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Your Scotland, Your Voice: A National Conversation

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CHAPTER 5 A GREENER SCOTLAND

OVERVIEW

5.1 Scotland's natural heritage enhances the lives of the people of Scotland and supports tourism, agriculture, fishing and aquaculture. The first decade of devolution has seen legislation on climate change, improving the environment and tackling flooding. Scotland has developed an approach to national parks, land reform and nature conservation designed for Scottish circumstances, and distinct from approaches in the rest of the United Kingdom.

5.2 Scotland could play a leading role in addressing the challenge of climate change and meeting European targets for renewable energy through its potential in wind, tide and wave power. Scotland's remaining reserves of oil and gas support an infrastructure and technical expertise that could play a leading role in the development of future low-carbon technologies, as well as providing capital to invest in developing renewables technology.

5.3 Major policy areas of energy, transport regulation and waste remain reserved. Many environmental, agriculture and fishing matters are the subject of international, particularly European Union agreement, where Scotland has no voice outwith the policies of the United Kingdom Government.

5.4 Further devolution could provide Scotland with mechanisms to develop its potential, for example responsibility for regulation of the marine environment could allow Scotland to encourage offshore renewables and carbon capture and storage technology. However, the need to work internationally, and the central role of the European Union in environmental matters, means that only independence would allow Scotland to make a full contribution and make the best use of its experience and potential.

ENVIRONMENT, AGRICULTURE AND FISHERIES

Current position

5.5 Scotland has extensive devolved responsibilities for its natural environment, natural resources, fisheries, and rural communities. 100 Important areas in which the Scottish Parliament and the Scottish Government have exercised these responsibilities include:

  • climate change
  • marine issues
  • fisheries and aquaculture
  • agriculture
  • waste

5.6 Many environmental issues - including fisheries, agriculture, pollution and climate change - are subject to decisions made in international bodies, including the European Union and the United Nations. The European Union also provides access to a common market for Scottish farmers, fishermen and businesses, as well as funding opportunities to rural communities, and regulations so that food is safe to eat.

5.7 The Scottish Parliament and Government are responsible for implementing European Union decisions within devolved areas, but Scotland is represented at the European Union as part of the United Kingdom. This can lead to anomalous situations. For example, Scotland is among the largest sea fishing nations in Europe and the Scottish fleet is responsible for landing 66% of the total United Kingdom volume of fish. Scotland is also the European Union's largest producer of farmed Atlantic salmon and is a globally significant salmon producing country in its own right. The Scottish Parliament and Government are already responsible for both sea fishing and aquaculture. However, the United Kingdom Government still takes the lead in European Union negotiations on these matters.

Climate change

5.8 The Climate Change (Scotland) Act 2009 is the most ambitious climate change legislation anywhere in the world. The Climate Change Delivery Plan sets out what needs to be done now and in the medium and long-term to achieve the necessary emissions reductions. Scotland cannot deliver its emissions targets by acting alone. For example, targets for the European Union Emissions Trading Scheme, the largest carbon trading scheme in the world, are set at European Union level. The main responsibilities for energy policy and regulation are reserved to the United Kingdom Government, as are fiscal levers to tackle climate change, including Vehicle Excise Duty, Fuel Duty, and Landfill Tax.

Marine issues

5.9 Responsibilities for Scotland's coasts and seas are divided between Scottish Ministers and the United Kingdom Government, with different rules within and beyond 12 nautical miles. Fishing is fully devolved out to 200 nautical miles. Regulating oil and gas and shipping is reserved even within inshore waters. The Crown Estate, a reserved body, determines the use of the seabed, and coastguard services are run by the Maritime and Coastguard Agency, an executive agency of the United Kingdom Government. Scotland has executive (but not legislative) responsibility for marine renewables. Legislative and executive competence for marine nature conservation and installations at sea are devolved, but only out to 12 nautical miles. Despite recent agreements the underlying fragmented nature of responsibilities does pose a risk to the successful management of marine issues, for example supporting the emerging wind and tidal energy industry in Scottish waters. 101

Fisheries

5.10 The Scottish Government manages fish stock quotas and the activities of the Scottish fleet, including number of days spent at sea, wherever they fish within European Union limits. It can also regulate inshore fisheries by all United Kingdom vessels within the 12 nautical mile territorial water limit around Scotland. The registration of fishing vessels is a reserved function. Scotland has been at the forefront of measures to support fish stock sustainability through, for example, the conservation credits scheme. 102 However, quota management and licensing cannot readily be adapted to Scottish needs as long as they are tied into a one-size-fits-all approach to United Kingdom fisheries management.

