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5. Costs and Benefits of Options
5.1.1. The following options are being considered to help inform the final draft of a Scottish Climate Change Bill which will be introduced into the Scottish Parliament. This section presents an analysis of the costs and benefits to:
- the economy;
- climate change;
- society; and
- Government finances.
The Strategic Environmental Assessment presents an analysis of the environmental costs and benefits.
5.1.2. The full range of possible options can not be presented due to the breadth of such a range. However, the Scottish Government is not limited to the options presented here in its final consideration of the proposed Bill. We would strongly welcome your comments in order to revise this RIA and improve its accuracy.
5.1.3. The formal consultation being held by the Scottish Government along with an expanding evidence base will be the basis of a final decision by the Scottish Ministers on the content of the draft Bill.
5.1.4. The final RIA will accompany a proposed Bill at its introduction.
5.2. Targets
Question #1: A target for carbon dioxide only or a basket of six greenhouse gases
5.2.1. CO 2 emissions currently make up the largest part of UKGHG emissions - in 2005, CO 2 made up around 80% of all Scottish GHG emissions. While it is the combined effect of GHGs which causes climate change, the Scottish Government is considering whether it should focus on all or some GHGs or whether to focus on the most prevalent one, CO 2. The Fluorinated gases (hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride) are already subject to regulation. Agriculture is responsible for most of Scotland's nitrous oxide (N 20) and methane (CH 4) emissions, primarily due to enteric fermentation from livestock (for CH 4) and fertiliser and grazing animals (for N 2O). There are also other greenhouse gases which contribute to climate change but these are not included in the basket of Kyoto gases and generally have shorter life spans and have not been included in the options here, in line with international practice. For example, water vapour is a very important GHG but is not an anthropogenic emission - it occurs naturally and responds to climate processes, so it is not possible to regulate it.
Option 1: CO2 target
5.2.2. The Scottish Government will set the target based on CO 2 alone.
Costs
5.2.3. A decision to exclude non-CO 2 gases would mean that approximately 20% of Scotland's impact on atmospheric emissions would not be covered by the proposed carbon management framework. In addition to the reduced environmental coverage, such an approach might create perverse economic incentives to focus on CO 2 even if it were economically or scientifically rational to take action on other gases.
Benefits
5.2.4. CO 2 emissions are the majority of Scotland's impact on climate change and a range of international and domestic policies have delivered substantial reductions in non-CO 2 emissions in recent years. There is already significant regulation in place to reduce fluorinated gases and greater gains could be made in reducing CO 2. The feasibility and cost of further non-CO 2 reduction is currently unknown, but in some sectors (e.g. methane from mines and HFCs in refrigeration), greater reductions in emissions may be very difficult and/or costly to achieve. 13 This would be consistent with the approach of the UK Government, possibly simplifying the regime for businesses.
Option 2: Kyoto greenhouse gases target
5.2.5. The Scottish Government will set the target based on the CO 2 equivalent of the basket of GHGs recognised in the Kyoto Protocol (CO 2, CH 4, N 2O, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride).
Costs
5.2.6. There are economic risks associated with the possible greater emphasis on non-CO 2 abatement in the short run; relatively less investment in CO 2 abatement might result in long term 'lock in' to markets currently investing heavily in high fixed cost capital, such as electricity generation (although this risk should not be great, as the overall framework would still provide a clear signal of current and future GHG budgets and how these are made up). There may be social impacts more particular to Scotland due to the higher level of methane emissions in Scotland due to farming. It is possible that the potential to reduce non-CO 2 emissions cost-effectively will fall over time; achieving further reductions will become increasingly costly. Therefore, CO 2 emissions may have to reduce further to compensate for maintaining a certain level of non-CO 2 emissions.
Benefits
5.2.7. This would capture all of Scotland's overall impact on climate change and incentivise cost-effective abatement across the range of GHGs, thus ensuring flexibility in abatement measures rather than those which only address CO 2.
Question #2: Provisions to alter which gases included in targets
5.2.8. This would allow the list of gases on which targets are based to be changed if new scientific information or international agreements necessitate a change.
Option 1: Yes, through secondary legislation
5.2.9. If new scientific information emerged which necessitated a change to which gases are targeted by the Bill, the list of gases could be changed through secondary legislation.
Costs
5.2.10. Such enabling powers would give Government the ability to introduce secondary legislation which could face less scrutiny than primary legislation and could also result in poorer quality legislation.
Benefits
5.2.11. This would enable Government to respond quickly to developments in science and to respond to advice given to it, either internally or by an independent body if it is created. Secondary legislation would still need to face strict parliamentary scrutiny and approval through an affirmative resolution procedure, but in a much shorter time period, and RIAs would need to be produced (alongside public consultation) for each statutory instrument. The procedure chosen and the extent of consultation on secondary legislation could be made more proportionate to the regulation, duty or scheme being introduced.
Option 2: No, it can only be changed through primary legislation
5.2.12. Any change to the list of gases on which targets are based would require new primary legislation.
Costs
5.2.13. Full scrutiny would be lengthy and could take years to introduce through primary legislation, increasing the likelihood that targets would be missed. This could also increase financial costs to Government to put forward a new Bill each time (devoting higher resources and research to a Bill).
Benefits
5.2.14. Any new regulations would face the most scrutiny and this would offer reassurance to private firms and the public.
Question #3: The target basis
5.2.15. The GHG inventory measures emissions produced in Scotland 14. It is published annually and complies with internationally recognised methodologies. In order to ensure that the Scottish Climate Change Bill provides the right incentives for all sectors of the economy, we must consider whether different means of setting a baseline for the 80% target might better reflect the Scottish Government's ambition in the areas of renewables and energy efficiency. We also need to consider how different accounting methods might reflect the lack of control we have over trading schemes capped at the UK or EU level, albeit Scottish Ministers are party to any UK-wide agreement and would be consulted by UK Ministers on lines for negotiating an EU-wide cap.
