New reports to watch out for

There is some valuable reading in store for you as you explore various aspects of sustainable energy.

• Why energy efficiency needs to have priority as part of the Energiewende

E3G, based in the UK, has come out with an important briefing paper on the energy transition (Energiewende) in Germany.  E3G analysis shows that regardless of the technology pathway selected to decarbonise the German power sector through the Energiewende, increased energy efficiency will be crucial to keeping electricity costs down to acceptable levels. The Energiewende debate needs to be reframed to consider how placing a higher priority on energy efficiency can help deliver a decarbonised power sector in an affordable manner and, in so doing, help consumers manage the impact of rising electricity costs. Successful delivery of the Energiewende will therefore require a stronger focus on increasing building efficiency and demand side options. Refocusing Energiewende priorities toward delivering such demand side solutions will not only reduce GHGs, it can also generate savings on energy bills by decreasing energy use in residential buildings by more than 70%. It will also offer greater value to the economy through a number of side benefits.

The briefing paper is available in here and German.

• Trade in Sustainable Energy Services

The Global Platform on Climate Change, Trade and Sustainable Energy of the International Centre for Trade and Sustainable Development (ICTSD) has recently published a new research publication, “Trade in Sustainable Energy Services”.  Facilitating trade in goods that can promote sustainable energy is intuitive and potentially powerful in the search for energy security, the provision of access to energy, and the mitigation of climate change. Much less recognised, however, is that the global market in services related to sustainable energy is closely linked to the goods market and it is much larger.  Joachim Monkelbaan of ICTSD examines the role of trade in services within the context of sustainable development and suggests ways forward in on-going negotiations as well as those under discussion such as ‘sustainable energy trade initiatives’ (SETIs). Removal of trade barriers in energy goods and services should go together. In so doing, policymakers can find larger gains (both in trade and climate change reduction terms) than doing so separately. The paper outlines the benefits of facilitating trade in sustainable energy services; how to identify such services; and how to analyse specific commitments by different WTO Members in this field.

The report is available here.

• Corporate Responses to the EU ETS

The Fridtjof Nansen Institute recently announced that the Ashgate Global Environmental Governance series has recently published Corporate Responses to EU Emissions Trading: Resistance, Innovation or Responsibility? edited by Jon Birger Skjærseth and Per Ove Eikeland. The book examines how the EU Emissions Trading System (EU ETS) has actually worked on the ground thorough a wide range of mechanisms.  These include how corporate norms of responsibility are affected by the EU ETS and how economic incentives provide opportunities for innovation. This study is the first systematic analysis of the extent to which and how the EU ETS has promoted low-carbon corporate strategies in all major industry sector covered by the system: electric power, oil, steel, cement and pulp and paper. The main conclusions can inform the current debate on whether and how the EU ETS should be fixed and potentially serve as a model for a global carbon market.

With its broad approach to the relationship between regulation and corporate climate strategies, we hope this will be a valuable resource for academics, NGOs and policymakers in the field of climate change.

More information about the book can be found on the Institute’s website.

• Report on global energy governance

“ The Politics and Institutions of Global Energy Governance” has recently been published by Palgrave in their “Energy, Climate and the Environment Series.” The book, written by Thijs Van de Graaf of the Ghent Institute for International Studies, studies the patchwork of global institutions that are involved in energy and climate policy coordination, including the International Energy Agency (IEA), the G8 and G20, and the newly created International Renewable Energy Agency (IRENA). It studies how this patchwork came about and how it has evolved over time, and provides an interpretation of the observed dynamics drawing from the regime complexity literature. With its broad conception of global energy governance, this book will be a valuable resource for academics, NGOs and policymakers in the field of climate change, global governance, and energy regulation. More information about the book can be found on the Palgrave website.


• Using pension funds for climate change activities

Louise Rouse writes in The Guardian about a new report urging pension funds to develop a climate change action plan or risk becoming unfit for purpose

Pension funds that ignore climate change are failing to protect savers

Despite signs that the economy is beginning to recover from the biggest financial collapse in living memory, the investment outlook remains challenging.

In this environment, as the difficulties of maintaining short-term returns dominate discussions about investment strategy, climate change may seem to many a less than pressing issue. Yet it represents a significant financial risk with enormous implications for the retirement outcomes of today’s savers. While understandably preoccupied with the fallout from the 2008 crisis, pension funds should not neglect to protect their members from what could be the next crisis in the making.

Climate change will have significant implications for pension funds under a range of different scenarios. If effective regulation to tackle climate change is introduced, fossil fuel companies and other high carbon assets could suffer a substantial loss in value. Around 17% of the FTSE 100’s market capitalisation is attributable to just four oil and gas producers.

Conversely, if climate change is allowed to advance unchecked, the risks are even greater: extreme weather events and growing volatility of food and fuel prices are likely to hit returns across entire portfolios in ways that are both dramatic and unpredictable. The Stern Review estimates that the total cost of climate change in the ‘business as usual’ scenario is likely to lie in the upper range of a 5-20% loss in global GDP.

These risks are particularly significant for pension funds because they tend to be ‘universal owners’, meaning they have holdings across the economy and an interest in its overall health. They also have inherently long-term horizons: many of the savers currently being auto-enrolled will be retiring decades from now, and therefore need their funds to focus on issues that will impact investment returns in the long term.

However, the transition, at whatever pace it happens, to a lower carbon global economy will create significant growth in certain industries. The OECD calculates that the cumulative investment in green infrastructure required for decarbonising the global economy is $36-$42tn between 2012 and 2030.

ShareAction publishes “The Green Light Report: resilient portfolios in an uncertain world,” setting out both the case for pension funds to give attention to climate change, and the practical steps they can take to manage the risks it presents and to take up the investment opportunities arising from it.

The report profiles excellent work taking place at a range of individual pension funds. Examples include the Environment Agency Pension Fund, which already has 12-13% of its portfolio allocated to the green economy; BT Pension Scheme, which has £100m invested in a green version of the FTSE All-Share Index (with carbon intensive companies underweighted), and the Universities Superannuation Scheme (USS), which has established processes for its property holdings to reduce energy use and carbon emissions.

But it also highlights the low priority given by the sector overall to the issue of climate change. The report presents a range of complementary recommendations for pension schemes to manage climate risks and make the most of low carbon investment.

The report is available here.


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