Scottish Budget: 2023 to 2024

Annex G Climate Change Assessment of the Budget

This annex is divided into two parts. Part 1 presents an overarching climate narrative, drawing on highlighted spending areas from multiple portfolios across the Scottish Budget 2023-24 that all contribute towards our response to climate change. This narrative is supported by a carbon assessment of the budget, which is published separately.

Part 2 provides a carbon assessment of the capital budget based on a taxonomy approach that allocates capital spending lines into three broad categories – low, neutral and high carbon. The carbon assessment of the capital expenditure in the Scottish Budget 2023-24 sets out around £2.2 billion of low carbon capital investment in Scotland's public infrastructure – the highest amount spent on low carbon capital investment to date – supporting the decarbonisation of our homes and buildings, transport and industry.

This annex is presented in the context of ongoing work driven by the Scottish Government and Parliament's Joint Budget Review in relation to Climate Change to improve transparency and scrutiny practices in the context of both the carbon assessment of the capital budget and the carbon assessment of the budget.

Part 1: Delivering the just transition to a Net Zero, climate- resilient and biodiverse Scotland and the 2023-24 Budget.

Successive budgets have demonstrated Scotland's commitment to using the powers and resources at our disposal to accelerate the just transition to a Net Zero, climate-resilient and biodiverse Scotland.

The latest emissions data shows our carbon emissions are down by 51% since the 1990 baseline, over halfway to Net Zero. However, as highlighted by recent Climate Change Committee advice, the scale of the change needed to achieve further targets is significant. This is the most challenging moment in our journey: we need to halve our emissions again within the next eight years.

To capture the full economic, social and environmental benefits of the transition we need targeted, impactful and long-term investment. This investment will unlock the opportunities ahead, from creating good jobs, and supporting localised and decarbonised supply chains, to delivering skills provision that is designed for a Net Zero economy. It will also help us respond to the current cost-of-living crisis – from improving energy efficiency, expanding the use of renewable energy and improving access to affordable public transport.

Renewable Energy and Energy Efficiency

• Across this Parliament we have committed over £1.8 billion to accelerate the deployment of heat and energy efficiency measures to shift over a million Scottish homes to zero-carbon heating by 2030. Including an investment in 2023‑24 of £366 million that will support a range of activities including work to promote the roll-out of zero emissions heat networks through our Scotland's Heat Network Fund, support energy efficiency and low carbon heating with grants for home owners through Home Energy Scotland and the public sector through the Green Public Sector Estate Decarbonisation Scheme, interest-free loans for businesses through our SME loan and Cashback Scheme, measures to tackle fuel poverty and work to decarbonise our social housing stock through the Social Housing Net Zero Heat Fund.
• Our £56 million investment in Energy Industries Net Zero funds in 2023-24 will support a wide range of energy efficiency and decarbonisation activities, including investment to maximise the economic and social outcomes of the transition to a Net Zero Scotland, and continues our commitment to focus on renewable hyrogen via the Emerging Energy Technologies Fund; support businesses in the North East of Scotland grow and diversify via the Energy Transition Fund; and co-invest with energy-intensive manufacturing industries to reduce energy costs and emissions via the Scottish Industrial Energy Transformation Fund.
• We will soon publish our finalised Hydrogen Action Plan, supported by a £100 million capital funding programme, designed to accelerate and maximise production. This includes £25 million in 2023-24 to support the development of infrastructure to deliver our ambitions for hydrogen, carbon capture, utilisation and storage and negative emissions technologies.
• Scotland has vast potential for CO2 storage in the North Sea and Carbon Capture Utilisation and Storage (CCUS) will play a role in reducing emissions in Scotland's hard to decarbonise industrial sectors, supporting a just transition to Net Zero. We have offered £80 million from our Emerging Energy Technologies Fund to accelerate the deployment of the Scottish CCUS Cluster. Due to delays with the UK Government announcing the Scottish Cluster, we have re-profiled our offer of financial support into subsequent years.