Option 1: Use standard Greenhouse gas inventory
5.2.16. The target would solely be based on the disaggregated greenhouse gas inventory.
Costs
5.2.17. There are a number of concerns that the inventory would not show the direct results of progress made in Scotland towards meeting the reduction target. The GHG inventory is unlikely to give the full picture of progress Scotland is making towards 80% emissions reductions as key areas of emissions savings are not measured. As an example, Scotland is a net exporter of electricity and the inventory is based on 'production', so the inventory does not directly reflect changes in Scottish consumption of energy or increased renewable generation capacity in Scotland. Some of the most cost-effective measures will be in energy efficiency and these will not be captured by the inventory. The flow of emissions allowances into and out of Scotland under emissions trading schemes are also not reflected in the inventory.
5.2.18. Additional methods of measuring emissions would have to be implemented in order to achieve reductions that are fully captured by the inventory. There is also a high level of uncertainty in the inventory figures, which is greater surrounding the measurement of non-CO 2 gases.
Benefits
5.2.19. The disaggregated greenhouse gas inventory is the best source of data we have for Scottish emissions. It is also the only Scottish emissions inventory currently available on an annual basis. It uses internationally recognised methodologies and provides data each year from 1998 as well as 1990 and 1995.
Option 2: Use adjusted end-user inventory
5.2.20. This would entail adjustment of the disaggregated inventory to become an end-user inventory. For energy, rather than count the emissions from Scotland's power stations, it could count the electricity consumed in Scotland and turn that into an emissions equivalent by multiplying it by the average emissions from all electricity generated in Scotland (this is known as the carbon factor). The end-user inventory would still count emissions from other carbon-intensive products that are exported
Costs
5.2.21. As Scotland does not currently have an end-user inventory one would have to be procured and published annually. The cost of this is not currently known but is likely to be in the region of £30,000 per year. Using an end-user inventory is not standard practice across the UK or internationally and as such, there may be a risk that Scotland's emissions are not directly comparable with other areas of the UK. The GHG inventory will still be produced annually, which will allow comparisons to be made.
Benefits
5.2.22. Measuring emissions from electricity consumed in Scotland rather than electricity produced will ensure that the target is more closely concerned with the domestic emissions that the Scottish population is responsible for. Any increase in generating electricity from renewable sources in Scotland will be reflected in the adjusted carbon factor for Scottish electricity.
Option 3: Greenhouse gas inventory with individual targets for renewable electricity generation and Scottish energy consumption
5.2.23. There would be separate, mandatory targets for energy demand and renewable energy
Costs
5.2.24. Introducing individual targets for areas may lead to a less transparent measure of progress. If 80% reduction of the GHG inventory is required in addition to these targets, it may make meeting the target more costly as there will be less flexibility in which measures are implemented. A non-statutory target to generate 50% of Scotland's electricity from renewable sources already exists so it could be argued that a statutory target is not necessary to ensure that investments in renewable technologies are made.
Benefits
5.2.25. Having statutory targets for renewable electricity generation and energy consumption will provide a greater incentive for these areas to be included in the full range of policy options applied to deliver the target as the GHG inventory may not provide such an incentive as changes in Scottish energy consumption will not necessarily be captured.
Question #4: Ability to amend the measurement system
5.2.26. A Climate Change Bill for Scotland would set a statutory target and how that progress to that target should be measured. However, circumstances could arise which would suggest the need for this system of measurement to be amended. Such circumstances could be developments in the science of climate change or new international agreements. Any system could be amended through the use of primary legislation but the Bill could enable the system to be amended through secondary legislation. The issue therefore is whether provision should be made in the Bill for the system of measurement to be amended through secondary legislation.
Option 1: No, only through primary legislation
5.2.27. All new duties would have to be introduced through new primary legislation and be subject to the 3-stage process in Parliament for passing it.
Costs
5.2.28. If a new system of measurement was needed to be introduced to immediately react to either developments in the science of climate change or to new international agreements, it is unlikely that this could be done quickly. Full scrutiny would be lengthy and could take years to introduce through primary legislation, increasing the likelihood that targets would be missed. This could also increase financial costs to Government to put forward a new Bill each time (devoting higher resources and research to a Bill).
Benefits
5.2.29. Any new system of measurement would face the most scrutiny and this would offer reassurance to the public sector.
Option 2: Yes, through secondary legislation
5.2.30. A Scottish Climate Change Bill would allow the system of measurement to be changed using secondary legislation.
Costs
5.2.31. This would give Government the ability to introduce secondary legislation which could face less scrutiny than primary legislation and could also result in poorer quality legislation.
Benefits
5.2.32. This would enable Government to quickly meet new international obligations or responding quickly to developments in science. Secondary legislation would still need to face parliamentary scrutiny, but in a much shorter time period. Consultation would still be required.
Question #5: Inclusion of emissions trading schemes
5.2.33. The EU Emissions Trading Scheme ( EUETS) currently regulates around 50% of Scottish CO 2 emissions. Trading schemes are one of the most economically efficient means of reducing emissions, because they allow emissions reductions to be made where they are least expensive. The results from Phase I show that the EUETS has been successfully implemented and the EUETS is seen by industry as a key factor in making investment decisions. Energy efficiency programs are taking place in many sectors in an effort to reduce emissions. Including this effort from the Scottish target would reinforce this successful mitigation tool and provide a strong message to Scottish firms that their effort is valuable. The Scottish Government does not want the Bill to undermine this important policy lever.
5.2.34. Accounting for the trading of emissions allowances under an EU-wide emissions trading scheme is problematic as Scotland does not have its own cap. How allowances are allocated to installations in the first instance is crucial to how they can be accounted for. A given allocation at the start of the phase would lead to straightforward accounting whereas auctioning of allowances will make it difficult to establish what Scotland's share of the UK-wide cap is. There is uncertainty over the arrangements for future phases of the EUETS, in particular how the EU cap will be set (by country or by sector) and how allowances will be distributed (by free allocation or by auctioning). This uncertainty means that accounting for traded effort under the EUETS may become more problematic over time.
