Despite uncertain commitments by governments to confront climate change, there is a sliver of encouraging news. Private and public investments in renewable energy sources like solar and wind, excluding hydro projects, have exceeded $1.5 trillion cumulatively since 2006. They accounted for 8.5 percent of global electricity generation in 2013, up from 7.8 per cent in 2012.
A report by the UN Environment Program (UNEP) and its partners said investment in renewable energy, including hydro, in 2013 reached US$227 billion compared to US$270 billion in fossil-fuel power like coal and gas. In fact, new investment in renewables was roughly double the net figure for investment in fossil-fuel power excluding replacement of plant.
These changes are significant because dealing with climate change remains controversial and some researchers still think that dire warnings by a UN panel are exaggerated. In its first comprehensive report since 2007, the Intergovernmental Panel on Climate Change (IPCC) last week warned of much worse climate induced disasters, including simultaneous heat waves, wildfires and floods.
It said severe food shortages could occur in poorer nations because of untimely droughts or excessive rainfall. Water and food-borne diseases could increase and coastal cities and low-lying nations might be submerged by rising sea levels.
The US might suffer massive wildfires and more urban floods and hurricanes could hit its coastal cities. Forests could dry up in some places while rain forest eco systems may be disrupted in others.
The chief remedy suggested by the panel is cutting pollution partly by slashing toxic emissions from coal and gas-based fuels. Such remedies do not have much traction around the world because many governments insist they need more fuel and electricity even at the cost of pollution and exacerbated climate change.
Politicians in America’s Republican and Democratic parties have also not yet reached consensus that climate change poses dangerous problems demanding immediate attention.
The UNEP report partnered by Bloomberg New Energy Finance is interesting because it indicates that private investors may be ahead of the curve compared to governments. It points out that renewable energy sources excluding hydro projects accounted for 43.6 per cent of newly installed generating capacity in 2013.
“Were it not for renewables, world energy-related CO2 emissions would have been an estimated 1.2 gigatonnes higher in 2013. This would have increased by about 12 per cent the gap between where emissions are heading and where they need to be in 2020, if the world is to have a realistic prospect of staying under a two degree Centigrade temperature rise,” it said.
It is encouraging that renewable energy is gaining a bigger share of overall generation. It might give governments the confidence to build a more robust climate agreement to cut emissions at a climate change conference in Paris next year.
Another positive sign is the growing involvement of long-term investors such as pension funds, insurance companies, wealth managers and private individuals in the equity and debt of wind and solar projects.
For instance, clean energy bond issues set a new record of US$3.2 billion raised in 2013. Equity raised by renewable energy companies from public stock markets jumped 201 per cent to US$11 billion in 2013, indicating increasing appetite after a downturn in 2012.
China, the world’s biggest polluter, invested $56 billion in renewable energy – more than Europe’s $48 billion and America’s $36 billion. India, the other great polluter, invested just $6 billion.
Falling costs caused installed solar capacity worldwide to jump by 26 per cent from 2012 to a record 39 Gigawatts in 2013, although actual investments decreased 23 percent from US$135.6 billion to US$104.1 billion.
Some wind and solar installations are now able to face hydro, coal and gas installations head-on, as in Chile where they compete openly on the spot power market with traditional sources.