Reducing greenhouse gas emissions - proposals and policies: report

Policies and Proposals

In response to the CCC, we are furthering our ambition with additional policies and proposals which will contribute to delivery of net zero. On 18^th April 2024 we announced an ambitious policy package, showing our readiness to expand climate action. The policy package contains 19 policy actions which are particularly concentrated around transport, land use and agriculture.

This package includes action to:

• Deliver approximately 24,000 additional electric vehicle (EV) charging points by 2030;
• Develop a new integrated ticketing system that people can use across all public transport;
• Continue implementation of the Agricultural Reform Programme, increasing conditions on payments over the next two years to better balance our commitments on food security, climate mitigation and biodiversity support;
• Publish our route map for 20% car km reduction by Autumn 2024, with a timeline for implementing demand management (this will include consideration of how local government action can further incentivise the switch to EVs in addition to reducing overall car km); and
• Consult on proposals to introduce a carbon land tax as part of considering fiscal and regulatory measures to incentivise peatland restoration, afforestation and renewable energy generation.

In addition, action has continued across a range of areas to drive emissions reduction. One significant source of emissions are Fluorinated gases (F gases), these are powerful greenhouse gases – up to 20,000 times more powerful than CO2 - which contribute to climate change. Hydrofluorocarbons (HFCs) are one type of F gas most widely used across our economy and within our homes. They are found in refrigeration, air conditioning and, for those who have made the transition, in heat pumps, among many other uses.

The Scottish Government works with the UK and Welsh Governments on F gas Regulations, with decisions made jointly between the three governments. The F gas Regulations reduce the amount of HFCs that can be placed on the GB market by 79% (based on 2015 levels) by 2030. The reduction in HFCs is primarily achieved through the implementation of a quota system, which limits the amount of F gases that can be used across GB. Any company intending to import or manufacture F gases must have a quota in place beforehand. The overall quota, and therefore the quota a company is allocated, reduces every three years in line with the overall phasedown policy target for 2030. Estimates of emissions reduction from these policies were not included in the CCPu.

This phasedown of the HFCs quota supports the reduction in F gas emissions. As demonstrated in a comprehensive report on the effectiveness of the F gas Regulation in reducing F gas emissions across Great Britain between 2015 and 2021, which was published jointly by the three nations in 2022, the regulations have successfully reduced emissions by between 13.6-24.2 MtCO2e, with the overall economic benefits estimated to be £1.8-£8.4 billion. Following the findings in the report, we are working with the UK and Welsh governments to develop further the F gas policy to ensure the Regulation continues to drive F gas emissions reductions. Subject to agreements between the three governments, proposals will be consulted prior to any legislative reform.

Another important tool in supporting emissions reduction is the UK Emissions Trading Scheme (UK ETS), which was established on 1 January 2021 by the Scottish, UK and Welsh Governments and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland (DAERA) after the UK’s exit from the EU. Up until this point, the UK was part of the EU ETS.

The UK ETS is a carbon pricing instrument that covers both devolved and reserved issues. Given carbon pricing markets function better at scale, the four nations agreed to cooperate on a single UK market. Therefore, the UK ETS is jointly managed and developed by Ministers from the four governments – jointly referred to as the UK ETS Authority (the “Authority”). As part of the Authority, the Scottish Government continues to push for the UK ETS policies to be as aligned as possible with the EU ETS.

When the UK ETS was established, the Authority committed to increasing the climate ambition of the scheme and in 2022 the Authority published the Developing the UK ETS consultation^[3], which covered a number of proposals to strengthen the UK ETS and align it with net zero targets.

In 2023, the Authority published a government response to the 2022 Developing the UK ETS consultation^[4], which revised the UK ETS cap for the remainder of phase 1, up to 2030, to align with net-zero targets. This revision means a new lower total cap of 937 million allowances over the period, compared to 1,366 million allowances, indicating 429 million fewer allowances over phase 1. This revision and reduction of the cap trajectory was referenced in the CCPu.

Updated Scottish Government industrial decarbonisation modelling suggests lower future emissions in the industry envelope than published in the original 2021 CCPu. This new modelling is in line with the historic approach taken by the CCC in its industrial modelling, using the Net Zero Industry Pathway (N-ZIP) model. In cumulative terms across the period 2025-32, we now expect industry emissions to be lower across the period, compared to what is published in the 2021 CCPu. These reductions are supported by existing policies, grants and schemes to allow greater adoption of decarbonisation technologies, further supported by the new net zero UK ETS cap.

In addition to aligning the cap with net zero targets, the response to the 2022 consultation also stated the Authority’s intention to expand the scope of the UK ETS to other sectors of the economy. The Authority published a consultation in May 2024 to include CO2 emissions from energy from waste and waste incineration from 2028. This would include a 2-year phasing-in period for the sector from 2026 during which emissions would be monitored, reported and verified, with no obligation to comply with the ETS until the sector’s full inclusion in 2028. The ETS would work alongside other initiatives to decarbonise the waste sector by providing an incentive for industry to adopt decarbonisation technologies.

The Authority also published a consultation in May 2024 on how UK-based engineered greenhouse gas removal technologies, such as carbon capture and storage solutions, could be integrated into the UK ETS. The consultation is also looking into whether carbon stored by the creation of new UK woodland could be integrated into the scheme.

The Authority aims to publish in due course two additional consultations on:

• how to expand the UK ETS scheme into the domestic maritime sector from 2026. The UK ETS represents one part of a wider policy mix necessary to address barriers to maritime decarbonisation and could incentivise the adoption of low-carbon fuels, support the deployment of fuel-efficient technologies and introduce more efficient operating practices; and
• how the UK ETS would recognise non-pipeline transportation methods for moving captured CO2 into geological storage, including by road, rail or shipping.

These changes to the UK ETS are expected to drive further emissions reductions across covered and new sectors, helping drive lower emissions in future years than recorded historically.

The action demonstrated in this report is just some of what the government is currently taking forward, but it is important to also highlight our Biodiversity Delivery Plan, Marine Protected Areas, Land Reform Bill, our Onshore Wind Sector Deal, Hydrogen Action Plan and Strategic Investment in Offshore Wind worth up to £500m over 5 years, all of which demonstrate the positive action this government is taking in climate progress. Taken together, it is the view of the Scottish Ministers that the proposals and policies set out in this report will compensate in future years for the combined excess emissions of 4.2 MtCO2e from the 2021 and 2022 targets.

This Government and Parliament rightly have high ambitions, and it is beyond doubt that investing now in net zero is the right thing for our environment, our society and our economy.