Parliamentary Monitor: 30 June 2021

Parliamentary Activity

Updates

• The Climate Change Committee (CCC) has published two progress reports that reveal the UK is behind on its goal to reduce greenhouse gases by 78 per cent by 2035. The Committee Chair, Lord Deben, commended the Government for setting remarkable targets, but expressed worry about how the policy to achieve these targets is not there, which in turn risks undermining international action on climate change ahead of COP26. Commenting on the reports’ launch, the CCC Chief Executive Chris Stark said that the delay in the publication of the Treasury’s final net zero review is ‘really noticeable.’ The CCC has now made over 200 recommendations to the government to address this lack of action, including to set carbon taxes on waste and industry as well as stiffer taxes on aviation, and to adopt an explicit “net-zero test” to ensure all policy and planning decisions are compatible with climate goals.
• In response to the Environment Audit Committee’s recommendations made in its Growing Back Better report, the Government has confirmed that the new National Infrastructure Bank will be a permanent public institution and has committed to reviewing the possibility of expanding the Bank’s mandate to include natural capital improvements. The Government also recognised the potential of a UK Carbon Border Adjustment in tackling carbon leakage, while also confirming that the role of a carbon tax in meeting the UK’s net zero target will be outlined in the Treasury’s upcoming Net Zero Review.
• Exports Minister Graham Stuart MP has announced that UK Export Finance has created a Renewables, Energy and Carbon Management underwriting team. The team will consist of 20 people and will aim to ensure that UKEF has sufficient resource to meet the increased demand of business across the green energy sectors and to develop relationships with these businesses to maximise the UK’s potential in projects abroad.

Oral questions

• On 22 June in the House of Commons, MPs quizzed the Chancellor in Treasury Questions. Relevant questions and answers include:
  • The Shadow Chancellor Rachel Reeves (Labour: Leeds West) stated that the Government cannot lead with authority at COP26 when it does not have a climate strategy with a sustainable economic plan. She asked when the Chancellor will be able to tell the House the date the final net zero review will be published. The Chancellor replied that the net zero review will be published imminently but that the Prime Minister’s 10-point plan is the most comprehensive plan from any Government on how net zero ambition will be met. The Shadow Chancellor replied that if the Chancellor cannot give a date for when the final review will be published, will he commit to ensuring that the UK’s net zero targets are hard-wired through the forthcoming spending review. The Chancellor replied that meeting the UK’s climate ambition is at the heart of everything the Government is doing.
  • Andrew Griffith (Conservative: Arundel and South Downs, UK Net Zero Business Champion) asked whether the Chancellor agrees that the launch of the UK Infrastructure Bank is precisely the sort of intervention needed to deliver net zero. The Chancellor replied that he is absolutely right and that he would like to pay tribute for his work last week on tech net zero. The Bank was launched last week in Leeds and is capitalised with £12 billion from the Government to then unlock £40 billion of private investment into addressing levelling up and net zero. He concluded that he is very confident about the Bank’s future progress.
  • Jason McCartney (Conservative: Colne Valley) asked what steps the Department is taking to encourage investment in green industries. The Exchequer Secretary to the Treasury Kemi Badenoch MP replied that the Budget 2021 built on the Prime Minister’s 10-point plan by encouraging further private investment. She also said that the Government will use the tax system and direct government support, including for offshore wind, energy innovation and hydrogen.

• In Prime Minister’s questions on 23 June, John Stevenson (Conservative: Carlisle) said ‘The UK is to host COP26, our goal is net zero by 2050, we need innovative policies and a free market approach would help. If we were to make solar panels compulsory for all new residential builds it will create a large market, innovation, lower prices, job creation and help reach net zero.’ He then asked whether the Prime Minister would support such a policy initiative. The Prime Minister replied that this is an interesting suggestion that he will look into. He added that some homes aren’t suitable for solar panels, but they are already tightening standards to ensure new homes produce 75% lower CO2 emissions that current standards.

