INSIDE THIS ISSUE 02 Mispricing Risk Raiders of the Lost Ark and the Dangers of a Carbon Bubble 07 Racing Ahead South Korea’s Leading Green Economy 10 From Sand to Silicon The Emergence of a New Solar Giant A B O U T W H E B WHEB is an independent investment management firm specialising in opportunities created by the global transition to more sustainable, resource efficient economies. Established in 2003, WHEB invests assets on behalf of institutional and private clients through listed equity, private equity and infrastructure investment strategies. With offices in London and Munich, WHEB’s team of more than 20 investment professionals have over 250 years of combined experience.

CONTENTS 02 Mispricing Risk Raiders of the Lost Ark and the Dangers of a Carbon Bubble 07 Racing Ahead South Korea’s Leading Green Economy 10 From Sand to Silicon The Emergence of a New Solar Giant 01

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Mapping the opportunities and risks in the green economy The race is on. In recent months we’ve had the opportunity to meet, work with and visit investors from across the globe and this edition of the WHEB Quarterly profiles the enormously ambitious programmes for green growth that are emerging from two very different – and perhaps unexpected – parts of the globe. EDITORIAL

Ben Goldsmith spent much of the spring visiting Middle Eastern investors and comments on the major deployment of infrastructure that is positioning the region as an exciting source of growth in this sector (pages 10-13). Meanwhile, across the world, South Korea is also staking a claim to the mantle of ‘green growth leader’. Hyewon Kong analyses some of the most ambitious national-level targets that are aimed at de-carbonising the South Korean economy, and assesses the ramifications that these commitments are having in the investment world (pages 7-9).

Meanwhile, Seb Beloe reviews the risks associated with investments in industries and specifically the risk that fossil fuel reserves are over-valued and may be subject to a ‘carbon bubble’ (pages 2-6).

Just as the investment opportunities associated with a ‘greening’ of the global economy are likely to fall disproportionately to those regions with ambitious programmes in critical technologies and sectors, so the risks associated with fossil fuel investment will fall disproportionately to those regions with the greatest exposure to these sectors. With their heavy exposure to the FTSE – one of the most carbon heavy indices in the world, UK investors and advisors will need to understand these risks and adapt their investment strategies accordingly.

We hope you enjoy the Quarterly and as always welcome your comments and feed-back.

Seb Beloe Editor [email protected] 02

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By Seb Beloe, Partner, Head of Research

Raiders of the Lost Ark, the 1981 fantasy adventure film starring Harrison Ford, is one of the highest-grossing films ever made and won four Academy Awards. The climax of the film comes when a group of Nazi soldiers open the Ark of the Covenant, believing it will make them invincible. But instead, a screaming cloud of Old Testament seraphim emerge, transform themselves into angels of death and annihilate anyone foolish enough to look upon them. Rarely can a prized asset have so swiftly turned itself into such a catastrophic and deadly liability. While the captains of the fossil fuel industry are unlikely to experience the ‘face-melting’ fate of Dr René Belloq, Major Arnold Ernst Toht and their cronies, the currently prized assets of , oil and gas reserves may prove just as illusory. 03

