Banking for 7 billion and 7 million

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GLOBAL INVESTOR 3.06 Basics — 22 “Climate change, deforestation, the voracious drain on natural resources cannot be ignored. Unchecked, these forces will hinder the economic development of the most vulnerable nations first and, ultimately, all nations.” Tony Blair, UK Prime Minister, Address to US Congress, July 2003 As the LA Times aptly puts it, “Global warming is a deadly threat precisely because it fails to trip the brain’s alarm, leaving us soundly asleep in a burning bed.” 1 The earth’s temperature could rise under the impact of global warming to levels far higher than previously predicted, according to the United Nations’ team of climate experts. Since 1960, the average global temperature has risen by one degree Celsius, and it is expected to continue to rise. The National Academy of Sciences recently presented to Congress a study indicating that the earth’s temperature is now the hottest it has been in 2,000 years, and humans are responsible for much of the warming. In addition to the implications of a rise in global average temperatures, secondary effects will include rising sea levels and a rise in extreme weather patterns. In some regions, damage from climate change has become glaringly visible, with stronger hurricanes, floods and disintegrating ice sheets as testament to its merciless severity. Climate change may well be the greatest threat and challenge facing our generation, putting tremendous strains on the environment, the world economy and individual businesses. We believe global warming will have both negative and positive implications for global economies and regard climate change as a clear risk. Long-term planning is one way of mitigating its potentially irreversible effects. Global warming has been linked to growing emissions of greenhouse gases (GHGs) caused by human activities. According to Eurostat, a vast majority of GHGs are from CO 2 (CO 2 : 83%, methane: 8.8% and nitrous oxide: 6%). CO 2 concentration in the atmosphere has shot up by 11% since the beginning of industrialization and is expected to double this century. According to a recent International Energy Agency (IEA) report, carbon dioxide emissions and oil demand will continue to grow rapidly over the next 25 years, and this worrisome trend is likely to worsen, extending this outlook beyond 2030 (see figures 1, 2 and 3). The climate problem cannot be solved piecemeal. The challenge is to create new energy systems that not only protect the climate but are also economically superior. The burgeoning markets for energy-efficient technologies – such as solar panels, wind turbines and biofuels – show what can happen when strong national policies are enacted. The global market for renewable energy technologies topped USD 25 billion in 2004, and is already helping to reduce greenhouse gas emissions in countries such as Germany and Spain. Scientific and political pressures are leading to better policies on climate change, while social changes and corporate action are producing a wide range of private-sector solutions as well. We believe these dynamics will affect most companies and create many investment opportunities. Many governments consider technology the best means to combat climate change. Renewable energy: The way to the future Renewable energy is the fastest-growing energy sector in terms of annual percentage increase, and has significant potential in helping to achieve global environmental, economic, safety, social and sustainability goals. According to a report released by the Renewable Energy Policy Network for the 21st Century (REN21), global investment in the clean energy sector (excluding large hydropower plants) reached a record of USD 30 billion in 2004, pushing renewable energy capacity to 160 GW and representing 4% of global capacity. It is becoming a big business, attracting some of the world’s largest companies, including Sharp, Siemens, General Electric and Royal Dutch Shell. Market leaders championing renewable energy in 2004 included China (solar hot water), Germany (solar electricity), Brazil (biofuels) and Spain (wind power) (see table 3). The fastestgrowing energy technology is grid-connected solar photovoltaic (PV) systems, whose capacity has increased by 60% per year from 2000 to 2004. Other renewable energy power generation technologies include biomass, geothermal and small hydro facilities, which are mature technologies and growing at rates of 2% – 4% per year. Some claim that renewable energy is not cost-effective,
GLOBAL INVESTOR 3.06 Basics — 23 Figure 1 Source: Carbon Ventures Sources of global GHG emissions Global GHG emissions are increasing in the wake of robust economic growth and the related increase in demand for electricity and fossil fuel. Figure 2 Source: Credit Suisse, CDIAC, UNEP Growing CO 2 emissions The Energy Information Administration (EIA) estimates global CO 2 emissions will increase by 75% from 2003 to 2030. Emissions increased by 2.5% per year from 2000 to 2002, mostly from developing nations. % 30 Million metric tons of carbon 8,000 25 24.9 7,000 20 19 18.7 18.8 6,000 15 10 11.3 5,000 4,000 5 5.9 5.9 3,000 0 2,000 USA Other OECD Eastern Europe and former Soviet Union China Japan Australia Developing countries 1,000 0 1751 1765 Figure 3 Source: Credit Suisse, IEA, EIA, International Energy Outlook 2006 World primary energy consumption World primary energy consumption by fuel type (million tons of oil equivalent, MTOE) is shown for the years 1980 to 2005, with demand forecasts up to 2015. Asia accounts for three-quarters of growth. Quadrillion British thermal units (Btu) 600 500 400 300 200 100 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1779 1793 1787 1801 1815 1829 1843 1857 1871 1885 1899 1913 1927 1941 1955 1969 1983 1997 Total Liquids Solids Gas Cement production Gas flaring Oil Nuclear Natural gas Renewables Coal Total primary energy
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