Memorandum submitted by Climate Change
Capital (BS 13)
1. INTRODUCTION
TO THE
AUTHORS
Climate Change Capital (CCC) is a specialist
investment banking group that occupies a distinctive position.
With access to a substantial and flexible capital base, we focus
on businesses created or affected by the convergence of laws and
policies on energy and the environment. Our dedicated team of
90 professionals located in London, Washington, Madrid and Beijing
are experts in the fields of renewable energy, clean technology,
biofuels and emissions reductions markets.
Kate Hampton is responsible for Head of Policy
at CCC. She is a Sherpa to the EU High Level Group on Competitiveness,
Energy and Environment, advising the European Commission. She
rejoined the company in January 2006 from a year's secondment
as a Senior Policy Advisor to Defra for the UK's G8 and EU Presidencies
where she worked on the future of international climate change
policy. Before joining CCC, Kate was Head of the Climate Change
Campaign for Friends of the Earth International. She is the former
Convenor of the Green Globe Network, an expert advisory group
funded by the Foreign and Commonwealth Office. She was a research
associate at the Institute for Policy Studies in Washington DC
and an EU policy consultant for Environmental Resources Management.
Kate holds a BSc from the London School of Economics and a Masters
in Public Policy from the Kennedy School of Government at Harvard
University.
Dr Tony White, MBE is Climate Change Capital's
Market Development Team. Tony has been involved in almost all
aspects of the energy industry, ranging from renewable energy
research through to strategy, finance, international development
and policy. He has made major contributions to the evolution of
the industry during this time. Having been the analyst for the
UK Government's broker during the liberalisation and privatisation
of the England and Wales electricity industry in 1990, he recognised
the different role required of network companies serving competitive
power markets. This led to the introduction of the Transmission
services scheme in England and Wales and was the driving force
behind the UK Government's recent review of distributed generation.
During the period 1996 to 2003, he was the head of the pan European
Utilities Equity Research team at Kleinwort Benson, then Citigroup.
Under his leadership, the team became ranked as the "team
of teams" in the Extel survey of equity research and was
ranked top European utility team by "Institutional Investor".
He has been at the forefront of understanding the impact of liberalisation
on the generation sector, correctly forecasting the path of power
prices in Europe and the USA. He is a non Executive Director of
the New and Renewable Energy Centre at Blyth and a member of the
Advisory Boards of the United Kingdom Energy Research Centre and
the Energy Centre at Sussex University. He has a BA in Physics
and D.Phil in Biophysics from Oxford University and an MBA in
Finance from the City University Business School.
2. THE CLIMATE
CHANGE BILL
CCC welcomes the Government's proposed Climate
Change Bill as representing a major step forward in efforts to
create an economy-wide policy framework for delivering a low carbon
economy. To date the UK's CO2 budget has covered only
part of the economy, and UK investors have had to rely on policy
signals on the need to deliver emission reductions from UN and
EU institutions that currently have not delivered certainty that
carbon will have a value post-2012. While this is not surprising,
since international negotiations can take time to reach a consensus,
the lack of certainty over carbon prices post-2012 means investment
in low carbon infrastructure both in the UK and in developing
countries is being delayed.
While it is very likely that the UNFCCC's Conference
of the Parties will agree on the form of a successor to Kyoto
by 2009, implementation of a UK framework for delivering emission
reductions with regularly updated carbon budgets and emission
reduction targets will mitigate investment risk by providing certainty
that, at least in the UK, a carbon price will exist post-2012
and for the foreseeable future. The lack of a sunset clause in
the Bill is important. Investment decisions are taken based on
returns made over 15-25-year periods. Long-term signals on the
price carbon will enable investors to make informed decisions
about whether to invest in high or low carbon infrastructure in
line with carbon targets set by Government.
CCC believes the creation of a Committee on
Climate Change to advise on the nature of targets and budgets
and assess government policy and progress towards meeting those
targets is a significant move forwards in terms of depoliticising
the issue of climate change. One of the barriers to date concerning
the development of effective climate change-mitigating policies
has been the gap between what climate change science indicates
needs to change in the UK (and global) economy and the policy
decisions, which carry political risk of unpopularity, politicians
are prepared to take to make these changes. The introduction of
a Committee on Climate Change to provide independent advice on
the interface between science and policy will, we hope, act to
remove some of the political controversy surrounding the UK's
approaches to reducing carbon emissions. In this way, Ministers—who
will ultimately remain responsible for setting and meeting targets—will
be provided with some "political cover" to make tough
decisions on future policies.
Following on from this the proposal to include
enabling powers to implement secondary legislation if required
to meet carbon targets is a revolutionary new approach to climate
change policy and one that will form a key pillar to the success
of the proposed legislation in delivering the carbon targets.
There is significant cross-party consensus on the need to tackle
climate change and so we are hopeful that this key part of the
Bill will be endorsed by the Scrutiny process. Without it, the
potency of the Bill will be significantly weakened.
While in light of the findings of the Stern
Review, the proposed carbon targets of 60% CO2 emission
reductions by 2050, and an intermediate target of at least 26%
reductions by 2020 are disappointing, it should be recognised
that the use of statutory domestic emission reduction targets
represents new political territory and therefore establishing
the Bill with these well-established targets in place is probably
a pragmatic first step. There will be, however, a strong need
to retain the proposed option for Government to review these targets
(on the advice of the Committee on Climate) in line with new scientific
or international policies justify it. This will provide a lever
to introduce more stringent targets as required.
March 2007
| 
