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The London Accord

The London Accord is unusual in that it was produced as the result of a collaboration between investment banks, research houses, academics and NGOs.

It claims to have produced the first “open source” research resource for investors in climate change solutions. The Website (www.london-accord.co.uk) and CD, set out the implications for the construction of investment portfolios.  The heart of the work of the London Accord is a series of papers dealing with different aspects of the move to a low-carbon economy.

The authors of the Executive Summary (published December 2007) were Jan-Peter Onstwedder and Professor Michael Mainelli, and they say that investors need to have a view about the likelihood and timing of changes, relating to climate  change, and that, “they need to be realistic about the implications for investments.”  They add that, “there is enough clarity to act now and put CASH IN a portfolio of investments to take CARBON OUT of the economy.”

They however assess that carbon emissions will cost emitters €30 to €40 per tonne (US$42-US$58), at the recent Future Energy Summit in Abu Dhabi (January 2008) at least one speaker claimed that a realistic cost would be nearer US$250 a tonne, the whole issue of carbon pricing (and rationing) is still extremely uncertain.  The ETS trading price in 2007 of around €20 a tonne cannot be a guide to the post-Kyoto future.

The authors also consider the impact on lifestyle of mitigation policies, they say that these may include:

  • material direct payments from wealthy countries to the poorer, perhaps of the order of a few hundred dollars per person per year in the wealthy nations;
  • large scale transformation of housing stock;
  • the end of oil and gas exploration;
  • a deep and massive cut in air-travel and, thus, tourism.

As they say, “These points illustrate the scale and the difficulties of moving to a low carbon economy.  There are good reasons to question the social commitment to halting greenhouse gas emissions.”

But the focus of the London Accord is investment, and that is an issue that is too easily overlooked, the transition to a low carbon economy will require enormous investment and much of the present infrastructure of transport and power generation, together with our building stocks will need to be replaced or massively upgraded, this will require the expenditure of trillions of Euros, or Dollars.

The advice to investors is that, “The key is to realize that it is not about picking a single winner, but to create a portfolio that carefully matches technology with the natural and regulatory environment (i.e., regional differentiation) and with public acceptance, that includes solutions for low carbon electricity generation both on- and off-grid as well as investments that have scope for greater efficiency.  Monitor and adjust for developments in policies that create economic incentives.  Defensive components (low carbon intensity, potential for efficiency gains, low adaptation cost) blended with opportunities (promising technologies).”

The papers produced by The London Accord are a unique resource and I strongly recommend this Website.

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