Scottish Government

05 TARGETS

5.1 This section discusses how a statutory target should be designed. It covers a number of complex issues:

• The target could be based on either emissions produced in Scotland, or on emissions from goods and services consumed in Scotland.
• The target could be expressed as a particular percentage reduction by a particular year, or as the total amount of emissions from Scotland over a particular time period.
• Different gases could be included in the target.
• Different means of measuring the target could be used.
• Different means of accounting for emissions which are already regulated through the EU emissions trading scheme.
• International credits.
• Emissions from international aviation and shipping.
• The level of the target.
• Future amendments to the target.

5.2 There are close relationships between each of these issues. For example, the choice of base year affects the level of the target. An 80% reduction by 2050 from 1990 levels is the equivalent of 77% reduction from 2005. Including international credits would enable a higher target to be met at the same cost to Government and the economy. Choosing a CO ₂ target rather than a target based on a basket of greenhouse gases may allow a higher target to be met for the same cost to Government and the economy. Therefore, when considering the issues discussed in this section it is important to bear in mind the linkages existing between them.

Targeting Scottish emissions

5.3 The conclusion of the IPCC Fourth Assessment Report ²⁴ is that to avoid dangerous climate change, global warming must be limited to 2°C above pre-industrial levels. The EU supports this as an objective and is using it as the foundation for its climate change policy development and in international negotiations. The Scottish Government has very little influence over global indicators such as global temperature rise or global emissions concentrations. Therefore it would not be credible for a Scottish target to use such global measures. The Scottish Government therefore proposes that the targets are specified in terms of Scottish emissions.

5.4 But what are Scottish emissions? Scottish emissions could be defined as the emissions from goods and services produced in Scotland (direct emissions), or emissions from goods and services consumed in Scotland (indirect emissions). Direct emissions are those emanating from activities in Scotland: such emissions form the basis for the Greenhouse Gas Inventories - and for existing international emission reduction agreements. But, as part of the global economy, most of the products Scotland consumes are produced outside Scotland. This external production activity also causes emissions, so-called indirect emissions. Such indirect emissions are not reflected in the Inventory.

5.5 A particular fraction of Scottish direct emissions worth mentioning in this context is that associated with the generation of electricity in Scotland which is subsequently exported outside Scotland (some 20% of the electricity generated in Scotland in 2006). In line with international practice, such emissions are recorded in Scotland's Inventory of emissions. Further discussion on the significance of this fraction in determining the Scottish target is set out in paragraph 5.28.

5.6 In addition to the emissions associated with the production and consumption of goods and services, we also need to consider the energy needed throughout the life of a product or service we consume. A new building may require less energy to heat than an old building, but renovating an old building may require far less energy and use materials that required far less energy to make (known as embodied energy) than building a new building.

5.7 There are ways under development to measure our overall impact on global emissions from our consumption. The most common of these is the carbon footprint. There are a number of definitions of carbon footprint but the one that is probably the most appropriate for Scotland is:

'The carbon footprint is a measure of the exclusive total amount of carbon dioxide emissions that is directly and indirectly caused by an activity or is accumulated over the life stages of a product.' ²⁵

However, methodologies of this kind are not yet sophisticated enough to be used as the basis for a statutory target and so it is not proposed to pursue such an approach at this time.

5.8 There is some evidence to suggest that currently there is little difference between measuring emissions associated with consumption and production. Analysis published by WWF reveals that 'Scotland's CO ₂ emissions from production (11.49 tonnes per capita) and consumption (11.61 tonnes per capita) are very similar. On a per capita basis, its territorial emissions are higher than the UK average and its CO ₂ emissions from consumption are lower. CO ₂ emissions from household energy consumption in Scotland are higher than the UK average: 3 tonnes per capita compared with an average of 2.75 tonnes per capita. This may be partially due to Scotland's colder climate. Even though much of Scotland is rural, it emits only 1.3 tonnes per capita of CO ₂ from transport, compared with the UK average of 1.7 tonnes per capita.' ²⁶ The relationship between emissions as measured by consumption and production methods may change over time, depending on several factors, including the mix of methods used to generate electricity in Scotland and how much of that electricity is exported.

