The Scottish Government will need to spend around 18% of its capital budget to meet net zero, Holyrood’s independent financial watchdog has warned.

In a new report, the Scottish Fiscal Commission (SFC) said ministers would need to spend an average of £1.1 billion a year to become a net zero greenhouse gas emitting nation by 2045.

They also warned that “it could be difficult for Scottish Government to fund meeting” an interim target of a 75% reduction in emissions by 2030.

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As the UK and Scottish targets are on a territorial basis, that means the Scottish Government has responsibility for delivering net zero in Scotland even though some of the emissions produced here are “from reserved sectors.”

Meanwhile, the UK Government has responsibility for the entirety of the UK reaching net zero.

These figures do not include the costs associated with adapting to climate change or damage from climate change. The Commission’s December 2023 forecast report highlighted how the capital budget is expected to fall 20 per cent in real terms between 2023-24 and 2028-29.

While both governments will be “dependent on the other for achieving their targets,” the SFC has warned that the costs could fall “disproportionately” on the Scottish Government because “a greater share of the UK reduction in emissions relating to forestry and land use needs to take place in Scotland.”

Scotland contains 32% of the UK’s land mass, with roughly half of its trees and 70% of its peatland.

The SFC also say more public spending per person in devolved areas is needed in Scotland than in the rest of the UK, “potentially making it difficult for the Scottish Government to fund the transition to net zero.”

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The Commission’s Chair, Professor Graeme Roy, said there was still a lack of clarity from both administrations.

The report pointed out that the current Scottish Government Climate Change Plan, published in December 2020, does not contain “sufficient information on the costs of the policies and proposals.”

Prof Roy said: “What matters for the Scottish budget are the differences between Scotland and the UK. It is clear that one major difference is the greater contribution of forestry and land use in Scotland.

“To better assess the fiscal risks facing the Scottish Government, we need more information from both governments about their plans for tackling all aspects of the climate change challenge.

“Handling not just the achievement of net zero and the future adaptation challenges, but also their fiscal consequences is a shared endeavour that needs to be managed well by both Scottish and UK Governments.”

Responding to the report, Lewis Ryder-Jones, Oxfam Scotland’s Advocacy Adviser, said: “There’s no denying the transition to net zero will be expensive: but delaying investing in climate action is like putting off fixing a leaky roof until the entire house is flooded. The longer governments procrastinate, the bigger the bill becomes. 

“It’s a no brainer that the biggest polluters, who are raking in record profits and amassing huge fortunes, must pay for the climate damage they disproportionately fuel and the cost of building a fairer low carbon future. Oxfam’s own modelling shows the UK Government could raise £23 billion annually through a series of common-sense, fair taxes on those with the greatest climate culpability.  

"The First Minister must press the Prime Minister to act, but he must do the same, by fairly using the Scottish Government’s new Tax Strategy to compel bigger and better off polluters to settle their bill and clean up their acts.”

Responding to the report, Net Zero Secretary Mairi McAllan said achieving net zero remained "an environmental imperative and our moral obligation."

She said: We are grateful to the SFC for this report. As it states, Scottish and UK net zero targets are intertwined. And in particular, UK targets rely on reforms to forestry and land use – a greater share of which has to take place in Scotland." 

The minister added: "In 2024-25 alone we are committing £4.7 billion in capital and resource for activities that will have a positively impact on delivery of our climate change goals.

"However, delivering the infrastructure required to meet our net zero will also require responsible investment by the private sector and – crucially - the UK Government who needs to stop shirking their responsibility and invest.

"That’s why it is deeply concerning that we are expecting a real-terms cut to our UK capital funding of 8.7 % over five years, totalling around £1.3 billion.

“Our calls for the Spring Budget to address this went unanswered, with no additional capital funding in 2024-25. This comes on top of the UK Government reneging on its net zero commitments, and rolling back policies already announced and accounted for.

“We will continue to call on the UK Government to change course, and ensure future financial settlements provide us with the resources we need to secure a just and fair transition to net zero.”