Coventry’s draft Climate Change Strategy

13.1 The major challenge that we collectively now face is finding significant levels of funding to be able to make the necessary changes to reduce carbon emissions, loss of biodiversity, pollution and the adverse impacts upon human health, wellbeing and the economy. We are also beginning to understand that the costs of delay in delivering the necessary changes are likely to be greater on the economy and society in the long term.

13.2 We very much need to continue our approach to financial business case accounting which takes into account the whole lifetime costings of our investments and assets. An approach which also in future takes a proper account of the costs of environmental impacts upon our environment and the essential life support services it provides. This means we will need to reflect fully the costs of the energy and materials used and their impacts in manufacture & construction the impacts during the lifetime of a product or building’s use and the final costs of re-use and/or responsible recycling/ disposal. We will be faced with choices that will need to account for the whole cost during the lifetime of an asset including an assessment of the costs of doing nothing.

13.3 For example:

do we demolish an energy inefficient building and build a new zero carbon designed property in its place which requires more energy and resources overall as the endogenous energy used in its original construction is to be disposed of?

or

do we undertake what might be a costlier refurbishment of a building but which uses less materials and energy overall as the original building and the materials and energy utilised in its construction are in effect being re-used which has a lower carbon footprint and reduced levels of waste produced?

13.4 The independently produced Zero Carbon Route-map is indicating that environmental actions fall into 3 categories of ‘cost effective’, ‘cost neutral’ and ‘technically viable’. The first category includes actions which at present day prices and cost will return clear cut savings in expenditure in the short to medium term (15 yrs). There are other initiatives in the ‘cost neutral’ category which could recover their financial investment costs over time, whilst providing net environmental benefits. The third category however where there are technically viable actions producing net environmental benefits, would not at present prices and cost assessments provide a positive or neutral financial return. The City-wide investment requirements are set out at a summary level in section 13.6 below.

13.5 The financial and environmental business case for each investment opportunity will be assessed locally to determine financial and environmental effectiveness, both individually, and compared to other potential investments to inform priorities. Where there is positive financial benefit, there may be opportunity to reinvest benefits to support other environmentally sustainable but less cost-effective development programmes to help decrease the pressures on achieving the carbon reductions by the target date of 2050 set by the Government.

13.6 The independently assessed levels of investment required to achieve the necessary carbon reductions illustrated in the graph are estimated below:

Cost-effective

• Invest £67m p.a. for 15 years
• Cut the energy bill by £86m p.a. by 2032
• Create 2,028 years of extra employment
• Close the gap to net zero by 17%.

Cost-neutral

• Invest £94m p.a. for 15 years
• Cut the energy bill by £64m p.a. by 2030
• Create 3,257 years of extra employment
• Close the gap to net zero by 23%.

Technically viable

• Invest £559m p.a. for 15 years
• Cut the energy bill by £144m p.a. by 2030
• Create 20,407 years of extra employment
• Close the gap to net zero by 59%.

13.7 All environmental investment opportunities will be considered both from a City Council and a City-wide partnership perspective to determine, not only the potential investment and levels of return, but also the delivery strategy to inform financing arrangements and benefit realisation. As stated above, where opportunities exist to reinvest financial benefits from cost effective propositions into less financially sustainable programmes, this will be considered in order to help the City to decrease the pressures on its ability to achieve the carbon reductions by the target date of 2050 set by the Government.

13.8 Despite, the modelled actions there is still a gap in reaching the 2050 target, but this is likely to be addressed by future innovations and advances in technology, also the introductions of taxation and financial incentives from the Government in future years may render more of the current technically viable options into more economically viable ones especially if they create jobs and stimulate the economy.

13.9 It is for these reasons that it is vital that the City Council find collaborative partnerships to share the financial and delivery burden and to develop commercial business venture opportunities which can take advantage of the expertise of those in the energy sector to develop the necessary services and infrastructure to support a zero-carbon society and economy.

13.10 Also the Government’s Procurement Policy note 6 is mandating the need to take account of Carbon Reduction Plans in the procurement of major government contracts it is no longer acceptable to be able to pick products and services at the lowest price if they have higher adverse impacts upon carbon emissions. This in turn will affect the cost of projects in the short term but with evidenced long term environmental benefits.

Funding opportunities and options

13.11 Innovate UK, BEIS, DEFRA and other Government departments are focusing on grant funding regimes which seek to address the causes of climate change. The City Council has currently benefited from such grants as the Local Authority Delivery Schemes (LADS) and the Social Housing Decarbonisation Fund (SHDF). As an authority it is imperative that we prioritise our resources to create the capacity to put together applications for grant funding or interest free Government loans such as the Salix Fund, whilst also lobbying the Government to create additional funding necessary to drive the pace of change required towards full cost accounting and establishing ways to incentivise more sustainable options for the future.

13.12 The sources of finance required to drive the necessary change cannot rely solely on Government Grant, or indeed public money alone. It is likely to be diverse, including Government grants, levies like the Energy Company Obligation (ECO4) and private sector investment from financial institutions and pension funds, more and more of which are finding investment in addressing the Zero Carbon agenda as increasingly more attractive propositions.

13.13 The Council’s own Treasury Management Strategy, which sets the framework for its own borrowing and investment activity, will need to consider and accommodate the Climate Change agenda, striking an appropriate balance between financial stewardship, return on investment and environmental benefit. Alternative financing arrangements (to traditional treasury loans) may be available which achieve both, including for example the Government’s UK Infrastructure Bank which focuses on investment in technologies and initiatives which tackle climate change clean energy, transport, digital, water and waste. Other examples include Municipal Bonds or crowdfunding platforms.

13.15 The consideration of joint ventures in partnership with third parties including the private sector, local communities, higher education, private charitable trusts and foundations as well as mobilising volunteers within the community to support projects may also provide opportunities to identify funding solutions for some initiatives. The River Sherbourne Project for example is a partnership between the Environment Agency, Severn Trent Water, Warwickshire Wildlife Trust and the City Council leveraging £1.8m funding from the National Lottery to restore stretches of the river for the benefit of the public and wildlife.

• F1 To learn from other organisations which are looking at accounting methodologies which take account of the full life environmental and sustainability costs of investments and costing the long-term consequences of the environmental impacts upon the economy, environment and society.
• F2 To modify the cost benefit analysis approach to financial decision making used by the City Council to address full life costings and the costs of impacts upon environmental quality and climate change.
• F3 To see the corporate Finance Team reflecting sustainability and climate change into the existing treasury management strategy which sets the framework for borrowing and investment decisions by the City Council.
• F4 Where appropriate to consider using derived benefit generated from cost-effective measures to invest in delivering the wider Strategy and ensuring the organisation prioritises resource to provide sufficient capacity to bid for external grant funding and loans to secure sustainable zero carbon initiatives and programmes
• F5 To support the development of appropriate commercial ventures and arms-length companies which are capable of securing investments to address sustainability & climate change issues.
• F6 To consider suitable projects and initiatives (and when to apply them) which may under the right fiscal conditions have the potential to secure public support through the use of Municipal Bonds and crowdfunding.