5.9 It is considered that the only workable option is to set a target based on the emissions that we produce in Scotland. However, what matters for climate change is global emissions, not just Scottish emissions, so this target should always be seen as a proxy for Scotland's impact on global emissions. Scottish policies should be designed to impact on the global emissions Scotland causes, not just those we produce. This may mean that Scottish climate change policies tackle our consumption patterns or encourage technology that may be used overseas. Such measures may not improve Scottish emissions figures, and so may not contribute towards our target, but they will help in the global fight against climate change. These supplementary measures could still be reported upon to Parliament.

How should the target be expressed: a point target or a cumulative target?

5.10 Most international agreements are phrased in terms of a point target: reducing emissions to a certain level by a certain year. Framing the Scottish target in a similar manner would facilitate comparisons of effort between countries.

5.11 It is not just the particular level of greenhouse gas emissions in a single year which affects climate change; rather it is the total amount emitted over a number of years. The graph below shows two emissions reduction paths from the same starting level to the same point reduction - but with different trajectories (rates of progress). The areas under each trajectory - representing the total amount of emissions over the period - are quite different: the darker shaded area shows how delaying emissions reduction results in greater cumulative emissions. Therefore, the setting of a single point reduction target does not, by itself, determine the total emissions produced over a period.

Figure 6 Illustration of the affect on total emissions over time of different emissions reduction trajectories

5.12 It would be possible to construct a target for the total amount of emissions that could be released to 2050. Such a target, if met, would give greater certainty about the level of Scotland's contribution to the global effort to tackle climate change than a single point percentage reduction target.

5.13 However, a cumulative emissions target will be more challenging and more costly to meet due to the fact that the economy will take time to shift onto a low carbon path and many of the technologies expected to deliver savings are not yet commercially viable. Setting a certain amount of emissions will mean that greater emissions reductions will be required in the short run which may force the government to implement measures which are not cost-effective, increasing the overall cost of meeting the target.

5.14 The credibility of the target will be key to the Scottish Climate Change Bill's success in providing a framework for long-term investment and business decisions. A cumulative target would give less flexibility with which to meet some of the great uncertainties in tackling climate change. If it were widely perceived that the target would be missed, a cumulative target would lack credibility.

5.15 Given that Scotland's global impact is relatively minor, and that the uncertainties involved in tackling climate change are indeed great, the Scottish Government proposes to adopt a point target for 2050, rather than a cumulative target. However the Scottish Government recognises the advantages which a cumulative approach can bring, and therefore proposes to adopt a cumulative approach to interim emissions budgets (see Section 6).

Which gases should be targeted?

5.16 The purpose of a Scottish target is to reduce our impact on global climate change. The emissions of gases which are caused by human activities and cause climate change and are included in international agreements are carbon dioxide (CO ₂), methane (CH ₄), nitrous oxide (N ₂O), hydrofluorocarbons (HFCs), perfluorocarbons ( PFCs) and sulphur hexafluoride (SF ₆) (see Section 4 for further information).

5.17 An individual target could be developed for each greenhouse gas but this would increase the cost of meeting the targets without bringing any additional benefits. Measures to reduce emissions of every gas would be needed. But a measure for one gas may be more expensive than another that produced the same reduction in carbon dioxide equivalent. If the cost of reducing emissions of a basket of greenhouse gases and individual targets for each gas that have the same overall impact on climate change are compared, the basket approach gives greater flexibility and therefore is likely to be less costly. This section therefore discusses two options: basing the target on carbon dioxide only, or basing the target on a basket of greenhouse gases (the carbon dioxide equivalent of the six greenhouse gases).

5.18 There are many ways of reducing Scotland's emissions of different gases and each measure will have a different cost associated with it. To inform policy development, more information is needed about the implications of pursuing particular options, including the associated costs and how these costs are distributed between the public and private sector. It may be impossible to stop some activities which produce greenhouse gas emissions or to eliminate some greenhouse gases altogether. If non-CO ₂ gases prove difficult and/or very costly to abate, greater reductions in CO ₂ will be needed to compensate. Therefore a target based on a basket of greenhouse gases may place additional costs on the economy as compared to a CO ₂ only target.

5.19 The Scottish Government is currently undertaking research to assess the potential range of measures available to reduce greenhouse gas emissions in Scotland, including the impact of these measures, any barriers to implementation and the likely costs involved. The output of this research is planned to be published in Spring 2008.

