These are hard economic times, but that's no reason for governments to back away from supporting the development and deployment of technologies to reduce greenhouse gas emissions, according to the investment bank, Deutsche Bank.
"Trillions of dollars have already been wiped off the global balance sheet by falling asset values, and the world's major economies are heading into recession," Kevin Parker, global head of Deutsche Bank's Asset Management division, said in a statement attached to a new bank report on investing in climate change. "Investors understandably lack confidence at the moment and governments...will be reluctant to commit further capital to the climate change sector for the foreseeable future," Parker acknowledged.
However, while the climate change sector has not been spared from the broader market downturn, government support provides a "significant safety net," said Mark Fulton, global head of climate change investment research for the bank.
"We know this is a turbulent time," Fulton said during a telephone press briefing. "Governments continue to see climate change as an important, long-term change affecting the whole planet and something they need to do something about. If you believe that, and you believe the science, then it is simply not an option to say times are tough and we really don't want to do anything about it."
Fulton said existing incentives should encourage investments in renewable energy and provide "a good impetus to growth over the next year or two. It's possible we'll see more action to boost incentives, because it remains a source for economic growth."
Infrastructure is also "highly connected with the issue of climate change, and the need to tackle climate change can be allied with the need to stimulate economies with infrastructure spending," Fulton said. "What we're trying to look at is how climate change investment can be a catalyst, part of the solution to the economic problems, rather than be seen as another cost in a difficult environment."
Governments "can take a big step in the right direction" by agreeing to a global carbon tax, such as a cap-and-trade, Kevin Parker said. "The aim must be to create a clear long-term regulatory regime that determines a market-driven cost of carbon while at the same time encouraging the development of alternatives. If governments recognize the necessity of creating the right regulatory environment, investors will recognize the opportunity and step in."
The report said that a high carbon price alone may not be the best way to drive technology development. Other regulatory instruments, such as research and development subsidies, "can be used to drive innovation of what are currently more expensive opportunities," such as carbon capture and sequestration.
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