Backbench MPs

• The BEIS Committee session hosted its latest evidence session on net zero and UN climate summits on 23 June with Nigel Topping (High Level Champion for Climate Action, COP26), Andrew Griffith MP (UK Net Zero Business Champion, COP26) and Matt Toombs (Director of Partnerships and Engagement, COP26 Unit, Cabinet Office). Some of the key points raised and discussed during the session include:
  • At this current moment, 4500 businesses (including 1200 UK businesses) and cities have signed up to the Race to Zero, covering 15 per cent of the world economy and equating to a total of £1 trillion of market capitalisation.
  • There has been a good level of awareness and increasing appetite among SMEs for COP26, although some knowledge barriers remain.
  • There is huge appetite to finance the transition to net zero, but this is conditional on returns.
  • Most FTSE 100 companies think that mandatory climate financial disclosure is a useful tool to encourage conversations with investors and to show off their climate action.
  • If businesses are accused of greenwashing, they may be at risk of being removed from the Race to Zero.

Relevant Parliamentary Written Questions

1. Question by Matthew Pennycook (Shadow Climate Change Minister):
To ask the Chancellor of the Exchequer, what discussions he has had with representatives of financial services companies on reducing global greenhouse gas emissions from projects and companies financed and underwritten by those companies in line with the goals of the Paris Agreement.

Answered by John Glen (Economic Secretary to the Treasury): 
Input from stakeholders is a valuable part of the policy making process, ensuring government and the private sector can work together to effectively address challenges such as net zero and driving economic growth across the UK. HMT is keen to engage with industry on the Chancellor’s vision for the future of financial services, of which green finance is a key pillar. The Chancellor holds regular discussions with industry to discuss this. For example, recently the Prime Minister alongside the Chancellor and the Governor of the Bank of England hosted a virtual roundtable with financial services leaders in advance of the Chancellor’s annual Mansion House speech.

2. Question by Baroness Hayman (Crossbench):
To ask Her Majesty’s Government what assessment they have made as to whether voluntary pledges by the UK financial sector will be sufficient to ensure that sector’s carbon emissions are reduced in line with the goals of the Paris Agreement.

Answered by Lord Callanan (Parliamentary Under-Secretary of State for Climate Change and Corporate Responsibility):
The UK was the first major economy to commit to Net Zero by 2050, and to achieve that ambition, we want to ensure that every financial decision takes climate change into account. This will require a drastic increase in the quantity, quality and comparability of climate-related disclosures. That is why, in November 2020, my Rt. Hon. Friend Mr Chancellor of the Exchequer announced the UK’s intention to make disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures mandatory in the UK across the economy, including the financial services sector, by 2025. This commitment is world-leading and significant progress towards achieving our ambition, including new requirements for premium-listed firms to disclose their greenhouse gas emissions, has already been made.

We have committed to implementing a green taxonomy that will establish a common definition for ‘sustainable economic activities’ and improve understanding around the impact of firms’ activities and investments on the environment. Together, these measures will ensure that firms across the whole economy are disclosing robust and comparable climate and sustainability-related information that is decision-useful for investors. This will help close the sustainability data gap, as well as preventing greenwashing and supporting the greening of the UK economy.

Finance is one of the four over-arching goals of the UK Government’s COP26 Presidency. At the core of the COP26 finance campaign is the creation of a private finance system for net zero. This entails building a virtuous cycle of innovation and investment, making sure that policies, business plans and investment decisions all align with net zero targets. As a result, we are already seeing very positive momentum within the private finance sector. For example, the Glasgow Financial Alliance for Net Zero has secured commitments from 160 firms (together responsible for assets in excess of $70tn) across the global financial system to accelerate the transition to net zero emissions. All members must be accredited by the UN Race to Zero campaign and use science-based guidelines to reach net zero emissions, covering all emissions scopes (including a 2030 interim target). Hence, there is already a large push for voluntary setting of net zero targets by financial institutions.

3. Question by Baroness Hayman (Crossbench):
To ask Her Majesty’s Government what assessment they have made of the carbon emissions produced by the UK financial sector.

