Focus on the Regional Economy and The Green/Carbon Economy
description
Transcript of Focus on the Regional Economy and The Green/Carbon Economy
Focus on the Regional Economyand
The Green/Carbon Economy
Focus on the Regional Economyand
The Green/Carbon Economy
WelcomeWelcomeMary RyanMary Ryan
Nutter McClennen & Fish LLPNutter McClennen & Fish LLP
WelcomeWelcomeMary RyanMary Ryan
Nutter McClennen & Fish LLPNutter McClennen & Fish LLP
Upcoming ProgrammingUpcoming ProgrammingUpcoming ProgrammingUpcoming Programming
May 9 – Regional Environmental Summit – Climate May 9 – Regional Environmental Summit – Climate Change/Green EconomyChange/Green Economy
May 13 – EBC C & D Committee May 13 – EBC C & D Committee May 15 – EBC Wind Energy Development CommitteeMay 15 – EBC Wind Energy Development Committee May 19 – EBC RI Breakfast – US Senator WhitehouseMay 19 – EBC RI Breakfast – US Senator Whitehouse May 22 – EBC Solid Waste Forum – Jim ColmanMay 22 – EBC Solid Waste Forum – Jim Colman May 29 – Land Based Wind Energy – 2May 29 – Land Based Wind Energy – 2ndnd Session Session June 5 – EBEE Awards CelebrationJune 5 – EBEE Awards Celebration June 20 – Breakfast Program w/ Deerin Babb-BrottJune 20 – Breakfast Program w/ Deerin Babb-Brott June 23 – LID ConferenceJune 23 – LID Conference July 11 – 3July 11 – 3rdrd Annual EBC Ocean Management Annual EBC Ocean Management
Conference - CConference - Climate Change Impacts on Ocean and limate Change Impacts on Ocean and Coastal ResourcesCoastal Resources
EBC Member SurveyEBC Member SurveyEBC Member SurveyEBC Member Survey
Regarding strategic issues/challenges, please rank each of the following in terms of importance to your company over the next three years.
1 - not important, 9 very important• Hiring/Recruiting/Retaining Staff 7.86• Business Development 7.86• Economy - Domestic 7.70• Growth 7.18• Energy Industry Trends 6.82• Environmental Industry Trends 6.00• Economy - Global 6.00• Regulatory/Legislative Developments 5.27• Company Operational Issues 5.00
Member Survey – Early 08Member Survey – Early 08Member Survey – Early 08Member Survey – Early 08
On a scale of 1 to 5, how strong was your company's business activity in 2007? WEAK STRONG
1. 0.0% 2. 5.9% 3. 23.5% 4. 41.2% 5. 29.4%
On a scale of 1 to 5, how strong do you anticipate your company's business activity will be in the 1st quarter of 2008?
WEAK STRONG 1. 0.0% 2. 8.7% 3. 17.4% 4. 52.2% 5. 21.7%
The New England Regional Economic Outlook
Bo Zhao Economist
Federal Reserve Bank of Boston
The New England Regional Economic Outlook
Bo Zhao Economist
Federal Reserve Bank of Boston
Regional Economic Overview
Bo Zhao, Senior Economist
New England Public Policy Center
Federal Reserve Bank of Boston
Presented to the Environmental Business Council of New England
The “Focus on the Regional Economy and the Green/Climate Change Economy” Event
May 8, 2008
The views expressed in the presentation are not necessarily those of either the Federal Reserve Bank of Boston or the Federal Reserve System.
Overview
• Job market• Personal income• Housing market• Prices and consumer
confidence• Economic outlook
9
INew England employment slipped
-30
-20
-10
0
10
20
30
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Monthly Employment Change in New EnglandThousands of Jobs
Source: U.S. Bureau of Labor Statistics.
10
The year-over-year employment growth was small
-6
-5
-4
-3
-2
-1
0
1
2
3
4
Apr-90 Apr-92 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04 Apr-06 Apr-08
Percent Change fromYear Earlier
Source: U.S. Bureau of Labor Statistics.
United States
New England
11Source: U.S. Bureau of Labor Statistics.
Rhode Island is experiencing large job losses
Percent Change from Year Earlier
Source: U.S. Bureau of Labor Statistics.
-8
-6
-4
-2
0
2
4
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-07 Mar-08
Rhode Island
Last 12 months: -2.0% Last 12 months: +0.1%
Maine
-8
-6
-4
-2
0
2
4
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08
12Source: U.S. Bureau of Labor Statistics.
CT’s and VT’s labor markets are weakening
Percent Change from Year Earlier
Source: U.S. Bureau of Labor Statistics.
Connecticut
-8
-6
-4
-2
0
2
4
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08
Last 12 months: +0.08%Last 12 months: +0.6%
-8
-6
-4
-2
0
2
4
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-07 Mar-07 Mar-07 Mar-08
Vermont
13Source: U.S. Bureau of Labor Statistics.
MA and NH have continuing and steady job growth
Percent Change from Year Earlier
Source: U.S. Bureau of Labor Statistics.
Massachusetts New Hampshire
-8
-6
-4
-2
0
2
4
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-07 Mar-04 Mar-07 Mar-08
-8
-6
-4
-2
0
2
4
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-07 Mar-08
Last 12 months: +1.5%Last 12 months: +0.7%
14
Employment growth by industry: mixed resultsPercent Change, March 2007 – March 2008
(Seasonally Adjusted)
Source: U.S. Bureau of Labor Statistics.
-2.2
-0.7
0.9
3.0
2.5
0.7
1.1
-0.2
2.5
0.7
-0.6
-0.1
-4.6
-1.3
-1.8
-1.4
1.1
-1.3
2.2
1.1
-5 -4 -3 -2 -1 0 1 2 3 4
Construction
Manufacturing
Trade, Transportation, & Utilities
Information
Financial Activities
Professional & Business Services
Private Education & Health Services
Leisure and Hospitality
Other Services
Government
United States
New England
11
1 New England data for CT, MA, and NH. Seasonally adjusted data are not available for ME, RI, or VT.
15
NE unemployment rate increased, but was still below the national average
0
1
2
3
4
5
6
7
8
9
Apr-94 Apr-95 Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08
Percent
Source: U.S. Bureau of Labor Statistics.
United States
New England
16
Unemployment rates within New England
4.4
4.4
4.4
4.6
4.6
3.8
4.9
4.0
5.1
4.8
5.3
5.0
4.4
6.1
4.6
3.9
0 1 2 3 4 5 6 7
United States
New England
Connecticut
Maine
Massachusetts
New Hampshire
Rhode I sland
Vermont
Mar-07
Mar-08
Source: U.S. Bureau of Labor Statistics.
Percent
17
Job postings in print ads were down
0
20
40
60
80
100
Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Index 1987 =100
Source: The Conference Board.
United States
New England
Help Wanted Index
18
Online job postings fell sharply
Percent change in total online postings,April 2007 – April 2008
-16.4-18.1
-24.8
-12.5
-30
-25
-20
-15
-10
-5
0
United States New England Boston NE less Boston
Source: Bureau of Economic Analysis.
Personal income growth slowed
Source: Bureau of Economic Analysis.
