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 MPs on the Environmental Audit
Committee.
The latest figures for low-carbon energy investment show that
there has been a ‘dramatic and worrying collapse’ since 2015 that
threatens the UK’s ability to meet its carbon budgets. 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. Huge policy and investment challenges remain
in decarbonising transport, domestic heating and industry.
MP, Chair of the Environmental
Audit Committee, 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 finds 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.
- 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 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 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 UK has made significant progress in redirecting investment
towards cleaner sources of power since the Climate Change Act was
passed in 2008. The proportion of our 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 Committee is encouraged by the cross-Departmental ambition of
the Government’s Clean Growth Strategy, but it will still lead to
a shortfall in meeting our 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.
Notes to editors
In 2015 the Government made the following changes to policy which
harmed confidence in low-carbon projects:
- closed the Renewables Obligation to onshore wind one year
earlier than had previously been announced;
- removed the Climate Change Levy (CCL) exemption for
renewables;
- reduced Feed-In-Tariffs for small scale renewable generation;
- cancelled the Zero Carbon Homes policy due to come into force
in 2016; and
- cancelled the £1 billion Carbon Capture & Storage
competition.
