Funding for renewable energy projects plunged 70 percent in the first quarter in Asia as the global recession curbed credit and cut oil prices, reducing the need for alternative power supplies.
Investments in wind farms, solar installations and hydropower plants in the region dropped to $1.8 billion in the first quarter of 2009 from $6.1 billion a year earlier, according to New Energy Finance, a London-based carbon markets research firm. China approved 18 percent fewer ventures, dragging down global spending by 53 percent to $13.3 billion.
The slowdown is critical to carbon trading and efforts to curb greenhouse gases blamed for global warming. Asia is home to 75 percent of the world’s sustainable energy projects, which create credits that polluters in Europe and Japan can buy to meet their obligations under the Kyoto Protocol to curtail emissions.
“We have seen a slowdown in renewable projects,” said Jotdeep Singh, Rabobank Groep NV’s Asia regional head for renewable energy and carbon credits in Singapore. “Carbon credit prices have crashed and banks have reduced appetite for financing.”
The credits generated by saving emissions in emerging markets help finance alternative energy developments. Certified Emission Reduction prices fell from 20.90 euros ($30) a ton in August to 12.79 euros yesterday on the Paris-based BlueNext exchange.
Crude oil in New York plunged to about $32 a barrel in December from a record $147.27 in July. Prices have since recovered to $68 a barrel.
Reduced Trade
The value of carbon trading globally declined by 16 percent in the first quarter of 2009 from the previous three months because of falling prices, according to New Energy Finance.
“Lots of renewable projects in Asia aren’t viable without carbon revenue,” Rabobank’s Singh said. Asia accounted for 75 percent of the world’s registered carbon projects, he said. The ventures are the biggest contributor to the United Nations program that creates tradable credits by cutting pollution in developing nations, known as the Clean Development Mechanism.
Returns from AES Corp.’s wind projects in China are “acceptable” because of carbon credits, said Jimmy Shih, project director for China at AES. The Arlington, Virginia-based company has invested about $60 million in four ventures in Inner Mongolia and Hebei. Shih said that the projects were viable if credits known as Certified Emission Reductions sell for more than 10 euros a ton.
CERs, may trade between 11.5 and 12.5 euros a ton this year and between 13.5 and 15 next year, Moe Moe Oo, the Singapore- based managing director of Tricorona AB, the second-largest developer of carbon credits, said on May 29.
Kyoto Protocol
The 1997 Kyoto Protocol, an agreement among nations to curb global warming, assigned emission targets to developed countries through 2012, allowing them to obtain a portion of the allowances from developing nations. Emissions reductions made in emerging economies, once certified and approved by the United Nations, can be used by factories and power stations in the European Union carbon market as an alternative to the permits handed out by governments.
The global recession has reduced demand for China’s products in the U.S. and Europe, cutting foreign direct investments by 23 percent in April. China’s growth slowed to 6.1 percent in the first quarter, the weakest pace since at least 1999.
China’s Projects
“The crisis may postpone initiatives to push clean technology as China wants to first promote economic stability and keep jobs,” Gael de Barmon, president of Natixis Private Equity Asia, part of Natixis, the Paris-based bank.
The latest draft of China’s 4 trillion-yuan ($587 billion) stimulus plan cut the allocation for sustainable energy investments to 210 billion yuan, said Andre Loesekrug-Pietri, managing partner of CEL Partners, a private equity fund in Beijing.
The National Development and Reform Commission, China’s top economic planner, approved 139 pollution-reduction ventures in the first quarter compared with 169 a year earlier, according to a presentation by Marco Terruzzin, the Beijing-based head of China at Evolution Markets Inc., a carbon broker and trader.
Prospects of fewer projects to cut emissions in emerging countries led a United Nations unit to reduce its forecast for supply of Clean Development Mechanism, or CDM, greenhouse-gas credits by 4 percent.
UN Credits
The UN will probably issue credits for 1.343 billion tons of carbon dioxide equivalent through 2012 in the program, down from 1.398 billion tons forecast in March, the Denmark-based Risoe Centre on Energy, Climate & Sustainable Development said on its Web site May 1.
The number of projects added to the UN list of carbon- saving ventures in April fell to 92 from 116 in March and an average 130 a month last year, according to the firm.
Investments in Asia may recover in the second half and outpace spending last year on less-polluting ventures because of China’s stimulus program, said Chris Greenwood, global head of research at New Energy Finance.
Spending in renewable energy projects in Asia rose to $24.3 billion last year from $4.5 billion in 2005, according to New Energy Finance. The figures exclude government and research spending on clean energy development.
