Scottish Budget 2026 to 2027: climate change taxonomy

Taxonomy

In the original Joint Budget Review, the Scottish Government and Parliament agreed to develop an enhanced taxonomy to provide a carbon assessment identifying and categorising the emissions impacts of all relevant spending lines in the budget cycle. This taxonomy has now standardised how the Scottish Government classifies both resource and capital budget spending lines relative to their climate impact. It classifies spend lines at the most detailed level:

• Positive-Neutral-Negative Environmental Alignment: this identifies if the spend line is positively aligned with the Scottish Government’s environmental outcomes, is neutral, or is negatively aligned.
• High-Low Impact: the scale of impact on Scottish Government climate objectives are rated using this measure.

The current taxonomy, which has undergone regular improvements since its introduction to the Scottish Budget several years ago, demonstrates the importance placed on providing more useful, transparent evidence around the anticipated effects of different forms of Scottish Government spending envisaged by the budget choices set out here.

Budget allocations to local authorities are excluded from the classification because of the complexity and uncertainty around how the funding will eventually be deployed. However, it is clear that Scottish local authorities continue to rise to the challenge of the climate crisis and spend on net zero priorities. Given this, the total positive climate spend from the Budget outlined in this document (£5.0 billion) is likely underestimated.

Capital

The total gross capital spend included in the taxonomy for the 2026-27 Budget is £7.2 billion. Of this, 41% of assessed capital spend is apportioned to positive activities. In absolute terms, this is £2.9 billion for positive spend. The largest spend areas are in affordable housing supply and supporting rail services.

In 2026-27, 52%, or £3.7 billion, of capital spending is classed as neutral. Budget lines classed as neutral primarily deliver activities which do not enable or influence wider emissions or climate resilience. However, these areas may be undertaking actions to reduce emissions and build climate resilience – such as measures to reduce emissions in the construction of new infrastructure – but they do not represent a significant share of the allocated spend and are difficult to identify.

If more granular identification of spend were possible the inclusion of spend relating to these activities would increase positive spend levels. The main example of this is healthcare spending which is the largest neutral spend in both capital and resource programme areas. More granular data would allow identification of spend relating to work the NHS is carrying out to reduce its greenhouse gas emissions. For example, over half of NHS cars are now electric; and, in the last five years, emissions from medical gas and heat and power emissions have fallen by 35% and 11% respectively.

Moreover, there will be measures that are contributing to climate-positive activities, but have a more indirect and supportive role, such as climate change and sustainability education within schools, rather than a direct impact on, for example, emissions reduction. The inclusion of spend relating to these activities would further increase positive spend levels.

The main areas of spending in the negative category, which accounts for 8% (or £0.6 billion) of capital spend, are those that relate to safety issues around trunk road network works and structural repairs and bridge strengthening and repairs.

Resource

The total gross resource funding included in the taxonomy for the 2026-27 Budget is £40.9 billion. The main focus of resource spend is on the NHS, social security, public services and wider anti-poverty measures, reflecting the government’s key priorities. In total, 5% of assessed resource spend is allocated to positive activities. In absolute terms, this is £2.1 billion for positive spend. The largest spend areas are for concessionary travel schemes and supporting rail services.

As with previous years, the resource taxonomy is much more neutral than the capital budget. The neutral spend of the resource budget in 2026-27 is 93%, or £38.0 billion, of the assessed resource budget. This is more significant than the capital budget both in terms of absolute spend and share of the included budget, mainly because the majority of resource spend is on staffing costs, alongside delivering healthcare, social care and disability payments, all of which have minimal direct climate impact.

The main areas of spending in the negative category, which accounts for 2% (or £0.8 billion) of resource spend, relate to agricultural support, largely through emissions associated with livestock. It also includes spend related to the trunk road network and tourism.

Adaptation and mitigation

The taxonomy evaluates budget spending lines on both an adaptation and mitigation basis. Many of these budget lines are evaluated on a similar basis for both, but there are some differences between ratings. The details of the individual breakdowns are provided in the breakdown of the lines published alongside this document.

The breakdown of adaptation and mitigation spend is shown in the table above. The totals do not sum to the total budget spend and can exceed the total as a budget line is allocated to the highest impact rating between either adaptation or mitigation (e.g. a line with a ‘Positive – low’ in mitigation and ‘Positive – high’ in adaptation would be allocated ‘Positive – high’).