What is the background to the EAC report?

In light of the importance of the Treasury in influencing environmental and sustainability policy, the object of the report is to learn lessons from the past and suggest proposals to help the Treasury improve its future performance regarding sustainable development and environmental matters. The timing of the report is intended to coincide with a period which has been marked by substantial political change (notably Brexit and a change in the Prime Minister and senior cabinet ministers).

What did the report conclude about the Treasury’s performance?

The report concluded that the Treasury had not adequately ensured that departments and their policies appropriately address long-term sustainability. It appears that short-term objectives are consistently prioritised, often leading to greater long-term costs. The report found that the Treasury should factor into its decision-making processes, long-term costs and benefits (which serve as a ‘green-check’) and incorporate new evidence on natural capital into its ‘Green Book’ appraisal process and reporting and accounting mechanisms. Concerns were also raised about the lack of transparency over how and why the Treasury has made certain decisions to change or cancel long-established policies to the confusion of investors and business. For example, in preparing the report, evidence was presented that the abolition of the zero carbon homes policy in 2015 surprised key industry stakeholders. The consequences of these ‘shock decisions’ is to undermine investor confidence, by amplifying concerns over policy risk (in particular, energy policy risk).

Cancellation of the CCS competition

Cancellation of the zero carbon homes policy

The announcement by the Treasury to abolish the zero carbon homes policy was also greeted with trepidation, particularly by the construction industry. The decision is considered to inhibit the development of new markets for innovative energy-saving products, and risks wasting the costs of preparation for the implementation of the policy in the first place. There is also a risk that costs will increase in the long-term, due to new homes needing to be retrofitted to improve their energy efficiency.

Landfill tax and PFI credits

The objective of the landfill tax levied by the Treasury was to enable the government to meet its target to divert waste from landfill. To encourage such decisions towards recycling, PFI credits were developed and implemented. The landfill tax is considered to have played a positive and important role, but is not sufficiently ‘nuanced’ to drive continued increases in recycling rates. This was exacerbated by the removal of PFI credits. The Treasury is called upon to outline its future plans for landfill tax and how it intends to incentivise further investment in the future.

Do you expect the report to have practical implications for policy decisions going forward?

It is hoped that the report will incentivise the Treasury to adopt a more co-ordinated, inclusive and unifying approach to policy decisions. The Financial Secretary to the Treasury, Jane Ellison, stated that the Treasury took its environmental impact very seriously, that she would read the EAC’s final report with great interest, and that it would inform her thinking in the future. However, it cannot be ignored that the Treasury is faced with a challenge to balance the competing demands of ensuring its policies remain consistent with sustainable development on the one hand, and the interests of economic growth on the other hand (in particular, short-term growth). As a result, long-term sustainable development is often subordinated to short-term economic gain. The EAC hoped that the government’s commitment to a reinvigorated revised industrial strategy, would also help shift the policy focus towards long-term sustainable development.

Interviewed by Susan Ghaiwal. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.