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Transatlantic boost for cleantech

Nathan Goode welcomes growth opportunities extra government scrutiny brings

The cleantech sector has been buoyed recently by government decisions on both sides of the Atlantic. While Europe has historically taken a global lead in introducing green policies, the United States, polarised by partisan politics, has been something of a laggard, refusing to sign the Kyoto Protocol and resisting attempts for a subsequent global agreement. However, it would be a mistake to assume that federal inertia is mirrored uniformly at state level in the US, or that US companies are blind to the opportunities, but progress on the ground has now been boosted by a visible determination by the White House to take a lead on climate change.

First to Europe, where the European Commission voted in July to require member states to boost energy efficiency by 30% by 2030 (from 2007 levels). Although European governments will not decide whether this is legally binding until they meet in October, the move gives a strong signal to the market that should encourage cleantech investment. As I have written previously, the crisis in Ukraine and ensuing sanctions aimed at Russia have raised the energy security alert level across the region, encouraging progress towards developing a broader energy mix and hopefully bringing short and long-term energy concerns more into alignment. Incentivising businesses and households to use less energy not only lowers bills but also reduces demand.

But perhaps the more surprising news comes from the United States. In July, the US and China – both the world’s largest economies and carbon emitters – signed a series of partnership pacts that seek to limit greenhouse gas emissions. The agreements between companies and research institutions include knowledge sharing around nascent technologies, such as carbon capture and storage (CCS), which could help make coal-fired power stations less polluting. The deal follows regulations set out by the Obama administration that would cut carbon pollution from power plants 30% by 2030 (from 2005 levels).

Action in the US has been slow, but there are signs following the publication of the Risky Business report at the end of last year that public opinion is waking up to the threat of climate change. The report highlighted the threats to infrastructure, agricultural productivity and public health posed by rising sea levels and higher temperatures. The White House says that every decade of inactivity will result in 40% higher losses from and costs due to climate change by deepening the risks to property and livelihoods. It estimates that a 4°C rise in world temperatures would slow the global economy by some 3.1%.

But it’s never plain sailing. In July, Australia acquired the dubious distinction of being the first developed nation to repeal a carbon tax. On a per capita basis, Australia’s greenhouse emissions are worse than the USA’s and almost four times higher than the global average.

The renewed sense of urgency from governments in the world’s major economic blocs, however, should present growth opportunities in the energy and cleantech sector. The good news uncovered by our Q2 International Business Report (IBR) is they are ready to meet the challenge. Cleantech businesses remain committed to innovation; 57% are planning to increase their R&D spend over the next 12 months, which is more than double the all-sector global average (28%). Almost one in two (46%) expect to develop or launch a new product or service in the year ahead, compared with fewer than one in three (29%) globally. Other growth indicators for the sector – revenues, profits, employment and investment – all remain robust, suggesting that businesses feel able to innovate while still expanding.

Clean technologies offer economies a means of mitigating the impact of energy production on the environment, not to mention the volatility of cost and supply. Notwithstanding a complex mix of signals, it would seem that cleantech continues to have the wind in its sails.