Scottish Budget 2025 to 2026: climate change taxonomy

Climate Change Taxonomy

As in last year’s Budget document, this supporting publication sets out how the Budget will impact on our climate change priority. It is divided into two parts: the first part presents an overarching climate narrative, highlighting key spending areas from multiple portfolios across the Scottish Budget 2025-26 that contribute towards our response to climate change; and the second part provides a carbon taxonomy assessment and commentary of the capital and resource budget.

Embedding Delivery of Our Just Transition to Net Zero

Our ambitions for net zero are long term, so it is vital that the Scottish Budget continues to prioritise spending to deliver our commitments on the twin crises of climate change and biodiversity loss. While our actions in addressing those crises require joint work and funding from across the public sector and beyond, the role of Scottish Government spending is critical. Budgets must be aligned clearly to our net zero priority mission, as set out by the First Minister for this government.

These spending plans build on our existing progress in delivery: for example, we are over halfway to net zero in terms of our emissions reduction compared to the 1990 baseline. The next phase of delivery will be particularly challenging: our success in decarbonising the energy sector in Scotland now needs to be matched by action across a number of other key sectors to achieve our statutory target of net zero by 2045. It is a challenge faced across the UK, and beyond, and one that will shape the development of our next climate change plan, following the recent passage of the Climate Change (Emissions Reduction Targets) (Scotland) Act 2024, and the publication of our Scottish National Adaptation Plan in September.

Continuing to address the climate change and biodiversity loss crises in balance with the need for fiscal sustainability remains one of our most difficult challenges. The costs of the net zero transformation are significant: the Scottish Fiscal Commission concluded that around 28% of the additional costs of achieving net zero (calculated at £43 billion for 2020-50) would fall to the public purse. Consequently, the Budget sets out how resources should be targeted at the areas where Scottish Government action can have a pivotal impact on managing the just transition to our vision for a net zero, biodiverse, climate-resilient Scotland – both in terms of physical capital expenditure, especially with respect to infrastructure investment, as well as our resource spending. That focused spending recognises both the net zero financing responsibility that sits across the public sector and beyond as well as the importance of action in key sectors to drive change over the coming decades.

At the same time, we are improving the information around the Scottish Government’s spend in terms of its climate impact. As part of the agreed actions to the Joint Budget Review with the Scottish Parliament, the Scottish Government has been piloting a new net zero assessment of new and significant expenditure, and the intention remains to mainstream this in 2025. The current taxonomy, which has undergone regular improvements since its introduction to the Scottish Budget several years ago, including over the past year, demonstrates the importance placed on providing more useful, telling evidence around the anticipated effects of different forms of Scottish Government spending envisaged by the budget choices set out here.