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26 Apr 2011 02:04:33

Policy uncertainty puts UK at risk of missing carbon targets

New report warns the government must set a clear policy direction to attract the investment needed for a low carbon economy.

Recurrent policy uncertainty could mean the UK fails to attract the estimated £150bn of investment needed to build a low carbon infrastructure over the next 20 years. This is the conclusion published in a new survey today by the CBI and Accenture entitled "Risky Business: investing in the UK's low-carbon infrastructure."

After interviewing 24 senior executives from the energy, finance, manufacturing and property sectors, the CBI report warns that the UK is at risk of missing its carbon emissions targets and failing to close the energy gap left by ageing coal and nuclear power stations that will become offline over the next 20 years.

According to the CBI, the UK's record of "sudden policy shifts", such as the changes to the Carbon Reduction Commitment (CRC) and feed-in tariff scheme (FiT), made investors reluctant to deliver low carbon investment at the scale and pace required. For the UK to appear as an attractive destination for investment, the CBI report calls for a UK-wide long-term, low carbon growth strategy.

Katja Hall, chief policy director for the CBI said "Businesses want to get on with building new low carbon infrastructure, but there is still too much policy uncertainty. We need the government to set a clear direction of travel and to stick to it."

Investment in low carbon infrastructure could move to other countries due to policy uncertainty in the UK.

The CBI report supports the proposed electricity market reforms outlined by the government in December, which include replacing the Renewable Obligation with long-term contracts and establishing a carbon floor price, as confirmed in last month's Budget. Also, the CBI welcomes measures outlined by George Osborne to clear the excess of major infrastructure projects until the establishment of the Major Infrastructure Planning Unit.

But, the CBI report criticises the government's decision to stop the Green Investment Bank from issuing government guaranteed bonds, arguing that a fully functioning bank would provide a "secure bridge between pension funds and capital intensive technologies". In addition, the report argues that the proposed Green Deal energy efficiency scheme should be supported by a viable financial model that spreads the level of financial risk.

"If the government reduces investment risks, low-carbon spending can happen sooner, driving economic growth and cutting the cost to the end consumer. If not, investment could be attracted to other countries with more appealing incentives."

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