The PRI welcomes the Environmental Audit Committee’s (EAC) exploration into the role of HM Treasury in shaping the UK’s response to climate change, nature loss and wider environmental sustainability.
The PRI welcomes the Environmental Audit Committee’s (EAC) exploration into the role of HM Treasury in shaping the UK’s response to climate change, nature loss and wider environmental sustainability. As the government department responsible for developing policies or regulation for the financial system, HM Treasury plays a vital and underexplored role in meeting the UK’s climate commitments.
Our response covers positions related to the role that HM Treasury is playing and can play in driving the UK’s climate change agenda; how HM Treasury works with other departments, regulators, public bodies; progress to date and recommendations.
The PRI’s key recommendations are:
- HM Treasury’s budget could include an explicit Transition Alignment Statement to showcase how fiscal measures align with the UK’s Carbon Budget and domestic sectoral pathways. Ensuring government decisions (budget, spending, tax, subsidies) are stress tested for their impact on the transition would limit the risks of setting conflicting policies and ensure consistency in prioritising low carbon policies.
- Sectoral pathways should be anchored in government oversight with clear cross governmental authority and mechanisms for structured collaboration between policy makers and investors, which should be formalised.
- HM Treasury could embed the Climate Change Committee’s (CCC) ten priority actions in the annual progress reports as a framework for policy interventions, enabling evidence-based policy making with a long-term perspective.
- Delivery units could be tasked with developing aligned policy tools with impact assessments, clear implementation routes, and regular review cycles to measure policy effectiveness. Alignment with HM Treasury’s fiscal policy should be prioritised, with transition milestones embedded into Treasury’s Spending Review processes.
- HM Treasury could better leverage existing incentives to catalyse markets through subsidies, tax credits, blended finance and pricing mechanisms (e.g. carbon markets), which would provide appropriate signals to investors and stimulate private finance towards the economic transition.
- Stronger inter-departmental coordination within government would ensure that climate targets are incorporated when designing tax, subsidies, or departmental budgets.
Read our full response below.
