Reacting to Secretary of State Amber Rudd’s speech later today on the importance of the EU internal energy market, Dame Fiona Woolf DBE, Energy Lawyer and Partner with CMS Cameron McKenna LLP and Honorary President of the Aldersgate Group said:
“Secretary of State Amber Rudd is right to highlight the contribution that the EU’s internal energy market makes towards the affordability and security of the UK’s electricity system. Co-operation within the EU isn’t just important for energy security; it is also important to tackle environmental issues such as climate change cost-effectively. EU energy and climate policy has an important role to play in helping the UK build a low carbon electricity system in a way that is secure and cost-effective, such as through building more links like the Britned interconnector between the EU’s national power grids.”
Civil society and business groups have set 5 tests against which any prospective buyers of the Green Investment Bank will be assessed, calling on them to commit to measures that will ensure it continues to act and invest in the public interest.
The Green Investment Bank ‘Public Interest Prospectus’, launched today, sets out the 5 tests which any prospective owners must pass.
Prospective buyers of the GIB should commit to:
Nick Molho, Executive Director of Aldersgate Group said: “What has made the Green Investment Bank unique to date hasn’t just been its focus on green infrastructure but the fact that it has been a step ahead of the market, by supporting projects that weren’t attracting sufficient levels of private sector investment. This focus on supporting novel projects, such as complex NHS energy efficiency schemes and offshore wind projects using cutting-edge technology, has allowed the bank to make a real difference by supporting innovation, accelerating cost reductions and delivering supply chain benefits to the UK.
It is in the interest of both the future owners of the GIB and the UK public that funded its creation for the bank to retain its market strength in these areas and to continue to provide genuine added value to the UK’s green finance sector.”
Karla Hill of ClientEarth said: “The GIB is a unique institution, integral to supporting the UK’s cost-effective transition to a low-carbon economy. In the coming years we will need investment in our most important green projects – which is why we have to protect the GIB and its special character now.”
Sepi Golzari-Munro, Head of the UK Programme at E3G said: “To stand any chance of winning civil society and business support, any new investors must commit to maintaining the GIB’s integrity as a single, functioning institution and to deploying at least £4bn of new GIB capital in the UK’s low carbon economy over the next three years. Nothing less will do. “
Angela Francis, Economist at Green Alliance said: “If the GIB can continue to provide first of a kind finance to green projects it will remain a powerful institution, but if this sale leads to the bank losing its distinctive leadership role in market, it will be written up as an experiment that failed”
Doug Parr, Policy Director at Greenpeace UK said: “If Government abandons giving the Green Investment Bank the clarity of purpose that made it such a special institution, then the investors who take it over will need to step up to the plate.”
As part of the government’s focus on developing “long term solutions to long term problems”, it must build on the announcements made today to fully restore investment confidence in the low carbon sector by rapidly adopting the Committee on Climate Change recommendations on the fifth carbon budget and putting in place a clear strategy by the end of the year to meet these budgets in a way that is economically beneficial.
Nick Molho, Executive Director of the Aldersgate Group said: “The government’s commitment to auction Contracts for Difference of up to £730 million during this Parliament for up to 4GW of offshore wind or other less established renewables is a positive step forward. This gives the offshore wind industry some confidence to continue to invest in new projects and drive down costs, although a more ambitious level of deployment would accelerate cost reductions and deliver greater supply chain benefits.
But much more still needs to be done in order to address the concerns of investors recently highlighted by the Energy and Climate Change Committee. We now look towards the government’s decision on the fifth carbon budget, the Autumn Statement and its emissions reduction plan to provide confidence that the UK is on the right track to decarbonise cost effectively. We will need a clear strategy to increase investment in energy efficiency and low carbon heat, support the deployment of mature low carbon generation technologies such as onshore wind and solar and the demonstration of carbon capture and storage technology.”
