A global price for carbon is likely to trigger an “explosion” of new industries, including major investment in carbon capture and storage and nuclear power, investment bank UBS said in a report released last week. It is the latest peak in the mountain of hype surrounding green investments, and the fact it comes from a respected bank shows there is an investment bubble looming in the field of renewable energy and clean technologies.
“A global carbon price will see an explosion of new industries profiting from atmospheric carbon abatement,” the bank said in a breathless new study on climate change and the implications for various sectors of the global economy. However the storage of carbon over time is a complete unknown. Researchers are still “determining if CO2 can be safely stored in the subsurface over significant timescales. This is the most critical issue confronting the acceptance of geological storage of man-made CO2 in the Earth’s crust,” says Dr Stuart Gilfillan of Edinburgh University (pictured investigating a CO2 geyser in Utah). And he is not expecting an answer any time soon.
“I’m particularly interested in geochemically investigating how CO2 migrates in the crust, especially through faults and cap rocks and the residence time of CO2 in natural reservoirs,” says Gilfilian. His work forms a constituent part of the wider TSEC and UKERC programmes focused on developing low carbon energy technologies within the UK and he is part of the Subsurface Geoscience Research Group at Edinburgh.
But a little thing like research does not bother the Masters of the Universe at UBS. “In our view the most positive technology will be a massive scaling up of carbon sequestration at large point sources, such as power plants and other major industrial facilities,” it said.
UBS also said a global price for carbon abatement/trading is the key to achieving any absolute decline in CO2 emissions.
“The world’s climate has already changed, probably due to global warming. The socio-political response to climate change will accelerate as the weather gets worse and calls for action get louder,” it said.
“Analysts suggest global political and social reactions to climate change will happen much faster in the next one to five years than is popularly envisaged,” it warned.
“The global rise in the intensity of use of materials will accelerate carbon emissions, particularly driven by China’s growth in the last three to five years and by the rapid broadening of growth throughout the rest of the world. The eventual realization of how fast China and others are adding to CO2 emissions will shock and galvanize action.”
“The response will be multifaceted and creative as is seen currently with initiatives in all forms of renewable energy, rediscovery of nuclear, biofuels and a rapidly growing interest in carbon sequestration,” the bank said.
UBS also highlighted to its clients a number of “tradable themes” that should be considered in any analysis of trends in the world economy.
“Severe and erratic weather is here to stay and will impact supply in a range of materials particularly bulk materials (iron ore, coal, bauxite, wood, crops, freight) and drive demand surprises associated with reconstruction and mitigation (steel, cement),” the bank said.
“Water will be the ultimate resource constraint impacting supply (copper, coal, cement) and also driving demand for storage, distribution, filtration, purification and desalination facilities (stainless steel, cement, membranes, chemicals, power),” it said.
UBS said global greenhouse gas emissions will grow faster than expected because of the growing materials, energy and carbon intensity of global growth.
It also said global carbon financing is “the real challenge and opportunity,” adding: “Global pricing and trading in CO2 emissions is the key to any real abatement but how it is paid for and its impact on global inflation and growth are to be resolved.”
The bank predicted that efficiency and other “quick fixes” will flourish.
“There are many areas where simple measures such as insulation, better light globes will cut emissions; we expect chemicals will be favored by this trend.”
UBS said carbon sequestration is the only mechanism that will create a “positive lowering” of CO2, as opposed to measures that simply mitigate emissions growth.
“Clean coal technology based on physical sequestration of CO2 underground or at ocean depth has to be the answer given the energy dependency (security) of China, India and the US on coal,” it said.
“Renewable energy will be popular and subsidized; solar, wind, biofuels, biomass will drive material demand (polysilicon, carbon fibers, aluminum, fertilizers, wood).”
“Nuclear power, carbon-free, will boom as energy options become limited in many countries, sustaining demand and the price of uranium,” it said.
“Transport will be the easy legislative target and source of technical innovation. Light-weighting, drive chains (diesels, hybrids, electric), energy storage (batteries, fuel cells) are likely to be positive on materials demand (aluminum, carbon fibers, cobalt, copper, plastics, platinum),” the bank said.
“Some materials demand growth will fall because of rising efficiencies, recycling, substitution and loss of economic growth through higher cost inflation; this is the key threat,” it added.
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