CSR: Some green goods – but no Green Bank?
With no CO2 impact assessment, and no jobs estimates, how to judge the Spending Review against climate change targets and green growth? We have to wait until next year for the CO2 figures, in a “government-wide carbon plan in 2011” (page 63).
DECC’s budget was cut by 30%, with nothing on projects foregone. News on the Renewable Heat Incentive is very positive. The Feed-in tariff looks safe, as is Labour’s £60m scheme to promote investment in North Sea port facilities for offshore wind turbines. We can welcome the single carbon capture project for coal, but the Coalition promised 4, and there’s still no decision on the CCS levy. Four CCS projects could generate 100,000 jobs. One won’t. As for the “Green Investment Bank”, it isn’t a bank, yet, and its got no money until 2013.
What’s good about the key DECC decisions:
- £860 million funding for the Renewable Heat Incentive from 2011-12. More detail is needed on how the incentive will work for different technologies. But our campaigning with many other organisations has paid off, and Ministers have responded appropriately. Heat sources generate 47% of our CO2 emissions, so “action this day” was needed. DECC says the decision will shift renewable heat from a fringe industry into the mainstream.
- £200 million for low-carbon technologies – with £60m for a competition to support the upgrading of the UK’s ports infrastructure. This is critical so that it is not a bottleneck limiting the attractiveness of the UK for offshore wind plant manufacturers. There could be 70,000 jobs in the offshore wind supply chain. A victory for all in the renewables lobby.
- “Up to £1 billion of investment to create one of the world’s first commercial-scale carbon capture and storage demonstration plants”. Chris Huhne has secured money from Treasury for the first CCS demonstration project. But Coalition promised 4 UK plants, so one will lack credibility with investors until the Government can confirm that the CCS Levy will be used to underwrite subsequent schemes. We’re promised a consultation on the levy and carbon pricing in November. More delay, and projects 2-4 may not be funded by a levy, either. But we look forward to DECC’s call for proposals for demos 2, 3 and 4 promised before the end of the year (2010) including clarification on whether gas projects will be eligible.
- Power investors wait: “a 900 MW IGCC power station with CCS that could be capturing, transporting and storing carbon dioxide on a commercial scale in 2016 is on hold until the UK’s coalition government clarifies its policy and incentives regime for the technology” – Powerfuel chief executive Richard Budge, 13 October. Not good news
But the Green Bank is a real concern.
- The CSR speaks of “plans for a Green Investment Bank… The Coalition Agreement set out the Government’s commitment to establish a UK-wide Green Investment Bank. The Government will initially capitalise a new institution with £1 billion of funding together with additional significant proceeds from the sale of Government owned assets, subject to a final design which meets the tests of effectiveness, affordability and transparency.”
- Table A3 tells us £1bn is set aside for 2013-14. This is not a Bank, and it is not enough funding. A Bank that issues bonds could leverage 20 times as much private capital, turning, say, a £6 billion government investment into £120 billion green investment bonanza.
Before the CSR, the TUC was concerned that the Government currently lacked a convincing narrative around economic growth. We support a well-capitalised GIB, rather than a green “fund”. A White Paper on growth is due to be published shortly. But since May’s General Election, political discourse has been dominated by the fiscal deficit, leaving many observers (including the TUC) concerned at the risk of very slow growth or even a double-dip recession that this presents. The GIB has a vital role to play in delivering the £450bn investment, from infrastructure to company-level finance, needed to secure low carbon economic growth and cut our CO2 emissions.
The Bank’s capitalisation must reflect the scale of the challenge: the GIB should receive £4bn to £6bn initially, and may need up to £20 billion in capitalisation by 2020 – an average injection of £2 billion pa from 2011.