In just months, the U.S. government has gone from putting environmental matters on the back burner to making it one of their top priorities. With the influx of environmental “buzz”, many investors are wondering how this will affect the market.
Secretary of State, Hillary Clinton, recently announced that the U.S. has officially joined the International Renewable Energy Agency (IRENA), increasing the number of participating countries to 136. Clinton believes IRENA will engage governments around the world in promoting a rapid transition toward the widespread and sustainable use of renewable energy.
Just how rapid that transition is may decide the future of clean energy initiatives. President Obama’s $67 billion stimulus package for renewable energy and energy efficiency makes America one of the world’s biggest clean energy proponents. However, if these funds are spent too quickly or too slowly, some investors believe it could further damage the clean energy industry.
Although concerns over climate change continue to climb, investments in clean energy have fallen in 2009 due to the current economic slump. To keep the industry stable, the government is filling in and acting as an investor. If the government moves too slowly though, loan guarantees from the American Recovery and Reinvestment Act may not be enough to save the industry. However, if the funds are dispersed too quickly, the chances of misappropriation and abuse are more likely. In this case, the loss of credibility could be too much for investors to handle.
In the first quarter of 2009, new investments fell by 53% compared to the first quarter in 2008 to $13.3 billion, according to an article in Science Daily. There have been some recoveries since then, but there is still a long way to go to reach the investment levels of previous years. In difficult economic times, clean energy investment is a tougher sell because the rate of return is often not as high as other investments.
Despite the seemingly bleak situation, many experts believe that climate change, economic recovery, and energy innovations will fuel investment growth in the years ahead. For those who are well-positioned investors, the financial crisis might even create new opportunities. According to Science Daily, a combination of low interest rates, thinning competition, declining construction costs and government support make the market more attractive.
Much to the relief of environmental companies, many investors continue to be optimistic and recognize that beyond the current economic situation, beyond the stimulus program, and beyond all the risks, one thing to be certain of is that we will never stop needing energy.