Net Zero Assessment: Pilot report

Annex B- The need to address current evidence gaps

Research by the Fraser of Allander Institute (FAI), part of the University of Strathclyde, commissioned by ClimateXChange on behalf of the SG for the JBR, set out the limited evidence on climate impacts that could be used to help inform spending decisions.

The research noted that delivering in-depth analysis is a common challenge for governments around the world. The research highlighted the challenge of scrutinising carbon emissions using planned spending lines, with the central issue being that spending lines do not generate emissions, instead the funded policies and their associated projects that generate the emissions, so attempting to equate planned spending lines with actual projects is fraught with difficulty. The research highlighted the inherent limitation of taxonomy-based approaches which categorise spending to carbon assessment at the point of budget setting and recommended a move towards the use of individual-level carbon assessments and gap analysis applied to individual policy outputs during their policy development stage to provide suitable data for fiscal and policy scrutiny.

The research recommended that the SG should improve the clarity and transparency of Government decisions that impact on climate change, acknowledging that trade-offs will always exist between different objectives. The research said that establishing the dedicated Budget narrative for climate, the new taxonomy approach for Budget, plus policy-level NZA, will deliver a comprehensive combination of qualitative and quantitative analysis on climate impact of spending levels. As noted by the research, the NZA will also serve a filtering function to ensure individual policy level carbon assessments are focussed on activities with major emissions implications, which will ensure a level of proportionality to what areas undergo such an assessment.

The NZA responds to a number of gaps within SG evidence requirements:

• Improving the availability of evidence, especially at earlier stages of policy development, will help Ministers be aware of the impact of policy options on achieving emissions targets, and help identify opportunities for emissions reduction measures.
• Current emissions assessments are typically later in the process and are not consistently undertaken across all policies in SG.
• SG policies requiring a SEA would already be expected to have an emissions estimate – the NZA may bring forward this assessment and require it to meet a set standard.