Option 1: Exclude EUETS traded effort
Costs
5.2.35. The disaggregated GHG inventory measures emissions produced in Scotland which means that for those installations, e.g. power stations, that participate in the EUETS there is no account taken of any allowances they buy and sell. The EUETS is a policy which delivers emissions savings at the lowest cost of abatement: a company in Scotland that finds it cheaper to buy a unit of carbon than to save that unit from its own activities will purchase from the carbon market in the knowledge that total emissions will have been reduced by that amount. By not accounting for this abatement in measuring progress towards the Scottish target, the Scottish Government would have to introduce measures which would induce additional domestic savings from these installations which would increase the cost and be counterproductive as there would be little incentive for Scottish firms who have already invested time and money to continue participating in the EUETS. There would also be a risk of firms leaving Scotland and a resulting loss in jobs. This would not affect Scotland's effort to mitigating Climate Change as firms may sell allowances, allowing other to emit more.
Benefits
5.2.36. The effort made by traded sectors may be limited by EU/ UK cap-setting arrangements, i.e. EU may set 20% target and UK need at least 26% by 2020 which is not necessarily compatible with an 80% reduction in 2050 in Scotland. If this is the case, the non-traded sectors would have to do more than their fair share to achieve the target. By not including the EUETS allowance when counting our emissions, the Scottish Government could set its own targets for the traded sector in line with the Scottish target.
5.2.37. Accounting for allowance trading is not a straightforward process and it is likely to get more complicated over time as the level of auctioning increases in the UK National Allocation Plan, up to 10% will be auctioned in Phase II, and more sectors and activities will be included in the EUETS.
Option 2: Include EUETS traded effort
Costs
5.2.38. The effort made by sectors covered by trading schemes in Scotland may be limited by EU/ UK cap setting arrangements, i.e. EU may set 20% target and UK need at least 26% by 2020 which is not necessarily compatible with an 80% reduction in 2050 in Scotland. If this is the case, the non-traded sectors would have to do more than their fair share to achieve the target, which is likely to increase the cost of meeting the reductions required in the short to medium term.
Benefits
5.2.39. Allowing for effort made through the EU emissions trading scheme should smooth Scotland's emissions data because the allocation for Scottish installations (apart from any allowances bought at auction) would be given at the start of the phase. This would mean that future emissions from power stations (generally the most volatile source of emissions) would be known and the amount of effort required in other sectors of the economy would also be known.
5.2.40. The EUETS is one of the key multilateral mitigation delivery mechanisms that has been established in recent years to tackle climate change. To date, more than 100 Scottish firms have participated in Phase I of the EUETS and 95 Scottish firms are participating in Phase II. The results from Phase I show that the EUETS has been successfully implemented and the EUETS is seen by industry as a key factor in making investment decisions. Energy efficiency programs are taking place in many sectors in an effort to reduce emissions. Including this effort from the Scottish target would reinforce this successful mitigation tool and provide a strong message to Scottish firms that their effort is valuable.
Question #6: Counting international credits towards targets
5.2.41. Both the Kyoto protocol and the EU emissions trading scheme allow the purchase of carbon credits from overseas to count towards domestic targets. The Scottish Government could count international credits towards its targets. These would be credits verified by international processes supporting the Kyoto protocol - either clean development mechanism ( CDM) or joint implementation credits ( JI). The use of international credits would be in line with the international principle of additionality - that the primary focus are emissions from within Scotland and that international credits would only be a minority of Scotland's emissions reductions.
Option 1: No use of international credits counted towards target
5.2.42. International credits would not count towards the target.
Costs
5.2.43. Likely to increase the overall cost of meeting the target in Scotland as domestic abatement may be more expensive than international abatement. May discourage other countries from making similar levels of reduction and will limit the transfer of finance and technology to developing countries.
Benefits
5.2.44. Ensures that abatement is achieved domestically and as soon as possible.
Option 2: Statutory limit on use of international credits counted towards target
5.2.45. There would be a statutory limit on the amount of international credits which could be counted towards the target.
Costs
5.2.46. Allows a certain level of reliance on overseas abatement and therefore there may not be the necessary domestic abatement which could mean certain technologies remain 'locked-in' to Scottish economy and it could make further significant domestic reductions more costly over the long run.
Benefits
5.2.47. Increases flexibility in achieving reductions where they are cheapest - potentially reducing the overall cost of meeting the target, whilst ensuring that adequate domestic abatement is also achieved.
Option 3: No statutory limit on use of international credits counted towards target
5.2.48. There would be no statutory limit on the amount of international credits that can be used
Costs
5.2.49. Permits possible over-reliance on overseas abatement which could mean certain technologies remain 'locked-in' to Scottish economy and it could make further significant domestic reductions more costly over the long run.
Benefits
5.2.50. Increases flexibility in achieving reductions where they are cheapest - potentially reducing the overall cost of meeting the target, depending on the market price of carbon allowances. Greater flows of capital may help developing countries utilise low-carbon technology.
Question #7: Provision to alter the level of the final target
5.2.51. A Climate Change Bill for Scotland would set a statutory target. However, circumstances could arise which would suggest the need for this target to be amended. Any target could be amended through the use of primary legislation but the Bill could enable the target to be amended through secondary legislation. The issue therefore is whether provision should be made in the Bill for the target to be amended through secondary legislation. This issue relates to previous questions on the system of measurement used and the type of gases included in the target.
Option 1: No, under any circumstances
5.2.52. The Scottish Parliament would need to amend any target through primary legislation, the most stringent method of passing legislation.
Costs
5.2.53. Developments in the science of climate change are increasing our understanding of the level of environmental risk for given concentration levels of GHGs. In addition, there are uncertainties surrounding the factors affecting the future costs of mitigation, resulting from the need to formulate long term expectations affecting the choice of emissions reductions pathway, such as the degree of international commitment to reduce GHG emissions and the cost of fossil fuels or less carbon-intensive technologies. Tightly restricting the capacity of the Government to amend either the long run or interim target might result in exposure to undesirable economic costs or competitiveness risks. If carbon-intensive industries locate away from Scotland as a result of a tight regulatory regime, this would not reduce emissions from these industries at a global level.
Benefits
5.2.54. This would provide households and firms with the greatest degree of certainty surrounding the intention of Government to manage policies designed to deliver a defined level of emissions reductions in a particular time period. This would potentially help provide a clear incentive to invest optimally in reducing carbon intensity.
