Scotland's draft Climate Change Plan 2026-2040: business and regulatory impact assessment

Section 1: Background, aims and options

Background to policy issue

The global climate emergency requires a global response. The Scottish Government is committed to playing its part by ending Scotland’s contribution to global emissions and reducing carbon emissions to net zero by 2045 at the latest.

The Climate Change Plan is the key strategic document which sets out the Scottish Government’s approach to delivering the emissions reduction targets that fall within the plan period. There is a requirement to publish an updated Climate Change Plan every five years.

The Climate Change Plan will cover the Scottish Government’s Carbon Budgets for the periods 2026-2030, 2031-2035 and 2036-2040.

The draft Climate Change Plan sets out the policies and proposals for meeting the Scottish Government’s carbon budget targets during the Climate Change Plan period. It sets out in detail how we intend to deliver action to tackle climate change. The draft Climate Change Plan sets out the policies and proposals by sectors as follows:

• Business and Industrial Process;
• Energy Supply;
• Residential and Public (in relation to buildings in those sectors);
• Agriculture;
• Land Use, Land Use Change and Forestry (including ‘Peatland’ and ‘Forestry’);
• Transport (including international aviation and shipping); and
• Waste Management.

Purpose/aim of action and desired effect

The draft Climate Change Plan is intended to inform Parliament, businesses and the public about the expected actions that are expected to influence Scotland’s emissions. The draft plan is laid in Parliament with a consultation period of 120 days through which the Scottish Government will review the views of stakeholders on the overall trajectory of decarbonisation, the package of policies and proposals being put forward, and the wider impacts of both of these.

The draft Climate Change Plan is being laid in Parliament in fulfilment of our statutory obligations. The Plan is intended to assure all stakeholders of Scottish Government’s intention to achieve its carbon budget targets as agreed by the Scottish Parliament, enabling it to meet its net zero target by 2045 at the latest, and bring forward a strong package of policies and proposals that not only achieves the targets but also that will maximise the benefit to the Scottish economy and residents through a just transition for all.

Options

The Scottish Government is legally required to bring forward a draft Climate Change Plan that demonstrates sufficient abatement to meet the carbon budget targets. However, to demonstrate the expected overall impact of the package of policies and proposals in the draft Climate Change Plan we will compare them to a ‘Do Nothing’ scenario, although this latter is not separately assessed:

• Do Nothing (Scenario) – Do not bring forward any of the polices or proposals as set out in the draft Climate Change Plan and instead only account for non-Scottish Government actions and other changes not driven by Scottish Government policies
• Option 1 – Bring forward a set of Scottish Government policies and proposals in a draft Climate Change Plan, in addition to the ‘Do Nothing’ actions, in order to meet carbon budget targets up to 2040.

Sectors/Groups impacted

This section sets out the sectors and groups that are expected to be either positively or negatively impacted by the policies and proposals identified in the draft Climate Change Plan. In some climate change sectors, it has been necessary to add further detail on the type of effects to provide wider context for the inclusion of specific groups. In other sectors a list approach has been sufficient.

Agriculture

The following sectors and groups may be impacted either positively or negatively by the proposals. The impacts may be direct or indirect:

Directly: The policies and proposals will affect a wide range of agricultural producers in Scotland such as:

• livestock farmers;
• arable farmers;
• mixed farmers; and
• crofters.

The direct effects will mainly be through the reform of agricultural support resulting in a range of new conditions farmers and crofters will need to meet in receipt of support from Government as well as incentivised actions they will be able to take. The policies and proposals will involve some direct costs to be incurred by farmers and crofters and in many cases require the farmer’s and crofter’s time. Many of the changes are also likely to result in longer term benefits to the farmer and crofter through more effective and efficient practices.

Indirectly: The main actors indirectly affected will be suppliers to the agriculture sector such as:

• vets;
• seed producers; and
• advisors.

For example, carrying out Whole Farm Plans and making other changes to farming businesses may result in a greater and more regular need for vet and advisor services. There may be some indirect effects on other supply chains like forestry, food and drink industry, energy and on broader rural communities.

Given the range, and how these sectors also support non-agriculture activities, it is not possible to identify exactly every type of sector which could be indirectly impacted.

Business and Industrial Process

The following sectors and groups may be impacted either positively or negatively by the proposals:

• Industrial sector trade associations (including food and drink, glass, chemicals, paper);
• Private industrial manufacturers;
• UK Government and other devolved administrations;
• Scottish public sector agencies (Scottish Environment Protection Agency (SEPA), enterprise agencies):
• Network System Operator (NESO);
• Leading academics and research partners including from the Industrial Decarbonisation Research and Innovation Centre (IDRIC) the Centre for Energy Policy and ClimateXChange from the University of Edinburgh;
• Broad cross-sector organisations e.g. NECCUS (for decarbonisation of the Scottish cluster);
• Trade Unions (e.g. Unite the Union);
• Related to NETS: the Direct Air Capture (DAC) coalition, the Anaerobic Digestion and Biogas Association, operators of biomass CHP, organisations seeking to utilise biogenic CO2 such as the Chemical Industries Association;
• Related to CCUS: the North Sea Transition Authority on storage licensing and Crown Estate Scotland, the Carbon Capture and Storage Association, and Scottish Carbon Capture and Storage;
• Hydrogen industry: a wide range of directorates, agencies and non-departmental public bodies were consulted during the development of the Hydrogen Action Plan, including: Directorate for Energy and Climate Change, Directorate for Economic Development, Directorate for Fair Work, Employability and Skills, Directorate for International Trade and Investment, Directorate for External Affairs, EU Directorate, Directorate For Local Government And Communities, Marine Scotland Directorate, Transport Scotland, Scottish Enterprise, Highlands and Islands Enterprise, South of Scotland Enterprise, Scottish Development International;
• Hydrogen Scotland; and
• the heat decarbonisation target proposals and policy relating to heat networks will potentially affect all businesses occupying premises requiring heating, business energy consumers, green heat supply chain firms, energy network companies, heat network developers and operators.

