Environmental Audit Cttee finds Treasury failing to take long-term environmental costs into account
The Environmental Audit Committee (EAC) has done an investigation into the role of the Treasury in relation to sustainable development and environmental protection. The EAC is calling for the Treasury to “green-check” all its decisions, after its major investigation found that the Treasury puts short term priorities over long term sustainability – potentially increasing costs to the economy in the future. [The Treasury has been a key promoter of a new south east runway, with Treasury staff helping the Airports Commission.] EAC Chair, Mary Creagh, said: “The Treasury is highly influential and uniquely placed to ensure the whole of Government works to promote sustainability. But we have seen considerable evidence that it fails to do this.The Treasury tends not to take full account of the long term environmental costs and benefits of decisions which would reduce costs for taxpayers and consumers in the long run. On the carbon capture and storage competition and zero carbon homes we saw the Treasury riding roughshod over departments, cancelling long-established environmental programmes at short notice with no consultation, costing businesses and the taxpayer tens of millions of pounds. With a week to go until the next Autumn Statement, we hope our inquiry will be a wake-up call to the Treasury.”
Treasury failing to take long-term environmental costs into account, MPs say
The Treasury has been lambasted by MPs for failing to adequately factor in long-term sustainability risks into its decisions, with the carbon capture and storage (CCS) and zero-carbon homes policies specifically cited as detrimental to both the economy and investor confidence.
The Environmental Audit Committee (EAC) finds the Treasury guilty of changing or cancelling several long-established projects at short notice, with little or no consultation with relevant businesses and industries
The Environmental Audit Committee (EAC) has criticised the Treasury following a major investigation concurred with a recent High Court allegation that its approach puts short-term priorities ahead of long-term sustainability. [The Treasury is one of the departments driving the push for a new Heathrow runway, with the DfT. AW note]
The EAC is particularly concerned by a perceived lack of environmental leadership considering the Treasury’s prominent role over Government spending, taxation policy and regulation.
The Treasury is accused of failing to encourage departments to work collaboratively on issues such as air quality, decarbonisation, and resource efficiency.
According to the EAC, the Treasury must ensure Spending Reviews provide strong incentives for departmental partnerships on environmental matters, increase decision-making accountability, and incorporate new evidence on long-term sustainability risks and benefits into policy decisions.
EAC Chair Mary Creagh MP said: “The Treasury is highly influential and uniquely placed to ensure the whole of Government works to promote sustainability. But we have seen considerable evidence that it fails to do this. The Treasury tends not to take full account of the long-term environmental costs and benefits of decisions which would reduce costs for taxpayers and consumers in the long run.”
The Treasury recently provided evidence at an EAC hearing, where departmental ministers defended the Government’s decision to scrap energy initiatives such as the zero-carbon homes initiative and the CCS competition. Speaking at the time, the department’s Financial Secretary insisted that past decisions were made in the interest of environmental and economic sustainability.
However, the EAC’s latest report finds the Treasury guilty of changing or cancelling several long-established projects at short notice, with little or no consultation with relevant businesses and industries.
The decision to cancel the long-running CCS competition, which the EAC found could cost the UK an additional £30bn to meet its 2050 carbon targets, was described as “devastating” by businesses who were left in “shock” by the way the Treasury handled the situation. The EAC criticises the Treasury for failing to quantify all the costs and benefits of delaying CCS deployment before it cancelled the competition.
The zero-carbon homes policy scrappage also came as a surprise and in some cases angered many in the construction industry, the EAC states, because the Government had worked towards implementing the policy for more than a decade. The decision harms the development of new markets for innovative energy-saving products and risks rising long-term costs to the economy, EAC states.
Creagh continued: “On the CCS competition and zero-carbon homes we saw the Treasury riding roughshod over departments, cancelling long-established environmental programmes at short notice with no consultation, costing businesses and the taxpayer tens of millions of pounds. With a week to go until the next Autumn Statement, we hope our inquiry will be a wake-up call to the Treasury.”
The Treasury announced last summer it would be scrapping regulations on house building, including a planned increase in on-site energy efficiency standards, in order to streamline development. The Government’s decision was heavily criticised by industry and politicians, who stressed it would likely add to long-term housing costs through a reduction in energy efficiency.
