Green Investment Bank
The UK Green Investment Bank (GIB) officially became a company last week, which means it is now able to operate, pending state aid approval from the EU.
The bank is the world’s first investment bank solely dedicated to ‘greening’ the UK economy. Its mission is to provide financial solutions to accelerate private sector investment in the green economy – considered vital in order to achieve both environmental objectives and economic growth. Armed with £3 billion worth of capital, the GIB will play a vital role in addressing market failures affecting green infrastructure projects in order to stimulate private investment.
It will also become a centre of expertise in financial markets and green investments, working towards a ‘double bottom line’ which will measure both green impact and financial returns.
The bank has already made £80million of funds available to the small-scale waste infrastructure. But large-scale investments cannot be made until the EU gives it the go-ahead – expected towards the end of the year. Once operational, it will be able to release its £3billion of capital to help fund much-needed low-carbon infrastructure.
But how much the bank will be able to borrow is still up for debate. The government has said the bank will not be able to borrow until its deficit reduction targets have been met – projected to be 2015-2016. Green businesses and NGOs have called for the rules to be relaxed in order to encourage investment as soon as possible. Others have said that if the bank lends on traditional commercial terms, it may prove difficult to get investment in the higher-risk projects and early-stage technologies which it was setup to support. Some have also expressed concern that it would tread on the toes of already established private sector banks.
‘Fracking’ rejected – shale gas ‘isn’t the answer’
Meanwhile, the Government has also rejected controversial shale gas extracting, or ‘fracking’, concluding that it would be uneconomical and unlikely to make any significant impact on our energy crisis.
The technology, which involves blasting water, sand and chemicals at extreme pressures to release gas trapped in deep rock, is said by some to be a solution to Britain’s energy crisis, reducing our reliance on imported fuels. However industry experts from Shell, Centrica, and Schlumberger, who are working on shale gas projects in America, the Ukraine and China, have told David Cameron and energy minister Ed Davey that the UK’s reserves are smaller than previously thought, making the laborious and environmentally-risky process of extraction uneconomical.
Green campaigners have been opposed to fracking as it would mean new gas power plants being built, at a time when we must move away from gas. Fracking is also said to have serious environmental risks, as it can trigger earthquakes, contaminate water supplies and emit large amounts of methane – considered by some experts to be worse than carbon dioxide - into the atmosphere.
Joss Garman, from Greenpeace, said in the Independent: "The shale gas bubble has burst. Despite all the hype, even the energy companies now acknowledge shale gas isn't the answer to Britain's energy needs. Ministers are having to face up to the fact that there isn't much of it, it won't bring down bills, and it's damaging to our climate."
Industry representatives still feel there is potential for shale gas in the UK and Europe but development will take time, in order to do it with little impact on communities, and the amount available will not be a ‘game changer.’
Energy Bill reforms announced
The Government’s long-awaited draft energy bill was published on Tuesday, announcing major changes to the energy market. The bill prompted reactions from consumer groups, who warned that the bill will not reduce household energy bills, and green campaigners, who say that the bill does not do enough to grow renewables but supports nuclear power.
One of the changes proposed by the bill includes giving low-carbon generators – including nuclear companies –a fixed price for entering into green electricity contracts, at a price higher than they would normally receive on the open market. However green groups opposed the ‘fixed price’ scheme for low carbon generators, saying this would favour nuclear power and breaks earlier promises not to subsidise nuclear.
Other changes introduced by the bill include a ‘capacity market’ being created to ensure a reliable supply and prevent blackouts, and an emissions performance standard to effectively stop any coal-fired stations being developed without carbon-capture technology. The bill will also change the way the market is regulated and the way utility companies will operate.
But it will also help bring forward the estimated £110billion of investment for new low-carbon capacity, as well as produce more jobs, said Ed Davey. ‘If we don't secure investment in our energy infrastructure, we could see the lights going out, consumers hit by spiralling energy prices and dangerous climate change,’ he said in the announcing the bill. ‘These reforms will ensure we can keep the lights on, bills down and the air clean.’
Many of the detail around the reforms and how they will be implemented are yet to be worked out. But the draft energy bill, and the Green Investment Bank, shows that the government is trying to make progress on the green economy and to nurture much-needed investment.