Some of our elected officials have assessed the current financial crisis and decided to back pedal on their commitments to build a clean energy future for America. But a report released today by Deutsche Bank's Asset Management Division confirms once again that in this economic downturn, green energy investments offer governments a prime opportunity to stimulate growth.
Hard Times for Fossil Fuels
There is no doubt that the current squeeze on financing is hitting the energy sector particularly hard. Energy, after all, is the third largest consumer of capital after banks and the federal government.
Fossil fuels are really feeling the chill. In the past few months, oil and gas companies have seen their financing rates rise between 2 and 5 percentage points and their stocks plummet 60 to 70 percent. This means we will likely see more price volatility, since the pipeline for new projects is drying up.
Coal is also struggling. As early as the last spring, the industry was having a hard time getting financing thanks to the growing concerns on Wall Street about carbon risk. Capital is even harder to come by today.
The Right Policy Can Prevent a Brownout
If these trends in the fossil fuel markets continue, prices will drop, but that means companies won't invest in new projects. Inevitability, we will be looking at a brownout future.
The future is brighter for renewables. Yes, some companies have seen their financing drop off, but analysts remain confident that solar will be the most interesting market to watch in the coming years. The key here is sound policy. The Senate just extended the renewable energy production tax credit, giving the industry a much needed boost, and more than 30 states have standards that require a certain percentage of the state's electricity to be generate from renewable sources.
The Best Economic Stimulus Package: Green Infrastructure
But a national commitment to addressing climate change would make this market really explode.
Today's Deutsche Bank report is titled, Invest in Climate Change 2009: Necessity and Opportunity in Turbulent Times. Mark Fulton, the firms' Global Head of Climate Change Investment Research, says, "Governments have before them a historic opportunity to 'climate-proof' their economies as they upgrade infrastructure as a core response to any economic downturn."
He goes on to detail where the biggest opportunities are:
Encouraging investment in renewable energy is a key focus. Energy efficiency technologies are obviously highly desirable in economies facing recession. Infrastructure stimulus can be tied directly to climate-sensitive sectors such as power grids, water, buildings, and public transport, which present a vast field for the creation of new technologies and jobs.
The report says that questions about global warming are moving away from "What are the costs and risks?" and toward "How can we capitalize on the many promising opportunities?"
Are your elected officials asking the right questions? I encourage you to find out of if they grasp this opportunity to stimulate growth and create jobs. Ask them if they realize that economic prosperity and environmental stewardship really do go hand-in-hand.