Green growth fluffed in Queen’s Speech
The Queen’s Speech opened with a set of measures intended “to reduce the deficit and restore economic stability.” Its single positive, recovery-oriented Bill will establish a Green Investment Bank. But it missed an opportunity to address the prevailing anti-austerity mood with an offer to boost the bank’s £3bn capitalisation. And if the government was fully alert to the industrial opportunities of a low carbon economy, it would have bracketed the Energy Bill as a growth and recovery measure, too.
Unless the government manages to develop a compelling growth story to its Electricity Market Reforms, we can look forward to an Energy Bill under attack from the anti-wind farm brigades.
The key aim of the Green Investment Bank is to take on the riskier end of investing in new, low carbon technologies, some of it tried and tested in operational terms but not on the market. One aspect of risk is availability of capital. A large proportion of UK companies operating in the energy intensive industries like steel or chemicals are subsidiaries of global organisations. They compete internally for capital investment. Higher costs and risks make it more difficult to justify internal group investment in the UK.
But the Green Investment Bank is seen as potential source of capital for energy efficiency projects among small and medium firms in other energy hungry sectors like ceramics. In the joint TUC-EIUG study, Technology innovation, the British Ceramic Confederation reported that the GIB “was potentially useful as a provider of capital for energy efficiency projects with proven technologies …The recession had run down cash in many companies compared with many European competitors (who were able to use temporary short time working compensation schemes). Many UK banks would also not lend to extend overdrafts even to expand production or help credit as firms pulled out of the recession – so the UK Government needed to recognise that conventional finance is often not available for this type of work.”
Potentially, the Green Investment Bank could drive renewable energy investments and industrial growth as potential source of capital for energy efficiency projects.