Capitalists scrutinize prospective energy shift chances following Labour's election victory
The newly elected Labour government has announced the launch of a National Wealth Fund Taskforce, with representatives from large pension funds and insurers advising on the initiative. This move is part of a broader strategy to drive the UK's transition to a net-zero carbon economy.
One of the key tasks for the new government will be the establishment of an Office for Net Zero Delivery. This office will coordinate departments to ensure delivery against the energy transition plan. The Labour party has cut its green spending pledges in half from £28bn per annum to £15bn, indicating a focus on efficiency and strategic investment.
Climate-conscious investors have expressed optimism about the UK's shift to the political centre, believing it could significantly impact the energy transition. David Wrigley, the head of the climate and nature advisory and investment firm Pollination, and Bruno Gardner, head of Climate Change and Nature at Phoenix Group, have both expressed a broad willingness among investors to back the transition.
Phoenix Group, one of the UK's largest life insurers, has recommended three key policy interventions to the new government. These include the creation of an investor advisory body to work with the Department of Energy Security and Net Zero (DESNZ) to build the skills and capacity in local authorities needed to build an investible deal pipeline of climate solutions. The group also recommends endorsing the Local Area Energy Plan Guidance as the national framework for place-based whole energy system decarbonisation planning.
The Labour government plans to fund part of the expansion of off- and onshore wind capacity through continued windfall taxes on profits from oil and gas companies. This strategy, along with the intention to derive much of the capital needed for the energy transition from investors rather than taking on additional borrowing, could help the government manage the challenge posed by the rise in borrowing costs, as yields on long-dated UK government debt exceed 4%.
One of Miliband's top priorities is to reverse the ban on onshore wind developments. The Labour government plans to double onshore wind, triple solar power, and quadruple offshore wind capacity by the end of the decade. This ambitious plan could see the UK leading the way in renewable energy production.
The new government is expected to be seen as hitting the ground running, with a new cabinet and ministers to be appointed over the weekend, and the first King's Speech scheduled for 17th July. However, it is unclear how Labour's plan for a publicly owned clean energy company - Great British Energy - and the National Wealth Fund would interact with existing institutions such as the UK Infrastructure Bank (UKIB).
Outgoing prime minister Rishi Sunak has staged a series of U-turns, including the opening of new oil and gas licences in the North Sea. The incoming Labour government, led by Ed Miliband as the energy secretary, has promised to fill the vacuum of climate leadership on the world stage. Patrick Suckling, managing director at Pollination, believes the election results could trigger significant progress on the road to net zero. Phoenix Group stands ready to play its part in accelerating the net zero transition across the UK.
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