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An emerging Green Economy is seen in the United Nations Environment Programme's (UNEP) 2008 Year Book which indicates that growing numbers of companies embrace environmental policies and investors are pumping hundreds of billions of dollars into cleaner and renewable energies.

Climate change, as documented in the Year Book, is increasingly changing the global environment from the melting of permafrost and glaciers to extreme weather events. It is also beginning to change the thinking, policies and actions of corporate heads, financiers and entrepreneurs as well as leaders of organized labour, governments and the United Nations itself.

Increasingly, combating climate change is being perceived as an opportunity rather than a burden and a path to a new kind of prosperity as opposed to a brake on profits and employment, the new report shows.

The UNEP Year Book 2008 says the emerging green economy is also driving invention, innovation and the imagination of engineers on a scale perhaps not witnessed since the industrial revolution of more than two centuries ago.

It includes the growing interest in novel 'geo-engineering' projects such as giant carbon dioxide (C02) collectors that absorb greenhouse gases from the air rather like trees do during photosynthesis.

"Based on technology used in fish tank filters and developed by scientists from Colombia University's Earth Institute, this method called 'air capture' can collect the C02 at the location of the ideal geological deposits for storage," says the report.

Meanwhile scientists in Iceland and elsewhere are looking at injecting C02 into that country's abundant basalt rocks where it is claimed the pollutant reacts to form inert limestone. Similar "sequestration rocks" exist in geological formations across much of the world and may provide a safe and long term disposal option for the main greenhouse gas emissions.

Elsewhere, scientists are helping to unravel both the uncertainties and the opportunities posed by the enormous quantities of methane trapped in the sea bed and in arctic permafrost.

As a greenhouse gas methane is 25 times more potent than CO2 so the possibility of dramatic increases in methane emissions from these deposits is a global warming 'wildcard' - a growing source of concern.

At the same time, if ways can be found of mining them safely and economically methane hydrates are a potentially large stockpile of clean-burning fuel.

Despite a great deal of activity and action, formidable challenges remain if all these fledgling transformations are to be sustained and embedded in the global economy over the coming years and decades.

Barriers include subsidies that favor fossil fuels over cleaner energies; tariff and trade regimes that make cleaner technologies more expensive and the risk-averse lending patterns of banks and other financial institutions when it comes to solar and wind power loans for poorer communities, the new report says.

The Year Book's findings were presented on February 20, 2008 at UNEP's Governing Council/Global Ministerial Environment Forum.  with the theme "Mobilizing Finance for the Climate Challenge".  It is the largest gathering of environment ministers since the climate convention meeting in Indonesia late last year which gave birth to the Bali Road Map. The Road Map is the climate negotiation agreement scheduled to be completed by the climate convention meeting in Copenhagen in 2009 in order to deliver a post 2012 climate regime.

The ministers, joined by senior figures from the worlds of business, organized labour, science and civil society, were attending.

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: "Hundreds of billions of dollars are now flowing into renewable and clean energy technologies and trillions more dollars are waiting in the wings looking to governments for a new and decisive climate regime post 2012 alongside the creative market mechanisms necessary to achieve this."

"Formidable hurdles remain as to whether these funds will ultimately seek out new, climate-friendly investments for the future or whether they will seek the lowest common denominator by flowing into the polluting technologies of the past," he said.

"… I am optimistic that we can shift gears to a Green Economy. If humans can go to the Moon; submarines sent under the Arctic; liver and heart transplants perfected; the mysteries of the human genome deciphered and tiny nano-machines designed then managing a transition to a low carbon society must be within humanity's grasp and intellect," he added.

Some Key Findings

The findings here are based on the UNEP Year Book 2008 with some additional supporting facts and figures from documents prepared by UNEP for the Governing Council/Global Ministerial Environment Forum..

Responsible Investing Takes Off

The UNEP Year Book, an annual report requested by ministers, underlines some of the elements of a Green Economy which are already falling into place.

Corporate Social Responsibility (CSR) reporting including environmental concerns is now found among corporations in over 90 countries with the number of such statements mushrooming from virtually zero in the early 1990s to well over 2,000 now.

•  The Investor Network on Climate Change, launched in November 2003, now has some 50 institutional investors with assets of over $3 trillion.
•  The Principles for Responsible Investment, jointly facilitated by UNEP's Finance Initiative and the UN Global Compact in 2006, now has 275 institutions with $13 trillion of assets.

Many companies now perceive that 'going' Green also improves their bottom line. The Year Book 2008 underlines a study by the investment bank Goldman Sachs.

A survey of companies in six sectors-ranging from mining and energy to food and media-indicates that those with pioneering environmental, social and governance strategies are out-performing the general stock market by 25 per cent.

Over 70 per cent out-perform their peers in similar sectors, the Year Book 2008 notes.

Meanwhile a survey of some 150 companies with CSR strategies in the United States as well as France, Germany and the United Kingdom underlines corporations' growing environmental priorities.

Cutting greenhouse gas emissions and boosting energy efficiency ranked number one among 54 per cent of those questioned followed by recycling, 52 per cent and waste reduction, 27 per cent.

