Public Spending Cuts Harmful to Clean Energy Growth

Lucas Gilmore, “Big 4″ observer
February 28, 2011 /

The fast expanding clean energy sector may come to a halt if governments proceed to push for a scale back in public spending, warns the latest Renewable Energy Country Attractiveness Indices of Ernst & Young.

According to the report, the positive business outlook on clean energy markets may be dampened by the governments’ willingness to reduce public spending, affecting the incentives for markets that exert efforts to reduce carbon emissions such as China and Brazil, which were recently ranked by PricewaterhouseCoopers’s Low Carbon Economy Index as leading in the drive to promote clean energy.

PricewaterhouseCoopers predicted that by 2050, carbon emission in Brazil will have gone down by 79 percent from the 5.4 percent it recorded since 2000 while India will have reduced its carbon emission by a maximum of 25 percent in 2020 as targeted by its government.

Ernst & Young’s analysis said incentives for companies to go on with their clean energy drive will be significantly affected by governments’ scaling back of support for the sector, such as the cut-off to Spain’s tariff incentives and the prohibition against new clean energy projects in France.

The analysis noted Bloomberg Energy Finance’s report that total investments for clean energy rose 30 percent to $243 billion in 2010.

However, there has been a varying level of support for clean energy promotion on country to country basis, the report added.

China, for example, becomes the leading destination of clean energy investors. The country’s total capacity for wind energy rose to 42GW, up 64 percent year on year.

On the other hand, UK ranked fifth in Ernst & Young’s indices when its government created uncertainty in the country’s efforts to support clean energy projects by ordering a review of feed-in tariff incentives for certain solar energy projects.

Ben Warren, energy and environmental infrastructure advisory leader at Ernst & Young, said governments and policy-makers increasingly focus on low-carbon economy where related energy policies continue to be less directly connected to job growth in the clean energy sector.


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