HSBC predicts low-carbon energy market will treble to $2.2tn by 2020

Report reckons US dominance will slip as China comes up on the rails!

The global market for low-carbon energy firms will almost treble over the next decade creating a market worth $2.2tn a year by 2020, according a major new report from banking giant HSBC.

The research report maps out a number of scenarios for the world’s emerging low-carbon energy generation and energy efficiency industries and concludes that despite current regulatory headwinds the sector is set to enjoy compound annual growth rates of around 11 per cent over the next 10 years.

Speaking to, report co-author Nick Robins said there was a good chance that the projections could prove to be pessimistic. “We just looked a low-carbon energy, we have not modelled the carbon market or the adaptation agenda,” he said. “The market could end up being a bit worse than we suggest, but it has the potential to get a lot better as well.”

The team behind the report mapped out four scenarios for the low-carbon energy sector, including a worst-case scenario backlash in which governments renege on green policy commitments and as a result the market only doubles to $1.5tn by 2020; a Copenhagen scenario in which governments make good on commitments made at last year’s UN climate change summit in the Danish capital and the market trebles to $2.2tn; and a green growth scenario in which governments build on current pledges and the market swells to $2.2tn.

HSBC then settled on a conviction scenario, which Robins described as a plausible set of projections based on current policies and the progress made by various economies towards the low-carbon economy. “For example, we reckon the EU will hit its renewable energy targets but fall short on its energy efficiency targets, while China looks well positioned to exceed its renewable energy targets,” he explained.

The projection means that as a result the low-carbon energy sector would see its share of global GDP rise from 1.3 per cent currently to 2.1 per cent by 2020.

Robins admitted the realisation of HSBC’s scenario faced a number of barriers, including the risk that promised policies could be withdrawn or delayed, as has already been the case with the proposed US climate bill. HSBC’s conviction scenario will also require high levels of capital investment with the report claiming investment in the low-carbon energy sector will grow from $460bn a year currently to $1.5tn a year by 2020.

However, Robins added that the internal clean energy investment and merger strategies being employed by many of the world’s largest companies meant there was an inevitability surrounding the growth being predicted for the low-carbon energy sector.

He also noted that the bank’s projections could prove to be decidedly conservative if an international climate change agreement is reached or a spike in fossil fuel prices drives further investment in alternative energy sources.

The report predicts that US dominance of the low-carbon energy market is likely to slip over the next decade as China’s massive renewable investment programme takes effect. It estimates that the EU’s share of the global market will slip from 33 per cent to 27 per cent, while the US share will fall from 21 per cent to 20 per cent. In contrast, China’s share is expected to rise from 17 per cent to 24 per cent, making it the second-largest market after the EU.

It also predicts that energy efficiency, particularly around vehicles and buildings, will dominate the market with the sector growing an average of 13 per cent a year to be worth $1.2tn a year by 2020. The low-carbon energy sector, including renewables and nuclear, will enjoy a more modest compound annual growth rate of 8.6 per cent resulting in a $1tn-a-year market by the end of the decade.

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