5.20 The greatest proportion of Scotland's greenhouse gas emissions is carbon dioxide (80% of greenhouse gas emissions in 2005). This is mostly generated by burning fossil fuels (coal, gas and oil) for electricity or transport. Whilst the Kyoto Protocol targets are based on the basket of greenhouse gases, other climate change frameworks, such as the UK Climate Change Bill and the EU Emissions Trading Scheme, only target carbon dioxide (although the UK Bill does allow for other greenhouse gases to be targeted at a later date and other activities which emit non-CO ₂ gases may be included in the EUETS in later phases). This is because carbon dioxide is the gas in which the deepest cuts are needed - both within the UK and globally.

5.21 Within the UK, substantial progress has been made in reducing emissions from non-CO ₂ gases. In 2005, UK non-CO ₂ emissions had fallen 45% since 1990. In Scotland the reduction was 25%. UK emissions of non-CO ₂ greenhouse gases are currently projected to fall to 50% of 1990 levels by 2050. 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. ²⁷

5.22 The data about how much of each gas Scotland produces is compiled in the Greenhouse Gas Inventories. Most of the elements of the inventory are estimates, rather than actual measurements, and there is a level of uncertainty associated with each figure (see Table 3). All statistics carry a degree of uncertainty but the recorded numbers are still a valid monitoring tool.

Table 3

5.23 In general, the emission estimates for carbon dioxide are less uncertain than those for the other greenhouse gases because the data relating to CO ₂ emissions is more robust. Most CO ₂ emissions are the result of combustion and we have good estimates of the amount of fuel burnt and the associated emission factors.

5.24 Uncertainty relates to both the emissions factor and activity data used to estimate emissions associated with each activity. The relatively larger contribution made by land use, land use change and forestry makes the Scottish CO ₂ estimate more uncertain than for the UK.

5.25 There are therefore a number of issues to consider when considering which gases should be included in the target: impact on global climate change, cost to the economy and credibility of the target.

Q 1. Should a Scottish target be based on carbon dioxide only or the basket of six greenhouse gases?

Q 2. Should the Bill contain provisions to alter which gases are included, for example if the reliability of data for a particular gas improves or if science changes in the future about which gases cause climate change?

How should progress towards the target be measured?

5.26 To ensure that the Scottish Climate Change Bill provides the right incentives to reduce emissions, we must consider whether different means of measuring the target might better reflect the Scottish Government's ambition for Scotland to make its contribution to tackling climate change.

5.27 The Greenhouse Gas Inventories measure emissions produced in Scotland. They are published annually and comply with internationally recognised methodologies. They are the best source of data we have for Scottish emissions. However, they are not perfect: compiling the data involves a 20-month delay before publication; and, as explained in paragraph 5.22, there is a level of uncertainty around the figures. In the context of setting a target, it is also important to note that, as it stands, the Inventories are unlikely to show explicitly, the results of all progress made in reducing energy demand, improving energy efficiency and scaling up renewable electricity generation in Scotland - key planks of Scotland's emissions reduction agenda.

5.28 Generation, transmission and supply of electricity is undertaken on an integrated basis across the UK. Accordingly, electricity is able to be transmitted across the countries of the UK, as demonstrated most recently by the fact that some 20% of electricity generated in Scotland was exported to other parts of the UK in 2006. As mentioned earlier (paragraph 5.5), one of the principal implications for Scotland of exporting electricity is that the emissions associated with the generation of such electricity count against Scotland's emissions total rather than that of the country receiving the electricity. Another significant implication is that any reduction in demand from within Scotland for electricity from fossil fuel power stations - as a result of a reduction in energy demand (e.g. closure of industrial instillations), improved energy efficiency or increased consumption of renewable electricity - increases the potential for such power stations to export electricity. In such circumstances, while Scotland may well be successful in its pursuit of improved energy efficiency and increased generation of renewable electricity, this success will not necessarily be reflected in Scotland's emissions Inventory. This said, Scotland's success in these areas will be reflected elsewhere in the UK due to the net affect on emissions at the UK-level of improved energy efficiency and increased supply of renewable electricity.

