Treasury defends lack of 'green strings' tied to corporate Covid-19 relief packages

The Government has defended its decision to issue billion-pound bailouts for carbon-intensive companies and sectors, with the Treasury hitting back at accusations that the Paris Agreement and the climate crisis had been cast aside, but a court case still looms.

Plan B’s director Tim Crosland argued that the decision remains a “fundamental breach of the social contract” and is working to file a claim with the courts

Plan B’s director Tim Crosland argued that the decision remains a “fundamental breach of the social contract” and is working to file a claim with the courts

Environmental charity Plan B sent a Letter before Action to Prime Minister Boris Johnson, chancellor Rishi Sunak, Michael Gove and Governor of the Bank of England Andre Bailey in July. The letter warns of an imminent issue of a court claim on climate change grounds.

The group threatened legal action over a perceived “new deal for polluters”, based on the £3bn package to stimulate the UK's green economy in the wake of the Covid-19 pandemic.

Plan B argued that the monetary value of the package is less than the finance that the Bank of England is providing to airlines and carmakers such as RyanAir, EasyJet, Nissan and Rolls Royce as a response to the pandemic, which notably isn’t tied to environmental performance.

The Treasury has this week responded to the letter, claiming that the Covid Corporate Financing Facility (CCFF) to provide financial relief was a “short-term emergency policy measure” and therefore not necessarily at odds with the UK’s long-term net-zero target.

“Given the nature, purpose, scope and duration of the CCFF, it is not accepted that the absence of explicit ‘climate-related conditions’ in the standard scheme provisions is incompatible with the Government’s climate change aspirations,” a letter from the Treasury sent to Plan B states.

“Nor is your characterisation, in your letter of 7 July, of the facility as a 'bailout of the carbon economy' accepted as accurate: the facility is a crisis liquidity support measure based on general criteria determined so as to protect, as far as possible, eligible businesses from irretrievable financial harm as a result of the pandemic.”

'Reckless' decision

The CCFF is operated by the Bank of England and indemnified by the Treasury and was introduced to address economic shortages as a result of the lockdown. The Treasury argued that the “economic emergency of a scale and intensity not previously known in peacetime” created cash flow challenges that needed to be addressed.

However, Plan B’s director Tim Crosland argued that the decision remains a “fundamental breach of the social contract” and that the Government is jeopardising efforts to combat the climate crisis through the ambitions of the Paris Agreement. As such, the organisation is working on filing a claim in court.

“Instead of addressing the evidence that its bailouts for polluters will lock us into a disastrous trajectory towards 4˚C warming, risking billions of human lives, the Government is hiding behind legal arguments to claim that it isn’t legally required to take that into account,” Crosland said.

That is not just reckless it is a fundamental breach of the social contract. It is the basic responsibility of the government to safeguard its people. Nor does the Government show any concern for the discriminatory impact of its catastrophic trajectory, which will hit hardest the younger generation, racially marginalised communities, and the Global South. Its primary concern is appeasing its corporate sponsors. This has to be stopped. We will now begin work on filing our claim with the court.”

The Government reiterates its commitment to both the Paris Agreement and the national net-zero commitment. The letter also states that the Government “will be bringing forward further plans in sectors like energy, heat and buildings in the run-up to COP26 in November 2021”.

Truss-t issues

However, the letter also responds to a separate issue raised by Plan B on behalf of the Minister for International Trade, Liz Truss. Plan B questioned UK Export Finance’s provision of $1.15bn for the design, construction and operation of a liquified natural gas (LNG) project in Mozambique. In contrast to the corporate bailouts, the Government claims that it did take the Paris Agreement into account on this decision.

“Before deciding to provide support in relation to the Mozambique LNG project, UKEF gave consideration to the project’s climate change impacts, including the impacts of the project on global greenhouse gas emissions, taking into account the Paris Agreement, and the consistency of the project with a pathway towards low greenhouse gas emissions, in both Mozambique and globally” the response states.

However, the Government also stated that “it is not known for certain whether the Project will displace renewable energy potential or lower carbon solutions”.

Matt Mace



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bank | cop26 | green economy | liz truss | net-zero | plan b | The Paris Agreement | Green Policy | coronavirus

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