Sale of Green Investment Bank contributes to fall in green spending, say MPs
A new report from Parliament’s Environmental Audit Committee (EAC) suggests that the government’s sale of the Green Investment Bank (GIB) has contributed to a fall in green investment over the past two years, with investment in clean energy falling by 56 per cent. This means that annual investment in clean energy is now at its lowest since 2008.
The EAC’s report, released on 16 May, calls on ministers to publish a plan to secure the investment needed to meet the UK’s carbon budgets, with the Committee claiming that the government’s Clean Growth Strategy will lead to a shortfall in meeting the fourth and fifth carbon budgets between 2023-2032, even if all current policies are delivered in full.
The report also says that 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, and that ministers should find new ways to support councils to mobilise investment in low-carbon projects.
Cited as being one of the key factors in the dramatic fall in green investment, it appears that fears voiced about the sale of the GIB to Australian investment firm Macquarie Group are being realised. Established in 2012, the GIB was a non-departmental body intended to address a lack of private investment in the green economy by providing public investment (and encouraging private investment) in green infrastructure projects. However, it was sold in 2017 to private investors to increase its access to capital. In March this year, a report by the House of Commons Public Accounts Committee (PAC) claimed that there was ‘no guarantee’ that the GIB would live up to its original aims because when sold ‘its green intentions were not sufficiently protected.’
The report also argued that measures put in place by the Department for Business, Energy & Industrial Strategy (BEIS) to ensure the GIB was an ‘enduring institution’ were insufficient. While the now rebranded Green Investment Group (GIG) has stated its commitment to upholding the initial ambitions of the GIB, it is still unclear whether the company will continue to support the government’s energy policy or climate change goals. PAC Deputy Chair Sir Geoffrey Clifton-Brown commented at the time: “This was a UK initiative but the rebranded GIG is not bound to invest in the UK’s energy policy at all, nor to invest in the kind of technologies that support its climate objectives.”
Reduction in European Investment Bank lending
Another of the report’s key findings is that there has been a significant reduction in European Investment Bank lending following the results of the 2016 Brexit referendum. It states that, in response, 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.
This finding is further evidence that Brexit – and a lack of clarity regarding the post-Brexit outlook – continues to create difficulties and pose a threat to the resources and waste sector. In January, Greener UK, a coalition of 13 major environmental organisations, stated in its Brexit Risk Tracker that budget cuts and a lack of funding at the Department for Environment, Food and Rural Affairs (Defra) could seriously undermine government plans for waste and resources policy after Brexit, while a PAC report released earlier this month found that continued uncertainty over what the UK’s departure from the EU will mean in practice is significantly impeding the department’s preparations.
The importance of resource efficiency
While the report calls for more investment in renewable energy, it is worth noting that a report released last week by independent environmental think tank Green Alliance has claimed that, contrary to current government policy, the quickest way of reducing the UK’s carbon emissions and meeting upcoming budgets would be to improve resource efficiency. It states that larger carbon savings can be achieved by a more indirect approach than that which the government is currently using, examining policies to improve how we use and reuse resources, ‘putting less in’ and ‘getting more out’ of supply chains.
You can view the full EAC report on green finance on the Parliament website.