Debt crisis should not deter investments in green economy

The debt crisis in Europe and the U.S. cannot be allowed to deter private sector investment in the green economy. That is a key message emerging from the inaugural Global Green Growth Forum underway in Copenhagen, the capital of Denmark. "We have to invest. This is very clear in Europe. We risk a jobless growth if we do not invest, for instance, in retrofitting buildings and expanding our energy systems," said Connie Hedegaard, the EU Commissioner for Climate Action. "If you invest in them now it will create economic activity and help us exit the crisis and create jobs which cannot be outsourced," she told Xinhua. Meanwhile, Mexico's Environment Minister Juan Rafael Elvira Quesada said that raising industrial competitiveness, a key component in coming out of crisis especially for developed economies, will not be possible without adopting green growth. Organized by the governments of Denmark, Mexico and South Korea, the forum encourages private-public partnerships in the green economy. UN Secretary-General Ban Ki-moon stressed the balance between environmental and economic growth in a keynote speech on Tuesday. "The green growth agenda can help drive the advancement of sustainable development for the 21st century. It is good business, good politics, and good for society,"he said. "By 2030 we must be able to provide universal access to all people who lack access to energy,"Ban added, referring to the UN's goal of energy for all by 2030. The new Danish government has also set an ambitious long-term energy target of generating the country's entire heating and electric supply from renewable sources by 2035. But Danish Prime Minister Helle Thorning-Schmidt was realistic about the challenges that exist now and which lie ahead. "We must be prepared to take tough decisions. This is not a win-win proposition. Some parts of our society will be affected negatively by the steps we need to take, and we need to make that very clear,"she told the forum. "Green development requires substantial investment in tomorrow's green technologies and solutions. This will not be without costs in the short run. But I am of the firm belief that in the long run, inaction will be even more costly to all of us,"she added. Financing green growth, however, is a problem for developed and developing economies, exacerbated by the debt crisis which has meant funding and bilateral aid is drying up. Kenya's Prime Minister Raila Odinga said that the "high cost of energy generation", limited access to land required to set up renewable energy structures, and lack of funding mechanisms, make it hard to attract private investment into his country's sustainable power sector. Kenya is betting on hydropower, geo-thermal, solar and wind energy to power its development to a middle-income economy by 2030. "In Kenya, we have learned not all money can come from government. There is a lot of cash around but it is in private hands,"observed Alexander Alusa, climate change policy advisor in Kenya's Office of the Prime Minister. "But you have to encourage them to see a bottom line increase in their returns in order to attract them to invest in green growth,"he told Xinhua. Kenya has waived customs taxes on imports of solar panels to incentivize this sector, but Alusa feels other tax breaks, as well as international funding, are also needed. Ethiopia, whose Prime Minister Meles Zenawi also addressed the conference, is financing its vast hydropower projects, which aim to reduce the country's carbon emissions to zero by 2025, through its own public finances. "We do not have any ideological bias as regards private financing, but the most important thing in this case for us is the pricing," said Ambassador Girum Abay, Director-General of European Affairs in Ethiopia's Ministry of Foreign Affairs. "Many in the private sector have this perceived view of high risk in such ventures in developing countries. I believe that is a misconception," he said. However, more private sector money could become available just by tapping existing but underused sources, say experts. "There are large amounts of capital in sovereign funds and in pension funds. Notwithstanding some of the fiscal problems in Europe at the moment, there are large amounts of resources around the world," said World Bank Vice President Rachel Kyte. "Part of this is also going to come from domestic mobilisation and investment in emerging markets, and their own pension and sovereign funds as well. The challenge is to make money work harder,"she told Xinhua. Some 200 high-level participants from government and industry, including sustainability-driven Danish companies such as wind-turbine manufacturer Vestas, temperature control systems maker Danfoss, and insulation company Rockwool, are attending the Forum. One emerging consensus from the meeting, which ends Wednesday, is that a combination of financial incentives and regulatory coercion will be needed to encourage more businesses see the benefits of green growth. If they do not, Hedegaard warned that "doing business as usual" will have enormous hidden costs both for the climate and the economy. She said that the EU is playing a vital role in encouraging green growth by setting-up emissions targets, finding the right price structures for the EU's emissions trading scheme, and soon, introducing energy taxation at the European level. "It is absolutely key for business that we get the pricing right, because they start to do something the moment they see it is costing to not do something," Hedegaard said.