Pathway to Paris #10: financing and developing the low carbon economy

A biweekly climate briefing for municipalities

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In this Issue #10

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  • Governments subsidise fossil fuels massively

  • The growing job market in renewables

  • Under2MOU: Regions unite for a low carbon future

  • Public commitments to climate action

  • Featured network: Global Parliament of Mayors

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Green bonds: A ballooning new mechanism to finance climate action

The transition to a low carbon society requires a major injection of capital to fund renewable energy, new transportation systems, retrofits of buildings and so on. At the same time, trillions of dollars from pension funds and insurance companies sits in the bond market. Match the need with green investments with capital and the result is green bonds or climates. First issued in 2007, green bonds totaled almost $37 billion in 2014 and are projected to climb to $300 billion by 2018. SSG is currently partnering with a number of financial institutions to explore how green bonds can be used to finance municipal climate action plans. Please be in touch if you are interested in this subject.

Governments subsidise fossil fuels massively

The International Monetary Fund issued an influential paper analysing national subsidies to fossil fuels last week. Subsidies were calculated to total $4.9 trillion (6.5 percent of global GDP) in 2013, and were projected to reach $5.3 trillion (6.5 percent of global GDP) in 2015, $10 million a minute. The elimination of these subsidies could raise government revenue by $2.9 trillion in 2015. In a previous 2013 report, the IMF estimated subsidies to fossil fuels in Canada to total $34 billion. The paper also describes impacts of the subsidies including damaging the environment, causing more premature deaths through local air pollution, exacerbating congestion and other adverse side effects of vehicle use, increasing atmospheric greenhouse gas concentrations, imposing large fiscal costs, which need to be financed by some combination of higher public debt, highertax burdens, and crowding out of potentially productive public spending (for example, on health, education, and infrastructure), discouraging needed investments in energy efficiency, renewables, and energy infrastructure, increasing the vulnerability of countries to volatile international energy prices and increasing inequality.

More and more people work in renewable energy

The International Renewable Energy Agency released its annual report on employment with the headliner that the total jobs in renewable energy reached 6.5 million in 2013 up from 5.7 million in the prior year, overall growth which masks some turbulence within countries due to the economic slowdown and shifting manufacturing base. The largest employers in China, Brazil, United States, India, Germany, Spain and Bangladesh.

Here are some inspiring examples from Canada:

The Ottawa Renewable Energy Co-operative (OREC), established in 2010, is a for-profit co-operative that develops renewable energy systems implementable in local communities. OREC, is based in Ottawa, and empowers Ottawa residents to support the growth of a local renewable energy sector through long-term investments that finance renewable energy projects through a co-operative structure. OREC enters into 20-year lease agreements with property owners in Ottawa communities to use their land or rooftops for the installation of renewable energy systems. Once the installations are in place, the renewable energy produced generates revenue through Ontario’s Feed-in Tariff (FIT) program, which provides guaranteed payment for each kilowatt hour (kWh) of electricity produced. This enables OREC to fully repay invested capital to investors along with a dividend over a 20-year period. In addition to the benefits of renewable energy and economic
growth associated with local community-level renewable projects, OREC’s projects are democratically governed through a co-operative model rooted in co-operation rather than competition and strong community engagement.

SolarShare is another example of a leading renewable energy co-op in Canada. SolarShare develop commercial scale solar energy installations for Ontario residents to invest in – 100% of the funds directly finance solar projects across the province that are already built and producing stable revenue. The solar projects range in size from 10 kW rural systems to 600 kW (DC) arrays on industrial rooftops. The projects are all generating clean power and earning a 5% return to their members. SolarShare’s completed portfolio is 3.5 MW of installed capacity and valued at $15 Million.

Under2MOU: Regions unite for a low carbon future

California and Baden-Wurttemberg in Germany initiated the Under2MOU, an agreement to reduce GHG emissions by 80% to 95% below the 1990 benchmark by 2050, a reduction which is considered necessary to limit the average increase in global temperatures to less than two degrees. Other regions have already signed on including BC, Ontario, Wales, Calalonia, Oregon, Washington, Baja California and Jalesco. To sign on, regions must submit an appendix describing how they all achieve the target. Other regions and cities are invited to join.

Public commitments to climate action

A new UN site, NAZCA, tracks GHG emissions targets by cities, regions, companies and investors. For example, Honda Motor Company has committed to reduce emissions by 50% across its entire value chain by 2040, Minneapolis has committed to reduce its emissions by 30% by 2025 over 2006 levels and so on it goes with more than 2,700 entities adopting science-based targets. Is your city listed there?

Featured network: Global Parliament of Mayors

If Mayor’s ruled the world, so they say. Here is a network of empowered mayors campaigning for decentralisation from national capitals, to support one another across borders and encourage climate action. This October, the network will convene to establish its governance legitimacy and address the urgent problems of climate change and sustainability. On their agenda is Governance, Sustainability and Resilience and Jurisdiction and resources to enable cities to take on climate action plans.

A briefing prepared by SSG’s Office of the Research

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