Treasury ‘not planning mandatory net-zero stress tests’ for major government investments

The Treasury is notably in the process of conducting its net-zero review

The publication of the National Infrastructure Strategy at last year’s Spending Review provided hope for many across the green economy. After delays of more than six months, which Chancellor Rishi Sunak said would give policymakers time to align the framework with the UK’s updated climate targets, the announcement provided some clarity to businesses and investors.

Specifically, the announcement saw the Treasury updating its Green Book guidance on checking policy and investments against net-zero. Green groups had hoped for the government to add “more teeth” to this guidance by introducing new requirements on emissions. This would force businesses to accelerate decarbonisation efforts to win government funding, while stimulating the market for low-carbon goods and services.

However, in a meeting of the Commons Public Accounts Committee late last week, representatives from the Treasury and BEIS confirmed that there will not be a blanket net-zero mandate for all major investments.

The Treasury’s director for climate, environment and energy, Steve Field, said the existing Green Book guidance means that all departments “should consider” emissions and other climate impacts when appraising projects and policies.

MPs sitting on the Committee questioned whether consideration would be enough to prevent the financing of projects and policies that are not compatible with the UK’s climate targets. They also asked Field if considerations were always being taken as recommended.

“It is fair to say that is not always happening on a consistent basis,” Field admitted. “We need to do more to set expectations of departments.

“We did not get results from every department, and there is more that we can do to help departments working with BEIS, to ensure that they have the tools and capabilities to properly assess the climate impacts of their policies and plans at an early stage.”

Field said that the Treasury is working with BEIS and the Climate Change Committee to develop better ways to measure the potential emissions impacts of future projects and policies. He added that departments are also being required to account for not only the financial reviews of projects already invested in but their climate impacts as they materialise.

MPs continued to voice concerns about the potential of emissions being “locked-in” in the long-term.

The Treasury is notably in the process of completing a review into the financial implications of the net-zero transition. An interim report on findings so far, published in December 2020, stated that the transition is unlikely to have any major negative impacts on the economy. The Climate Change Committee had estimated that the transition would cost 1-2% of GDP by 2050 but has since adjusted forecasts to 0.5-1%.

‘Green’ policy?

Since Parliament returned from the winter recess in January, Ministers have repeatedly been grilled over policy decisions relating to energy and the environment.

Secretary of State for the Ministry of Housing, Communities and Local Government, Robert Jenrick, has been repeatedly asked to rethink his decision not to intervene with Cumbria County Council’s decision to grant planning permission to a new coal mine. Proponents of the mine say it will create jobs and lower emissions related to importing coal for use in the steel sector. But critics say it sends the wrong message ahead of COP26 and argue that it could discourage steel companies from developing fossil-free solutions.

Elsewhere, MPs, businesses and NGOs have expressed frustrations over further delays to the Environment Bill. The policy package was due to return last week but Covid-19-related complications are likely to result in a setback of six months or more. The delay was announced as Ministers faced accusations of backtracking on commitments to ban the export of plastic waste to low-income nations and to maintain food standards after Brexit.

There have been some positive movements, however. For example, COP26 now has a full-time president after Alok Sharma stepped down from his BEIS Secretary role. Since that move, the COP26 team has unveiled a radical new roadmap to push the global economy towards net-zero emissions, targeting a range of near-term tipping points to deliver decarbonisation in hard-to-abate and high-emission sectors.

Sarah George

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