Prime Minister Turnbull’s attendance at COP21 is seen by many as a symbolic move signalling a shift in Australia’s position on the global fight against climate change. Let’s hope these small improvements build momentum and that Australia uses its co-chairmanship of the GCF to help create a sustainable future for the world and provide economic and social opportunities for all involved.
Developed countries have pledged to raise $100 billion (bn) per year by 2020 for the Green Climate Fund (GCF) as part of their commitments under the new global climate agreement being negotiated in Paris this week. Current financial contributions from developed countries like Australia have fallen short, so engaging the private sector will be key to successfully funding the GCF. A smart solution to bridging the gap — which will benefit Australia and Australian banks — is green climate bonds.
World leaders gathered in Paris on Monday for the opening of the United Nations (UN) climate change meeting, COP 21. After nearly a week of negotiations, finance remains to be a key issue of contention.
In his address to the UN, Australian Prime Minister Malcolm Turnbull pledged $1bn (from the existing aid budget) in climate finance over the next five years. Though this is an improvement on Australia’s 2013 pledge of $200mn, it still falls short. According to a recent report from Oxfam, a fair contribution for Australia, based on the size of its economy, is estimated to be $1.6bn per year.
In the negotiations, achieving the $100bn by 2020 climate finance goal is seen as critical to get developing countries to the table in Paris. And though $100 billion by 2020 sounds like a lot, in the post-2020 period some projections suggest that around $400bn per year is required to effectively address the worsening consequences of climate change in the developing world.
The bottom line — innovative and bold new initiatives are required to raise long-term finance for clean technologies and clean economic development in the developing world —and private sector investment will be key.
Australia was recently elected co-chair of the GCF and could play a vital role in finding creative solutions to the finance shortfall. The emerging green bond market offers an appealing solution because, with the right support, economists estimate up to $1trillion in climate-focussed bonds could be issued per year by 2020.
And Australian banks stand to benefit. According to a recent report from ANZ, social impact financing is already becoming increasingly popular in Australia. The New South Wales Government pioneered Australia’s first two social impact bonds in 2013 for small-scale social projects, which raised $7mn and $10mn respectively.
ANZ issued its first green bond in May 2015 for $600mn. The bond was fully funded by private sector investors and will be used for investments in wind and solar projects and green buildings around Australia, New Zealand, and the Asia Pacific. With well-established Asian business branches, Australian banks like ANZ are well positioned to invest in climate-safe projects in our region through the GCF.
According to Australia’s Clean Energy Finance Corporation, Australian investors are very interested in investing for clean energy projects, but options to date have been extremely limited. These positive examples show that there is great potential for growth in the Australian market, and the future for social impact and green bonds looks very promising.
Lauding India for doubling its funding for research and development of climate change technology, the former Microsoft CEO and co-founder of the world’s biggest charitable foundation, Bill Gates, says technological innovation is the only way to fight climate change. “If we are going to make the cost of clean energy as inexpensive as hydrocarbons, or coal energy today, which will need innovations. That will mean you won’t have to think about this huge trade-off between ‘Should I be clean’ or ‘Should I electrify’?” he told The Hindu in an exclusive interview.
Mr. Gates was in Paris for the COP21 summit, where he launched a multi-billion dollar 20-nation ‘Breakthrough Energy Coalition,’ and has met Prime Minister Narendra Modi twice this week, both in Paris and in Delhi on Friday.
Backing India’s stand on ‘climate justice’ or the need for the developing world to be financed for cutting emissions, Mr. Gates said that unless clean energy was made cheaper, it put countries like India in an “impossible” situation. “I can’t comment on climate justice, I don’t know what the definition of that is. I think while the premium cost of clean energy is very high, you force an almost impossible trade-off between two very important goals. My belief is that if you increase the R&D that will lower the price of energy,” he said.
However, Mr. Gates indicated that solar and wind energy, which forms the bulk of India’s clean energy mix, may not be the most viable sources of electricity in future. In its latest plans, the government has announced it will raise its renewable energy production from the current 38 Gigawatts to 175 Gigawatts by 2022, 100 GWs of which would come from solar energy alone.
But Mr. Gates said the “intermittency” of solar and wind makes it unviable, compared with other sources like nuclear energy and new technologies for storage. “Energy has to be reliable, and when the sun isn’t shining and the wind isn’t blowing, you still need energy. So the whole system designed in terms of storage and transmission gets quite complex. Wind and solar can be a part of your mix, but you can’t do much with them without a storage miracle.”
