Climate Action

Uncertainty in UK could cost investment in low-carbon

With the UK committed to cutting CO2 emissions by 80 per cent by 2050, significant investment in the UK’s low-carbon infrastructure is needed. The latest CBI report raises concerns that uncertainty over policy will mean the £150 billion of investment needed over the next 20 years will not be met, as other countries offer a more viable option for investors.

  • 27 April 2011
  • Websolutions

Uncertainty for investors could mean the UK would fail to attract the £150 billion of investment needed for a low carbon economy over the next 20 years, according to the CBI.

As the UK falls from 5th to 13th in the global ranking for low-carbon investment, they urge for the government to set out an overall vision for growth in the low-carbon sector, and limit the uncertainty for investors.

While they acknowledge that private investment has a huge role to play the report, entitled ‘Risky business: investing in the UK’s low-carbon infrastructure’, calls on government to create the right investment conditions, and use the limited public funds available to leverage investment from the private sector.

Katja Hall, chief policy director at the CBI said: "We know the UK needs a balanced energy mix to cut emissions and grow the low-carbon economy, but the big question now is how we pay for it.

"Businesses want to get on with building new low-carbon infrastructure, but there is still too much policy uncertainty. We need the Government to set a clear direction of travel and to stick to it.”

The report, conducted on behalf of the CBI by management consultants Accenture, used interviews with executives from financial institutions, investors, utilities and manufacturers, to find out what stands in the way of the £7.5 billion to £10 billion annual investment needed in low-carbon energy.

While some acts of government were welcomed, including the National Infrastructure Plan, the Carbon Plan and the recent growth review, all of which go some way to expressing the government’s green ambition, investor confidence in the UK remains low, as the country falls from 5th to 13th in global rankings.

The report says the UK must following the footsteps of countries such as India, with their National Action Plan and China, with their Five-Year Plan, showing clear commitment and vision.

Companies interviewed were concerned after sudden policy shifts from the government, including the removal of the recycling revenue from the Carbon Reduction Commitment, and an early review of the Feed-In Tariffs.

While the Electricity Market Reform is welcomed, the report says more need to be done, including making sure the planning system delivers timely decisions, with a default position of yes, and that the backlog of applications is shifted through quickly, and that the government provide a financially viable framework to their Green Deal, making it an attractive option for lenders and providers.

Finally the report pushes for the success of the Green Investment Bank, and while the report welcomed the clarity that was provided under the Budget announcement, it believes the bank need to issue bonds as soon as possible.

The report responds to a worry that in a global market, if the UK continues to be an unattractive option for investment, companies will invest elsewhere, leaving the UK lagging behind where it could be a global leader, and missing it’s carbon reduction targets for 2050.

Omar Abbosh, Managing Director UK & Ireland, Resources at Accenture said: "The companies we spoke to were clear - few believe that the UK is on track to meet its emissions-related targets. If the Government reduces investment risks, low-carbon spending can happen sooner, driving economic growth and cutting the cost to the end consumer. If not, investment could be attracted to other countries with more appealing incentives."


Image: Kevin Dooley | flickr