Bottom of the list are 'making shipping and transport more efficient and eco-friendly, eight per cent; environmental education and research, seven per cent and supporting employees use of alternative transportation, six per cent.

Industrial Emission Reductions Remain Mixed

Meanwhile, some of the globe's most carbon-intensive industries are leading the way in publicly disclosing their carbon footprint under an eight year-old initiative called the Carbon Disclosure Project.

Disclosure is seen as one powerful route towards companies taking responsibility and acting to reduce their emissions.

The Project, aimed also at empowering shareholders to better understand the current and future economic risks facing the companies they support, estimates that:

• Close to 80 per cent of the Financial Times 500 corporations are disclosing their carbon performance.

• Over three quarters of those who are disclosing such information are now also implementing greenhouse gas reductions via direct emissions reductions or via the emerging carbon markets. This is up from nearly half the year before.

• The highest rate of achievement in terms of carbon disclosure is among the carbon-intensive industries such as metals, mining and steel sectors alongside oil and gas and the power sector.

The Year Book 2008 indicates that despite these promising steps, more needs to be achieved.

A survey by Innovest, a research company whose findings are in the report, shows that some sectors are making in-roads into greenhouse gas emissions.

These include electric power companies in North America, international automobile manufacturers and metals and mining companies. But other sectors appear to be either treading water or seeing emissions continue to rise including oil and gas and chemicals.

Carbon Markets

The best known carbon markets are those established under the Kyoto Protocol of the UN Framework Convention on Climate Change (UNFCCC).

These include International Emissions Trading; Joint Implementation and the Clean Development Mechanism (CDM).

The CDM allows industrialized countries to offset some of their domestic emissions via cleaner and renewable energy schemes alongside afforestation and reforestation projects in developing countries.

As of November 2007, over 850 projects had been registered in close to 50 countries worth just over $1 billion in what are known as certified emission reductions.

A further $1.4 billion are in the pipeline and the CDM could, if fully exploited eventually trigger investment flows for some $100 billion from North to South.

A recent survey of the CDM, published in the Year Book, indicates that close to 30 per cent of such projects are currently aimed at tackling the refrigerant by-product HFC-23 followed by:-

• Reductions in the nitrous oxide gas adipic acid, 10 per cent
• Waste methane from landfills into electricity, 11 per cent
• Biomass fuels, seven per cent
• Wind power, installation of combined gas turbines and hydro-power six per cent each
• Emissions reductions from oil-fields and coal mining, four per cent each.

The Year Book also chronicles the rise of voluntary emission reduction markets such as the Chicago Climate Exchange and the Over the Counter offsets.

The Chicago exchange now has over 330 companies, cities, states and other participants despite the decision of the United States not to ratify the Kyoto Protocol. And while it is deemed a voluntary exchange, those involved are required to sign legally-binding contracts.

Since 2003, the volume of carbon traded has risen from zero to around 20 million tonnes of carbon dioxide equivalent by 2006. The exchange is also involved in a wider suite of offsets when compared with the formal Kyoto-inspired markets.

For example, participants in the Chicago exchange can invest in reducing emissions from livestock and animal wastes including biogas; agricultural soil carbon sequestration and grass planting; urban tree planting and forest conservation projects.

The voluntary Over the Counter offsets market is also evolving after suffering a measure of criticism and concern that some projects were flawed, counter-productive or even environmentally and socially-damaging.

"Schemes are emerging to guarantee to purchasers that carbon offsets represent genuine emission reductions, without harmful environmental side effects," says the Year Book.

The Voluntary Carbon Standard was introduced in November 2007 and is endorsed by the International Organization for Standards under its ISO 14064 and ISO 14065 series.

The latest figures indicates that the total voluntary carbon market was, in 2006, worth around $90 million with most projects in North America and dominated by forestry schemes, followed by Asia where the lion's share of projects are for renewable energies.

This compares with close to $30 billion from the formal Kyoto markets and mechanisms in the same year.

Payments for Ecosystem Services

The formal and voluntary carbon markets are triggering new market mechanisms for including the carbon removing value of forests alongside other benefits such as water management, biodiversity conservation and the preservation of traditional livelihoods.

Some countries and communities are already pursuing these multiple goals under the voluntary markets by finding buyers interested in more than just carbon.

The Year Book cites the case of the Grupo Ecologico Sierra Gorda and the organization Bosque Sustentable of Mexico. In 2006, they completed a sale of land to the United Nations Foundation which was keen to reduce its carbon footprint via a project that will also alleviate poverty.

A similar sale is the final stages to the World Land Trust, a UK-based organization who will be selling the Sierra Gorda Carbon and Environmental Offsets to a range of European buyers.

These developments are also underlined by a project funded by the Government of the Netherlands in Tanzania called Kyoto: Think Global, Act Local.

The project has involved training people on hand-held Geographic Information Systems in order to assist local forest communities estimate the amount of carbon being sequestered by their trees.

Each village forest was found to be sequestering 1,300 tonnes of carbon per year-equivalent to an income of $6,500 per village per year at the then prevailing market price for carbon.

By bundling in the added value of water and biodiversity conservation, the actual incomes could be even higher.