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Mispricing risk

In recent years, global capital markets have swung The role of CO2 as a greenhouse gas is well understood violently from boom to bust. Overheated internet stocks (having been first documented in 1859iv) and, according created the dot-com bubble which burst in 2000- to a recent studyv, over 97% of nearly 12,000 peer- 2001. More recently, the financial crisis in 2007-08 was reviewed papers published in scientific journals have caused in large part by the bursting of the US housing found that is caused by human activity. bubble. That economic bubbles exist is incontrovertible A previous studyvi using a slightly different methodology after the fact, but spotting them beforehand is much found that out of 13,950 papers, only 24 papers reject more difficult. climate change. You are less likely to pull ten of these studies randomly from the complete set of 13,950 As its name suggests, the Initiative studies than you are to be hit first by lightning... is focused on the issue of , its role in and then by an asteroidvii. climate change and the contention that businesses focused on developing and selling fossil carbon-based While monitoring of the vast majority of physical data fuels, notably coal, oil and gas, are overvalued. (such as melting ice sheets, increasing annual land and The existence of this so-called ‘carbon bubble’ is the sea temperatures, global mean sea-level, and changing principal conclusion of their latest report, ‘Unburnable patterns of precipitation) indicates significant warmingviii, Carbon 2013’, which has been produced in partnership the main concern for investors is the economic impacts with the Grantham Research Institute on Climate of climate change. Several studies have attempted to Change and the Environmenti. put a price on the impacts of climate change, including most notably the on the Economics of Climate Change in 2006ix. While these estimates are Recapping the science contentious, recent experience of the direct and indirect Fundamentally, the report is based on the premise that economic impacts of extreme weather suggests that climatic change is caused by human activity. It is worth costs associated with climate change will be significant. briefly revisiting the scientific evidence for this. In mid A 2011 study by the National Center for Atmospheric

May 2013, the proportion of carbon dioxide (CO2) in Research in the US, for example, estimated that the atmosphere passed 400 parts per million (ppm)ii. extreme weather is costing US$485 billion per year, x The last time atmospheric CO2 reached this level was equivalent to 3.4% of US GDP . In the UK, the approximately three million years ago. 450ppm is widely Association of British Insurers has estimated that 4°C of regarded as the level beyond which the probability of warming could be expected to result in average annual dangerous climate change becomes uncomfortably insured flood losses increasing by 14% to £633m as highiii. At the current rate of increase, this level is likely a consequence of increased inland flooding, and this to be reached in 25 years’ time. component of insurance premiums increasing by 21%xi.

‘ In mid May 2013, the proportion of carbon dioxide (CO2) in the atmosphere passed 400 parts per million. The last time atmospheric CO2 reached this level was approximately three million years ago.’ 04

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Sizing the carbon bubble of climate change remain manageable, but is little consolation when the longer-term impacts undermine 450ppm of CO is believed to equate to approximately 2 returns across other sectors and asset classes. 2°C of warming globally. If warming is to be kept to below this level, the amount of carbon dioxide that can It is also a big bet for investors to take. HSBC estimates be put into the atmosphere between now and 2050 that the market capitalisation of some European oil and

must be limited to approximately 900 gigatonnes of CO2 gas companies could be reduced by as much as 16%

(GTCO2). The problem is that total proven reserves of (with Statoil the most at risk) if climate change policies fossil carbon energy resources represent about 2,860 are implementedxiv, and UK mining stocks could lose up xv GTCO2 or slightly more than three times what can be to 15% of their value . safely used during that period. Most of these reserves are owned by governments and could be left in the Of course, most investors won’t hold large active positions in single stocks, but, for certain markets, ground, but 762 GTCO2 are owned by listed companies that are valued by investors on the basis that these the risks associated with exposure to carbon assets are significant. Citi estimates that the Australian index resources will be exploited, with a further 1,541 GTCO2 listed in potential reserves. (the ASX200) is over 14% related to fossil fuelsxvi. The FTSE100 is the third most carbon-intense index If listed fossil fuel companies have a pro rata portion globally (behind Moscow and Athens). Average unit of the 900 GTCO carbon ‘budget’, this would amount 2 holders of a FTSE100 tracker fund have approximately to 125-275 GTCO or approximately 20-40% of the 2 18% of their holdings in oil and gas companies and a xii reserves already booked by these companies . further 11% in mining, of which a significant portion In other words, if CO levels are to be kept at levels 2 is coal. that the scientific community considers to be safe, then between 60%-80% of the existing booked Fossil fuel carbon budget reserves of listed fossil fuel companies should not Maximum temperature rise (˚C) 2013-2049 (GtCO2) be exploited during that period. 1.5 ˚C - 2.0 ˚C 900 Implications for investors 2.5 ˚C 1125 3.0 ˚C 1275 How the world’s governments are likely to respond is uncertain. Currently it seems that fossil fuel companies and their financial backers are ‘betting that government

climate policies will fail [and that] they will be able to TOTAL PROVEN RESERVES burn all their reserves, including new ones, after all’ OF FOSSIL FUELS UNBURNABLE (as The Economist put itxiii). This may prove to be right, 2860 GtCO2 at least in the short to medium term while the impacts