Alongside the Budget, the government has published its response to the consultation on business energy efficiency. In response to this Nick Molho added: “It is great to see HM Treasury’s support for retaining mandatory greenhouse gas reporting. As the Aldersgate Group has repeatedly highlighted and the government has recognised, this requirement improves business productivity, provides more transparent information to investors and will help build London as a centre of global green finance. Businesses have been very clear about the importance of retaining the current standards.”
Steve Waygood, Chief Responsible Investment Officer at Aviva Investors, the £290 million asset manager, also commented on today’s update about mandatory carbon reporting requirements: “We welcome HM Treasury’s acceptance of the importance of retaining mandatory carbon reporting standards for UK listed companies, as outlined in today’s consultation response. With the decision, the UK remains aligned with international sentiment, which is placing greater emphasis on sustainable business models following last year’s climate conference in Paris and the creation of the Financial Stability Board’s climate disclosure task force. Mandatory standards are based on hard business logic and enable us to make better informed investment decisions over the longer term because sustainable companies are better performers over longer horizons.”
In a context of more sluggish economic growth forecasts but growing international momentum to tackle environmental challenges such as climate change, this Budget must be one that supports the continued growth of the UK’s low carbon goods and services sector in a way that is cost effective and economically beneficial, recognising the £122bn contribution the low carbon sector already makes to the British economy.
Following the government’s consultation on business energy efficiency policies, we urge the government to confirm on Budget Day that it will keep the UK’s carbon reporting requirements for listed companies in place. As made clear in an open letter from several businesses last week, these requirements have been essential in driving greater business productivity and providing material information to institutional investors to guide their fund management decisions. Removing or weakening them would make no economic or environmental sense and would go against the growing international trend towards greater corporate disclosure of greenhouse gas emissions.
The Budget is also an important opportunity to provide much awaited clarity on the size of the levy control framework to allow the continued deployment, cost reductions and supply chain growth of low carbon technologies such as offshore wind. At a time when the government is reviewing the advice from the Committee on Climate Change on the fifth carbon budget and developing its emissions reduction plan, we hope to see greater clarity on the support that will be made available to improve the energy efficiency of the UK’s building stock and demonstrate the commercial viability of carbon capture and storage technology in the UK.
In today's edition of The Independent, the Aldersgate Group and 16 other signatories from leading businesses and NGOs call on government to ensure that the UK's market-leading mandatory carbon reporting requirements are retained.
Nick Molho, Executive Director of the Aldersgate Group said: “The UK’s mandatory carbon reporting rules require listed companies to report every year on their global greenhouse gas emissions in the directors’ report of the annual report. The broad scope of the reporting requirements is important as it provides a far more comprehensive picture of a company’s resource efficiency beyond just carbon emissions from the consumption of energy, which only account for a limited part of the emissions of some businesses. The fact that the reporting has to be signed off annually at a senior level also means that boards of directors become far more engaged behind initiatives aimed at driving greater energy and resource efficiency in their business, thereby improving their productivity whilst reducing environmental impact."
Nick Molho added: "Critically, the requirements provide institutional investors with material information about listed companies’ greenhouse gas emissions in a way that is reliable, standardised and comparable, where in the past information was provided through different voluntary initiatives using different metrics. This information is key to helping them better understand financial risks linked to climate change and guide their fund management decisions.”
The full letter is available online.
Reacting to today’s publication of the Energy and Climate Change Select Committee’s report on investor confidence in the energy sector, the Aldersgate Group urged the Government to rapidly adopt the fifth carbon budget as set out by the Committee on Climate Change and work with businesses from across the economy to deliver a compelling Carbon Plan to stimulate business investment in low carbon and energy efficient technologies. The Group highlighted that this would also help bring the UK’s domestic climate and energy policies in line with the positive work done by the UK government that helped deliver an international climate deal at the recent Paris COP 21 summit.
Nick Molho, executive director of the Aldersgate Group, said: “We have to recognise that the Government has faced some important cost pressures leading to some of its recent policy decisions in the low carbon and energy efficiency sector. But the Energy and Climate Change Select Committee is right to highlight the recent dip in investor confidence in the sector. What has been particularly damaging is the lack of an alternative plan accompanying recent policy changes, rather than the changes themselves.
