Green Investments Are Being Clouded by Copenhagen

The Copenhagen climate summit will do little to spur further investment in environmental technologies.
That is hardly surprising given the fundamental flaw at the heart of the process: Negotiations to reduce global carbon dioxide emissions were premised on how much of the gas nations produce, rather than what they consume.
Industrializing countries feared the emissions curbs being demanded of them were a protectionist ruse by the developed world. One country's production cuts, if achieved by reducing local CO2 emissions by relying on imports, is another country's production increase, with no gain for the world's climate.
The nonbinding accord cooked up by the world's biggest industrial nations looks like the lowest common denominator you would expect from countries skeptical of each others' motives and increasingly mistrustful of the science that predicts global warming.
For investors and business leaders, there is no extra clarity on an international regulatory framework that might help them predict the cost of CO2. Such certainty is critical for evaluating the investment merits of environmental projects to meet the emission reductions advised by the United Nations.
McKinsey has forecast such spending might amount to as much as €530 billion ($759.76 billion) a year by 2020 and €810 billion by 2030.
The price of CO2 in the European Union, which has the world's most advanced emissions trading system, is around €14 a metric ton, less than half the level necessary to make many low-emission projects viable. The combination of the severe European recession, coupled with too generous issuance of trading permits, has undermined the perceived advantage of a market-based approach to carbon reduction over tax-based carbon pricing: that it leads to more predictable outcomes.
What is more, EU planning for the CO2 trading regime extends only to 2020, another problem when many CO2-intensive capital projects, like power stations, have far longer lives.
Still, all isn't lost. The good news in Europe is that a floor price for CO2 is being established through new carbon taxes.
The European Commission is seeking a region-wide tax to catch CO2 emitters currently exempt from the emissions trading system, but European states are increasingly putting levies in place unilaterally, among them France, Finland, Ireland, Norway and Sweden.
The U.K.'s Conservative Party, ahead in the polls ahead of next year's general election, also advocates a carbon tax.
Raising money to pay for stretched government budgets may be the motivation rather than reducing global warming, but it may do more to spur green investment in Europe than all the hot air in Copenhagen. — Matthew Curtin