George Osborne is under mounting pressure to dramatically cut Britain’s reliance on gas after a coalition of the world’s biggest investment fund managers made an unprecedented call on the UK government to step up its commitment to low carbon energy.
The alliance of 200 investment institutions includes Scottish Widows, Aviva and HSBC and controls $21 trillion (£13trn) of assets worldwide and its lobbying of the UK government is part of a broader campaign to persuade the world’s biggest economies to escalate their actions against climate change.
The alliance’s call, which extends to countries such as the US, China and India, represents by far the biggest political intervention staged by financial investors over climate change and underlines just how concerned they have become about the damage it could inflict on the global economy.
“Hurricane Sandy, which caused more than $50bn (£31bn) in economic losses, is typical of what we can expect if no action is taken and warming trends continue,” said Chris Davis, a member of the alliance who advises institutions controlling $11trillion (£6.9 trn) on climate change issues.
“Investors are rightly concerned about the short and long-term economic risks of climate change and understand that ambitious climate and clean energy policies are urgently needed to avoid catastrophic impact,” Mr Davis added.
In a letter to the governments, ahead of the international climate negotiations that kick off in Doha on Monday, the alliance urges the world’s largest economies to engage in “a new dialogue on climate change policy”. In particular, it calls for “clear, consistent and predictable policies that encourage low carbon investment”.
This will come as an embarrassment to the Chancellor, George Osborne, who is fighting to scrap a proposal by the Liberal Democrat Energy Secretary Ed Davey to include in the forthcoming Energy Bill a legally binding target to make electricity generation almost entirely green by 2030. Instead, Mr Osborne is proposing to champion the use of gas in the bill, which is a more environmentally friendly way of generating energy than coal and oil, but produces far more emissions than nuclear, wind and solar power.
In a separate embarrassment for the Chancellor, the Environmental Audit Committee of MPs will cast doubt on Mr Osborne's reliance on gas today, arguing that "a Treasury-led 'dash for gas' could make the UK's carbon targets under the Climate Change Act unachievable."
Mr Osborne's commitment to fighting climate change has been increasingly questioned in recent weeks. A secret recording revealed in The Independent last week showed Mr Osborne's father-in-law, Lord Howell, who also advises the Government on energy, claiming that the Chancellor is hostile to building more onshore wind-turbines.
Britain has signed up to legally binding targets to cut emissions by 34 per cent by 2020 and by 80 per cent by 2050, compared to 1990 levels.
Joan Walley, the Labour MP for Stoke-on-Trent North who leads the committee, said: "The Government needs to reassure investors by setting a clear target in the Energy Bill to clean up the power sector by 2030. The Treasury must end the uncertainty on energy policy and give investors the confidence to seize the enormous opportunities presented by new clean technologies." Britain's energy infrastructure needs an estimated £200bn worth of investment by 2020 – and £330bn by 2030 – as ageing coal and oil plants prepare to close over the next few years. Much of the investment is needed to build wind, nuclear, solar and other low-carbon power plants.
Potential investors will not commit cash to infrastructure projects until they know new legislation on key issues such as subsidies.
The Bill has already been postponed several times and last week was pushed back again as disagreements persisted between Mr Osborne and Mr Davey.