Natural capital: marine and terrestrial economic reliance analysis

2. Methodology

This supplementary research and analysis was undertaken utilising the original economic model, designed by WSP and Economics for the Environment Consultancy (eftec), to model the minimum level of economic output supported by Scotland’s natural capital. The core analysis focused on a renewables-based definition of natural capital. This means that sectors such as oil and gas were excluded as they are non-renewable resources (i.e. resources that will not regenerate after exploitation within any useful time period^[4]).

The analysis uses data from the Scottish National Accounts (SNAs), a set of economic statistics that provide a detailed picture of Scotland’s national economy at an industry-by-industry level. The Standard Industrial Classification (SIC) system is used to categorise industries based on their primary business activities. As such, the SNAs show annual data on how different industries interact with, buy from, and sell to, each other and can be grouped up to sub-sector or sector levels. Further detail on the methodology of this research can be found in the main publication¹.

As the original analysis was undertaken in 2024, it was decided to use the 2019 data instead of the 2020 data - the latest available at the time - to help avoid the short-term distortion of the economic activity due to the COVID-19 pandemic. The analysis also used the 2007 SIC codes classification, noting that the Office for National Statistics (ONS) is working on a revision of the UK SIC codes in 2026, following a public consultation^[5]. Additionally, since 2019 there has been a shift in the provision of renewable electricity in Scotland, with marine generated electricity making up a higher share of all renewable electricity generated and terrestrial an accordingly lower share.

The focus of this analysis is on how businesses are reliant on natural capital. Alongside the SIC code classifications the methodology also uses the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) Tool ^[6] to determine the additional economic value of ecosystem services which otherwise might not be captured or only partially reflected in the market data used (i.e. the aforementioned SNAs). Whilst ENCORE does include marine ecosystem services, its coverage is somewhat limited compared to terrestrial ecosystems due to a focus on those services most relevant to economic sectors. More detailed description of the methodology, including the ENCORE Tool, is available in the main publication¹.

The methodology looks at national-level economic data to understand how all of Scotland’s natural capital underpins the wider economy. As such, the results for economic activity attributed to different regions is based on natural capital in all of Scotland, and not natural capital located only in a specific region. Employment data is used as a proxy to attribute economic activity to different Regional Economic Partnerships (REPs). As a result, the employment and output figures are not always attributed to the same area in which the natural capital is located. For example, the electricity generated from wind turbines located on a site in Aberdeenshire may be managed by employees partially based in a different region, for example in head offices in Glasgow. Nonetheless, the analysis is picking up on wider natural capital reliance of economic activity, so administrative employment will also be reliant on natural capital to a degree.

Finally, the results from this analysis cannot be compared in a straightforward way to traditional economic statistics or data (e.g. Gross Value Added (GVA) estimates). This is because the methodology is innovative in trying to capture the value of natural capital to the economy which is not currently reflected, or only partially reflected, in the market prices, and could cause double counting issues if compared to other economic statistics.

2.1 Methodology – Marine Natural Capital Model

In order to separate economic reliance results by marine and terrestrial natural capital, the first step was to identify and isolate marine natural capital reliant industries from the existing model. This process was then repeated for terrestrial natural capital reliant industries. Marine reliant business activity was isolated first as there are fewer core industries extracting marine resources.

Available economic data and expert opinion was used to identify the broad distinctions between marine and terrestrial natural capital reliant industries, and how to approach sectors which could not be deemed fully marine or fully terrestrial reliant. Subsequently, a version of the model was updated allowing for the marine-terrestrial breakdown based on the methodology outlined in this report.

To measure natural capital reliance in terms of an economic market value, the original research used three methods to identify sectors’ reliance on natural capital. Acting as a proxy for natural capital reliance, Method 1 provided the narrowest definition of reliance using the SNA data, while Method 2 expanded upon Method 1 by looking at industries’ activity across the economy and still using traditional economic datasets. A more innovative approach is through Method 3 which in turn built upon Method 2 by uplifting to include the additional and often invisible economic value to businesses of benefits from ecosystem services. These methods are explained below in the context of this supplementary analysis, and in more depth in the original publication¹.

2.1.1 Method 1: Core Marine Natural Capital Industries

Method 1 looks at the value of resources provided directly by nature that are sold in the economy. For marine natural capital, this means taking the industries that sell resources provided by the marine environment and using these industries as a proxy for the value of marine natural resources to the Scottish economy. This is then used to apportion natural capital reliance to other downstream industries which purchase from the natural capital industries.

As part of this update to the methodology, a literature review was undertaken of Scotland’s Marine Economic Statistics 2019 report^[7], Scottish Government’s Fisheries analysis^[8], Scotland’s Annual Energy Statistics commentary^[9], and the Department for Energy Security and Net Zero Energy Trends: UK renewables data^[10] to help determine marine natural capital economic reliance. The proposed methodology was socialised with marine and natural capital stakeholders in NatureScot.

The industries that fully or partially rely on the marine environment for resources were determined to be:

• Fishing,
• Aquaculture,
• and Electricity.

