Antinuclear

In a new report dubbed Keeping it Cool; Financing a 2°C World, the economists at HSBC says there is now clear momentum towards a low-carbon global economy.

“We think the drivers for the transition are falling in to place now,” they write.

“1 We have the real possibility of a universal climate agreement to be signed in Paris in December next year;

“2 The cost of renewables has fallen significantly even before the full costs to the economy (of high-carbon) are priced-in; and

“3 We are beginning to understand how to better price-in other climate risks which would make low-carbon options not just economical but also beneficial.”

Australia might have been well placed to benefit from this and attract some of the hundreds of billions of 2°C finance – money that HSBC says is consistent with a 2°C world – given its carbon price, renewable energy target, and other measures.

Those, however, are now either gone (in the case of carbon pricing) or neutered (in the case of renewables). Energy efficiency schemes are being wound back, and in their place is the government’s controversial Direct Action plan – capped at $2.5 billion – and the Green Army, a program of cheap young labour for environmental projects.

The HSBC report highlights a couple of key factors of a low-carbon economy, and what it means for governments. Here are a few of them, and an observation fromRenewEconomy on how the Australian government will be doing……….

“Over the longer term we expect carbon to be priced and this should naturally favour lower carbon projects. In addition, the carbon price should rise as climate policies change (e.g. subsidy removal; increased urgency of reacting to the climate impact) and the external costs of high carbon projects are better priced-in (i.e. pollution damage, health costs). Essentially, we think it’s going to become more expensive to emit in the future.

“Pricing carbon is a slow process. In the meantime, the rewards can be enhanced by giving low-carbon a “leg up” via mechanisms like feed-in-tariffs. To make these work, policy commitment is key since policy drivers can create the right signals to grow markets and increase revenue potential. For example, targets for renewable energy as a percentage of the overall energy mix.”

HSBC argues that a climate agreement in Paris next year would be a key policy signal that shows political commitment to the transition to a low-carbon world. As a result, both industry and financiers should then be more willing to invest in projects that help deliver this transition because they would come with more assurance that the associated returns are less risky.http://reneweconomy.com.au/2014/can-australia-prosper-2c-finance-world-35343