Climate change and the associated costs of meeting the Scottish Government’s carbon emission targets will put significant pressure on the Scottish budget, the Scottish Fiscal Commission has said today.
Under the Paris Agreement, both the Scottish and UK Governments have committed to help limit global warming through their own carbon emissions targets. These will require substantial investment across Scotland and the Scottish Government is expected to shortly publish its plans to reach net zero. The Commission says that these plans should specify the level of investment required and how much of this is to be funded by the public sector.
The Commission’s updated estimates suggest that from 2026 to 2050 the additional public investment required could average £0.7 billion a year (in 2024 prices).
Public spending required in devolved areas is expected to be 26 per cent more per person in Scotland than the rest of the UK. The main factor driving this is the difference in the expected investment in buildings compared to the rest of the UK. Funding received from the UK Government would not be sufficient to cover the total costs of reducing carbon emissions, so additional funding would have to be found from elsewhere in the Scottish Budget.
The potential scale of spending to meet Scotland’s net zero targets, relative to the funding available, presents a fiscal risk to the Scottish Government.
The Commission’s Chair, Professor Graeme Roy, said:
“It is clear that the long-term consequences of damages from climate change are going to be costly to individuals, the economy and public finances. To reduce the damages from climate change all countries will need to reduce their emissions. The cost of reducing emissions will also have significant effects on public finances.
“The Scottish Government has crucial decisions to make in their forthcoming Climate Change Plan. While the level and timing of investment will depend upon the government’s plans, our report today shows that major investment is required.
“What matters for the Scottish Budget are the differences between Scotland and the rest of the UK. It’s clear that more investment is needed in Scotland per person, and if these costs are picked up by the Scottish Government that will have fiscal consequences.”
ENDS
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