Conclusions
1. Increasing investment
in low-carbon energy, and reducing investment in fossil fuels,
depends on an unambiguous assessment by investors that the international
community will produce a credible and significant commitment to
reduce emissions in a timescale commensurate with the urgency
needed for avoiding dangerous climate change. (Paragraph 5)
2. We recognise the
Government and European Commission's arguments about the importance
and flexibility and dealing with individual states' circumstances
and energy policies. Although energy efficiency may be more cost-effective
than switching to renewable sources of energy for some countries,
it is vital that each country has an ambitious and binding target
for renewable energy to create a level playing field within the
EU. (Paragraph 8)
3. There is a significant
green investment gap. The current level of green investment is
running at less than half of the level needed to deliver the decarbonisation
implicit in national and international targets. A significant
scale-up us needed. (Paragraph 12)
4. As we have highlighted in previous inquiries,
a significant barrier to investment in low-carbon energy has been
uncertainty for potential investors about the future direction
of Government policy. The Government's Electricity Market Reform,
including the contracts for difference and capacity market regimes,
though flawed, provide an opportunity for greater policy stability
in future. (Paragraph 25)
5. New carbon reporting arrangements for
companies can help investors understand carbon impacts, and could
help stimulate greater focus on these issues amongst customers
and suppliers to help add pressure on companies to adopt more
sustainable practices. (Paragraph
35)
6. All investors are required to follow
a fiduciary duty in their investment decisions, but that can be
interpreted in different ways by different investors. It is important
that investors factor the risks of exposure to carbon into their
decision-making and consider the climate impacts of investments,
as part of their wider social and environmental responsibilities.
(Paragraph 40)
7. The Green Investment Bank has made a
solid start, making investments which will help to fill part of
the gap in the required level of green investment. The Bank's
aim, rightly, is to establish itself as an enduring institution.
It needs to be able to raise significant further private sector
capital for investment alongside the Bank's programmes, and to
borrow itself to enlarge the scale of its work. However, with
Autumn Statement 2013 indicating a flat, rather than falling,
trajectory in 201-16 for Government debt as a percentage of GDP—the
Government's test for allowing the Bank to borrow—there
is doubt about the prospects of the Bank being able to borrow
in that year as originally planned. (Paragraph 50)
8. We are pleased that the Green Investment
Bank has provided funding for Green Deal energy efficiency schemes.
However, the number of schemes financed by the Green Deal is still
some way off the required level, or that achieved in Germany.
(Paragraph 54)
9. The Government's Community Energy Strategy
addresses a number of the issues of concern raised during our
inquiry. The scale of some of the challenges is significant, and
will require co-ordination between Government departments and
local authorities for progress to be made. We await to see what
'teeth' the Community Energy Unit will have to make progress on
these issues. In contrast, the European Commission's proposals
on energy state aid rules appear to run counter to the strategy's
objective of encouraging community energy groups. The pace of
change has been slow, particularly around key initiatives such
as 'license lite' and State Aid approval for the Green Investment
Bank to be involved in Community Energy. (Paragraph 62)
10. Whilst we recognise the difficulties
inherent in redirecting Quantitative Easing and securing the international
support needed to introduce a financial transaction tax, we consider
there is merit in further investigating such devices to provide
an additional source of finance for green investment. (Paragraph
69)
11. As we have described in this report,
there is an urgent need to address the green investment gap. The
Green Investment Bank and some individual programmes and initiatives
are making some inroads in filling that gap. But a more co-ordinated
approach is needed to accelerate progress. (Paragraph 73)
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