Will a low carbon phoenix rise from the ashes of the financial meltdown?

It has been very difficult to ignore the financial meltdown resulting from the global credit crunch |this week. The question that has been circulating my brain throughout this saga is "what effect will the credit crunch have on investment in low carbon technologies?" It's a somewhat daft question because it all rather depends what aspect of low carbon technologies you are talking about. Fortunately, far more intelligent people than me have been pondering this.

Jeremy Leggett |, founder and chairman of Solarcentury, thinks that the renewables sector will not only survive the credit crunch, but it will actually prosper. He cites the significant growth of investment (>$100bn in 2007) in renewables and the growth in key technologies, such as solar PV (67% growth in 2007). To some extent others agree, although the prognosis seems somewhat gloomier in the short term.

Rabobank green energy executive Tanja Cuppen |has suggested that the credit crunch will have a major impact on renewable energy and the worst is yet to come. Because credit will be harder and more expensive to obtain it is estimated that the European renewable energy sector will experience a shortfall of €21 billion up to 2020 |. This represents almost a quarter of the €85 billion worth of investment that wind, solar and other forms of zero-emissions power will require between now and then to meet the EU's target for 20 per cent of electricity to be generated from green sources by 2020.

It is likely that the different sectors of low carbon technology will feel different effects from the credit crunch |. Established industries such as wind and biofuels will find it tougher and more expensive to raise finance from banks and other institutions ultimately meaning that energy from such projects will cost more. The private venture capital for early stage companies, however, seems to be unperturbed by the crisis thus far and continues to flow. For companies with new technologies the pinch point comes where finance needs to be raised to finance the gap between product development and commercialisation. Overall the long term prognosis for investment in low carbon technology remains good – like all other sectors it will just have to tighten its belt during this period.

I have found it difficult to find any reference to what might happen to public (government) investment in low carbon projects. For example, will the credit crunch have an effect on the timescale for the global demonstration of CCS technologies? I'd be happy to hear from anyone on this subject – if only to put my own mind at rest and so that I stop annoying friends and colleagues with my incessant questions.