Prospect Head of Research Sue Ferns said: “The Conservatives made a lot of noise before the election about setting up a green investment bank but the coalition has backtracked, instead opting for a fund that could evolve into a bank.

“The spending review provided for £1bn of capitalisation by 2013. Analysts have argued that to make a significant impact, the green bank would need £6bn, and needs to be established as a genuinely independent bank. This is crucial because without effective measures for stimulating green investment we will not achieve the necessary policy change to deliver the emissions reductions that will curtail dangerous climate change.

“Control of carbon is the key issue. With growing evidence that ‘cap and trade’ schemes do not work to maximum effectiveness, ‘cap and regulate’ should also be an option.”

In the UK, electricity generation from renewable sources fell in the first half of 2010, so expansion of feed-in tariffs is welcome, Ferns said. “But, as part of a balanced energy policy, nuclear should be treated in an even-handed way compared to other forms of carbon-free generation.”

Prospect also broadly supports the introduction of Energy Performance Standards, though warns that there will be challenges to modify existing plant to meet new standards without compromising energy security or escalating prices further. The union said the reforms must pass three key tests:

• supporting a stable floor price for carbon
• regulation to encourage investment in staff and skills as well as infrastructure renewal
• strategic government support to stimulate innovation and UK supply chains.

Ferns said: “This cannot be done on the cheap. The much needed investment in the UK’s energy infrastructure will inevitably increase costs, but a separate debate must be had about how to apportion the impact of price increases – not least to guard against a regressive outcome for the fuel poor, many of whom are already being hit by other government cuts.”