The Kyoto protocol is dead. Long live the Kyoto protocol. The world’s commitment to its accord on climate change expires in a year. Climate change is falling down the political agenda as fast as austerity is moving up. The United Nations climate conference in Durban, South Africa, is likely to be a fractious and unsuccessful affair. Climate change as an investment strategy is a busted flush. What should happen now?
First, don’t panic. There is a world of difference between renewable energy and carbon trading. The carbon trading market is suffering a blow-out: the carbon price, which is aligned to industrial activity, declined by 30 per cent in November. That is not surprising: it is closely aligned to European industrial output, which fell 2 per cent in September compared with the previous month.
The second thing: look at China. The country is the largest market for just about everything these days, including renewable energy. China’s strategy, however, is linked to energy security rather than climate change. It is investing heavily in solar and wind power to diversify its energy sources, not to save the planet. That has created Chinese champions in those sectors, boosting competition with incumbents such as Vestas; its share price has fallen nearly 90 per cent since 2008.
