Scottish Budget 2025 to 2026: climate change taxonomy

The 2025-26 Budget and Climate Change

Making precise year-to-year comparisons between budget carbon assessments is not possible because of changes each year to the Budget structure. In addition, in line with this commitment under the Joint Budget Review to pursue continuous and incremental improvement, we have made changes to our carbon assessment process this year, building on the approach from last year and bringing in more views across Scottish Government in determining the evaluation of spend. Further, the new process breaks down the classification by Adaptation and Mitigation to better provide transparency on the impact of spend. That makes this year’s figure not directly comparable to last year’s.

Using this updated approach, we estimate that we are committing £4.9 billion in capital and resource for activities that will have a positive impact on delivery of our climate change goals in the 2025-26 Budget.

This document highlights a selection of spending areas – across the whole of the Scottish Government Budget – that are contributing towards our response to climate change.

Renewable energy

We will deploy capital funding of £150 million to continue to anchor our offshore wind supply chain in Scotland – almost trebling our capital investment compared to last year. This is part of our five-year commitment to invest up to £500 million into the sector, which is expected to leverage £1.5 billion in private sector investment and support thousands of jobs, embedding innovation and boosting skills.

Our energy industries budgets (of £44.1 million) will help realise the economic and social benefits of the transition to a net zero Scotland through our commitment to investing in: the key net zero areas of hydrogen, carbon capture, utilisation and storage and negative emissions technologies; energy-intensive manufacturing industries to bring down energy costs and emissions; and a strategic approach to supporting the energy transition, as well as support for Wave Energy Scotland.

The Carbon Neutral Islands project – with funding of £2.5 million (£1.6 million of which is funding from the Government’s Climate Change Capital Fund) – will demonstrate the low carbon potential of islands as hubs of innovation, renewable energy and climate change resilience.

Energy efficiency and heat transition

The Affordable Housing Supply Programme will deliver more energy-efficient affordable homes across Scotland helping to support our climate change ambitions through funding of £767.7 million (capital and financial transactions). Local authorities and Registered Social Landlords which apply for grant funding through the programme are required to ensure that homes within new build and conversion projects contain zero-direct emissions heating systems (unless there are compelling reasons why this is not considered appropriate, or where a valid building warrant application was submitted before December 2023).

Support of £349.1 million (which includes financial transactions) in energy efficiency and decarbonisation will promote energy efficiency and clean heating, helping to reduce emissions from our homes and buildings as well as supporting households in or at risk of fuel poverty. This includes programmes of advice and support to homeowners and small and medium sized businesses helping them install energy efficient and clean heating measures, as well as support for major capital funding programmes for the retrofit of social housing and the public sector estate, and the development of heat networks.

Funding of £2.5 million will support a programme of research and professional advice to ensure the Building Standards system delivers its regulatory requirements.

International and strategic climate change

In addition to these other budgets, specific funding will focus on how we can support a just transition to net zero, as well as help Scotland to have an important role in wider global action to address climate change. £72.9 million will target areas including: the Just Transition Fund to support new and ongoing projects in the North East and Moray; enabling local communities to take action on climate change in their own areas; public and community engagement on the opportunities and challenges of net zero; and supporting climate change leadership in the public sector, especially local government. The budget also continues to demonstrate Scotland’s international climate change leadership through the Climate Justice Fund and support on addressing loss and damage.

Transport

Our investment in public transport is vital for our climate action by providing viable and sustainable alternatives to car use for those who need it. Nearly £2.9 billion (which includes resource, capital and non-cash funding) will support our bus, rail and ferry networks, low carbon programmes and active and sustainable travel, including investment of £468 million in bus services (via the Network Support Grant and concessionary travel schemes). £188.7 million on Sustainable and Active Travel will increase our investment in walking, wheeling and cycling, and improve connections into the public transport network. £54.4 million will be targeted at programmes to reduce the impact of transport on our environment to support low carbon, zero emissions and climate change. We will invest £342 million in support for ferry services, and £191 million to support improvements in ferry infrastructure and new ferries.

Nature, forestry and landscape restoration

We will invest over £168.4 million to maximise the ‘power’ of our land and forests to help tackle climate change and protect nature. This funding will increase woodland creation and further protect and restore peatland, our iconic Atlantic rainforests, and ancient Caledonian pinewoods, and deliver Scotland’s Biodiversity Strategy. With this spending, we are continuing to protect and restore our natural environment on land and at sea to drive landscape scale change. Woodland creation, sustainable management of Scotland’s national forests and land, and peatland restoration are part of our just transition to net zero, supporting Scotland’s rural economy, creating economic opportunities and good green jobs.

Flood management

Our Flood Resilience Strategy will set our shared ambitions to deliver a sustainable and climate-resilient approach to reduce the impacts of flooding. This will be supported in this budget with £15 million capital, which recognises the increased likelihood and severity of flood events because of climate change. It builds on our investment of £42 million a year since 2009 to support local authorities to reduce flood risk and supports our Programme for Government commitment of additional £150 million funding over the lifetime of the Parliament.

