7 December 2007
City investment report says carbon capture “unlikely to help
C02” over next 20 years due to lack of price certainty and other
factors
A key finding released today (Friday) in the London Accord
research project suggests that Carbon Capture and Storage (CCS)
technologies will fail to play a major role in stabilising CO2
concentrations in the next two decades – due to the lack of price
signals, plus missing technology and absent regulatory and legal
enablers.
The report by Marc Levinson, an analyst at JP MorganChase*, is
part of London Accord, the largest ever collaborative investment
climate research project by City firms and institutions (to be
formally launched on 19 December).
Michael Snyder, City of London Corporation Policy &
Resources Chairman and co-originator of the London Accord project
along with the City’s Gresham Professor Michael Mainelli, of Z/Yen
Group, said:
"The London Accord project will help unleash the resources of
the market to solve the CO2 problem by raising the quality of
investment thinking and establishing sign-posts for the general
investment community.”
Key points in the current draft of the London Accord available
on the web (see below) are:
- Investors should invest now if they believe carbon markets are
coming. Markets and other government measures could produce prices
in the range of €30 to €40 per tonne of CO2. Investment portfolios
can be constructed that produce attractive financial and 'carbon
returns' at those levels - and beyond.
- Energy investment is going to become much, much riskier - this
is due to greater uncertainty over the pace of technological
development, higher and more volatile prices for oil and gas - and
uncertainty about the mechanism for the pricing of greenhouse gas
emissions.
- Forestry is a big unknown – there is a need to narrow the
range of credible estimates for the real extent of abatement
potential and the real costs of forestry project which mitigate
greenhouse gas emissions.
- Efficiency gains continue to show great potential for financial
and carbon returns but need behavioural incentives such as
regulation.
- Carbon capture and sequestration/storage (CCS) seems an
unrealistic investment at prices for greenhouse gas emission
allowances below $45 per tonne (approximately €32/tonne).
In general, private sector investment is crucial to climate
change investment (86% of capital investment in energy supply,
according to UNFCCC). Much of that investment will be funded
through large institutions like pension funds and asset managers,
who rely on analysis by the financial services sector for their
decision-making.
The financial services sector is shown to understand well the
implications of climate change: leaders such as Morgan Stanley, JP
MorganChase, Barclays, ABN AMRO, Merrill Lynch co-operated in the
London Accord which is an “open-source” research project resulting
in a 780-page guide to investment for climate change - the largest
private-sector investment collaborative research project ever into
climate change, representing work valued at £7million
($15million).
Sponsors of the London Accord, which follows from the City's
involvement in the Johannesburg Summit in 2002, are BP, the City of
London Corporation (the authority for the Square Mile business
district), Forum for the Future, Gresham College and Z/Yen Group.
Reuters, the London School of Economics (LSE), the Santa Fe
Institute are also behind the initiative and key City institutions
who invested research time include: ABN Amro, Canaccord Adams,
Credit Suisse, Societe Generale, Morgan Stanley, Bank
Sarasin, Barclays Capital, Cheuvreux, JPMorgan Chase, Merrill
Lynch and WestLB. Firms like Herbert Smith and Sustainable
Forestry Management also contributed, as did institutions like the
Cambridge Centre for Energy Studies, the NextEarth Foundation and
River Path Associates.
The LSE and the Santa Fe Institute have helped draw the threads
of the research together while buy-side firms such as USS, Insight,
and Legal & General helped to shape the project to ensure its
outcomes will be useful to investors. Observers from the EU,
the International Energy Agency, UNFCCC and others have been
involved.
Project Director Jan Peter Onstwedder is seconded from BP.
Ends
Notes for editors
Reports are available to download from the
London Accord website (NB This site is being
readied in phases for 19 Dec and some embargoed material will not
be accessible).
(*The views expressed are those of the author and not
necessarily those of JPMorganChase)
See also the
earlier press release.
Media contacts
For more information, Contact Greg Williams, 020 7332 1455 or
07889 167 205.
To contact London Accord Project Director Jan-Peter Onstwedder ring
0044 20 7948 5979
City of London Corporation
The City of London Corporation is committed to maintaining and
enhancing the status of the wealth and tax-generating business of
the City as the world's leading international financial and
business centre through its policies and services. Examples are the
extensive overseas business missions on behalf of UK-based
financial services and the wide-ranging economic development,
research and regeneration effort the City of London Corporation
undertakes across London. It also runs the City Office in Brussels
on behalf of the City and City Representations in Beijing, Shenzhen
and Shanghai - and a City Office in Mumbai. Although the City of
London Corporation provides local government services for the City,
the financial and commercial heart of Britain, its responsibilities
also extend far beyond the City boundaries and include management
of the Barbican Centre, Central Criminal Court at the Old Bailey,
Epping Forest, Hampstead Heath, three wholesale food markets, as
well as acting as the London Port Health Authority - and running
the Animal Reception Centre at Heathrow. Other work on climate
issues include a pioneering climate-change adaptation plan for the
Square Mile and a proposal to encourage all City firms to go carbon
neutral.