Waste

5.11 Scottish recycling rates are increasing, and Scotland has met its share of the 2010 European Union Landfill Directive target 18 months ahead of schedule. However, regulation of the design and content of packaging is reserved, which prevents Scotland taking its own steps to prevent and reduce waste by designing in reusability and recyclability.

Environmental recommendations of the Commission on Scottish Devolution

5.12 The Commission made a number of recommendations relating to the environment.

Environmental taxation

5.13 The Commission recommended that Landfill Tax and the Aggregates Levy are devolved. Landfill Tax is a tax on the disposal of waste and the Aggregates Levy is a tax on the commercial extraction of rock, sand and gravel. Devolution of these taxes would allow Scotland greater opportunities to design integrated waste and other environmental policies, for example by employing both higher Landfill Tax and landfill bans which are being examined in a Scotland-led project. However, key environmental taxes, such as Vehicle Excise Duty and Fuel Duty, would remain reserved.

Marine and nature conservation

5.14 The Commission recommended review of the effectiveness of legislative agreements between the United Kingdom and Scottish Governments on the marine environment, and that marine nature conservation should be devolved to the Scottish Parliament at the earliest opportunity. This would allow fisheries and marine conservation to be managed in an integrated way. However, regulatory responsibilities would remain divided for marine planning, mineral deposits and marine renewables.

Crown Estate

5.15 The Commission recommended that the United Kingdom Government should consult Scottish Ministers and more actively exercise powers of direction under the Crown Estate Act 1961. The Commission also proposed that the appointment of a Scottish Crown Estate Commissioner should be made following formal consultation with Scottish Ministers. These recommendations would offer Scotland a role in the management of the seabed by the Crown Estate. However, the more significant issue - that revenues collected from Scottish coastal businesses by the Crown Estate bring very little visible benefit to Scotland - would remain.

Animal health and welfare

5.16 The Commission recommended that funding for policy relating to endemic diseases in animals should be devolved, while responsibility for funding exotic disease outbreaks should be retained at a United Kingdom level. At present, policy on animal health, including response to exotic disease outbreaks is devolved, but the budgets are held by the United Kingdom Government. One of the lessons learnt from Scotland's response to the foot and mouth disease outbreak in 2007 was that the separation of policy responsibility from financial responsibility, as recommended by the Commission, is unsustainable. 103 Full devolution of the animal health budget would bring responsibility for that budget and animal welfare policy in line, and allow devolved budgets to support improvements in animal health and welfare in Scotland, to reduce animal disease and support increased sustainable economic growth of the livestock farming sector.

Food labelling

5.17 The Commission recommended that regulations of food content and labelling should be reserved, where separate devolved arrangements would place a burden on the manufacturing, distribution and supply of foodstuffs to consumers. However, this recommendation would separate responsibility for food labelling from devolved responsibilities for health, nutrition and food policies. Food labelling in Scotland is also governed by European Union legislation and already reflects the single European market.

Full devolution

Would there be scope
for an independent
Scotland to have a
distinct policy on fuel
duty that reflects the
needs of a rural
economy? I'm thinking
particularly in
relation to the
farming, haulage and
fishing sectors that we
have in the Borders.

(Jedburgh National Conversation Event, 29 April 2009)

5.18 Full devolution could bring benefits to Scotland beyond those envisaged by the Commission.

Fisheries

5.19 By agreement, quota management and vessel licensing arrangements have been overseen by the four United Kingdom Fisheries Administrations acting jointly. As policy objectives and fleet structures across the United Kingdom have diverged, the current joint management arrangements have constrained the Scottish Government's ability to put in place arrangements tailored to Scottish circumstances. Greater management flexibility under full devolution would allow Scottish Ministers to adapt fisheries management measures to meet the specific needs of the Scottish industry. Such an arrangement would avoid disagreements between the Scottish Government and the United Kingdom Government on, for example, quota management.

