UPDATE 1-UK green bank to start lending from April 2012
* Early funding to focus on offshore wind, waste, efficiency
* Green bank to borrow money from April 2015
* Funds sceptical GIB projects can meet 2020 targets
(Adds details, background, fund reaction)
LONDON, May 23 (Reuters) - Britain's Green Investment Bank (GIB) will start lending money to fund low-carbon energy projects from April 2012, a year earlier than initially planned, Deputy Prime Minister Nick Clegg said. "Possible early priorities for the bank are offshore wind, waste, and non-domestic energy efficiency," Clegg said in a speech to the Climate Change Capital advisory group in London on Monday. The bank is also set to borrow money from April 2015 onwards, provided that national debt starts falling as a percentage of Britain's Gross Domestic Product (GDP).
Britain needs to invest around 200 billion pounds ($324 billion) by 2020 in greener technologies so it can meet targets to reduce greenhouse gas emissions by 34 percent below 1990 levels and generate 15 percent of energy from renewables.
The UK government has guaranteed 3 billion pounds to fund the startup of the GIB, the world's first national bank dedicated to green project financing, which is seen as a funding tool for the transition to a low-carbon economy. [ID:nLDE72M1O0]
"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," Clegg said.
The bank will initially make funding decisions under interim arrangements that Business Secretary Vince Cable is expected to announce in more detail shortly.
The first stages of the government's Green Deal, a programme to improve domestic energy efficiency by helping the funding of items such as loft insulation, may also be financed using GIB money.
"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," Clegg urged investors.
The government estimates the initial 3 billion pounds of investment may raise an additional 15 billion pounds in capital.
INVESTMENT FUNDS QUESTION TIMING
Some fund managers say the GIB is more about the long-term and in particular doesn't help projects in financial limbo awaiting details in the coming weeks of UK electricity market reform.
"If there's no borrowing until 2015 then it implies the GIB as a source of a significant amount of capital goes on the backburner as a medium-term prospect," said Ian Simm, chief executive of Impax Asset Management, which has 2.4 billion pounds under management in environmental markets.
"Meanwhile the issues around electricity market reform and what happens to the renewables obligation in particular are very current. There's already a significant slowdown in UK projects getting financed until everyone hears back on what the government intends on that."
Next to proposals for the GIB, Britain is making plans to reform its electricity market to encourage more investment in low-carbon forms of power, such as wind and nuclear energy.
Proposals include changing preferential support tariffs, including the renewables obligation mechanism, for types of power generation which emit little or no carbon.
The plans are set to be presented to parliament before the summer recess, which starts in July. (Reporting by Karolin Schaps, editing by Anthony Barker)
- Islamic State executes soldiers, takes hostages at Syria base: social media
- WHO shuts Sierra Leone lab after worker infected with Ebola
- Gaza truce holding but Israel's Netanyahu under fire at home |
- Talks optimism fades as Ukraine says Russia makes new incursion |
- 'Men in green' raise suspicions of east Ukrainian villagers