The Deputy Prime Minister’s speech on the green economy at the Climate Change Capital in London on 23 May 2011.
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I am delighted to be here to talk about the Coalition Government’s actions on the environment - and in particular on climate change.
The Prime Minister and I have set out our ambition to be ‘the greenest Government ever’. That might sound either grandiloquent, or setting the bar pretty low, depending on your point of view.
But you should be in no doubt of the Coalition’s commitment.
Since coming to office there has been a quiet green revolution in Government. We have:
provided £1 billion for the first commercial-scale carbon capture and storage demonstration, and guaranteed funding for three further projects;
announced reforms to the UK’s electricity market to encourage greater investment into low-carbon electricity plants;
launched the world’s first incentive scheme for renewable heat, which should increase investment in green heat technologies by £7.5bn by 2020;
announced support for 1,000 green apprenticeships to build the skilled workforce we need for the Green Deal programme;
provided £400m of Government support for ultra low emissions vehicles;
announced the biggest rollout of smart meters in the world, starting from 2014, to help control energy use at home and at work;
and set up the Green Economy Council to work with Government on making the transition to a low-carbon economy. I am delighted that Shaun Mays, the CEO of Climate Change Capital, is part of that group.
And in the last fortnight, the Government has made two major announcements on the climate change front.
First, we have set out more detail on our Green Deal. The Green Deal means that householders, businesses and landlords will be able to improve the energy efficiency of their homes and buildings at no up-front cost. Householders could access up to £10,000 investment and repay it through the expected energy bill savings they enjoy as a result.
Second, just last week Chris Huhne announced ambitious, legally binding, targets to reduce the UK’s carbon emissions.
In the fourth carbon budget, the Coalition Government accepted the recommendation of the Climate Change Committee to cut carbon emissions to 50% of 1990 levels by 2025.
No other country in the world has set legally-binding carbon targets in this much detail, this far ahead. By being so clear, and so committed, we can help to stimulate the investment the low carbon sector badly needs. Investors and potential investors in low carbon economic activity - like renewable electricity, electric cars, or home insulation - will have the certainty they need to make long-term investments.
Because we are leading by example, we can make stronger demands of the international community. So we will, for example, continue to argue for an EU target of a 30 per cent cut by 2020.
It also puts the UK at the forefront of the international debate, helping to build momentum toward a legally binding global climate change deal.
Today I am pleased to be able to update you on our plans for a third key initiative - a Green Investment Bank, the world’s first national green development bank.
Before doing that, I want to take a step back and remind ourselves why we are doing all this. For me, there is both an ethical and economic dimension to action on climate change.
We have an obligation to consider the impact of our actions not only on the people close to us today, but on people everywhere tomorrow. Justice must be done between generations, as well as within a particular generation. That is why, in another area of policy, I am working so hard on social mobility, to ensure that the next generation has better chances than the one before.
Tackling climate change, like boosting social mobility, is a long-term challenge. So one of the biggest questions facing politicians today is: how do we get better at tackling long-term problems, rather than taking the easy route and leaving them to future governments?
The liberal philosopher John Rawls insisted that justice requires us to consider the consequences of our actions over ‘at least two generations’. Some North American Indian tribes used to judge the impact of their decisions over seven generations.
We can only succeed on issues like climate change if we lift our chins and look to the horizon, well beyond the next election. A genuine desire to take a long-term view is one of the things that animates this Government.
My generation - and the one before us - got it wrong. We have run up massive debts and damaged the planet along the way. Now we have to do the hard work to ensure that future generations can thrive, without being burdened by the dead weight of our debt or faced with the consequences of our failures to address climate change.
But as well as the ethical call to action, there is a strong economic imperative too. There is a huge, growing market for low carbon and environmental goods and services. This market was worth £3.2 trillion globally in 2008/09, and is forecast to continue to show strong growth. The UK green sector is the sixth largest in the world - and a vital part of our future national prosperity. The offshore wind sector alone could provide up to 66,000 UK jobs by 2020, according to the Carbon Trust.
Earlier this month, Vestas secured 70 hectares of land at the port of Sheerness in Kent with the potential to invest in a wind turbine manufacturing and installation facility, and create up to 2,000 jobs. Companies like Siemens, GE and Mitsubishi are all keen to do business in renewable and offshore wind in the UK.
But if we want to stay competitive we can’t afford to let up. In 2009, China, the world’s biggest energy consumer, poured $34 billion into its low-carbon economy. The UK currently generates the most offshore wind power in the world - but China is set to overtake us. The Chinese lay 16,000 kilometres of high-speed rail track in the time it takes us to go from London to Birmingham. They have the highest installed hydro capacity in the world; the most solar water heaters in the world; six of the biggest renewable energy companies in the world. China knows what’s coming - now it’s up to us to catch up.