Transport

• To expand access to affordable public transport we commit over £359 million in 2023-24 to provide free bus travel for over 2 million people, including all children and young people under 22 and older, and disabled passengers. Over 550,000 young people have signed up to the scheme since it launched in January 2022, making over 35 million journeys as of November 2022.
• In 2023-24 we will commit £35 million through the Bus Partnership Fund to address the issue of congestion; making bus travel more attractive and leading to a mode shift from car; creating better air quality and supporting a just transition to Net Zero.
• £62 million will be provided for the Bus Network Support Grant Plus which supports the bus industry across Scotland to help operators keep fares down enabling them to run services that might not otherwise be commercially viable; helps sustain the economy reducing costs to local authorities of supporting non-commercial socially necessary services. This spend also supports policy development for the Community Bus Fund.
• We will continue delivering on our ambitious target of reducing car kilometres by 20% by 2030 for a healthier, fairer and greener Scotland. We have pledged at least £197 million on active and sustainable travel programmes, including increasing access to bikes and supporting behaviour change.
• We will continue, with the private sector, to deliver the £60 million Public EV Infrastructure fund to expand Scotland's EV charging network, this will build on our existing network which sees Scotland having the most public chargers outside of London and the most 'rapid chargers' anywhere in the UK per head of population.
• We are making progress in our commitment to decarbonise passenger rail services by 2035: since 2019 approximately 75% of all rail passenger journeys in Scotland have been electric. In 2023-24 we will invest a total of £1.4 billion to maintain and enhance Scotland's railway, including activity for on-going electrification and decarbonisation through our Rail Services Decarbonisation Plan and Freight Investment Strategy.
• We have committed £60 million over 2022-23 to 2025-26 to deliver a Roads Adaptation Fund to support the delivery of minor improvement schemes on the Trunk Road Network (TRN). Our TRN is facing unprecedented vulnerability to the weather-related impacts of climate change, such as flooding and landslides, which can contribute to the deterioration of assets, disruption to networks, and potentially hazardous incidents that may cause fatalities or serious injuries. Minor improvement schemes address these impacts and their effects on road users, improving the overall safety, reliability and climate resilience of the network.

Agriculture, Rural Affairs and Islands

• This year's budget provides over £45 million to deliver a range of activities through the National Test Programme, Agricultural Reform Programme and Agricultural Transformation Fund to support the transformation of how farming and food production is supporting Scotland to become a global leader in sustainable and regenerative agriculture, and to support the industry to achieve our statutory emission targets.
• Overall funding for Carbon Neutral Islands will be £3 million in 2023-24, creating jobs, protecting our island environments from climate change impacts, and contributing to delivery of our statutory climate change targets.

Nature restoration

• We will invest over £26 million in peatland restoration as part of our multi-year spending package of £250 million over ten years, as we upscale activity to meet our target of 250,000 hectares of restored peatland by 2030.
• On reforestation, Scotland is leading the way, with over 75% of the UK's new woodland creation in recent years. In the next 12 months, we will invest over £77 million to support the scaling up of activity to meet our annual target of 18,000 hectares of woodland creation by 2024-25, alongside delivery of ambitious programmes focused on nature restoration and addressing biodiversity loss.
• Reaching our climate change targets goes hand in hand with providing access to a better natural environment for Scottish people. We are continuing to focus on protecting and restoring our natural environment, having already distributed over £20 million for projects around the country through our nature restoration fund, and with at least £13.5 million invested over 2023-24 to support recovery of Scotland's species, woodlands, rivers and seas.

Flood Management

• Scotland is embedding a sustainable and climate-resilient approach to flood risk management. Over 2023-24, we will invest £42 million to support measures to reduce flood risk, recognising the likelihood of increases in storm severity and number.

Zero Waste and Circular Economy

• We will invest over £47 million in circular economy delivery programmes including the Deposit Return Scheme, implementation of the Circular Economy Bill and Waste Route Map, Extended Producer Responsibility, incinerator research, landfill remediation, recycling single-use plastics, litter, fly tipping, as well as funding for Zero Waste Scotland.

Private Investment and Natural Capital

• The National Strategy for Economic Transformation includes a commitment to develop a high-integrity, values-led market for responsible investment. This cross-public sector programme aims to reduce pressure on public spending, help address the funding gap for nature, and increase levels of responsible private investment into the climate change policy outcomes such as increased levels of woodland creation and peatland restoration. In 2023-24, we will take this work further by establishing a new facility to stimulate responsible private investment in the restoration of nature and enhancement of Scotland's natural capital.
• We will fund the Scottish National Investment Bank with £240 million in 2023-24 to continue to invest in Scottish businesses, projects and communities across all three of the missions set for it by Scottish Ministers: Net Zero emissions, place and innovation. The Bank continues to act as a mission-focused investor, making commercial investments and crowding in private capital to deliver impact across its three missions.