Option 2: Yes, but only as a result of significant changes
5.2.55. The Bill would give provision that the target could be amended through secondary legislation but only as a result of significant changes in understanding.
Costs
5.2.56. A review facility reduces the certainty among households and firms about the long run scale and timing of the Government's objectives to reduce emissions. This has implications for the way in which it can be expected to manage policy. Costs are limited if only significant changes allow for a change in target.
Benefits
5.2.57. The capacity to review budgets or targets would enable policy makers to minimise economic and social costs and competitiveness risks arising from significant changes to key drivers of mitigation costs if Parliament deemed the cost of reaching a target to be too high. It would also allow the Government to respond to the evolving science of climate change or new international agreements.
Option 3: Yes, but only as a result of significant changes and on the basis of a source of independent advice.
5.2.58. The Bill would give provision that the target could be only be amended through secondary legislation as a result of significant changes in understanding and on the basis of a source of independent advice.
Costs
5.2.59. The costs are similar to Option 22, but would add greater economic and competitiveness risks due to uncertainty if government could increase the burden on Scotland of mitigating climate change in response to the evolving science of climate change or new international agreements.
Benefits
5.2.60. The benefits are similar to Option 2, with added flexibility if scientific understanding changed to require stricter action.
5.3 .Supporting framework
5.3.1. It is the total amount of GHGs emitted over a particular time which causes climate change, rather than the amount of emissions in any single year. Whilst there are difficulties with taking a cumulative approach for the 2050 target (setting a target for all emissions until 2050), it is possible to set the desired trajectory, and thus limit cumulative emissions, by establishing a set of emissions budgets. An emissions budget period would last for a specific number of years and would allow for annual fluctuations in emissions to occur whilst limiting the overall amount of emissions during the budget period.
Question #8: Factors to be taken into account when setting level of budgets
5.3.2. Options have not been presented for this question and we strongly encourage an open response to this issue in the consultation. Options considered for the Bill will be presented in the final RIA.
Question #9: Length of interim budget periods
5.3.3. There are significant annual variations in emissions (due to changes in external factors such as international fuel prices or temperature) which can disguise underlying trends. For example, there was an increase of 23% between 2005 and 2006 in emissions from Scottish industries covered by the EU emissions trading scheme. These variations were more prominent in Scotland than for the UK or EU because our emissions are dominated by a few power stations: 3 power stations produce around 40% of Scotland's CO 2 emissions, so changes in production at those stations have a very significant impact. If interim budgets are set, these should be set in advance to give sufficient time for the public sector, private sector and individuals to make the necessary changes to meet the targets.
5.3.4. These interim budgets could be set by Government or by another body. These issues will be discussed in the consultation but the different options are unlikely to have a great difference in regulatory impact and so have not been considered here.
Option 1: 5-year emissions budgets
5.3.5. The Government would, over the long term target period, set 5-yearly emissions budgets to give flexibility, aligned with Kyoto, EUETS and UK Climate Change Bill periods.
Costs
5.3.6. As scrutiny would still be taking place annually, any misses in reaching a yearly target could be labelled a failure, even if the Government adheres to a 5-year budget. As 5-year budgets would not align with the Parliamentary cycle, Government could delay action, passing along increased burdens on a future administration. This could also result in investment in higher-emissions technologies which are acceptable in a 5-year average but would fail annual emissions targets.
Benefits
5.3.7. This would offer flexibility to Government and any independent advice body to determine the correct balance between technology, the economy and science. It would still take account of total emissions in each year of a budget cycle, while driving Government forward. Current international agreements are generally in 5-year cycles and replicating this would synchronise reporting and accounting cycles and reduce the costs of reporting and scrutiny.
Option 2: 4-year emissions budgets
5.3.8. The Government would, over the long term target period, set 4-yearly emissions budgets to give flexibility, aligned with the Scottish Parliamentary cycle.
Costs
5.3.9. As scrutiny would still be taking place annually, any misses in reaching a yearly target could be labelled a failure, even if the Government adheres to a 4-year budget. It would be more difficult to spread average emissions over 4 years than in 5 years. This could also result in investment in higher-emissions technologies which are acceptable in a 4-year average but would fail annual emissions targets. Current international agreements are generally in 5-year cycles which could result in different reporting and accounting cycles, and higher costs for reporting and scrutiny.
Benefits
5.3.10. This would offer flexibility to Government and any independent advice body to determine the correct balance between technology, the economy and science. It would still take account of total emissions in each year of a budget cycle, while driving Government forward. This would more closely align with the Parliamentary cycle, holding particular Government administrations accountable during their term and minimising the likelihood that increased burdens would be passed to a future administration. However disaggregated emissions data is published 2 years late (assuming the target is based on the current disaggregated inventory), so there would be a maximum of only 2 years of any government's own action being assessed within its 4 year term. Data collection issues mean it is unlikely to be able to acquire the data more than 6 months earlier.
Option 3: 8-year emissions budgets
5.3.11. The Government would, over the long term target period, set 8-yearly emissions budgets, aligned with proposed EUETS phase periods.
Costs
5.3.12. This may allow to much flexibility, allowing a Government administration to delay action for too long. This may not provide enough certainty for business that action will take place.
Benefits
5.3.13. This would align the budgets with the proposed EU- ETS phase periods and provide much flexibility to Government.
Question #10: Setting emissions budget period in advance
5.3.14. The rationale behind having longer term emissions budgets is to provide certainty for businesses and governments, to provide sufficient incentive to invest and innovate. Some technologies or changes in plant need a long lead in time and some behaviours take generations to change. The Scottish Government believes that emissions budgets should be set far enough in advance so that they can be taken account of when making most investment decisions that are likely to affect our emissions trajectory. This question directly correlates to the issue of the length of budget periods and therefore options presented here are approximate periods of time.
Option 1: Approximately 5 years
5.3.15. Budgets would be set approximately 5 years in advance.
Costs
5.3.16. One budget period will not give sufficient certainty to allow firms to make investment decisions that result in emissions reductions.
