Leading UK business organisation the CBI has claimed in a new report that there is “still too much policy uncertainty” when it comes to building the new low-carbon infrastructure that the UK needs.
The report, entitled Risky Business: Investing in the UK’s low-carbon infrastructure, says that senior business leaders are “not convinced” that the UK can attract low-carbon investment “at the scale and pace required”.
In order to meet emissions reduction targets, the UK’s power sector alone needs £150 billion (€169 billion; $247 billion) of private sector investment over the next 20 years.
In order to put the UK back on track to meet such targets, the report makes a number of recommendations. Among these is tackling the backlog of energy infrastructure projects awaiting approval “by ensuring that the Infrastructure Planning Commission (IPC) continues to make decisions on projects currently under review until the estabishment of the Major Infrastructure Planning Unit”.
The IPC was given notice of its abolition by the UK’s coalition government in October last year. When in opposition, the Conservative and Liberal Democrats had dismissed the IPC as an unaccountable quango (government-created and financed organisations that operate at arm’s length from the government).
At the time of the announcement of its abolition, the IPC had 42 projects at the “pre-application” stage and there are fears that a large bottleneck of projects is being allowed to build up prior to the IPC’s eventual replacement by the Major Infrastructure Planning Unit, which will sit within the government’s Planning Inspectorate.
The report also calls on the government to “allow a Green Investment Bank to issue government guaranteed bonds as soon as possible”.
It was announced in the March budget that a new Green Investment Bank would have a guaranteed initial capitalisation of £3 billion. However, the issue of ‘green bonds’ is not without difficulties. A report by the Green Investment Bank Commission admitted that the creation of a green bond market would “take several years to produce a cash flow”.
It added that the market would have to overcome a number of constraints – bonds would have to be rated by external agencies and the market would have to be deep and long-dated enough to offer the necessary liquidity to allow investors to easily move in and out of it. In addition, it would also have to offer “long-term incentives” to channel institutional investment in the sector on a large scale.