At the beginning of last week, former leader of the opposition Ed Miliband called for the UK to become the first country to enshrine zero-emissions targets in law. However, in what proved to be one of the busiest political weeks outside of a general election in living memory, the proposal received little attention. With an inquiry into the state of investor confidence in the UK energy sector by the Energy and Climate Change Committee (ECC) ongoing, and the launch of COP21 in Paris, Miliband’s idea may well be worth serious consideration.
Between 2010 and 2013, the UK’s green economy grew more than seven per cent a year, compared to growth of under two per cent for the economy as a whole over the same period. Such impressive performance is indicative of strong investor confidence in the sector, due largely to government policies ensuring a relatively low-risk environment. The 2008 climate change act, in combination with initiatives such as the Green Investment Bank (GIB), the development of electricity market reform, the Green Deal, and high feed-in-tariff rates for solar power generation, sent a strong message to investors about the government’s commitment to ensuring a prosperous green economy. So much so, that in 2013 the UK was ranked as the fourth most attractive place in the world for investment in renewables, by the Renewable Energy Country Attractiveness Index (RECAI).
Fast forward to 2015, and the perceived level of political risk in the UK’s renewables sector has increased significantly. Many in the sector feel like it has taken something of a battering since the election. Announcements on onshore wind subsidy and planning, solar feed-in-tariffs, effective abolition of the green deal, privatisation of the Green Investment Bank and proposed reductions in solar subsidies of up to 87% have generated a myriad of regulatory uncertainties over the sector. Increasingly the government’s commitment to emissions reduction has been called into question.
Consequently, in September the RECAI ranked the UK as only the 11th most attractive country for investment in renewables.
ECC’s current inquiry is likely to conclude that these regulatory uncertainties are curtailing investment in renewables. A legislative commitment to zero-emissions targets may be one way to reinstate confidence in the sector, by reaffirming the government’s commitment to the renewables industry. Such a gesture is unlikely however, as Cameron and Osborne have made clear that they oppose any further unilateral emissions targets beyond 2020. This position highlights the importance of COP21, where countries with a greater capacity to act will come under pressure to enter more demanding multilateral agreements. Beyond the Paris climate talks, environmental campaigners and those concerned about investor confidence in the green economy should look to apply pressure on the government around zero-emissions targets. While such legislation won’t be forthcoming, a debate focussed on strong action will make incremental changes more likely.