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Harrabin's Notes: Funding energy reform

24 March 10 20:35 GMT

In his regular column, BBC environment analyst Roger Harrabin says that energy reform is meeting economics across the UK's political parties.

GREEN BANK EMERGES FROM THE RED BOX

The Chancellor has announced plans for a "green investment bank" to finance clean energy projects in the UK.

The bank would be kick-started with £1bn from the sale of assets like the Channel Tunnel, combined with £1bn of private cash.

Mr Darling also promised a full review of the privatised energy market to make sure low-carbon energy projects get delivered.

Environmentalists welcomed both announcements but said the bank fund is too small.

They said it would take too long to raise the capital from asset sales, and complained that the sum would need to be rapidly increased in the next Parliament if the UK was to capitalise on green jobs in industries like offshore wind.

Peter Young, chairman of the Aldersgate Group, a coalition of businesses and green groups said: "The new green investment bank is rightly at the heart of the (UK) Government's growth and jobs strategy. But the total low carbon investment needed by 2020 is at least £250bn."

The government's plan is similar to schemes already launched by the Conservatives and Liberal Democrats, which indicates that this idea has at last come of age after years of lobbying.

The Conservatives are studying Germany's KfW bank - a development bank set up after the war - which invested nearly 20bn euros in environmental projects last year.

All the major parties are now also focused on finding new ways to allow people to get long-term pay-as-you-save loans to insulate their homes and install small-scale renewable power. Plans in this area have been slow to come to fruition because so many different agencies are involved.

Campaign group WWF praised today's green bank decision. But the World Development Movement said it did not go nearly far enough. A spokesman said the government should instruct the taxpayer-owned RBS to use public money for the kinds of projects it wants to fund under a green investment bank, rather than investing in companies involved in polluting industries.

'Inevitable'

There was a broad welcome for the Chancellor's review of the energy market. Civil servants have been convinced since Mrs Thatcher's time that the market would deliver on two key objectives of low energy prices and secure supply.

But the task for the markets was complicated by the additional requirement for a third objective: low-carbon energy. Experts have complained for several years that the current framework is not capable of delivering all three.

The government insists that energy supplies are secure in the near term but has concluded that the carbon price will not deliver sufficient clean energy in the long term.

It wants to remove some of the barriers that are shutting clean energy innovations out of the market and today's statement lays out three possible options to guarantee funds: by feed-in tariffs for large generators, by a competitive tender process for low-carbon generation, or by a regulator agreeing an appropriate return on clean energy generated.

Energy policy is so complex and arcane that it generates few of the media headlines that so often drive policy. But politicians have received enormous pressure from green groups and industry alike on this agenda. And whichever party wins the coming election, energy reform looks inevitable.

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