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Government encouraged to engage fully with EAC recommendations for boosting financial sector’s role in achieving net zero

23 February 2024

The Government has confirmed that it will not introduce quarterly reporting on how it is meeting net zero targets while enhancing energy security when it rolls out new oil and gas licences in the North Sea. While the Environmental Audit Committee (EAC) appreciates there will be a role for oil and gas in the net zero transition, MPs had raised concerns that the issue of new fossil fuel licences could send mixed signals to the market about the Government’s appetite for decarbonisation.

The Government’s rejection of EAC’s recommendation is within its response to the Committee’s ‘Financial sector and the UK’s net zero transition’ report.

In its report published in November, EAC also called for companies to have mandatory transition plans for net zero, and argued that the current ‘comply or explain’ approach defeated the point of the policy as a company could disclose by simply not having a transition plan. The Government declined to engage with this recommendation. EAC notes that both the Government and the Financial Conduct Authority (FCA) are expected to consult on the approach to transition plans.

While the Committee is disappointed that the Government rejected recommendations to send clear signals to the market by setting an end date to new oil and gas licensing in the North Sea and on transition plans, EAC is pleased to see progress on increasing the funding allocated to the Boiler Upgrade Scheme and on carbon markets. The Government confirms that consultations on voluntary carbon markets and carbon border adjustment mechanisms (CBAMs) are expected in early 2024.

With a General Election expected later in 2024, efforts to implement policy informed by the consultations could run out of time in the current Parliament. Other long-awaited consultations on transition plans and the UK green taxonomy remain overdue. An investment roadmap for nature, expected in Autumn 2023, has now been pushed back to the end of 2024, raising concerns that it will be pre-empted by a General Election.

In light of EAC’s concerns that key areas such as transition plans and green taxonomy were not sufficiently engaged within the Government response, the Chair has also written to the Minister for Energy Efficiency and Green Finance and the Treasury Lords Minister urging them to take the Committee’s arguments into account in full in all relevant upcoming consultations.

Chair comment

Environmental Audit Committee Chair, Rt Hon Philip Dunne MP, said:

“The UK is a global leader in efforts to embed environmental improvements into finance and across the wider economy. But this is no time for any complacency: the Committee warned in November that mixed signals from Government in terms of net zero policy risked undermining further progress.

“From mandatory transition plans to offering companies greater clarity on net zero investment in sectors across the economy, there is plenty the Government can be doing to enhance the UK’s standing. So much of the journey to Net Zero Britain hinges on the private sector playing a key part and the Government must be clear and unwavering in setting out the roadmaps for achieving its environmental objectives.

“While there have been several positive moves in recent months – including the funding boost for the Boiler Upgrade Scheme which the Committee had called for – there are clear risks to making meaningful policy progress arising from outstanding Government consultations due to a looming General Election. This ought to concentrate minds in the Treasury and across Whitehall: to keep the UK as the global green finance leader it currently is, the Government must continue to be swift and agile in its policy development and implementation.”

Further information

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