Thursday 28 May 2009

The Low Carbon Economy

Abchurch has one of the UK’s leading environmental practices and views the carbon market primarily in terms of its effect on investor confidence.

The world is on the edge of what US and EU Political advisor Jeremy Rifkin has dubbed ‘The Third Industrial Revolution’. This is a world in which we move away from traditional fossil fuel and uranium-based energies into a non-polluting, sustainable future for the human race.

In this new age investors are concerned not just with the impact that traditional commodities, such as oil, grain and minerals, have on a company’s profitability but also with factors such as the cost of carbon, sulphur dioxide, water and even holes in the ground. Indeed, Britain is widely expected to be routinely mining its landfill sites within the next decade to recover many of these valuable commodities whilst minimizing the energy usage and harmful emissions associated with extracting them from primary sources.

The investment agenda is no longer one solely of balance sheets and cashflow statements, however. Climate change concerns have fuelled the rise of Corporate & Social Responsibility in high streets and boardrooms across the world. This Triple Bottom Line approach to company reporting (financial, social and environmental) demands simple shorthands and metrics and there is none more convenient than ‘carbon equivalent.’ Hence the “low carbon economy.”

Research carried out in late 2008 amongst UK based fund managers for British Energy found that:
· 80% think that a carbon reduction strategy can have a positive impact on investor perceptions
· 2 in 5 believe that commitment to carbon reduction can have a positive impact on share price
· 25% see a growing media and public demand for carbon reduction commitment at the corporate level

The Carbon Trust’s March 2009 report ‘Global Carbon Mechanisms: Emerging lessons and implications’ reveals:
· The Clean Development Mechanism, specifically, has triggered over 4000 emission-reducing projects in developing countries
· It is likely to reduce carbon emissions by 2 billion tonnes by 2012

Climate Change Capital, just one of thousands of specialist environmental funds globally, has:
· over US $1.5 billion under management as of January 2009
· estimated that Clean energy (just one subset of the climate change market) was worth $148 billion in 2007
· predicted that current climate change needs require a future investment in clean energy of up to $45 trillion

No revolution is without its hazards, however. Indeed, many would argue that the focus on ‘low carbon’ has become an unhealthy obsession, with the same whiff of snake oil, get rich quick and too good to be truisms witnessed in the energy and silicon rushes of the first and second industrial revolutions. Hence the concept of “greenwash.”

One of Abchurch’s most important roles is to steer companies through this new communications landscape; taking carbon credit where it is due and avoiding tempting, but often meaningless hype. This experienced counsel, based on our team’s genuine earth science credentials, is just as true whether working with our intrinsically environmental clients, or with our broader customer base of companies who are simply playing their responsible part is a newly carbon-conscious world.


Image courtesy of Olof S on Flickr, through a Creative Commons License.

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