century. But while the Kigali Amendment provides a pathway to address refrigerants, the world must now tackle the problem of air conditioners’ energy intensity.

Most AC units sold today are 2-3 times less efficient than the best commercially available products. This is largely because consumers buy the lowest-priced units, with little or no understanding of the lifecycle cost implications of their purchase. The IEA estimates that widely diffusing the most efficient air conditioners on the market today could cut cooling energy demand by half.

While the AC industry needs to continue making units more efficient, we can, and must, take steps to drive the adoption of the best products already available. That means flipping the way we address the efficiency issue, which in turn will require policymakers and the industry to come together and show bold leadership.

One way to boost energy efficiency is through policy intervention, specifically regarding minimum energy-performance standards (MEPS). Currently, MEPS are set just above the level of the worst-performing AC products, in order to keep them out of the market and provide some protection to consumers.

But with market growth continuing to accelerate, policymakers should instead set MEPS with reference to the best commercially available products – meaning that the MEPS would be just below the technology ceiling, rather than just above the technology floor.

This significant change would not only protect consumers; it would also considerably reduce the lifecycle costs of owning and operating air conditioners. At the same time, it would still allow sufficient space for product competition, thereby bringing down the purchase price of more efficient units.

Such a policy could emulate and build on Japan’s Top Runner program, launched in 1999, which effectively advances the country’s AC market while delivering energy savings and reducing lifecycle costs. The scheme encourages consumers to purchase the best-performing available units through a labeling program, which in turn increases economies of scale and lowers costs. And by demanding more efficient AC technologies from the market, Top Runner also bolsters investor confidence.

Targeting maximum efficiency in this way worldwide would decrease the lifecycle cost for consumers of owning an AC unit by a factor of two to three and eliminate the need for over 1,300 gigawatts of electricity generation capacity globally. It would also avoid 157-345 gigatons of carbon dioxide emissions over the next four decades.

Establishing policies based upon the best commercially available AC products rather than the most commonly sold ones would thus avoid emissions, reduce government spending on power generation, and save consumers money, all while continuing to incentivise the market to develop better performing products.

Better yet, such a policy shift would prepare the market for AC products with even greater efficiency potential that are already on the horizon. In 2018, an international coalition launched the Global Cooling Prize to identify a residential room air conditioner that uses dramatically less energy and contains refrigerants with little to no effect on the climate.

Eight teams have developed technologies that potentially could have five times less climate impact than standard AC units on the market today. Following testing this fall, one winner will be awarded a prize of $1 million in March 2021 for their innovative cooling solution.

Scaling such a cooling technology globally could save consumers $1 trillion in operational costs in the next 30 years, and avoid up to 0.5°C of warming by the end of the century. And that includes only the residential sector.

A single change in our approach to energy efficiency can enable more people around the world to stay cool, benefit consumers, and flatten the curve on cooling-related energy demand and emissions. If we want climate-friendly AC, we need to leap toward the technology ceiling.

Iain Campbell is a senior fellow at the Rocky Mountain Institute. Caroline Winslow is an associate with the Buildings Team at the Rocky Mountain Institute.

 

 

By Iain Campbell and Caroline Winslow

Source: Eco-Business

Proposed Indonesian coal power plant not financially viable, study finds

Posted on by dishanth
Proposed Indonesian coal power plant not financially viable, study finds

Green groups have long criticised the Jawa 9 & 10 coal power project over its devastating impacts on public health and the environment. Now, a study has revealed the project would also be unprofitable for its investors.

The 2,000-megawatt Jawa 9 & 10 coal-fired power project planned to be built near the Indonesian capital city Jakarta would result in significant losses for investors if it goes through, a new pre-feasibility study released on Thursday (18 June) has revealed.

The analysis conducted by Korea Development Institute (KDI), an autonomous policy-oriented research organisation, shows the present value of cash flows pumped into the power project would exceed that of inbound cash flows by US$43.58 million over the station’s lifetime.

Almost three-quarters of the project volume is financed through loans provided by lenders such as Singapore bank DBS, Siemens Bank, Korean public banks, as well as Malaysian and Indonesian banks, which include Maybank, CIMB, Bank Negara Indonesia, Exim Bank of Indonesia and Bank Mandiri, among others.

