Carbon Neutral Islands: financing roadmap

Scotland’s Islands and Decarbonisation

The Carbon Neutral Islands Project does not exist in isolation. A significant amount of activity is already underway across Scotland to meet our decarbonisation targets. While the project focuses on community-led development within an island context, many national-level changes will directly impact its progress. In some cases, these broader changes will be essential to enable the transition of one or more of these islands to net-zero emissions.

Sources of Emissions

Energy and Heating

By 2040, renewable energy is projected to create 46.8 GW^[1] of capacity, with storage projects contributing significantly. This renewable energy revolution, backed by robust government policies and investments, focuses on modernising the electricity grid, integrating smart technologies, and enhancing energy storage capabilities.

One significant challenge is the capacity of the electricity grid, at both transmission and distribution levels. As Scotland transitions to renewable energy, the demand for electricity is increasing, particularly with the necessary electrification of transport and heating. Work is ongoing to strategically upgrade, enhance and extend the grid infrastructure which will be required to achieve a net zero electricity system. This includes the incorporation of advanced grid technologies, improving energy storage solutions, and developing interconnectors to balance supply and demand across regions.

Existing island grid infrastructure has significant barriers to overcome capacity restrictions, in order to deal with increasing energy demand. For example:

• Islay’s grid infrastructure cannot currently support largescale renewable energy projects, limiting the island’s ability to transition to low-carbon-energy.

Similarly, the widespread adoption of low-carbon heating solutions is critical but in some cases faces specific obstacles in an islands context including the need for more reliable power due to extreme weather, space constraints, upfront cost of installation, higher transportation costs and more complicated logistics, a colder climate, the need for retrofitting older buildings to improve energy efficiency and ensuring a skilled workforce to install and maintain these systems. This need for available skilled professionals on each island in particular will require a long-term, system-wide focus to achieve. Consideration of this specific island context is fundamental to a successful and just transition for the islands in this project.

Examples:

• On Yell, many homes rely on importing fossil fuels for oil-fired heating, and the cost of converting to heat pumps or other low-carbon systems is prohibitive for many residents.
• Raasay’s older stone-built houses are difficult to insulate effectively, requiring innovative solutions to meet energy efficiency targets.

It is worth noting that many of the key decision-making powers in energy sit with the UK Government, with responsibility for making or changing legislation and regulations reserved under the Scotland Act. Critical areas where the UK Government must take action to secure the full benefits of the energy transition for Scotland’s people and businesses include:

• electricity market reform;
• support for carbon capture and storage;
• action on energy affordability;
• reforms to consenting of offshore wind and regulation of the offshore marine environment; and
• the development of new market mechanisms to support clean energy technology deployment.

Land Use and Agriculture

Peatlands and forests act as carbon sinks, sequestering more carbon than they emit, however many peatlands across Scotland’s islands are damaged or degraded, turning them from efficient carbon sinks into carbon emitters. Restoration of these ecosystems plays a crucial role in preventing the release of stored carbon and enhance their role in carbon sequestration.

This is especially true when integrated into agricultural practices which are hugely important to islands economies.. Agriculture will continue to be a vital part of island life, and to play a key role in achieving the carbon emissions reductions and biodiversity development we need.

• Land ownership complexity: Disputes over land rights or fragmented ownership can delay project timelines and increase costs, particularly in respect of peatland restoration and afforestation initiatives.
• Degraded peatland: Degraded peatlands release significant quantities of stored carbon. Restoring these areas is resource-intensive however this restoration is crucial to reducing emissions.

Circular Economy

Embracing a circular economy on islands is also essential for achieving sustainability goals to minimise waste, optimise resource use and extend the lifecycle of products. Local food growth and community gardens are vital in reducing food miles and promoting sustainable agriculture. By prioritising on-island food production and consumption, islands can minimise the high carbon footprint associated with long transportation distances often involving multiple means of transportation whilst at the same time supporting community resilience. Additionally, disposal options are very often limited on islands and so reducing, reusing, and recycling are crucial components for diverting waste from landfills. Helping to achieve Scotland’s net zero ambition involves minimising waste generation on islands, reusing materials whenever possible, and promoting comprehensive recycling programs.

Transport

Scotland’s islands present unique barriers for implementing low-carbon transport solutions and the electrification of transport, supported by extensive electric vehicle charging infrastructure is key. Addressing challenges like ensuring sufficient coverage on islands, managing heightened demand on the grid, and tackling range anxiety for longer trips is crucial for a successful transition. Overcoming these challenges could lead to significant opportunities for emissions reductions in ferry and aviation transport through decarbonisation.