Wermuth Asset Management has warned that the global response to last year’s COP21 agreement had been too slow. However, it said the Middle East had a clear opportunity to lead the shift towards renewable energy.

 

Renowned experts at the second annual Berlin Investment Forum discussed the structural changes required in investment and government policy in order for climate change goals to be realised. 

 

Among the speakers were German State Secretary Rainer Baake of the Federal Ministry for Economic Affairs and Energy, and representatives of major global companies and impact investors, including Allianz Global Investors, Citigroup, General Electric, Willows Investments and Wermuth Asset Management. 

 

“Today, solar power is being offered in Dubai for $3 cents per kilowatt-hour (kWh), equating to an oil price of just $5 per barrel,” explained Jochen Wermuth of Wermuth Asset Management, a family office focused on impact investing. 

 

“Electric cars are another obvious direction we should be taking. These vehicles require significantly less energy than diesel or petrol fuelled alternatives, and are far cheaper to maintain. They are now cheaper to buy than fossil fuel cars, on a net basis, if one allows them to feed power into the grid. For these reasons, further investments in fossil fuel exploration and combustion engines make no business sense. Investors must not lose sight of this,” he added. 

 

The UAE has already taken important steps towards increasing its renewable energy output. Dubai set a new global benchmark in December 2014, when Acwa Power and TSK successfully bid for Dewas 200 MW solar PV plant, offering $5.84 cents/kWh. 

 

Meanwhile, Masdar’s Shams 1 facility is the largest renewable energy project in the Middle East, occupying 2.5 sq km and with a capacity of 100 megawatts. The project is designed to contribute to Abu Dhabi’s 2020 target of 7 per cent renewable power generation capacity, as well as displacing 175,000 tonnes of carbon dioxide per year. 

 

“Ultimately, this is about redirecting global capital flows – and this must be done quickly. Time is of the essence,” said Wermuth. “If this is to happen, there needs to be an immediate and far-reaching change in thinking on the part of oil, gas and coal producing companies and countries.”

 

He added: “GCC countries that remain dependent on hydrocarbon revenues need to take responsibility for aligning their business strategies with economic realities. In many ways, the recent decline in oil prices provides the perfect opportunity for diversifying revenues and investing in renewable energy production. Proceeds from existing fossil fuel production should not be invested in senseless new projects, but should be directed towards opportunities for renewable energy and resource efficiency.”

 

Wermuth Asset Management believes that there is a global requirement for clear market signals for reflecting the true costs of emissions. According to International Monetary Fund (IMF) estimates, the total value of direct and indirect subsidies for fossil fuels amounts to around USD 5.3 trillion per year. Calculations by Wermuth Asset Management, based on global CO2 emissions of approx. 40 gigatonnes, suggest this corresponds to roughly $130 per tonne of CO2 emissions. –TradeArabia New Service