Departmental ministers refuted this claim in September, insisting that contrary to widespread belief, the initiative would not have incentivised energy efficiency. Ministers stressed that the Treasury is approaching the upcoming Autumn Statement from a “position of strength” in terms of energy policy, citing the Government’s annual support of renewables is set to double over the current parliament.
Responding to today’s EAC report, UK-GBC (Green Building Council) campaign and policy director John Alker said: “The Committee is absolutely right to highlight the damaging effects of the ill-conceived deregulation we have seen from the Treasury in recent years.
“The scrapping of Zero Carbon Homes was an example of politically motivated policy-making. It showed not only an irresponsible disregard for the steps we need to take to tackle climate change, but also overlooked the years of investment and preparation made by thousands of companies across the construction supply chain. This volatility in the policy landscape is highly damaging to industry, jobs and investor confidence.”
The decision to scrap the CCS scheme was previously said to have been taken under the narrative of “reducing the costs for businesses” when in fact businesses were in favour of environmental commitments. This view was challenged by the Energy Environment and Agriculture Deputy Director, who recently told the EAC that the costs involved in these schemes could have added “many billions” to consumer bills.
Accusations against the Treasury regarding long-term sustainability commitments recently extended to the courtroom. During evidence last month, the High Court heard that the Treasury had deliberately blocked plans to bring UK air pollution within legal limits as part of an “entire approach driven by cost”, and that Defra’s original plans for a more extensive network of Clean Air Zones in more than a dozen UK cities had been watered down, on cost grounds, to five in addition to London.
From the EAC website
Scope of the inquiry
The Environmental Audit Committee called for written evidence on the role of HM Treasury in relation to sustainable development and environmental protection in December 2015.
It now calls for additional written evidence on HM Treasury’s contribution to meeting waste and recycling targets to help inform its inquiry into sustainability and HM Treasury.
- 05 Jul 2016 – Sustainability and HM Treasury – oral evidence | PDF version (346 KB) HC 181 | Published 21 Oct 2016Evidence given by Lord Deben, Chair, and Matthew Bell, Chief Executive, Committee on Climate Change; Matthew Knight, Business Development Director, Siemens, and Barbara Vest, Director of Generation, Energy UK (at 10.45am); Estelle Brachlianoff, Senior Executive, Vice-President UK and Ireland, Veolia, Jerry McLaughlin, Director, Economics and Public Affairs, Mineral Products Association, and Dan Cooke, Director of Communications and External Affairs, Viridor and Chairman of Communications Committee, Chartered Institution of Wastes Management (at 11.15am).
- HM Treasury – written evidence | PDF version (88 KB) SAT0076 | Ordered to be published 25 Oct 2016
- Grantham Research Institute at the London School of Economics – written evidence | PDF version (117 KB) SAT0075 | Ordered to be published 15 Sep 2016
One quote from the EAC report on the Treasury
4 Performance on environmental sustainability
34. The Treasury uses a technical and political framework which favours short-term affordability over long-term benefits. In this chapter we explore this in more detail by looking at the Treasury’s track record in a number of specific policy areas and assessing the extent to which the Treasury’s approach to environmental sustainability is sufficiently joined-up. Meeting carbon budgets
35. The UK has an economy wide target to reduce greenhouse gas emissions by 80% by 2050 (from a 1990 baseline). To get there the Government sets five-yearly carbon budgets. The level of these budgets is recommended by the CCC which establishes the most cost effective pathway towards meeting the UK’s 2050 target.69 Following initial research, the CCC determined that the first sector which needed to decarbonise was the energy sector and other sectors such as buildings, transport and industry soon afterwards.70 The CCC recently reported that the Government was on track to meet the third carbon budget but, unless new policies are put in place, is likely to miss the fourth and fifth carbon budget.71 The gap between the target and the UK’s current emission trajectory is sometimes referred to as the policy gap.
