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Budget 2010 - Environment

Get ready for the Green Investment Bank

The Chancellor announced that an investment bank controlling £2bn of equity will be set up to fund green transport and energy initiatives, which would help move the UK towards a low carbon economy. Additionally £60m will be spent helping ports develop in order to be able to manufacture wind turbines, ultimately boosting the country's offshore wind power.

The Guardian reported yesterday on the views of various environmental experts on the subject. The main issues raised in the article relate to what shape this investment bank would take: would it be run at arms length from the government/Treasury, would it be set up quickly enough, how will its capital be raised, will it be funded at a levels that adequately correspond to the financial challenge faced and what will it fund?

The experts will be happy to learn, that at least some of their ideas have been heard. Yes, funding will go towards a greener infrastructure. And yes it will go towards low carbon projects in desperate need of support such as offshore wind farms. Will it be adequately funded? Well, as Ian Parrett an analyst at the one of the UK's longest established energy and utility consultancies Inenco put it: “The required figure we are looking at is more than £200 billion – meaning that £2billion equates to less than one per cent – and could be as high as £400 billion. £2billion will only buy two-thirds of a nuclear power station and we cannot rely on private sector investment at a time when the economics of nuclear, wind and clean coal do not add up and the financial markets are still fragile. The Government really needs to drive this – as nobody else is in a position to do it.” No good news there then.

Little was revealed about the shape of the bank itself. Whether the experts will get their independent agency, or one model on either the KfW Bank in Germany or the European Investment Bank is still anyone's guess, or maybe I just missed it? I hope that there will be a competition to design the building, a challenge to design a government institution that is actually environmentally friendly. Shouldn't be too hard really seeing many of them are still in poorly insulated old buildings, and the Home Office often leave their lights on overnight.

Comments on: Budget 2010 - Environment

Gravatar Chris Cook 25 March 2010
Kimr/>r/>Development credit such as this is what public credit aka QE should be used for rather than keeping financial asset prices pumped up, but - putting that unconventional thought to one side - any pool of development credit is better than none.r/>r/>It's what you do once projects have been developed that is the interesting bit, and I believe that there is massive investment out there available to refinance the streams of energy or 'Energy Pools' created by building renewables.r/>r/>There are literally tens of billions of dollars already invested in energy funds as a non income-bearing 'hedge against inflation' like gold, but with the difference that you can heat your house or fuel your car with energy.r/>r/>And there's probably hundreds of billions more public funds available in the form of sovereign wealth funds fed up with 0% on T-Bills.r/>r/>I gave evidence to a hearing of the Holyrood Parliament's Economy, Energy and Tourism committee last year on a new 'asset-based' approach to energy financing.r/>r/>Here's the presentation I did at the All Energy Show re funding a North Sea Supergrid.r/>r/>http://www.slideshare.net/ChrisJCook/energy-pool-20-05-2009r/>r/>It's not Rocket Science: anyone who can understand Air Miles could probably understand a Unit redeemable in payment for energy supplied.r/>r/>
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Gravatar asheem.singh 24 March 2010
Kim, good post. This is very familiar territory; similar to the long running debate had over the social investment bank. r/>r/>It has taken literally years for the treasury and the OTS to get their heads around some sort of model for that. So either lessons have been learned, there will be simply more political will behind this (which will alarm many who have been anxiously awaiting the social investment bank, I am sure) - or we'll have a while to wait before seeing this in action!
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Detailed Summary

Date Published
24 March 2010

Categories
environment
green investment bank

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