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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 PowerPoint Presentation
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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.

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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

overview
Overview
  • A vision for a green economy
  • Green investment needs
  • The policy environment
the uk climate and renewables targets
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
implication of carbon targets by sector
Implication of carbon targets by sector

Decarbonisation starts in the power sector

Source: Committee on Climate Change (2010)

electric power emissions
Electric power emissions

Electricity generation needs to be all but carbon-free in 20 years

Source: Committee on Climate Change (2010)

implications for renewable electricity
Implications for renewable electricity

Sharp ramp up in investment (mostly wind)

on-shore wind off-shore wind

Source: Committee on Climate Change

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Some renewables in domestic energy use

But initial priority is energy efficiency

overview1
Overview
  • A vision for a green economy
  • Green investment needs
  • The policy environment
large green investment needs
Large green investment needs

Green investment rising from £8-10bn to £30-50 billion p.a. by 2020

Source: Vivid Economics (indicative numbers)

investment needs dominated by wind
Investment needs dominated by wind

Sector decomposition (maximum scenario)

Source: Vivid Economics (indicative numbers)

at a time of severe investor caution
At a time of severe investor caution

UK aggregate investment is at a low, relative to GDP

Source: Zenghelis (2012)

overview2
Overview
  • A vision for a green economy
  • Green investment needs
  • The policy environment
decarbonisation requires policy intervention
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

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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)

key new policies electricity market reform
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)
key new policies green investment bank
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
key new policies carbon price floor
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
t here are clear policy risks
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
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
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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