Investors want proof of Obama "green" change

LONDON/SINGAPORE (Reuters) - President elect Barack Obama faces demands for proof of a change in U.S. tack on the climate from "green" investors and businesses around the world.

Obama said in his acceptance speech Tuesday that climate change was a top priority, alongside wars in Iraq and Afghanistan -- marking a sharp shift with President George W. Bush, criticized for downplaying the threat from global warming.

Obama's other priority was to revive a wilting economy and that will take top spot on his agenda before dealing with national carbon trading and clean energy.

"Green" investors, analysts and bankers were not expecting miracles overnight but want early proof of Obama's climate credentials, when he takes office on January 20.

"The first is that he is seriously looking for a quick way through for national cap and trade in the United States," said Henry Derwent, head of the Geneva-based International Emissions Trading Association (IETA), the carbon market lobby group.

Cap and trade is one way to drive investment in low carbon technologies, by putting a ceiling on greenhouse gases using a fixed quota of tradable emissions permits, an approach Obama backed during his campaign.

Obama could threaten to use existing U.S. clean air laws to force through a cap and trade scheme, widely considered a messy approach which may then encourage the Senate to back a climate bill, said Derwent.

More green proof would be regular mention of climate change in bilateral meetings in coming months, he added.

Analysts were wary of Obama's campaign promises, not convinced he will deliver on cap and trade nor plans to invest $150 billion over 10 years in low-carbon energy sources.

"A cap and trade system is by no means a done deal," said Guy Turner at London-based New Carbon Finance, given that would need Senate support.

"I'd like to see the first $15 billion (of low-carbon cash) funded in his first budget," said Mark Diesendorf, environmental and sustainable energy analyst at Australia's University of New South Wales.

The Australian government was elected last year partly on promises to cut greenhouse gases and expand renewable energy. "However, in its first budget in May 2008, it funded almost none of its promises to renewable energy," said Diesendorf.

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"A U.S. cap and trade scheme will provide a strong stimulus for the development of (low carbon) technologies," said David Russell, co-head of responsible investment at the London-based USS pension fund, which has 30 billion pounds under management.

The world's biggest wind turbine maker Vestas Wind Systems A/S would invest more in the United States if renewable energy targets were made stronger, said Ditlev Engel, chief executive of the Danish company.

"Thirty states have their own renewable portfolio standards, now a solution for the entire U.S. is needed. We need long term targets and long term energy plans," he told Reuters.

Environmental markets depend on tough climate goals, to drive a switch to low-carbon fossil fuel alternatives. It therefore matters what the country most responsible for climate change now -- according to scientists -- does about the problem.

Under Bush, the United States is the world's only industrialized country not to ratify the Kyoto Protocol.

More proof of change would include a multi-year extension of tax credits for the wind energy industry, similar to solar, said Michael McNamara, London-based analyst at Jefferies Bank.

"The question is does this get bundled into a broader energy bill -- that could slow things down," he added.

Green policies may face opposition, because carbon markets and promoting renewable energy often raise energy costs -- something difficult to endorse as recession looms. Obama has underscored job opportunities from climate policies.

"I don't see the U.S. becoming competitive again in the car industry, steel industry, cement. Renewable energy could be a new source of growth," said Emmanuel Fages, SocGen analyst.

But depleted government coffers, rising unemployment and plunging profits across most industries could prevent him from making sweeping changes in his crucial first year.

Obama wants to cut carbon dioxide emissions to 80 percent below 1990 levels by 2050.

"He's certainly committed to a very aggressive reduction target," said Abyd Karmali, global head of emissions trading at Merrill Lynch.

"The economic downturn suggests that there may be a light start approach, similar to that we had in Europe," said adding that the draft Dingell-Boucher climate bill allowed gentler carbon emissions cuts than previous proposals.

Another strong signal would be Obama or his advisors' participation in an unofficial role at U.N.-led climate talks in Poland next month, said Josh Margolis, co-chief executive of carbon brokers, CantorCO2e.

-- Additional reporting by Nina Chestney in London