Mr. Gates words are significant as it runs counter to the solar alliance of countries with hot climates, which Mr. Modi launched at the Paris summit
To the criticism of “philanthro-capitalism” that the Gates foundation funds programmes tied to technologies and companies wherein Mr. Gates has interests, including intellectual property rights, he said he finds the allegations “amusing”. “If you think the way to make money is to come to India and help people get healthcare, that is one strange way to make money,” he said. “The healthcare system in India is under-funded , and we give money away to it, not make money. We give hundreds and hundreds of millions of dollars to help children get nutrition. We don’t get some benefit back from that.”
Text of the interview
We will start with a question from one of our readers to ask, why Climate Change. The Gates foundation has gone from HIV to vaccines, and now taken up funding Climate Change…
The main focus of my work is on health and that’s the area in which were investing a lot of money, we have expertise, partnerships. We also do work in agriculture, in finances, but the biggest work remains health. If you want to uplift the poor then you have to ensure agriculture is not impacted, and that climate is conducive for farming. But my main focus, as you can see through our funding remains on malaria, diaorrhea,pneumonia. Climate change could interfere with uplifting the poorest so everyone should care a little bit about that too.
This week you have launched the Breakthrough Energy Coalition in Paris, spoken to world leaders about Climate change. How optimistic are you that there will be a sustainable, binding declaration out of COP21?
I’m no expert on whats going on in Paris. My whole life has been about innovation, from my work on personal computing to the IT sector, and even health and agriculture has been helped by people getting together [to innovate] and use that little miracle. In health, like inventing new vaccines, that’s innovation. In energy, I feel whats best is strong innovation and that’s why I was so excited that 20 countries including India and US and China agreed to double their energy R&D budgets. If we are going to make the cost of clean energy as inexpensive as hydrocarbons, or coal energy today, which will need innovations. That will mean you won’t have to think about this huge trade-off between “Should I be clean” or “Should I electrify”?
We do want to speak about your focus on innovation, but you mention this trade-off. That is the basis for India’s position at COP21, when it calls for ‘climate justice’, the idea that the developed world wants the developing world to cut emissions, while it is desperately trying for economic growth. Do you then support the Indian position? Can your coalition be a bridge for this?
I can’t comment on climate justice, I don’t know what the definition of that is. I think while the premium cost of clean energy is very high, you force an almost impossible trade off between two very important goals. My belief is that if you increase the R&D that will lower the price of energy. A poor person is buying fertilizer, fuel, materials. The price of energy is affecting their life in so many ways, we need to find anything that can bring the cost of that down.
The Breakthrough Energy Coalition (BEC) you have set up says: Technology will help solve our energy issues. What kind of technology and what kind of energy has the best chance in your opinion?
The beauty of the commitment at BEC is that a diverse set of things will be tried. We can try hydrocarbons and hydrocarbon sequestration, there is nuclear fusion and fission. There’s wind energy, but that’s very high up. Instead of solar energy to make electricity we want to look at making gasoline directly, so we don’t have the storage problem. So I would say we have about 15 different paths, so we should back all of them between the various countries.
But India has made it very clear. They want to increase renewable energy to 175 GW, of which atleast 100 GW will come from solar energy. Is India going down the wrong path then?
Well, wind and solar energy will be a big part of the mix, but the intermittency makes it unviable. Energy has to be reliable, and when the sun isn’t shining and the wind isn’t blowing, you still need energy. If youre running a factory 24 hours a day. So the whole system designed in terms of storage and transmission gets quite complex. You still have other substantial sources of energy that are reliable. So wind and solar can be a part of your mix, but you cant do much with them without a storage miracle.
Many also feel that the push for technology as you have spoken off is the wrong path…that it is in conservation, emission cuts that the world has to push instead of waiting for some elusive miracle, as you term it?
I don’t think you can say to somebody who doesn’t have lights or a refrigerator that they should cut down on energy usage. We want people to have these services, basically the world will use more energy in the future. Even if the US used 1/3rd of the energy it uses today by some…’virtuous behaviour’…the increase in energy demand out of Asia will be far greater than a 2/3rds reduction by everyone in the US. So yes, we shouldn’t waste energy, but we should also be realistic. When you speak of cutting greenhouse gas emissions to zero, you cant conserve your way there, you have to have new energy innovations in order to make up for it.