Rural and environmental taxation

5.20 The viability of rural areas and the Scottish Government's ability to assist their economic recovery could benefit from fiscal autonomy. For example, Scotland could tailor fuel and vehicle excise duties to take better account of Scottish circumstances, balancing the need to reduce emissions against the desire to support rural and remote communities. Specific tax incentives could be given to landowners who let whole farms to new entrants to farming, or relief from Stamp Duty Land Tax for new entrants taking up leases. Such measures could encourage new farmers and increase enterprise in agriculture, food production and land management in Scotland.

Independence

5.21 Independence would allow Scotland to be a full member of various international organisations, including the European Union. This would place Scotland in a stronger negotiating position on rural and environmental issues.

Relationship with the European Union

5.22 Currently the representation of Scottish interests in the European Union relies entirely on the political goodwill of the United Kingdom Government, without any external check or remedy. Where there are differences of view on policy, for example on reform of the Common Agricultural Policy (see Box 8) or genetically modified crops or products, the United Kingdom Government will vote contrary to Scottish preferences. Independence would give Scotland a full voice in Europe.

5.23 Similarly, independence would offer Scotland, as a leading fishing nation, the opportunity to argue directly for replacement of the current Common Fisheries Policy, through, for example, promoting repatriation of sea fisheries management to the coastal Member States.

In my view the most cogent argument for
independence for Scotland is the need for
separate representation at the European Union.

(Dundee Summer Cabinet, 30 June 2009)

Climate change

5.24 Scotland is a key player in energy policy at both United Kingdom and European Union levels. The United Nations Framework Convention on Climate Change ( UNFCCC) is the basis on which international agreement on climate change is negotiated. The meeting in Copenhagen in December 2009 aims to deliver a successor to the UNFCCC Kyoto Protocol. A new international agreement would help Scotland and Europe as a whole deliver greater emissions reductions. An independent Scotland would make its own contribution to such international agreements (see Box 9).

5.25 The Scottish Government works in constructive collaboration with the United Kingdom Government, the Welsh Assembly Government and the Northern Ireland Executive on climate change. Such collaborations could continue and expand on independence, both within this group, and within the European Union.

BOX 8: SCOTLAND IN EUROPE - REFORM OF THE COMMON AGRICULTURAL POLICY ( CAP)

1. The United Kingdom and Scottish Governments have fundamentally different views on reform of the CAP. The United Kingdom Government's policy, on which devolved administrations were not consulted, is that the entire "First Pillar" of the CAP, which delivers income support for farmers through the Single Farm Payment and markets interventions for certain products, should be phased out. 104 The Scottish Government believes that this approach would seriously jeopardise large parts of Scottish agriculture. About 85% of Scotland falls under the European Union's category of "Less Favoured" agricultural land, where profitability is by definition lower than on better quality land. The proportion of "Less Favoured" land is considerably lower elsewhere in the United Kingdom.

2. The United Kingdom Government's position on the "Second Pillar" of the CAP also differs from that of the Scottish Government. The Second Pillar is designed to ensure delivery of public goods where there is market failure. While environmental public goods are an important part of the Second Pillar, the United Kingdom Government position fails to take account of other rural public goods which are important for Scotland, including the maintenance of flourishing communities in remote areas.

3. This difficulty is brought into focus in European Union negotiations, where Scotland's position can be heard formally in the Council of Ministers only if it aligns with the United Kingdom position. This leaves some of Scotland's most vulnerable areas at a serious disadvantage. An independent Scotland would have the same voice as other member states.

BOX 9: INTERNATIONAL CLIMATE CHANGE NEGOTIATIONS

1. Scotland's share of global emissions is small, and Scotland's most important contribution at a global level is to demonstrate strong leadership and demonstrate that the pathway to a successful low carbon economy is achievable.

2. The Scottish Parliament has passed world-leading climate change legislation, a key illustration of the positive leadership and contribution Scotland can make to meeting global challenges. Scotland could be at the centre of international discussions, such as the Copenhagen climate change summit, supported by Scotland's environmental organisations. However, Scotland's official attendance at such events depends on the agreement of the United Kingdom Government.

