"Rapid mobilisation" of a Green Investment Bank is needed within the next six months to unlock the £550 billion of public and private sector money required for the UK to move to a low carbon economy, according to a report by the government-backed Green Investment Bank (GIB) Commission.
The Commission recommends that the GIB be established "to support the delivery of the UK's emission reduction targets as set by the Climate Change Act 2008."
But it must ensure it does not "crowd out the private sector, with the private sector leading and executing deals wherever activity is viable and the GIB operating only where its actions achieve a result that would not otherwise have been possible and then in partnership with the private sector wherever possible."
The committee and its advisory panel includes representatives of banks and investors, including Citibank, Merrill Lynch, Carlyle Group and Goldman Sachs.
Initial Bank capitalisation and funding should come from private sector and state owned bank capitalisation, including use of bank levy and bank bonus taxes; proceeds from the sale of Government owned assets; and UK revenues from EU ETS auctions. Green bonds and ISAs could be another source.
A recent National Audit Office report, Government funding for developing renewable energy technologies, recommended that the GIB should use a rationalisation of quangos to radically divert funding to improve Government support for low carbon innovation and the commercialisation of new technologies.
Claiming that £550 billion of investment would be needed between now and 2020 if the UK was to meet its renewable energy and climate change goals, it identifies amongst the promising new technologies that need pump-priming: waste-derived biofuels, offshore wind, marine renewable technologies, grid infrastructure, energy efficiency and low carbon vehicles.
It wants to work with the Carbon Trust to incentivise businesses to invest via a business rate differential on the energy performance of their buildings, offer loan finance at favourable rates for investment in the energy efficiency measures and provide assurance to SMEs around the technology solutions that they implement.
The Green Investment Bank (GIB) Commission was established by the Conservatives when in opposition, in February 2010.
The Commission, chaired by Bob Wigley, CEO of Yell Group, has set a target for the bank to be established and active within the next six months, claiming that "rapid mobilisation will avoid the potential for investors to take a wait-and-see approach".
As such, the report calls for a non-executive chairman of the Bank to be selected by August 2010 and the board – or shadow board – by October 2010 – and, while it says that eventually the Bank should be created as a statutory body through an Act of Parliament, the "initial establishment" of the institution should rest on this or overall government policy.
CIWEM's Executive Director, Nick Reeves, said: "The Green Investment Bank must offer value for money." He compared the level of work needed to "the railway mania of the 1800s" because this "was backed by a mind-boggling level of investment that was akin to treble the UK's gross domestic product (GDP)."
Commenting on the report, Tom Delay, Chief Executive of the Carbon Trust, said: "the same day the report was published, the Carbon Trust has announced that seven major energy companies are investing millions into our offshore wind technology accelerator to cut the cost of offshore wind by 10%.
"We are pleased to see this report has incorporated our ideas to increase private sector investment and has flagged our low carbon innovation and wider work with business as mission critical to delivering a low carbon economy."
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