-5
0
5
10
15
90Q1 91Q3 93Q1 94Q3 96Q1 97Q3 99Q1 00Q3 02Q1 03Q3 05Q1 06Q3 08Q1
United States
New England
Percent Change from Year Earlier
Personal income growth within the region: mixed performance
5.95.6 5.6 5.7
2.9
4.1
5.7
6.6
0
1
2
3
4
5
6
7
United States New England Connecticut Maine Massachusetts NewHampshire
Rhode I sland Vermont
Source: Bureau of Economic Analysis.
Percent Change, Q4 2006 – Q4 2007
Per capita personal income levels and growth
Source: Bureau of Economic Analysis.
State Per capita personal income (dollars)
Rank inthe U.S.
Percent change 2006-2007
Rank of percent change
2006 2007 2006 2007
U.S. 36,714 38,611 5.2
CT 50,762 54,117 1 1 6.6 4
ME 32,095 33,722 36 35 5.1 27
MA 46,299 49,082 3 3 6.0 8
NH 39,753 41,512 7 8 4.4 39
RI 37,523 39,463 17 17 5.2 23
VT 34,871 36,670 22 23 5.2 25
House prices continued to be soft
Source: Office of Federal Housing Enterprise Oversight / Haver Analytics.
Percent Changefrom Year Earlier
-10
-5
0
5
10
15
20
Feb-92
Feb-93
Feb-94
Feb-95
Feb-96
Feb-97
Feb-98
Feb-99
Feb-00
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
United States
New England
OFHEO House Price Purchase Only Index
23
Boston had a smaller decrease in home prices than some major metro areas
Source: S&P Case-Shiller / Haver Analytics.
Percent Change, February 2007 – February 2008
-13.6
-12.7
-4.6
-8.5
-5.5
-6.6
-19.2
-17.2
-13.0
-19.4
-21.7
-22.8
-24 -22 -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0
Composite 10
Composite 20
Boston
Chicago
Denver
Las Vegas
Los Angeles
Miami
New York
San Diego
San Francisco
Washington
S&P Case-Shiller Home Price Index
NE single-family housing permits continued to fall
Index, 1988 = 1
0.0
0.5
1.0
1.5
2.0
Feb-84 Feb-86 Feb-88 Feb-90 Feb-92 Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08
United States
New England
Source: U.S. Census Bureau
NE multi-family housing permits were down
even more
Source: U.S. Census Bureau
Index, 1988 = 1
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Feb-84 Feb-86 Feb-88 Feb-90 Feb-92 Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08
United States
New England
Boston inflation rate was lower than the national average
Source: U.S. Bureau of Labor Statistics.
Percent Change from Year Earlier
0
1
2
3
4
5
6
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
United States
Boston
Consumer Price Index
27
Price changes in major expenditure categories
Source: U.S. Bureau of Labor Statistics.
Consumer Prices Percent Change, March 2007 – March 2008
4.0
4.5
2.9
4.6
1.3
3.1
2.4
2.9
3.0
0.2
1.4
6.5
8.2
9.4
4.7
5.6
10.1
2.7
0 1 2 3 4 5 6 7 8 9 10 11
All Items
Food
Shelter
Fuel & Utilities
Transportation
Medical Care
Recreation
Education and Communication
All Items, Less Food and Energy
United States
Boston
Consumer confidence remained weak
Source: U.S. Bureau of Labor Statistics.
1985 U.S. Average = 100
0
20
40
60
80
100
120
140
160
180
Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08
United States
New England
Outlook for the New England employment: slow growth
Source: NEEP
Summary• The New England economy is slipping
throughout the first quarter of 2008, mostly in line with national patterns.
• Economic conditions vary considerably across the six New England states.
• CPI inflation in the Boston area continues to run lower than the national average.
• NEEP forecast that the region’s outlook is “slow growth, below the national average.”
Outlook for the New England housing market
Source: NEEP
Backup slides
-0.7
-1.0
3.3
0.0
3.1
2.6
-0.1
1.1
1.3
0.9
-0.6
-3.1
3.1
0.0
-0.3
1.6
0.8
1.8
2.4
2.9
0.0
-1.2
-2.1
-2.4
1.2
-2.0
1.1
-0.1
2.6
0.4-0.6
-1.3
-2.1
0.0
-4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0
MANUFACTURING:Durable Goods
Nondurable GoodsTRADE, TRANSPORTATION AND UTILITIES:
Wholesale TradeRetail Trade
Transportation, Warehousing, & UtilitiesFINANCIAL ACTIVITIES:
Finance and InsuranceReal Estate & Rental & Leasing
PROFESSIONAL & BUSINESS SERVICES:Professional, Scientific & Technical
Management of Companies and EntrerprisesAdministrative & Waste ManagementEDUCATION & HEALTH SERVICES:
Educational ServicesHealth Care & Social Assistance
LEISURE & HOSPITALITY:Arts, Entertainment & Recreation
Accommodation & Food ServicesGOVERNMENT:
FederalStateLocal
United States
New England
1 Industries selected based on the availability of seasonally adjusted data for the New England states. 2 Data not available for CT.3 Data not available for RI and VT.4 Data not available for ME, NH, RI and VT.5 Data not available for CT,ME, NH, RI and VT.6 Data not available for ME.7 Data not available for ME, RI and VT
Source: U.S. Bureau of Labor Statistics.
Employment Growth by Industry1
Percent Change, March 2007 – March 2008(Seasonally Adjusted)
4
6
3
2
5
7
0.6
0.8
1.0
1.2
1.4
Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08
Source: U.S. Employment and Training Administration.
Initial Claims for Unemployment InsuranceIndex 1995 = 1
United States
New England
-5
0
5
10
15
89Q4 91Q4 93Q4 95Q4 97Q4 99Q4 01Q4 03Q4 05Q4 07Q4
-5
0
5
10
15
89Q4 91Q4 93Q4 95Q4 97Q4 99Q4 01Q4 03Q4 05Q4 07Q4
United States
United States
Personal Income
Total Wage and Salary Disbursements
New England
New England
Percent Change from Year Earlier
Percent Change from Year Earlier
Source: U.S. Bureau of Labor Statistics.
Percent Change from Year EarlierPercent Change, Q4 2007 – Q4 2008
0
1
2
3
4
5
6
7
United States New England Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont
Personal Income Wage and Salary Disbursements
0.95
1.00
1.05
1.10
1.15
1.20
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Coincident IndexesEach State’s Post-Recession Trough = 1
RI
NH
VT
ME
CT
MAUS
Note: The Rhode Island index does not have a post-recession trough. It is equal to 1 at the U.S. trough.Source: The Federal Reserve Bank of Philadelphia.
108
91
139
130
88
6465
57
89
79
4843
0
15
30
45
60
75
90
105
120
135
150
Mar-07
Mar-08
Consumer Confidence1985 U.S. Average = 100
0
20
40
60
80
100
120
140
160
180
Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08
Index (1985 U.S. Average = 100)
New England Present Situation and Future Expectations1985 Average = 100
Consumer Confidence Present Situation Future ExpectationsUS NE US NE US NE
New England
United States
0
40
80
120
160
200
240
Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-05 Mar-05 Mar-06 Mar-08
Present Situation
Future Expectations
Source: The Conference Board.
