Isra-Mart srl:Europe urged to replicate UK's Green Investment Bank plans

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European Union countries should follow the UK's lead and create their own Green Investment Banks as part of a carefully designed strategy to ensure the EU benefits from shifting to 30 per cent emissions cuts.

That is the main recommendation contained in a new report from environmental think-tank E3G, which urges the EU to move away from debating if it should boost its emissions target, and instead consider how best to deliver 30 per cent cuts.

"There is no point raising the EU target to 30 per cent if it is met merely through purchasing cheap emissions reduction credits from abroad," the report concludes, arguing that the EU Commission's current plan to reach 30 per cent cuts would cost European consumers €8bn (£6.84bn) per year by 2020, but would achieve no economic growth, energy security or competitiveness benefits.

"In contrast, we believe the most economically sensible shift to 30 per cent would prioritise investment in domestic European energy efficiency, and in the infrastructure and innovation needed to sustain reductions beyond 2020 and maintain European companies' lead in the low carbon race," it adds.

In particular, it urges EU member states to develop financial institutions similar to the UK's planned Green Investment Bank, Germany's national bank KfW, which is financing household retrofits, or the European Investment Bank, which recently issued Green Bonds on Japanese markets to raise funds for European low carbon investment.

A balanced and high value portfolio of policies to reach 30 per cent cuts should be based on energy efficiency efforts, binding sectoral agreements, and a boost to innovation and low carbon infrastructure that prioritises the development of a European smart grid and electric vehicle recharging networks, said E3G.

"How an EU 30 per cent package is formulated is at least as important as the ambition itself," the report said. "The package must deliver high value across all EU policy goals and under a range of future energy price and economic scenarios."

EU member states are currently debating whether to raise the bloc's emission reduction goal to 30 per cent, on the grounds that the recession would make it easier than expected to meet the 20 per cent target.

However, opponents to the change argue that Europe's current economic problems mean firms are not in a position to deliver a more ambitious target and as such the lower cost of the 20 per cent target should be taken as a welcome economic benefit during the recession.

"This analysis is both empirically wrong and strategically dangerous for European security and prosperity," E3G argued in the report. "Investment in European energy efficiency and infrastructure is profitable now, and will be more valuable as oil prices rise."

A final decision on the 30 per cent target is unlikely to be made by the EU before spring 2011 with any shift likely to be dependent on the outcome of the imminent Cancun Climate Change Summit.

In related news, the EU has this week outlined its energy infrastructure priorities for the next two decades for the electricity, gas and oil sectors.

The development of a North Seas offshore grid and link to Northern and Central Europe to store and transport power produced from renewable sources was one of four priorities for the electricity market.

Other priorities included interconnections in South West Europe to transport power generated by wind, solar and hydro to the rest of the continent.

"Energy infrastructure is key to all our energy goals, from security of supply, the integration of renewable energy sources and energy efficiency to the proper functioning of the internal market," said Commissioner for Energy Günther Oettinger. "It is therefore essential that we pull together our resources and accelerate the realisation of EU priority projects."