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HM Treasury’s Decarbonisation of the UK Economy and Green Finance Inquiry

CUSP evidence submissions
September 2019

CC.0 Clever Visuals / unsplash.com

Earlier in 2019, the UK Treasury Select Committee launched an inquiry into the decarbonisation of the UK economy and green finance, set out to scrutinise the role of the Treasury department, regulators and financial services firms in supporting the UK Government’s climate change commitments, and examining the economic potential of decarbonisation for the UK economy.

CUSP evidence was submitted via CUSP director Tim Jackson (1), our partners at GSI (2) and the Aldersgate Group (3); and published in early September.

1 | Decarbonisation Strategy and Modelling

Tim Jackson responded in particular to questions 4 and 6 in the call, namely:

  • What is HMT’s current strategy, and approach to, UK decarbonisation, and is it fit for purpose?
  • How should HMT’s approach evolve to ensure the Government meets the legally binding carbon budgets (and the net-zero targets, if applicable)?
  • With some additional relevance for question 3 (on ensuring a just transition) and question 7 (on the spending review).

Making the case for early ‘deep’ carbon reductions when it comes to remaining within a fair carbon budget for the UK, the evidence draws on and summarises the findings from three recent CUSP working papers addressing i) the adequacy of the UK’s carbon targets; ii) the modelling challenge associated with ‘deep decarbonisation’; and iii) the measurement of prosperity.

In the light of the challenges associated with navigating the transition to a net zero economy, and in addition to the recommendations made in the paper regarding the Treasury model, it is suggested that there is an urgent need to explore alternatives to the dominant outcome measure of the GDP through which lens the Treasury sees its role and discharges its responsibilities. “As the New Zealand example has shown, there are distinct advantages to locating a broader set of measures of wellbeing inside Treasury”.

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2 | Investment Barriers

Our partners at GSI submitted evidence based on the recent review by Sarah Hafner et al on Barriers to investment in climate change solutions; outlining that key barriers identified in the study are policy uncertainty, the short-term nature of investors, and the lack of appropriate scale in investment opportunities. Submitted by CUSP co-investigator Aled Jones, the findings are summarised on our blog page.

3 | Green Infrastructure

Our partners at the Aldersgate Group also submitted evidence based on our joint work on the Towards the new normal report, setting out a list of policy recommendations that can maximise opportunities for private green infrastructure investment. Key suggestions are: building project pipelines through policy stability and regulation; addressing structural market barriers such as short-termism; using public spending to incentivise private investment; improving access to data and high quality financial disclosure to inform investment strategies; and supporting innovative financial products to maximise the UK’s competitive advantage in green finance.

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For a full list of submission papers, including from our friends at Positive Money UK; Green Alliance and IFoA, please see the UK parliament website.

Further Reading

Zero Carbon Sooner —The case for an early zero carbon target for the UK
Zero Carbon Sooner —The case for an early zero carbon target for the UK
APPG
Economy
Finance
System Dynamics
July 18, 2019
This briefing paper summarises the dilemma associated with using mainstream, macroeconomic models to guide disruptive, transformative change such as those that might occur under ‘deep decarbonisation’: a rapid transition to a net-zero carbon economy. Some form of macro-economic modelling framework is essential to enable policy-makers to exercise short- and long-term fiscal responsibility. Incremental models based on historical behaviour, however, are a poor guide to outcomes under circumstances of disruptive change.
This briefing paper summarises the dilemma associated with using mainstream, macroeconomic models to guide disruptive, transformative change such as those that might occur under ‘deep decarbonisation’: a rapid transition to a net-zero carbon economy. Some form of macro-economic modelling framework is essential to enable policy-makers to exercise short- and long-term fiscal responsibility. Incremental models based on historical behaviour, however, are a poor guide to outcomes under circumstances of disruptive change.
Economy
Finance
System Dynamics
July 30, 2019
Since its development in the 1930s, GDP has been the most widely used measure of the health and progress of an economy, being adopted as the principal policy objective of countless national and international bodies across the world. Its many shortcomings as a measure of progress are well documented, and the alternative indicators of progress developed in response to these shortcomings have been diverse and numerous. This paper synthesises the literature, highlighting the importance of context and purpose in determining what makes a ‘good’ indicator.
Since its development in the 1930s, GDP has been the most widely used measure of the health and progress of an economy, being adopted as the principal policy objective of countless national and international bodies across the world. Its many shortcomings as a measure of progress are well documented, and the alternative indicators of progress developed in response to these shortcomings have been diverse and numerous. This paper synthesises the literature, highlighting the importance of context and purpose in determining what makes a ‘good’ indicator.
Economy
Nature
System Dynamics
August 5, 2019
Sluggish recovery in the wake of the financial crisis has revived discussion of a ‘secular stagnation’. These conditions have been blamed for rising inequality and political instability. Tim Jackson contests this view, pointing instead to a steadfast refusal to address the ‘post-growth challenge’.
Sluggish recovery in the wake of the financial crisis has revived discussion of a ‘secular stagnation’. These conditions have been blamed for rising inequality and political instability. Tim Jackson contests this view, pointing instead to a steadfast refusal to address the ‘post-growth challenge’.
Economy
Health
Politics & Enterprise
System Dynamics
May 13, 2018
Confronting inequality in a post-growth world – basic income, factor substitution and the future of work
Confronting inequality in a post-growth world – basic income, factor substitution and the future of work
Economy
System Dynamics
April 17, 2018
TRansit | Modelling transition risk
TRansit | Modelling transition risk
Finance
System Dynamics
July 1, 2019