Scottish Budget 2021-2022: 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 (December 2020) and HM Treasury GDP Deflators, December 2020.

3. A fuller description of the model and its associated Greenhouse Gas effects estimates that this assessment is based upon can be found at: Supply, Use and Input-Output Tables

Revisions to the Environmental Input-Output Model

4. There has been no update to the UK Input-Output Analytical Tables at full industry detail since the Blue Book 2018 based 2015 tables. As a result, the only changes to the underlying model are:

Update of the emissions data from ONS environmental accounts to the latest published version (December 2020).

Update of the forecast GDP deflator used to project estimates to the budget year to the latest version published by HMT (December 2020).

5. These changes have led to a downward revision to estimated greenhouse gas emissions arising from the 2020-21 Draft Budget of around 6%.

6. The majority (over 95%) of this revision arises from the updating of the UK HM Treasury GDP Deflators from the December 2019 published series to December 2020. The new series shows a sharp increase in 2020-21 due to the impact of Covid-19, implying a lower volume of activity (and hence emissions) per pound spent in the revised model compared to the published one. The remainder of the revision is due to taking on updated estimates of greenhouse gas emissions by industry from the UK Environmental Accounts.

7. 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.