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Business Bulletin 1999-2011

Minutes of Proceedings 1999-2011

Journal of Parliamentary Proceedings Sessions 1 & 2

Committees Sessions 1, 2 & 3

Annual reports

Report on the Financial Memorandum of the Climate Change (Scotland) Bill

Remit and membership

Remit:

1. The remit of the Finance Committee is to consider and report on-

(a) any report or other document laid before the Parliament by members of the Scottish Executive containing proposals for, or budgets of, public expenditure or proposals for the making of a tax-varying resolution, taking into account any report or recommendations concerning such documents made to them by any other committee with power to consider such documents or any part of them;

(b) any report made by a committee setting out proposals concerning public expenditure;

(c) Budget Bills; and

(d) any other matter relating to or affecting the expenditure of the Scottish Administration or other expenditure payable out of the Scottish Consolidated Fund.

2. The Committee may also consider and, where it sees fit, report to the Parliament on the timetable for the Stages of Budget Bills and on the handling of financial business.

3. In these Rules, "public expenditure" means expenditure of the Scottish Administration, other expenditure payable out of the Scottish Consolidated Fund and any other expenditure met out of taxes, charges and other public revenue.

(Standing Orders of the Scottish Parliament, Rule 6.6)

Membership:

Jackie Baillie (Deputy Convener)
Derek Brownlee
Linda Fabiani
Joe Fitzpatrick
James Kelly
Jeremy Purvis
Andrew Welsh (Convener)
David Whitton

Committee Clerking Team:

Clerk to the Committee
Mark Brough

Senior Assistant Clerk
Lewis McNaughton

Assistant Clerk
Allan Campbell

Committee Assistant
Jennifer Bell

Report on the Financial Memorandum of the Climate Change (Scotland) Bill

The Committee reports to the Transport, Infrastructure and Climate Change Committee as follows—

introduction

1. The Climate Change (Scotland) Bill (“the Bill”) was introduced in the Scottish Parliament on 4 December 2008. The Transport, Infrastructure and Climate Change Committee has been designated as the lead committee on the Bill at Stage 1, with the Rural Affairs and Environment Committee being designated as secondary committee. In addition, the Economy, Energy and Tourism Committee considered certain aspects of the Bill.

2. Under Standing Orders Rule 9.6, the lead committee at Stage 1 is required, among other things, to consider and report on the Bill’s Financial Memorandum. In doing so, it is required to consider any views submitted to it by the Finance Committee (“the Committee”).

3. At its meeting on 13 January 2009, the Committee agreed to adopt level three scrutiny in relation to the Bill.1 The Committee took oral evidence from the Scottish Environment Protection Agency (SEPA) – who also provided written evidence – the Federation of Small Businesses (FSB) and from Scottish Government officials, at its meeting on 10 February. The Scottish Government and the FSB submitted supplementary written evidence after they gave oral evidence to the Committee.

4. The Committee also received written evidence from—

  • Aberdeen City Council
  • East Ayrshire Council
  • Glasgow City Council
  • Fife Council
  • Confederation of Forest Industries
  • East Lothian Council
  • Highland Council
  • UK Committee on Climate Change (UKCCC)
  • Scottish Retail Consortium
  • Dundee City Council

5. All written evidence received is published as the Annexe to this report. The Official Report of the oral evidence session on 10 February can be found on the Parliament’s website.2

The bill

6. The Bill sets a long-term target to reduce Scotland’s emissions of Kyoto Protocol greenhouse gases by 80% by the year 2050. This target will be supported by a framework of annual targets intended to stimulate policies necessary for achieving the long-term target. Many of the policy measures required to meet these targets will not require legislation to implement them. Certain climate change mitigation and adaptation policies have been identified which do require legislation and the Bill contains provisions in Part 5 which will allow these to be taken forward.

7. The Bill is separated into five Parts—

  • Part 1 creates a statutory framework for greenhouse gas emissions reductions in Scotland by setting a 50% reduction target for 2030 and an 80% reduction target for 2050. To help ensure the delivery of these targets, the Bill also requires that Scottish Ministers set annual targets, in secondary legislation, from 2010 to 2050.
  • Part 2 allows Scottish Ministers to establish a Scottish Committee on Climate Change, or to designate an existing body, to exercise advisory functions.
  • Part 3 requires Scottish Ministers to report regularly to the Parliament on Scotland’s emissions and progress towards the targets set in the Bill.
  • Part 4 allows Scottish Ministers, by regulations, to impose duties on public bodies in relation to climate change, to issue guidance to those bodies relating to their climate change duties and to require that they report upon the discharge of those duties.
  • Part 5 is divided into four chapters—

o Chapter 1 contains provisions relating to adaptation to the impact of climate change. It requires Scottish Ministers to produce a report setting out their objectives in relation to adaptation to climate change, proposals and policies for meeting them and the timescales within which they will be introduced. It also contains an enabling power for the Scottish Ministers to vary the permitted times during which muirburn may be made.

