A sign directing towards electric vehicle charging points is seen in a car park in Manchester, Britain, September 8, 2023. REUTERS/Phil Noble/File Photo Acquire Licensing Rights
LONDON, Oct 20 (Reuters) – Britain needs to better track funds going into green investments to assess how much is needed from the private sector and should consider targeted tax changes to encourage sustainable projects, banking industry body UK Finance said.
In its first major position paper on the topic, UK Finance also told the country’s political parties that more clarity is needed on the path to a net zero economy to help financial markets muster the huge amounts of capital needed.
The private sector is being asked to play a central role in funding the infrastructure and other investments needed to curb carbon emissions, but needs greater policy support, the group added.
By contrast, the year-old U.S. Inflation Reduction Act provides $391 billion in tax credits to help consumers buy electric vehicles and companies produce renewable energy, attracting firms and their money from Europe.
In response, the European Union has adapted its state aid rules, and proposed a Net-Zero Industry Act in March to boost manufacturing in green tech.
“The UK risks seeing its efforts to reach net zero by 2050 made more difficult as global competition sees funding going to jurisdictions offering advantageous subsidies and public funding mechanisms,” UK Finance said in a paper to government and other political parties seen by Reuters.
“Policymakers should consider our pragmatic recommendations, which would enable financial services firms to allocate capital where it is needed to transform and decarbonise the economy,” added Ian Bhullar, principal of sustainability and strategic policy at UK Finance.
The call comes a month after the government delayed a plan to ban sales of new petrol cars and softened targets around household heating and insulation.
Britain, whose economy leaves it with little room to slash taxes, is relying on private sources of cash to fund green investments, such as from direct contribution pension schemes, and from insurers following an easing of their capital rules.
In April, the government estimated it would need an additional 50 billion pounds-60 billion pounds ($61 billion-$73 billion) of capital investment a year through the late 2020s and 2030s to meet its net zero targets.
UK Finance, which represents around 300 firms, set out a series of recommendations to marshal pools of capital which are currently “underused” due to “policy gaps”.
Among them was a call to consider “targeted” changes to taxes to incentivise sustainable behaviour; scale up electricity grid connections; and streamline the planning process for infrastructure.
Such relatively speedy fixes would bring clarity to policy and recognise a “tightening political timetable”, a reference to an anticipated general election next year, which the opposition Labour Party is tipped in the polls to win.
The government’s “roadmaps” on transition to net zero have yet to spell out how it will incentivise the private sector to invest the needed cash, and therefore better tracking of the “investment gap” was also needed, UK Finance said.
An independent body could be asked to monitor and provide updates on public and private capital flows, it added.
($1 = 0.8214 pounds)
Reporting by Huw Jones and Simon Jessop; Editing by Sharon Singleton
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