-4
-2
0
2
4
6
8
Mar-01 Sep-01 Mar-02 Sep-02 Jan-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-0838
44
50
56
62
68
74
U Mass Leading Index (Left Axis)
AIM Business Confidence (Right Axis)
Massachusetts Indicators
Source: Associated Industries of Massachusetts and the University of Massachusetts.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Feb-84 Feb-86 Feb-88 Feb-90 Feb-92 Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04 Feb-05 Feb-08
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Mar-84 Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08
0.0
0.5
1.0
1.5
2.0
Feb-84 Feb-86 Feb-88 Feb-90 Feb-92 Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08
United States
New England
United States
New England
Source: U.S. Department of Commerce, Construction Statistics Division.
Source: McGraw-Hill Information Systems Company, F.W. Dodge Division.
Single-Family Housing Permits
Dollar Value of Residential Construction Contracts
Index, 1988 = 1
Multi-Family Housing Permits
Index, 1988 = 1
United States
New England
Index, 1988 = 1
The Green & Climate Change Economic OutlookAndrew Paterson
Director of EconomicsEconergy International Corporation
The Green & Climate Change Economic OutlookAndrew Paterson
Director of EconomicsEconergy International Corporation
Climate Policy Outlook and Carbon Management Business Opportunities
New England Environmental Business CouncilWestborough, MA
May 2008
Andrew D. PatersonDirector – North America, Economics & Finance Consulting
Washington, DC [email protected]
São Paulo
Monterrey
Washington D.C.Boulder (CO)
London
Fortaleza
Rio de Janeiro
Belo HorizonteCochabamba
San Jose
Office
Project
Cambria
São Paulo
Monterrey
Washington D.C.Boulder (CO)
London
Fortaleza
Rio de Janeiro
Belo HorizonteCochabamba
San Jose
Office
Project
Cambria
42
ECONERGY’S BUSINESS (“ECG” on London AIM)
Raised $100M on London AIM in Feb. 2006
$25M in revenues for 2007, from $3M in 2005.
OFFICES & PROJECTS
Climate Policy: Good News / Bad News
Good News:
• No matter the results of the election in 2008, the federal political landscape will improve dramatically for legislation on GHGs.
– Democrats will likely gain +15 in the House, +5 in Senate in 2008.– All three presidential candidates will sign climate legislation
• Voluntary efforts, early action, and state initiatives are underway already.
Bad News:
• A primary excuse for failing to pass GHG legislation vanishes in 2009.
• Regional differences within US are physically vast, making consensus on environmental policies very elusive, and with clear leaders and laggards.
• China and India + ROW will continue to pump GHGs into the global airshed faster than we curb emissions… without massive infrastructure overhaul.
• The federal deficit poses a huge barrier to funding new incentives.
• Policy models are not focused well on scale of the fossil economy challenge.
Overview: Environmental Business Opportunities
A. Environmental Market Update
– Progress and plateaus; Growth Markets vs. Large Markets
B. Politics 2008: Impact on Policy Outlook
– Democrats will gain in Congress… plus the White House (?)
– But, the country will remain divided: Red vs. Blue
C. Carbon Policy Options & Financing Issues
– Supreme Court: Impact of Mass v. U.S. EPA (April 2007)
– U.S. and Global Carbon Emission Outlook
– The scale of the fossil economy is daunting worldwide
– Socolow’s Wedges as a basis for Business Strategy
– The WBCSD Framework (long-term) vs. Kyoto (short term)
– The Bond Market: The critical market for financing clean energy
U.S. Environmental Market Growth Rides on Resources
U.S. Environmental Market 1970-2010
$-
$50
$100
$150
$200
$250
$300
$350
1970 1980 1990 2000 2010
$Bill
ion
s (n
om
inal
)
Services Equipment Resources
projected
NEPA,CAA
Environmental Legislation: RCRA, SF
Economic Growth,Redevelopment
Global Growth,Energy demand
Environmental legislation in 1970s and 1980s helped drive growth, but economic recovery, manufacturing excellence in the 1990s became larger drivers as cleanup markets topped out. Exports comprise about 10% of the total market, concentrated in air, water equipment. Global growth draws on resources.
Some Service Sectors Declining; Water, Energy Growing
Environmental 70-80 80-90 90-00 00-10 Industry Segment 1970 1980 Growth 1990 Growth 2000 Growth 2010 Growth Services Analytical Services 0.1 0.4 300% 1.5 314% 1.6 7% 1.9 20% Wastewater Treatment Works 4.3 9.2 116% 19.8 116% 30.0 52% 44.5 48% Solid Waste Management 3.2 8.5 164% 26.1 208% 42.0 61% 58.8 40% Hazardous Waste Management 0.1 0.6 550% 6.3 921% 8.0 27% 9.7 21% Remediation/Industrial Services 0.1 0.4 550% 8.5 1813% 10.0 18% 13.7 37% Consulting & Engineering 0.3 1.5 367% 12.5 761% 18.0 44% 28.8 60% Equipment Water Equipment and Chemicals 3.2 6.9 117% 13.5 95% 20.0 48% 32.6 63% Instruments & Information Systems 0.1 0.2 100% 2.0 820% 4.0 100% 6.0 50% Air Pollution Control Equipment 1.0 3.0 196% 10.7 258% 18.0 68% 19.1 6% Waste Management Equipment 2.0 4.0 105% 10.4 159% 9.6 -8% 11.5 19% Process & Prevention Technology 0.0 0.1 259% 0.4 418% 1.2 200% 2.0 70% Resources Water Utilities 5.7 11.9 109% 19.8 67% 33.0 67% 42.3 28% Resource Recovery (recycling) 1.2 4.4 283% 13.1 197% 18.0 37% 25.5 42% Environmental Energy Sources 0.3 1.5 420% 1.8 15% 15.0 733% 38.2 155% U.S. Totals: $21.4 $52.6 145% $146.4 178% $228.4 56% $334.6 46%
Backend treatment services – remediation, hazardous waste management, analytical labs and related consulting peaked in the 1980s and plateaued. Energy and water niches, process technologies grow with demographic and economic drivers.
Source: Environmental Business Journal
Market Traits (Growth, Size) Affect Financing Options
• Different market traits – growth rate, competitive dominance, nature of purchasing decisions – call for different financing approaches, incentives.
• Clean energy and instruments offer much higher growth rates (>20% per year) to allow recovery of equity investments (Group A).
• Larger markets, like water treatment and resource recovery with steadier growth rates, that match the economy and demographic trends, allow for some debt funding and project finance, often with some public finance (Group B). Municipal ownership is high in these sectors precluding venture capital. Tax exempt bonds, international lending are more typical.
• Declining markets, like remediation and consulting, must rely on asset conversion, e.g. brownfield development or facility turnaround, to generate returns since losses on operations are common (Group C).
• For international markets, project debt financing is a paramount factor since markets and enforcement mechanisms are not well-developed.