Answered by Lord Callanan (Parliamentary Under-Secretary of State for Climate Change and Corporate Responsibility):
The UK follows the agreed international approach for estimating and reporting greenhouse gas emissions under the UN Framework Convention on Climate Change (UNFCCC), which is for countries to report emissions produced within their territories. All UK domestic and international greenhouse gas emissions reductions targets, including our Net Zero commitment, are based on these territorial emissions.

The UK was the first major economy to commit to Net Zero by 2050, and to achieve that ambition, we want to ensure that every financial decision takes climate change into account. This will require a drastic increase in the quantity, quality and comparability of climate-related disclosures.

That is why, in November 2020, my Rt. Hon. Friend Mr Chancellor of the Exchequer announced the UK’s intention to make disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures mandatory in the UK across the economy, including the financial services sector, by 2025. This commitment is world-leading and significant progress towards achieving our ambition, including new requirements for premium-listed firms to disclose their greenhouse gas emissions, has already been made.

We have also committed to implementing a green taxonomy that will establish a common definition for ’sustainable economic activities’ and improve understanding around the impact of firms’ activities and investments on the environment. Together, these measures will ensure that firms across the whole economy are disclosing robust and comparable climate and sustainability-related information that is decision-useful for investors. This will help close the sustainability data gap, as well as preventing greenwashing and supporting the greening of the UK economy.

4. Question by Baroness Bennett (Green):
To ask Her Majesty’s Government what steps they plan to take in response to the report by the TUC Ranking G7 Green Recovery Plans and jobs, published on 2 June.

Answered by Lord Callanan (Parliamentary Under-Secretary of State for Climate Change and Corporate Responsibility):
Under UK leadership at the G7, we have put Green Recovery from COVID-19 at the top of the international agenda and secured historic commitments such as the first ever ‘net zero G7’, with all countries committed to reaching net zero carbon emissions by 2050. The G7 agreed to phase out new direct government support for fossil fuel energy projects internationally, following a leading commitment made by the UK in December, and G7 members will end all new direct government support for unabated international thermal coal power generation by the end of 2021.

In order to deliver this, my Rt. Hon. Friend the Prime Minister’s Ten Point Plan brings together £12 billion of government investment to unlock three times as much private sector investment by 2030; and support up to 250,000 jobs across the UK by 2030. On top of this, schemes such as the Contracts for Difference (CfD) incentivise investment. Up to £557m of annual support for future Contracts for Difference has been committed, providing renewables developers with the confidence they need to invest in bringing forward new projects.

We will build on this even further and deliver a stronger, greener, more sustainable economy after this pandemic. We have started with the Energy White Paper and Industrial Decarbonisation Plan, and we will continue to set out further measures as in the run up to COP26, including publishing our Net Zero Strategy.

5. Question by Jamie Stone (Liberal Democrat: Caithness, Sutherland and Easter Ross):
To ask the Chancellor of the Exchequer, with reference to the Committee on Climate Change’s report entitled The Sixth Carbon Budget: The UK’s path to Net Zero, published in December 2020, whether he has plans to publish a roadmap for increasing low-carbon investment from £10 billion per year to £50 billion per year by 2030 prior to COP26 in line with the recommendations in that report.

Answered by Kemi Badenoch (Exchequer Secretary to the Treasury):
The Government takes its environmental responsibilities very seriously. The Prime Minister’s Ten Point Plan demonstrates this commitment to tackling greenhouse gas emissions. It sets out £12 billion of new government investment in green industries.
In addition to this £12 billion, the ambitious policies and significant new public investment will mobilise private sector investment. Providing the co-funding, regulatory certainty and robust green finance frameworks included in the plan is expected to attract up to £42 billion of low-carbon private investment across energy, buildings, transport, innovation and the natural environment by 2030.
Further detail on the plan for decarbonising and increasing low-carbon investment will be set out in the Government’s Net Zero Strategy ahead of COP26.