5.29 Energy efficiency measures are generally the least expensive means of reducing emissions and can often save money. However there are barriers to improving energy efficiency which need to be overcome: making use of and acting on clear and trusted information, disruption when improvement works are taking place, and the initial financial investment (although most energy efficiency measures produce financial savings in a relatively short time). There is also evidence that when energy efficiency measures are installed, energy demand does not always decrease - householders may, for example, set their heating higher because it is now cheaper, or use the savings to buy energy intensive goods such as a dishwasher or plasma TV. The Bill must therefore provide a stronger incentive to reduce overall energy demand.

5.30 As mentioned above, increases in Scottish renewables capacity and generation do not necessarily affect the emissions counted in the Scottish inventory. Existing UK fossil-fuel powered stations will continue to dominate emissions until a combination of reductions in demand and renewables are capable of replacing generation capacity when it reaches the end of its productive life. The decision on when to close (or whether to build replacement) fossil fuel power stations, the type of fuel used (e.g. gas, oil or coal), and where in the UK to build them, is for electricity generators, though it is also influenced by legislation such as the Large Combustion Plants Directive and the EU Emissions Trading Scheme.

5.31 Yet providing the right incentives for each of these measures will be critical to decarbonising the Scottish economy. Increasing renewable capacity (both electricity and heat), improving energy efficiency and reducing energy demand can each have knock-on effects greater than the associated reduction in immediate emissions: greater renewables generation and reduced energy demand may mean we need fewer new fossil fuel (or nuclear) power stations in the UK, avoiding future emissions from construction and technological lock in. Improvements in energy efficiency would counter our need for the energy capacity we require currently because of inefficient generation, transmission and appliances and products.

5.32 Even though energy efficiency and renewable energy may not reduce the emissions Scotland produces, they do help to reduce emissions elsewhere and so should be encouraged. The Scottish Government wants to ensure that the Bill creates the right incentives to encourage energy efficiency and renewable energy by ensuring that the statutory target is framed in a way which allows progress made in there areas to be reflected. Measuring emissions from Scottish sources alone is unlikely to do this. Two options which may help to provide the appropriate incentives for renewable energy and energy efficiency are to base the target on an end-user inventory instead of the source inventory, or to have separate targets for energy demand and renewable electricity in addition to a target for the source inventory.

End-user inventory

5.33 To create an end-user inventory, the figure for emissions from our power stations and oil refineries in the standard inventory is replaced by a measure of the electricity and fuel consumed in Scotland. This would entail counting the electricity consumed in Scotland and translating it into an emissions equivalent by multiplying it by the average emissions factor for all electricity generated in Scotland (this is known as the "carbon factor"). This means that reductions in energy demand in Scotland would be reflected. It also means that an increase in renewable electricity generation would be reflected because such an increase would reduce the carbon factor. The end-user inventory would still count emissions from other products that are exported, such as whisky, food products, chemicals and office machinery.

Figure 7 Relationship between Greenhouse Gas Source Inventory (production-based) and End-user Inventory (consumption-based) - showing how emissions relating to energy production are reallocated to other sectors

(Note the information shown is purely indicative)

Separate targets

5.34 Another option would be to have a separate, mandatory target for each of energy demand and renewable electricity, where it is within the competence of the Scottish Parliament to set such a target (regulation of energy supply is reserved). Having separate statutory targets would mean that we would have less flexibility in how we reduce our emissions. Given that the regulation of energy supply is reserved to the UK Government, and therefore that the Scottish Government does not have access to all of the necessary policy and financial levers, there is a risk of falling short of statutory targets expressed in terms of energy efficiency or renewable electricity. Separate targets might provide the wrong incentive: money or effort may be spent on meeting a renewables target when the same amount of money or effort invested in supporting another type of measure may have resulted in a greater reduction in emissions. Separate targets may also be confusing: if emissions were not decreasing but targets for energy demand and renewables were being met, should Scotland be doing more or would we be on track?

Q 3. The Scottish Government wishes to ensure that the Bill gives sufficient incentives to invest in energy efficiency and renewable electricity. Should the targets be based on source emissions; an end-user inventory; or on individual targets for energy efficiency and renewable electricity? Do you have any other suggestions?

Q 4. Do you agree that the Bill should allow the means of measuring the target to be changed through secondary legislation to reflect international developments or unforeseen consequences of the Bill?

