Scottish Marine Recovery Fund: consultation

3. Introduction

3.1. Background

The threat posed by the twin crises of climate change and biodiversity loss is real and present, but so is the opportunity to successfully reach net zero and beyond. That is why reducing emissions and creating a thriving economy in tandem through a green industrial revolution is one of the four key priorities in Scotland’s Programme for Government 2025-26.

The growth of the renewable energy sector - and the offshore wind sector in particular - in Scotland is critical to delivering a net zero future, energy security and to capitalising on the opportunities of Scotland’s abundant renewable energy resources to deliver both economic and environmental benefits.

Scotland’s Offshore Wind Policy Statement, published in 2020, set an ambition of 8-11GW (gigawatts) of offshore wind development by 2030. In recognition of the significant project pipeline, and to underline Scottish Government’s firm commitment to the offshore wind sector, the Scottish Government has consulted on proposals which would see Scotland’s offshore wind ambition increased to up to 40GW by 2035-2040, in addition to our existing operational capacity.

To support the delivery of our offshore wind ambitions, it is essential to create the right enabling environment for accelerating development of offshore wind whilst also maximising the benefits for Scotland’s environment.

Offshore wind developers must apply to Scottish Ministers for consent to construct and operate offshore wind farms in Scottish waters. This application process requires Scottish Ministers to consider the adverse effects of any proposed development on protected sites, which include Special Areas of Conservation (SACs), Special Protection Areas (SPAs) and Marine Protected Areas (MPAs). If an adverse effect on the site integrity of a protected site(s) is considered likely, a development can be consented only where a derogation case is approved and appropriate compensatory measures are secured. Further information on the process for offshore wind consenting is available in the Scottish MRF interim guidance.

For offshore wind development in Scotland, this derogations process is anticipated to be triggered at the plan and project level largely due to adverse effects on protected seabird species.

The Energy Act 2023 enables the UK Government to make provision for the establishment, operation and management of one or more MRFs, which would take payments from developers to fulfil environmental compensation requirements, by delivering strategic compensatory measures.

The MRF mechanism is an important part of the UK Government’s Offshore Wind Environmental Improvement Package (OWEIP) and in Scotland the Acceleration and Regulatory Reform of Offshore Wind (ARROW) programme, which support the growth of offshore wind by helping to de-risk and accelerate planning decisions while supporting positive investment to protect the marine environment.

The Scottish Government is now exploring the establishment of a Scottish MRF and seeking views through this consultation on how such a fund should be operated and managed.

3.2. Supporting Scotland’s net zero future

The current and future pipeline of offshore wind projects in Scotland is ambitious and requires similarly ambitious policy and regulatory reform. That includes streamlining the consenting processes for offshore wind, shortening application and determination timeframes wherever possible and ensuring projects can quickly construct and begin generation, but also ensuring that adverse environmental effects of offshore wind are addressed, and maximum overall benefit for Scotland’s environment is obtained.

A Scottish MRF would support timely decision making on offshore wind applications by enabling developers to discharge their environmental compensation conditions, wholly or in part, through appropriate payment to the Scottish MRF to deliver the necessary compensatory measures.

Use of a Scottish MRF would be voluntary and offshore wind developers would be able to pursue delivery of their own compensatory measures as they currently do.

As well as the benefits for streamlined consenting, a Scottish MRF would enable delivery of environmental compensation more strategically and effectively.

The power to make regulations under the Energy Act 2023 to establish a Scottish MRF lies with the UK Government. The UK Government has recently consulted on their own MRF, which will be available for projects affecting protected sites in English, Welsh and Northern Irish waters. We believe a separate Scottish MRF would be more effective for meeting the unique needs of the Scottish offshore wind consenting process but support the two MRFs working together as closely as possible.

