Europe 2020: Scottish National Reform Programme 2016

Chapter 4: Climate Change, Low Carbon and Resource Efficiency

Securing the transition to a lower carbon, more resource-efficient economy is central to delivering growth that is sustainable across Scotland and across generations.

Scotland's Economic Strategy emphasises the importance of ensuring that Scotland protects and nurtures its natural resources and explores the opportunities offered by the transition to more resource efficient, lower carbon economy.

This chapter sets out the activities being undertaken across Scotland in support of the transition to a low carbon, resource-efficient economy and the EU's flagship initiative, 'Resource Efficient Europe'.

Europe 2020 headline targets:

• Reducing greenhouse gas emissions by 20 per cent compared to 1990 levels (or by 30 per cent if conditions are right);
• Increasing the share of renewable energy sources in final energy consumption to 20 per cent; and
• A 20 per cent increase in energy efficiency.

Current Scottish Performance

The Scottish Government has established a range of targets which are focused on driving Scotland's transition to a low carbon economy. Scotland's current performance against these targets is presented in Table 4.

Table 4 - Current Scottish Performance Against Transition to a Low Carbon Economy Indicators

Indicator	Target	Current Level	Change Over Year	Reference Period
Greenhouse Gas Emissions [39]	Reduce emissions by at least 42% by 2020 and at least 80% by 2050, compared to a 1990 base year	38.4% reduction from 1990 to 2013, after taking account of trading in the EU Emissions Trading System ( EU ETS)	14.0% decrease in emissions, after taking account of trading in the EU Emissions Trading System ( EU ETS)	2013
Indigenous Renewable Energy Sources [40]	Generate the equivalent of 100% of gross electricity consumption from renewable sources by 2020	49.7%	5.3% pts increase	2014
Heat Demand [41]	11% of Scotland's heat demand from renewables by 2020	2.7%	0.3% pts increase	2013
Energy Efficiency [42]	Reduce final energy end-use consumption by 12% by 2020 (against a 2005-2007 baseline)	14.1% lower than baseline	2.0% pts decrease in consumption	2013

Scotland is performing well against each of its low carbon targets. As shown in Table 4, Scotland is on track to meet its own 42 per cent greenhouse gas emissions reduction target, with progress among the leading countries in Western Europe; Scotland almost met its interim target to produce 50 per cent of its gross electricity consumption from renewable sources a year early; final energy end-use consumption is decreasing; and the share of Scotland's heat demand from renewables is increasing.

Opportunities from a Low Carbon Economy

The Scottish Government is committed to growing the low carbon economy in Scotland, characterised by high levels of resource efficiency and the development of low carbon goods, processes and services.

Support for Renewable Energy Technologies

To support developments in renewable energy, the £103 million Renewable Energy Investment Fund ( REIF) was established to provide commercial loans and equity, particularly in the marine and community sectors. To date, REIF has invested £37.1 million in marine energy projects with further investments planned. This includes over £1.5 million to support the largest wholly community-owned wind farm in the UK (on the Isle of Lewis).

With the support of REIF, the Scottish public sector has invested £23 million in the MeyGen project, developed by Atlantis Resources. Meygen is the largest planned tidal development project in the world and will have 398 MW of installed capacity when fully constructed.

The Scottish Government set an ambitious target in 2011 for 500 MW of community and locally-owned renewables to be operational by 2020. This has been met 5 years early. By the end of September 2015, an estimated 508 MW of community and locally-owned energy capacity was operational in Scotland, with 62 MW of this under direct community ownership. It is estimated that achieving this target could be worth up to £2.2 billion to Scottish communities and rurally-owned businesses over the lifetime of those projects. ^[43]

We are helping to cut the cost of offshore wind by at least 10 per cent through £2.2 million of investment in the Carbon Trust's Offshore Wind Accelerator Programme ^[44] over 2014-15 to 2015-16. The investment will be used to encourage international collaboration between the world's leading offshore wind developers; share knowledge on design and operation of offshore wind technology; and support the commercialisation of floating offshore wind turbines for Scottish waters.

Local Energy Challenge Fund

To support community involvement in the supply of renewable energy, the Local Energy Challenge Fund will support large-scale low carbon demonstrator projects that link local energy generation to local energy use. There have been two rounds of the Challenge Fund since its inception in August 2014. The first round has delivered four innovative projects which will inspire similar projects across the country. The second round of projects will progress from feasibility to capital spend during 2016. The £500,000 development and feasibility support for this second round has been provided through the ESF-supported Low Carbon Infrastructure Transition Programme ( LCITP). More information on the LCITP is provided in Box 4.

Box 4: Low Carbon Infrastructure Transition Programme

The Low Carbon Infrastructure Transition Programme ( LCITP) ^[45] is a working partnership between the Scottish Government, Scottish Enterprise, Highlands and Islands Enterprise, Scottish Futures Trust and sector specialists, designed to support the development and acceleration of low carbon infrastructure projects to investment grade business cases allowing them to secure existing streams of public and private capital finance.

This is supported by the 2014-20 European Regional Development Fund ( ERDF) programme and is worth £76 million (of which £32.9 million is from the ERDF grant), over 2015-18.

