Low-carbon market to treble by 2020: HSBC

LONDON Mon Sep 6, 2010 8:47am EDT

LONDON (Reuters) - The world's low-carbon energy market is likely to treble by 2020, HSBC analysts forecast on Monday, saying that rising concerns about resource scarcity would support broad consensus on the threat of climate change.

The electric vehicle market would benefit most, growing more than 20 times by 2020 to reach $473 billion, said HSBC's "Sizing the climate economy" report.

Climate policy has faced headwinds including faltering U.N. climate talks to agree a post-2012 successor to the Kyoto Protocol and repeated Senate setbacks to a U.S. climate bill.

But mounting pressure on land, water and energy as a result of growth in emerging economies and world population will add momentum toward a more efficient "climate economy," the bank said.

"A new climate is starting to emerge, driven as much by resource scarcity and industrial innovation as by the raw realities of global warming," the HSBC report said.

A market in low-carbon energy and efficiency technologies will at least double to $1.5 trillion from $740 billion now, but HSBC analysts expected that it would more likely treble to $2.2 trillion, implying global annual market growth of 7-11 percent from 2009-2020.

By region, the market will grow fastest in China, which will leap-frog the United States but still trail the European Union, which has set itself tough renewable energy, emissions and efficiency targets to 2020.

"In the EU we expect renewable but not energy efficiency targets to be met; in the United States we project limited growth in clean energy; and in China, we expect current targets for clean energy to be exceeded," the report said.

The dominant sector shift would be to efficiency technologies such as building insulation and electric cars, which would overtake low-carbon energy technologies such as wind, solar and nuclear power.

Renewable energy is the biggest low carbon sector now, and revenues would grow at 9.4 percent annually to a market size of more than $500 billion by 2020 but still lag transport efficiency at nearly $700 billion in 10 years' time after 18 percent annual growth.

A low-carbon energy economy requires higher upfront costs, for example in insulation or expensive wind turbines. That has led to doubts that targets will be met given spending constraints following the financial crisis.

But low-carbon technologies also cut operating costs by saving on energy or using free, renewable sources.

Under what it called the "conviction" scenario, which HSBC says is most likely, annual capital investment would grow from an annualized $460 billion in 2010 to $1.5 trillion in 2020.

New funding models would be required to meet this, especially where investment was from the household sector as for example to purchase electric vehicles or upgrade housing.

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