Scottish Budget 2022 to 2023: carbon assessment

1. Introduction

1. This assessment is based on the expenditure data presented in the 2022-23 Budget and fulfils the statutory requirement under Section 94 of the Climate Change (Scotland) Act 2009 to report upon the emissions impact of expenditure proposals.

2. It provides a limited overview of emissions and does not, for example, provide any indication as to the consequential impact of specific policies. As a result, policies and expenditure which have emissions reducing lifetime impacts may appear in this assessment as generating emissions due to short run impacts. Care should therefore be taken in interpreting this assessment

3. The overall approach to carbon assessment of the budget is under review, in collaboration with Scottish Parliament, and we will seek to incrementally improve it alongside any recommendations from the review.

4. The aim of this joint review is to improve budget information on climate change – to understand and reduce spend that will 'lock in' future greenhouse gas emissions and increase alignment between the budget and climate change plans.

5. Recommendations from the review are expected in Summer 2022 with a view to improve budget information on climate for the 2023-24 Budget and subsequent rounds.

1.1. Scope of Assessment

6. The assessment of the Budget captures the emissions associated with the Scottish Government's purchase of goods and services. It is a consumption-based measure that covers direct emissions (e.g. the production of gravel for roads constructed by the Government or generation of electricity used by Government) and also any imported emissions that are generated in producing the direct and indirect goods and services that the Government purchases.

7. The assessment does not take account of 'second-round' emissions. While we do include emission impacts associated with Government spend and its supply chain, we do not count the emissions or savings associated with all of the outcomes arising from this spending. For example, while the Carbon Assessment could include an estimate of the carbon associated with the cost of constructing a road, the carbon associated with the subsequent use of the road is not included.

8. The Scottish Government uses a range of other tools, during the policy development stage, to quantify emissions impacts over the policy/project lifetime. These tools include Strategic Environmental Assessments. The Environmental Assessment (Scotland) Act 2005 requires that every qualifying public plan, programme and strategy is considered for its likely environmental effects and, where likely to be significant, opportunities to avoid adverse impacts are sought and positive ones enhanced. Results are published in the Environmental Reports within the Strategic Environmental Assessment database: Environmental assessment: Strategic Environmental Assessment (SEA) - gov.scot (www.gov.scot)^[1]

9. Further tools include Environmental Statements, which are required to assess the environmental effects of certain public and private projects under the Roads (Scotland) Act 1984 (Environmental Impact Assessment) Regulations 2017, which update the requirements in the Roads (Scotland) Act 1984. The Carbon Account for Transport also provides a balance sheet for Scotland's greenhouse gas emissions, and the expected emissions impacts of major transport infrastructure projects and regulatory measures. The latest Transport Carbon Account is available at the following link: Carbon Account for Transport No. 11: 2019 Edition^[2]

10. The combined effect of Scottish Government policies to reduce emissions over the period to 2032 is set out in the Climate Change Plan update, published in December 2020. The Climate Change Plan update sets out our pathway to achieve our world-leading emissions-reduction goals and contains significant new policy commitments to do this.

11. Although the methodology underpinning the Carbon Assessment of the Budget remains the same as for the Carbon Assessment of the 2021-22 Budget, the base year of Environmental Input-Output (EIO) model itself has been updated from 2015 to 2017. This is possible because of the newly available input-output analytical tables covering the year 2017 for Scotland and the UK. As usual the model has also been updated to use the latest available Greenhouse Gas emissions ratios and HM Treasury deflators. More information about these changes and their effects on the overall GHG estimates can be found in Annex A.

12. Following amendments brought forward to 2019's Climate Change Bill, the Government established a Joint Budget Review with Scottish Parliament's environment committee to undertake a review of current processes and outputs around budget information as it relates to climate change, including the Carbon Assessment. This work is currently underway and the Government have engaged the Fraser of Allander Institute to provide analytical support. The Review will conclude during 2022.

1.2. Key Results

13. Following the approach set out in section 1.1, it is estimated that total emissions attributed to the 2022-23 Budget amount to 9.9 million tonnes carbon dioxide equivalent (MtCO2e). Applying the updated model to last year's 2021-22 Budget leads to a downward revision from the published 10.2 MtCO2e to 9.8 MtCO2e.

14. The revision is almost entirely due to the update of the underlying Scottish and closed UK Input-Output models from 2015 to 2017, with the revisions due to updating the projected HMT deflators and GHG industry emissions ratios almost completely cancelling each other out.

15. Details on the various sources of emissions show that some 25 per cent of the Scottish Government's carbon footprint is caused by the use of Energy, Water and Waste, followed by Transport and Communication (22 per cent) and Manufacturing (18 per cent).

16. It is estimated that total emissions attributed to capital investment plans of £6.4 billion of investment in 2022-23 amount to 1.8 MtCO2e. Note that these are the emissions associated with putting the capital investment in place and not their long term use. Emissions associated with resource spend amount to 8.1 MtCO2e.

1.3. Budget Context

17. Budget for 2022-23 contains details of Total Managed Expenditure (TME) of £56.4 billion across portfolio areas. Expenditure is split between resources and capital expenditure, and Annually Managed Expenditure (AME). This is illustrated in Table 1.

Summary

It is estimated that total emissions resulting from the 2022-23 Budget will be 9.9 Mt CO₂-equivalent.

This has increased from 9.8 Mt when applying the updated Environmental Input-Output model to last year's 2021-22 Budget. This is in line with the change in published budgeted spend.

Emissions remain broadly proportional to spend, except for Rural Affairs and Islands, where emissions per unit of spend are higher.

'Second-round' emissions that may result from Government spending and the use of public goods and services, whether beneficial in terms of reducing emissions (e.g. spending on energy efficiency or afforestation) or negative in terms of increasing emissions (e.g. road use) are not captured.