Businesses 'need guarantee' to invest in renewable energy

26 April, 2010

There was much anticipation ahead of the Copenhagen Climate Change Summit in December.

The conference, which was attended by officials and ministers from 192 countries, promised much. Over 20,000 people from governments, United Nations bodies and agencies, non-governmental organisations and the media went to Denmark with the expectation that a historic deal would be signed.

In the end, the Copenhagen Accord lacked many of the rulings that climate change campaigners and governments had called for in the build up to the summit, such as legally binding agreements and deadlines for action.

Despite this, the Accord was brokered between the US, China, India, Brazil and South Africa and since then 55 countries have pledged to support the recommendations set out in the document. These include the US, all EU countries, China, Brazil, Indonesia and China. Together, the 55 nations emit 78 per cent of the world's greenhouse gases.

They agreed to limit the rise in temperature to two degrees, but the Accord did not indicate when this would have to be achieved by. It outlined that this would require "deep cuts in global emissions", but again has not specified the level of cuts or a timeframe for these, other than "as soon as possible".

'Further to go'

UN secretary-general Ban Ki-Moon admitted that the resulting deal did not live up to expectations.

Speaking after the signing of the accord at the Bella Center in Copenhagen, he said: "Finally, we sealed the deal."

"It may not be everything we hoped for, but this decision of the Conference of Parties is an essential beginning.

"We must transform this into a legally-binding treaty next year. The importance will only be recognised when it's codified into international law," he added.

Climate change secretary Ed Milliband echoed Mr Ban's statement that more must be done.

"These negotiations have shown how hard it is to get agreement on such complex and profound issues. Today it took eight hours from the convening of the plenary in the early hours of the morning," he said.

"There is much further to go, including ensuring we achieve a legally-binding outcome for everyone. As the British government, our aim is, as it has always been, to ensure that the politics catches up with the science. Today we made a start but we have a long way to go," Mr Miliband added.

In response to the decision of 55 countries to support the Accord, he once again stressed the need to up the ante.

"There's still more to do and we'll continue to push for bold cuts in emissions as well as a comprehensive, legally-binding climate change framework under the UN. A global climate deal is vital to Britain - helping us protect the environment, boost green jobs and enhance our energy security," he commented.

'Muted' response

Indeed, the sentiment that the Copenhagen Accord is "just the beginning" is one that has been echoed across industry.

Mike Major, chief executive of the Energy Industries Council, said the response to the agreement from within the energy sector had been fairly "muted".

"The view was that everybody's hopes and expectations were built up to having a more finite way forward than we've currently got and I suspect that perhaps our expectations have been raised higher than they should've been, that there would be something coming out of Copenhagen that would be the roadmap for the way forward," he commented.

Mr Major said that the deal fell short of what many people were hoping for since it did not include the "legally-binding commitment to make some progress on reducing the carbon element in the atmosphere".

He suggested that businesses are "waiting for the penny to drop" in terms of investment in renewable energy.

"I think looking at Copenhagen I would say it is a step in the right direction, but it's not the big step that everyone wanted. I think the fundamental thing that everyone's got to grasp in government is that private companies will not invest unless there is that certainty of getting their money back and a profit on top of that, because that's what they're in business for," Mr Major explained.

"The basic problem we've got is that the investing fraternity need two things - they need certainty and they need confidence and the other thing to bear in mind is that the international companies do have a choice as to where they put their money," he continued.

Risk and reward

Mr Major referred to the fact that much of the manufacturing surrounding wind energy is currently based overseas, with the likes of turbine blades, gearboxes and generators all being produced mainly on the continent.

The government is aiming to reverse this trend, announcing in January that it is to offer £3 million of grants to further support the offshore wind supply chain.

"These grants are part of a package of support to ensure the UK - and UK manufacturing in particular - benefits from the innovative market we are creating. The turbines we need have not been designed yet. Our goal is to encourage their design and manufacture on our shores," commented Lord Drayson, minister for science and innovation.

But Mr Major warned that businesses "will look at various countries and they will make their decisions on where they think is the least risk, the best reward".

"It is, as far as they are concerned, a business decision and I think what we need to get renewables moving is some floor on the carbon price so that people know they're going to get their money back," he commented.

"When you invest in a power station you're not looking at one or two years, you're looking at 30 or maybe 50 years - it's a long-term investment that's needed."

Importantly, there is a desire among businesses to get involved in renewable energy, according to Mr Major.

At the recent World Future Energy Summit in Abu Dhabi, both statesmen and industry representatives indicated that they wanted to move forward with clean fuel, he said.

"So there's obviously a huge amount of interest around the world in renewables," Mr Major added.

And once they decide to move in that direction, the investment will be significant, he stressed.

"The amounts they're going to spend when it comes to it are huge, truly huge," he concluded.