I do want to ask about a term your critics use, which is philanthro-capitalism…where they say that whether it is climate change or health, your foundation funding is tied to technologies or companies that you have an interest in…how do you respond to that?
The notion that we do what we do out of self interest is….you know somebody should and see if that’s legitimate. We don’t benefit in any way from this. If you think the way to make money is to come to India and help people get healthcare (laughs) that is one strange way to make money. I find it amusing someone can say that. The healthcare system in India is under-funded , and we give money away to it, not make money. We give hundreds and hundreds of millions of dollars to help children get nutrition. We don’t get some benefit back from that.
Mark Zuckerberg says you were his hero… and looks like he is following with you his philanthropic announcement 99 per cent of his shares… you haven’t always been complimentary about his priorities… what do you think of the announcement?
It’s fantastic! Mark is starting at a younger age than I did, he will do things smarter because he wont make the mistakes I did. He is younger than me, but we do partner on many things, his commitment is phenomenal, he is a great person.
Keywords: Bill Gates interview, Climate Change, solar energy, wind energy
Market pressures for cheap rare earths may lead managers to skimp on environmental protections.and produces a “tremendous amount” of solid waste, according to the U. S. Environmental Protection Agency. China’s rare earths mines have used only a fraction of the world’s total supply, and substantial untapped reserves are found in Australia, the United States, parts of the former Soviet Union, and other countries. Global demand for rare earths dipped last year on the heels of a speculative bubble, but the EPA said in December there is a “high likelihood” that some of the elements will be in short supply by 2014.
A half-century of rare earths mining in China has caused serious environmental problems.reported that the country’s rare earths operations are causing “increasingly significant” environmental problems. A half century of rare earths mining and processing has “severely damaged surface vegetation, caused soil erosion, pollution, and acidification, and reduced or even eliminated food crop output,” the council reported, adding that Chinese rare earths plants typically produce wastewater with a “high concentration” of radioactive residues.
The Malaysian plant sits atop reclaimed wetland that is prone to flooding and lies only two miles from the sea.The study faults a Lynas plan to dispose of wastewater through an open channel rather than a closed pipeline; a refusal by the company to disclose what the plant’s exact chemical byproducts will be; and a temporary waste storage facility that the institute predicts will cause radioactive leakage “even under normal operating conditions.” A Lynas spokesperson from the company’s Australia headquarters did not respond to a request for comment.
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In 2011, the average price of 'rare earth' metals shot up by as much as 750 percent.Platinum, needed as a catalyst in fuel cells that turn hydrogen into energy, comes almost exclusively from South Africa.
A Belgian company now recycles 350,000 tons of e-waste a year, including photovoltaic cells.Massachusetts. "There’s something like 32 tons of gold in all the world's cell phones," says Apelian. "There's a huge goldmine in our urban landfills."
The onus has to be put on the manufacturers to recover and recycle their own products, one researcher notes.forefront of efforts to automate these processes so they can be done economically and safely by machines, says King.
One approach is to find alternative materials that don’t need so many critical elements.Australia is ramping up. These efforts, among others, have reduced China’s production share from 97 percent to about 90 percent in the past year or two, says King.
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Warren Buffett’s Berkshire Hathaway Inc. agreed to buy Precision Castparts Corp., the maker of equipment for the aerospace and energy industries, in a deal valued at $37.2 billion, including debt.
Buffett’s firm will pay $235 a share in cash, the companies said Monday in a statement. That’s 21 percent more than Friday’s closing price for the Portland, Oregon-based company, which had dropped 17 percent in 12 months amid the slump in energy prices.
The deal is one of the largest by Buffett, who has been building his Omaha, Nebraska-based firm in recent years with the acquisition of industrial companies such as Iscar Metalworking in 2006 and chemical maker Lubrizol in 2011. It will also help work down a cash pile that climbed to more than $66 billion at Berkshire as of June 30.
“This is a business that’s multi-decade in nature,” David Rolfe, who manages about $11 billion including Berkshire shares at Wedgewood Partners Inc., said of Precision Castparts. “They have these incredibly long relationships with some of their customers. And people aren’t going to Fred’s moldings or Fred’s castings to get a little bit cheaper part on the inside of a jet engine.”
The target company uses advanced engineering technology to make metal industrial components for jet engines and power plants as well as pipes for the oil and gas industry. It employs about 30,000 people and produced $2.6 billion of pretax operating income on $10 billion of revenue in its last fiscal year.