The Scottish MRF and the UK Government MRF intend to operate under the following joint principles, where both MRFs will:

• deliver a more streamlined process for securing compensation required in respect of offshore wind developments and do so in a way that enables strategic environmental benefits to be delivered
• be tailored to each nation’s unique constitutional, legal and sectoral needs, maximising their effectiveness and value
• work in close partnership, with opportunities to broadly align approaches being sought wherever possible and practicable

3.3. Environmental compensatory measure reform and strategic compensation policy for offshore wind

Proposals for reform of environmental compensatory measures for offshore wind under the Energy Act 2023, including potential changes to the Habitats Regulations^[1] and for the development of strategic compensation policy for offshore wind, are subject to separate consultation by the UK and Scottish Governments. These consultations were launched on 22 July 2025.

The purpose of these reforms is to create a more flexible and pragmatic approach to compensation requirements under the Habitats Regulations for offshore wind, unlocking barriers to offshore wind development and its associated benefits and providing new opportunities for positive investment in Scotland’s marine environment.

Strategic compensation refers to a coordinated approach to the delivery of environmental compensation, in order to achieve economies of scale and provide opportunities for positive investment in the marine environment. Strategic compensatory measures can be delivered:

• at scale
• over extended timeframes, for example there may be instances where compensation may not become fully functional until after the impact of the plan or project occurs
• at the project or plan level by Government (such as at the Sectoral Marine Plan for Offshore Wind Energy (SMP-OWE) level)
• across multiple offshore wind projects
• by a single project with multiple adverse effects
• through the delivery of wider compensatory measures (i.e., non-like-for-like measures)

Scottish Government is taking forward work to develop a Scottish Portfolio of Strategic Compensatory Measures, with current research projects being undertaken on the following:

• Predator Control and Biosecurity
• Habitat Management and Restoration, and Reduction of Disturbance at Colony
• Fisheries management compensatory measures
• Restoring and enhancing supporting prey habitats
• Marine litter removal at scale

The UK and Scottish Government consultations on strategic compensation policy will establish the framework that allows the identification of strategic compensatory measures for use by the Scottish MRF. Further detail is available in the Scottish Government consultation at the following link: Strategic Compensation Policy for Offshore Wind - Scottish Government consultations - Citizen Space

Ensuring there is an evidenced and diversified range of compensatory measures available for use by the Scottish MRF over time will be critical to maximising its useability. This consultation does not cover strategic compensation however consultation on the Scottish Government’s Strategic Compensation Policy for Offshore Wind (link above) is open until 1 September.

3.4. The process to establish a Scottish MRF

Establishing a Scottish MRF would enable resources to be targeted at strategic compensatory measures which best address both plan-level and project-level adverse effects, maximising the environmental benefit in Scotland. A Scottish MRF would also allow Scottish Ministers to have operational oversight and ensure the delivery of compensatory measures aligns with their strategic policy priorities and statutory obligations.

The regulation-making power to establish a Scottish MRF resides with the Secretary of State. Regulations to establish a Scottish MRF may provide that functions that relate to the taking or securing of measures in Scotland be delegated to the Scottish Ministers or any other public authority whose functions are exercisable only or mainly in or as regards Scotland. Such a delegation of functions requires the consent of the Scottish Ministers. We are seeking both the establishment of a Scottish MRF and the delegation of functions.

The specific functions to be delegated in relation to a Scottish MRF are still under discussion with UK Government. The broad functions that would require delegation to operate and manage a Scottish MRF are anticipated to include the following:

• receiving funds into the Scottish MRF, including payments from applicants
• holding funds and managing cashflow
• spending funds from the Scottish MRF on the delivery of compensatory measures and other relevant costs
• setting charges for using the Scottish MRF, and to do so in a way which enables full cost recovery

Additional functions to be performed by Scottish Ministers relating to the Scottish MRF that would not require delegation are anticipated to include:

• identifying and approving appropriate compensatory measures for use by the Scottish MRF
• accounting for Scottish MRF performance and expenditure to the Scottish Parliament
• issuing guidance on the Scottish MRF as appropriate