Benefits
5.3.17. This will provide more certainty over the likely abatement options in the short term and therefore will provide more certainty about the budget.
Option 2: Approximately 10 years
5.3.18. Budgets would be set approximately 10 years in advance.
Costs
5.3.19. This may not give sufficient certainty to allow firms to make investment decisions that result in emissions reductions. This would require greater analysis than option 1 with the risk that scientific and technological uncertainties will mean that the further ahead budgets do not reflect the actual situation in the future and may not deliver sufficient savings and will have to be amended.
Benefits
5.3.20. This would enhance the level of certainty for firms making longer-term investment decisions and actions to reduce their emissions.
Option 3: Approximately 15 years
5.3.21. Budgets would be set approximately 15 years in advance.
Costs
5.3.22. This would require greater analysis with the risk that scientific and technological uncertainties will mean that the further ahead budgets do not reflect the actual situation in the future and may not deliver sufficient savings and will have to be amended.
Benefits
5.3.23. Enhance the level of certainty for firms making longer-term investment decisions and actions to reduce their emissions. Sets a clear trajectory of emissions in the medium term which would commit Scotland to a certain the level of cumulative emissions.
Question #11: Limits on the amount of emissions which can be borrowed from following budget period
5.3.24. If the trajectory towards the target is to be set by budget periods, banking and borrowing would allow the Scottish Government to carry unused emissions rights over to later budget periods (banking) or allow it to bring forward emissions allocations from future budget periods (borrowing). Please note we are also seeking views in the consultation on what the limit should be set at, if any.
Option 1: Banking and limited borrowing allowed
5.3.25. This would allow the Government to carry over unused emissions rights to later budget periods and allow a set amount to be borrowed from future budget periods.
Costs
5.3.26. Banking and borrowing may impose a cost by reducing certainty surrounding the precise profile of emissions reductions. Furthermore, borrowing might limit the potential of Government to deliver the following carbon budget, thereby reducing credibility in the overall framework.
Benefits
5.3.27. Banking incentivises 'over-performance' in one period and may reduce the costs of mitigation, particularly where abatement could become more expensive over time. The capacity to borrow would help to reduce the costs of mitigation arising from the need to manage policy in response to short run shocks or volatility in emissions or the cost of abatement and deal with "accounting errors" due to time lags in data availability. This would also reflect the fact that overall quantity of emissions is relevant to climate change, not timing.
Option 2: Unlimited banking and borrowing
5.3.28. This would allow the Government to carry over unused emissions rights to later budget periods and would allow an unlimited amount to be borrowed from future budget periods.
Costs
5.3.29. Banking and borrowing may detract from investor confidence by increasing uncertainty surrounding the precise profile of emissions reductions. Furthermore, borrowing might limit the potential of Government to deliver the following carbon budget, thereby reducing credibility in the overall framework. Too much borrowing would allow abatement to be postponed, resulting in technology 'lock-in' which may restrict cost-effective abatement over the long term.
Benefits
5.3.30. Banking incentivises 'over-performance' in one period and may reduce the costs of mitigation, particularly where abatement could become more expensive over time. The capacity to borrow would help to reduce the costs of mitigation arising from the need to manage policy in response to short run shocks or volatility in emissions or the cost of abatement and deal with "accounting errors" due to time lags in data availability. This would also reflect the fact that overall quantity of emissions is relevant to climate change, not timing.
Question #12: Including an interim point target
5.3.31. There is strong evidence that action over the next 10-15 years is critical if dangerous climate change is to be avoided. UK and European climate change objectives contain interim targets for emissions reductions by 2020. (26 - 32% CO 2 for UK, 20% GHG for EU or 30% if an international agreement is reached).
Option 1: Yes, there should be an interim point target
5.3.32. An interim point target will be set in the Bill.
Costs
5.3.33. There is a danger that setting an arbitrary figure which either became implausible, or lacked sufficient ambition, would damage the credibility of the Bill. Setting an interim target in may constrain the abatement options and increase the cost of meeting the 2050 target if set too high. For example, many low carbon technologies may not become commercially available until the second half of the period, i.e. after 2025, and so a lack of flexibility would prevent the Scottish economy from taking full advantage of these later developments. The process of setting emissions budgets in advance, on the basis of expert advice, will provide clear information about the likely trajectory.
Benefits
5.3.34. Sets out a clearly defined trajectory towards a low carbon economy which will allow businesses to make decisions in light of the target, ensuring that adequate effort is made in the medium term.
Option 2: No, there should not be an interim point target
5.3.35. An interim point target will not be set in the Bill.
Costs
5.3.36. The trajectory set by carbon budgeting alone might not be steep enough to ensure a cost-effective transition to 80% emissions reduction in 2050, and mitigation effort might be postponed until later years with greater uncertainty over what mitigation options will be available and the cost of these. Also a shallow trajectory in early years may reduce Scotland's contribution to reducing global emissions and may lead to unavoidable impacts causing greater harm to the economy.
Benefits
5.3.37. This would provide greater flexibility to achieve savings in line with the most cost-effective abatement options within the first few budget periods. The process of setting emissions budgets in advance, on the basis of expert advice, will provide clear information about the likely trajectory such that an interim target would be unnecessary.
5.4. Scrutiny framework
Question #13: Additional reporting requirements
5.4.1. Options have not been presented for this questions and we strongly encourage an open response to this issue. Options considered for the Bill will be presented in the final RIA.
Question #14: Process of Parliamentary scrutiny
5.4.2. There is a risk that targets established by the Bill may not be met. The Bill could therefore set out what the consequences of such failure might be. The purpose of any such mechanism would be to ensure compliance, rather than to punish. The Scottish Government would like to seek views on the options below.
5.4.3. In developing these policy options, consideration was given to potentially requiring Government to face financial sanctions for failing to make progress on reducing emissions. These financial sanctions would have entailed penalties linked to the amount by which the Government missed a set target and could have been used to fund measures to reach the emissions level required by the missed target. However, this option has been ruled out because it could reduce Government flexibility over finances. For example, the money to pay a fine would have to be found from funds already allocated to other plans or programmes and would therefore damage their delivery. The other alternative would be to have money set aside to pay such fines but it would make far more sense for this money to be committed to measures to meet emissions reduction targets in the first place.
