The Environment Strategy for Scotland: Delivering the Environment Strategy Outcome on Scotland's Economy - Evidence Base & Policy Levers

2. Introduction

2.1 Context

This research project was undertaken to support the evidence base for informing the development of a ‘pathway’ for achieving one of the outcomes of Scotland’s Environment Strategy. The outcome focuses on the transformations in Scotland’s economy needed to play Scotland’s role in tackling the global climate and nature emergencies.

This pathway, and the content of the research, is therefore limited to the functioning of the domestic economy within Scotland and the features and functions of key sectors of the Scottish economy. Other Environment Strategy outcomes outside the scope of this research are focused on related areas, such as the transformations in Scotland’s society (including lifestyles and social policies) needed to tackle the climate and nature emergencies; and the sustainability of Scotland’s global footprint (including sustainable consumption and international trade).

The Environment Strategy for Scotland’s vision, published in 2020, describes the country’s ambitions for achieving net zero by 2045, restoring Scotland’s natural environment, and playing Scotland’s full role in tackling the climate and nature emergencies. It acknowledges that this will require transformative changes across Scotland’s economy and society. In turn, these transformations can help to ‘transform Scotland for the better’ by improving people’s health and wellbeing, tackling inequalities, and supporting new opportunities for green jobs and businesses.

The ‘economy’ outcome within the strategy focuses, in particular, on the goal of a just transition to a net zero, nature positive, circular economy. This outcome is integral to Scottish Government’s vision for a wellbeing economy,[6] described as ‘an economic system, within safe environmental limits, which serves and prioritises the collective wellbeing of current and future generations’. It also directly aligns with one of the three ambitions set out in the 2022 National Strategy for Economic Transformation,[7] to create a ‘greener economy: demonstrating global leadership in delivering a just transition to a net zero, nature positive economy, and rebuilding natural capital’.

The Scottish Government (SG) is now developing a ‘pathway’ to identify actions and priorities across the breadth of government for driving progress towards the Environment Strategy ‘economy’ outcome.

2.2 Overview of approach

In order to identify evidence to support the development of this pathway, a comprehensive literature review was undertaken, assessing a series of strategy and policy documents that included, among others, the National Strategy for Economic Transformation, the draft Biodiversity Strategy, the Just Transition Planning Framework, the Infrastructure Investment Plan, the National Planning Framework 4 and the updated Climate Change Plan.

The research considers within each of these plans and strategies, how the Government is currently deploying, or planning to deploy, economic policy levers to achieve its targets and objectives and the research offers a qualitative assessment of their effectiveness and sufficiency in driving progress towards the Environment Strategy ‘economy’ outcome. When referring to the SG, the report also considers Government funded public sector organisations and private sector organisations that the Government can influence directly (e.g. investors and employers through regulation or public investment).

2.3 Methodology

In order to develop evidence for the pathway, the research project was undertaken with two overarching research questions, which were:

• Research Question 1: What does existing evidence tell us about Scotland’s current progress towards a just transition to a net zero, nature positive, circular economy?
• Research Question 2: How can the SG and its partners use the available policy levers most effectively to drive progress towards a just transition to a net zero, nature positive, circular economy?

The research was also necessarily broad given the range of sectors within the Scottish economy requiring due consideration, and the breadth of policy areas which are relevant across these sectors and with environmental and economic implications.

It is important to note, that in many cases, detailed evidence or data, for example about sufficiency of policies for delivering objectives, is not always available, nor are targets and objectives always explicit in different areas about what would achieve the outcomes. Therefore, the research team has in many cases had to use its own judgement as to sufficiency in many areas. The team is aware that in assessing the sufficiency of policies already in place or in design, it is clearly not always possible to be scientific; hence in places the assessment is necessarily based on framing (of the problem), belief (in paradigms, e.g. technological optimism, market forces), and judgement.

The researchers note the intention for the pathways, once developed, to be taken to public consultation. The evidence presented here is therefore not intended to be a final say on the challenges set out, but an informed and evidenced judgement.

2.4 Key definitions used

A number of key terms that are used throughout the report are defined as follows:

• Just transition: we draw on the definition used by the Just Transition Commission, who state that just transition policies are those designed “in a way that ensures the benefits of climate change action are shared widely, while the costs do not unfairly burden those least able to pay, or whose livelihoods are directly or indirectly at risk as the economy shifts and changes.”[8] This does not mean eliminating the costs of transition or a situation where nobody loses out from transition, but rather protecting the most vulnerable from their impacts. Importantly, when applying this definition in the report, we broaden its scope beyond climate change action alone, to refer more holistically to the just transition to a net zero, nature positive, circular economy.
• Net zero economy: in line with the SG’s 2045 target, a net zero economy is one where the sum of the greenhouse gases created and greenhouse gases removed from the Scottish economy will be at or below zero.[9]
• Nature positive economy: for the purposes of this project, we have defined a nature positive economy to be one that halts biodiversity loss by 2030 and creates an increase in and restoration of biodiversity levels after that point, in line with its definition in the international literature.[10] This matches the high-level outcomes proposed by the SG in the 2022 draft Scottish Biodiversity Strategy.[11]
• Circular economy: based on the approach used in the Circularity Gap report for Scotland, we define a circular economy as one that minimises resource extraction, ensures that remaining extraction is regenerative and minimises the dispersion and loss of materials. In practice, increasing circularity in an economy requires narrowing material flows by using less material in the making of products and the delivery of services, slowing material flows by using goods for longer, replacing inputs and materials with regenerative alternatives where possible, and maximising re-use of materials and products.

2.5 Structure of the report

The report is structured into three sections (A, B and C), which broadly follow a logical structure as follows:

Section A reviews existing and proposed policies across the three interlinked objectives that fall within the Environment Strategy ‘economy’ outcome i.e. ‘net zero economy’, ‘nature positive economy’ and ‘circular economy’. For the purposes of this report, these objectives are described as ‘missions’. For each of these areas, policies are reviewed as ‘levers’ that sit under overarching policy lever-domains. Where evidence and existing data allows, levers are reviewed for their sufficiency and effectiveness in supporting the three missions.

Section B undertakes a Theory of Change exercise for the ‘net zero economy’ and ‘nature positive economy’ missions. It takes the policy levers set out in Section A, adds additional levers identified in wider national and international literature, and tests them systematically across different sectors of the Scottish economy for formulations of the levers (existing or hypothetical) which could effectively contribute towards these missions over the short, medium and long term.

Section C then synthesises the research of Sections A and B to identify policy-lever recommendations, aligned to specific sectors within the Scottish economy (following the structure of Section B). These recommendations both identify new levers as well as proposing how existing levers could be improved or go further.