Greg Barker is MP for Bexhill and Battle and is a former Minister for Climate Change.
When David Cameron came to the House of Commons recently to report back on the latest EU Summit, it was the extraordinary demand from the EU for a further £1.7 billion which stole the headlines. However, the Prime Minister also reported something else we should be shouting about – but in a good way.
The ambitious package of EU measures on climate change, including a new target to reduce EU-wide emissions by at least 40 per cent by 2030, is a victory for British leadership. It is a vindication of the Coalition’s efforts to gain “early mover” advantage in the high-growth global market for low carbon goods and services, and rewards our focus on shifting away from over-dependence on imported fossil fuels.
With this binding EU commitment now in place, much of the rest of Europe will need to play low-carbon catch up. As they do so, they will be looking across the channel to see why the UK is turning the climate crisis into an opportunity, and just how we have managed to attract more investment into UK clean energy under the Coalition than in all of the last three Parliaments put together.
Other countries want to know how we are managing to continue to drive down our CO2 pollution, and have the fastest growing major developed economy in the world. And why we are on track to attract more than £100 billion of new investment into our future energy sector between now and 2020. But, unlike Germany, we have pursued the most cost-efficient path possible.
When historians look back on the early 21st century, I believe they will hold that sticking to his guns on climate change, while bearing down on the cost of the low-carbon transition, to be one of the big calls that Cameron got really right – one of the Prime Minister’s enduring accomplishments. Quietly done it may have been, but this is an achievement that will stand the test of time. At the centre of this distinctly Conservative approach to boosting innovation and investment sits our newly created Green Investment Bank, which this week celebrates its second birthday.
Sure, the past few years have seen climate change slip down the news agenda – and for understandable reasons. The legacy of Labour’s debt crisis has dominated this Parliament. We have taken difficult decisions to restabilise our economy and cut back government spending to live within our means. As the economy recovers so strongly, it is tempting to forget just how difficult things were before Labour left office.
Yet I still remember, as if it were yesterday, my one shot at pitching the idea for a Green Investment Bank to George Osborne. It was the autumn of 2009. The Conservative manifesto was already in an advanced draft. Our policy machine had spent four years carefully considering the agenda for our first term. To say this idea was a late entry would be an understatement – and with the country still reeling from Labour’s banking and debt crisis, asking the Shadow Chancellor to find even more money to capitalise a new financial institution was optimistic on my part, to say the least. But George got it, with that clarity of vision and no nonsense, analytical approach which has helped him emerge as one of the most successful chancellors of the post war period.
No fluff, no greenwash, no political positioning. George grasped the clear economic case for the GIB and empowered me to immediately set about creating the Green Investment Bank Commission. This group of specially selected economists and wise City financiers, under the expert chairmanship of Bob Wigley, took the first ambitious steps which ended with the bank opening its doors in Edinburgh less than three years later.
So now, as it approaches its second birthday, the GIB is proving to be one of the very real, yet largely unsung successes of this Government. It is the first of its type in the world. In fact, it is that rare British achievement, a global policy trailblazer – copycat institutions have since been set up in a number of countries. It might also be said that the GIB is one of the environmental policies that all three main parties – the Tories, Lib Dems and Labour – agree on.
Why is this? Well, first you have to really understand what the GIB is and what it does. Most people accept that the world needs to reduce its dependence on fossil fuels, especially coal, and to move to more low-carbon forms of energy. And most accept that renewable sources are an essential part of making this happen. However, although the technology is well proven, renewables are at a relatively early stage in their development – as once was the case with other sources of energy – and are still building a track record of operating at a large scale. Because of this, the private sector has been reluctant to invest at the level required to really drive things on.
There was a clear market failure here. So we set up the Green Investment Bank with some basic rules. It was given a budget of £3.8 billion and a double bottom line: it could only invest in energy projects that were both green and profitable. It would back them on commercial terms – whether through loans or equity stakes – and mobilise the private sector into greater action. In other words, it would correct the market failure. It would involve itself in offshore wind farms, in creating green energy from waste and in reducing energy demand through greater efficiency.
And what a job it has done in such a short time. It has directly committed to invest £1.6bn in almost 40 green energy projects right across the UK, from the Scottish Highlands to the south west of England and from off the coast of Wales to off the coast of Yorkshire. It has attracted finance from over 70 co-investors, many of whom are investing in the UK from overseas. In total, GIB has been instrumental in helping to move £5bn of UK infrastructure projects forward.
GIB finance was needed before these projects could proceed and all the investments have been made on fully commercial terms. The work of GIB will generate a profit for the UK taxpayer as well as modernising our energy infrastructure.
For me, the GIB and its hard-headed practices are the future of the battle against climate change. Before the crash, the Green Movement was in danger of getting itself a bad reputation. The claims about global warming were at times so dramatic and hair-raising that they risked alienating the public and creating a sense of fatalism. The vast amounts that would have to be spent to address the worst-case scenarios being put forward were blood-curdling. As an issue, it too often looked like it was wholly owned by the Left.
It should not be so. Conservative values can tackle the practical difficulties of addressing climate change. We can make expensive renewable energy cheaper through innovation and competition. Almost all new sources of energy are costly in their early years. Already, the price of solar panels has plummeted as we’ve improved the technology. The trick is to do the same thing with the rest – wind, wave, tidal and hydropower.
I would never claim that renewables are the whole answer, but they they are a big part of our future. Through their development we are also creating jobs, supply chain benefits, tax revenues and exportable skills, and building up our energy security.
But that all takes investment – record investment, which in no small part is thanks to the new Green Investment Bank. A green institution that fits squarely with our long-term economic plan. And just because it’s two years old, don’t think the GIB has come of age – its most exciting growth has only just begun.