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December 16, 2009
Creating a Sustainable Clean Energy Economy Will Require Government Support
    by Robert Kropp

A report from the Global Climate Network finds that opportunities for investment in the global transition to a low-carbon economy will require government support in the current economic climate. First of a two-part series.

The global economy is facing two crises at the same time. The threat of worsening climate change poses long-term risks to companies across industry sectors. At the same time, global unemployment in the aftermath of the economic crisis has reached nearly historic levels. The US reported an unemployment rate of 10.2% in October, the highest rate since 1983; and even China, despite its State-run economy, had a rate of 4.6%, largely due to a decrease on demand for exports.

The simultaneous presence of two such crises certainly pose grave dangers, and if both are not addressed with full knowledge of those dangers in mind, insufficient action on either front could well led to disaster, both on environmental and economic fronts.

But is it possible that in the face of such grave risk, opportunities are plentiful as well? Certainly, such steps as have already been taken by the Obama administration in the US indicate that green jobs creation can both combat climate change while addressing unemployment. Reports indicate that the American Recovery and Reinvestment Act, when combined with clean energy legislation modeled on the Waxman-Markey bill passed by the House of Representatives in June, could generate 1.7 million new jobs in energy efficiency, renewable energy, and other green sectors.

Furthermore, according to a report issued this month by the Global Climate Network (GCN), enacting climate legislation could lead to the creation of an additional 1.9 million jobs in efficiency and renewable energy by 2020.

The GCN report, entitled Low-Carbon Jobs in an Interconnected World, addresses efforts in eight countries to align emissions reductions with jobs creation. The nations covered by the report include Australia, China, Germany, India, Nigeria, South Africa, the United Kingdom, and the US. In the US, the analysis was provided by the Center for American Progress, a GCN partner.

At least implied throughout the GCN report is the need for government action to spur private investment, which according to reports is currently down 20% from peak levels in 2007. But the scope of the GCN report does not include specific recommendations for encouraging the private investment necessary to keep the transformation of economies sufficiently funded, especially in systems such as that in the US.

For investors, and in particular sustainable investors who have been at the forefront in calling for the consideration of environmental, social, and governance (ESG) factors by companies in order to inform their long-term investment horizons, meaningful proposals for government action that will spur renewed investment in a low-carbon economy are critical.

A Fi ve-Point Plan issued earlier this month by the Apollo Alliance, a coalition of labor, business, environmental, and community leaders, proposes a number of measures to encourage the private investment necessary for a successful transition to a low-carbon economy. The Alliance’s proposals will be taken up in depth in Part II of this article.

The GCN report states that the development and wide use of low-carbon technology will create millions of jobs globally. Furthermore, low-carbon jobs will likely outnumber job loss in carbon-intensive sectors, and will on the whole attract above-average salaries. And the report cites findings that renewable-energy programs will generate more jobs per dollar, as well as more jobs per megawatt of installed power, than fossil fuel plants.

According to the report, “active government policy to trigger the wholesale expansion of clean-energy industries is a key driver of low-carbon employment opportunities.” The report recommends the adoption of national low-carbon industrial strategies, increased government spending in an economic climate where access to capital is constrained, job training, and minimizing job loss.

The role of investors in the report’s scenario is addressed by its call for the establishment of “a robust pipeline of financing from government, the financial markets, and international institutions, to ensure that low-carbon technologies are not starved of investment.”

Because of the uniquely global character of a low-carbon economy, investors should eventually discover various opportunities according to specific national emphases. In China, for instance, enacting wind, solar, and hydropower targets, along with an anticipated shift in its economy from industry to the services sector, could lead to the creation of up to 10 million new jobs. And in India, according to the report, enacting its “National Action Plan on Climate Change could create an additional 10.5 million direct jobs in wind, solar and biofuel energy production.”

In the US, the Center for American Progress focused its findings on Smart Grid, defined by the report as “a group of digital technologies and systems with the ability to transform electricity generation, transmission, distribution, storage, metering and grid maintenance.” Assuming that the US can capture 60% of the global smart grid manufacturing market, then global installation of smart grid technologies could lead to the creation of up to 138,000 additional US jobs from global investment in smart grids.

Such a development could also serve to quiet claims that the US economic stimulus has led to the creation of jobs elsewhere, a claim whose accuracy, according to the report, cannot easily be verified.

The report concludes that “more aggressive and ambitious government policies seem likely to create higher net numbers of jobs,” and holds up the experience of Germany as an example. Although Germany is not an ideal location for solar power, 17,400 people were employed in solar thermal industries there in 2008, a 44% increase over the preceding year. Most of Germany’s solar products and services are destined for export, primarily to Mediterranean and North African countries.


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