BURNABLE

900 GtCO2

‘ Of 13,950 scientific papers, only 24 reject [humanity’s role in causing] 762 GtCO climate change. You are less likely 60-80% 2 OWNED BY to pull ten of these studies randomly NATIONAL 20-40% AND PRIVATE OWNED BY from the complete set of 13,950 COMPANIES PUBLIC COMPANIES studies than you are to be hit first by lightning... and then by an asteroid.’ 05

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‘The FTSE100 is the third most carbon-intense index globally (behind Moscow and Athens).’

Investment strategies Asset Owners) who strongly believe in “unburnable carbon” [might] find it more productive to actively tilt So what can investors do? As we argue elsewhere in their portfolios [away from high carbon assets]’. this edition of the Quarterly, governments around the The International Energy Agency predicts that in order world are still implementing policies to progressively to stay within the safe threshold of 450ppm of CO ‘decarbonise’ their economies. Even the most ardent 2 climate change sceptic will have to admit that, at in the atmosphere, coal consumption will have to fall xvii the very least, there is a non-negligible risk that 30% from 2010-2035 and oil by 12% . In perhaps a governments will implement climate change policies foretaste of things to come, the market capitalisation of that in turn shift market demand from high to low US coal has already fallen approximately 75% in the last carbon fuels. Prudent investors might want to take two years, caused in large part by the emergence of account of this risk in their investment strategies. cheaper – and lower carbon – shale gas. With this in mind, one area investors might wish to Finally, the investment consultants Mercer go further in reconsider is the nearly US$700bn that is spent annually their report on the implications of climate change for on finding new sources of fossil fuels. Often expensive strategic asset allocatorsxviii. Their view is that ‘mitigating and in extreme environments, these resources, where they are found, are arguably unlikely ever to climate change risks will require a new approach for be exploited. Better perhaps to return this money in investors… [involving] increased asset allocations to dividends to shareholders who, in an environment of climate-sensitive assets as a climate “hedge”’. In other low interest rates and bond yields, are increasingly words, hedge the carbon-heavy investments with desperate for income. investments in clean energy and sustainability themed funds, by ensuring that climate risk is integrated into Another approach is to avoid fossil fuels that carry a fund manager analysis, and through engagement with particularly heavy carbon burden per unit of energy, policy-makers. such as coal or ‘unconventionals’ such as . As Citi’s Australian division put it, ‘investors (including 06

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Reputational risks of carbon investments Where next?

