The Climate Race

U.S. green biz seen as risky investment

Kai Ryssdal Nov 20, 2009
The Climate Race

U.S. green biz seen as risky investment

Kai Ryssdal Nov 20, 2009


Kai Ryssdal One of the big things the U.N. climate-change meeting in Copenhagen next month was supposed to help figure out is what the rules are going to be. How does the global economy get from here to there as we try to figure out how to control greenhouse gas emissions? It’s no small question, not least because there’s all kinds of money to be made in a green economy.

But companies need money, fresh new capital, to make money. The International Energy Agency figures it’s going to take $45 trillion to transition from oil and gas to low carbon energy worldwide. Total investment so far, only about a trillion or so. In part, because nobody knows what those new rules and regulations are going to be.

Kevin Parker is the head of global asset management at Deutsche Bank. Kevin, welcome to the program.

Kevin Parker: Good to be here.

Ryssdal: Why do we need regulation to make this investment more attractive?

Parker: We need regulation in order to reduce the risk, the regulatory risk. You know, when investors sit down and they take their fancy spreadsheets out and they start to look at all the risks of their investments — given all the other potential investments all over the world today and all kinds of asset classes and opportunities — if renewable energy has a higher degree of regulatory risk associated with it, all else being equal, investors will choose to put their money somewhere else.

Ryssdal: What does that mean, “regulatory risk?”

Parker: You’ve had a series of regulations that have happened in this country that have created a very favorable environment for the development of, say, wind energy. When those tax credits have gone away, because they’ve been set for two years or three years, when they’ve gone away, we’ve seen a dramatic drop off in further development. So this stop-start notion of regulations that favor it and then are taken away, because of political reasons or other reasons, that really kills equity investment.

Ryssdal: So where do you like right now? What is a good country? Give me an example of a place that has good rules and regulations for green investment?

Parker: Well, we are Deutsche Bank. Our home country’s Germany, and it’s not the reason we’re saying this, but Germany is the leader today. Germany’s created unquestionably the right regulatory framework to foster energy efficiency and renewable energy development. Germany is out in front.

Ryssdal: I’m almost afraid to ask this, but what’s your take on the United States and the regulatory framework here?

Parker: Well, we’ve bucketed countries around the world into risk categories — risk 1, 2 and 3. And the U.S. is in the middle of the pack.

Ryssdal: Well, at least we’re not at the end, right? I mean, we’re at least not down at the bottom.

Parker: We’re not down at the bottom. However, if we’re the world’s biggest polluter, we should really have the best regulatory environment for going after it and the lowest risk environment and it’s not a very good story.

Ryssdal: What can the U.S. do, then, to make itself more attractive and to get a leg up in this race to the green technology?

Parker: Well, it falls into two categories. There’s a long-term framework, which is what cap-and-trade is really meaning to get at.

Ryssdal: Cap-and-trade, this device by which you cap the emissions and then you trade the pollution quotas basically.

Parker: Exactly. And the Waxman-Markey bill, the Senate bill, that addresses putting a price on carbon and a cap on carbon long term. It doesn’t address the near-term issues of capital formation and getting after the opportunities in renewable energy and energy efficiency.

Ryssdal: What I hear you saying is that in this country, we are largely nibbling around the edges.

Parker: The system we have in the U.S. today is a… It’s a bit of a quagmire, frankly. Because the states all sort of go off their own thing. We don’t have federal legislation, which is difficult. We have, 29 states have state-level renewable portfolio standards. It’s a myriad of regulations and requirements and what that does is it prevents the system from really scaling up.

Ryssdal: Kevin Parker, he’s the head of Global Asset Management at Deutsche Bank. Kevin, thanks a lot.

Parker: Great to be here.

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