Net Zero Assessment: independent review

Review

This section comprises a review of the NZA pilot, based on the provided documentation. Comments and recommendations are provided under the following categories:

• Definitions
• Thresholds
• Process
• Resources
• Implementation
• Governance

Each subsection contains an overview, followed by recommendations that are relevant for the NZA process (P), its wider implementation (I) and/or future consideration (F).

1. Definitions

The report and accompanying documentation contain variations on the word “carbon” and related terms, such as “greenhouse gases”, “net zero”, “emission impact”, etc. The potential magnitude or importance of such emissions is also described variably in the documentation, e.g. “significant”, “major”, “material change”, etc.

Recommendation:

1. Include a Definitions section in the Report to ensure consistent terminology. (P)

2. Thresholds

The initial de minimis screening threshold for the carbon emissions of policies was set at 1% of the national target level in any given year, which equated to 0.4 MtCO₂e in 2020. This threshold proved to be impractically high, as almost no policy was likely to exceed this value. The pilot threshold was adjusted to a lower level of 0.1 MtCO₂e in any one year or a cumulative 1 MtCO₂e impact over a 10-year period. This adjustment aimed to capture a more realistic range of policies that could significantly impact emissions, ensuring that the NZA process remained relevant and effective in identifying policies requiring detailed analysis.

The Report notes that even the revised threshold might still be too high, as a large proportion of policies considered still did not reach the 0.1 MtCO2e threshold and were therefore evaluated as having no significant emissions impact. By decreasing the threshold, the number of policies subjected to the NZA would increase, thereby potentially improving the credibility and comprehensiveness of the assessment. However, this would also increase the policy and analytical resources required, presenting a trade-off between the thoroughness of the NZA process and resource implications.

A revised de minimus threshold should also consider a potential scenario where multiple policies fall below the threshold, but if the policies were implemented simultaneously, the total resultant emissions could exceed the threshold. This is an unlikely scenario for policy impacts and is more relevant for multiple capital projects (e.g. a road building programme), although should still be considered.

Recommendations:

2. Reduce the threshold for emissions impact in the context of a more holistic view, considering the cumulative impact of multiple policies. (P)

3. When deriving a revised de minimis value, considering greenhouse gas significance criteria published by the Institute for Environmental Management and Assessment (IEMA). (P)

4. Include an additional early step, e.g. as part of Stage 1, to consider whether the policy is likely to increase or decrease carbon emissions, or have no measurable effect. (P)

5. If Green Book carbon values are to be used for assessments (in £/tonne CO₂e) values, consider adjusting them to match Scotland’s 2045 net zero target year. (F)

3. Process

The NZA process is focused on emissions generated within Scotland, aligning with the Scottish Government's statutory climate change commitments. However, the Report also highlights the importance of considering “embedded” emissions, which are described as emissions associated with the production and transportation of goods and services consumed in Scotland but produced elsewhere. This broader scope would ensure that the NZA process captures a more comprehensive picture of Scotland's carbon emissions impact. It would also align with good practice that recognises whole life carbon emissions impact should always be considered (this is described as “lifecycle greenhouse gas emissions” in National Planning Framework 4 (Part 2, Policy 2).

The NZA methodology is designed to align with existing impact assessments such as the Strategic Environmental Assessment (SEA) and Business Regulatory Impact Assessment (BRIA), ensuring consistency and avoiding duplication of effort. The NZA aims to support decision-making by providing early estimates of carbon emissions, allowing for the consideration of mitigation measures and enhancing the opportunities for emissions reduction.

Recommendations:

6. Expand the NZA to include whole life carbon emissions (national and international), aligning with policy and best practice. (P)

7. Expand on the final output of yearly emissions reductions to determine the complete carbon emissions impact (whole life carbon). (P)

8. Consider a minimum 20-year appraisal period for carbon emissions, up to Scotland’s net zero target year (2045). (F)

9. Expand the NZA to cover procurement, capital investment, and business cases, learning from the approach to carbon management in the Scottish City & Regional Growth deals. (F)

10. Reference the PAS 2080 (Carbon Management in Buildings and Infrastructure) approach within the NZA, particularly in relation to environmental assessment and the planning process (NPF4). (F)

4. Resources

The Report explains that the successful implementation of the NZA process will require resources, including policy development skills, analytical support, and a central team for guidance, oversight, and coordination. Several potential delivery arrangements are identified, ranging from a fully centralised approach by a specialist team to a mainstreamed approach where policy teams lead their assessments with central team support.

