Scotland's Climate Change Plan – 2026-2040

The Benefits and Costs of Climate Action

The actions outlined across this plan provide substantial long-term opportunities for people and businesses across Scotland, nevertheless we are clear that delivering these will require up-front spending. In meeting these costs, it is important to understand that while the costs of a just transition to a net zero economy are significant, the costs of global inaction will likely be even higher.

Damage and disruption from flooding, failing crops and the impact of storms all pose increasing risks to the Scottish economy as the impacts of climate change grow. A 2025 report by the Office of Budget Responsibility^[11] estimates that climate damages could reach 8% of UK GDP by 2070 if the world warms by 3 degrees by the end of the century.

Scotland’s changing climate also poses growing risks to households and businesses through physical damage to homes or assets, health and safety risks to employees and customers, disruption to supply chains, reduced access to finance or insurance coverage and increased risks to employee health and safety.

As such, action on climate mitigation now is essential – not just to prevent the worst impacts of climate change, but also to ensure Scotland can take advantage of the opportunities of the transition. The Scottish Government is committed to ensuring a fair distribution of the costs of these actions, in fulfilment of its Just Transition responsibilities.

Delivering the action now is also essential to unlock significant benefits for the people of Scotland into the future. The Scottish Government and the CCC both agree that the move to net zero will provide substantial direct, financial benefits and cost savings, particularly for households who will see significant long-term savings from the transition to net zero.^[12]

A key example is EVs, which in many cases are cheaper to run than a petrol or diesel car, with lower maintenance and repair costs. Recently published independent research suggests an average saving of £700 a year.^[13]' In addition, action by the UK Government to lower the cost of electricity will also make clean heat options such as heat pumps more affordable. The CCC advises that delaying proper investment in decarbonisation will delay the benefits, including operating cost savings, improved climate resilience, and energy security.

The direct financial benefits (‘cost savings and financial benefits’) of delivering all the policies in this Plan is estimated at £42.3 billion over the period from 2026 to 2040. Table 1 breaks this down by sector and by carbon budget.

Note: All costs are in 2025 prices. Totals may not sum due to rounding.

Our analysis suggests that most of the direct benefits are anticipated to go to households and businesses. This is largely driven by the substantial forecasted financial benefits associated with the switch to EVs. But further substantial benefits are expected for farming businesses from the Common Agricultural Payment, and for forestry businesses through the economic activity around timber and carbon credits.

Scotland’s Climate Change Plan is also the first in the UK, to set out the costs of the policies within it. This assessment shows that the net cost^[15] arising from delivering all the policies in this Plan is estimated at £4.8 billion over the period from 2026 to 2040. These are shown in Table 2, set out across the different carbon budget periods and by sector. These figures are produced by deducting the estimated cost savings and financial benefits in Table 1 from the estimated costs. This is based on a similar approach to the one used by the Scottish Fiscal Commission (SFC) in their report on the costs of climate mitigation.^[16]

The SFC agrees that increased investment will be required to meet carbon budgets. It is a priority for the Scottish Government to minimise the cost to the public sector by delivering at a pace and a scale that maximises third-party investment in critical mitigation measures.

Note: All costs are in 2025 prices. Totals may not sum due to rounding.

The benefits and net costs presented in these tables are set out in more detail in the Analytical Annex. Estimates are based on forecasts to 2040 and so rely on a series of assumptions, meaning there is a degree of uncertainty and they represent best estimates. In reality, costs and benefits are likely to change as a result of economic and technological factors.

In addition to the benefits set out in Table 1, there are further indirect benefits from climate action which will support the wellbeing of people across Scotland, for example protecting people and communities from the health harms associated with fossil fuels. Coupled with effective adaptation, these may prevent many of the anticipated health impacts of climate change. Health benefits from cleaner air, warmer homes, healthier food, health-promoting natural and built environments, high quality public services and fair work in a thriving economy can be immediate.

The Edinburgh Climate Change Institute (ECCI) at the University of Edinburgh has developed a model,^[18] based on the CCC recommendations, to estimate the monetised scale of each co-benefit for Scotland. As this data is based on CCC recommendations for the UK’s 7^th Carbon Budget it draws from a slightly different policy pathway to that set out in this Plan, so the data should be used alongside our assessment of direct costs and benefits with caution.^[19] However, it is reasonable to assume the co-benefits achieved by this Plan will be similar, particularly in the transport and buildings sectors.

Their estimates include the benefits of improving air quality, valued at roughly £1.5 billion over the next 15 years; addressing dangers associated with excessively cold homes, valued at £180 million over the same period; and increases in physical activity caused by a move to active travel, valued at £4 billion between 2025-40. Further co-benefits include noise reduction, reduced congestion and increased road safety.

All co-benefits they identify taken together could deliver over £6.3 billion worth of value to Scotland between 2025 to 2040, which is a per capita benefit of £1,150 over the 15-year period. These benefits will not be felt immediately, though as we implement climate action policies the benefits will quickly become evident, with most producing increased benefits yearly through to 2040 and beyond.

Beyond this, actions to reduce emissions provide wider value as they also benefit our climate resilience and improve biodiversity and nature restoration. For example, peatland restoration and woodland creation can support both climate change and biodiversity goals.