Has the Green Investment Bank cleaned up its act?


The Green Investment Bank (GIB) has just published its second Annual Review. In their first one, they claimed that over 91% of projected carbon savings from their loans would come from Drax’s partial conversion to biomass. Drax were the recipients of the first large GIB loan, initially for £100 million but later reduced to £50 million after they were awarded a £75 million public loan guarantee by the Treasury. This public loan has been the only one of its kind so far.

The loan to Drax should have been a major embarrassment: soon after it was made, Secretary Vince Cable thanked the GIB for helping Drax avoid being closed down under EU regulations. This confirmed our suspicions that, in effect, the Bank has made it possible for many more millions of tonnes of coal to be burnt long into the future, as well as the 15-odd million tonnes of wood each year once the conversion is complete. In addition, US environmental NGOs and scientists have published compelling evidence that some of the pellets burned by Drax have come from clearcut ancient wetland forests in North Carolina.

In addition, it has just been revealed that a new coal-fired power station is going to be built on land next to Drax’s existing power station. It will be the first large-scale carbon capture and storage (CCS) project in the EU and 90% of its carbon dioxide emissions will be trapped and buried under the North Sea. It is being funded by the European Union. Corporate Watch has recently published a report – To the Ends of the Earth: A Guide to Unconventional Fossil Fuels – which explains the problems with carbon capture and storage (CCS) technology.

So a year on – has the GIB learned any lessons and cleaned up its act?

Well, they have since published five policy documents with the words ‘responsible’ or ‘green’ in the titles. Their “Green Investment Policy” lists five “green purposes” which look fairly standard for any company or constitution with green in the title, these include: reducing greenhouse gas emissions, advancing efficiency, protecting or enhancing the natural environment as well as biodiversity, and promoting environmental sustainability. However, the assessment criteria for each of these are weak and ineffectual. Here are some examples:

+ Offshore wind farm operators can demonstrate their commitment to biodiversity by showing that the project “reduces net loss and improves net gain to biodiversity” – in other words by paying for biodiversity offsets;

+ For waste incinerators, GIB will always assume that waste would otherwise go to landfill rather than being recycled or re-used, unless told otherwise by the developer, something a developer wouldn’t admit anyway. ‘Diversion of waste from landfill’ then automatically demonstrates ‘protection or enhancement of the natural environment’;

+ For waste incinerators and biomass power stations, ‘advancement of efficiency’ can be demonstrated simply by showing that the plant has “future potential” to deploy combined heat and power technology. Virtually every power plant can, in theory, be retrofitted this way. In practice, it very rarely happens;

+ Biomass projects can demonstrate “protection or enhancement of the natural environment” by using any recognised ‘sustainable forestry standard’ and through “compliance with the land criteria set out in the relevant Renewable Obligations Orders…which prohibit use of materials from high biodiversity sources such as grasslands”. “Sustainable forestry standards” have been widely shown to offer no guarantees of any description, including of protecting biodiversity. As for the land criteria referred to, there are in fact no mandatory standards whatsoever.

So far, GIB’s policy reads like a fairly average, meaningless Corporate Social Responsibility document. But there is one extraordinary difference:

Out of the five standard ‘green purposes’, each project only needs to meet a single one. GIB allows itself to invest in projects that breach a full four of the basic ‘green principles’. In practice of course, this is unlikely to happen since the assessment criteria are so weak that it is hard to see how they could be breached in the first place. And to be fair, it wasn’t the GIB Board who first decided that four out of five basic principles could be breached, that was the minimum requirement set out in the legislation under which GIB was set up. Although, the Board could have taken the initiative and decided to do better.

GIB does not excel in transparency either. When Biofuelwatch submitted a Freedom of Information request to them, GIB refused to answer. One of the questions asked was: how had they reached the conclusion that partially converting Drax to biomass would reduce carbon emissions, considering that the power station would otherwise have had to close and stop burning anything at all? The Information Commissioner will now decide whether they have to answer this question or not as a fully government owned institution.

Since Biofuelwatch’s campaign began against GIB’s funding for big biomass, the Bank has not approved any further loans for import-reliant biomass power stations. At least two large biomass power stations have been considered by GIB over the past 18 months but have not so far been funded. These are Forth Energy’s planned biomass power station in Grangemouth (Scotland) which would have burned 1.5 million tonnes of largely imported wood, and Helius Energy’s proposed 1 million tonnes biomass power station in Avonmouth, next to Bristol. Both have faced major local opposition and in both cases Biofuelwatch ran email alerts calling on the GIB to steer clear of any investments in them. Forth Energy has now folded and Helius Energy has not met their self-imposed deadline for attracting funding for the plant.

Public pressure, it seems, can have some bearing. Indeed the GIB’s Green Investment Policy states that they “will also consider the wider reputational risk associated with an investment”. Yet in both cases, campaigners were simply lucky to have been ‘tipped off’ about GIB negotiations with developers. In the case of Avonmouth this was done by Helius Energy themselves, who announced in their Annual Report that they were in discussions with GIB. Others are unlikely to repeat such a blunder. The GIB themselves maintain total confidentiality as to who they are speaking with. By the time an investment is announced, it is too late to stop it.