Interaction with EU Emissions Trading Scheme

5.35 The EU Emissions Trading Scheme ( EUETS) currently regulates just under 50% of Scottish CO ₂ emissions. Trading schemes are, under particular conditions, the most economically efficient means of reducing emissions, because they allow emissions reductions to be made where they are least expensive. They also guarantee the level of emissions reductions (in a global context) because the total amount of emissions from installations included within the trading scheme is capped. In establishing over-arching national statutory targets through the Scottish Climate Change Bill, the Scottish Government does not want the Bill to undermine this important policy lever.

The EU Emissions Trading Scheme ( EUETS)

The EUETS is one of the key policies introduced by the European Commission to help meet the EU's 8% greenhouse gas emissions reduction target under the Kyoto Protocol. The Scheme covers energy activities (e.g. boilers, electricity generation, Combined Heat and Power); production and processing of ferrous metals; mineral industries; pulp and paper industries.

The EUETS uses a market-based mechanism to incentivise the reduction of greenhouse gas emissions in a cost-effective and economically efficient manner. The Scheme operates through the allocation and trade of greenhouse gas emissions allowances throughout the EU, where one allowance represents one tonne of CO ₂ equivalent. In phases I and II of the scheme (2005-2007 and 2008-2012). An overall limit or 'cap' is set by each Member State on the total number of allowances to issue to installations in the Scheme, based on the member state's Kyoto and/or national emissions reduction target.

At the end of each year, the Scheme's participants (i.e. individual companies) are required to ensure they have sufficient allowances to account for their installation's actual emissions. They have the flexibility to buy allowances to meet their actual emissions, or to sell any surplus allowances generated by reducing their emissions below their allocation. The buying and selling of allowances takes place on an EU-wide market, and under the rules of the Scheme there is no restriction placed on where within the EU allowances are sourced, or how many may be purchased to cover actual emissions. All transfers are recorded in national registries.

The Linking Directive amends the EUETS Directive and provides for the use of credits from the Kyoto Protocol's flexible mechanism for compliance purposes in the EUETS. Use of these credits are required to be restricted up to the limit set out in each member state's national allocation plan.

5.36 In considering the relationship between the EUETS and an over-arching statutory emissions reduction target for Scotland it is important to understand certain features of the trading regime. Although the EUETS is largely a devolved measure, the allocation of allowances for individual installations is set through the mechanism of a National Allocation Plan for the UK as a whole and agreed by the European Commission. The UK-level cap for Phase II of the EUETS was informed by the UK Government's domestic CO ₂ emissions target to reduce emissions by 20% by 2010 - a target the previous Scottish administration committed to support. It is likely that future caps will be set by the European Commission, ³⁰ informed by the EU's overarching emissions target of a reduction in greenhouse gas emissions of 20% by 2020 (30% if an international agreement is reached). Therefore the caps for individual installations covered by the EUETS in Scotland may be set on the basis of a different target to that proposed to be set in the Scottish Climate Change Bill. Imposing further statutory controls on those installations covered by the EUETS, in line with Scotland's emissions reduction target would be unlikely to generate any additional reductions globally (see paragraph 5.38) and may result in industry moving out of Scotland.

5.37 The other important feature to note about the EUETS - as described in the box on page 46 - is the facility to buy additional allowances to cover emissions made beyond an installation's cap or to sell any surplus allowances generated as a result of an installation reducing its emissions below its allocation. This process of trading is an international one - within the EU-wide market and beyond into the wider international arena through the Kyoto Protocol's flexible mechanisms. Given the wider mechanisms at work, the EUETS imposes certain, important, limitations on what can be achieved through national emission reduction targets, limitations that will have to be borne in mind when determining the form of target to be set through the Bill.

5.38 If the statutory target included actual emissions from installations covered by the EUETS (rather than the allocations given to those installations), the benefits of the trading scheme would be redundant and result in higher costs for Scottish installations. Scottish installations are likely to have to make more emissions reductions to contribute to meeting the national target, even if the making of such reductions are more expensive than buying allowances. Such a situation would mean that the installations would be emitting below the EUETS cap allocated to them, thereby enabling the installation operators to sell their excess allowances through the EUETS market. Although Scottish emissions would fall, there would be no difference in overall emissions from the Scheme. An analogy would be to imagine a balloon filled with a fixed amount of air, representing the EU-wide emissions cap. Squeezing part of the balloon, i.e. the emissions in Scotland, simply leads to a bulge in another part of the balloon, i.e. the emissions in other countries.

