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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

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.

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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

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  1. The environmental and policy contextfor crowd-funding in the UKLSE Seminar on Crowd-Funding for Renewables2 May 2013 Sam Fankhauser Grantham Research Institute and CCCEP London School of Economics

  2. Overview • A vision for a green economy • Green investment needs • The policy environment

  3. The UK climate and renewables targets Under the 2008 Climate Change Act and EU Renewable Energy 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

  4. Implication of carbon targets by sector Decarbonisation starts in the power sector Source: Committee on Climate Change (2010)

  5. Electric power emissions Electricity generation needs to be all but carbon-free in 20 years Source: Committee on Climate Change (2010)

  6. Implications for renewable electricity Sharp ramp up in investment (mostly wind) on-shore wind off-shore wind Source: Committee on Climate Change

  7. Some renewables in domestic energy use But initial priority is energy efficiency

  8. Overview • A vision for a green economy • Green investment needs • The policy environment

  9. Large green investment needs Green investment rising from £8-10bn to £30-50 billion p.a. by 2020 Source: Vivid Economics (indicative numbers)

  10. Investment needs dominated by wind Sector decomposition (maximum scenario) Source: Vivid Economics (indicative numbers)

  11. At a time of severe investor caution UK aggregate investment is at a low, relative to GDP Source: Zenghelis (2012)

  12. Overview • A vision for a green economy • Green investment needs • The policy environment

  13. Decarbonisation requires policy intervention Put a price on carbon Address climate change externality Support low-carbon technology Address market failures related to RDD&D Remove barriers to energy efficiency Address market and behaviour issues related to energy use Source: Stern 2007

  14. A very complex policy landscape For 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)

  15. Key new policies: electricity market reform 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)

  16. Key new policies: green investment bank New institution to overcome problems in accessing finance Green investment needs • 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

  17. Key new policies: carbon price floor EU 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

  18. 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

  19. 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

  20. The environmental and policy contextfor crowd-funding in the UKLSE Seminar on Crowd-Funding for Renewables2 May 2013 Sam Fankhauser Grantham Research Institute and CCCEP London School of Economics

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