In last week’s Budget, the Chancellor announced £15bn in green bonds to help finance the transition to ‘Net Zero’ by 2050. Katie Crookbain asks: is this sufficient?
A potential new coalmine in Cumbria hit the headlines recently, which seemed completely at odds with these commitments, yet councillors said there was no good reason to reject the application. We can confidently expect scrutiny of investment decisions such as these to increase. To ensure we can achieve the government’s commitment to Net Zero carbon emissions by 2050, it must be at the heart of every single investment decision made by the public sector.
For an investment to be sure to support the Net Zero commitment, it must be a stated objective
HM Treasury is the part of government that is responsible for defining the decision-making process that should be followed for any public sector investment, and this is captured within ‘The Green Book’. The final report from a recent review of this guidance stated that: “The Green Book does not set policy objectives, nor does it determine decisions… The Green Book instead helps ministers to identify the best way of achieving their goals.” As a result, the latest version of the Green Book has an increased focus on encouraging decision-makers to set the right objectives in the first place and, where relevant, link these to strategic policy priorities.
The Green Book makes it clear that, if something does not feature in the list of objectives for an investment, then it will be judged as a nice-to-have rather than a must-have in any options appraisal. If it cannot demonstrate a clear return, then it is likely to be binned. For example, PA Consulting is currently working with a Hospital Trust that plans to build a new multi-storey car park - a key enabler for its wider estate redevelopment programme. It wants to do ‘the right thing’ and install solar panels on the roof of the car park, but the benefits from this approach are not sufficient to outweigh the associated costs.
This means that a pure Green Book-compliant options appraisal would say that it should not be pursued unless generating electricity is a specific objective of the car park project, as it does not demonstrate the best value for money. It does not take into account that anything that fails to address the Net Zero agenda now is likely to need some retrofitting in the future, adding to the overall cost.
So, if the UK is to have any chance of achieving its net zero ambitions, all public sector investments must have an objective in support of this commitment. All investments require some combination of infrastructure, technology, and transport, which require energy. For example, data centres are estimated to account for around 1% of worldwide electricity use. Commercially operated cloud data centres are much better optimised for energy efficiency than corporate data centres, but this is rarely the main rationale used to advocate a move to the cloud.
Departments could be provided with more support to make sure their investments align with the Net Zero commitment
There are two changes that would help to make sure this approach sticks:
Firstly, it would be beneficial to have government-wide ownership of the Net Zero agenda. Of course, the Department for Business, Energy & Industrial Strategy (BEIS) holds responsibility for tackling climate change and driving forward that green industrial revolution we’ve heard so much about, but it does not currently have a remit to check and challenge the investment decisions made by the rest of government in its day-to-day operations. And the Infrastructure and Projects Authority (IPA) oversees infrastructure and major projects, but rarely gets involved in lower value investments.
A similar approach could be adopted to that used for the Spend Control process. This is run by the Cabinet Office for certain categories of spend, including digital and technology activities, to make sure departments adhere to relevant government policy, such as the Government Digital Service (GDS) service standards. This was initially very clunky, but has been streamlined over time and is now, in the main, effective. BEIS or IPA could have similar input to ensure all departments have appropriately considered the Net Zero commitment in their investment objectives right at the start of a new programme.
Secondly, departments would welcome some ‘rules of thumb’ for appraising the potential carbon emissions associated with different options at a high level. Supplementary guidance to the Green Book does currently exist to support a detailed appraisal, but for non-infrastructure projects and those in the early stages of development, such a detailed approach is unlikely to be proportionate. Some basic facts, such as the energy consumption of different types of a data centre, would help departments to effectively assess how best to achieve the government’s Net Zero ambitions, whilst also delivering on the wider aims and objectives of any proposed investment.
Achieving Net Zero is not an option, but a requirement. We all must do our bit to make it a reality, and the public sector must lead the way by making it a primary objective of all its investments, not just a nice-to have.