Some institutional investors are coming under pressure It is still early days in understanding how investors are from activists and end beneficiaries to alter their likely to respond to the risks posed by climate change. approach to carbon risks. Groups such as 350.org The work of the Carbon Tracker Initiative and others have been encouraging US institutional investors – demonstrates the size of the carbon bubble and the particularly educational endowments and foundations potential for fossil fuel assets to be impaired as the – to divest from fossil fuel companies. Their request is world seeks alternative low-carbon energy sources. that these groups should freeze any new investments From an investment perspective, knowing whether in fossil fuel companies, and divest from fossil fuel this is likely or not is in many ways less important public equities and corporate bondsxix. The campaign than recognising that it is possible, and reflecting has spread to Australia and is due to come to the UK this possibility in investment decisions. in October, with some campaigners already taking the charge to religious and environmental foundations ‘ Even the most ardent climate change sceptic in the UKxx. will have to admit that, at the very least, there is a It isn’t clear how far such a campaign can go. non-negligible risk that governments will implement The 350.org campaign can point to some small communities as well as university endowments and city climate change policies’ pension funds that have already divested or are in the process of doing so. Surveys of SRI (sustainable and Shutting their eyes was the unlikely but successful responsible investment) investors have confirmed that strategy employed by Dr. Jones and his heroine Marion over two-thirds of them are keen to move away from Ravenwood to avoid the fate of their captors in Raiders traditional energy companiesxxi. There are also signs that non-SRI investors are also waking up to the issue. of the Lost Ark. Such a strategy is unlikely to prove In Australia, a survey of pension fund members found effective for institutional investors keen to avoid the that 25% would switch providers to avoid coal and risks associated with carbon finance. coal seam gas investmentsxxii. In the USA nearly 20% of investors in Consol Energy asked for the company to produce a report detailing how it was planning to respond to the risks of unburnable carbonxxiii.

i ‘Unburnable Carbon 2013: Waste capital and stranded assets’, Carbon Tracker & The Grantham Research Institute, 2013 ii http://scrippsnews.ucsd.edu/Releases/?releaseID=1358&pass=843811 iii http://unfccc.int/essential_background/library/items/3599.php?rec=j&priref=4965 iv John Tyndall was a British physicist who documented the infrared absorptive capacities of various atmospheric gases such as water vapour and carbon dioxide. v John Cook et al., ‘Quantifying the consensus on anthropogenic global warming in the scientific literature’, Environmental Research Letters, May 2013 vi http://www.desmogblog.com/2012/11/15/why-climate-deniers-have-no-credibility-science-one-pie-chart vii http://blogs.scientificamerican.com/overthinking-it/2013/05/20/the-overwhelming-odds-of-climate-change/?WT.mc_id=SA_sharetool_Twitter viii Zoe Knight et al., ‘Have temperatures peaked?’, HSBC, April 2013 ix The Stern Review on the Economics of Climate Change concluded that the overall costs of climate change will be equivalent to losing at least 5% of global gross domestic product (GDP) each year and might be as much as 20% of GDP. x http://science.time.com/2011/06/27/sticker-shock-what-extreme-weather-costs-the-u-s/#ixzz2VMKrUoBXpoint xi ‘The Financial Risks of Climate Change, ABI Research Paper No. 19, 2009 xii Because of slow deployment times, the role played by carbon capture and storage (CCS) in allowing fossil fuels to be burnt with resultant CO2 emissions captured and sequestered, is found to play only a marginal difference by 2050. xiii Energy firms and climate change: Unburnable fuel, The Economist 4th May 2013 xiv ‘Oil & carbon revisited – Value at risk from ‘unburnable’ reserves’, HSBC, 25th January 2013 xv ‘Coal and carbon – Stranded assets: assessing the risk’, HSBC, 21st June 2012 xvi ‘Unburnable carbon – A catalyst for debate’, Citi Research, 8 April 2013 xvii ‘World Energy Outlook’, International Energy Agency, 2012 xviii ‘Climate Change Scenarios – Implications for Strategic Asset Allocation’, Mercer LLC, 2011 xix http://gofossilfree.org/faq/ xx http://www.guardian.co.uk/commentisfree/2013/may/03/giants-green-world-profit-planets-destruction xxi http://www.prnewswire.com/news-releases/sri-professionals-survey--majority-of-retail-institutional-investors-interested-in-fossil-fuel-free-portfolios-207702621.html xxii Quoted in ‘”Unburnable Carbon” Rising on the Rader’, Citi Research, 22 April 2013 xxiii http://blogs.wsj.com/corporate-intelligence/2013/05/16/after-bubbles-in-dotcoms-and-housing-heres-the-carbon-bubble/ 07

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RACING AHEAD - SOUTH KOREA’S LEADING GREEN ECONOMY By Hyewon Kong, Senior Analyst

Much of the media narrative around investment in renewables and environmental technologies has focused on the costs that are being borne by the wealthy Western nations in Europe and North America. Less well-known, however, is the extent to which nations such as China, Japan, Australia and South Korea are dominating the green agenda, supplying no less than two-thirds of the global green stimulus packages that have been committed to datei.

