Agenda item

GREEN FINANCE STRATEGY

This report seeks Cabinet approval for the approach set out in the Green Finance Strategy which builds on and develops the Initial Finance Strategy, produced in 2021.

 

(The decisions on this item can be called-in by the Communities, Environment and Highways Select Committee)

 

Decision:

RESOLVED:

 

1.    That Cabinet agrees the updated approach and investment principles, that support the delivery of the Council’s 2030 and 2050 net zero targets, as set out in the Green Finance Strategy.

2.    That Cabinet agrees the recommended approach option for the delivery of the Council’s 2030 net zero target, including exploring and developing additional finance mechanisms to offset potential future costs.

Reasons for Decisions:

  • In the eighteen months since the Climate Change Delivery Plan and the Initial Finance Strategy were published in November 2021, rapidly changing and increasing costs along with learnings from the delivery of capital decarbonisation schemes on the Council’s estate, has meant that the Finance Strategy requires updating. This paper, and the accompanying Green Finance Strategy, sets out the updated approach for approval.

 

  • Officers in Greener Futures and Finance with support from Land and Property have been further developing the 2030 finance model, which was originally produced by consultants, in order to gain a more robust understanding of the capital costs required to achieve the 2030 target, as well as the potential to offset these costs through energy savings and income generation. Given the increase in costs, four future approach options have been developed. The recommendation to Cabinet is to adopt the 4th option.

 

  • It should be noted that all options will require the Council to invest money up front in advance of income being generated. Net zero is a significant cost to the council with all options, but the approach is to off set this and aim for cost neutrality over the longer term by generating income through renewables and reducing costs of energy.

 

  1. The Council abandons the 2030 net zero target.
  2. The Council only installs decarbonisation measures which have a strong return on investment (such as solar) to reduce capex, accepting that this will increase the cost to the Council for carbon offsets from 2030 onwards. The minimum projected offset costs for this option (to 2050) amount to at least £14m, calculated at a rate of £95t/CO2, however by 2030 this rate may be much higher. This option is therefore not recommended as the financial risk is considered too great and the efficiencies resulting from investment in the more costly decarbonisation measures would not be achieved.
  3. The Council builds all the projected increased costs of achieving the 2030 target into the Medium Term Financial Plan, and income is seen as a bonus. This is the approach taken by other Local Authorities however by not pursuing and prioritising investment in renewables, which would generate income, this would lead to a budget pressure.
  4. The Council continues with the current approach to achieving the 2030 target, which includes being open and transparent with costings and balancing the delivery of high cost and quick pay back measures. This approach includes the development of finance income generation mechanisms, mainly renewables, with the purpose of generating a return on investment to offset any future potential cost increases to the Council, or to be used for other Greener Futures priorities.

 

(The decisions on this item can be called -in by the Communities, Environment and Highways Select Committee)

 

 

 

Minutes:

The Cabinet Member for Environment explained that the report set out the updated approach and investment principles that support the delivery of the Council’s 2030 and 2050 net zero targets, as set out in the Green Finance Strategy. Officers in Greener Futures and Finance with support from Land and Property had been further developing the 2030 finance model, which was originally produced by consultants, in order to gain a more robust understanding of the capital costs required to achieve the 2030 target. Given the increase in costs, four future approach options had been developed. Work around achieving net zero carbon targets would constantly be reviewed as new policies and targets are introduced. With regards to the expansion of the ULEZ, the Leader stated that the council supported improving air quality but did not support the negative impacts the charge would have upon Surrey residents and businesses.

 

RESOLVED:

 

1.    That Cabinet agrees the updated approach and investment principles, that support the delivery of the Council’s 2030 and 2050 net zero targets, as set out in the Green Finance Strategy.

2.    That Cabinet agrees the recommended approach option for the delivery of the Council’s 2030 net zero target, including exploring and developing additional finance mechanisms to offset potential future costs.

Reasons for Decisions:

  • In the eighteen months since the Climate Change Delivery Plan and the Initial Finance Strategy were published in November 2021, rapidly changing and increasing costs along with learnings from the delivery of capital decarbonisation schemes on the Council’s estate, has meant that the Finance Strategy requires updating. This paper, and the accompanying Green Finance Strategy, sets out the updated approach for approval.

 

  • Officers in Greener Futures and Finance with support from Land and Property have been further developing the 2030 finance model, which was originally produced by consultants, in order to gain a more robust understanding of the capital costs required to achieve the 2030 target, as well as the potential to offset these costs through energy savings and income generation. Given the increase in costs, four future approach options have been developed. The recommendation to Cabinet is to adopt the 4th option.

 

  • It should be noted that all options will require the Council to invest money up front in advance of income being generated. Net zero is a significant cost to the council with all options, but the approach is to off set this and aim for cost neutrality over the longer term by generating income through renewables and reducing costs of energy.

 

  1. The Council abandons the 2030 net zero target.
  2. The Council only installs decarbonisation measures which have a strong return on investment (such as solar) to reduce capex, accepting that this will increase the cost to the Council for carbon offsets from 2030 onwards. The minimum projected offset costs for this option (to 2050) amount to at least £14m, calculated at a rate of £95t/CO2, however by 2030 this rate may be much higher. This option is therefore not recommended as the financial risk is considered too great and the efficiencies resulting from investment in the more costly decarbonisation measures would not be achieved.
  3. The Council builds all the projected increased costs of achieving the 2030 target into the Medium Term Financial Plan, and income is seen as a bonus. This is the approach taken by other Local Authorities however by not pursuing and prioritising investment in renewables, which would generate income, this would lead to a budget pressure.
  4. The Council continues with the current approach to achieving the 2030 target, which includes being open and transparent with costings and balancing the delivery of high cost and quick pay back measures. This approach includes the development of finance income generation mechanisms, mainly renewables, with the purpose of generating a return on investment to offset any future potential cost increases to the Council, or to be used for other Greener Futures priorities.

 

(The decisions on this item can be called -in by the Communities, Environment and Highways Select Committee)

 

 

 

Supporting documents: