Natural capital: marine and terrestrial economic reliance analysis

4. Terrestrial Natural Capital Reliance Results

4.1 Headline Results

Out of the estimated £40 billion total direct and indirect output supported by natural capital in Scotland, around 84% is reliant on terrestrial natural capital.

Industries reliant on terrestrial natural capital, excluding non-renewable resource sectors such as oil and gas, supported approximately £33.6 billion of total economic output and around 222,900 jobs, directly and indirectly.

The industries most dependent on terrestrial natural capital included:

• Electricity,
• Agriculture,
• Water and Sewerage,
• Meat Processing,
• Manufacture and Distribution of Gas and Air Conditioning.

The REPs estimated to have the largest shares of output and employment reliant on terrestrial natural capital were:

• Glasgow REP,
• Edinburgh & South East REP,
• and Highlands & Islands REP.

4.2 Industry Level Results

• The Electricity sector shows the greatest reliance on terrestrial natural capital. This is largely because companies within this sector purchase a lot of electricity from renewable sources that depend on land-based natural capital. In Scotland, key renewable terrestrial sources of electricity are onshore wind, hydro energy, bioenergy, and solar. In 2020, Scotland generated the equivalent of 98.8% of Scotland’s gross final electricity consumption from renewable sources^[21]. As the sector continues to grow, Scotland’s terrestrial natural capital reliant output and employment will too.
• The Agriculture sector has over £7 billion of direct and indirect output dependent on natural capital, with over £3 billion of this total due to the industry’s dependence on ecosystem services such as climate regulation, soil quality, and pollination. The analysis found that over half of the ecosystem services that Scottish agriculture relies on could not be hypothetically replaced by engineering solutions should ecosystem services degrade or fail entirely. This highlights the dependency of the industry on often ignored services provided by nature.
• Meat Processing economic activities are highly dependent on terrestrial natural capital, with over 60% of domestic expenditure on purchases from the Agriculture industry.
• The Retail and Health industries appear among the most terrestrial natural capital dependent industries, with this dependence underpinned by purchases of renewable electricity. The retail industry has extensive use of lighting, refrigeration, and long operating hours that accounts for some of this high electricity demand. The health sector also has 24/7 operations, energy intensive medical equipment, and climate control requirements that contribute to high energy consumption.
• The Gas (Manufacture and Distribution of Gas and Air Conditioning) industry includes a variety of activities such as:
  • the manufacture and distribution of gaseous fuels, from carbonation of coal and by-products of agriculture;
  • the production, collection and distribution of steam and hot water for heating, power and other purposes;
  • the production and distribution of cooled air and chilled water; and,
  • the production of ice for food and non-food purposes.

These activities require significant electricity usage, including from renewable sources, with the industry spending almost 50% of its total domestic expenditure in 2019 on electricity.

• Public Administration & Defence, unlike the industries above, has a high level of terrestrial natural capital reliance due to expenditure from the Water and Sewerage industry. The industry encompasses public services such as provisioning of drinking water which likely accounts for this dependence.

4.3 Regional Results – Regional Economic Partnerships - Terrestrial

4.3.1 Glasgow City REP and Edinburgh & South East REP

When broken down by region, the terrestrial natural capital reliant economic activity is concentrated in urban REPs, with the Glasgow City REP and the Edinburgh & South East REP the most reliant in terms of output and employment.

The Glasgow City REP had an estimated £9 billion output and 54,500 jobs supported by terrestrial natural capital. As discussed before, it is worth noting that some of the output attributed to the Glasgow City REP is reliant on natural capital located in rural areas across Scotland. The Electricity, Water and Sewerage, and then Agriculture sectors represent the greatest portion of the region’s output. In fact, these three industries alone account for over half of the Glasgow City REP’s terrestrial natural capital dependent output and nearly a third of employment.

The Edinburgh & South East REP has a similar distribution of terrestrial natural capital reliant output to the Glasgow REP with Electricity, Agriculture, and Water and Sewerage were estimated to represent over 40% of output and over a quarter of jobs. However, differing from the Glasgow City REP, was the high level of economic activity dependent on terrestrial natural capital within the Manufacture and Distribution of Gas and Air Conditioning Industry, at about £550 million and 1,200 jobs, making it the third highest and coming before Water and Sewerage. This is because this non-renewable industry is heavily reliant on the renewable electricity sector.

4.3.2 Highlands & Islands REP

The Highlands & Islands REP has £5.3 billion in output and 38,500 jobs estimated to be reliant on terrestrial natural capital, with the sectors contributing the most being Agriculture, Electricity, and Water and Sewerage. A substantial number of Scotland’s onshore wind farms are located around the coast of the region, which could explain the high output and employment (around £950 million and 2,600 jobs) in the REP.

Outside of the core natural capital industries mentioned above, the Spirits & Wine industry (which includes Scottish whisky) has the fourth highest level of direct and indirect output, with £150 million estimated to be supported by terrestrial natural cap ital.

4.4 Terrestrial Tourism

This section sets out different estimates of terrestrial tourism in Scotland due to the limitations of the methodology to provide tourism specific estimates. Tourism is an important part of the Scottish economy, especially tourism motivated or enhanced by the natural assets unique to Scotland. The value of tourism to Scotland’s economy is estimated at £5 billion in terms of GVA (using 2023 data) and supporting around 240,000 jobs (using 2024 data)¹⁶.

A limitation of this study is that tourism is not treated as a distinct industry, and therefore an estimate for natural capital reliance of tourism cannot be provided separately. This is because the data underpinning this analysis comes from the National Accounts data which is organized by production sectors (e.g., Transportation, Accommodation, Food Services), whereas tourism spans multiple of these sectors. Tourists consume goods and services from various sectors, so its economic impact is best measured through the Tourism Satellite Accounts (TSA)¹⁹, which link tourism demand to these industries rather than creating a separate "tourism industry" category. Nonetheless, despite tourism not being a distinct category, the impact of tourism through those other sectors is still captured within the National Accounts data and as a result in this natural capital economic reliance analysis.

The natural environment is a key tourism asset motivating people to visit Scotland. As noted in section 2.6., a study commissioned by NatureScot²⁰ estimates the value of tourism activity taking place in the natural heritage. Spending on nature-based tourism is estimated to contribute nearly 40% (or £1.4 billion) of all tourism spend and supporting 39,000 full time equivalent jobs, with the caveat that these are 2010 estimates. If we were to uplift the estimates to 2019 prices, this would imply £1.64 billion in tourism spend is due to nature-based tourism, if the assumption held true in 2019. As the NatureScot paper suggests marine nature-based tourism is likely to be around a quarter of the estimated total, therefore three quarters of total nature-based tourism can be assumed to be terrestrial. Activities that contribute to Scotland’s nature-based tourism market include wildlife watching (estimated at £117 million in value per year in 2010 terms) and walking and mountaineering (estimated at £533 million in value per year in 2010 terms), among others.