UK.gov lacks understanding of climate impact, says watchdog

Risks of changing climate and cost of transition to low-carbon energy poorly measured by government departments

Public bodies in the UK expect higher operating costs and energy charges as a result of climate changes and the transition to lower carbon energy, but few have a good picture of the risks, according to government auditors.

A new report from the National Audit Office (NAO) says some public bodies expect financial impact from the risks they identified, although bodies were often not able to cost these – even approximately.

"Bodies anticipate costs to arise from damage to assets and infrastructure, driven by physical damage from extreme weather, as well as from chronic shifts to higher temperatures and more precipitation. Bodies also expect higher maintenance and repair costs, potential asset upgrades, and transition costs. Many bodies expect increased operating costs, including energy charges. Bodies controlling significant property or infrastructure are particularly concerned with decarbonization and adaptation costs," the report stated.

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His Majesty’s Treasury (HMT) has set out rules for climate-related financial disclosure in larger central government bodies' annual reports, which produced their first set of reports for the 2025-26 financial year. Other rules for disclosure have been in place since 2022.

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However, the NAO found [PDF] that understanding of the risks in the impact of climate change –  increasing temperatures, higher risk of flooding, higher winds and longer droughts – was poor, as was insight into costs of moving to a low-carbon economy.

"Bodies did not articulate transition risks as well as physical risks in the strategy disclosures. In the disclosures we reviewed, while several transition risks were listed, few specifics were given, unlike physical risks, which were explained in greater detail," the report from the watchdog stated.

"The transition risks most frequently identified included the financial cost of transition, and supply chain disruption. Anticipated transition costs included the costs of: switching to lower-carbon energy sources, including investments in new technology; complying with new regulations; and of fluctuations in the price and availability of materials, water, energy and specialist skills," it added.

Gareth Davies, head of the NAO, said: "UK public services will need to adapt to the impacts of climate change. Parliament needs clear information on the resilience of infrastructure, service provision and finances to climate change, and on how these risks are being managed."

"Although public bodies are still learning how best to report their most pressing climate risks, the requirement on all large central government bodies to make such disclosures from 2025-26 is an important first step. We expect this reporting to become more useful over time."

Earlier this year a report from Global Action Plan, a climate charity, claimed 84 percent of proposed datacenter developments were in areas that are already water stressed or projected to be water stressed by 2040.

Water consumption by datacenters could intensify strain on the UK’s water systems already stressed by climate change, it argued.®