Greenhouse gas emissions projections: phase 1 and phase 2 modelling results

3. Methodology

3.1 Overview of approach

Our approach to delivering the GHG emissions projections is summarised in the diagram below.

Step 1: The boundaries of the analysis and methodology were agreed at project inception. This included an initial screening exercise to establish which CCPu policies would be taken forward for assessment. Ricardo sector experts engaged with representatives of the Scottish Government to identify existing impact assessments for CCPu policies and, for those without an impact assessment, discuss how the GHG impacts could be quantified within the scope of this project.

Step 2: The next step was to collect inventory data and input this to the GHG projections model developed by Ricardo.

The GHG projections set out in this report use 2019 as the starting point or "base year". The source of this data was the Devolved Administration GHG inventory, which was published in 2022. The data in this publication is two years in arrears, so the most recent data it contained was for 2020. However, due to impacts of COVID-19 on the economy, the 2020 data was considered anomalous, and therefore the year 2019 was selected as the base year This approach meant that the starting year and baseline projection are consistent with historical trends in the inventory.

Step 3: From 2019 onwards, a baseline projection was then calculated. This is essentially a 'business as usual' scenario where trends continue without the influence of any mitigation policies. In the baseline scenario, the main drivers of change are associated with economic and population growth.

• Estimates of economic growth are based on projections for gross value added (GVA) as per Office of National Statistics (ONS) data on regional GVA.^[5]
• Estimates of population growth are based on National Records of Scotland (NRS) population projections.^[6]

In some sectors, energy use and emissions are assumed to scale directly with these trends. For instance, industrial emissions are assumed to scale with economic growth and domestic wastewater emissions are assumed to scale with population. In other sectors, the relationship is less direct, and/or there may be additional underlying drivers of energy use and emissions that were chosen for modelling in agreement with the Scottish Government. These are summarised in the table below. Further information on the sector-specific drivers is provided in subsequent chapters.

Table 3‑1. Underlying drivers of energy use and emissions in the Baseline scenario

The baseline, and all other future GHG pathways, were modelled using the Ricardo Net Zero Projections (NZP) tool, which enables users to model the impact of implementing mitigation measures on GHG emissions over time.

What is the NZP tool?

The tool is designed to enable the development of scenarios for reaching net zero by any given target year and allows the users to define mitigation measures for each line (sector, sub-sector, fuel type or source of emissions) in the GHG emissions inventory.

These scenarios can be used to build a baseline projection, assess the likely impact of planned measures, and model the impact of alternative strategies to reaching net zero ("scenarios"). The tool can also be used to undertake sensitivity testing around the impact of changes in assumptions.

GHG reductions from the mitigation measures in each sector and sub-sector were initially modelled separately, and then combined into a single model to ensure that interactions between sectors were accounted for.

Note the following:

• Modelling for the LULUCF sector was undertaken separately by CEH, and the results were integrated into the Ricardo NZP tool once they were finalised.
• We modelled electricity demand in each sector/sub-sector and then confirmed that the amount of electricity generated in Scotland would always exceed this demand, so there was no need to model imports of electricity.

Emissions in the baseline scenario are shown in the figure below. Overall, it is expected that there would be a relatively small (c. 5%) increase in total emissions between 2019 and 2045.

The results are described in subsequent tables and text

Step 4: Next, the impacts of CCPu policies and proposals were assessed by sector experts from Ricardo and CEH. The precise methodology that was used to quantify emissions reductions from each policy/proposal depended on whether the policy had already undergone a full impact assessment, and if not, what level of data was available to support such an assessment. Further information on the approach taken for each sector is provided in subsequent chapters of this report.

When assessing the impacts of CCPu policies/outcomes, a wide range of variables were considered, including: improvements in energy efficiency, fuel switching, product substitutions and phase outs, changes in transport modes, reductions in demand, material usage and waste production, increased digitisation, electrification, carbon capture & storage and negative emissions technologies (NETs).