However, South Korean utility Korea Electric Power Corporation (Kepco) is the only foreign firm backing the project that will hold a share of ownership in the plant. It is poised to lose US$7.08 million in equity investments, according to the study, which was obtained by Seoul-based non-profit Solutions for our Climate.

Other equity investors associated with the venture include Jakarta-based power and petrochemical firm Barito Pacific and Indonesia Power, a subsidiary of Indonesia’s state utility Perusahaan Listrik Negara (PLN), which provides the land for the station.

Solutions for our Climate director Youn Sejong said while loan investors were less at risk because their investment would be paid off first, the fact that the project itself was valued negative should still be a wakeup call for the banks supporting it.

“Investors backing the project should pull out given the estimated unprofitability. Because the construction has not commenced, this is the best time to withdraw from the project with no sunk cost involved,” he told Eco-Business.

The project, which is to add two power plant units to the Suralaya coal-fired power station in Cilegon, a city in Indonesia’s Banten province, is expected to be in operation from 2024. The new plant units will use ultra-supercritical technology to enable higher efficiencies and lower emissions.

Besides the Jawa project, Kepco is planning to acquire a share in the planned Vung Ang 2 project in Ha Tinh province, Vietnam. Its stake in the venture would see the company build two 600-megawatt coal plants carrying a price tag of US$2.24 billion.

This is despite a recent estimate by the KDI that the net value of the Vung Ang 2 project stands at negative $158 million, with Kepco’s planned investment valued at negative $80 million.

Around the globe, pressure is mounting on governments and companies to drop coal, the world’s single-biggest contributor to man-made global warming, amid increasingly dire warnings of climate change.

Both the Jawa and the Vung Ang ventures have received heavy criticism from environmental activists and health experts in recent years, who have urged the corporations backing them to recognise the reputational, legal and environmental risks involved in the investments.

A 2019 report by environmental campaigners Greenpeace that modelled the health impacts of the Jawa project concluded the station would cause 4,700 premature deaths over its lifetime.

The new assessment comes as the Korean government puts together its Green New Deal package, a collection of sweeping policies geared towards ending South Korea’s contribution to climate change. The move was announced as part of the Liberal Party of Korea’s election manifesto earlier this year.

Following Moon Jae-in’s recent landslide victory, the government is expected to implement a carbon tax, foster investment in clean energy, and phase out domestic as well as overseas coal power financing.

Last month, the world’s top asset manager BlackRock, which owns shares in Kepco, raised concerns over several coal projects the utility firm is involved in.

According to the KDI, Kepco’s financial plan for the Jawa project takes an overly optimistic view of the expected amount of power sales and potential power transmission rates.

The firm has also likely underestimated engineering, procurement and construction (EPC) costs and not taken into account the financial difficulties currently facing Korean company Doosan Heavy Industries & Construction, the venture’s EPC contractor, amid the coronavirus crisis.

This increases the risk of budget overruns and project delays, although they would only indirectly affect Kepco as the EPC contractor would be required to bear the added costs.

The KDI pointed out the global transition to renewables indicated coal’s decline and could entail negative consequences for the Jawa power plant units.

At the same time, the ongoing coronavirus pandemic, which has yet to peak in Indonesia, may affect the project as it wreaks havoc on supply chains and project timelines while reducing electricity consumption. Youn said: “Planning of the Jawa 9 & 10 project was based on a gross overestimation of power demand growth.”

“Kepco should consider participating in the project only after closely examining the particular economic and market conditions in Indonesia,” reads the KDI’s report.

Despite the bleak profitability outlook, however, Kepco pursues its investment plans and seeks to obtain its board’s approval on the investment in the next board meeting scheduled for the end of June, according to Solutions for our Climate.

Earlier this month, the company announced through the media that the project passed the new pre-feasibility study, although the project score indicated that investments should be “considered with caution”, said the non-profit in a statement released on Thursday (18 June). In total, the firm looks to commit US$51 million to the Jawa venture.

In its statement, Solutions for our Climate said: “Kepco’s hasty decision to invest in the Jawa 9 & 10 project is likely to undermine the Korean government’s initiative towards a clean energy transition and sustainable economy.”

 

 

Source : https://www.eco-business.com/

By Tim Ha