MPs have warned that the UK faces a ‘carbon bubble’ through overvalued oil, coal and gas companies which could threaten the financial stability of the country.
Shares in fossil fuel energy firms risk being too high if carbon reduction plans leave their reserves unusable, members of Westminster’s Environmental Audit Committee said.
Now they want the Bank of England to include consultation with climate change experts in their economic measures to prevent carbon exposure destabilising the economy.
“The UK government and Bank of England must not be complacent about the risks of carbon exposure in the world economy,” warned committee chair Joan Walley.
“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.
“The transition to a low carbon economy will be much more painful if we wait until there is a climate crisis before recognising that more than half of the world’s fossil fuel reserves will have to remain in the ground.”
The warning came as the committee launched its 12th Green Finance report, which claimed the UK risked a green finance gap over infrastructure investment.
The report warns that investment in infrastructure was currently less than half the £200billion needed to deliver emission reduction targets by 2020.
It has recommended awarding borrowing powers for the Green Investment Bank to allow it to increase potential support for low-carbon projects across the country.
“Allowing the Green Investment Bank to borrow would boost green investment and create jobs, and should not be delayed even if public debt is flat rather than falling in 2015-16,” said Mrs Whalley.
“In Germany their green investment bank has driven a massive home energy efficiency programme by providing loans at lower than market rates through high street banks – and writing off some of the loan if refurbishment makes the house ‘near zero’ carbon homes standard.
“The Government could help insulate consumers against rising energy bills and support jobs in the home improvement industry by reducing the interest rate on Green Deal loans in line with the more attractive Help to Buy scheme.”
The cross party committee’s findings were welcomed by green energy industry body RenewableUK, who said it sounded a clarion call to Chancellor George Osborne ahead of this month’s Budget.
“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,” said chief executive Maria McCaffery.
“We welcome the calls for a joined-up stable policy framework which looks beyond 2020, including a carbon intensity target, to ensure we can develop these very necessary technologies into the next decade.
“A long-term view isn’t just necessary for the environment, it will give the supply chain the certainty to invest and create tens of thousands of jobs.”
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