Of these, however, only Fishing is based completely in marine environments. Both Aquaculture and Electricity have only part of their production based on marine natural capital as seen in Figure 1 below. Evidence on the share of value attributed to the sector’s marine-based activities was used as a proxy for the share of marine natural capital dependence in the model.

For Aquaculture, three species of fish make up most of the Scottish aquaculture industry: salmon, rainbow trout, and brown trout. Whilst saltwater is necessary for the lifecycle of salmon, neither trout species require marine environments to breed or grow. Thus, trout is excluded from the Aquaculture core marine natural capital industry. Even though farmed shellfish are also of importance to Scotland, particularly farmed mussels, they made up less than 1% of total value in the aquaculture industry in 2019. On the other hand, salmon accounts for 98% of the Aquaculture farm gate value in Scotland^[11], so in this analysis only this proportion is considered marine.

For the Electricity sector, given the renewables focus of the analysis, the non-renewable portion of the industry was excluded in the original report. In Scotland 53% of electricity production was deemed renewables-based in 2019, and out of this 53% only the portion produced by offshore wind is considered marine natural capital based. Electricity generation statistics are used as a proxy for electricity consumption due to availability. As around 10% of renewable electricity generation in 2019 can be attributed to offshore wind^[12], therefore only 5.3% of the total electricity (non-renewables and renewables) industry is directly dependent on marine natural capital.

It is worth noting that this analysis is constrained to data accurate as of 2019, however between 2019 and 2024 (latest data) the offshore wind generation capacity has grown significantly, and the overall balance of renewable electricity generation from marine and terrestrial sources in Scotland has changed as well. In 2019, 10.5% of renewable electricity generation came from marine sources^[13] but by 2024 this had grown to 18.8%. This growth is due to a 124.9% increase in renewable electricity generated from marine natural capital (offshore wind and shoreline wave/tidal but the changes are primarily driven by increases in offshore wind) over this same period. As a result, there may be some changes to the overall split between marine and terrestrial natural capital reliance since 2019.

2.1.2 Method 2 and Method 3: Marine Natural Capital Industries

More detailed description of the full methodology can be found in the main report¹. Details on how the model and the methodology was adapted for Method 2 and 3 for both marine and terrestrial natural capital can be found below and in Appendix 2, noting that Method 1 was the main area of changes for the marine-terrestrial split.

Method 2: Natural Capital Industries’ Expenditure

This method measures how much Scottish industries depend on natural resources by tracking their spending on goods and services from core natural capital sectors identified in Method 1, such as agriculture, aquaculture, fishing, forestry, or water supply. It uses the supply-use tables to calculate the share of each industry’s expenditure linked to these sectors. Imports are excluded, focusing only on domestic resource use. The spending is then converted into economic output values to show the contribution of natural capital to the economy. This approach captures both direct and indirect reliance through supply chains.

Method 3: Reliance on Ecosystem Services

Method 3 goes beyond market transactions by including non-market ecosystem services such as pollination, water regulation, and climate stability. It uses the ENCORE database⁶ to score industries on their dependence on these services and adjusts for how much of that reliance can be substituted by technology. Only the non-substitutable portion is considered in monetary terms, highlighting where nature’s role is irreplaceable. These scores are applied to uplift the economic output values from Method 2 in order to estimate the broader contribution of ecosystems. This method provides a more comprehensive picture of the economy’s dependence on natural capital.

It is important to note that high dependence on the Electricity sector in the wider economy is picked up in the final results. As other sectors purchase electricity -including renewable electricity, which will partially be supplied by offshore windfarms - this will show up as marine natural capital reliance.

2.2 Methodology – Terrestrial Natural Capital Model

After adapting the model to produce only marine natural capital reliance results, similar steps were undertaken to arrive at terrestrial natural capital reliance. The terrestrial natural capital reliance model was adapted by simply assuming all natural capital that was not deemed marine is terrestrial.

2.2.1 Method 1: Core Terrestrial Natural Capital Industries

A similar methodology is followed as for marine natural capital reliance outlined above. Method 1 looks at the value of resources provided directly by nature that are sold in the economy. For terrestrial natural capital, this means taking the industries that sell resources provided by the land-based environment, allowing for a creation of a proxy for the value of terrestrial natural resources to the Scottish economy, which can then be applied to downstream industries.

For method 1, the core natural capital industries from the original model were used, with the percentage attributed to marine (as described in Figure 5) subtracted to give the following proportions for terrestrial natural capital reliance as seen in Figure 6.

Approximately 53% of total electricity is renewables-based, and 10% of renewable generation in 2019 is attributed to offshore wind, therefore the remaining 48% of all electricity generated is assumed to be terrestrial natural capital dependent.

Both Aquaculture and Electricity have only part of their production based on terrestrial natural capital. Evidence on the share of value attributed to the sector’s marine-based activities was used as a proxy for the share of marine natural capital dependence in the model, and the remaining share of value was attributed to terrestrial natural capital.

2.2.2 Method 2 and Method 3: Terrestrial Natural Capital Industries

More detailed description of the full methodology can be found in the main report¹. Details on how the model and the methodology was adapted for Method 2 and 3 for both marine and terrestrial natural capital can be found described in section 2.1.2 above and in Appendix 2, noting that Method 1 was the main area of changes for the marine-terrestrial split.