Confidence is essential to attracting investment at sufficient scale and at the lowest possible cost in the energy efficiency and low carbon sector and needs to be a priority for the government in 2016. A rapid adoption of the fifth carbon budget, together with a clear plan to increase investment in energy efficiency, low carbon generation and low carbon heat as well as to support the demonstration of carbon capture and storage technology would be an important step forward in re-establishing that confidence.”
Reacting to the announcement on the start of the sale process for the Green Investment Bank (GIB), the Aldersgate Group welcomed the government’s rethink to create a special share in the GIB but reiterated that maintaining the GIB’s focus on novel projects under its future ownership was key to its long-term value added and success.
Nick Molho, Executive Director of the Aldersgate Group said: “What has made the GIB unique to date has been its ability to be a step ahead of the market by supporting projects that weren’t getting sufficient support from mainstream private investors such as complex energy efficiency projects and offshore wind farms using new technologies. This focus on projects that are both green and novel has allowed the GIB to help tackle important market failures in the area of green infrastructure. Identifying investors with a clear plan and commitment to maintain this current focus must be an important part of the GIB sale process.”
Reacting to the Prime Minister’s announcement today on an EU referendum to take place on 23 June, the Aldersgate Group issued the following statement on the importance of EU environmental legislation for UK businesses.
High quality environmental legislation is good for the economy, for business and for citizens. EU environmental legislation has provided to date important benefits for UK businesses and the environment. Many environmental issues such as climate change and air quality are transnational in nature and other environmental issues, whilst not always or necessarily transboundary (e.g. water pollution), are common to many member states.
Whilst some improvements must be made, EU legislation has helped tackle some of these challenges in a more environmentally and economically effective manner by pooling the resources of different member states to address a particular environmental concern and driving environmental and business innovation across the EU. Membership of the EU has also strengthened UK diplomatic efforts in international negotiations such as recently at the climate change summit in Paris.
The UK has at times been a major player in the improvement of EU environmental legislation such as on emissions trading and industrial pollution; however, EU legislation has often resulted in standards that have resulted in a higher degree of environmental protection than would have otherwise applied in the UK. For instance, EU legislation has been the principal driver of rising UK standards on air and water pollution with major health benefits - the Bathing Water Directive has driven real improvements in beach water quality and benefitted tourism. The Environment Agency has stated that the Landfill Directive has changed for the better the way that waste is managed in the UK. The Birds and Habitats Directives have led to substantial improvements in the standards of protection for habitats and species in the UK.
In addition to addressing environmental issues cost-effectively, EU legislation has resulted in the introduction of common environmental and product standards which have been beneficial to UK businesses by providing more of a level playing field across different member states and providing clear market signals on the standards that products and services being developed on the Single Market need to meet. These standards have also often resulted in cost reductions for consumers, for instance DECC predicts that tighter efficiency standards for household energy appliances are expected to deliver an average annual saving of around £158 per household in 2020 (including around £25 per household through more efficient TVs and set-top boxes, £25 through more efficient consumer electronics and around £20 through more efficient lighting).
There are undoubtedly areas of European environmental legislation that could be improved and made more effective, in particular through more consistent implementation across member states and a greater focus on looking at environmental issues as a whole when developing policy to avoid unintended impacts. This could help avoid instances where some areas of EU legislation undermine its environmental objectives such as the European Court of Justice ruling last June that the UK’s reduced 5% VAT rate on energy-saving products was in breach of EU laws. However, the UK is most likely to have some influence in supporting these improvements and ensuring that the interests of its businesses are recognised and promoted if it continues to be part of the EU.
Should the UK leave the EU, the government must ensure that the UK continues to abide by environmental standards of at least a similar threshold to those contained in existing European legislation and applied across the Single Market. This is particularly the case in key areas such as product efficiency, fuel efficiency, industrial pollution and climate change. However, no clarity has been provided to date as to how this would be done and how the future development of these standards and legislation could still be influenced by the UK in the event that it was no longer part of the EU.