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The environmental and policy context for crowd-funding in the UK LSE Seminar on Crowd-Funding for Renewables 2 May 2013. Sam Fankhauser Grantham Research Institute and CCCEP London School of Economics. Overview . A vision for a green economy Green investment needs The policy environment. - PowerPoint PPT Presentation
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The environmental and policy contextfor crowd-funding in the UK
LSE Seminar on Crowd-Funding for Renewables2 May 2013
Sam FankhauserGrantham Research Institute and CCCEPLondon School of Economics
Overview
• A vision for a green economy
• Green investment needs
• The policy environment
The UK climate and renewables targets • Legally binding carbon targets
• Long-term (2050) target of an 80% cut• Binding 5-year carbon budgets set 12 years ahead
• Legally binding renewables targets• 15% of energy use by 2020• Mostly to be achieved in electricity generation
Under the 2008 Climate Change Act and EU Renewable Energy Targets
Implication of carbon targets by sector
Source: Committee on Climate Change (2010)
Decarbonisation starts in the power sector
Electric power emissions
Source: Committee on Climate Change (2010)
Electricity generation needs to be all but carbon-free in 20 years
Implications for renewable electricity
Source: Committee on Climate Change
Sharp ramp up in investment (mostly wind)
on-shore wind off-shore wind
Some renewables in domestic energy useBut initial priority is energy efficiency
Overview
• A vision for a green economy
• Green investment needs
• The policy environment
Large green investment needsGreen investment rising from £8-10bn to £30-50 billion p.a. by 2020
Source: Vivid Economics (indicative numbers)
Investment needs dominated by windSector decomposition (maximum scenario)
Source: Vivid Economics (indicative numbers)
At a time of severe investor cautionUK aggregate investment is at a low, relative to GDP
Source: Zenghelis (2012)
Overview
• A vision for a green economy
• Green investment needs
• The policy environment
Decarbonisation requires policy intervention
Put a priceon carbon
Support low-carbon technology
Remove barriers to energy efficiency
Source: Stern 2007
Address climate change externality
Address market failures related to RDD&D
Address market and behaviour issues related to energy use
A very complex policy landscapeFor example, UK carbon policies aimed at business
CCL: Climate Change Levy on fossil fuels (most larger businesses)CCA: Climate Change Agreement (voluntary standard resulting in a discount on the CCL)CRC EES: Carbon Reduction Commitment Energy Efficiency Scheme (services and public entities)EU ETS: European Union Emissions Trading Scheme (electricity and heavy industry)
Source: Bowen and Rydge (2011)
Key new policies: electricity market reform
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gCO
2/kW
h Risky market, no carbon price certaintyMedium scenario
Current arrangements do not deliver the required emission cuts
What market may deliver
Required path
• Low-carbon support through long-term Contracts for Difference (replacing renewable energy obligation)
• New capacity market to address intermittency issues of wind• Emission Performance Standard (gCO2 / kWh)
Key new policies: green investment bankNew institution to overcome problems in accessing finance
• Initial equity of GBP 3 billion, no commercial borrowing until 2015• Focus on off-shore wind, non-domestic industrial energy efficiency, waste• Offering both commercial and (eventually) state aided products
Gre
en in
vest
men
t nee
ds
Key new policies: carbon price floorEU Emissions Trading Scheme provides insufficient price signal
• Recession means EU ETS cap is increasingly loose• Unilateral floor price rising from GBP16 in 2013 to GBP 30 by 2020• EU-wide effect is constant emissions, lower prices, higher
compliancecosts
There are clear policy risks
“I want a Conservative Treasury to be in the lead of developing the low carbon economy” UK Shadow Chancellor George Osborne, November 2009
“We're not going to save the planet by putting our country out of business”UK Chancellor George Osborne, October 2011
Conclusions
• The UK remains at the forefront of global efforts to decarbonise the economy
• Low carbon investment needs are massive at a time of low capital availability
• But policy (and other risks) can be substantial
The environmental and policy contextfor crowd-funding in the UK
LSE Seminar on Crowd-Funding for Renewables2 May 2013
Sam FankhauserGrantham Research Institute and CCCEPLondon School of Economics
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