1. NATIONS: While economies crash, environmentally friendly laws proliferate (ClimateWire, 02/24/2009)

Nathanial Gronewold, E&E reporter

NEW YORK -- Fears that governments will halt or even roll back efforts to tackle climate change as they struggle to deal with an international financial crisis and rising unemployment appear unfounded. Instead, what is happening is a global boom in new eco-friendly legislation.

A new study published yesterday by Deutsche Bank shows that governments' support for environmental and climate change initiatives remains solid and strong, promising to help the clean technology industry revive from the current global economic slump much sooner than most other industries.

In a survey of recent government action around the globe from July 2008 to February 2009, climate change business advisers and experts at the bank say that roughly 250 new regulations supporting energy efficiency, renewable energy and climate change strategies were passed during the period when economies were crashing. On top of an increasingly favorable regulatory climate, new economic stimulus spending approved by multiple governments will further fuel a revitalization of investment in clean energy and climate change mitigation, now threatened by stagnant credit markets.

"Governments have been stepping up the pace of legislation designed to help and support 'green' industries," said Mark Fulton, Deutsche Bank's head of climate change investment research, in the report foreword. "The burst of activity on this front by the new Obama Administration in the U.S. is particularly visible and will provide welcome leadership and focus to similar efforts across the globe."

In an accounting of various stimulus packages by governments around the world, Deutsche Bank analysts say that well over $200 billion will be spent globally on green projects over the stimulus spending period. The lion's share of spending, $106 billion, will come from the U.S. government, thanks to the package pushed forward by President Obama.

China and the U.S. appear to be the biggest spenders

The report's authors say that the contribution to green business and climate change industries from China's announced stimulus spending is harder to define, since that government's plan lacks enough clear specifics. But spending from Beijing should also provide a big boost to the sector, especially for firms invested in energy efficiency technology and products.

A "ramping up" of government anti-climate change measures in other countries, as well, including Germany, the United Kingdom, France, New Zealand, Greece and others, also bodes well for green-oriented companies and investors. Further efforts to place a price on carbon dioxide pollution, especially regional and national developments in the United States, should also help bolster global carbon markets, now wavering in the weak economy, analysts say.

"We believe this trend towards greater regulation will provide crucial support to climate change industries during the current global economic downturn," Deutsche Bank says in the report. "Our research shows that, contrary to the widespread concern that recession would force governments to abandon initiatives on this front, governments have in fact been increasing their efforts."

As evidence for their conclusion, the analysts point to a series of legislative milestones that have occurred well into the onset of the current economic crisis. Solar power, in particular, stands to become a big winner as regulations kick in and stimulus spending is rolled out in the months ahead.

For instance, in November of last year, French authorities pledged to expand the amount of solar power generated in that country by a factor of 400 over the next 12 years. The country also aims to increase the percentage of alternative energy sources other than fossil fuels or nuclear power in its energy production mix to 23 percent of the total by 2020. Part of the plan involves generous feed-in tariffs of the sort popularized by Germany that stand to favor solar generation over other sources.

The United Kingdom is also slated to introduce German-style feed-in tariffs -- which guarantee photovoltaic energy suppliers a fixed price per kilowatt-hour that they can sell to utilities -- by November this year. Analysts expect the pending regulatory framework will primarily benefit small-scale renewable power generation, especially solar.

Solar power stands to gain as feed-in tariffs multiply

Aside from support by the U.S. federal government, solar power stands to gain in the coming uplift from expanding state government support, first popularized by projects in California and New Jersey, the nation's top two solar power states.

An agreement among the state governor, business groups and the utility company in Hawaii could see the United States' first feed-in tariff system introduced by July 2009. Discussions on introducing feed-in tariff systems are also under way in Minnesota, Michigan and Indiana, and utilities in Florida have spoken in favor of a similar plan.

Deutsche Bank also believes that state renewable portfolio standards, mandates on utility companies to generate a proportion of their electricity from renewable energy sources, will further help the solar power industry weather the financial crisis. Particularly promising are moves in the U.S. Congress to institute a federal renewable energy standard, a provision that solar industry insiders say could be added to a new energy bill.

Worldwide solar technology manufacturers report plans to boost output and manufacturing capacity, despite warnings by market watchers that the industry could soon be facing an oversupply of solar power capacity this year as weak markets dampen demand. Last week, market analysts at the New York firm Lux Research predicted that overproduction by solar technology companies could lead to supplies becoming more than double the amount of demand this year, foreshadowing increasingly heated competition that will likely lead to the failure of dozens of companies.

At a Piper Jaffray clean energy conference held here last week, solar company executives largely shrugged off such warnings, confident that the multiple public policy moves cited by this newest Deutsche Bank study will prove a boon to their industry.

Other technologies will survive and thrive during the recession, thanks to government policy, analysts say.

Makers of compact fluorescent lights will enjoy growing market share as countries work to phase out sales of wasteful and inefficient incandescent light bulbs. In October of last year, for example, the European Commission was asked to begin drafting regulations for phasing out incandescent bulb sales in the European Union by 2010. New Zealand recently announced a ban on incandescent lighting beginning in late 2009. The U.S. government has already ordered a phase-out by 2014.

Higher oil prices should lift sagging carbon prices

While various government mandates, incentives and spending packages will prove extremely important to the vitality of the clean technology and renewable energy industry over the challenging economic period, Deutsche Bank analysts say instituting a price on carbon will be far more important for the long term.

Global carbon markets have been hit hard as oil and energy prices have collapsed since peaking last summer. Prices for E.U. greenhouse gas allowances and U.N. offset credits have slid sharply over the past six months, from more than €20 per tonne of carbon dioxide equivalent to less than €10 per tonne today.

But most energy market analysts expect oil prices to trend upward slightly toward the summer as government stimulus spending kicks in and major oil producers cut output to match fallen demand. Higher energy commodity prices should help lift carbon markets globally.

And despite a coming flood of new issuances of greenhouse gas emission allowances in Europe and from the U.N. Clean Development Mechanism, Deutsche Bank sees positive growth for carbon markets this year, thanks again to new government regulations. Legislative activity in the United States, including evolving regional cap-and-trade programs, state moves to regulate the voluntary carbon markets, and forthcoming negotiations on a nationwide carbon trading system in Congress, should provide the greatest lift to the carbon markets, further benefiting the climate change industry.

"We continue to see the establishment of transparent carbon prices as the key long-run regulatory development to encourage private investment flows," the report's authors say.

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