The UK government needs to come up with a plan to secure finance to meet the country’s carbon budgets because policy changes have led to a collapse in clean energy investment, according to MPs on parliament’s Environmental Audit Committee (EAC).
A new EAC report warns that clean power investment fell 56% last year and is now at its lowest level since 2008.
The report said that the government’s Clean Growth Strategy does not do enough to meet legally binding climate change targets, even if all its policies are implemented.
Changes to low-carbon energy policy in 2015 likely undermined investor confidence, cutting the number of projects in development, the committee said.
It added that privatisation of the Green Investment Bank and a reduction in European Investment Bank (EIB) lending may also have played a part in the fall in clean energy investment.
The committee called for the UK to maintain its relationship with the EIB after Brexit, “which would allow riskier early-stage green infrastructure projects in the UK continued access to development bank finance”.
A sovereign green bond could be issued by the government to set a benchmark for good practice and raise the capital needed to deliver projects.
The report also called for fixed-price contracts and a steadily rising carbon price to help meet the carbon budgets in the 2020s and 2030s.
A spokesperson for the Department for Business, Energy and Industrial Strategy said: “We’re committed to meeting our climate change targets and will have invested £2.5bn on low carbon innovations by 2021.
“We will consider this report carefully and respond in full in due course.”
Environmental Audit Committee chair Mary Creagh said: “Billions of pounds of investment is needed in clean energy, transport, heating and industry to meet our carbon targets.
“But a dramatic fall in investment is threatening the government’s ability to meet legally binding climate change targets.
“The government must urgently plug this policy gap and publish its plan to secure the investment required to meet the UK’s climate change targets.”
Renewable Energy Association head of policy James Court said: “This report perfectly chimes with the reality that our members are feeling.
“There is a real frustration that at a time of renewable costs plummeting and other countries steaming ahead, the UK is going backwards. Government must now move forward quickly by implementing the recommendations of the Green Finance Task Force that reported back in March.”