Details and registration here for the Globes Israel Business Conference on December 6 and 7 at the Tel Aviv David Intercontinental Hotel.
Israel is heading to Paris in December to confirm its pledge among the nations of the world to reduce its carbon emissions by 8.8 tons per capita by 2025 and to 7.7 tons per capita by 2030. This intention will take a variety of forms in policies, regulations, education, community, and industry initiative - all of which will require new and more capital. The government recently passed a decision committing resources to finance this reduction as well through new technologies.
Numerous studies have concluded that private investment will outpace anything governments could spend on climate change and would meaningfully reduce global warming while preserving profits and growth. This requires securing access to modern low-carbon energy supplies, doubling the share of renewable energy production and distribution in the global energy mix, increasing energy efficiency in buildings and urban planning water supply and recycling, waste management, and phasing out inefficient fossil fuel subsidies (estimated at $548 billion by the International Energy Agency) and transferring them to clean technology.
The role of climate change as a key factor in global economic systemic risk is becoming quickly apparent. The “externalities” of climate change are huge and proven. The message from all countries in the run-up to the Paris Summit in December is clear: if companies and countries don’t do something serious to manage carbon risk, investors may dump their stocks, triggering a downward economic spiral. Standard and Poor’s, the credit rating agency has already started downgrading the creditworthiness of governments vulnerable to climate-related extreme weather events. Citigroup recently announced that it would lend, invest, and facilitate $100 billion over the next decade to address climate change and Bank of America declared a similar commitment to spend $125 billion. If one includes the $70 trillion under management by institutional investors that have been pledged to low-carbon investments, the private sector is on track to spend large funds leveraged through public-private partnerships. The market for “green bonds” to fund climate friendly project are bought by investors with large enough balance sheets to enable projects to be funded at attractive interest rates has grown rapidly. These bonds have come from nowhere 3 years ago to $37 billion in issuance in 2015 and anticipated to close 2015 at $70-100 billion of issuance.
The economic transition toward climate change requires a redeployment of public money that leverages private investment through blended public-private funds targeting climate change targets. This is precisely the type of program the Government of Israel passed last month to leverage NIS 300 million of budget expenditures and NIS 500 million into a climate change cleantech fund that would target new technologies to reduce not only Israel’s carbon footprint, but the world’s. Israel is the perfect laboratory for these technologies and it has long struggled with its own scarcity building a country by solving technology problems at the energy-food-water nexus. The climate change issue matters for Israel because it presents it with opportunities to exercise global competitive advantage and increase economic growth by decoupling growth from resource consumption.
The effects from climate change leads to a rise in demand among developing and developed countries exactly for the technologies and techniques that Israeli is equipped to supply and help finance. In the 2014 Global Cleantech Innovation Index, Israel topped the list as a world leader. The Asian Development Bank lists precision irrigation and water use technologies that reduce waste and waste to energy technologies as among the most relevant for climate change. Desalination and leak detection to create new sources of water and reduce non-revenue water are other important areas. The World Bank and the State of California have both signed agreements to expand use of Israeli water technologies. Over 350 Israeli companies have been mapped into a CleanTech Ecosystem relevant for climate change focusing on everything from alternative energy, fuel substitutes for oil, water use, agricultural techniques, infrastructure materials, and disaster response. In India and China, an increasing number of projects ranging from desalination to renewable energy to crop protection, constructed wetlands and new seed technologies to drive climate adaptive technologies for agriculture, water, and energy solutions.
Just as the need for information and communications solutions drove entrepreneurial cultural, knowledge capital, and government programs through a three decade long expansion of the Israeli economy, the scarcity of energy, water, and agricultural resources are pulling new technologies that will drive Israel’s next wave of technology innovations for use at home and abroad. With the worldwide demands growing to address climate change and feed people, the implication of knowledge capital exports in water, energy, and food technologies will drive economic growth while meeting our obligations to reduce our impact our natural resources.
Prof. Glenn Yago is Senior Director Milken Innovation Center-Jerusalem Institute and Senior Fellow, Milken Institute. He will address the New directions in innovative finance: health and environment session at the Globes Israel Business Conference on December 7 at the David Intercontinental Hotel in Tel Aviv.
Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2015
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