In late May, the accounting firm Ernst & Young reported that 7 out of 10 major global corporations will spend 0.5% or more of their earnings this year on "fighting" climate change, notably by investing in ways to cut their energy consumption. This trend is despite the massive setback to global effort and corporate governance in "fighting" climate change, at the ill-starred Copenhagen conference. The companies polled by Ernst & Young all claimed their decision was driven by "customer demand" -- again showing the effectiveness of massive media campaigns, through 2009, to generate public alarm over what Al Gore continues to call the "unimaginable calamity" of global warming.

Businesses in many parts of the world, and especially recession-hit Europe are therefore still spending in ways thought to "mitigate" climate change even as the economy contracted and any prospect of full, binding, international agreements to cut CO2 emissions are, at best, on hold. To be sure, we can also see this spending as the real fight by enterprises to cut costs, by trimming energy spending, and increasing sales, by finding or inventing new "climate linked" goods and services.

Attributing corporate interest to this as due to customer demand for action could be seen as simply a momentum effect, left over from the massive political and media campaigns on global warming and climate change, culminating in 2009. The general public is now groping towards an understanding of the real issues and trends in play, and finding that what they heard from the media as climate news, last year, was heavily biased to extremist claims.

What the Ernst & Young report calls "new climate related products and services" is the revenue side of the coin, with the costs side addressed by clipping company energy spending. Calling this "driven by customer demand" is a way to pay tribute to restructured marketing effort by corporations now engaged in heavy cost cutting effort, in the US and Europe. After massively invested in the global warming advertising, PR and communication lode through 2009, the obligation to perform remains.

Uncritical media support and attention to extreme theses on global warming, after a peak in 2009, has drifted over to 2010 but with sharp shrinkage, because overkill threatens in many domains and the fabled bovine-style tolerance of the general public has weakened. It is now no longer politically incorrect to play “climate skeptic” and doubt is now permitted on the global warming propaganda fed to the masses through the recent past: media and public attitudes to climate changed have come a long way since 2009. This weakened superstructure for "climate change spending" on green energy vanity projects is now massively hit by cuts to its basic infrastructure: big government subsidies.

As Europe grapples with fallout from Greece’s economic woes, some corporate and business analysts have expressed surprise that among the first affected, renewable energy companies feature high up the list. This betrays fundamental ignorance of how the green energy bubble was launched: few if any wind energy, solar energy, and other green electric power installations could make money without subsidies. As governments across Europe curb spending and cut subsidies in response to the Greek crisis, the props to green energy are being cut back. As almost each day is marked by a new, and harsher national austerity plan announcement in countries ranging far up the scale from small-size Greece, we can be sure that reining in deficits will not be kind to green energy vanity projects.

On May 6, German lawmakers reduced subsidies to new solar plants by as much as 16%, dealing another blow to the generally high cost German solar energy industry, already faced with rising, low cost competition from China and India. Italian solar industry groups expect government support for new wind and solar energy power generation plants to be scaled back by 25% or more, in June.

In Spain, where subsidies to the country's massive windfarms and their dependent industries is estimated to have attained as much as 12 billion Euros in 2009, either directly or through "feed-in tariff" subsidy for power sales, government proposals target at least a 30% cut in subsidies. Major wind energy producer firms, such as Gamesa, have begun cutting their workforces, while trying to find sales outside Europe, helped by a weaker Euro. In addition and due to Spain's highly exposed deficit finance status, making it a target for market speculators betting its bond rates must rise, the Spanish government is also likely to cut financial backing to existing renewable energy power plants, built with an expectation of guaranteed prices and government subsidies for 25 years.

Spillover from the European context, where government subsidy to green energy is being ripped away, has impacted renewable businesses outside of Europe, where the pain is being increased by Euro devaluation. Sales and profits for North American and Chinese renewable energy companies selling their products in Europe have declined, as the Euro has lost about 15% against the US dollar this year. Affecting profits more than sales in first impact, profits for China's leading solar-cell maker Yingli Green Energy will fall more than 40%, and Yingli's major home rival Suntech Holdings will suffer a 79% drop in profits, according to Barclays Capital analysts, if the Euro stays below $1.25 in the next 6 months.

This has quickly spilled over to stock price valuations. European, North American, Chinese, and Indian wind and solar energy companies are suffering large falls in their stock price value. The higher priced, higher tech sectors have been most affected, shown by Canadian Solar's stock falling about 50% since April 1, while stock of Suntech Holdings is off by 35% since April 1. Spain's biggest producer of wind turbines, Gamesa Corporacion, has lost 43% of its share price value since January 2010, and 19% since April 1.

Renewable energy indexes grouping sector-wide company stocks have, since late 2009, consistently trended down, as investors back away from a dangerously oversold, and overpriced asset sectors. The cleantech indexes tracked by Clean Edge, the CELS and ECO, have, in the first quarter of 2010, both sunk into negative territory, contracting by 3% and 10% respectively, from quarterly growth rates as high as 30% one year ago.

The report from Ernst & Young interprets corporate spending on energy saving and new consumer products as the fight against climate change, but this ignores the reality of hedge funds and brokers packaging climate worry with government subsidies into a short-life boom for cleantech and green energy spending. Many companies and corporations in Europe and the US have suffered serious cuts in turnover and earnings since 2008, making new revenues, and pared costs more important than ever. Cutting office energy bills, car fleet spending and travel costs is a simple necessity. Investing in dubious feasibility, high cost green energy gadgets is a luxury.

In the high times of 2005-2008, the Goldman Sachs flair and transparency used by private bankers and brokers to lever big ticket cleantech and green energy spending was a winning strategy, but the final backstop and font of cash underpinning this push -- government subsidies -- is now an endangered species. Without these, energy investors will avoid the bright highway signs to the green energy dead-end, and flow with renewed strength into oil, gas, coal and uranium.

Windfarms, solar power stations, low-performance solar thermal equipment, biofuels and electric cars, and other green energy hopefuls are featured in a lengthening list of boom-bust industries that siphoned spending from real energy. In many cases, it is the OECD countries which have the least competitive, most subsidy-dependent industries in this sector, making the coming turn down in green energy spending probably stronger in these countries, than elsewhere.

Also in most OECD countries, the oil sector is what analysts call "highly mature" with low prospects of serious output hikes above depletion losses, while natural gas enjoys the radical increase of activity driven by shale and fracture gas, and LNG development. Coal and uranium production and infrastructure development only concerns a few OECD countries, including Australia and the US, in a global market context where import demand can quickly outstrip export supply. This sets the scene for a major recovery in commodity prices, badly mauled by fallout from equity and bond market worries driven by the Europe debt crisis.

To be sure, rearguard action can be expected by politicians who nailed their colors high up the slippery green mast, but current and coming government debt downsizing shuts off any potential for raising green energy spending. This will shortly be recognized in the US, in particular, due to fallout from the BP Gulf of Mexico disaster, casting long and dark shadows on deep offshore drilling - which in theory only could or might rescue green energy spending. Time is not available for this option. Growing energy needs, including increased US oil imports with economic recovery will reinforce the only option - switching back to real energy. Through 2008-2009, government deciders in OECD countries found ways to engage unprecedented spending to fight recession. Today, growing the economy demands both cuts and refocusing of government spending. Conventional energy will be the big winner.

Andrew McKillop is a project director at GSO Consulting Associates