5.39 The UK Government already uses a means of accounting which includes the effort made through EUETS in its Energy White Paper 2007, the updated Energy Projections 2007, and the Greenhouse Gas Inventories. UK Climate Change Bill allows for effort made through the EU emissions trading scheme (buying allowances and credits).

Impacts of including EUETS effort

5.40 Because the EUETS currently regulates just under 50% of Scottish CO ₂ emissions, taking account of the EUETS in the Scottish target is important. There appear to be two options, both of which have serious disadvantages:

• Counting the allocations to installations rather than actual emissions from the traded sector. The disadvantages would be that there may be a substantial lack of Scottish control over the level of emissions made, and installations may not be given allocations in future years (they may be auctioned) so this approach may not be possible in future years.
• Excluding the traded sector from the target. The disadvantages would be that this would be likely to exclude more and more activity over time and diminish the importance of the Scottish target.

This section seeks your views and suggestions on how to address this significant, complex, and evolving problem.

5.41 Allowing for effort made through the EU Emissions Trading Scheme should smooth Scotland's emissions data. Power generation in particular can be very volatile. In the past, emissions from this sector have fluctuated by up to 12% but early, indicative, data shows that between 2005 and 2006 the rise in emissions from power stations is likely to be confirmed to be in the region of 35%. To take advantage of this smoothing, one option for factoring the emissions from installations covered by EUETS in Scotland into a national emissions reduction target would be to count their annual allocation (set in advance), rather than their actual emissions.

5.42 The nature of the EUETS means that the Scottish Government cannot directly control what emissions are released by installations within the EUETS. The EUETS is largely a devolved measure, but the cap has been set at the member state level (ie the UK level) and is likely to move to the EU level. Scottish emissions may rise because Scottish emitters choose to buy allowances, but nevertheless there would be an overall beneficial impact on global emissions because savings would have occurred elsewhere.

5.43 Although the EUETS cap is currently set at the UK level, it takes into account competitiveness issues. If the cap is set so tightly for a competitive industry that production moves to another country, the economy suffers with no benefit in overall emissions: the bulge moves to another part of the balloon. Therefore the cap tends to be set at a "business as usual" level for sectors subject to international competition. This is likely to be insufficient to meet domestic emissions reductions targets. The non-traded sector would have to make a greater effort in reducing emissions to meet the target. This would mean that one of the key policy levers regulating a large proportion of our CO ₂ emissions to meet the Scottish target is not set directly by Scottish Ministers, nor is it necessarily set consistently with Scottish or UK targets.

5.44 In the future, the influence of the EUETS on national emissions is likely to become of greater significance. It is probable that over time, other sectors and gases not currently covered by the scheme will be included, such as aviation and possibly surface transport. This means that emissions from other areas of the economy will be removed from the direct control of Scottish Ministers.

5.45 Another feature of the EUETS that could introduce more complication in the future is the intention for a greater proportion of allowances to be auctioned rather than allocated. Scotland is not allocated an allowance; rather it is proposed that each member state would be given a certain allocation to auction. Installations from any member state could bid for allowances auctioned in the UK. If a greater proportion of allowances are auctioned it may be difficult to establish what Scotland's share of the UK allowance is.

5.46 Given the way the EUETS operates and acknowledging the important role trading has to play in bringing about emission reductions within the EU and globally - through an ever-increasing carbon market - it is important that the relationship between the EUETS and national emission reduction targets is clear. On the face of it, the two regimes need to be considered separately. To do otherwise risks undermining the rationale behind the EUETS - to encourage reductions through the most cost-effective means. But, excluding emissions from installations covered by the EUETS from the scope of the proposed statutory emissions reduction target equally runs the risk of severely limiting the range of emission sources covered by such a target. This is an extremely difficult issue. The Scottish Government considers that maximising the emission sources covered by its planned 80% reduction target is imperative and, to this end, welcomes views on how best to take account of the EUETS in the design of the target.

Q 5. Should the emissions reduction target take account of the abatement effort made by companies under emissions trading schemes? If so, how?

International credits

5.47 Emissions of greenhouse gases have the same effect wherever they occur in the world. Both the Kyoto Protocol and the EU Emissions Trading Scheme allow the purchase of carbon credits from overseas to count towards domestic targets. This allows emissions reductions to be made at a lower cost and provides a flow of low carbon investment funds for developing countries. A recent study by the UNFCCC Secretariat ³¹ estimated that of the US $200-$210 billion necessary in 2030 to return global greenhouse gas emissions to current levels, almost half of this funding - around US $100 billion - would need to go to developing countries if they were to meet their growing demands for energy in a sustainable way.