However, massive opposition to a development alone does not seem sufficient to deter the GIB from lending to it. In March this year, GIB approved £51 million for a waste incinerator in the Norfolk town of Kings Lynn. The incinerator had faced overwhelming local opposition. In 2011, 65% of local residents took part in a referendum about the proposal and 92% of them voted against it. According to GIB’s policy, no investments will be made unless GIB is satisfied that the project “will comply with all environmental and planning laws, regulations and permits in all material respects”. But the planning application for this incinerator had not even been decided. When questioned on this, a GIB representative defended the loan by arguing that they did not interfere with local democracy and did not write any letters in support of the application. They may not have made any formal planning submissions, but they did issue a press release endorsing the developer’s highly disputed claims about ‘avoided landfill’ in the middle of the planning process. Fortunately, GIB’s intervention did not save the scheme. On 7 April, Norfolk Council cancelled its contract with the developer, Cory Wheelabrator, effectively sinking the plans and forcing GIB to cancel the loan.

Unfortunately, GIB investments into two other waste incinerators, in Avonmouth and Wilton, have not been cancelled.

And while last year’s biomass investments were not as shocking as GIBs loan to Drax in 2012, some of them have been very questionable indeed:

+ One loan is helping Bernard Matthews install 179 ‘energy efficient’ biomass boilers and allowing them access to substantial long-term subsidies through the Renewable Heat Initiative in the process. The boilers will help the company to increase profitably from their large turkey factory farms. Bernard Matthews were exposed for animal cruelty some years ago and they have been linked to two outbreaks of avian flu in the UK. Perhaps the most disconcerting aspect is that the GIB has chosen a large intensive livestock farming company as the recipient of their only investment in the food and agriculture sector so far. Confining turkeys more ‘efficiently’ to vast crowded sheds will not be everybody’s idea of ‘energy savings’;

+ At the Annual Review events in June 2014, GIB presented their ‘flagship’ ‘waste biomass’ investment in Derry, their first ever investment in Northern Ireland. The biomass power station, which is now being built by Evermore Renewable Energy, will be Northern Ireland’s largest. The company calls it a combined heat and power plant but neither their Environmental Permit nor any articles published about the plant mention any heat customers. According to the Permit, the plant will generate 16 MW of electricity from 160,000 tonnes of woodchips, which would make it just 23% efficient, far less than many other biomass power stations. GIB claims that the plant will prevent 100,000 tonnes of waste wood going to landfill every year. A bold assertion indeed considering that the original planning consent was for burning virgin wood, not waste wood. Their Environmental Permit allows both.

Across the UK, the vast majority of waste wood isn’t going to landfill. In fact, landfilling of wood waste has little to do with a lack of demand (mainly from bioenergy and for panel board), but is mostly due to a lack of separate waste collections. According to the Londonderry Port Authority, 70% of all the wood for the power station will be ‘local.’ The remainder, as the location suggests, will likely be shipped in. During a GIB presentation, a biomass campaigner from Bristol thought she recognised the woodchip pile shown to promote ‘waste wood’ combustion from Stobart’s Avonmouth woodchip site. Stobart has in the past been forced to stop woodchipping in Avonmouth, following action by the Environment Agency. Avonmouth residents have, for a long time, complained about wood dust, which is carcinogenic and linked to a wide range of other health problems.

So the GIB’s flagship biomass investment this time round wasn’t quite as scandalous as their support for Drax’s continued burning of coal and vastly increased burning of wood sourced as a result of forest destruction across North America. This time, it “only” involves a much smaller, highly inefficient biomass power station which will ship in waste and likely virgin wood and might put the health of communities at risk.

Not all GIB investments are quite as questionable. Indeed, the two largest ones during the past year support offshore wind developments i.e. more genuine renewable energy investments. But no loan has gone to community projects. Projects involving the NHS or local authorities invariably involve Private Finance Initiatives and the recipients of the two big wind energy investments are Dong and RWE, i.e. large transnational energy corporations. Onshore wind and solar projects have received no support.

Biofuelwatch’s campaign only opposes GIB investment in biomass and waste incineration, because these investments are causing obvious harm. But clearly, the problems go deeper. They go back to the GIB’s core purpose: “to back green projects, on commercial terms, across the UK and mobilise other private sector capital into the UK’s green economy”. Private sector capital will always look for higher returns first and foremost. GIB’s preference for big biomass, offshore wind and, to a smaller extent, waste incineration makes perfect sense in this context. These have been guaranteed the highest long-term subsidies by the government, and it is subsidies which guarantee returns. Attracting private sector capital means investing in large corporations like Drax, RWE or Dong; in schemes already backed by venture capital (such as the biomass power station in Derry) and in Private Finance Initiatives. In short, an institution like the Green Investment Bank will inevitably bolster corporate control over the energy system. And this is the very last thing we need if we want to move away from destructive, polluting energy generation and instead towards much reduced, but fairer, energy use.