China, Germany and the UK have the most stable and consistent clean energy policies, a boon for investors seeking jurisdictions with the least amount of uncertainty, according to a report by Deutsche Bank Climate Change Advisors.
The three countries rank best-in-class in terms of the transparency, longevity and certainty of their climate policies, according to the consulting firm’s global climate change policy tracker. All three countries have favourable and consistent policies to control emissions, such as binding or accountable emissions targets, renewable electricity standards and long-term energy efficiency plans. They also have strong financial support mechanisms such as feed-in tariffs and green banks to facilitate funding for clean energy projects.
The only concern in these ‘tier one’ countries is the UK’s budget deficit, but the government has plans to address it while preserving much of its green energy agenda, said Mark Fulton, global head of climate change research at DB Climate Change Advisors in New York. “We haven’t held that against them,” he said.
“The UK could have wobbled and didn’t,” he added. “The Germans, of course, don’t falter and China doesn’t either.”
Denmark, Finland, France and Italy fell into the ‘tier two’ category because they do not have green banks although they have feed-in tariffs (FiTs), tax incentives and other long-term funding programmes. Japan also fell into the second category because of the absence of a green bank while Brazil was placed in the group because of the lack of feed-in tariffs.
“I think it’s one of the things that can be very useful,” Fulton said of the green banks.
The DB report places a strong emphasis on the importance of FiTs, which exist in 20 of 27 EU countries, because they are highly effective, he added.
“FiTs usually see very strong responses,” Fulton said. “They’re criticised for their efficiency because sometimes they are couched too high and seem to be very expensive.”
But changes to a FiT can dramatically hurt a country’s profile, he warned. Ontario’s FiT programme has been viewed as a success because it has drawn C$20 billion (US$21 billion) in investments to the Canadian province. But evidence of challenges in connecting renewables to the grid have emerged, a clause in the FiT contracts allows them to be revoked and the country’s Conservative Party has vowed to repeal the tariff and other green energy policies if they take power in October’s provincial elections.
“Ontario is signalling a losing position,” Fulton said.
Spain was placed in a lower tier compared to several EU counterparts because it retroactively cut the FiT for some solar arrays. “The retroactive changing of the FiT just crashed them,” he said.
US lingers at bottom of rankings, California second tier
Although the US ranks in the lowest tier because of a lack of federal policies, California made the tier two list because it met all qualifications except having a green bank, although supporters plan to push for its adoption. If California had a green bank, it would be in the highest tier, Fulton said.
The report examined three US states – California, Texas and New Jersey – because the authors felt it would be unfair to only examine what is being done, or not being done, at the federal level when several states have solid clean energy policies, he added.
But the cumulative impact of current policies will only reduce global emissions by nearly 11 billion tonnes (GT) to 49 GT in 2020, which is still about 5 GT higher than the target for stabilisation of the atmosphere at 450 parts per million of carbon dioxide equivalent, according to the report.
“The message is thus clear: policy at the current level still will not achieve the reductions necessary to stabilise global emissions at 2°C,” the report states.
By. Gloria Gonzalez