U.S. Enviro Markets 2010 Forecast: Growth vs. Size (I)
U.S. Environmental Markets 2010: Growth vs. Size
0%
20%
40%
60%
80%
100%
120%
140%
160%
$- $10 $20 $30 $40 $50 $60
Market Size in 2010 ($Billion)
Mark
et
Gro
wth
2000-2
010
CleanEnergy
Process TechWastewater Treatment
Drinking Water
Consulting
Solid Waste
AirPC
Remed
A.Labs
HazW
Water Equip
Resource RecoveryWaste
Mgt.Eq
Instruments
A
B
C
A
A) Small markets growing faster: Process Technology, Instruments, Energy, Water
B) Large markets growing basically with the economy: Infrastructure, Services
C) Shrinking markets: Traditional backend Cleanup and Remediation
Source: EBI
U.S. Enviro Markets 2010 Forecast: Growth vs. Size (II)
U.S. Environmental Markets 2010: Growth vs. Size
0%
10%
20%
30%
40%
50%
60%
70%
80%
$- $10 $20 $30 $40 $50 $60
Market Size in 2010 ($Billion)
Mark
et
Gro
wth
2000-2
010
CleanEnergyProcess Tech
Wastewater Treatment
Drinking Water
Consulting
Solid Waste
AirPC
Remed
A.Labs
HazW
Water Equip
Resource Recovery
Waste Mgt.Eq
Instruments
A
B
C
A
Source: EBI
A) Small markets growing faster: Process Technology, Instruments, Energy, Water
B) Large markets growing basically with the economy: Infrastructure, Services
C) Shrinking markets: Traditional backend Cleanup and Remediation
Drivers & Multi-media Linkage
1. Even with changeover in Congress, traditional environmental legislation is on a slow track (e.g., no RCRA, Superfund bills).
2. High market segment growth (>2x-3x GDP) drives returns needed to recover costs and risks of technology innovation.
3. Many environmental sectors are mature and driven by GDP and demographics: water resources, solid waste, land use.
4. Back-end cleanup, e.g., remediation, air, hazardous waste, are not high growth niches. Much work has been completed (USTs).
5. Redevelopment of aging infrastructure is becoming a bigger driver, including energy and grid, water, urban transport, gov’t.
6. Interest rates are low, allowing ample financing for infrastructure.
7. Water shortages have appeared, but have not triggered large scale budget increases yet, which will be needed for innovation.
8. Linkage: Innovative energy technologies look to be a high growth niche, creating higher water demands, affected by GHG policy.
9. Regulatory uncertainty freezes investment and market growth.
10. Better long-term policies mobilize more private capital.
U.S. Regional Differences Remain Sharp into 2008
• Sharp regional differences drive water resource and environmental policies, led by Governors / states:
– Energy use patterns, electricity prices, and transmission constraints– Levels of urbanization, air pollution, vehicle use– Availability of renewable resources (hydro, biomass, wind, solar) – Water use and supply, and agricultural (“CAFO”) priorities– Land use management and pressures for suburban development
• Political leadership at state and local level will differ from federal agencies regardless of party affiliation.
• Priorities for urban states diverge from suburbs and rural states.
• Federal policy (e.g., EPA, FERC, DOI) and funding of key programs will struggle to balance regional priorities. “Producers” vs. “Consumers”.
• Hurricane recovery, climate change will aggravate regional differences.
Difficult to frame national solutions when country remains divided.Difficult to frame national solutions when country remains divided.
States: “Red” (Bush) vs. “Blue” (Gore/Kerry)
Red States
Petrochemicals & NASCAR!
• Producer states: Opportunities for expansion of energy infrastructure (pipelines, LNG)
• Roads & suburbs; SUVs, soccer
• Transportation and siting projects
• More energy exploration
• State PUCs approve “clean coal” plants (with scrubbers, CCS)
• Water + drought management
• Real estate development and more access to federal lands
Blue States
High-tech & Hockey
• User states: Need upgrades of energy infrastructure: pipelines and transmission, urban load
• Mass transit, traffic congestion
• Hybrids and “clean fleets”
• More EE, “green energy” policies
• More lawsuits on coal power plants (feud over NSR)
• Water infrastructure makeovers
• “Restoration Economy” and land use conservation
Different priorities will alter market and technology opportunities.
Different regions, different policies
B. Race for President: 2008 Outlook
February 20, 2008 | Issue 44•04 CHARLESTON, SC—After spending four months accompanying his wife, Hillary, on the campaign trail, former president Bill Clinton announced Monday that he is joining the 2008 presidential race, saying he "could no longer resist the urge.“I have to.“Clinton told reporters Tuesday that seeing so many "Clinton '08" posters "really got [him] thinking," and said that the fact that he was already wearing a suit, and smiling and waving on the campaign trail was an added motivator. "My fellow Americans, I am sick and tired of not being president," said Clinton, introducing his wife at a "Hillary '08" rally. "For seven agonizing years, I have sat idly by as others experienced the joys of campaigning, debating, and interacting with the people of this great nation, and I simply cannot take it anymore. I have to be president again. He continued, "It is with a great sense of relief that I say to all of you today, 'Screw it. I'm in.'"
Bill Clinton then completed his introduction of Hillary Clinton, calling her a "wonderful wife and worthy political adversary,".
Bill Clinton: 'Screw It, I'm Running For President'
Poll: Many Americans Still Unsure Whom To Vote Against
Late Bulletin (from The Onion)…
2004 Result: “Red” (Bush) vs. “Blue” (Kerry or Gore)
The U.S. remains sharply divided after 2004 election…in Congress also.
http://www.2001inaugural.com/2000-election-map.html
Result in 2000Bush: 271Gore: 267
Result in 2004Bush: 286Kerry: 252
2000 Census+ 7 for red
Only +8 shifted, net
2008 Election is the Democrats to lose…
Dems GOP
States Won in 2004 19+DC 31
Results in 2004 252 286
Total Electoral Votes Needed 270 270
Likely switches in 2008: OH, IA +27 -27
More shifts in 2008 ?: MO, NM, NV, VA +39 -39
Possible Result for 2008: 318 220
Alternative Scenario: Puts Election in New House [Each state gets 1 vote]Results in 2004 252 286Likely switches in 2008: OH + IA = + 27 279 259McCain counterpunch: WI or MN = -10 269 269(or GOP keeps OH, but loses IA, NM, WV)
2004 Results with Voting Tendencies
The electoral battle will be focused on just a few “edge” states. The electoral battle will be focused on just a few “edge” states.
http://www.electoral-vote.com/
There are plausible scenarios for a tie: 269 – 269 in EC.
Dems: IA+NM+NVDems: OH +IA, less MN or WI
UPDATE: Scenarios for 2008 Face-off
A) “Camelot restored” Obama wins out,
Hillary loses (not chosen VP)
C) “There will be Blood”Clinton selected by Super Delegates – Obama leads protest (Chicago 1968 ?)
SCENARIOs Democrats:
Huge momentum and turnout. “Yes we can” rivals March Madness
Elevated turmoil in Gulf region brings security issue back.
Outrage: “Million Voter March”. Black vote stays home. Chaos.
Dem
ocr
ats GOP surprise:
Democrats lose some voters in struggle for nomination. McCainpulls in OH, PA, WI.
Blue Victory:Low GOP turnout with “liberal” nominee, GOP suffers all over.
Divided Gov’t:Clinton unites Conservatives. McCain garners Independents 3:2. Dems keep Congress.