And quickly, if we are to meet our energy needs. Even if green concerns were not uppermost in our mind, there is no escaping the hard fact that a quarter of the UK’s current generating capacity will need replacing by 2020.
So, investing in a greener future is an ambition that combines an ethical duty and an economic opportunity.
This is an important moment for the politics of climate change. The green cause has spent decades outside government, banging on the door.
Of course, for many green campaigners this will not be enough. They will quite rightly be pushing us to go further, faster. I understand that it is the job of green campaigners to keep pushing the Government. And I welcome that pressure.
But it is important not to remain trapped in the past, and get stuck in the oppositionist language that has - often quite rightly - characterised the environmental lobby in days gone by. I hope that our critics will recognise that while of course we can do more, the action we are taking amounts to a whole new impetus on climate change: a green gear-change by the Government.
Let me now say more about the Green Investment Bank.
There are capital funds that want to invest in the green economy, and firms bursting to grow but desperate for funds. The role of the Green Investment Bank is to close the gap between the two. Smart investment from the Bank will catalyse much greater investment from the capital markets.
By providing the finance for low carbon infrastructure, the bank will also help to lay the foundations for our long term growth.
It will be one of the tools we use to rebalance our economy, creating opportunities across the country and in a range of different industries - manufacturing, engineering, energy. Unlike most of our banks, the benefits of this one will be largely felt outside of London, and in sectors other than financial services.
The establishment of the Bank represents a world first. Most countries have a development bank. But the UK will be the first country in the world to have a national bank dedicated to the green economy.
The Government is determined to get this new bank right, but equally to make progress quickly, avoiding unnecessary delay. Vince Cable in particular has devoted a huge amount of time and energy to getting us where we are today, and I know he will continue to do so as we move forward.
The key questions about the bank are: How will it be set up? How much money will it have? When will the money start to flow? When will it be independent? And when will it start to borrow itself? I will answer all those questions today.
First, the Government will bring forward legislation to ensure both the operational independence and enduring nature of the Bank. We are determined this organisation will be part of the institutional architecture of this country. Legislation will ensure a long shelf-life.
Second, the Government has guaranteed £3 billion for the initial capitalisation of the Bank. As we made clear in the Budget, we hope to generate these funds through asset sales, but we are also clear that the money does not depend on those sales. It has been underwritten by the Treasury, and it will be made available.
Third, I can announce today that investments will be able to be made from April 2012, just eleven months from now. Possible early priorities for the Bank are offshore wind, waste, and non-domestic energy efficiency. We are also looking at the potential for using the Bank to help deliver the first stages of the Green Deal. In the initial period, investment decisions will be made under interim governance arrangements, which Vince Cable will set out in more detail shortly.
Fourth, the Bank will have full operational independence under the leadership of a new board as soon as state aid clearance has been approved, which will take place as soon as possible. The bank will then be able to undertake a wide range of transactions, including equity, debt and risk mitigation products. The initial £3 billion capital by 2014/15 should enable the bank to catalyse an additional £15 billion of investment in green infrastructure.
And finally, the Bank will have borrowing powers from April 2015, on the basis - as set out in the Budget - that the Government target for debt to be falling as a percentage of GDP has been met.
So the Green Investment Bank will go from an idea to a flow of investment in under two years, and quickly grow into an independent investing, and then borrowing, institution. A real legacy of the Coalition Government’s green commitment.
The Green Investment Bank is only part, though a vital one, of the Government’s action to seize the opportunities of a green economy, and meet the obligations of this generation to the ones that follow.
And Government action is, of course, just part of the broader revolution that has to take place in the way we live, work and make money.
Those of you in the investment community have perhaps had some reason to question whether investing in some green companies offered the right balance of risk against reward, even when there were many sectors, such as renewable energy production, crying out for capital.
I understand why. But I hope you see that we are responding to your concerns.
You told us you wanted greater clarity and certainty from Government: the carbon budgets provide it.
You said increased consumer demand is essential: the green deal and promotion of cleaner cars will help galvanise it.
You called for an institution to help prime the pump in parts of the green economy, bridging the gap between investor and innovator: the Green Investment Bank will do that.
So we are listening. But the Government cannot create a green economy by itself. Only business and investors can do that. We need you to embrace these changes and seize the opportunities they present.
This is something that we need to get right, for today but even more so for the next generation, and the one after that. So let’s do it together. And be able - all of us - to look our children and grandchildren in the eye.