Overcoming barriers to the engagement of supply-side actors in Scotland's peatland natural capital markets - Final Report

6 Findings – Costs and revenues to government

In this final results section, more detail is given on the costs of each scenario to Scottish Government. In addition, perspectives on the introduction of a new tax on degraded peatlands are presented.

6.1 Costs to Scottish Government

In making policy decisions, Scottish Government will have to assess the cost implication of each mechanism. Table 10 summarises the NPV of the costs to Scottish Government for each scenario.

6.2 Taxes on degraded peatland

After each scenario was discussed, participants were asked their opinions on introducing a tax on degraded peatland. This would act as a disincentive to encourage people to restore their peatlands or to pay for their lack of action. This was the first time interviewees had an opportunity to discuss a disincentive rather than an incentive.

6.2.1 Attitudes towards tax

A portion of the participants approved of the proposal, with the main reason being it would "motivate landowners to get going", "get it done quicker" (Survey Responses) and to act with less hesitancy. There did appear to be a pattern to the participants who were in favour of a tax. Firstly, those who have a duty or ethos to restore environments and habitats such as NGOs and charities. In many cases, these participants had already restored or were planning to. As an NGO, one participant thought it would damage their reputation and "would be embarrassed" (Participant 24) if they were to be charged. Secondly, participants who did not have heavily degraded peat were more inclined to support the notion of a tax. Their restoration projects may have been more straightforward, less expensive, and more likely to have been accepted into the Peatland Code than heavily degraded or inaccessible peatland. They would also not be as affected by the tax, so it is of less concern to them.

However, other participants were against the idea of a new land tax. The main theme identified was that it would be unfair on some landowners, especially if their individual circumstances were restricting their abilities to restore peatlands. This view was particularly strong amongst landowners, with one estate owner stating: "incentivisation is a far better mechanism than punishment" (Participant 5).

A commonly cited example as to why it might be considered unfair was that the Common Agricultural Policy in the 1970s incentivised landowners to drain peatlands (actively contributing to their degradation) and that it would be unfair to then penalise these people retrospectively. Another more recent example of the Government "subsidising things in the past and then putting a tax on it later" (Participant 16) was hydroelectric schemes.

In some circumstances, the degradation of peatland may not have been the landowner's fault (e.g., a wildfire), was beyond their control (e.g. deer migration from a neighbours plot), or was degraded before it came into their management – all of which were deemed "profoundly unfair" (Participant 28) to retrospectively penalise.

Some participants have a desire to restore peatlands but are restricted by individual circumstances (e.g., remote locations or a lack of capital). Having a tax in place wouldn't change their desire to restore peatland, but it would punish them for something that might be out of their control. Two examples below demonstrate some of these restrictions.

Lastly, some participants were concerned that a tax would not be suitable to crofting and it would be disproportionately unfair to common grazings, especially considering there are many unresolved issues that continue to hold back restoration on common land.

6.2.2 Implementing the tax

Even within those who support the notion of a land tax on degraded peatland, there was still scepticism over how the Government would implement this, with participants citing how it was "way too political". Another supporter of the tax still contemplated the difficulties in implementing such a measure:

"[But] not all peatlands are equal … If a landowner has a degraded peatland but is absolutely inaccessible surely it can't be restored - there should not be a penalty on that. So, then would you start having a case-by-case basis? … You create a problem for yourself where what was meant to be a standardised tax, you are breaking it down, and then someone hears that his neighbour got a tax break!". (Participant 4)

Suggestions were made of how the land tax could work in practice:

"Ring-fence the tax for people who aren't restoring the peatlands to pay for those who are, rather than it going back into the public purse" (Participant 13)

Some participants thought the tax might be applied to the sale of carbon credits and was against this idea as people were already wary of the uncertainty on taxes:

"There isn't even clear guidance on tax treatment of carbon sales at the moment, which already served to dampen expectation. … A rumour that any revenue would be treated putatively then that would definitely serve to create a negative impact" (Participant 5)