Energy Supply

Electricity

The following sectors and groups may be impacted either positively or negatively by the proposals:

• Network Operators (distribution and transmission);
• EfW, gas and island diesel power station operators;
• Island communities;
• Renewables companies – developers, investors, others in the supply chain;
• Local authorities;
• Communities located close to existing or planned EfW sites; and
• Wider consumers.

Oil and Gas

As set out in the Energy Supply chapter of the draft Climate Change Plan, emissions associated with offshore oil and gas production, for example flaring on platforms, are not within the scope of Scotland’s statutory emission reduction targets. These emissions are not disaggregated to a Scotland level within the UK Greenhouse Gas Inventory. As such, these emissions are also not in the scope of this BRIA.

Additionally, following the closure of the Grangemouth refinery, the draft Climate Change Plan does not include policies focused specifically on reducing emissions arising from the process of refining crude oil, with demand for finished fuels now being met via import.

The Scottish Government’s finalised policy position of no support for onshore conventional oil and gas in Scotland was subject to statutory and other assessments before the policy-making process for the draft Climate Change Plan was completed, including in our National Planning Framework 4 (NPF4). The finalised BRIA report for NPF4 can be found here: National Planning Framework 4: BRIA - gov.scot. The Scottish Government’s finalised policy position of no support for unconventional oil and gas development in Scotland was also subject to a BRIA process, the report from which can be found here: Unconventional oil and gas policy: BRIA - gov.scot.

Land Use, Land Use Change and Forestry

The following sectors and groups may be impacted either positively or negatively by the proposals:

• Landowners, land managers, rural and island communities;
• Third sector, public bodies and professional organisations representing environmental, land use, farming, crofting, forestry, peatland and nature sectors;
• Environmental and project design and delivery consultancies and contractors;
• Retail and commercial horticulture;
• Academic and research organisations;
• Skills development and enterprise agencies;
• Local authorities; and
• Private investment bodies.

Residential and Public

Transforming the way we heat our homes and buildings will touch the lives of almost everyone in Scotland. The following sectors and groups may be impacted:

• Green heat supply chain businesses may see employment growth if demand for energy efficiency and clean heating systems increases. The list is not exhaustive, but this includes building assessors, heating engineers, smart heating companies and private finance. Some businesses may need to factor in any shift towards clean heating into their work planning. Evidence reported by Nesta^[1] indicates that heat pump installing businesses “tend to be small”, suggesting that an increase in demand for heat pumps could lead to increased economic activity among SMEs.
• Energy network companies: if a much larger proportion of heat demand will be electrified compared to today, supplied through either individual heat pumps or larger scale heat pumps supplying heat networks, this could have implications for both electricity generation capacity and distribution networks, including costs associated with increasing capacity and reinforcing networks.
• Local authorities may be affected beyond their role as building owners and occupants, including acting as lead partner in developing projects as well as a potential role in regulating heat networks within their boundaries, although this is yet to be determined and will be subject to further consultation and engagement with local authorities.
• Energy consumers: the above investment in increasing capacity and reinforcing networks will increase network charges on energy consumer’s bills. However, the exact costs are not known and will depend on how much energy they use. While decisions over energy pricing are reserved to the UK Government, the Scottish Government will continue to make the case that energy consumers must benefit from the lower costs of renewable electricity and there must be protections in place for the most vulnerable households, including those living in or at risk of fuel poverty. We will continue working closely with the UK Government to ensure Scotland’s interests are fully considered.
• Heat Network proposals might affect any business involved in developing or operating a heat network.
• Local authorities may be affected if they develop or operate heat networks, in the same way as private businesses. Local authorities may also have potential responsibilities for enforcing minimum energy efficiency standards, although this is subject to further policy development.
• The proposals for residential and public buildings will affect green heat supply chain firms, energy network companies, heat network developers and operators.

Transport

The following sectors and groups may be impacted either positively or negatively by the proposals:

• Individuals and households;
• Businesses and commercial organisations;
• Local authorities;
• Regional Transport Partnerships;
• Active Travel Delivery Partners;
• The road freight and haulage sector, including freight and logistics providers;
• Rail freight sector;
• Chargepoint operators across all road vehicle types;
• Aviation sector, including airlines;
• The energy sector (both production and distribution of energy);
• The commercial finance sector;
• Ferry operating companies; and
• Vehicle manufacturers.

Different business sectors were engaged during the public consultation on the draft Transport Just Transition Plan that ran between February and May 2025 and contained questions about workers and businesses, with 13 responding formally.

Engagement in the Transport sector which is specific to the draft Climate Change Plan has included a workshop on road transport and aviation in September.

The wider engagement approach is set out in more detail in the Transport subsection of Section 2: Engagement and information gathering - including the engagement carried out by each modal area, and the types of businesses that the Transport sector engages with in the development of the policies and proposals included in the draft Climate Change Plan.

Waste Management

The following sectors and groups may be impacted either positively or negatively by the proposals:

• Manufacturers, distributors and retailers;
• Online marketplaces;
• Other businesses or commercial organisations;
• Consumers and households;
• Third sector;
• Waste management sector; and
• Local authorities and other public bodies, including SEPA.