Windfarm in Hoengseong, South Korea. 08

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According to a 2009 United Nations report on green (‘ETS’), paving the way for carbon costs as high as growthii, boosting global investment in renewable US$90 a tonne for many of the country’s key industriesiv. energy to $630bn by 2030 would create at least 20m This surprised the world, coming as it did after the additional jobs worldwide, potentially making it a much dramatic collapse in European carbon prices and larger source of employment than today’s fossil energy the near collapse of the EU’s carbon emissions industry. But for all the Western media’s angst, it is trading scheme. the Western economies that seem most unable or unwilling to follow such a path. Meanwhile, South Korea Green Growth as an international agenda has emerged as a clear leader in developing a green In 2008, Korea launched the East Asia Climate economy. This is largely driven by top-down policy Partnership (‘EACP’), an international development decisions that see green growth as a new economic initiative to help tackle climate change in developing development paradigm for the country that helps to countries and promote green growth in Asia. solve its over-reliance on energy imports and addresses EACP designated five priority areas: water resource the economic slowdown. But these ambitions are also management, waste management, low-carbon energy, reflected in the prominent role that the country is taking low-carbon cities, and forestation and biomass. in advancing global co-operation in response to EACP is implementing 20 bilateral projects in its five climate change. priority fields in ten countries and nine cooperation projects with seven international organisations. Green Growth as South Korea’s national agenda While development aid from Western countries has been falling due to budgetary pressures, the South Korean In July 2009, South Korea announced its “National government has significantly increased its development Strategy for Green Growth” through to 2050, providing assistance budget since 2000 by 7.4 times (albeit from a a blueprint to shift its economic structure away from energy-intensive industries that have driven much of the development across Asia. The target goal is to reduce greenhouse gas emissions by 30% by 2020 relative ‘For a country that only emerged from martial to a “business as usual” baseline, and increase the share of renewable energy out of the total energy law in 1981... [South Korea’s] emergence supply from 3% to 11% by 2030iii. as the front runner in the race for sustainable With initial funding of $83.6bn (representing 2% of development is remarkable.’ its GDP), South Korea’s first Five-Year Plan for Green Growth 2009-2013 has successfully turned high-level strategy into operational policy initiatives targeted low base) to $1.6bn in 2012v, and has pledged to boost toward achieving green growth and resource efficiency. financing of regional renewable energy, conservation, South Korea’s government announced plans to and development projects to $50bn, equivalent to 30% continue making investments in innovative, low-carbon of the total aid budget by 2020. In contrast, climate technologies for renewable energy, waste management, change represents less than 2% of the UK’s overseas vii public transport, and to create enough new jobs aid budget for the period 2010-2015 . South Korea has to offset the loss of employment in current carbon- also been chosen as the home of the Green Climate intensive industries. Fund (GCF), the multilateral financial mechanism created to support the UN Framework Convention on Perhaps the initiative that shows South Korea’s ambition Climate Change adaptation and mitigation efforts. It is in starkest relief is the country’s plan for what will be hoped that the fund will have $100bn of financing to the world’s most ambitious emissions trading scheme spend annually by 2020. 09

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Investors are responding

The policy frameworks being developed in South Korea are filtering down to many of the country’s institutional investors. These investors are now increasingly active in developing a significant portfolio of environmental investments. This is particularly true in renewable energy infrastructure and in private equity. Interestingly, at least to date, the public equity opportunities are more limited – primarily perhaps because so much of the activity takes place within the country’s dominant ‘chaebol’ conglomerates such as Hyundai, LG and Samsung and so is largely concealed from public equity investors.