The pilot highlighted the need for a combination of these approaches, depending on the specific requirements of the policy being assessed. For instance, policy teams could engage in self-assessment using developed guidance and tools, refer themselves to a central team for additional guidance when necessary, or have the central team actively oversee and engage with policy teams to ensure adequate standards for reporting.

The report also identifies several challenges associated with resourcing the NZA process. One key issue is the “intensive” resources required for the rollout across the government, especially given the need to align the NZA with other existing impact assessments like the Strategic Environmental Assessment (SEA) process. The pilot also revealed difficulties in engaging policy teams early in the policy development process, which is crucial for the NZA to influence policy design effectively.

The Report also notes that lowering the de minimis threshold to include a broader range of policies will increase the policy and analytical resources required, presenting a trade-off between the thoroughness of the NZA process and the resource implications.

Recommendations:

11. Provide details on the likely resources required to complete a net zero assessment, including time taken, skills, experience and possible grade required, associated recording and monitoring, and how these efforts may differ from existing Green Book carbon assessment requirements. (P)

12. Expand on the point within the Report that intensive resources are required for the rollout across government. (P)

13. Recognise the potential resourcing issue for complex policies that may require external technical expertise. (F)

5. Implementation

The results of any NZA need to be clear and consistent, however there is ambiguity over what levels of carbon emissions may be acceptable. This uncertainty extends to decision-making, particularly regarding advice provided to ministers. The report highlights that emissions estimates should accompany relevant submissions on key decisions, ensuring that ministers are informed about the potential climate impacts of policy proposals. How ministers will make decisions on these results is described within the Report.

The NZA process aims to guide policy options and support decision-making that aligns with Scotland's net zero targets. However, the pilot identified challenges in engaging policy teams early in the development process and ensuring that the NZA is effectively integrated into policy design.

It is apparent that the current guidance (within the documentation provided for review) would require specialist expertise to be effective, however more detailed guidance would be less open to interpretation and perhaps more widely deployable.

Recommendations:

14. Clarify how the results of the NZA are intended to be used, e.g., notably through advice to ministers. Likely scenarios could be discussed and templates developed for efficiency. This includes advice to ministers on how to interpret outputs from an NZA. (P)

15. Confirm the source of carbon emissions factors, e.g. adopt Green Book carbon assessment guidance but be clear about elements of the Green Book process that are not included in the NZA, e.g. the translation of carbon emissions into economic values. (P)

16. Consider linking the NZA process to the budget, thereby allowing carbon emissions and public sector spending to be considered simultaneously. (F)(I)

6. Governance

The NZA pilot has been designed to ensure that policies undergo an NZA in the early stages of development. Initial discussions and assessments are intended to be carried out during the early policy design and planning stages, before any policy decisions are made, to guide which policy options are developed and presented to Ministers. It is essential that governance of the NZA process is clear and consistent.

The NZA assessments will be the responsibility of lead policy teams, who need to commission their own analyses. These assessments will then be reviewed by a central review panel, which provides guidance and support. This approach should ensure that the assessments are of sufficient quality and that they are appropriately applying the proportionality built into the NZA process.

Transparency and consistency are crucial in the NZA process to maintain credibility and trust. The results of the assessments, including cases where no significant emissions impacts are identified, need to be consistently reported to senior leaders and Ministers to ensure that all relevant information is available for decision-making. The governance process also includes a central analytical function designed to validate the results and ensure that assessment standards are met. This approach helps to maintain a high level of transparency and consistency, which is essential for the credibility of the NZA process.

The NZA assessment itself is relatively clear, but without a robust governance process with suitably experienced decision makers in key positions such as on the Review Panel and through existing governance structures, its effectiveness is at risk.

Recommendations:

17. Provide details on how the Review Panel would be chosen, its terms of reference, and checks and balances to ensure consistent and transparent assessments. (P)

18. Clarify how the most appropriate option for governance of the NZA process will be chosen. (P)