Cash 'black hole' threatens Scots low-carbon economy
Tuesday, 25 May 2010
Published Date: 25 May 2010
A FINANCIAL black hole is threatening Scotland's transformation to a low carbon economy, the head of Lloyds Banking Group has warned.
• Susan Rice, of Lloyds Banking Group, warned of a huge funding gap. Picture: Neil Hanna
Lady Susan Rice, the group's managing director, told a conference yesterday she estimated £20 billion was needed to fund investments in renewables needed to bring about green schemes such as major wind farms and new marine renewable technology.
This was far higher than the one-off £2bn government funding set for a planned new Green Investment Bank, she said.
"We know what needs to be done," she told the conference at Queen Margaret University, Edinburgh. "The big question is, how do we fund it?"
She said banks could not be expected to shoulder the burden when investments in emerging technologies such as wave power devices were often still risky.
"Banks aren't always best placed to take that risk," she said.
Speaking at "Can the green economy delivery for Scotland", organised by Scotsman Conferences, she added: "Banks have a key role to play in this but not the only role.
"It would be very helpful if people understood that."
And Lady Rice, who is also a non-executive director at energy giant Scottish and Southern Energy, said that neither could major utilities firms be expected to get into much more debt in order to fund new renewables schemes.
"There's a limit to how much more debt these utilities can put on their balance sheets," she said.
However, she acknowledged that the public purse was also tight.
Lady Rice told the conference finite resources were running out due to rapid industrialisation and population growth, and that sustainable development had to go hand in hand with economic recovery.
However, she said she did not have the answers as to how this could happen.
"We have a sense of urgency at the same time as we don't have clear answers," she said.
As a result, new mechanisms could be needed to encourage investment – possibly including a carbon tax.
"The business case is really hard to make because it's cheaper to run a carbon inefficient economy," she said.
"Whether it's a tax on carbon or something else in that sphere it has to be looked at."
Dr Richard Dixon, director of WWF Scotland, also speaking at the conference, agreed money was "the big challenge".
However, he pointed out that last year publicly-owned Royal Bank of Scotland made more than £2bn in profits and bonuses.
He questioned why this profit could not be ploughed into development of renewables, in addition to the £2bn pledged to the Green Investment Bank.
Instead, he accused the bank of investing less in renewables over the past year than the year before, and opening an office in Alberta so it could invest in tar sands oil extraction – the most polluting form of fossil fuel.
He said another big challenge to Scotland's ability to transform to a low carbon economy included competition from overseas.
He pointed out that US president Barack Obama had pledged £103bn for renewables over the next decade.
This meant Scotland must act fast to capitalise on its lead in development of marine renewables.
Jim Mather, energy and enterprise minister, said Scotland had to grasp the challenge to transform to a low carbon economy.
"We are at a new beginning here. We have got an opportunity to move on and anticipate the shift more successfully than other countries and grasp the opportunities."
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