To date, LCITP has funded a number of projects across private, public and community sectors, and has held two specific calls for geothermal energy projects and water-source heat pump projects. These calls have accelerated the deployment of these technologies in the Scottish context.

Through the LCITP, the Water Source Heat Pumps Challenge Fund has been set up to support district heating schemes in Scotland. The fund is made up of two elements: £375,000 to support the development of high-quality and comprehensive investment grade business proposals (up to £75,000 per project), and up to £2 million financial support for a demonstrator project. It is intended that both elements of the Challenge Fund will be concluded before the end of the 2016-17 financial year.

Maximising the Social and Economic Opportunities of Energy and Resource Efficiency

Achieving high levels of resource efficiency, cutting waste out of processes and adopting more circular behaviours (such as design for reuse and repair) is critical to improving productivity and competitiveness, and reducing the carbon intensity of economic activity.

To help improve levels of resource efficiency a range of actions are being taken forward in Scotland, which are focused on providing support to business, public sector and communities and to helping to improve the energy efficiency of households.

Circular Economy

The Scottish Government welcomes the European Commission's continuing emphasis on making the move towards a more circular economy, as set out in the Commission's December 2015 communication, Closing the Loop. ^[46]

The Scottish Government's circular economy Making Things Last, published in February 2016, sets out the priorities for moving towards a more circular economy - where products and materials are kept in high value use for as long as possible. The strategy outlines the benefits of a more circular approach to the Environment, the Economy, and Communities.

The strategy sets a new target to cut food waste by a third by 2025 - the first national target of its kind in Europe - with actions to help both businesses and households achieve these major savings.

Our circular economy approach places a greater emphasis on product design, re-use and repair. Scotland's enterprise agencies and Zero Waste Scotland ^[47] will make circular economy approaches a new focus for innovation support and will establish a new support service to help businesses adopt these approaches. The Scottish Institute of Remanufacture ^[48] is already working to increase collaboration and innovation among remanufacturing businesses - with wider support led by the Scottish Manufacturing Advisory Service ^[49] and Zero Waste Scotland as an integral part of Scotland's new Manufacturing Action Plan. ^[50]

Box 5: Supporting the Move Towards a More Circular Economy

In February 2016 the First Minister announced a £70 million programme of investment, including some £30 million of ERDF funding, to support a more circular economy which will be delivered in partnership between Zero Waste Scotland and Scottish Enterprise.

This includes a Circular Economy Investment Fund ^[51] which will support the development of innovative technologies, business models and infrastructure that will typically be at proof of concept state through to scoping and pre-feasibility and commercialisation. Funding will help to accelerate these products, practices, developments and business models towards widespread adoption and implementation. It will also encourage the development of infrastructure utilising proven technology, to stimulate the collection and reprocessing of materials, which are currently commercially unavailable in Scotland.

The programme also includes a new Circular Economy Service, which will offer a fully integrated, whole supply chain approach to businesses seeking to redesign processes or products and small- to medium-sized businesses within the supply chains of larger companies. The priority sectors for the service will be the built environment (construction and demolition), energy infrastructure (Oil and Gas Decommissioning) and the bioeconomy (Food and Drink). SMEs that are eligible for support will receive an agreed level of specialist development support to help progress their idea or business opportunity to the next stage.

Heat and Energy Efficiency

The Heat Policy Statement ^[52] was published in June 2015, which sets out the Scottish Government's framework for achieving a resilient heat system which transitions to be an affordable low carbon heat system for households, organisations and industry and which seizes the economic opportunities that this transformation offers. The Heat Policy Statement sets out the Scottish Government's heat hierarchy, a step-phased approach, firstly reducing the need for heat for example through better insulated buildings; secondly by ensuring an efficient heat supply, such as development of the district heating sector and the use of unused excess heat through heat recovery, and lastly through the effective use of renewable or low carbon heat sources. A range of actions are being taken forward to make this transition.

• Our national retrofit programme, Home Energy Efficiency Programmes for Scotland ( HEEPS), is helping us meet our fuel poverty and climate change targets and enable Scottish households and businesses to get maximum benefit from energy efficiency works and other investment. The Scottish Government allocated £119 million for HEEPS in 2015-16, and in 2016-17 over £103 million will be made available to tackle fuel poverty and improve energy efficiency. This funding will be used to help install energy efficiency measures, including solid wall insulation, in 14,000 homes and will build on the 900,000 energy efficiency measures delivered since 2009.
• The District Heating Loan Fund ^[53] offers loans to support the development of district heating networks in Scotland. The scheme is available to provide loans for both low carbon and renewable technologies in order to overcome a range of infrastructural issues and costs of developing these projects. Since 2011, the fund has provided loans totalling around £7 million to 33 projects.
• To help support the development and growth of a geothermal energy industry in Scotland, the Geothermal Energy Challenge Fund ^[54] was launched in March 2015 to support the capacity of Scotland's geothermal resources. £185,235 has been awarded to four feasibility studies exploring the geothermal potential of sites in Fife, North Lanarkshire, Aberdeen, and Aberdeenshire to meet the energy needs of local communities, and the feasibility studies are expected to report in mid-2016.