The Kyoto Protocol and flexible mechanisms

The Kyoto Protocol provides countries that have adopted targets with a number of ways to meet them, through international emissions trading and 'flexible' mechanisms (explained below). Through these mechanisms the Protocol creates a system whereby emissions reductions may occur at the least cost location, the net effect being a reduction in global greenhouse gas emissions.

The Kyoto flexible mechanisms, the Clean Development Mechanism ( CDM) and Joint Implementation ( JI), allow for countries with a Kyoto target to participate in projects that abate emissions in another country. The credits generated (where each is worth one tonne of CO ₂e abated) can then be used to meet the participating country's Kyoto target.

The CDM provides for countries with a Kyoto target ('Annex I' countries) to carry out projects in developing countries which do not have a reduction commitment ('non-Annex-I' countries). These projects reduce emissions and may have additional sustainable development benefits. The 2006 Department for International Development White Paper ³² set out the UK Government's objectives regarding deployment of low-carbon technology in developing countries and CDM projects play an important role in this regard.

JI allows a country with a reduction target under Kyoto to purchase credits generated by a project to reduce emissions in another country covered by a Kyoto target.

5.48 Many countries with substantial emissions reductions targets expect to use international credits to help meet those targets. The Scottish Government proposes to allow international credits to be counted towards its targets. These would only be credits verified by international processes supporting the Kyoto Protocol - either clean development mechanism ( CDM) or joint implementation credits ( JI). Allowing international credits also helps to make a stringent target more credible. Even if new technologies and behavioural change are not having sufficient effect, the Scottish Government can ensure our targets are met by buying international credits. Any use of international credits would be in line with the international principle of 'supplementarity' established under the Kyoto Protocol. This means that the primary focus must be emissions from within Scotland, and that international credits should only be a minority of our emissions reductions. However, the Scottish Government does not propose to set a statutory limit on the amount of international credits that can be used. This would provide greater flexibility and lower costs to meeting the targets, and provides a mechanism to rectify any deviation from the emissions reduction pathway. The Scottish Government would propose to obtain independent advice on what the appropriate usage of international credits would be.

Q 6. Do you agree that international credits should be counted towards Scottish targets? Should there be limits on credits counted towards Scottish targets?

International aviation and shipping

5.49 Due principally to the international nature of the aviation industry, emissions from international aviation are not currently covered by international climate change agreements by the UK's targets or those proposed for Scotland. Complications might include passengers taking more than one flight to reach their final destination, given the hub and spoke model of international aviation routes; and long haul flights where aeroplanes have to stop in a different country en route just to refuel. And, within a UK context, many of the policy measures which might be used to reduce international aviation emissions are reserved to the UK Parliament, so it would be difficult for Scottish Ministers to influence emission levels to the extent necessary.

5.50 Given aviation's international nature, the Scottish Government supports the UK in believing that an international solution is needed. The Scottish Government has supported the UK Government's efforts to press to include aviation in the EU Emissions Trading Scheme and is pleased that, at the EU Environment Council meeting in December 2007, it was agreed that this would happen during Phase II of the Scheme, in 2012. The current European Commission proposal would require airlines to pay for the growth of their emissions above 2004-06 levels with equivalent emissions reductions from other sectors.

5.51 International discussions on how best to deal with international shipping emissions are even less advanced than in the aviation sector. The Scottish Government's view is that international shipping emissions (as with international aviation emissions) are best addressed at an international level. The Scottish Government also supports the UK Government's pressure for international action for the maritime sector.

5.52 Domestic aviation and shipping are already included in the Greenhouse Gas Inventories statistics (i.e. emissions from planes and ships whose journies start and finish within the territorial limits of the UK). As methods for apportioning aviation and shipping emissions within an international framework develop and are agreed internationally, it may become possible for these emissions to be satisfactorily included in Scotland's reduction targets and there will be scope in the Bill to include these sectors in the legislative framework at a future date.