5.4.4. Consideration was also given to creating a parliamentary process in line with a reporting cycle in addition to standard Parliamentary scrutiny. This could have been achieved by establishing a Committee or similar body dedicated to examining the reports made to Parliament by the Scottish Government emissions reduction and with powers to scrutinise the Government's activity on climate change in general. However, it was considered that this would not add value to the already robust levels of scrutiny within existing Parliamentary mechanisms, which could already hold the Government to account in this regard.
Option 1: No specific consequences set out in the Bill
5.4.5. The Scottish Government will be required to report to the Scottish Parliament the progress being made towards meeting the emissions reduction targets established by the Bill. Existing Parliamentary mechanisms will ensure robust scrutiny of these reports and Ministers will have to defend and face criticism if they fail to make progress on reducing emissions and this in itself would be considered sufficient sanction.
Costs
5.4.6. There may be a perception that the embarrassment of being required to report to the Scottish Parliament any failure to achieve targets is not enough incentive for Government to make the difficult policy changes needed to reach targets. This may reduce the credibility of the framework the Bill establishes.
Benefits
5.4.7. Parliamentary scrutiny, particularly on an issue that has high public awareness and media scrutiny such as climate change (and can only grow as climate change continues to become one of the most serious threats to Scotland and the world), is usually sufficient to drive Government policies forward. Failures on the part of Government would cause sufficient embarrassment that it would be unlikely to happen repeatedly. Independent scrutiny from any body created would further incentivise significant changes to Government policy so that targets were achieved.
Option 2: In addition to Parliamentary scrutiny, if emissions reduction targets were not achieved, the Government would be required to present an action plan to Parliament setting out the measures to be taken to get back on track.
5.4.8. In addition to the standard reporting to Parliament required by the provisions of the Bill, if emissions reduction targets were not achieved, for any reason, the Scottish Government would also be required to report to the Scottish Parliament setting out an action plan on how it intended reaching the reduced emission levels required and maintaining the reduction trajectory necessary to achieve future targets.
Costs
5.4.9. This might be seen as purely a political or Parliamentary exercise and not a strong enough disincentive to ensure that targets are achieved in the first place. This could be seen to reduce the credibility of the framework the Bill establishes.
Benefits
5.4.10. The track record of Parliament (and, as a consequence, the media and public opinion) holding Ministers to account for failures and prompting reparation where required is strong. It could be argued that the basic reporting requirements would on their own compel Ministers to set out measures for addressing any failure to meet targets. However, introducing a duty to report to Parliament with an action plan of how failure will be remedied strengthens this process by making it clear exactly what is expected in these circumstances and focuses on ways of making better progress rather than simply on the fact that targets have been missed.
Question #15/16: Source of advice on setting emissions budgets
5.4.11. In order to meet these targets, the Government will require advice on the appropriate level of any interim budgets (i.e. the optimum trajectory towards the final target). The Government will also require advice about in which sectors and over what time measures to tackle change should be taken. Difficult decisions may need to be taken to tackle climate change and therefore it is proposed that such advice is made public so that there is a shared, transparent evidence base available. This public advice function would not include detailed advice about what means should be used to take action in a particular sector. Such advice would cover most Government policies (those which are devolved for the purposes of advice to the Scottish Government) and would therefore remain a matter for the Scottish Government. The advice is likely to cover economic issues, including taking account of the state of the economy at that time.
Option 1: Advice to be carried out by Scottish Government
5.4.12. This will give the responsibility of designing the pathway to reach a target by 2050 to the Scottish Government and its own research and analysts (whether wholly or partially in-house or with a series of contracts with external organisations).
Costs
5.4.13. In establishing mitigation objectives, the Government balances a range of different evidence from the scientific, academic and business communities on the costs and benefits of action, factoring in the impacts on different sectors and the economy. The Government currently establishes objectives effectively, but the advice on which these decisions are made is not always transparent to those outside of the process. More importantly, Government publications are subject to Ministerial clearance, potentially affecting the perceived credibility of the analysis presented. This proposal may have some additional costs to procure research or hire a limited number of staff.
Benefits
5.4.14. The Government has well established resources, capabilities and experience for determining carbon management objectives based on assessments of expected relative costs and benefits. These assessments could be readily adapted to a new framework at minimum resource costs. As these analyses are already carried out, and would continue to be regardless of the option chosen, there would be no duplication of work.
Option 2: Give advice provision to an existing Scottish public body or agency
5.4.15. This would give this responsibility to an existing Scottish public body or agency.
Costs
5.4.16. There is no obvious public body or agency which has the breadth of expertise required to carry out the duties associated with climate change and associated advice. Any body chosen could be perceived to have a bias carried over from its previous remit, giving precedence to environmental, economic or technological issues, or may not commit as much resource and time as a dedicated climate change body would. Additional resources would need to be supplied to such a body to enable them to carry out these duties, including procuring resources and increasing staff numbers, particularly in those fields where it has not previously had a remit. In addition, appointments would need to be made to this body to enhance the skills and expertise of the board, unless an advisory panel was set up to work to the board.
Benefits
5.4.17. There may be an enhanced perception of independence in the advice given as opposed to keeping the function within government. As well, this option would achieve savings over setting up a new organisation, particularly with costs around HR, IT and accommodation provision which can be significant.
Option 3: Utilising the UK Committee on Climate Change
5.4.18. This would give this responsibility to the proposed UK Committee on Climate Change. This body will be created by the UK Government to advise the UK Government (and devolved administrations at their request) on how to reach the UK target of 60% (or any other target instituted by a devolved administration). As in the other options, this would entail offering advice on designing the trajectory, which could be tailored to meet differing targets across the administrative components of the UK. Appointments to the Committee will be made jointly by the Secretary of State and the Scottish Ministers.
Costs
5.4.19. The Scottish Government would be expected to make a contribution towards running costs, including research additional to Scotland. A UK Committee may not commit as much resource to Scottish-specific research and advice.
