Investors call on Osborne to set 2030 decarbonisation target
The Chancellor George Osborne has today been urged to include a decarbonisation target in the Energy Bill by a group of investors.
Writing to the Chancellor on the day of his speech to the Conservative Party Conference, the group, responsible for over a £1tn of investment worldwide, argue that the lack of a target inhibits investment decisions and negatively impacts the UK's ability to attract the capital needed to update its "ageing infrastructure".
The UK's electricity network needs a capital investment of an estimated £110bn to make it fit for the twenty-first century and able to deliver affordable, secure and low carbon power.
To achieve this, the group says it is essential for Government to provide investors with the long-term confidence they need to transform the electricity market and drive economic growth.
The letter states that "the lack of a meaningful 2030 decarbonisation target in the Energy Bill is detrimental to this objective - exacerbating policy risk and investor uncertainty. In many cases, this increases the cost of capital and deters major investors, manufacturers and project developers from investing in the UK and creating jobs."
It calls for the inclusion of a 2030 carbon intensity target for the energy sector to be set in 2014 for implementation by 2030, in line with recommendations made by the independent Committee on Climate Change.
This has been identified as the least-cost pathway to decarbonisation by 2050 and would trigger significant growth opportunities for the UK.
Aviva Investors', who signed the letter, chief responsible investment officer Steve Waygood, said: "As investors, we acknowledge that climate change represents a significant threat to global GDP and consequently the value of the assets we manage. We are increasingly factoring climate change risks into the decisions we make, but the confusion over medium-term energy policy is a significant impediment. We call on the Chancellor to support legally binding decarbonisation targets, which will benefit all stakeholders in the investment chain."
Executive director of the Aldersgate Group, which co-ordinated the letter with the UK Sustainable Investment and Finance Association (UKSIF), Andrew Raingold, said: "The Chancellor's lack of support for a decarbonisation target in the Energy Bill is completely out of kilter with mainstream business and investor opinion. Such a target would provide certainty to investors, energy generators and their supply chains, giving a much needed investment boost to the UK economy."
The call follows the Intergovernmental Panel on Climate Change's first part of its fifth assessment (AR5), which finds that human influence on the climate system is "clear" and has been the dominant cause of global warming since the mid-20th century. The findings are expected to spur on governments and businesses around the world to increase action on climate change.
UKSIF chief executive Simon Howard said: "The continued investor support for a 2030 decarbonisation target highlights the significant appetite for the UK to lead the world in low-carbon energy solutions and to ensure security of supply. Both investors and businesses are looking for a clear commitment from Government to further boost investment in an area which provides exceptional opportunities for long-term growth.
"The Chancellor should now respond to our coalition's call and use the Energy Bill to provide the stable and coherent policy framework to support the long-term investment decisions which are vital for sustainable economic growth," added Howard.