Big Sticks, Big Solutions and the Unmentionable Funding Proposal
Now don’t get me wrong – I am a big fan of the proposals launched this week by the Green Investment Bank (GIB) commission. Let’s celebrate a report that explicitly recognises market failures, and applies some big brains to how to encourage investment in useful low-carbon infrastructure. Let’s hope that George Osborne, having set up the commission, acts quickly to create the GIB.
So why mention big sticks? In launching the report to a packed house at the Green Alliance summer reception, commission Chairman Bob Wigley was refreshingly blunt. Surveying the dismal impact of previous policies to encourage domestic households into energy efficiency and renewables, he observed that the old regime was one of “grants and advice”. To really get anywhere what we need is a regime of “Sticks, grants, advice and loans”. The GIB can do something about the last three; the first requires political guts. Penalising house owners for not being green enough? Go, Bob, go. However, Mr Wigley was understandably diplomatic when asked his opinion of the fortitude of the government’s guts.
And what of big solutions – isn’t that what we need? Well up to a point, yes. There will be many large scale infrastructure projects to fund. But the commission identifies that most investment funds are too big to invest in small scale community energy projects, of which we need tens of thousands. The solution it seems is to aggregate the small morsels of community energy into a suitably large and appetising dish for the institutional fund managers to feast on.
Instead, how about making it easier for people to invest directly in their local energy co-operative and not give the cash to the giant institutional funds in the first place? Oh no, hold on – how would the City earn its cut? Best not go down that route.
And finally, what about the Unmentionable Funding Proposal? The commission says we need to find £550bn over 10 years to invest in the low-carbon transition. A questioner from the floor pointed out that the Bank of England had pumped £200bn into the economy in as many months to save the financial system. This has clearly not caused a Zimbabwe style monetary collapse, despite the orthodox horror of ‘printing money’, but now it seems that it is rather impolite to mention it. When there is spare productive capacity in the economy, why not use ‘green quantitative easing’ to kick start the GIB? Bob was characteristically blunt in his evasiveness: “I’m afraid as a former member of the Court of the Bank of England I’m going to dodge that question”.