Level of the target

5.53 The level of the target could be set either on the basis of the science and supporting research that indicates by how much emissions need to be reduced to avoid dangerous climate change or, alternatively, by looking at what existing and new technologies and likely behavioural change are expected to achieve. The target must be set at a level which is sufficiently challenging to drive action and set an example to the rest of the world of the level of ambition required to avoid dangerous climate change. However, there must be a reasonable likelihood of achieving the target. If it is set so high that it cannot be achieved, businesses and firms will not believe that Government will do everything needed to meet the target and one of the primary reasons of having the mandatory target - constructing a credible, long-term framework for private sector investment - will be undermined. This is a delicate balance. The target needs to be more ambitious than what current technologies can deliver in order to help provide an incentive to develop new technologies, yet not so challenging as to be unachievable and therefore redundant.

5.54 The Scottish Government's preference is to reduce emissions by 80% by 2050. Opting for an ambitious target recognises that Scotland has a relatively affluent economy and great potential for generating energy from renewable sources. This is in line with the latest IPCC report which states that global emissions cuts of between 50% and 85% by 2050 will be required to minimise the chances of a global temperature rise in excess of 2°C - 2.4°C.

5.55 The Scottish Government proposes to use the same base dates as the Kyoto Protocol target for the baseline. This would be 1990 for carbon dioxide. If the target were to be based on the basket of greenhouse gases, this would be 1990 for carbon dioxide, nitrous oxide and methane, and 1995 for F gases (hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride).

5.56 The level of ambition will, of course, depend on many of the other issues discussed in this section. If any elements of flexibility are tightened, the target will become more difficult to achieve.

5.57 Meeting an 80% target - no matter how it is framed - will be extremely challenging. Many of the factors which influence emissions are outwith Scottish Ministers' control, such as temperature and relative fuel prices. Greenhouse gas emissions from certain sectors (such as methane from cattle and carbon dioxide from ploughing land) are very difficult to reduce without reducing the size of a particular sector or its productivity. Scotland has a relatively small energy intensive sector in which large efficiencies might be made. Section 4 of this consultation, the partial Regulatory Impact Assessment and the draft Environmental Report ³³ give more information on what the impacts of meeting such a target might be.

Amending the target

5.58 Considerable scientific uncertainty remains over the optimal stabilisation rate to avoid dangerous climate change. The Stern Review and the Royal Commission on Environmental Pollution ³⁴ suggest reducing emissions to stabilise atmospheric concentrations to 550ppm by 2050. At this level, the Royal Commission estimates that UK CO ₂ levels would have to fall by 60% by 2050 (around 440 - 500 ppm CO ₂ only). The Stern Review states that stabilising CO ₂e at or below 550 ppm would require global emissions to peak in the next 10-20 years, and then fall at a rate of at least 1-3% per year. By 2050, global emissions would need to be around 25% below current levels, and reductions of this kind would need to be made in the context of a world economy which could be three to four times larger than today.

5.59 Scotland's greenhouse gas emissions are only 0.15% of the world's emissions, and that proportion will fall as large developing countries continue to industrialise. Whilst it is important to lead by example, even eliminating all Scottish emissions would have a negligible affect on climate change. Climate change policies which focus solely on cutting Scottish emissions may have a perverse impact on emissions elsewhere. Tight regulations that force larger emitters to move from Scotland could damage the Scottish economy whilst having no effect on global emissions; they simply move the emissions to another part of the world. Indeed such action might even increase emissions if the goods produced elsewhere then need to be transported back to Scotland.

5.60 New international agreements are anticipated in the next few years. These may have an impact on some of the factors relevant to how we measure the Scottish target: for example, agreements on how to allocate emissions from international aviation and shipping, new trading schemes, changes to the international credit mechanisms, or changing the international approach from measuring source emissions to measuring consumption.

5.61 The Scottish Climate Change Bill could allow for the 2050 target to be changed in future through secondary legislation, which would be faster and require less Parliamentary scrutiny than creating a new Bill to change the target. This could be limited so that the target could only be revised on the basis of independent, expert advice if, for example, new technologies are developed or the science of climate change develops. It could be limited to only increasing the target to increase the certainty for business that investment in low carbon technologies is worthwhile.

Q 7. Should the Bill allow the level of the 2050 target to be changed through secondary legislation? If so, should this only be allowed on the basis of independent, expert advice, to reflect international developments or unforeseen consequences of the Bill? Should any changes to the target be limited to an increase in the target?