Climate Change Policy Development, Implementation and Public Engagement

• In 2023-24 we will be investing over £80 million across a wide range of activities covering policy development, implementation, public engagement and supporting climate change leadership in the public sector, including:
  • investing £29 million in the Just Transition Fund for the North East and Moray, in addition to providing £21 million capital for successful projects from the first funding round. This more than doubles the 2022-23 allocation to £50 million in 2023-24, to diversify the regional economy away from carbon-intensive industries and capitalise on the opportunities, including jobs and prosperity, the transition to Net Zero brings.
  • continued delivery of our £36 million Climate Fund to include action to address climate induced loss and damage to help those communities most affected by climate change.
  • support for the Green Growth Accelerator investment programme to speed up delivery of low carbon infrastructure projects across Scotland and provide extra resources and technical support to local authorities to get projects off the ground more quickly.
  • expansion of the Climate Action Hubs programme and continuation of the Climate Action Towns programme to deliver a framework for community support to take collective action, enabling a place-based response that is locally led, anchoring climate action to local priorities and plans.
  • continuation of the multi-year Let's Do Net Zero marketing campaign, which is part of a programme to increase public awareness of the climate crisis and the action we need to take as a country to tackle it. The campaign approach maintains 'always on' communications through social media and our one-stop-shop website NetZeroNation.scot, alongside annual targeted advertising campaigns.

Looking ahead

It is essential we ensure our climate change policy approach is well planned. Planning supports value for money and effective spend, and it empowers business, communities and individuals to play their part in driving forward action.

The Scottish Budget 2023-24 supports our focus on delivering the updated Climate Change Plan, our adaptation outcomes through the 2019 Adaptation Programme and planning for a just transition across the economy.

Ambitious, enhanced policy packages will be set out in the year ahead – and before the next budget – through our upcoming Climate Change Plan and our new Just Transition Plans.

Part 2: Carbon Assessment of the Capital Budget

The Scottish Government's investment in publicly funded infrastructure is critical for Scotland to meet our target of achieving Net Zero greenhouse gas emissions by 2045. The Scottish Budget 2023-24 sets out around £2.2 billion of low carbon capital investment in Scotland's public infrastructure – supporting the decarbonisation of our homes and buildings, transport and industry.

The Scottish Government currently uses a taxonomy approach to provide a summary carbon assessment of the annual Capital Budget. This approach allocates spending lines into three broad categories – low, neutral and high carbon. The categorisation is shown in the table below and was developed and proposed by the Low Carbon Infrastructure Taskforce in 2015.^[17]

Category: Low Carbon

Description: Seen as necessary to the low carbon transition

Examples:

• Transport – bus, rail and ferry
• Energy – all renewable generation and electricity transmission and distribution
• Rural affairs and the environment – waste
• Housing – energy efficiency programmes

Category: Neutral

Description: Do not represent substantial carbon efficiency gains in their own right but are consistent with low carbon ambitions

Examples:

• Rural affairs and the environment – all non-waste
• Housing – all non-energy efficiency
• Water, Digital, Health, Schools, Justice
• Culture and heritage
• Regeneration

Category: High Carbon

Description: Relatively carbon-intensive

Examples

• Transport – roads and airports
• Energy – fossil fuel generation

The following table provides the percentage of capital spending in the Scottish Budget 2023-24 in low, neutral and high carbon categories compared with Scottish Budget 2022-23 (at introduction). The detailed tables that accompany this annex set out a line-by-line breakdown of how these percentages are calculated. In line with previous years, local government spending lines are excluded from the measure as we do not hold specific information on low/neutral/high carbon spend made by local authorities. The total also considers net Financial Transactions funding only. This makes the total budget being assessed lower than the overall capital budget.

The tables are available in Excel format in the supporting files of this publication.

To show like-for-like comparison between financial years, each spending line is taken from that year's budget at introduction:

Key Changes

The total absolute spend in low carbon investment by this method is around £2.2 billion, increasing by £204 million from 2022-23, the highest amount spent on low carbon capital investment. Compared to 2022-23, there is a 4.2 percentage point increase in the percentage in the low carbon investment category, with increases across a number of low carbon spending lines including an additional £39.2 million for Active Travel. This overall increase demonstrates clear progress against the ambitions for low carbon investment as set out in the Infrastructure Investment Plan.^[18]

Programmes in the neutral category are consistent with the Scottish Government's emissions reduction targets and are likely to have a considerable share of low carbon investment which is not easy to identify accurately. Examples of this are the Health capital programme and the Affordable Housing Supply programme, which are embedding low carbon initiatives within them but these are not separately identifiable and the programmes as a whole are still classed as neutral. Where information is available on the proportion of spending dedicated to low carbon initiatives, this has been attributed between the categories.

The share of high carbon investment has fallen between 2022-23 and 2023-24 by 1.3 percentage points, from 7.3 per cent to 6.0 per cent. The main areas of spending that fall into this classification relate to improving and maintaining our road and bridge networks, which is vital for the economy and connectivity, as well as road safety.