Green investment bank plans to be unveiled
29/06/2010 by FINANCIAL TIMES
By Fiona Harvey and Jim Pickard
Details of a new “green investment bank”, replacing several government quangos and with powers to raise billions from green Individual Saving Accounts and other financial instruments, will be unveiled on Tuesday.
Putting the UK’s economy on a low-carbon footing will cost about £550bn by 2020, according to a commission set up to examine how a green investment bank could work.
In its report, the commission, chaired by Bob Wigley, former European chairman of Merrill Lynch, said selling green ISAs could raise up to £2bn a year, which would be invested in projects including offshore wind farms.
The bank would also absorb the funding from other quangos, with those likely to be targeted including the Carbon Trust, which provides environmental advice to businesses, the Energy Saving Trust, which provides similar services to consumers, and the Marine Renewables Deployment Fund.
“The green investment bank would roll up the relevant quangos – [whose] spending today is at least £185m per year – and [public] funds, which today total around £2bn – so that it can improve the efficiency with which the money is invested,” Mr Wigley said, writing in Tuesday’s Financial Times. A spokesman for the Department of Energy and Climate Change said such decisions would not be made until ministers had digested the Wigley report.
James Cameron, founder of Climate Change Capital, the investment manager and adviser, and a member of the commission, said the main test for the bank would be whether private sector institutions viewed it as a “serious player” that could leverage their investments to improve returns.
Existing government funding for green investments was fragmented, he said: “There are pots of money there but none of them are on a sufficient scale.”
However, he warned: “There is a lot of work still to be done before [the green investment bank] will be real.”
George Osborne, the chancellor, floated the idea of a green investment bank last year. Mr Osborne also reinforced his green message, notably lacking from last week’s Budget, when he told a business audience on Monday that he wanted to find a way to stabilise the price of carbon.
“We want to provide a price for carbon, an affordable price for carbon, it is the volatility of the price of carbon that makes investment decisions very problematic,” he said.
Both the Conservatives and the Liberal Democrats entered the general election calling for a floor in the carbon price. However, the UK cannot achieve this independently, as carbon is traded across the European Union.
Instead, the coalition will focus on reforming the climate change levy on businesses in a way that would in effect set a floor price for carbon. However, the government has not yet said what level of carbon price it would like to see.
The government is pushing Europe to raise its target for emissions cuts from 20 per cent to 30 per cent by 2020. This would raise the price of carbon but looks unlikely to be adopted by the European Commission in the short term, owing to objections from business.
Copyright The Financial Times Limited
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