Big polluters to reap benefit of climate deal

LONDON,  (Reuters) – Big energy and engineering  companies will reap most profit from a climate deal due in  December, as they use their financial and intellectual clout to  grab low carbon subsidies

Utilities and oil companies, among the biggest polluters,  are using their market awareness to stay ahead of a climate  race, manoeuvring to own the most viable low-carbon  technologies.

In addition, they are a natural magnet for government  incentives as big emitters which have to drive cuts.

“They are sufficiently commercially and technically mature  and their concentration makes action possible,” said Chris  Mottershead, head of research and innovation at King’s College  London and former climate change adviser to oil firm BP.

“There’s an obvious conclusion: the big utilities, the  international companies are the ones that are going to benefit  in the first phase,” said Copenhagen Climate Council director  Per Meilstrup. “And that’s quite a problem as I see it.”

The council works with scientists and sympathetic industry  to develop a green business voice and says governments must  penalise carbon emissions more, to drive more investment in  cash-starved, clean energy entrepreneurs.

The world is meant to agree a global climate deal at a  U.N.-led Dec. 7-18 meeting in Copenhagen. Negotiators may miss  that deadline, say analysts who expect an agreement in 2010  which governments will craft into national policies to drive  carbon cuts.

Big business is competing in a technology race by snapping  up or partnering with smaller companies as these develop  products, said Mark Kenber, policy analyst at The Climate Group.

That has been seen in wind power and in a technology to bury  carbon emissions from coal plants — called carbon capture and  storage (CCS). In biofuels U.S. oil giant Exxon Mobil Corp  announced in July $600 million plans to develop clean fuels from  algae.     The dominance of high-carbon companies in cleantech is  underscored by patent ownership. Exxon is the world’s top holder of CCS patents, research by the UK thinktank Chatham House  showed last month.

UNFAIR

CCS is receiving billions of dollars but may take a decade  to develop. It is popular with big corporates as a bolt-on to  coal plants which may use depleted oil wells to store carbon  dioxide. The European Union’s executive Commission two weeks ago  awarded 1 billion euros to 6 CCS projects.

Analysts at the investment bank Citigroup have identified a “watch list” of 181 publicly traded companies which could  benefit in the long-term from strong targets to cut carbon.

Benefiting sectors included utilities and engineering  companies in nuclear, hydro and wind power, and the natural gas  industry following new reserve finds and favourable economics  for the low-carbon fossil fuel.

Likely winners were mostly large and well established —  such as electronics firm Philips, engineering company Alstom,  oil and gas company Gazprom and waste firm Suez Environment.

Not everyone is happy that oil firms, utilities and big  engineering companies may hold the keys to a low-carbon future,  and there is a worry that insufficient public funds are reaching  start-up companies and entrepreneurs.

“If you are not in a lab in a big international company that  can afford to develop ideas, demonstrate projects and market  mature products, then it’s really hard,” said Meilstrup.

He added that “amazing” technologies were being missed —  for example to generate cheap household energy from waste in  developing countries.

High-carbon utilities may also have an unfair headstart  after winning windfall profits under Europe’s emissions trading  scheme, meant to penalise polluters. And oil companies continue  to get subsidies, such as U.S. oil exploration tax breaks.

U.S. venture capital investors in cleantech start-ups needed  the same tax breaks, argued Mungo Park, chairman of Innovator  Capital, a specialist investment bank.

But a booming wind industry is proof that a low-carbon  revolution will likely create new winners outside traditional  sectors — perhaps battery makers, expected to roll out mass  production units in pure electric cars from next year.