Can Clegg’s ‘quiet green revolution’ inspire growth?
By Emily Towers, Communications Manager
He used the event to provide further clarity on the role and remit of the Green Investment Bank (GIB).
The Deputy Prime Minister told the audience that they should be in ‘no doubt’ about the Coalition’s commitment, asserting that a ‘quiet green revolution’ was underway in Whitehall.
As proof of this he listed recent commitments the Government has made to this agenda including the £1 billion funding for the CCS demonstration project, the launch of the Renewable Heat Incentive and acceptance of our recommended 4th Carbon Budget.
Mr Clegg argued that achieving green growth will require a ‘green gear change’, whereby politicians take a longer-term less partisan view of policy, and an approach that combines ethics with sound economics. “Justice must be done between generations” , he said, talking of the onus on all of us to ensure that our grandchildren can thrive in a carbon-constrained world. Key to ensuring growth will be the creation of the right investment climate, and the Government considers the formation of the GIB to be crucial to this.
Clegg used his speech to announce some finer details about the GIB:
- The GIB is a world-first – no other country has a dedicated ‘green’ investment bank.
- The bank will be open for business from April 2012, when the first investments can be made.
- Government will provide £3 billion in initial capitalisation from asset sales. This is expected to catalyse an additional £15 billion of investment by 2015.
- Early priorities for investment will be on projects related to offshore wind, waste and promotion of non-domestic energy efficiency.
- The bank will have full operational independence and will be led by a new board
- The bank will be able to start borrowing funds in April 2015.
The idea of forming a GIB has been welcomed by many working in the sector, including ourselves. In our recently published Renewable Energy Review, we argued that there could be a valuable role for a Green Investment Bank, both in terms of providing comfort to investors and in the provision of an additional pool of capital for risk sharing. The GIB can best fulfil both of these roles by being a bank, rather than a fund, so the news that it will operate as such is welcome.
However, we sounded a note of caution and recommended that to mitigate risks, Government should consider allowing the GIB to borrow money from its inception. Then it would be able to capitalise on a window of opportunity prior to 2015, when the new EMR arrangements will be uncertain, and there will be few proven examples of offshore wind projects in successful operation.
Further details about the way the bank will work are due to be announced by Vince Cable over the coming months. These will be crucial in determining the extent to which the GIB will contribute to meeting carbon budgets.