Section 3: Actual emissions
In addition to increasing the level of target ambition, it is proposed that the new Bill will increase the transparency of the targets.
Targets based on actual Scottish emissions
The emission reduction targets in the 2009 Act are set on the basis of "adjusted" emissions, which takes into account the operation of the EU Emissions Trading System ( ETS - see Box 5).
The adjustment means that actual emissions from sectors covered by the EU ETS (such as heavy industry and the power sector) are replaced by a notional Scottish share of the EU ETS cap. This means that the actual emissions from the "traded sector", are not counted against our targets. The rationale behind this is that the ETS, which is an EU-level policy, represents the principal lever for reducing domestic emissions from these sectors.
Adjusted emissions have, however, proven to be very difficult to understand. Whilst emissions across Europe are reducing as a result of the participation of operators in Scotland, these reductions may not be fully reflected when reporting progress to Scottish targets.
The CCC advise that all targets in the Bill should be based on actual emissions in Scotland, by removing the EU ETS adjustment, as this will increase the transparency of measuring progress to targets.
The proposal to change how the targets are measured will not change how the EU ETS operates in practice - participants in the Scottish power generation and industrial sectors will still have to reduce their emissions and surrender their allowances on an annual basis in line with the EU-wide cap of -43% by 2030. The Scottish Government considers that an ambitious EU ETS is the most cost effective way to achieve emission reductions from energy intensive industry and the power sector, through the level playing field of the world's largest carbon market.
Box 5: The EU ETS
Launched in 2005, the EU ETS is an EU policy aimed at mitigating climate change by limiting greenhouse gas emissions from energy intensive industry, the power sector and aviation.
The EU ETS is a 'cap and trade' system. A limit (cap) is placed on the overall volume of emissions from participants in the system. Within the cap, organisations receive or buy emissions allowances which they can trade (one emissions allowance equals one tonne of carbon dioxide equivalent). Each year, an organisation must obtain and surrender enough allowances to cover its emissions. The cap is reduced over time so that by 2020, the volume of emissions permitted within the system will be 21% lower than in 2005. Under the proposals for the next phase of the EU ETS (to 2030), the volume of emissions permitted within the system would be 43% lower than in 2005. This reduction of emissions within the sectors covered by the EU ETS is consistent with the EU's overall 2030 greenhouse gas reduction commitment within the Paris Agreement adopted in December 2015.
The EU ETS contributes to delivering Scotland's Climate Change targets through incentivising the reduction in emissions from Scottish organisations participating in the system. It is currently the largest single contributor to our climate change mitigation effort - covering around 40% of our emissions. See Annex A for more information about the ETS and how it is accounted for under the 2009 Act.
The Scottish Government proposes, in line with the CCC advice, to set all targets on the basis of actual emissions, by removing the EU ETS adjustment.
We will continue to ensure that policies for industrial decarbonisation remain consistent with the operation of the EU ETS cap, including the provisions within the EU ETS for mitigating the risk of industry being displaced to other countries with less stringent climate policies. It is anticipated that statistics will continue to report emissions on both actual and adjusted bases.
Do you agree that all emission reduction targets should be set on the basis of actual emissions, removing the accounting adjustment for the EU ETS?
Yes / No (please explain your answer)
Note on accounting for International Aviation and Shipping emissions
The 2009 Act includes specific provisions to include a share of International Aviation and Shipping emissions when measuring progress towards Scotland's domestic climate targets. In line with the CCC's advice, the Scottish Government intends to continue to include a share of such emissions in the accounting basis for the new Bill.
Note on International Credits
The 2009 Act allows the Scottish Government the option of purchasing international carbon offsetting credits to help meet domestic emission reduction targets, subject to limitations. In line with the CCC's advice the Scottish Government intends to retain this flexibility.
Email: Jack Murray, CCBill@gov.scot
Phone: 0300 244 4000 – Central Enquiry Unit
The Scottish Government
St Andrew's House