Benefits
5.4.20. The UK body would be able to offer the best depth and expertise, and could be set up jointly by UK and Scottish (and other devolved) Governments, and report to them jointly. There could be provision for the Scottish Government to seek Scottish-specific advice from the Committee. A strong Scottish role for the UK Committee would also be likely to encourage it to be more considerate of Scottish interests when formulating UK-wide advice. This approach would ensure that there would be no conflict in the climate change advice given to Scotland and the rest of the UK. Many UK businesses would benefit from the availability and use of such joined up advice and the resulting increased clarity.
Option 4: Utilise a new Scottish Committee on Climate Change
5.4.21. This would entail the creation of a separate Scottish Committee on Climate Change.
Costs
5.4.22. The Scottish Government would be responsible for financing the set-up and running costs of the organisation. It is unlikely to contain the quality of expertise available to a UK Committee which would attract internationally renowned experts. A Scottish Committee could compete for research contracts with a UK Committee. Advice could be given which conflicts with the advice of the UK Committee, possible reducing the credibility of the advice, particularly on issues where there are elements which are both reserved and devolved.
Benefits
5.4.23. A Scottish Committee would be seen as being independent from Government and offer a breadth of knowledge in key areas related to climate change, including science, the economy and technology. Its advice would be targeted towards Scotland's unique society and economy and separate target.
Question #17/18: Monitoring the progress of Government on reducing emissions
5.4.24. In order to meet these targets and produce advice on setting emissions budgets, it will also be necessary to monitor progress.
Option 1: Monitoring to be carried out by Scottish Government
5.4.25. This will give the responsibility of monitoring progress to the Scottish Government and its own research and analysts (whether wholly or partially in-house or with a series of contracts with external organisations).
Costs
5.4.26. Government publications are subject to Ministerial clearance, potentially affecting the perceived credibility of the monitoring. This proposal may have some additional costs to procure research or hire a limited number of staff though much of this is already undertaken by Government.
Benefits
5.4.27. The Government has well established resources, capabilities and experience for monitoring emissions levels. These assessments could be readily adapted to a new framework at minimum resource costs. As these analyses are already carried out, and would continue to be regardless of the option chosen, there would be no duplication of work.
Option 2: Give monitoring to an existing Scottish public body or agency
5.4.28. This would give this responsibility to an existing Scottish public body or agency.
Costs
5.4.29. Additional resources would need to be supplied to such a body to enable them to carry out these duties, including procuring resources and increasing staff numbers.
Benefits
5.4.30. There may be an enhanced perception of independence as opposed to keeping the function within government. As well, this option would achieve savings over setting up a new organisation, particularly with costs around HR, IT and accommodation provision which can be significant.
Option 3: Utilising the UK Committee on Climate Change
5.4.31. This would give this responsibility to the proposed UK Committee on Climate Change. The UK Committee will monitor progress and could report to both the UK Parliament and the Scottish Parliament. Appointments to the Committee will be made jointly by the Secretary of State and the Scottish Ministers.
Costs
5.4.32. The Scottish Government would be expected to make a contribution towards running costs, including research additional to Scotland. A UK Committee may not commit as much resource to Scottish-specific research and advice.
Benefits
5.4.33. A strong Scottish role for the UK Committee would also be likely to encourage it to be more considerate of Scottish interests when formulating UK-wide advice.
Option 4: Utilise a new Scottish Committee on Climate Change
5.4.34. This would entail the creation of a separate Scottish Committee on Climate Change.
Costs
5.4.35. The Scottish Government would be responsible for financing the set-up and running costs of the organisation. A Scottish Committee could compete for research contracts with a UK Committee.
Benefits
5.4.36. A Scottish Committee would be seen as being independent from Government and would be targeted towards Scotland's unique society and economy.
Question #19: Additional independent mechanisms to scrutinise effectiveness of Government policies
5.4.37. This question depends on what additional mechanisms are put into place and views on this are welcomed. Options have not been presented as it requires views from the public consultation. Further information will be provided in the final RIA.
Question#20/21: Source of scrutiny on effectiveness of Government climate change policies
5.4.38. This question depends on what additional scrutiny is put into place and views on this and where this scrutiny should come from are welcomed. Options have not been presented as it requires views from the public consultation. Further information will be provided in the final RIA.
Question #22: Additional functions to be carried out at arms-length
5.4.39. Options have not been presented as it requires views from the public consultation. Further information will be provided in the final RIA.
5.5. Supporting measures
Question #23/24: Enabling powers to introduce a duty on public sector organisations
5.5.1. The public sector has a key role to play in reducing emissions in Scotland due to its size, the policies it is responsible for setting and delivering and its leadership position in Scotland. Using the public sector to reduce emissions can continue to be done through voluntary measures However, as it becomes more difficult to reduce emissions, some organisations may be reluctant to take action. Officers responsible for implementing changes to reduce emissions may face some organisational resistance to reducing emissions as it is seen as 'not their job'. The proposed Bill could, through the inclusion of specific enabling powers, serve as a vehicle to introduce a duty of some sort on certain parts of the public sector such as local authorities or large public bodies.
5.5.2. It should be noted that the creation of single outcome agreements is the current preferred primary method of ensuring action on climate change across the public sector. However, a workshop at the Sustainable Scotland Network conference in November 2007 identified this as a possible measure. It should be noted that a new duty would increase the regulatory burden on the public sector, increasing financial costs.
Option 1: No, a new duty would primary legislation
5.5.3. All new duties would have to be introduced through new primary legislation and be subject to the 3-stage process in Parliament for passing it.
Costs
5.5.4. If new duties needed to be introduced to immediately tackle emissions, particularly if strict targets are to be adhered to, it is unlikely that these could be achieved on time. Full scrutiny would be lengthy and could take years to introduce through primary legislation, increasing the likelihood that targets would be missed. This could also increase financial costs to Government to put forward a new Bill each time (devoting higher resources and research to a Bill).
Benefits
5.5.5. Any new duties would face the most scrutiny and this would offer reassurance to the public sector.
Option 2: Yes, a new duty could be introduced through secondary legislation
5.5.6. A Scottish Climate Change Bill would contain enabling powers for duties so that Ministers could bring these measures forward quickly using secondary legislation.