This may change as the South Korean environmental sector evolves and grows with the continuing support of the government. For a country that only emerged from martial law in 1981, was only admitted to the UN in 1991, and still struggles to be seen as ‘developed’viii, it’s emergence as the front runner in the race for sustainable development is remarkable.

i http://www.unep.org/documents.multilingual/default.asp?documentid=594&articleid=6277&l=en ii http://www.unep.org/pdf/UNEP_2009_ANNUAL_REPORT.pdf iii http://www.reegle.info/policy-and-regulatory-overviews/KR iv http://about.bnef.com/white-papers/south-koreas-emissions-trading-scheme/ v http://www.oecd.org/newsroom/aidtopoorcountriesslipsfurtherasgovernmentstightenbudgets.htmv1 vi https://portals.iucn.org/2012forum/sites/2012forum/files/workshop-mr.hoejin-jeong-koica.pdf vii The UK’s Department for International Development (DFID) publishes country-level budgets on each programmatic area and this can be accessed at: http://www.guardian.co.uk/global-development/datablog/2011/oct/05/datablog-future-plans-uk-aid#data viii http://www.msci.com/eqb/pressreleases/archive/Mkt_Class_2012.pdf 10

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FROM SAND TO SILICON – THE EMERGENCE OF A NEW SOLAR GIANT By Ben Goldsmith, Partner 11

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The great traveller and writer, Wilfred Thesiger, Surrounded by the cheapest oil in the world, on tap, was probably the first outsider to come close to I was surprised therefore that the big news story in understanding the ways of the Bedu, the nomadic Dubai at the time of my visit in February 2013 was people of the Arabian peninsula. Thesiger lived with the announcement by HH Sheikh Mohammed bin the Bedu for almost five years, twice crossing the Rashid al Makhtoum, that, as the oil runs dry, the so-called ‘Empty Quarter’ in the heart of Arabia on emirate will embark on a programme of investment in camelback in the years following the Second World War. solar energy capacity on a massive scale. According In ‘Arabian Sands’i, Thesiger describes time and again to the ruler of Dubai, reliance on your neighbours for how meticulous the Bedu were in their management imported fossil fuel energy is not conducive to national of scarce resources, and their often overwhelming and security. In the same week, the Government of Saudi incomprehensible generosity to strangers. In the arid Arabia announced plans to install more solar and wind regions of the middle-east, the misuse or misallocation power in the next 20 years than the rest of the world of water, grain, grazing, the stamina of camels and has installed to date. The King Abdullah Centre for ammunition often meant the difference between life Renewable Energy will engage in a massive parallel and death. technological effort to tackle the challenges associated with operating this type of infrastructure, such as But without knowing it, the hardy, thrifty people of overheating solar panels, in the desert. the region were in fact sitting on the greatest reserves of stored energy in the world, and its discovery, at around the time of Thesiger, brought them wealth ‘ The Saudi government subsidises beyond the dreams of avarice. It is hard to think of any people whose existence was transformed more domestic demand of both oil and gas dramatically than the nomads of Arabia after the at the price of US$4 per barrel, which it discovery of their oil and gas. For the next fifty years, otherwise could have sold on international Arabia engaged in a glut of consumption the likes of which the world had never seen. Flying into Riyadh on markets at $US100 per barrel.’ a clear and cool February afternoon, I saw row upon row of immaculately bespoke private 747s. According The Saudis are reckoned to burn more than two million to one Saudi businessman with whom I ate sushi, barrels of their oil per day to meet unrestrained and ii forgetting the countless hundreds of miles of desert burgeoning domestic electricity demand . A growing in every direction, Riyadh is home to more than a population, eager to share in the wealth of their country, thousand palaces, each of which would put the most is placing an increasing cost burden on the Saudi extravagant homes in London to shame. Underground government which subsidises domestic demand of air-conditioned tennis courts are the current ‘must have’ both oil and gas at the price of US$4 per barrel, accessory. A few days earlier, in Dubai, I had decided which it otherwise could have sold on international against an afternoon learning how to ski at the world’s markets at $US100 per barrel. The Saudi Electricity only indoor ski resort, built by the conglomerate of and Co-Generation Regulatory Agency estimates that iii legendary businessman Majid al Futtaim, whose CEO the annual loss is at least Dh50 billion ($13.61bn) . told me that the annual energy bill of the resort runs to So the general policy is the more of its oil that can more than $80 million. Conspicuous consumption of be freed up for sale abroad, the better. energy, water and everything else is the name of the game in Dubai. A sort of Islamabad meets Las Vegas.

