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The Association for Consultancy and Engineering has welcomed the launch of the Green Investment Bank following past budget announcements, but fears that its narrow remit, as well as uncertainty in the wider infrastructure regulatory environment, such as delays to electricity market reform, could undermine its potential to drive growth.

The Chancellor of the Exchequer confirmed the launch of the Green Investment Bank (GIB) this year to support new projects, which has been welcomed by industry as a potential catalyst for future green infrastructure investment. However, in the budget the Chancellor has left open the possibility of replacing the carbon reduction commitment if administration costs cannot be reduced. This adds to uncertainty in the energy sector.

The ability of the GIB to effectively identify and address market failures may also be limited by its narrow remit. This is important given the breadth and scale of private investment required to enhance and decarbonise the UK’s infrastructure.

One area of concern is that whilst the GIB intends to work alongside existing environmental policies, the current volatility of the regulatory environment is causing uncertainty and driving investors away. For example, Electricity Market Reform (EMR) has been delayed for more than a year now, causing several energy companies to halt low carbon projects, as investors become uncertain over the scale and length of their pay back period.

The Chancellor announced that there will be a new gas generation strategy developed ahead of the autumn, though until this reports there will be further uncertainty about the viability of key energy investments.

ACE chief executive, Nelson Ogunshakin OBE, said: “Industry welcomes the establishment of the Green Investment Bank. This helps to demonstrate the government’s commitment to meeting the UK’s de-carbonisation agenda and growing energy needs.

“However, with projects such as E.On’s 150MW biomass plant in Bristol on hold because of changes to green subsidies, as well as the one year delay on electricity market reform, the need for renewed certainty in the regulatory environment for investors is crucial. A failure to do so will undermine any progress in infrastructure delivery that the Green Investment Bank can potentially unlock.

“Longer term, as deficit reduction commitments ease, the government should strengthen the Green Investment Bank by putting in place a clear roadmap expanding its remit and funding capacity. This strengthening of the Bank, in tandem with a clearer regulatory environment, will provide the holistic infrastructure investment plan the UK needs to give investors and industry the confidence to invest.”


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Notes to Editors


The green investment challenge remains substantial as the UK seeks to meet the following commitments:

• The UK’s green capital needs are likely to increase by four to six times their present annual level of £6bn to £8bn per year by 2020.
• The Climate Change Act requires the UK to reduce its greenhouse gas emissions by 80% by 2050, with an interim target of a 34% reduction by 2020, when compared to1990.   
• Compliance with EU air quality standards
• Compliance with EU waste targets, which calls for 50% of household waste to be recycled by 2020, and a 35% reduction in biodegradable municipal waste landfill by 2020 when compared with 1995.
• The Water Framework Directive contains two objectives of no deterioration and achieving ‘good’ status in water bodies by 2015.