The chance to realize such incomes is becoming a growing possibility. Late last year, the World Bank announced the Forest Carbon Partnership Facility to conserve standing forests and to begin avoiding the estimated 20 per cent of global greenhouse gas emissions from deforestation.

A further development emerged at the Bali climate convention in December 2007 when Norway announced $2.7 billion of funding for Reduced Emissions from Deforestation and Degradation (REDD).

Adapting Insurance to Vulnerability

Creative market mechanisms are also emerging to try and deal with adaptation to climate change.

Extreme weather events are on the rise and are likely to become more prevalent in a climate constrained world. Yet many of those at risk have little access to formal insurance markets.

The Year Book cites a new study by Munich Re, one of the world's leading re-insurance companies. This estimates that cover for catastrophic events such as hurricanes and storm surges, is virtually non-existent for billions of people in Africa, Asia and Latin America and the Caribbean.

"Of the 2.5 billion people world-wide who have less than two dollars a day at their disposal, it has been estimated that only ten million are able to purchase insurance," says the report.

Some developments are underway however including micro-insurance. In Africa, pilot projects that pay out to farmers when rainfall drops below a key threshold, are being tested.

• For example the UN's World Food Programme have partnered with the re-insurer AXA to develop weather derivatives that pay out to Ethiopian farmers in the event of severe drought.
• Swiss Re, a member of the UNEP Finance Initiative, has launched a Climate Adaptation Development Programme to provide financial protection to up to 400,000 people in 10 countries in Africa from drought.

The UNEP Year Book 2008 concludes that "for new developments to reach the scale and scope that is needed, governments must play a stronger stimulation and facilitation role".

Some of the Measures That Governments Might Wish To Consider Include

Subsidies

• Removing fossil fuel subsidies could reduce C02 emissions by five to six per cent annually. Currently, fossil fuel subsidies amount up to $200 billion a year versus support for low-carbon technologies of an estimated $33 billion annually.

Research and Development (R+D)

• Boosting research and development. The International Energy Agency estimates that R+D for low emission innovations such as renewables and energy savings declined by 50 per cent between 1980 and 2004.
• In order to achieve a C02 stabilization target of 550 parts per million, support for innovation needs to rise from just over $30 billion to $90 billion by 2015 and to $160 billion by 2025 according to some experts.

Energy Savings

• Increase global targets for energy efficiency improvements to 2.5 per cent annually.
• These should be supported by policies including stronger energy savings building codes for new and existing structures; penalties or disincentives for builders to choose the cheapest, least energy efficient designs, materials and gadgets; policies that promote mass transit especially rail and international minimum performance standards for industrial and household appliances.
• Other measures include the promotion of utility pricing that favours energy efficiency; promotes combined heat and power and improves energy savings in existing power plants and electricity transmission infrastructure.

Renewables

• Policies that increase the uptake of renewables may include 'feed-in laws' that guarantee a fixed price for each unit of renewable electricity generated; regulations that boost access to the Grid; incentives for second generation biofuels and ones that address other barriers including resource mapping-UNEP/GEF's Solar and Wind Energy Resource Assessment is a good example of the latter.
• Government agencies and donors need to develop and deploy new forms of 'end-user' credit schemes to assist consumers to purchase climate mitigation technologies and systems.
• New approaches are needed to assist small to medium-sized enterprises innovate including enterprise development services and seed capital.
• Attention needs to be paid to new financial and regulatory solutions that address the lack of local currency financing in least developed economies-this is effectively shutting out such economies from low C02 emitting infrastructure developments.
• The 'green procurement' potential of local authorities needs to be harnessed through financial incentives that stimulate voluntary low carbon investments.

Adaptation

• Public investments are needed to mobilize finance for adaptation given that market mechanisms are in their infancy.
• Other actions for adaptation include regulations to limit the vulnerability of new investments and infrastructure such as bans on building in flood prone areas and new, labour intensive, programme to 'climate proof' rural areas that improve resilience of local populations; address poverty; boost incomes and increase the skills base.

Notes:

The UNEP Year Book 2008 can be found at www.unep.org

It can be purchased at Earthprint www.earthprint.com and is available in all six official UN languages (Arabic, Chinese, English, French, Russian and Spanish)

Contacts:

Nick Nuttall, UNEP Spokesperson and Head of Media

Tel:+ 254-20 7623084

Cell: +41 79 596 57 37

nick.nuttall@unep.org

Robert Bisset, UNEP Spokesperson for Europe

Tel: +33 6 2272 5842

robert.bisset@unep.fr

Mr. François Chantrait, Directeur. Centre de Presse

pnue2008.press@gouv.mc

Jim Sniffen, Information Officer

UN Environment Programme New York

tel: +1-212-963-8094/8210

info@nyo.unep.org

www.nyo.unep.org

The preceding report is based on a UNEP press release of February 20, 2008 and on a UNEP report to ministers that can be found under Official Documents http://www.unep.org/gc/gcss-x/info_docs.asp.

Note:

References:

Bali and Beyond:Towards a Low Carbon Society
UN Climate Convention - 2 to 14 December 2007

UNEP Sustainable Energy Finance Initiative (SEFI)