3. With independence, Scotland would be able to play a full role in a subject in which it has much to offer. The experience of a nation with both oil and gas reserves, significant carbon capture and storage potential and the ability to develop substantial renewable energy capacity would add to the voices on this issue of global concern, to the benefit of the debate on tackling climate change within Europe and across the world.

The result is a hotch potch which…
is inhibiting transport integration in Scotland
and the integration of transport in energy
and climate change policies.

(Scottish Association for Public Transport response to the National Conversation, September 2008)

TRANSPORT

Current position

5.26 The majority of transport functions are devolved, and distinctive Scottish policies aim to create a well-connected, safe and reliable transport system which underpins business and economic growth.

5.27 A number of transport functions remain reserved to the United Kingdom:

  • roads: regulation of roads, vehicles and drivers; national speed limits, and renewable Transport Fuels Obligation
  • rail: Great Britain-wide rail network issues, standards and regulation frameworks, representation of passenger interests and complaints, and cross-border franchises
  • marine: marine policy, regulation and security
  • air: economic, security and safety regulation, international representation

5.28 The experience of enhanced rail devolution (see Box 10) demonstrates the opportunities of devolving responsibility for transport policy, and focussing on Scottish needs.

Transport recommendations of the Commission on Scottish Devolution

5.29 The Commission makes only one recommendation affecting transport in Scotland. Among its recommendations on taxation (discussed in more detail at paragraphs 3.22 - 3.28), the Commission proposed that Air Passenger Duty ( APD) should be devolved to the Scottish Parliament. Devolved APD could be reduced, providing an incentive for airlines to expand direct connections to Scotland, benefitting the Scottish economy and reducing air travel connections within the United Kingdom. This is an example of the scope to use fiscal policy to encourage economic activity, and the principle of the Commission's recommendation could bring benefits in other areas of taxation.

Independence

5.30 Independence - or full devolution -would offer allow Scotland to integrate fully all transport policies and initiatives. 105 Scotland would also have responsibility for the overall public financial framework, which could benefit transport through borrowing and taxation policies.

Borrowing

5.31 Greater borrowing autonomy for the Scottish Government would allow more flexibility in the pace and priorities of Scotland's capital expenditure programme, and provide an alternative source of financing for major infrastructure projects when required. For example, phasing the funding of the new Forth crossing would allow existing capital budgets to take forward more projects at the same time as bridge construction.

Transport taxes

5.32 Other taxes directly linked to transport could be devolved, beyond the APD recommended by the Commission on Scottish Devolution. Fuel duty, APD and vehicle excise duty accounted for just 5% of Scottish tax revenue in 2007/08, but they are important policy instruments to influence behaviour and achieve economic objectives.

5.33 With responsibility for fuel duty, Scotland could press the European Union for a derogation to apply a lower rate of fuel duty in rural areas, recognising accessibility and price disadvantages faced by Scotland's remote and island communities. The French government has introduced a lower rate of duty in Corsica under a similar system. The United Kingdom Government has not pursued such a policy for Scotland although the Commission on Scottish Devolution acknowledged the case for the Scottish and United Kingdom Governments 'to pursue a derogation limited to the outlying parts of the Highlands and Islands'. 106

5.34 Responsibility for fuel duty would also enable the Scottish Government to respond to the pressures faced by Scottish businesses due to Scotland's geographic position.

BOX 10: DEVOLUTION OF RAIL SERVICES

1. Until the Railways Act 2005 rail investment was decided at United Kingdom level, and Scottish projects competed for funding in a United Kingdom Government hierarchy. Since 2006 devolved responsibility for investment decisions has allowed the Scottish Government to target investment in the Scottish rail network to meet Scottish objectives, from improving connectivity to meeting climate change targets.

2. For example, in July 2007 the Scottish Government specified on behalf of Scottish rail passengers and freight users industry deliverables to secure the most positive outcomes for Scotland. Different priorities from the United Kingdom included a focus on faster journey times to benefit business, resulting in substantial planned investment in the Glasgow to Edinburgh line and from Inverness and Aberdeen to the central belt.