Republicans:
B) “We Were Soldiers”Obama survives against Hillary -- doubts emerge. Economy holds up.
70%
25%
5%
Obama Surges after Super Tuesday
80%
20%
Open Market Trading (4/12/08) on “Presidential Futures” (Iowa Biz)
Obama wins Iowa
Hillary rallies in N.H.
Obama on fire in
Super Tuesday
Establishment Democrats break
for Hillary
Obama internet money train kicks in
Outlook on Carbon Policy: 2009+, not 2008
• Differences are wide just between Democrats in House vs. Senate.
• Regional differences are significant, creating winners and losers.
• Recall: Clean Air Act took 12 years (to 1990) – consensus is difficult.
• House is less responsive to international pressure vs. district issues.
• “Pay-as-you-go” rules in House pose a real fiscal challenge.
– Curbing oil and gas tax benefits to create funds is not easy.
– Possible opportunity with expiration of RE credits at end of 2008.
– Industry not enthusiastic about carbon funds going to Treasury.
– Allocating carbon allowances creates a huge battle.
• Next White House will be more disposed toward a climate bill, no matter what happens in presidential election, but terms vary.
• Democrats will pick up seats in House and Senate, so environmental groups already see they can get a better carbon reg deal in 2009.
• Wildcards: More storm damage, oil supply disruptions, heat wave or drought aggravating electricity prices, a terror attack in Gulf.
C. Energy & Carbon Policy Outlook
Key Agencies Energy / Climate 2008 Campaign International Congress v. WH Capital Mkts
EIA recently raised its forecast for more coal use in the wake of rising natural gas prices.EIA recently raised its forecast for more coal use in the wake of rising natural gas prices.
Situation Briefing: U.S. Energy
• Declining on-shore U.S. oil production for three decades• Moratoriums intensified for off-shore drilling (e.g., Florida, California) • Tighter regional clean air regulations in major urban areas• Currently importing >60% of oil consumption, most of it from unstable – or
even hostile regimes, who explicitly limit supply– Very grave terrorist threats at supply sources or choke points (2/26/06)– Steady erosion of global swing capacity of oil production and refining– No new refineries built in U.S. since 1976; (just expansion at sites)– Balkanized gasoline markets: 11 formulas in 3 grades = >30 fuels
• Global oil consumption hit a record high in 2007: 84 M bbl/day• Substantial local resistance to more LNG capacity• Demand driven by weather, commuting patterns, growth… not price• Carbon regulations on the horizon, but very uncertain terms and timing
CrisisDrivers
Therefore: Energy Security & Reliability >> End-use Market Pricing
After Supreme Court Ruling, no turning back
• Mass v. EPA – “ripple effect”
• 1. States have standing
• 2. CO2 is a pollutant under CAA
• 3. EPA must determine harm
• GHG regulation is coming – no longer if but:
• What will it look like?
• When will it happen?
• Whom will it effect?
• Energy from fossil fuels, remains the dominant source: who will pay ?
Key Players Massachusetts et al. v. EPA(U.S. Supreme Court Case No. 05-1120)
Petitioners: the Commonwealth of Massachusetts, the states of California, Connecticut, Illinois, Maine, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington, the District of Columbia, American Samoa Government, New York City, Mayor and City Council of Baltimore, Center for Biological Diversity, Center for Food Safety, Conservation Law Foundation, Environmental Advocates, Environmental Defense, Friends of the Earth, Greenpeace, International Center for Technology Assessment, National Environmental Trust, Natural Resources Defense Council, Sierra Club, Union of Concerned Scientists, U.S. Public Interest Research Group.
Respondents: the U.S. Environmental Protection Agency, the Alliance of Automobile Manufacturers, National Automobile Dealers Association, Engine Manufacturers Association; Truck Manufacturers Association, CO2 Litigation Group; Utility Air
Regulatory Group, and the States of Michigan, Texas, North Dakota, Utah, South Dakota, Alaska, Kansas, Nebraska, and Ohio.
All blue states
Projected CO2 Emissions, 1990 – 2030 “Major Emitters” (Top 10) matter most. U.S.+China = 50% in 2030
Kyoto signers were 55% in 2002; but will only be 35% in 2030.
1990 2010 2030
EIA: U.S. CO2 Emissions by Sector, 2010 rev
Ele
ctr
icit
y
Re
sid
en
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Co
mm
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ial
Ind
us
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l
Tra
ns
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rtCoal
PetroNGas0
100
200
300
400
500
600
700
Coal
Petro
NGas
2010
To
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of
Ca
rbo
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mit
ted
Source: EIA, AEO 2008
EIA trimmed emission projections only a bit due to higher gas prices.EIA trimmed emission projections only a bit due to higher gas prices.
CrisisDrivers
EIA: U.S. CO2 Emissions by Sector, 2030 EST
Ele
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PetroNGas0
100
200
300
400
500
600
700
Coal
Petro
NGas
2030
To
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of
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mit
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Source: EIA, AEO 2008
Absent a massive turnover in equipment, CO2 emissions keep rising.Absent a massive turnover in equipment, CO2 emissions keep rising.
CrisisDrivers
Electricity broken out by end-use sector.
Electricity broken out by end-use sector.
Coal fired electricity continues to rise in total because of higher gas prices.
Baseline: U.S. CO2 Emissions by Sector, 2000
Ele
ctr
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y
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mm
erc
ial
Ind
us
tria
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Tra
ns
po
rtCoal
Petro
NGas0
100
200
300
400
500
600
Coal
Petro
NGas
2000
To
ns
of
Ca
rbo
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Source: EIA, AEO 2003
Electricity broken out by end-use sector.
Electricity broken out by end-use sector.
Power sector drew early attention, but transportation is crucial also.Power sector drew early attention, but transportation is crucial also.
Difficulty in dealing with transport sector emissions plagues EU as well.
CrisisDrivers
“Where are the U.S. CO2 Emissions”
Driver: “Life, Liberty & Pursuit of Happiness”
In U.S.: Drivers Vehicles1960 87m 74m -13m1980 145m 156m +11m2000 190m 220m +30mMass Transit ridership: 10b trips, rising slowly
CrisisDrivers
Public transit use peaked in 1946, when Americans took 23.4 billion trips on trains, buses and trolleys, said Donna Aggazio, spokeswoman for the American Public Transportation Association. By 1960, it dropped to 9.3 billion, and it declined further as roads and car culture gripped the nation. In 1972, transit ridership hit rock bottom at 6.5 billion trips. Since then, it seesawed until 1995, when it began steadily climbing. Ridership in 2007 reached 10.7 billion trips.
Consumer Energy / Electric Use NOT based on Price
New York Times, March 30, 2007
Drivers Shrug as Gasoline Prices Soar… As Americans enter the sixth year of rising oil and gasoline prices, their shift in driving habits this time has been much less extensive. What’s more, in recent weeks, gas consumption has gone up, not down, and drivers are changing their daily driving habits only slightly. “I don’t think about gas prices at all,” said Michael Machat, 48, a lawyer in West Los Angeles, where gasoline prices are among the highest in the country. As he filled up his BMW with super unleaded at $3.39 this week, he added, “I guess maybe if it was $10 a gallon, I’d think about it.” A recent study that Christopher Knittel, an economics professor at the University of California, Davis, helped write showed that every time from November 1975 to November 1980 that gasoline prices went up 20 percent, consumers changed their driving behavior by cutting gas consumption by 6 percent per capita nationwide. But from March 2001 to March 2006, drivers reduced consumption just 1 percent when prices rose 20 percent. Prices swung up and down seasonally during both periods, but Mr. Knittel said the two periods were comparable because regular gasoline prices increased in both periods by about 66 percent, to $2.50 from $1.50 in real terms, set at 2000 dollars.
