Brown vs Green Trap

Relevance: To study the path for a green economy.

Synopsis:

The more the world push towards a green economy, the more expensive the campaign will become and less will be the chance to achieve its aim & limit the worst effects of global warming.

Introduction:

Governments around the world are focused on driving up the demands of materials required to build a clean economy. They are also curbing the supply of sources that are contributors to carbon. For instance, discouraging investment in mines, smelters etc.

The world is facing a rise in oil prices and decreasing investments in hydrocarbon companies. But still, the hydrocarbon companies are reinventing themselves as provider’s clean power.

The actions of government and Hydrocarbon companies will lead to greenflation -rising prices for metals & minerals like aluminium, iron which are required for building green technologies. For e.g. copper prices are up by more than 100%.

Further, limiting the supply of oil threatens to raise what Bill Gates calls the “greenium” – the premium the world must be prepared to pay for climate-friendly infrastructure.

ESG movement:

ESG stands for Environment, Social & Governance.

This is used by asset managers and investors to evaluate companies’ potential financial performance and their performance in ESG.

The asset managers aim to invest in companies that strive to make the world a better place. It evaluates companies and countries on various metrics like sustainability, clean energy, etc.

Effect of ESG movement:

• Mining projects are now taking ten or more years time in countries like Chile and Peru, where earlier it took only five years
• Chile adopted new environmental rules & royalty which makes the mining unprofitable there

Suggestions:

The World will not be able to meet the rising demand for Green construction materials. So they require using more technology in order to facilitate them. For instance,

• The US has joined China in its commitment to carbon neutrality.
• Governments have announced Green spending plans.

Way Forward:

We should not be in a hurry to shut the old economy into a new green economy. We have to strive for a balance between the old and the new.

Terms to know: 

• ESG movement