The priceof savingthe planet

May 2023

CIPFA’s Jeffrey Matsu says if we are to save the planet then the public sector must be part of the solution.

The timelines for achieving net zero are ambitious, and radical solutions will be needed to achieve them.

Carbon pricing is one such idea. While the scale of the challenge cannot be addressed through public finances alone, the sector can leverage its expertise in measurement and reporting through carbon pricing. The framework places a monetary value on emissions, encouraging behavioural shifts in production and consumption to less carbon- intensive activities. For example, the revenue generated through policies such as cap-and- trade or a carbon tax can help to alleviate budgetary pressures and support the delivery of vital public services.

Considerable progress has been made in adopting carbon pricing in the UK, and there are opportunities for stronger follow-through in policies. The UK was among the first industrialised economies to commit to a legally binding target to achieve net zero by 2050.

Common standards and practices in accountancy and audit can enable the managers of public services to understand cost drivers and behaviours in a shared language.

Information can then be more readily aggregated, interpreted and exchanged. By better aligning economic activity with the cost of environmental impact, carbon pricing can form a part of a whole-system approach to national green transition.

Public financial management can support climate action through the reporting of carbon emissions data in a standardised and globally recognised format. The sector can then integrate this with wider forms of reporting, while accelerating the alignment and harmonisation of existing frameworks.

National measurement and integration of carbon emissions data is mandatory under the Greening Government Commitments guidance and HM Treasury’s sustainability reporting advice. This activity should be guided by what is happening across local jurisdictions.

Did you know?

According to the Climate Change Committee, an independent, statutory body established under the UK’s Climate Change Act 2008, local authorities can influence around a third of emissions through their statutory and discretionary public services, including engagement with local stakeholders. While local government is currently not covered in the guidance on Greening Government Commitments and sustainability reporting, public financial management professionals can play a constructive role in operationalising national goals into local practices.
In the UK, 21 central government departments are already required to measure their progress towards the GGC.

There can be a considerable difference in how emissions are measured, depending on the method used. For example, the Department for Business and Trade estimates that the public sector contributes 3% of the UK’s total emissions, compared with the Department for Environment, Food and Rural Affairs’ estimate of 8%. For local government, the choice between these two approaches can be equally significant – emissions from consumption can be up to twice that of production. In practice, the approaches should be considered as complementary rather than mutually exclusive. The Global Protocol for Community-Scale Greenhouse Gas Emission Inventories (GPC) standards blend these approaches with a degree of flexibility on the granularity permitted, based on local capacity.

As measurement incurs administrative costs and burden, the sector should consult existing tools that have been developed for local authorities. For instance, SCATTER, developed by the Department for Business and Trade, Greater Manchester Combined Authority and Nottingham City Council, quantifies the impact of capital and revenue projects while embedding the financial cost of carbon into decision-making across statutory responsibilities, such as housing and transport.

Similarly, Local Partnerships and the Local Government Association have produced a greenhouse gas accounting tool to help local authorities establish an annual baseline using the Greenhouse Gas Protocol.

The scale of climate change and consequences for inaction make net zero a target we cannot afford to miss.

  • Jeffrey Matsu is chief economist at CIPFA