The Committee on Climate Change (CCC) today published a report by Frontier (Europe) on the cost of capital for household low-carbon investments such as electric vehicles and heat pumps. The report assesses current financial products available to households, identifies barriers to financing low-carbon investments, and sets out policies that could reduce the cost of capital for these investments.
Although some financial products that could be used for low-carbon investments have low interest rates, their availability is limited to certain groups of consumers. The Green Deal (a policy introduced by the UK government in 2013) increases the availability of finance to consumers without collateral by allowing loans to be secured through energy bills. However, high interest rates on Green Deal loans may be reducing take-up. The report shows that there is potential for Green Deal interest rates to fall by around two percentage points if lending is increased. This could be encouraged by a time-limited government guarantee of Green Deal Finance Company (GDFC) funding and by amending the ‘Golden Rule’ (a requirement that expected financial savings must be equal to or greater than loan repayments). The report also finds that measures to understand and transfer risks around future technology performance could help reduce finance costs.
Frontier (Europe) regularly advises public and private sector organisations on low-carbon policy and household finance.
For more information, please contact Andrew Leicester at email@example.com or call +44 (0) 20 7031 7000.