Green Investment Barrier Model, 2016-2021

In 2019, the UK pledged to achieve a net-zero carbon emission economy by 2050. While the so-called ‘green finance gap’ is generally acknowledged in this context, tailored policy recommendations on how to address it are missing. The focus of this project lies on the upscaling of private finance (e.g. from institutional investors) and represents a new system dynamics energy-economy model – called the Green Investment Barrier Model (GIBM) – that includes as a main novelty the representation of a green finance gap. System dynamics is most appropriate to model complex systems and to understand the likely long-term trends. In terms of key contributions, first the qualitative investigation demonstrates that key investment barriers form a complex system characterised by path dependency, lock-in and non-linearity. Therefore, the adoption of a systems policy, drawing on a long-term and holistic systems perspective and tackling identified key green investment barriers is recommended to close the green finance gap. Second, in terms of modelling contributions and as shown by GIBM, when a green finance gap exists, the introduction of a finance systems policy leads to multiple co-benefits, including an emission reduction, a decline in unemployment and a drop in the unit costs of energy, while increasing GDP by 2050. Further, GIBM results reveal that reaching the UK zero carbon targets for the electricity sector by 2050 requires the implementation of additional low-carbon energy policies besides a finance system policy. Finally in terms of modelling results, the recommended energy policy scenario includes a step-wise linear halt in brown energy infrastructure until 2050. Co-benefits of this latter policy scenario include higher GDP, lower energy system costs and lower unemployment. Third, in terms of theoretical contributions, it is demonstrated that the theoretical underpinning of models influences not only the magnitude of the impact but also the sign of their results and consequently policy formulation, it is therefore argued that more transparency on this among policy-makers is required, along with increased knowledge on how models with different theoretical frameworks should or should not be applied in combination.We propose to establish a multi-disciplinary Centre for the Understanding of Sustainable Prosperity (CUSP). Led by the University of Surrey, CUSP will work with a range of academic and non-academic partners to establish a rich international network of collaborative research. The aim of this research will be to explore the economic, ecological, social and governance dimensions of sustainable prosperity and to make concrete recommendations to government, business and civil society in pursuit of it. Our guiding vision for sustainable prosperity is one in which people everywhere have the capability to flourish as human beings - within the ecological and resource constraints of a finite planet. Our work will explore not just the economic aspects of this challenge, but also its social, political and philosophical dimensions. We will address the implications of sustainable prosperity at the level of households and firms; and we will explore sector-level and macro-economic implications of different pathways to prosperity. We will pay particular attention to the pragmatic steps that need to be taken by enterprise, government and civil society in order to achieve a sustainable prosperity. The CUSP work programme is split into five themes (our MAPSS framework). Theme M explores the moral framing and contested meanings of prosperity itself. Taking a broadly philosophical approach we examine how people, enterprise and government negotiate the tensions between sustainability and prosperity. Theme A explores the role of the arts and of culture in our society. We will look not only at the role of the arts in communicating sustainability but at culture as a vital element in prosperity itself. Theme P addresses the politics of sustainable prosperity and explores the institutional shifts that will be needed to achieve it. We will work closely with both corporate and social enterprise to test new models of sustainability for business. Theme S1 explores the social and psychological dimensions of prosperity. We will work with households and individuals in order to understand how people negotiate their aspirations for the good life. As part of this theme we will engage with UNEP in a major study of young people's lifestyles across the world. Theme S2 examines the complex dynamics of social and economic systems on which sustainable prosperity depends. We will address in particular the challenge of achieving financial stability and high employment under conditions of constrained resource consumption. Alongside our MAPSS work programme, we will initiate a major international Sustainable Prosperity Dialogue (chaired by Dr Rowan Williams - former Archbishop of Canterbury and Master of Magdalene College Cambridge). We will also establish an international network of CUSP Fellows from both academic and non-academic institutions.