o Chapter 2 allows modification by regulations of the functions of the Forestry Commissioners to enable the Forestry Commission in Scotland to play a greater role in tackling climate change.

o Chapter 3 requires Scottish Ministers to produce an action plan setting out their current and proposed measures to improve the energy efficiency of buildings in Scotland, as well as measures to encourage behavioural change in regard to energy efficiency. It also contains measures for improving the energy performance of existing non-domestic buildings in order to raise the contribution that those buildings can make to mitigating climate change through reducing energy demand and thereby emissions of greenhouse gases. It also places a duty on Scottish Ministers to promote the use of heat from renewable sources.

o Chapter 4 enables Scottish Ministers to make regulations addressing various issues in moving towards a zero waste society, and securing a more sustainable use of resources, thereby limiting the emissions of greenhouse gases which contribute to climate change.

summary of costs outlined in the financial memorandum

8. The Financial Memorandum contains substantial cost information, and explanation of policy background and assumptions underpinning the cost estimates. The nature of the Bill means, however, that the cost information is not presented in a way that allows identification of clear total one-off or recurring costs associated with the Bill’s implementation.

Part 1 – Emissions reduction targets

9. Based on a range of research, the Financial Memorandum estimates that the overall cost to Scottish Government, local authorities, public bodies and Scottish businesses of delivering an 80% reduction in emissions by 2050 would be in the region of 1%-2% of GDP in 2050. In 2006, 1%-2% of Scottish GDP would have been equivalent to £1 billion - £2 billion. These costs would apply across the whole of the Scottish public sector and all business sectors.

10. The exact cost depends on the particular policy measures used to contribute to meeting the target. The Financial Memorandum points out that it is extremely difficult to cost sub-sets of options. However, it outlines one assessment of a set of measures which may, in the year 2050, cost the equivalent of £1.7 billion at 2005 prices.

11. These overall figures do not assess the wider economic costs from implementation or the proportions of costs likely to fall on producers, consumers or taxpayers. However, the Financial Memorandum points out that research estimates the cost to society if no action is taken to alleviate climate change to be 5%-20% of global GDP.

12. The Financial Memorandum states that costing delivery of the 2030 target is also difficult as a straight line reduction trajectory is unlikely. Rather, some more significant emissions reductions are expected to result from step changes in approach.

13. The Bill does not specify the means by which the annual targets are to be delivered, and the costs and efficiencies will depend on many inter-related factors. Future emissions also depend, at least in part, on the general level of economic activity. Ministers will be required to seek advice on the most cost-effective reductions available when setting annual targets. The periodic statutory instruments prescribing annual targets (which will be instruments subject to the affirmative procedure) will be accompanied by a Regulatory Impact Assessment which details the likely cost implications.

14. In the event of failing to meet an annual target, the Bill includes powers to address this by purchasing carbon units. The cost of this would depend on the extent of any failure and the market price of units (estimated to be at least £15-£30 per tonne of carbon dioxide equivalent), and would represent a transfer of funds from Scotland to the country generating the carbon credit.

15. The Bill allows for the establishment of a carbon tracking and accounting scheme, with an estimated cost on the Scottish Government or a designated public body of £60,000 per annum.

Part 2 – Advisory functions

16. The Bill requires Ministers to seek independent expert advice before setting annual targets. At present, the Scottish Government is committed to providing £275,000 in 2008-09 to part-fund the UK Committee on Climate Change, established under the UK Climate Change Act 2008. The Financial Memorandum states that this is regarded as the most cost-effective option for obtaining advice. In the event that Ministers decide to exercise the Bill’s power to establish a Scottish Committee on Climate Change, the Financial Memorandum estimates a cost of around £2.5 million per annum. In that event, there may be some potential for savings on payment to the UK Committee for work in relation to Scotland.

Part 3 – Reporting duties

17. Various reporting requirements set out in the Bill are estimated to cost a total of £17,000 per annum, with this cost to be absorbed within existing administration budgets.

Part 4 – Duties of public bodies

18. The Bill provides for the possibility of imposing a duty on public bodies to ensure consistent and fair contributions to delivery across the public sector. The cost of doing this will depend on the circumstances. The Financial Memorandum does not outline any estimates, stating that imposing the duty would be part of the cost of meeting the various statutory targets. It states that, if an order was proposed to impose such duties, a Regulatory Impact Assessment would be produced.