Costs
5.5.7. Such enabling powers would give Government the ability to introduce secondary legislation which could face less scrutiny than primary legislation and could also result in poorer quality legislation.
Benefits
5.5.8. This would enable Government to meet strict targets most easily, responding quickly to developments. Secondary legislation would still need to face parliamentary scrutiny, but in a much shorter time period and consultation would be required.
Question #25/26: Enabling powers to introduce guidance for public sector organisations
5.5.9. The proposed Bill could, through the inclusion of specific enabling powers, serve as a vehicle to introduce guidance some sort for certain parts of the public sector such as local authorities or large public bodies. This would both provide the public sector with information on how to reduce emissions while ensuring consistency and action. It would only be necessary to commence provisions for statutory guidance in the Bill if insufficient action was being taken on a voluntary basis. It should be noted that adhering to new guidance and scrutinising it would increase the regulatory burden on the public sector, increasing financial costs.
Option 1: No, new guidance would require new primary legislation
5.5.10. All new guidance would have to be introduced through new primary legislation and be subject to the 3-stage process in Parliament for passing it.
Costs
5.5.11. Full scrutiny would be lengthy and could take years to introduce through primary legislation, increasing the likelihood that targets would be missed. This could also increase financial costs to Government to put forward a new Bill each time (devoting higher resources and research to a Bill).
Benefits
5.5.12. Any new guidance would face the most scrutiny and this would offer reassurance to the public sector.
Option 2: Yes, new guidance could be introduced through secondary legislation
5.5.13. A Scottish Climate Change Bill would contain enabling powers so that Ministers could introduce guidance using secondary legislation.
Costs
5.5.14. Such enabling powers would give Government the ability to introduce secondary legislation which could face less scrutiny than primary legislation and could also result in poorer quality legislation.
Benefits
5.5.15. This would enable Government to meet strict targets most easily, responding quickly to developments. Secondary legislation would still need to face parliamentary scrutiny and require consultation.
Question #27: Enabling powers to introduce a reporting requirement on public sector organisations
5.5.16. The proposed Bill could, through the inclusion of specific enabling powers, serve as a vehicle to introduce a climate change reporting requirement of some sort for certain parts of the public sector such as local authorities or large public bodies. This would help ensure public sector organisations were transparent about what action they were taking. It would only be necessary to commence provisions for statutory guidance in the Bill if insufficient action was being taken on a voluntary basis. It should be noted that a new reporting requirement would increase the regulatory burden on the public sector, increasing financial costs.
Option 1: No, a new reporting requirement would require new primary legislation
5.5.17. A new reporting requirement would have to be introduced through new primary legislation and be subject to the 3-stage process in Parliament for passing it.
Costs
5.5.18. Full scrutiny would be lengthy and could take years to introduce through primary legislation. This could increase financial costs to Government to put forward a new Bill each time (devoting higher resources and research to a Bill).
Benefits
5.5.19. Any new reporting requirement would face the most scrutiny and this would offer reassurance to the public sector.
Option 2: Yes, a new reporting requirement could be introduced through secondary legislation
5.5.20. A Scottish Climate Change Bill would contain enabling powers so that Ministers could introduce a reporting requirement using secondary legislation.
Costs
5.5.21. Such enabling powers would give Government the ability to introduce secondary legislation which could face less scrutiny than primary legislation and could also result in poorer quality legislation.
Benefits
5.5.22. Secondary legislation would still need to face parliamentary scrutiny and require consultation. This provision could be brought into force more quickly.
Question #28: Amending best value
5.5.23. The Local Government in Scotland Act 2003 placed a statutory duty of Best Value upon local authorities in the discharge of their functions and statutory guidance was introduced in 2004. In 2002, a non-statutory duty of Best Value was placed on certain other public service organisations. Best Value guidance includes Sustainable Development as a key characteristic of Best Value and through this organisations should "consider social, economic and environmental impacts of activities and decisions in the short and long term." However, this may not be a clear enough signal that public service organisations should embed climate change considerations in their policies and seek to reduce their own corporate emissions. Best Value may be an appropriate vehicle for driving forward change in the public sector as it would not be prescriptive as to how emissions reductions took place and has a successful existing scrutiny process in place.
Option 1: Yes, amend Best Value
5.5.24. This would amend current Best Value guidance to specifically require consideration of climate change in an organisations activities or when reaching decisions.
Costs
5.5.25. Audit Scotland currently carries out audits on Best Value and it would be required to increase its capacity in this area in order to be able to carry out this function. New systems of measuring performance in this area would need to be developed. These would all have additional financial costs.
Benefits
5.5.26. The current scrutiny mechanism for Best Value is already in place and a new requirement could become a part of that mechanism relatively easily. This would ensure Climate Change is properly taken account of by the relevant organisations.
Option 2: No, do not amend Best Value
5.5.27. Current Best Value guidance would not be altered to specifically take account of climate change.
Costs
5.5.28. Any new system of scrutiny of climate change policies on the public sector would need to be created, duplicating functions already carried out in other areas.
Benefits
5.5.29. There would be no additional financial cost to the Best Value regime (though there would be additional costs if a new scrutiny regime were created).
Question #29: Amendments or enabling powers to allow variable charging
5.5.30. Options have not been presented for this question and we strongly encourage you to provide on open response on this. Options considered for the Bill will be presented in the final RIA.
Question #30: Provisions on adaptation
5.5.31. Options have not been presented for this question and we strongly encourage you to provide on open response on this. Options considered for the Bill will be presented in the final RIA.
Question #31: Amendment to Environmental Assessment (Scotland) Act 2005
5.5.32. Options have not been presented for this question and we strongly encourage you to provide on open response on this. Options considered for the Bill will be presented in the final RIA.
Question #32: Equalities implications
5.5.33. Options have not been presented for this question and we strongly encourage you to provide on open response on this. Options considered for the Bill will be presented in the final RIA.
Question #33: Amendments to other existing legislation
5.5.34. Options have not been presented for this question and we strongly encourage you to provide on open response on this. Options considered for the Bill will be presented in the final RIA.
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