LONDON (UK) – British finance minister Rishi Sunak’s annual budget on March 3 is set to have a green tinge, even as the country has spent billions of pounds to fund its response to the coronavirus pandemic.
Sunak plans to introduce Britain’s first “green” government bonds, designed to finance environmentally friendly investments, and might also give a nod to the Bank of England to lay their focus more on climate change.
Britain is hosting a major United Nations environmental summit, COP 26, in November and Sunak told other finance ministers last week that he wanted steps taken on the lines of climate change, and considered it as a major theme of Britain’s chairmanship of the G7 this year.
Philip Dunne, the Conservative chair of the British parliament’s Environmental Audit Committee, said Sunak should employ the budget, aiming to make progress on a government promise to cut down net carbon emissions to zero by 2050.
He said, “The government has a golden opportunity from COP26 to be able to start showing some international leadership on these issues.”
As per a report published on Wednesday, the committee urged Sunak to reduce the 20% rate of value-added tax on domestic energy efficiency projects and raise incentives to buy electric cars.
The finance ministry should also start “scoping” work, when it comes to new taxes on carbon emissions, and its aim must be to get concrete proposals ready before the end of the year, Dunne said.
One thing Sunak has committed to, within the short term is the unveiling of so-called “green” gilts as part of 2021/22 borrowing plans, likely to be announced on March 3. The scale of the green issuance and the maturity of the bonds is not yet known.
Britain has fallen behind other European countries in issuing this type of debt.
However, Germany sold green bonds last year at a lesser rate than conventional debt.
For Simon Youel, head of policy at campaign group Positive Money, green bonds are a symbolic gesture partly.
Youel said, “There’s no reason why ordinary gilts can’t be funding green infrastructure.” However, it would benefit if they bring more transparency about what the government views as green investment, he said.
A major concern for Positive Money is the Bank of England, which, according to the campaign group, has shown reluctance to allow businesses in a more carbon-neutral direction.
Sunak should use his annual review of the BoE’s remits, so that it could get a full account of the government’s environmental goals. Youel said it would help to sell its holdings of bonds issued by oil and gas companies.
This will be the first time BoE will require banks and insurers to consider formally at risks posed by climate change and publish results in early 2022.