* 200 bln stg low-carbon investment needed over next 10 yrs
* Only 8-10 bln stg/yr currently being spent
* Stock markets over-value fossil fuel firms
(Adds UK government comment in paras 7 and 8)
By Nina Chestney
LONDON, March 6 Britain's investment in
low-carbon energy is running at less than half of the 200
billion pounds ($334.6 billion) needed over the next decade to
meet emissions reduction targets, British lawmakers said in a
report on Thursday.
The European Union as a whole has to cut emissions by 20
percent from 1990 levels by 2020 under the Kyoto Protocol
international climate pact.
Britain set up the Green Investment Bank (GIB) in 2012 with
3.8 billion pounds ($6.3 billion) of initial capital to help
spur investments in renewable energy and energy efficiency and
stipulated it could turn to the debt markets for funding next
year depending on the government debt burden.
GIB has estimated that at least 200 billion pounds must be
invested in low-carbon infrastructure over the next 10 years,
including around 110 billion to replace old nuclear and coal
power plants and upgrade the grid.
Currently, around 8-10 billion pounds a year is being spent
on low-carbon investments, which would reach a maximum of 100
billion within a decade, creating a "significant investment
gap", Parliament's green watchdog, the Environmental Audit
Committee, said in the report.
"The current level of green investment is running at less
than half of the level needed to deliver the decarbonisation
implicit in national and international targets. A significant
scale-up is needed," the committee said.
The Department of Energy and Climate Change expects
investment in renewable energy generation projects to total
around 40 billion pounds by 2020, which will help support up to
110 billion pounds of investment across the electricity sector,
a spokeswoman said.
"We have set the conditions to attract investment into our
energy sector which will keep the lights on for years to come,"
Following the 2008 global financial crisis, banks have been
less enthusiastic about providing long-term debt financing, on
which many renewable energy projects depend.
Stricter banking regulations have also lowered the desire of
some financial institutions to hold long-term assets and can
mean they charge more for their available capital.
Uncertainty among investors about some government policies
has also hindered financing, the committee said.
The government has embarked on a sweeping reform of its
electricity market, introducing incentives for renewables
investment through new mechanisms.
To give greater certainty, the government should reveal its
renewables incentives levels to 2030 and confirm that the GIB
will have the power to borrow from 2015-2016, the committee
The report also said stock markets could be over-valuing
companies that use and produce fossil fuels, which has the
potential to threaten financial stability in Britain.
As much as 60 to 80 percent of coal, oil and gas reserves of
publicly listed firms should not be burnt if the world wants to
limit global warming, according to a study last year by the
Grantham Research Institute and Carbon Tracker.
"The UK government and Bank of England must not be
complacent about the risks of carbon exposure in the world
economy," said Joan Walley, chair of the Environmental Audit
"Financial stability could be threatened if shares in fossil
fuel companies turn out to be over-valued because the bulk of
their oil, coal and gas reserves cannot be burnt without further
destabilising the climate," she added.
($1 = 0.5977 British pounds)
(Editing by Keiron Henderson and Jane Baird)