Scottish Budget 2024 to 2025: high level carbon assessment

Annex A – Methodology

1. The figures presented in this report are estimated using the Scottish Government Environmental Input-Output Model (EIO) 2019.

2. The EIO is constructed using the Scottish Government Input-Output Tables 2019 (taken from the 1998-2020 Tables published in November 2023), ONS United Kingdom Analytical Input-Output Tables, 2019 (Blue Book 2022), ONS Environmental Accounts, Atmospheric emissions: greenhouse gases by industry and gas, 2019 (Published October 2023) and HM Treasury GDP Deflators as at 22 November 2023.

3. A fuller description of the model and its associated Greenhouse Gas effects estimates that this assessment is based upon can be found at: https://www.gov.scot/publications/about-supply-use-input-output-tables/pages/environmental-input-output/

Revisions to the Environmental Input-Output Model

1. With the release of new Input-Output Analytical Tables covering the year 2019 for Scotland and the UK, this year the base year of the EIO model has been updated from 2018 to 2019. This has involved several changes to the model:

• The updating of the underlying Scottish Input-Output model and UK closed economy Input-Output model from the 2018 version to the latest published version for 2019.
• The updating of the year used to calculate emissions factors from 2018 to 2019.

alongside the regular annual updates of:

• Updating the emissions data from ONS environmental accounts to the latest published version.
• Updating the forecast GDP deflator used to project estimates to the budget year to the latest version published by HM Treasury.

2. Updating to the latest version of the model incorporating the regular changes listed in the bullets above leads to a reduction to the previously published HLCA estimates of greenhouse gas emissions arising from the 2023-24 budget from 8.8 MtCO2e to 8.4 MtCO2e, a downward revision of 7%.

3. The majority of this downward revision arises from the update of the underlying UK input-output tables, followed by the updates to the HMT deflators, while the updates to the GHG industry emissions ratios act to partly offset these downward contributions.

4. Care should be taken when interpreting the revision to imported GHGs. Given the lack of a world economy model and emissions factors, the EIO model uses the UK economy as a proxy for the world economy. Changes in emissions intensities in the UK economy may not be representative of changes in the world economy, for example due to different technologies being used, or if more carbon intensive activities move overseas and are replaced by imports.