Nuclear, tidal, wind, clean-coal are, in varying proportions, ingredients
for energy. The Scottish Government is against nuclear energy, so is there
any confident assurance that other remaining sources are adequate to
meet present and future demands, and within reasonable timescales?

(Melrose Summer Cabinet, 28 July 2009)

ENERGY

Objectives of energy policy

5.35 Energy policy encompasses both supply of energy, and developing the energy sector in Scotland's economy, including renewable energy and climate change targets.

5.36 The Climate Change (Scotland) Act 2009 introduced a statutory target to reduce emissions in Scotland by 42% by 2020. 50% of Scottish electricity consumption should come from renewable sources by 2020, with 31% by 2011, and, in line with European Union-wide targets, 20% of all energy use should come from renewable sources by 2020.

5.37 Scotland has a competitive advantage in energy: natural and geographic opportunities in wind and wave and tidal generation; and established expertise in the oil and gas and power generation industries. Scotland is estimated to have 25% of Europe's offshore wind resource, 10% of Europe's wave resource and 25% of its tidal resource, which would make a significant contribution to a low carbon future for Scotland and Europe. Energy will be a key sector in Scotland's sustainable economic growth over the next 30 years and beyond.

Current position

5.38 The major policy responsibilities for energy are reserved, including the regulation of energy markets, regulation and taxation of the oil and gas sector and the promotion of Scottish interests at European Union level. Grid access is also reserved, and the current grid charging system works against the development of clean, renewable energy in Scotland.

5.39 Scottish responsibilities in relation to energy are limited to the promotion of renewable energy and energy efficiency. 107 Through the planning system, the Scottish Government can also influence decisions relating to investment and the energy mix.

Energy recommendations of the Commission on Scottish Devolution

5.40 The Commission did not recommend any improvements to the current responsibilities for energy, either to encourage development of Scotland's renewables or to maximise the benefits of oil and gas to Scotland.

Oil and Gas

5.41 The Commission established an Independent Expert Group to examine the issue of North Sea taxation and revenue. This reported that there would be economic opportunities from devolving responsibility for North Sea taxation, although there could also be challenges. 108 The Expert Group also identified the benefits of a Scottish oil fund. However, the Commission itself concluded that oil and gas revenues should remain reserved and did not recommend a Scottish oil fund.

Other Energy Matters

5.42 The Commission considered electricity generation and supply issues and made no recommendations in this area. On transmission charging, the Commission noted that this was an issue for many of those who gave evidence, but did not consider the subject was within its remit.

Full devolution

5.43 There are a number of areas of energy policy which could be devolved, despite the conclusions of the Commission on Scottish Devolution.

Renewables

5.44 The Scottish renewables target requires the right infrastructure, including harbours, test facilities, heat networks and upgrades to the grid. These require co-operative working across the public and private sectors, and major investment. The Fossil Fuel Levy fund is collected in Scotland to promote renewable energy, and currently stands at £174 million. A decision by the United Kingdom Government means that this fund cannot be invested in renewables without a corresponding reduction on the Scottish block grant. A devolved Fossil Fuel Levy fund could be invested to encourage the renewable energy sector in Scotland, helping to meet renewables targets in Scotland and across the United Kingdom.

Carbon Capture and Storage

5.45 Carbon Capture and Storage ( CSS) is a technology in which Scotland has a number of significant advantages including academic expertise, considerable offshore storage capacity and the potential to utilise the skills and infrastructure of our existing oil and gas and power engineering sectors. There are a number of outstanding potential CCS projects which could be developed in Scotland. Giving greater powers to Scotland, such as ensuring that funding raised from the proposed United Kingdom Government levy on generation to fund CCS projects is allocated directly to Scotland, would provide an opportunity to assist the development of such projects and ensure that Scotland can be seen as a leader in the development of this emerging sector. In addition, CCS is currently regulated by a number of bodies including Scottish Ministers, the United Kingdom Government, and the Crown Estate. Devolving all offshore licensing, including oil and gas licensing, to Scotland would create a seamless regulatory framework for low carbon-based energy activity in the Scottish offshore area.

