The United Nations Secretary-General António Guterres told delegates at the UN Climate Change Summit in his opening address that well-regulated markets could help address the environmental crisis. “To put a price on carbon is vital if we are to have any chance of limiting global temperature rise and avoiding runaway climate change,” he said.
How are commercial renewable energy solutions helping?
In addition, energy storage and battery advances have benefited from mainstream corporate and venture capital investment activity in recent times assisted by attractive government subsidies.
The effect is global. China now possesses 70% of global installed solar capacity. In 2018 alone, it expanded its solar production capacity by 81%, even as government incentives were reduced. Similarly dramatic stories of solar power adoption in countries from the US to India are causing energy agencies to accelerate their plans for phasing out coal and other fossil fuels.
Battery storage technology growth
Battery technology has made a quick shift to the forefront of corporate and venture capital investment activity. Epitomised by the vast increase in investment shown over H1 in 2019 compared to 2015.
Why are aligned markets so important?
Kenya, it should be noted, produced 85% of its power last year from renewables – largely by positioning itself as “one of the foremost destinations in the region for private energy investment,” according to the World Bank.
The market is responding in other ways, too. Smart energy grids and storage technology are advancing and enabling distributed energy models to evolve. Many of the improvements allow greater flexibility in the distribution and storage for the growing amounts of wind and solar energy, both of which are reliant on the intermittent availability of wind and sunshine.
What about carbon pricing?
The Paris Climate Agreement backs use of a cap-and-trade system. At the 2019 UN Climate Change Summit Gutteres said: “I strongly hope that COP25 will be able to agree on the guidelines for the implementation of Article 6 of the Paris Agreement.”
At present, carbon pricing is not used globally and manufacturers can outsource their work to locations where there is no charge for emissions. But there are risks for companies that attempt to side-step climate responsibilities in this way. Countries could apply targeted tariffs to companies that side-step emissions controls in future.
Why are consumers and investors so important?
Institutional shareholders in particular are keen to invest in businesses that offer this combination of promising growth along with excellent ESG credentials.
In all cases, authenticity is crucial. Not least because press articles have targeted companies that claim to have green credentials but have high emissions. This incongruence this could affect consumer sentiment.
16-year-old Greta Thunberg is among many who have been actively speaking about the climate crisis.
How can regulation support responsible markets?
In the UK, The Faraday Institution is focused on electrochemical energy storage research and skills development. It brings together scientists and industry partners to help reduce the cost, weight and volume of batteries, as well as their performance and reliability.
Competition and market solutions can accelerate the adoption of the most effective ideas and technologies for mitigating and even reversing the effects of global warming.
Where do we go from here?
Competition and market solutions will accelerate the adoption of the most effective ideas for reducing and reversing the effects of
global warming. But for markets to be able to deliver, effective regulation is a needed to spur investment, learning and technological breakthrough that that will ensure a future for the next generation.
The wider the application of appropriate regulations, the more certainty markets will have on the benefits of embracing climate-friendly investment policies – and the more effective they will be in responding to the climate change crisis.
Equity Analyst - Energy
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