UK Faces Threat of Carbon Bubble

The cross-party Environmental Audit Committee has warned of a “carbon bubble” that threatens the UK’s financial stability because fossil fuel companies are being over-valued.The over-valuation results from the need to meet climate change targets that require between 60% and 80% of coal, oil and gas reserves of publicly-listed companies to stay in the ground.The warning came in the committee’s 12th Green Finance report, which added that companies face being stuck with stranded assets.

The EAC also said that a large investment gap exists in green finance, with investments currently running at less than half of the £200bn needed in energy infrastructure by 2020.“More must be done to secure the required levels of green investment in areas such as low-carbon energy generation, energy efficiency, and transport,” the report said.It added that the 2014 Budget must allow the Green Investment Bank to borrow in 2015-16 to “significantly enlarge the scale of its work”.The UK government should also “play a central role in concerted international efforts to address climate change and ensure that markets price-in the cost of carbon” and back binding renewables targets in the EU.

The report also highlighted the importance of the carbon price floor to low-carbon investment and urged the government to reiterate its commitment to the planned escalation of the floor price.RenewableUK chief executive of RenewableUK Maria McCaffery (pictured)said: “This report should act as a clarion call to the government to ensure that we’re not backing the wrong horse, and the UK should be committing to further investment in low carbon technologies.

“This cross-party grouping of MPs has come to a very clear conclusion that relying on fossil fuels is not just bad for the environment, it could be damaging to financial stability.“As the Chancellor puts the finishing touches to his Budget speech, I hope he will heed the calls from the committee to reiterate its commitment to the planned escalation of the carbon price floor.“Cancelling this escalation will not just make it harder for individual low carbon projects to come forward but spread further policy uncertainty in the sector – something this report shows has already been highly damaging.”

Source : reNews