36. The Treasury is in a critical position to ensure carbon budgets are met because of its control over capital spending, taxation policy, regulations and approval of major projects. During spending reviews, in particular, the Treasury has the opportunity to draw together policy relevant information from across different departments and ensure interventions across government are working towards achieving carbon budgets. But the Treasury does not seem to be doing this. A large proportion of respondents highlighted a number of recent policy announcements which could have the opposite effect.
….. and there is much more …
70 Committee on Climate Change, Building a low-carbon economy – The UK’s contribution to tackling climate change (December 2008)
71 Committee on Climate Change, Meeting Carbon Budgets – 2016 Progress Report to Parliament (June 2016), p11
The EAC press notice
Treasury must factor in long term impact of policies on environment
The Environmental Audit Committee is calling for the Treasury to “green-check” all its decisions after a major investigation into its approach found that it puts short term priorities over long term sustainability – potentially increasing costs to the economy in the future, and harming investor confidence.
- Read the report summary
- Read the report conclusions and recommendations
- Read the full report: Sustainability and HM Treasury
The Chair Mary Creagh MP, said:
“The Treasury is highly influential and uniquely placed to ensure the whole of Government works to promote sustainability. But we have seen considerable evidence that it fails to do this.The Treasury tends not to take full account of the long term environmental costs and benefits of decisions which would reduce costs for taxpayers and consumers in the long run.On the carbon capture and storage competition and zero carbon homes we saw the Treasury riding roughshod over departments, cancelling long-established environmental programmes at short notice with no consultation, costing businesses and the taxpayer tens of millions of pounds. With a week to go until the next Autumn Statement, we hope our inquiry will be a wake-up call to the Treasury.”
The Treasury, through its control over government spending, taxation policy and regulation is arguably the most important department for ensuring the UK meets its environmental obligations. However, the Treasury is failing adequately to factor in long-term environmental risks into its decisions and is not doing enough to encourage departments to work together on environmental issues – such as air quality, decarbonisation, energy and resource efficiency.
If the Treasury is going to improve its performance and provide greater leadership on environmental sustainability it must:
- Ensure Spending Reviews provide strong incentives for collaboration between departments on environmental matters.
- Incorporate new evidence on long-term environmental risks and benefits into its frameworks for assessing the value for money of government interventions;
- Increase transparency and accountability by providing publically available justifications for its decisions;
- Work with other departments whose policies affect the environment to ensure the Government’s new industrial strategies promote sustainability.
Treasury decision to cancel CCS funding without notice
Carbon capture and storage is an essential technology because it has the potential to help decarbonise a range of sectors including power, transport and heavy industry. Before the Treasury cancelled a long running CCS ‘competition’ to award financial support to pilot projects, the Government did not quantify all the costs and benefits of delaying CCS deployment. This meant that the full risks of cancelling the competition were not factored into the decision.
The Treasury’s decision will delay the roll out of CCS in the UK and will increase the cost of deploying it in the future. Without CCS, the inquiry found that it could cost an additional £30 billion to meet the 2050 carbon targets. The way the Treasury communicated its decision to industry left businesses in ‘shock’, and was described as ‘devastating’, potentially undermining the Government’s efforts to deploy CCS in the future.
It is vital the Government produces a new strategy for CCS this year. Treasury should work with BEIS to ensure the new strategy is published as part of the carbon reduction plan by the end of the year. Failing to do so will make it more expensive to meet our long-term, legally binding climate change targets.
….. and there is more on other case studies ….
see full statement at
Earlier this year, the EAC held an evidence session about the sustainability of the work of the Department for Transport
Sustainability in the Department for Transport examined with Government officials
In this one-off evidence session, the Committee questions senior Department for Transport officials about the role that sustainability plays in departmental policy-making, governance, procurement and operations.
- Watch Parliament TV: Sustainability in the Department for Transport
- Inquiry: Sustainability in the Department for Transport
- Environmental Audit Committee
Tuesday 26 April, Committee Room 8, Palace of Westminster
- Lucy Chadwick – Director-General for International, Security and Environment, Department for Transport
- Emma Campbell – Head of Environment and International Transport Analysis, Department for Transport
- Rosalind Wall – Head of Environmental Strategy, Department for Transport