Oil and gas taxation

5.46 Oil and gas remain an important sector in the Scottish economy. With further devolution the Scottish government could encourage development in a number of key areas:

  • improving depletion rates and promoting enhanced oil recovery
  • worldwide marketing of Scottish oil services expertise
  • sustainable use and decommissioning of the oil and gas infrastructure (including for CCS)
  • encouraging diversification of skills from the sector into low carbon opportunities such as CCS and marine renewables
  • better use of fiscal revenues, including a sovereign wealth fund

5.47 The taxation regime is an important factor in maximising investment and production in the sector. The current taxation regime is made up of three parts: petroleum revenue tax: charged at 50% on profits from fields approved before March 1993 (when the tax was abolished for new fields); corporation tax: now charged at an effective rate of 50%; and license fees paid by operators to the United Kingdom Government to explore and extract oil and gas from specified areas.

As energy security issues climb to the top
of the geopolitical security agenda, how
will this impact on Scotland's energy
security in the coming decade?

(Dumfries Summer Cabinet, 29 July 2008)

5.48 It is in Scotland's interests to develop an oil and gas taxation regime that balances revenues, environmental objectives on decommissioning and re-use of the infrastructure, and incentives for continued development and exploration in the North Sea. Remaining reserves may have a wholesale value of between £650 billion and £1.1 trillion. Full devolution of the North Sea tax regime would allow the Scottish Government to work with industry to develop a fiscal regime that met these objectives and ensured an appropriate level of taxation on a valuable and non-renewable resource.

Independence

5.49 Independence would give Scotland the advantages of full devolution and bring responsibility for important areas such as energy regulation and engagement with the European Union.

Energy regulation

5.50 Under independence, energy market regulation would address Scotland's specific needs in transmission of energy, encouraging renewables and energy efficiency, promoting trade with the rest of the United Kingdom and further afield within European Union rules. The Commission on Scottish Devolution considered the issue of electricity supply and concluded the current model of a United Kingdom-wide market was the best way ahead to ensure security of supply and allow consumers access to a competitive and modern energy market, as well as ensuring that obligations and targets are met. However, there are a number of examples where independent countries can operate a common electricity transmission and distribution system, such as the pooling arrangements that exist between a number of Nordic countries. 109 A single electricity market now exists between the Republic of Ireland and Northern Ireland, demonstrating that agreements and co-operation between individual countries on energy market regulation is possible.

5.51 Under the current United Kingdom system, there are higher charges for connection and use of the United Kingdom electricity grid for generators furthest from the main United Kingdom centres of demand, favouring generation in the south of England. Scottish generators produce 12% of United Kingdom generation, but account for 40% of the transmission costs, or about £100 million per year more than their proportionate share. This is a reserved matter, and Scotland cannot reform this regime even though it discriminates against Scottish generators and acts against the delivery of renewable energy targets. With independence Scotland would have its own voice in any wider pooling structures to ensure that its interests were promoted.

Engagement with Europe

5.52 Scotland has a major contribution to make to European Union and international energy policy. Scotland is in a unique position with its extensive experience of the oil and gas industry and its significant potential to develop renewable and carbon capture technology. Scotland will play an important role in meeting Europe's energy security and climate change needs in the decades ahead. Scotland has also made innovative proposals for the future of the energy sector in Europe, for example on a supergrid across Europe centred on the North Sea.

5.53 The Scottish Government has already made substantial progress in recent years in engaging actively with Europe on energy issues and has made energy a long-term priority for European engagement. 110 Experience on low carbon energy research and development show that an active role for Scotland strengthens the United Kingdom's energy objectives within the European Union. However, only under independence could Scotland play a full part in European Union energy policy.

CONCLUSION

5.54 Scotland has a rich natural heritage, which, along with energy production, plays an important role in the economy. Much of the policy that affects its environment, agriculture and fisheries comes from the European Union and is therefore effectively reserved to the United Kingdom. Energy policy is also reserved, as is much regulation of transport.

5.55 It would be possible to devolve further responsibility to Scotland for some of these matters, for example particularly taxes on waste and transport. However, the challenges of climate change, energy supply and food security mean that international organisations, especially the European Union, are likely to continue to develop as the most important forums for decision making on environmental and energy matters in the future. Only independence would give Scotland a full voice in these international discussions, and allow its expertise and potential to be represented properly.