How the G8 Fails Greentech Investors

by mpabst - July 10, 2009

Do G8 leaders discourage investment in green energy by not committing to shared goals on climate change?

Simon Johnson, the MIT Sloan School of Management professor who has successfully transformed himself into a diversified media brand, levels provocative charge against the world’s developed economies in a post on his blog this morning. His broader point is that G8 nations destabilize oil prices but we’re most interested in this claim:

They claim to see no link between their failure to converge on climate change/environmental policies and what happens to energy prices. The extent to which industrialized countries effectively control carbon emissions will have a big impact on the longer-run demand for oil. Flip-flopping on this issue discourages investment in the energy sector (regular and alternative), and thus directly and indirectly contributes to oil price volatility.

This argument dovetails with Rep. Henry Waxman’s claim, made earlier this week on New York Public Radio, that businesses “want to know what the rules are going to be” before they invest in cleantech.

But it points to problems for green energy sector beyond the eventual passage of a cap-and-trade bill in the U.S. Unless some broader accord with enforceable targets for carbon emissions – not just to 2 degrees celsius – can be reached among the G8 countries and beyond, greentech investors will be without a compass.

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