Operating MarginPrecision Castparts said in July that it expects $10 billion to $10.4 billion of sales and an operating margin of about 27 percent in its current fiscal year, which ends in March. Last year, 70 percent of its sales were made to the aerospace industry, with another 17 percent going to the energy market. The company’s customers include General Electric Co., Boeing Co. and Airbus Group SE.
“I’ve admired PCC’s operation for a long time,” Buffett said in the statement. “It is the supplier of choice for the world’s aerospace industry, one of the largest sources of American exports.” Berkshire said the deal is expected to be completed in the first quarter of 2016, subject to regulatory approvals.
Berkshire will use about $23 billion of its cash for the deal and borrow approximately $10 billion, Buffett told CNBC. He said he plans to hold off from megadeals for about a year, because the company needs to make sure it still has plenty of cash on hand.
Newspapers, ShoesPCC pushes Berkshire further into heavy industry and cuts reliance on insurance and stock picking, growth engines for most of Buffett’s 50 years in charge. Today’s Berkshire, with BNSF railroad and renewable energy holdings, could hardly have been imagined in the mid 1990s when the Buffalo News and shoe businesses were prominent units and the company was considered a mutual fund because of its equity holdings.
“Those days are gone,” Lawrence Cunningham, a professor at George Washington University and author of the book “Berkshire Beyond Buffett,” said in an interview. “It’s really an industrial operation now.”
Buffett has also shifted his equity portfolio, cutting back on some long-time holdings. Take the case of Procter & Gamble Co., the razor maker that has long been closely associated with the billionaire and was his third-largest position at the end of 2008. Last year, he struck a deal to trade most of the stock back to P&G in exchange for its Duracell battery business.
‘Phase Two’Buying companies with enduring prospects is “a different sort of build-up of value” than investing in stocks, Buffett, Berkshire’s chairman and chief executive officer, told shareholders at his annual meeting last year. “We’ve moved into phase two.”
In 2010, Buffett spent $26.5 billion in cash and stock for the portion of Burlington Northern Santa Fe that Berkshire didn’t already own, valuing the railroad at about $34 billion. Berkshire also agreed to take on about $10 billion of BNSF debt.
Jeff Matthews, an investor who has written books about Buffett, said it’s unlikely that a purchase of Precision Castparts will work out as well as the railroad.
‘No Bargains’“It’s night-and-day different from the BNSF acquisition,” which was announced at a time when there was widespread concern about the economy, he said in an e-mail. “Today there are no bargains like that,” Matthews said, adding that he was considering whether to sell his Berkshire stock. “I just don’t feel comfortable spending that kind of dough on that kind of business in this kind of market.”
Berkshire Class B shares slipped 1.4 percent to $141.60 in early trading at 8:06 a.m. in New York. The stock had dropped more than 4 percent this year through Friday’s close.
Buffett also backed the merger that created Kraft Heinz Co., and Berkshire said Friday in its second-quarter report that results for the three months ending Sept. 30 will probably include a pretax gain of about $7 billion tied to the transaction.
Insurance operations haven’t fared as well lately, posting a net underwriting loss of $38 million in the second quarter, compared with a gain of $411 million a year earlier, driven by deteriorating results at the company’s namesake reinsurance operation.
‘Fabulous Five’The billionaire, who will turn 85 on Aug. 30, told shareholders in May that reinsurance, in which the company takes on risks from primary carriers, has “turned for the worse.” That’s because hedge funds and other investors have piled into the industry seeking to add premium revenue for investment portfolios.
Buffett for years has been highlighting his push beyond insurance, using the phrase “fabulous five” in 2012 to describe BNSF, the energy business, Iscar, Lubrizol and Marmon, which provides engineered wire and cables and motor-vehicle parts.
Adding Precision Castparts would make the group “the spectacular six,” Cunningham said. “A huge acquisition just reinforces the idea that Berkshire is an industrial conglomerate.”
Buffett doesn’t pay a dividend and rarely repurchases shares, meaning he may have to eventually pursue more megadeals, said Meyer Shields, an analyst at Keefe Bruyette & Woods.
“This is going to be a recurring phenomenon where the businesses in the aggregate are spinning off so much cash that you can go out and buy another business,” Shields said before Monday’s deal was announced.
PCC’s bank on the deal is Credit Suisse Group AG, and the legal advisers are Cravath, Swaine & Moore LLP and Stoel Rives LLP. Berkshire’s legal counsel is Munger, Tolles & Olson LLP.