There has been a “dramatic and worrying collapse” in low-carbon investment since 201, says the Environmental Audit Committee (EAC), and it threatens the UK’s ability to meet carbon targets. The Committee said the government must “urgently plug the policy gap”.
Annual investment in clean energy is now at its lowest since 2008, falling by 10% in 2016 and 56% in 2017. The falling cost of electricity from wind and solar power “cushioned the impact of the fall in cash investment”.
In a new report, the Committee said changes to low-carbon energy policy in 2015 – including closing the Renewables Obligation to onshore wind, removing the Climate Change Levy exemption for renewables, reducing the feed-in tariff and cancelling the zero-carbon homes policy – undermined investor confidence and led to a reduction in the number of projects in development. Privatisation of the Green Investment Bank and a reduction in European Investment Bank lending following the Brexit referendum may also have played a part in the fall in investment.
It said the government should negotiate to maintain the UK’s relationship with the European Investment Bank, which would allow riskier early-stage green infrastructure projects in the UK continued access to development bank finance. It should consider issuing a Sovereign Green Bond to set a benchmark of good practice for domestic green bonds and raise the capital necessary to deliver UK carbon budgets.
Ministers should also find new ways to support councils to mobilise investment in low carbon projects.
The Committee said it was “encouraged by the cross-departmental ambition of the government’s Clean Growth Strategy”, but warned of a shortfall in meeting carbon budgets between 2023-2032 – even if all the clean growth policies are delivered. The report calls on Ministers to “urgently plug this policy gap and publish a delivery plan to secure the investment needed to meet the fourth and fifth carbon budgets”.
James Court, head of policy at the Renewable Energy Association, said: ”“This report perfectly chimes with the reality that our members are feeling. There is a real frustration that at a time of renewable costs plummeting and other countries steaming ahead, the UK is going backwards. Government must now move forward quickly by implementing the recommendations of the Green Finance Task Force that reported back in March.”
Alex White, senior policy officer at the Aldersgate Group said: “There are willing investors in the green economy, but not enough projects to invest in. Boosting the pipeline of green infrastructure projects will be critical to meet the UK’s environmental goals and should be the first priority in growing green finance. … Government must now restore investor confidence and increase the base of investible propositions through clear and stable policies.”
Anjalika Bardalai, chief economist and head of research at TheCityUK, said, “The committee is right to warn that the UK risks falling behind its international competitors in this area. It is key that Britain plays a globally leading role in this space. A strong commitment to industry-wide standards for impact reporting and transparency, for example, would send a clear signal about the UK’s global leadership.”
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