Briefing Paper

Investing in the future: how the UK can replace EU funding for low carbon infrastructure

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If the UK Government's climate targets are to be met at least cost to energy consumers, access to reliable sources of low cost carbon assests is essential.

Brexit calls into question the UK’s access to several EU sources of low cost finance for clean energy infrastructure risking future increases to consumer energy bills. The following brief explores how the UK can replace EU funding for low carbon infrastructure.

Key points

  • UK clean energy investment declined by 56% between 2016 and 2017, with Brexit creating a decisive chilling effect on investment;

  • Loss of access to EU funding mechanisms risks exacerbating this investment hiatus;

  • In the short-term the Government should develop an infrastructure funding package to address the uncertainty created by Brexit and to act as an emergency stimulus in the event of a no-deal Brexit scenario.

  • Concurrently, the Government needs to develop options for addressing the longer-term gap in investment architecture left by EU funding. Existing options under consideration include maintaining access to European Investment Bank (EIB) finance through a new EIB subsidiary for non-EU Member States, or developing a new UK national infrastructure bank;

  • However continued UK access to substantial amounts of EIB capital would be politically challenging for the EU27 to agree to, and a new UK infrastructure bank would likely result in the UK missing its fiscal target for Public Sector Net Debt (PSND) to fall as a percentage of GDP in 2020-21;

  • The UK should assess the potential for establishing a new multilateral infrastructure development bank with other interested countries, to address the shortfall in a way that would support the evolution of infrastructure systems and strengthen alliances, whilst avoiding any impact to the government’s balance sheet.

You can read the full brief, Investing in the future: how the UK can replace EU funding for low carbon infrastructure, here.