Agriculture, rural affairs and marine

We are committed to transforming farming and food production, supporting Scotland to become a global leader in sustainable and regenerative agriculture, and enabling these industries to contribute to our statutory emission targets. Working with the sector, we will provide £35.5 million to deliver key activities including the Agri-environment and Climate Change scheme, the Agricultural Reform Programme (which includes the National Test Programme) and an additional £20 million for a new Transformation Fund.

Our funding of £94.3 million will help to realise our Vision for Scotland’s Blue Economy, which sets out our ambition for the sustainable management and shared stewardship of Scotland’s sea. This includes the contribution of the blue economy and marine environment to reaching our net zero target by 2045, and specific activities such as: investment to deliver a sound scientific evidence base to inform our marine policies; and marine planning and licensing responsibilities which promote sustainable economic growth from the marine renewables industry.

Zero waste and circular economy

Building on our landmark Circular Economy (Scotland) Act 2024, we are providing £39.6 million to make progress in Scotland’s transition to a circular economy and deliver actions to reduce waste and promote sustainable consumption, increase re-use and recycling of our resources and decarbonise the disposal of waste. This includes: major delivery programmes for packaging extended producer responsibility; modernising recycling services through the co-design of a new Household Recycling Code of Practice; banning the sale and supply of single-use vapes; and funding for Zero Waste Scotland to allow work with partners and businesses to support progress to a more circular economy.

Taxonomy

Through the Joint Budget Review, the Scottish Government and Parliament agreed to develop an enhanced taxonomy to provide a carbon assessment identifying and categorising the emissions impacts of all relevant spending lines in the budget cycle. This taxonomy refresh has standardised how the Scottish Government classifies both resource and capital budget spending lines relative to their climate impact. The taxonomy approach classifies spend lines at the most detailed level:

• Positive-Neutral-Negative Environmental Alignment: this identifies if the spend line is positively aligned with the Scottish Government environmental outcomes, is neutral, or is negatively aligned.
• High-Low Impact: the scale of impact on Scottish Government climate objectives are rated using this measure.

Budget allocations to local authorities are excluded from the classification because of the complexity of breakdown, but it is clear councils continue to rise to the challenge of the climate crisis and spend on net zero priorities.

Key points

Capital

The total gross capital spend included in the Taxonomy for 2025-26 budget is £6.67 billion not including income or Local Authority spend^[1], with 44% of assessed capital spend apportioned to Positive activities – in absolute terms, this is around £2.95 billion for Positive spend. The largest spend areas are rail and major public transport projects, areas which have few direct emissions associated with them and which enable our transition away from car use, as well as action to decarbonise rail stock.

Budget lines classed as Neutral primarily deliver activities which do not enable or influence wider emissions (although generating some emissions from consumption or operations such as heating). These areas can involve actions to reduce emissions but those actions may not represent a significant share of the total allocated budget and can be difficult to identify. A prime example of this is healthcare spending, the largest Neutral spend in both capital and resource terms. Due to the increased share in overall spending on essential public services, such as Justice and Health and Social Care, in 2025-26, just under half of assessed capital spending is classed as Neutral.

With respect to the Negative category, the main areas of spending remains those that relate to road infrastructure – including funding to improve and maintain our road and bridge networks (activities essential for road safety, economic support and connectivity).

Resource

The total gross resource funding included in the Taxonomy for 2025-26 is £39.5 billion, not including income or Local Authority spend^[2], with the main focus of spend on the NHS, social security, public services (including local government) and wider anti-poverty measures, reflecting the government’s key priorities.

Overall, the Positive spend on climate is smaller than the capital spend (£1.98 billion). The largest sources are: agricultural greening payments, which actively focus on reducing emissions; and investment in public transport and programmes to encourage walking, wheeling and cycling and reduce car use. The Scottish Environmental Protection Agency (SEPA) is the other largest spend which covers numerous activities including regulation of industry to monitor the environment and promote adaptation.

The taxonomy of resource spend within the Budget is much more neutral than the capital budget. The Neutral spend of the resource budget of 2025-26 is around 93% of the assessed resource budget. This is more significant than the capital budget both in terms of absolute spend and share of the included budget, mainly because the majority of resource spend is on staffing costs, alongside delivering healthcare, social care and disability payments, all of which have minimal direct climate impact.

With respect to the Negative category, the main areas of spend relate to agricultural support, largely through emissions associated with livestock. This is along with Budget allocations which support road transport with associated car, van and HGV emissions.

Adaptation and Mitigation

The taxonomy evaluates budget spending lines on both an Adaptation and Mitigation basis. Many of these budget lines are evaluated on a similar basis for both, but there are some differences between ratings. The details of the individual breakdowns are provided in the detailed breakdown of the lines published alongside this document.

The breakdown of Adaptation and Mitigation spend is shown below. The totals do not sum to the total budget spend and can exceed the total as a budget line is allocated to the highest impact rating between either adaptation or mitigation (e.g. a line with a ‘Positive – Low’ in mitigation and ‘Positive – High’ in Adaptation would be allocated ‘Positive – High’).