Ministers must publish a plan to secure the investment needed to meet the UK’s carbon budgets after a series of Government policy changes have contributed to a “collapse” in clean energy investment, according to a new Environmental Audit Committee (EAC) report.
The latest figures for low-carbon energy investment show there has been a “dramatic and worrying collapse” since 2015 that threatens the UK’s ability to meet its carbon budgets, the EAC says.
In cash terms, investment in clean energy fell by 10% in 2016 and 56% in 2017. Annual investment in clean energy is now at its lowest since 2008, the EAC claims.
The UK has made significant progress in redirecting investment towards cleaner sources of power since the Climate Change Act was passed in 2008.
Mary Creagh MP, chair of the EAC – “The Government must urgently plug this policy gap and publish its plan to secure the investment required to meet the UK’s climate change targets.”
The proportion of the country’s electricity generated from low-carbon sources doubled between 2009 and 2017 and reached a record 50% last year. This has helped to put the UK on track to meet our carbon budgets up to 2022.
The EAC says it is encouraged by the cross-Departmental ambition of the Government’s Clean Growth Strategy, but it will still lead to a shortfall in meeting fourth and fifth carbon budgets between 2023-2032 – even if all its policies are delivered in full.
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.
Mary Creagh MP, chair of the EAC, said: “Billions of pounds of investment is needed in clean energy, transport, heating and industry to meet our carbon targets. But a dramatic fall in investment is threatening the Government’s ability to meet legally binding climate change targets. The Government’s Clean Growth Strategy was long on aspiration, but short on detail.”
“The Government must urgently plug this policy gap and publish its plan to secure the investment required to meet the UK’s climate change targets. It should provide greater clarity on how it intends to deliver the Clean Growth Strategy by the 2018 Budget, and explore how a Sovereign Green Bond could kickstart its Clean Growth Strategy.”
The report found that the Government’s Clean Growth Strategy does not do enough to meet legally binding climate change targets, even if all its policies are delivered in full.
The privatisation of the Green Investment Bank and a reduction in European Investment Bank lending following the referendum may also have played a part in the fall in investment, the EAC says, and claims it is “likely” that changes to low-carbon energy policy in 2015 undermined investor confidence and led to a reduction in the number of projects in development.
The EAC says the UK 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.
Issuing a Sovereign Green Bond could present an opportunity for the Government to set a benchmark of good practice for domestic green bonds be a useful mechanism to raise the capital necessary to deliver our carbon budgets.
Ministers should also find new ways to support councils to mobilise investment in low carbon projects.
Fixed-price contracts will be key to ensuring a pipeline of low-carbon energy projects and a steadily rising carbon price will be necessary to achieve our carbon budgets in the 2020s and 2030s.
The falling cost of generating electricity from wind and solar power means that we can now secure clean energy capacity at lower prices, which may have cushioned the impact of the fall in cash investment, the EAC says.
Commenting on the Environmental Audit Report on green financing, 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.
“Renewables are now cheaper than building new gas and nuclear generation, yet the decisions of the last three years will have an impact on not only the UK hitting our climate targets, but whether we will have a cheaper, cleaner, smarter and future-proofed energy system, and the jobs and investment that come with that.”
A Department for Business, Energy & Indsutrial Strategy spokesperson commented: “The UK is a world-leader in cutting emissions, with 50% of our electricity coming from low-carbon sources and recently going 72 hours without burning coal.
“We’re committed to meeting our climate change targets and will have invested £2.5bn on low carbon innovations by 2021.
“We will consider this report carefully and respond in full in due course.”