Price signals are not effective in driving consumption, but do affect investment. Lifestyle, weather, sprawl are bigger factors.
Prices rising
Per capita use steady
Prices falling
1980s 1990s 2000s
“Getting the carbon price right” is more important to investors than consumers
CrisisDrivers
Transportation Sector Vital, but Difficult with Growth
“I am proposing $1.2 billion in research funding so America can lead the world in developing clean, hydrogen-powered automobiles.”
President Bush, Jan. 2003“We have a serious problem: America is addicted to oil.” President Bush, Jan. 2006
FORD HYBRID
EPAct 2005• Biofuels Standards and
tax subsidies • Loan Guarantees for
fuel plants and Auto manucturing facilities
TOYOTA PRIUS
CrisisDrivers
EIA: Energy Trade Balance… Unsustainable EIA: Monthly Energy Review, March 2008 Energy imports aggravate
the US trade balance deficit.
Hitch: recession related to 9/11
Curbing Carbon Emissions is Smart Anyway…
• Resource reserves: We are using up resources within several decades that took millions of years for the planet to generate. Fossil fuel resources are NOT renewable. Conservation is vital.
• War & Terrorism: Because of where fossil fuels are located, rising prices end up providing funds for terrorist networks. Some believe resource wars are already underway… again (See Human History).
• Water: Oil and chemical spills threaten vital water supplies and wildlife; mercury from coal accumulates in lakes and streams.
• Urban pollution: As humans increasingly live in cities pollution from burning fossil fuels is killing us with pollution and vehicle accidents.
• So, curbing fossil fuel use or finding more innovative ways to utilize it efficiently without causing damage to our air and water makes sense.
• This will require multiple decades (two generations) to complete a transition to an economy based on low-carbon sources.
0
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1500
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1990 1995 2000 2005 2010 2015 2020 2025 2030
U.S
. Ele
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EIA Base Case 2007
EPRI “Carbon Constrained” Scenario for Electricity
Technology EIA 2007 Reference Target
Efficiency Load Growth ~ +1.5%/yr Load Growth ~ +1.1%/yr
Renewables 30 GWe by 2030 70 GWe by 2030
Nuclear Generation 12.5 GWe by 2030 64 GWe by 2030
Advanced Coal GenerationNo Existing Plant Upgrades
40% New Plant Efficiency by 2020–2030
150 GWe Plant Upgrades
46% New Plant Efficiency by 2020; 49% in 2030
CCS None Widely Deployed After 2020
PHEV None10% of New Vehicle Sales by 2017;
+2%/yr Thereafter
DER < 0.1% of Base Load in 2030 5% of Base Load in 2030
* Achieving all targets is very aggressive, but potentially feasible.
Reaching lower carbon goals requires many technologies:
U.S. Electricity Sources (2006) – over 24 hours
U.S. Electricity Sources - 2006 (indexed to 24 hrs)
CHP
Pumped
Geo (5m)
Solar/PV (0.2m)
Wind (9m)
Wood (14m)
Waste (6m)Petro (22m)
Hydro (1.7h)
Coal (11.8h)
N.Gas (4.8h)
Nuclear (4.7h)
RE
Coal Petro N.Gas CHP
Nuclear Pumped Hydro Wood (14m)
Waste (6m) Geo (5m) Solar/PV (0.2m) Wind (9m)
RE = 34 minutes a day
Natural gas accounts for most growth since 1990; overall demand +33%
4,038 TWh
OUTLOOK ON U.S. CLIMATE POLICY TIMING: UTILITY EXECS (2007)
Source: Survey by GF Energy of Utility Executives in North America, April 2007
themselves
Challenge: New capacity is needed before federal legislation is expected to be resolved and litigated.
Opportunity Built on Princeton CMI Wedges
“Carbon emissions from fossil fuel burning are projected to double in the next 50 years (Figure 1), keeping the world on course to more than triple the atmosphere’s carbon dioxide (CO2) concentration from its pre-industrial level. In contrast, if emissions can be kept flat over the next 50 years (orange line), we can steer a safer course. The flat path, followed by emissions reductions later in the century, is predicted to limit CO2 rise to less than a doubling and skirt the worst predicted consequences of climate change.”
Robert Socolow, Steve Pacala in Science (Aug. 2004)
“Keeping emissions flat for 50 years will require trimming projected carbon output by roughly 7 billion tons per year by 2054, keeping a total of ~175 billion tons of carbon from entering the atmosphere (yellow triangle). We refer to this carbon savings as the “stabilization triangle.”
“Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies”
Figure 1
Technology Vital to Business Opportunities Princeton Carbon Mitigation Initiative
EPA Role
Category Technology for savings of 1 GigaTon/YearElec-tricity Fuel Heat
Carbon Sink Worldwide results by 2054
Efficiency1 Major Efficient vehicles (double mpg worldwide) X 60 mpg vs. 30 x 2Bil vehicles
2 Minor Reduced use of vehicles (e.g., telecommuting) X Curb VMT 50% to 5,000 m/yr
3 Major ? Efficient buildings and industrial facilities X X X Lighting, heating, cooling
4 Major Efficient baseload coal plants X 60% efficiency vs. 30%; 13K TWh
Decarbonization of power5 Minor Gas baseload power for coal baseload power X 1400 GW of gas vs. coal
6 Major Capture CO2 at baseload power plant X 800 GW of coal with CCS
7 Little Nuclear power for coal power X 700 GW of reactors vs. coal
8 Little Wind power for coal power X 2000 GW of wind (2 M turbines)
9 Little PV power for coal power X 4000 GW of PV v. gas; 40K sq.km
Decarbonization of fuel10 Major Capture CO2 at H2 plant X 400 Mt of H2 (vs. 40 Mt today)
11 Major Capture CO2 at coal-to-synfuels plant X 30M bpd with CCS
12 Little Wind H2 in fuel-cell car for gasoline X 4000 GW of wind
13 Minor Biomass fuel for fossil fuel X 1000 B liters of ethanol (100x today)
Forests & Soils14 Minor Reduced deforestation, plus reforestation X 6m hectares; zero burning
15 Minor Conservation tillage X Low tillage to all cropland
“Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies”
Carbon Cap from Various Proposed Bills
Several bills call for moving below 1990 levels by 2030 or sooner.
How’s Europe doing on Carbon Emissions ?
Recent economic growth and transport fuel use is reversing early GHG savings from economic contraction and shift from coal to gas.
How’s Europe doing on Carbon Emissions ?
Recent economic growth and transport fuel use is reversing early GHG savings from economic contraction and shift from coal to gas.
Early savings in Germany have been in shutting down massive inefficiencies in old East German facilities and shifting to gas.
