Answer Not in Copenhagen
Tue, Jan 05 2010 at 5:22 PM EST
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By Merrill Lynch Analysts Steven Milunovich and Peter Christiansen
Copenhagen sputters to a vague agreement |
| The Copenhagen proceedings ended with a nonbinding final statement that resolved little beyond agreement that climate change is happening, the average temperature increase must be limited to 2°C, and industrialized countries will have to help pay for the developing world de-carbonizing. The lack of actionable plan was not surprising; Copenhagen generally was a non-event for investors. The basic conflict of developed countries focusing on absolute emissions while developing countries emphasize per capita emissions is difficult to solve. |
| Legislation an uphill battle |
| High hopes that public policy that would aid alternative energy are giving way to challenging realities. Delayed stimulus actually slowed development through most of the year, though the cash grant should be a boon to 2010 renewables investment since projects must be under construction in 2010. The watered down federal RES could pass next year though cap-and-trade looks less likely. The weak economy, Climategate, and recent polls showing that only 57% of Americans believe in global warming (a three-year low) make substantial legislative progress difficult in 2010. Also important will be utility commissions supporting time-of-day pricing and providing incentives for efficiency. |
| Bottom-up may beat top-down |
| It will be hard for alternative energy to be broadly successful without top-down action, including a price on carbon. We continue to believe, however, that bottom-up entrepreneurial forces will prove more important than UN resolutions. Our carbon markets colleague Abyd Karmali was quoted as saying, "The United Nations has shown why it can't cope with trying to reach consensus among 193 countries on a way forward." |
| Columnist Thomas Friedman addressed the issue Sunday in his Earth Day versus Earth Race piece. The Earth Day strategy depends on countries jointly agreeing to a framework for reducing greenhouse gas emissions and how to finance it. Earth Race is an analogy to the space race, when Sputnik sent the US into action. Earth Race will be a competition among countries and economies to invent clean technologies and gain whatever benefits, both monetary and quality of life, come from winning. In fact, it appears that China intends to lead in providing cleantech to the world. |
| While governments can set the rules, companies will find the solutions. As Friedman says, "An Earth Race led by America—built on markets, economic competition, self-interest and strategic advantage—is a much more self-sustaining way to reduce carbon emissions than a festival of voluntary, nonbinding, commitments at a U.N. Conference." |
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ClydeDrexly
01/14/2010 23:32 PM
environmental management needs everyone's cooperation. It would certainly be a totalitarian way of doing things if leaders would not consider the voice of the people and just make the decisions all by themselves and push hidden agendas in a discreet manner by putting on some sociable company name but what lies behind is pure evil. No wonder why protests and riots are more rampant during this point of time
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