Green finance machine revives on market rally; plus, the hot new U.S. offshore wind site

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A spate of good climate news with passage of President Joe Biden’s climate bill and a summer rally on Wall Street after six months of declines is starting to revive the green finance market in Europe and the U.S.

Clean energy stocks extended their rally into a fifth week as Biden signed the Inflation Reduction Act, which will pour $327 billion into new wind, solar, and carbon storage technologies, and support the emerging electric vehicle market. Green bonds, whose issuance was down by half in July from June, are still claiming market share from traditional bonds as interest rates rise, Bloomberg reports.

And over in London, the Intercontinental Exchange (ICE) this week introduced 10 new carbon credit futures contracts (say that three times fast), bringing its total to 11, which allow energy traders to trade, hedge, and speculate on specific carbon credit “vintages” out until 2030.

Debate still rages about whether the stock market rally in the past few weeks is the beginning of a new bull run or simply a relief rally that will collapse this fall. But the revival of some of these new green products, all of which of course would have taken weeks or months to develop, provides some confidence that the momentum behind green finance that began four years ago is here to stay.

More insights below . . . .

Despite summer rally, clean energy funds still lagging fossil fuels

. . . . Clean energy stocks have been on a tear for a month on optimism around Biden’s new climate and health bill. But while they are now beating the S&P 500 by a few percentage points, they still lag the performance of fossil fuel stocks this ear by a wide margin. Mark Hulbert argues the discrepancy all comes back to the business philosophies deployed by each sector, and what that means for investors who want to back a green transition and make money at the same time. . . .

Read the full column

A selection of this week’s subscriber-only insights

. . . . Germany has decided to halt closure of its last three nuclear power plants. California’s Gov. Gavin Newsom wants to do the same with the state’s only remaining nuclear facility, Diablo Canyon. Both are examples of an energy sweet spot — an already-existing (and non-polluting) renewable electricity source, albeit controversial. As oil prices stay high and energy shortages remain around the world though, it’s better than the alternative. Here’s what investors can expect. Read more here. . . .

. . . . In China and parts of Europe, wind power from offshore installations is now a huge source of renewable energy. Not so much in the U.S. But there are signs of life, including in new hot spots, the Gulf of Mexico and off Maine. And now arrives the Inflation Reduction Act. What will be the effects? . . .

. . . . With President Joe Biden’s signature on the Inflation Reduction Act, investors and industries are looking forward to its financial impact. We round up some of the benefits and industries poised to boom. Read more about the winners and losers. . . .

. . . . EV chargers from the sky? Apart from range anxiety, one of the barriers to EV adoption is convenience, especially for drivers who don’t have garages with chargers installed. Chargers mounted on electric utility poles and other interesting delivery mechanisms might provide part of the solution, as shown by pilot programs on both coasts. Read more here. . . .

Editor’s picks: Future of wildfires; U.S. grid needs expansion

The relationship between climate change and wildfires

In a rich and detailed explanatory graphic, Visual Capitalist explains the fire climate feedback loop:

  1. Carbon in the atmosphere traps heat and raises temperatures
  2. Increased temperatures influence wildfire conditions
  3. Drier conditions ignite wildfires and burn larger areas
  4. More carbon dioxide enters the atmosphere

“Each year, thousands of wildfires burn through millions of acres of land around the world,” Mark Belan writes. “We’ve already seen the mass devastation that wildfires can bring, especially in places like Australia, Serbia, and California. But new research by the UN indicates that things might get even worse by the end of the century. By 2100, the frequency of wildfires could increase by up to 50%.” The report notes it’s not just wildfires that are growing in frequency and intensity because of climate change. Other deadly disasters, including drought, heatwaves and flooding, are occurring more frequently and with greater intensity. This summer high temperatures broke records across Europe, damaging infrastructure and claiming lives. “Experts warn that this may become the new normal. To help mitigate risk, governments, policymakers, and companies need to band together to create safeguards and establish proper preventative measures.” To read more about the relationship between climate change and wildfires and to see the full visualization, go to Visual Capitalist.

U.S. grid expansion vital to transition

The U.S. may need to boost its electric transmission capacity by 60% over the next eight years to support the hoped-for development in clean energy. Researchers at Princeton say the country will need to boost transmission capacity to achieve the Biden administration’s target of a net-zero economy by 2050, as well as fulfill the goals set out in the Inflation Reduction Act, writes Zack Hale in a report for S&P Global Market Intelligence. Hale says the same researchers, in a separate analysis, say the bill could increase annual utility-scale wind capacity additions from 15 GW in 2020 to 39 GW in 2025-2026 and annual solar capacity additions from 10 GW to 49 GW over the same period.

Latest findings: New research, studies and projects

Scientists report on 40 years of ecological research, effects of climate change

As global warming accelerates, it is increasingly clear that climate change is affecting our planet on every scale, from global shifts in weather patterns to local ecosystem changes, new research from the American Institute of Biological Sciences shows. In a special section in BioScience, a group of authors from the U.S. National Science Foundation’s Long Term Ecological Research (LTER) Network have synthesized insights from 40 years of long-term ecological research on how ecosystems are responding to climate change. The long duration of this research allows for both spatial and temporal analyses of change, and “enhances the impacts of science on environmental policy relative to short-term studies.” According to the special section authors, although the variety of ecosystems have some responses in common, “most ecosystem responses to climate change are unique and are the result of a combination of region-specific drivers, human activities, and interactions between multiple climate drivers.” In the lead peer-reviewed article, Julia Jones of Oregon State University and Charles Driscoll of Syracuse University explain the conceptual framework behind the processes driving these ecosystem changes and the logistics of and varied results from the 28 LTER research sites that were used to collect the data.

Words to live by . . . .

“We are sleepwalking to climate catastrophe. Our planet has already warmed by as much as 1.2°C. — and we see the devastating consequences everywhere. We need a 45% reduction in global emissions by 2030 and carbon neutrality by midcentury to keep our climate goals alive.” — António Guterres, Secretary-General of the UN.