Last week the Chancellor of the Exchequer, Rishi Sunak announced the new UK budget. Despite the clear emphasis on the COVID crisis and economic recovery, the budget contained several points of interest for the green energy, technology and finance space and received some warm words from industry.
The most significant green elements of the budget seem to harness Britain’s talent for financial innovation and capture the zeitgeist of the times – the need for green innovation in general. Three announcements in particular capture this sentiment:
“Located in Leeds, the bank will invest across the UK in public and private projects to finance the green industrial revolution and starting this spring with an initial capitalisation of £12bn and we expect it to support at least £40bn in total investment in infrastructure.” Rishi Sunak
The announcement confirms the plans revealed last November alongside publication of the National Infrastructure Strategy. The bank is intended to compliment the Infrastructure and Projects Authority and the National Infrastructure Commission, this should tie into the wider “levelling up” agenda for the UK. Excitingly it is intended to play a role to help the transition of traditional brown industries into green industries.
This summer the UK will launch the world’s first sovereign green bonds with more details due to be released in June. The bonds are expected to help finance projects to tackle climate change, fund infrastructure investment and create environmentally-friendly jobs across the country. Given the massive need for innovation at scale to aid the green transformation, this is a very timely offering from the Government.
“In a world first, we’re launching a new green savings bond which will give people across the UK the opportunity to contribute to the collective effort to tackle climate change,” Rishi Sunak
The government will offer a green retail savings product through the Treasury-backed National Savings & Investments in the summer of 2021, the aim is to help individual savers contribute toward fighting climate change. This is great way of helping regular people feel they are contributing to the fight against climate change at a time when billionaires are grabbing all the headlines! It does seem like retail banking and savings is lagging a long way behind other markets in offering green products to consumers, hopefully this marks a change for the sector.
The budget went beyond financial innovation for the green space and in particular pledged support for two emerging sectors, floating wind and green hydrogen, with the following announcements:
Both seem highly relevant to the UK and may ally itself with the countries significant offshore wind resources and represent part of the future direction of the green energy space.
There is a lot of positivity around the new infrastructure bank and green bonds. These are a serious effort to put money behind decarbonisation. This approach should also help fund more green jobs in the UK.
Some will be critical that following this budget is that the freeze on fuel duty remains in place and that the government is also not altering the current carbon pricing. Many campaigners believe that a more aggressive approach on both these points would lead to a faster decarbonisation of the UK economy. However, given the balancing act required between decarbonisation and economic recovery this may have been very hard to achieve this time round. The pressure will be on green innovation to reduce the green premium versus fossil fuels in all aspects of the economy instead.