The establishment of a UK Green Investment Bank (GIB) has been a project of the environmental lobby for some years now. Recently, however, combining as it does the zeitgeists of financial reform and greening the UK, the idea has been fast-tracked to the top of all three major parties' agendas.
The Conservatives have it as the centrepiece of their proposals, and UK chancellor Alistair Darling this weekend committed to a similar scheme ahead of the Budget.
According to estimates, an investment of some £230bn in new infrastructure will be needed by 2025 to ensure the UK's energy security and emissions targets are met - yet green groups fear that existing banks will be reticent to engage with the relatively low-yielding renewables sector. An entirely new GIB would, say Green Alliance, 'disburse capital on a commercial basis, but exclusively to companies and projects designed to accelerate the transition towards a low carbon economy' - for example, clean energy, grid improvements and public transport. They suggest using taxpayer shares in nationalised banks, revenue raised by auctioning carbon permits, or fossil fuel taxes to capitalise the bank; the chancellor plans to sell government assets, including the Tote and the High Speed One rail link.
But would it work in practice? Green banking is not a new concept; the Co-op has promised since 1992 not to finance 'any business whose core activity contributes to global climate change, via the extraction or production of fossil fuels'. Worldwide investment in clean energy tripled to $70.9bn in the three years to 2006 - yet just months later, major banks were collapsing left, right and centre. The worth of a new GIB will be measured not only by the sustainability of the projects in which it invests, but also the sustainability of the sector in which it operates.
There is also the question of whether the UK workforce is equipped for the low-carbon transition. While public spending on science has doubled over the past 10 years, the R&D spending of British firms still lags behind their French and German rivals. It has been estimated that the wind energy industry will require 10 times more jobs over the next decade - some 50,000 by 2020 - but, as one commentator put it, not many people 'come straight out of school with the knowledge of how to calculate load factors on a 100-metre tall wind turbine operating in a force five gale'. The next government will need to work urgently with business to plug the technology skills gap, if the GIB is to have anything to fund.
Yet despite the scale of the carbon challenge ahead, there is, as someone once said, no alternative. A GIB could both stimulate the investment and training required to meet it, and provide a model of good governance for UK financial services.
The Conservatives have it as the centrepiece of their proposals, and UK chancellor Alistair Darling this weekend committed to a similar scheme ahead of the Budget.
According to estimates, an investment of some £230bn in new infrastructure will be needed by 2025 to ensure the UK's energy security and emissions targets are met - yet green groups fear that existing banks will be reticent to engage with the relatively low-yielding renewables sector. An entirely new GIB would, say Green Alliance, 'disburse capital on a commercial basis, but exclusively to companies and projects designed to accelerate the transition towards a low carbon economy' - for example, clean energy, grid improvements and public transport. They suggest using taxpayer shares in nationalised banks, revenue raised by auctioning carbon permits, or fossil fuel taxes to capitalise the bank; the chancellor plans to sell government assets, including the Tote and the High Speed One rail link.
But would it work in practice? Green banking is not a new concept; the Co-op has promised since 1992 not to finance 'any business whose core activity contributes to global climate change, via the extraction or production of fossil fuels'. Worldwide investment in clean energy tripled to $70.9bn in the three years to 2006 - yet just months later, major banks were collapsing left, right and centre. The worth of a new GIB will be measured not only by the sustainability of the projects in which it invests, but also the sustainability of the sector in which it operates.
There is also the question of whether the UK workforce is equipped for the low-carbon transition. While public spending on science has doubled over the past 10 years, the R&D spending of British firms still lags behind their French and German rivals. It has been estimated that the wind energy industry will require 10 times more jobs over the next decade - some 50,000 by 2020 - but, as one commentator put it, not many people 'come straight out of school with the knowledge of how to calculate load factors on a 100-metre tall wind turbine operating in a force five gale'. The next government will need to work urgently with business to plug the technology skills gap, if the GIB is to have anything to fund.
Yet despite the scale of the carbon challenge ahead, there is, as someone once said, no alternative. A GIB could both stimulate the investment and training required to meet it, and provide a model of good governance for UK financial services.
There are many such excellent initiatives - but each one seems to need to require a new quango - with CEO, FD, corporate infrastructure, flash HQ, quasi-autonomous, multi-agency relationships etc. Basically a sea of semi-accountable, self-serving bloat.
Before signing off on GIB I'd need a realistic estimate of its overheads, and a super-quango responsible for squeezing its pips.
Posted by: Dave Evans | 25 March 2010 at 19:26