Turmoil in EU Carbon Market (May 2006)
http://www.ft.com/cms/s/b03dbc7a-06cf-11db-81d7-0000779e2340.html
Europe hopes to avert a false economy in carbonBy Fiona Harvey, June 28 2006 19:38 | Financial Times of London“What came close to putting the scheme on life support was data released between late April and mid-May which showed that last year – the first the scheme had been in operation – businesses covered by it had been given more permits than they needed because member states had overestimated demand.”
Public sector “gaming”
Several EU states over estimated the allowances they might need as economic growth and demographics came in below projections, and national bureaus also wanted to create “headroom” in their estimates for their industry to reduce the impact of carbon compliance costs. Lower future demand for allowances led to a sudden selloff.
UK Regulator (FSA) Posts Risks on Carbon Trading
http://www.ft.com/cms/s/b03dbc7a-06cf-11db-81d7-0000779e2340.html
UK watchdog warns on carbon trading / March 2008By Fiona Harvey and Ed CrooksPublished: March 31 2008 22:05 | Financial Times of London The fast-growing market in carbon dioxide emissions poses risks that could threaten other commodities markets, the FSA, Financial Services Authority, warned on Monday. The watchdog said problems including investors being sold unsuitable products, confusion over the regulation of emissions traders, and insufficient official data created risks to both the fledgling global emissions markets and to related commodities such as gas and electricity. EU traders in fossil fuels and electricity, for instance, factor carbon permit prices into their deals, which can hit consumers. “Cap and trade” systems, which place a limit on the amounts of carbon that companies produce, are widely seen as one of the most promising ways of curbing greenhouse gas emissions at the lowest cost, and have been embraced since 2005 by the EU. In the EU the market is regulated by the European Commission. The FSA does not have a direct hand in regulating the market, and said it had no plans to do so. But it said in a paper published on Monday that “the emissions markets justifiably demand the FSA’s continued attention”. The emissions markets have been beset by difficulties, for example in 2006 when it was revealed that more carbon permits had been issued for the first phase of the EU’s scheme than were needed. This led to a steep fall in the price of the permits. Among problems cited by the FSA is that some companies authorised for other financial markets may have misled customers by citing their FSA authorisation in relation to carbon trading. The paper warned: “Aside from being misleading and leading to potential enforcement action, this type of behaviour undermines confidence in the market.” There was a strong reputational risk to the carbon market from unsuitable products being sold to investors, the FSA said.
The next “credit” crisis: carbon credits ? (March 2008)
U.K. FSA lists risks of carbon trading: The Financial Services Authority does not govern the carbon market but the watchdog listed risks in a report on carbon regulation this week:
• The lack of links between emissions trading markets globally; • Some companies authorized for other financial markets may have misled customers by citing FSA authorization; • Unsuitable products being sold to investors, which could "potentially lead to damage to consumers or to disorderly trading, and a lack of confidence in market"; • The potential lack of appropriate experience among practitioners; • The quality of information available about emission quantities and allowances; • The lack of market liquidity.(also on p.A1 of WSJ, April 12, 2008)
$7.1
$7.6?
EPA Budget Declining… not funded to regulate CO2
The Game:White House OMB cuts state water grants and earmarks, knowing Congress will restore them. Congress will likely boost climate budget also… in 2010.
The Game:White House OMB cuts state water grants and earmarks, knowing Congress will restore them. Congress will likely boost climate budget also… in 2010.
Source: EPA Budget in Brief, 2009
Budget Challenge in USA for U.S. EPA
Drivers in EU vs. USA… and how to engage Asia ?
EU is committed to a cap because:
• They can’t harmonize 27 national tax systems (social contracts)
• A cap is a policy mandate needed to prop up coalition parliaments
• They need CDM as a means to channel funds to emerging nations
• They are shifting from coal to gas, with market pricing of electricity, rather than regulated pricing
• EU economies face demographic decline, and are stagnant
• EU is casting energy security on Russian/FSU gas, and they want to tax profits from fossil economy – some interest in coal with CCS.
USA can choose and engage Asia:
• We have a common federal tax system (and clever tax lawyers)
• State incentives can supplement and help tailor approaches
• U.S. will be at 50% coal for power, and China, India are using more coal
• USA and Asia are still growing ! But, U.S. growth is concentrated in “Red” states; …“Blue” states are older, colder and losing young people
• Asia leads in building new reactors and we have big stake in nuclear for national security… and GHG gains
• Our future requires baseload and RE, including PHEVs (electrify transport)
Smart
Policy ?
WBCSD Module: Pathways to 2050
Pathways to 2050 - Energy and Climate Change
Pathways to 2050 - Energy & climate change builds on the WBCSD’s 2004 Facts and Trends to 2050: Energy and Climate Change and provides a more detailed overview of potential pathways to reducing CO2 emissions.
The pathways shown illustrate the scale and complexity of the change needed, as well as the progress that has to be made through to 2050. Our “checkpoint” in 2025 gives a measure of this progress and demonstrates the urgency to act early to shift to a sustainable emissions trajectory.
The WBCSD has chosen to continue to illustrate the challenges associated with one particular trajectory, consistent with the discussion already presented in Facts and Trends ( 1.9 MB). This document therefore looks closely at the changes needed to begin to stabilize CO2 concentrations in the atmosphere at no more than 550-ppm (see glossary), which relates to the “9 Gt world” described in Facts and Trends. As such, and based upon simplified assumptions and extrapolations, we have made many choices, some arbitrary, to present this single illustrative story. It is neither a fully-fledged scenario nor does it recommend a target. Moreover, this document does not discuss policy definitions or options, topics that need to be dealt with separately.
www.wbcsd.org
World Business Council for Sustainable Development
Smart
Policy
0
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2005 2050
Target Mobility - FuelsVehicle Efficiency Mobility ChoiceRenewable Power CCSBuildings IndustryDomestic Other Actions
WBCSD: Opportunity starts at national / sectoral level
A. Opportunity Wedges (National)(Developed Country Example)
B. National/Sectoral Goals & Targets
Efficiency BuildingsIndustry xx % p.a.
Domestic through to 20xx
Power Renewables xx MW p.a. by 20xxGeneration CCS xx tonnes CO2 p.a.
Mobility Bio-fuels xx litres p.a. by 20xxEfficiency xx mpg by 20xx
Choice Hybrid / Diesel uptakeMass transit
C. National Policies
Buildings – adopt new country building standards, design awareness
Industry – Sectoral agreements, emissions trading, technology standards
Domestic – carbon labeling, increased product standards (e.g. standby energy)
Renewable Energy – renewables targets.
CCS – funding for infrastructure, tax cuts on capital investments, price signals for
carbon via emissions trading
Biofuels – targets, support for manufacturing, CO2 labeling
Vehicle Efficiency - support technology, incentives, sectoral agreements
Mobility Choice - consumer incentives, promote public/private partnerships for
transport networks
National CO2 trajectory
CO
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GHG markets are expanding globally
Linkages develop between all
systems and more systems appear
2000 2005 2010 2015 2020 2025
Danish-ETS
UK-ETSCalifornia vehicle CO2 & ETS
Australian states ETS
Canadian LFE-ETS
EU-ETS
CDM
CDM evolves to includes sectors
Pre-Kyoto Kyoto
Expanding EU-ETS
US NE-States ETS
Japan technology standards
Linkage framework is implemented
88
A future framework – What is needed?
