Thursday 17 October 2019

Ireland an ideal 'global lab' for green industry

Climate finance expert sees massive opportunity to make mark on renewables, writes Fearghal O'Connor

Green finance expert Sean Kidney says that Ireland should follow Singapore’s example and become an innovative hub despite its small size. Photo: SON Photographic
Green finance expert Sean Kidney says that Ireland should follow Singapore’s example and become an innovative hub despite its small size. Photo: SON Photographic

Fearghal O'Connor

Ireland can become "a global laboratory" for green finance and renewable technologies and help drive an economic transition plan to transform sectors such as transport and energy, according to a leading expert in climate finance.

"We are heading into a world of big volatility and we have to make sure we carve out a future that has the maximum opportunity for prosperity," said London-based Australian green finance expert Sean Kidney.

He believes that Ireland is perfectly positioned to become a hub for the type of industries that will be needed to create a carbon-free global economy in the coming decade.

"There are ways to solve the problems we face in a way that gives people clean energy and better cities to live in by using measures that brings in private capital to help solve problems," said Kidney, who is the chief executive of Climate Bonds Initiative, an NGO focused on raising money for climate-change solutions, particularly in the debt markets.

Kidney was in Ireland for the launch of a new report by consultants Deloitte that outlines the challenges ahead for Ireland as it transitions to a low-carbon sustainable economy. Commissioned by Sustainable Nation Ireland, the report by Michael Flynn, Deloitte's Infrastructure & Capital Projects Leader, states that meeting Ireland's 2030 decarbonisation targets will require at least €50bn in investment, which includes government's €21.8bn investment programme in the National Development Plan.

That plan includes upgrading 45,000 homes a year from 2021, providing up to 4.5GW of additional renewable energy and transitioning to low-emission public transport. The Government has also recommended that all new vehicles should be zero emissions beyond 2030.

But speaking to the Sunday Independent, Kidney said that Ireland could still do more to build on the opportunities being presented by the huge deployment of public and private capital that is needed globally to tackle the issue of climate change.

"I'm going to call it a failure of vision," said Kidney. "Ireland should be looking to develop its offshore wind energy resource, for example. In reality, the country should ultimately not need any fossil fuel generation at all. And in transport there are huge possibilities and the vehicle range in Ireland is perfect for transitioning to electric.

"It is very hard for individuals to do anything about climate change. Most of what needs to be done is around what you might describe as engineering solutions. Yes, you can buy an electric car and that is great. But the way the world is going to change is when the government legislates that you can't buy a fossil fuel car anymore. Or you need the large-scale contracting of renewable energy as Germany did, which has since driven down the price of solar panels to such an extent that they are now affordable to use in a country like Ireland. So an individual can do what they believe is right themselves but you have got to understand that the solutions are systemic."

The Deloitte report found that, at a global scale, estimates of the financing requirements for sustainable infrastructure are in the range of up to €90 trillion. In Europe, it has been estimated by the European Commission that an additional investment of €177bn a year is required to achieve Europe's 2030 climate and energy targets.

Kidney believes that Ireland can be a major beneficiary of what will amount to "an extraordinary investment boom."

"Ireland is a highly-developed, highly-educated environment with high-tech skills and a global financial centre," he said. "It has the opportunity now of being both a green finance centre and a green technology centre. Ireland has the chance of becoming a lab for the planet on these issues.

"The challenge is for Ireland to change its own economy and then the prize is for it to export the solutions. For example, you have a strong and sophisticated agricultural industry - shift it to green fast and then export the solutions that are developed around the world."

Ireland's key advantage is that it is small and "the economy, in theory at least, is nimble", said Kidney. "Now is the time to use that nimbleness. Look at Singapore. It gets so much attention that you would think it is the size of China, but it's tiny and has become a hub for the whole of Asia on many of these issues. That's the model you need to follow."

Kidney pointed to the aviation-leasing industry as an example of how, with 60pc of leased aircraft listed here, Ireland has taken a leadership role in an industry. He believes that the country can use similar tactics to become a leader in green finance.

In February, Belgium become the third European country to issue a green bond to finance projects to lessen its dependence on carbon, with the issuance of $4.5bn, 15-year debt. That followed similar issues of green debt by France and Poland on top of an already booming market for environmentally-friendly corporate finance.

Green bonds now account for 1.5pc of global bond issuance from zero four years ago and is growing at well over 50pc a year, said Kidney - but Ireland is yet to issue one.

"The NTMA should issue a green bond on the back of the success of similar French, Belgian and Polish bonds," said Kidney.

"The challenge for the NTMA is that it has to have real projects and assets to put into such a bond. So for example it could look at buildings in the national register that are energy inefficient, any kind of mass transit project such as the Luas, the proposal to shift the gas system to biogas would qualify. The French have used this type of finance to introduce tax credits to boost renewable energy. They can also use it to refinance rollover debt if the assets that were originally financed are green too."

The issuance of green bonds makes good macro economic sense because it helps to stimulate markets in renewable and helps to create export opportunities, said Kidney.

"Every treasury that has done this has resisted it until they have done it and then become a fan afterwards," he said.

"There is a tidal wave of mainstream investor interest in this. It's not niche. Pension funds, insurance funds, Central Banks are all the customers for these types of bonds," he said.

The real solutions around climate change are largely based around urban development issues, said Kidney.

"To address climate change we have to green our cities. We are about to build a string of new cities of 20 million people, mostly in the developing world. The investment volume is like nothing the planet has ever seen before. It dwarfs the industrial revolution. If that investment is not green then the world is lost. We will lock in long-term high-carbon infrastructure, climate change feedback loops will kick in and we will have four to six degrees average warming by the end of the century and sea level rise of 4-6 metres. That is no good for anyone on the planet."

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