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US: International climate pact impacts volatility of energy market

Pic credit: GB Times
The pact can only be enacted when a minimum of 55 countries, and those who account for 55% of total global greenhouse gas emissions, have ratified it. Pic credit: GB Times

Following a global pact made between various members of state at the UN Climate Summit in Paris, saw stocks in the fossil fuel market take a dive while there was an intermittent increase in renewable energy shares on Monday.

Reuters reports that the deal, which will only come into effect in 2020 following a 55% vote in, marks the most important climate agreement since the 1997 Kyoto Protocol.

Climate pact goes global

The agreement brings both developed and developing nations to commit to reducing the amount of carbon levels, which aims to eventually eliminate net greenhouse gas emissions from human activity this century.

According to Thiemo Lang, portfolio manager of Zurich-based RobecoSAM, which owns shares in solar stocks: “This deal will help boost the mid- to long-term fundamentals in renewable energy generation, especially solar, while making any further investments in fossil-fuels increasingly vulnerable.”

Market impacts

Reuters reported that the MAC Global Solar Energy Index increased by 1.9%, while the iShares Global Clean Energy Exchange Traded Fund, which allows investors to trade a basket of renewable energy stocks, was bumped up to 1.4%.

“The US Oil & Gas Index slipped 0.5%. Prices of both oil and gas are trading at more than seven-year lows. Shares of companies that produce coal, seen as dirtier than oil and gas, sank the most. Peabody Energy Corp dropped 11.3% and Consol Energy Inc fell 4.9%,” Reuters said.

SunPower Corp chief executive officer, Tom Werner, commented: “Without question, solar is positioned to make the single biggest contribution of any industry to carbon reduction goals – more than wind, more than efficiency, more than any other technology on the horizon.”

Cause for concern

Due to the unofficial nature of the contract, industry players voiced their concerns around the hastiness and surety that some people are showing since the announcement.

Francois Savary, chief investment officer at investment management firm Prime Partners said: “I would not just rush in to buy these stocks on the back of the weekend’s agreement. You need to give time to wait for the dust to settle, and 2020 is still a long way out.”

Edward Guinness, portfolio manager at the Guinness Atkinson Alternative Energy Fund in London added: “I don’t see anything meaningful for me for the next 4-5 years, but it’s clearly a positive they’ve reached an agreement.

“What’s really going to make a difference is the individual countries’ policies, most of which are happening notwithstanding an international agreement.”

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.