For the purpose of this assessment, some policies have been grouped into "packages". A "package" refers to a collection of policies where the combined impact of the policies has been quantified, but disaggregated results are not provided.

This approach was adopted for the following reasons:

• In some cases, different policies are aimed at tackling similar issues. Where they overlap, there would be a risk of double-counting if the policies were quantified separately. For example, the Scottish Government has a variety of funding schemes in place to promote uptake of zero direct emission heating (ZDEH) systems. Separately, there is an ambition for all buildings to switch to ZDEH. The former would contribute towards the latter; therefore, it makes more sense to assess the policies in combination.
• Some policies and proposals essentially serve as "supporting measures", where there is no quantifiable target or outcome even if they still help to achieve the Scottish Government's goals. An example would be requiring Local Authorities to produce Local Heat and Energy Efficiency Strategies (LHEES). These would facilitate the deployment of solutions such as heat networks but would not directly result in GHG emissions reductions. Policies that were deemed unquantifiable have either been screened out of the assessment or included in packages as "supporting measures".

In this context, one of the benefits of modelling policies in groups is that it helps to reduce the level of uncertainty relative to trying to estimate the impacts of individual policies and then trying to correct for the interactions between them.

Step 5: Having established the baseline projection, and then calculated the impacts of CCPu policies/proposals, the work explored five additional future GHG emissions scenarios. In these scenarios, the Scottish Government's policies and proposals on climate change, as set out in the CCPu, act as mitigation measures that reduce GHG emissions. The scenarios reflect different assumptions on drivers and structural changes, and thus often assume different rates of action implementation.

A summary of each scenario is provided below, and further details on how this has been reflected in the modelling for each sector is provided in subsequent chapters.

Note: Hydrogen scenarios were only modelled for Buildings, Industry and NETs as these were the only sectors where future hydrogen availability was considered likely to have a significant on sector development and sectoral emissions.

Step 6: After the initial set of GHG projections were developed, in what will henceforth be referred to as Phase 1 of the project, a second iteration was carried out, which will be referred to as Phase 2. Phase 2 allowed for further refinements to the modelling, and notably introduced higher levels of ambition for some sectors, based on the intended outcomes set out in the CCPu.

In Phase 2 of the work, details of the updated modelling approach were agreed with the Scottish Government in a series of sectoral workshops. The workshops looked beyond the specific policies in the CCPu by considering approaches outlined in more recent policy papers, sector road maps and any relevant research and analysis of additional policy measures which the Scottish Government sector teams shared with Ricardo sector experts. Once the modelling assumptions were agreed, the GHG projections from Phase 1 were updated to provide a revised set of results.

As a shorthand for differentiating between them, Phase 1 may be considered the "Policies" phase while Phase 2 was the "Outcomes" phase – though for many sectors, Phase 2 only involved modelling refinements, as detailed in Table 3‑3 below.

Further details on the changes modelled in each sector are provided in subsequent chapters.

The baseline projection is consistent between the two Phases.

It is important to note that some outcomes are not supported by enough specific policies or proposals in the CCPu to enable them to be achieved. Some of the policies or proposals that have already been published are nonetheless at an early stage of development where the regulatory approach, funding, etc. has not yet been confirmed. The impact on GHG emissions will depend on the specific technologies and solutions that are ultimately adopted. All of the quantified GHG impacts set out in this report are therefore subject to confirmation of the regulatory approach or policy design.

3.2 Comparison against the Scottish TIMES model

The table below briefly compares the modelling approaches used in the Scottish TIMES model and the bottom-up modelling approach used in this study delivered by the Ricardo Net Zero Gap Analysis Tool. This comparison provides an insight into the potential differences and comparability of outputs between the two modelling approaches, and the key limitations of each modelling approach.

Further information on the limitations, uncertainties and sensitivities that apply to each sector are provided in subsequent chapters.