The week in clean energy and carbon: Slim pickings at Rio+20

Shares in quoted clean energy companies slipped around 3 per cent between the close in New York last Tuesday and the middle of Monday’s trading session – a suitably damp reaction to last week’s Rio+20 United Nations Conference on Sustainable Development.

To be fair, the gathering, 20 years after the Earth Summit of 1992 in Rio de Janeiro, was not expected to do much directly for investment in clean energy, still less for sector stock prices.

However, there had been hopes that the conference’s focus on the “green economy” would help to revive politicians’ interest in combining the goals of economic recovery and the low-carbon transition.

In the event, the most constructive moves of last week took place on the fringes of Rio+20, rather than in the main communiqué agreed by all countries.

There was a commitment by the US government to provide grants, loans and loan guarantees of $US2 billion to the Sustainable Energy For All initiative launched by UN secretary-general Ban Ki-moon last September; and the eight largest multilateral development banks announced that they will invest $US175 billion in sustainable transportation systems over the coming decade. The pledge was made by the Asian Development Bank, the World Bank, the Latin American and African Development banks, and four other MDBs.

The Rio+20 event faced significant handicaps in the way of making progress. One, of the organisers’ own making, was vagueness – the concept of the green economy was left woolly and not narrowed down to something achievable; and the timing – at a low point in the economic fortunes of the West and a moment of difficulty even for the likes of India, Brazil and China – was far from ideal.

The 20-22 June conference ended with an “outcome document” entitled The Future We Want. Of 53 pages and 283 paragraphs, it attempted to address a vast list of topics ranging from poverty eradication to empowering rural women, disaster risk reduction to sustainable tourism.

Unfortunately, the wording was ponderous, and bereft of concrete commitments from the 180 countries taking part. An example was point 12 in the opening, “common vision” section.

It said: “We resolve to take urgent action to achieve sustainable development. We therefore renew our commitment to sustainable development, assessing the progress to date and the remaining gaps in the implementation of the outcomes of the major summits on sustainable development and addressing new and emerging challenges. We express our determination to address the themes of the United Nations Conference on Sustainable Development, namely, a green economy in the context of sustainable development and poverty eradication, and the institutional framework for sustainable development.”

Even in the area of fossil-fuel subsidies, which the International Energy Agency estimates will exceed $US600 billion in 2012, the wording left countries with plenty of room to continue much as before. The outcome document said that countries “reaffirm the commitments they have made to phase out harmful and inefficient fossil fuel subsidies that encourage wasteful consumption and undermine sustainable development. We invite others to consider rationalising inefficient fossil fuel subsidies…..”

There were a few interesting ideas, including a UK proposal to require companies quoted on the London Stock Exchange to detail their greenhouse gas emissions in annual reports, and a document signed by 50 countries and 86 large corporations supporting “natural capital accounting”. The latter includes the value of natural assets as well as conventional GDP.

Reaction to Rio+20 from some policy-makers themselves was tepid, French President Francois Hollande for instance talking of “disappointment”. Environmental lobby groups were more outspoken, Greenpeace describing the meeting as “a failure of epic proportions” and Friends of the Earth saying that it “strongly condemns world leaders for selling out people and the planet in their Rio+20 declaration”.

Investors will take a less emotional view. Expectations were very low that Rio+20 would do anything to spur on the low-carbon transition, so the result came as no surprise to them. Instead, many will have spent the week thinking about the continuing tension between fading subsidies for renewable power on the one hand, and on the other, falling costs, which are enabling companies to build capacity nonetheless.

Last week, US developer NextEra Energy emerged as the highest bidder for the 1GW Blythe solar project in California in an auction taking place for the assets of the bankrupt company, Solar Trust of America.

In Uruguay, meanwhile, the government said it planned to increase its target for wind capacity on the grid at the end of 2015 from the previously stated 800MW, to 1GW. The South American country only has 40MW online now.

And in Spain, Solaria Energia Medio Ambiente said it is planning a 150MW PV project near Toledo, to be built in the second half of 2013. It could be the first large Spanish solar project to be built without the provision of any power price subsidies, and its developer hopes to do it at a rock-bottom cost of just EUR 1m (USD 1.25m) per MW.

EUROPEAN CARBON PERMITS EXTENDED GAINS ON POLICY SPECULATION

EU carbon prices surged last week on continued speculation over the possibility of delays in emission allowance sales from 2013. EUAs for December 2012 advanced 11.6% last week. The benchmark contract ended Friday’s session on London’s ICE Futures Europe exchange at €8.17/t, compared with €7.32/t at the close of the previous week. United Nations Certified Emission Reductions for December 2012 soared 14.1% last week to €4.13/t. EUAs extended gains from the preceding week, when prices rose following news that a draft report on possible options to strengthen the market had been sent for internal consultation in the European Commission.

A Bloomberg News article revealed that the EU may favour delaying sales of as many as 1.2 billion carbon allowances from 2013. The report was drafted by the Commission’s climate department and needs to be signed off by EU Commissioners heading directorates from industry to energy. Dec-12 EUA prices jumped €0.30/t to €7.91/t on Friday morning as traders who had bet on a fall in prices bought allowances to cover their losses. The December contract spiked to a weekly intraday high of €8.20/t on Friday afternoon, while trading volume more than doubled from the previous day to 28.5Mt.

US WATER PARTNERSHIP TO DEDICATE OVER $500M TO ADDRESS ISSUES

The Rio+20 conference saw the launch of the US Water Partnership – a public-private partnership that will pool resources and money – more than USD 500m – to address water challenges around the globe. The World Bank is lending Kenya USD 300m to modernise the water and sewer systems in major cities, Bloomberg News reported. Also, the African Development Bank has agreed to lend Mozambique USD 180m for irrigation projects in the southern Gaza and northern Nampula provinces. The British Government is in discussions with its Scottish counterpart about how best to tackle the issue of drought in the former’s south east regions after Scottish Infrastructure and Capital Investment Secretary Alex Neil offered help with water-supply in the long term, the Telegraph said.

FUKUSHIMA STARES SECOND TYPHOON SEASON IN THE FACE

Japan’s former Prime Minister Naoto Kan, who last year presided over the initial response to the country’s biggest crisis since World War II, urged political leaders to debate banning nuclear power generation. Meanwhile, Tokyo Electric Power Co’s crippled Fukushima nuclear plant faces its second typhoon season since the 11 March disaster last year, raising the risk of further radiation leaks if storms thrash exposed pools of urnaium fuel rods or tanks holding contaminated water. In the UK, EDF agreed to extend the life of seven of its nuclear plants by two years, according to the Mail. This means the plants will close in 2025, and not in 2023 as previously scheduled. And in US, nuclear power production rose to the highest level in almost five months as PG&E’s Diablo Canyon 1 reactor in California and Exelon Corp’s Byron Unit 1 in Illinois increased output, Bloomberg reported.