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Charles Levy
Senior Economist
Charles  Levy

Green Investment Bank needs to grow

Authors: Charles Levy Charles Levy

30 June 2010

The call from the Green Investment Bank Commission this week for the establishment of a Green Investment Bank (GIB) looks like a very positive development. In our paper ‘A 2020 Low Carbon Economy’ we identified similar barriers to investment but we believe its proposed remit is too narrow.

The remit of the GIB is heavily skewed towards investments in low carbon infrastructure – to meet the UK’s emission reduction targets as set by the Climate Change Act 2008 – that would be likely to come at the expense of investment in other areas of the low carbon economy.

Our research identified that economic activities such as advanced-manufacturing and low carbon services (such as financial or business advisory services) are facing many of the same market failures and barriers to investment as infrastructure schemes.

While the recommendations do suggest that the GIB might also invest in low carbon ‘technologies’, it will be very hard for firms to demonstrate how their business plans fit directly with the mission of the GIB to support the delivery of the UK’s emission reduction targets. This is because any environmental benefits would be very hard to predict and could be distributed globally through trade.

The notion of support for the development of low carbon service was absent from the report. This is unfortunate since our analysis suggests that these are the areas where the low carbon economy has the greatest potential to generate net employment growth.

The Commission’s report recommends that the GIB should be funded from a rationalisation of current public support for the low carbon economy. This chimed with our finding that current funding arrangements are too complex. We also called for the creation of a single, politically independent point of contact to be set up – funded from a rationalisation process of current spending arrangements.

There is a need for the Comprehensive Spending Review to better structure public investment in the low carbon economy. But, if the job creation potential of these activities is to be maximised, then these funds must be distributed in ways which support the development of the whole low carbon economy, rather than focusing on one sub-sector.

 

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