Scottish Budget 2020-2021: carbon assessment

Annex A – Methodology

1. The figures presented in this report are estimated using the Scottish Government Environmental Input-Output Model (EIO) 2015.

2. The EIO is constructed using the Scottish Government Input-Output Tables 2015 (taken from the 1998-2016 Tables published in July 2019), UK Blue Book 2018 consistent Input-Output Tables 2015 and UK Analytical Tables 2015, UK Environmental Accounts 2015 (June 2019) and HM Treasury GDP Deflators, December 2019.

3. A fuller description of the model and its associated Greenhouse Gas effects estimates that this assessment is based upon can be found at: https://www.gov.scot/publications/about-supply-use-input-output-tables/pages/environmental-input-output/

Revisions to the Environmental Input-Output Model

4. With the release of new Input-Output Analytical Tables covering the year 2015 for the UK, this year the base year of the EIO model has been updated from 2014 to 2015.This has involved a number of additional changes to the model:

• The updating of the underlying Scottish Input-Output model and UK closed economy input-output model from the 2014 version to the latest published version for 2015
• The updating of the year used to calculate emissions factors from 2014 to 2015

alongside the regular annual updates of:

• Updating the emissions data from ONS environmental accounts to the latest published version
• Updating the forecast GDP deflator used to project estimates to the budget year to the latest version published by HMT.

5. These changes have led to a downward revision to estimated greenhouse gas emissions arising from the 2019-20 Draft Budget of around 3%.

6. The majority of this revision arises from arises from the updating of the UK Input-Output Tables from the old 2014 version to the 2015 version in the closed economy model.

7. Other sources of revision include changes in the GHG emissions factors between 2014 (the year for which the old model was constructed) and 2015 (the year for which the new model was constructed), changes in the underlying Scottish Tables between the old 2014 versions and the 2015, revisions to the forecast GDP deflator, and price changes between 2014 and 2015 which were not well approximated by the change in the GDP deflator.

8. Care should be taken when interpreting the revision to imported GHGs. Given the lack of a world economy model and emissions factors, the EIO model uses the UK economy as a proxy for the world economy. Changes in emissions intensities in the UK economy may not be representative of changes in the world economy, for example due to different technologies being used, or if more carbon intensive activities move overseas and are replaced by imports.