1. A long-term goal (>2040)… geared to capital markets Established by 2010 Described in terms of carbon equivalent emissions
2. Technology development and deployment framework Expanded support for R&D Global standards Technology transfer driven by standards Risk management
3. Emissions management at national and sectoral level Bottom-up approach aligned with energy policy Sector by sector Expanded project mechanism Progressive inclusion of all countries
4. Linkage framework to encourage international trading
WBCSD Framework vs. Kyoto Protocol
Kyoto – 2008-2012 WBCSD Revised Framework
Top down reduction obligations Bottom-up – National / sector policies and commitments
Short term (5 year) compliance obligation Longer term (50 year emissions trajectory)
Allocation of a reduction obligation – equitable allocation difficult to achieve politically
National opportunities and policies aligned with energy security and climate change priorities
Least cost compliance – not enough certainty for large investments in new technologies
Technology development and deployment focus
Emissions market Deeper engagement of capital markets and greater influence over allocation of capital driven by a wide range of policies and a broad based emissions market.
Targets –tons reduced relative to a baseline Targets still in terms of carbon reductions – but aligned to specific actions with GHG benefits – e.g. XX MW of wind power by 20XX.
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
1) Able to meet most U.S.needs with EE RE
2) New nuclear on-line by2020 (EPAct 2005)
3) New GHG bill enactedby 2012
4) GHG regs likely fromEPA by 2015
5) Cap-and-trade betterthan carbon tax
6) Can handle near-termwith natural gas
7) CCS needed at outsetfor coal plants
8) CCS costs can becovered by rates
9) States best to regulateCCS liability
10) State RPS standardsbetter than Fed RPS
Strongly Disagree Strongly AgreeMaybe; not sure
Energy Policy Survey in Lehman Roundtable at NARUC
Bond Market Viewpoints (32 responses; > $2 Trillion under management)
Least variance (high agreement)
Most variance
Observations:• Wide agreement that EE / RE
will not offer enough.• New nuclear is possible.• GHG legislation likely,
though regs may take longer than 2015.
• Not clear that cap-and-trade is better than tax. Lot of policy confusion.
• Just building gas will likely fall short of demand.
• CCS terms, liability, and recovery of cost not clear yet. Policy unsettled.
• State RPS clearly better than federal RPS.
Strong Outlook for Clean Energy Investing
Clean Energy Trends - 2007“Since the publication of our first Clean Energy Trends report in 2002, we’ve provided an annual snapshot of both the global and U.S. clean-energy sectors. In this, our sixth edition, we find markets for our four benchmark technologies — solar photovoltaics, wind power, biofuels, and fuel cells — continuing their healthy climb. Annual revenue for these four technologies ramped up nearly 39% in one year — from $40 billion in 2005 to $55 billion in 2006. We forecast that they will continue on this trajectory to become a $226 billion market by 2016.”
Rapid growth is forecast for investment in clean energy niches.Rapid growth is forecast for investment in clean energy niches.
Source:Clean Edge
Climate & Clean Energy Business Opportunities
CARBON MANAGEMENT APPROACHES Now to 2010 2010 - 2020 2020 - 2030A. Energy & Sequestration
1 Energy Efficiency (Practices / Equip)- Buildings: residential, commercial, community-scale M M H- Industrial efficiency and co-generation; on-site power M M M- Smart transmission and distributed generation L M H- Expanded demand side mgmt.; consumer campaigns L L M
2 Low Carbon Power Generation- Power from coal or gas with carbon capture - storage L M M- More nuclear power L L H- Renewable power: wind, biomass, solar, geothermal L L M
3 Transportation- Vehicles and motors L M H- Non-grain Biofuels L M H- Electrified transport (plug-in hybrids) L L H- Hydrogen fuels (from nuclear or renewables) L L M- Telecommuting, traffic flows L L L
B. Sinks and Resource Management (CO2 + Methane)Aggressive forestry L L MAgricultural soil management L L LLandfill gas capture L L LLivestock management L L L
C. AdaptationCoastal building and community measuresCommunity preparation & Emergency response systems
Different opportunities emerge at varying paces with varying impact.Different opportunities emerge at varying paces with varying impact.
Wrap-up: Capital Incentives First, + Long-cycle Cap (2040)
• Accelerating turnover of huge capital stock from carbon intensive assets to low-carbon, efficient systems is the #1 issue; curbing consumption won’t be enough:
– Power generation (and sequestration) and grid upgrades (300 GW of coal)– Fuel refineries, vehicles, transport infrastructure (300m vehicles; 150B gal.)– End-use efficiency in wide array of buildings (design, use, “smart” systems)– Industrial manufacturing and fuels production in a vast economy
• Capital incentives stimulate economic growth, which is needed to fund innovation and regional infrastructure, and change how energy is used.
• Capital incentives create demand for engineering / tech services and products.• North American capital markets are largest, most responsive, already in place.• Cap & trade creates bureaucratic inefficiencies and incentives for “gaming” and
widespread difficulties for enforcement in both public and private sectors.– Economy-wide enforcement costs are extensive; bond market is more liquid. – Uneven impact creates large scale winners and losers by region, sector.
• Natural sources of carbon and climate drivers are immense and not “capped”• Investment incentives engage big developing economies (BRIC); caps don’t.• A long-term (~2040) cap / permit system geared to the capital cycle is feasible.
Take-Home Message: Policy Approaches Still in Flux
• Aim “price signals” at capital markets first, then consumers• A massive >$3 Trillion investment ($100B+ a year to 2040) is needed
to overhaul both power and transport sectors.• A short-term cap (2020) will trigger more volatility of fuel and power
prices, chilling the investment needed.• Gearing a CO2 emissions limit to the capital cycle (30 years+) enables
the economy to pay the “mortgage”… (recommended by WBSCD) • Capital incentives can be funded with fuel taxes, fossil royalties, CO2
injection fees – all currently used ! • Alternative fuels and renewables curb our unsustainable import
addiction, while damping oil / gas price volatilities. • Technology and market factors need risk-based policies.
Questions & Discussion
Andrew Paterson
Director – Economics & Finance Consulting / North America
ECONERGY
www.econergy.com
202-822-4981 x311
Environmental Market data:
www.ebiusa.com
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BACKGROUND: ECONERGY COMPANY FOCUS
• Renewable Project Development– Latin America: Acquisition and development of hydroelectric and wind power projects in
Bolivia, Brazil, Mexico, Costa Rica and Chile
– United States: Renewable energy and carbon offset project development
• Energy and Carbon Consulting– Completed over 250 assignments in more than 70 countries
– Perform market studies, technology assessments, fuel/feedstock resource assessments and investment performance reviews
– Advise corporations, utilities, energy developers, banks, governments and multilateral institutions on carbon savings and project potential
• Carbon Markets– Originate CERs and VERs from Econergy investments and investments of partners and
clients
– Contribute to the development of programs that foster investment in high-quality GHG emission reduction projects domestically and internationally
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Thank You for attending and Thank you to our Speakers and sponsor
Thank You for attending and Thank you to our Speakers and sponsor