< Opposite Page: Artists impression of the Masdar City courtyard building 12

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The old ways in Arabia still run deep; most of all the designed millennia ago, creating a perpetual cool spirit of generosity to visitors. I travelled from Dubai to breeze in the streets below. Masdar City is home to a its conservative and vastly richer neighbour, Abu Dhabi. world leading university specialising in environmental I was invited to the majlis - or daily public audience - sciences, and specifically resource management - of HH Sheikh Nahyan bin Mubarak al Nahyan, cousin of a partnership with the American MIT. And Masdar is the ruler, sage of the ruling family, government minister the vehicle through which the huge Abu Dhabi several times over, and to many, the public face of sovereign wealth fund, Mubadala, is buying up Abu Dhabi. I was surprised to find myself in the midst prime renewable energy assets all over the world, of a Marmite vs. Vegemite debate between the Sheikh, including the world’s largest offshore wind farm, who was educated at Glastonbury in England, and the the London Array. Australian ministers of education and agriculture, after which an impossibly extravagant banquet was laid Masdar, and the Saudi commitment to spend before us (sheep’s heads on piled rice - the cheeks and US$100bn on 55GW of solar and wind electricity in the eyeballs are supposedly the best part). We discussed next 20 years, are undoubtedly bold and impressive a project of which Abu Dhabi is immensely proud, and commitments. It has even been suggested that these rightly. Masdar, a city within a city being built in Abu commitments might presage a broader shift in industrial Dhabi, combines traditional style and local building and international policy to support renewables and materials, age old techniques for keeping cool in the international action on climate changeiv. Whether this day and warm at night, with radical new technology is a likely outcome is still unclear, but as the people of for the efficient use of energy and resources. I was the United Arab Emirates, Saudi Arabia and across shown around by the Norwegian Head of Strategy, the Arabian Peninsula rediscover their skills for careful Martin Nagell, who pointed out to me the huge reddish resource management, the region is clearly emerging as desert clay wind tower in the main square, which takes a driving force of the global “green ”. in the cool breeze from high above the city, funnels it The Sheikhs have a tendency to think and do big. down through a series of water troughs, in a system We should be excited.

‘ Masdar, and the Saudi commitment to spend US$100bn on 55GW of solar and wind electricity in the next 20 years, are undoubtedly bold and impressive commitments.’

i Arabian Sands, Wilfred Thesiger, Penguin Travel, 1959 ii http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/7284877 iii http://theenergycollective.com/rhys-clay/84828/saudi-arabia-unleash-solar-investing-109-billion iv Letters to the Financial Times, Dr Stephan Singer, WWF International, 3 June 2013. 13

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‘As the people [from]… across the Arabian Peninsula rediscover their skills for careful resource management, the region is clearly emerging as a driving force of the global "green industrial revolution".

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+44 (0)20 3219 3441 [email protected] www.whebgroup.com INSIDE THIS ISSUE 02 Mispricing Risk Raiders of the Lost Ark and the Dangers of a Carbon Bubble 07 Racing Ahead South Korea’s Leading Green Economy 10 From Sand to Silicon The Emergence of a New Solar Giant