Part 5 – Other climate change provisions

Chapter 1 – Adaptation
19. The Bill requires that, where the Secretary of State has laid a report on the impacts of climate change (under section 56 of the UK Act), Scottish Ministers must lay a programme before the Parliament setting out proposals for adapting to these impacts. The Financial Memorandum estimates staff costs of £30,000 in each year in which such a programme is required (within three years of the UK Act coming into force, and thereafter at least every five years).

Chapter 2 – Forestry
20. The Financial Memorandum states that the power to modify the functions of the Forestry Commissioners in respect of Scotland is intended in the first instance to allow the Forestry Commission Scotland (FCS) to enter into joint ventures for renewable energy development, and to let timber cutting rights to fund climate change activity. Initial costs of establishing joint ventures are estimated at £0.5 million per annum for 2009-10 and 2010-11, to be met from current FCS budgets. It is estimated that the potential net annual income from joint ventures could reach £10 million by 2012 and £30 million by 2020.

21. Initial costs of establishing contracts for letting cutting rights are estimated at £0.2 million per annum for 2009-10 and 2010-11, to be met from current FCS budgets. No estimate of potential income is given. A Regulatory Impact Assessment would be prepared for any secondary legislation to pursue this.

22. Initial costs of pursuing the option of establishing an additional body to pursue woodland creation are estimated at £0.3 million per annum for 2009-10 and 2010-11 – again to be met from current FCS budgets – although detailed proposals have yet to be developed.

23. For all the forestry initiatives, the Financial Memorandum suggests that, after the first two years, running costs will be funded from income generated.

Chapter 3 – Energy efficiency
24. The Financial Memorandum states a range of cost scenarios that may arise from provisions to improve the energy performance of non-domestic buildings. The total cost to the Scottish Government depends on a number of variables, and the Financial Memorandum states that detailed estimates cannot be developed until the Bill is enacted and new responsibilities agreed. The menu of preliminary estimates results in scenarios with one-off costs ranging from £0.3 million to £0.6 million, and average annual costs ranging from £0.3 million to £12.4 million.

25. The potential costs on local authorities are similarly wide-ranging. The Financial Memorandum estimates the average annual costs of the scenarios to be from £2.6-£3.5 million to £27.7-£37 million. Scenarios for the costs on other bodies, individuals and businesses range from average annual costs of £5.3-£6.2 million to £55.4-£64.7 million. Again, any secondary legislation will be accompanied by a Regulatory Impact Assessment.

Chapter 4 – Waste reduction and recycling
26. The Financial Memorandum states that this chapter of the Bill contains enabling powers to introduce a wide range of secondary legislation. The costs and efficiencies arising as a result of the proposals will vary widely according to how and when they are implemented and it is, therefore, not possible to provide exact costings for the proposals which will come forward in secondary legislation. All secondary legislation will be accompanied by a Regulatory Impact Assessment.

27. The Financial Memorandum includes a table which summarises the potential estimated costs of the provisions in this chapter of the Bill (see Table 8 on page 51).

summary of evidence

Specific issues

Advisory functions (Part 2)
28. Evidence from the UK Committee on Climate Change (UKCCC) supported the assumptions in the Financial Memorandum relating to its advisory functions. It agreed that future Scottish annual contributions to the Committee are likely to be in line with that made in 2008-09, i.e. £275,000. Also, the UKCCC considered that additional funding may be required where it is commissioned to provide advice and the cost of that task is particularly expensive. In fact, the UKCCC considered it likely that such additional funding would be required, but noted that specific costs and the timing of any required funding were yet to be established.

29. SEPA referred to the provision in the Bill to establish a Scottish Committee on Climate Change which would provide the advisory function currently carried out by the UKCCC. SEPA acknowledged that at this stage it was difficult to comment on the scale of additional charges relating to a Scottish advisory function. SEPA expected, however, that the costs of carrying out such a role would be substantial; requiring expertise in climate change science and environmental technology, economic assessment and modelling and understanding of social impacts.

30. In supplementary evidence, the Scottish Government confirmed that its contribution to the funding for the UKCCC is expected to vary year on year. This is partly due to the inclusion in the 2008-09 fees of one-off start up expenditure. Moreover, the Government confirmed that additional funding is also expected to be required for analysis regarding the annual Scottish targets and trajectory. It was suggested that—

“if this work requires, for example, an additional analyst and perhaps some additional research to build on the analysis work already undertaken by the Committee, this could be estimated to be in the region of up to £100,000.”

31. The Government also confirmed that the UKCCC is currently considering the resource implications of work in support of the Bill, in addition to reviewing its funding requirements for 2009-10 with the UK administrations.

32. In relation to the estimated cost of establishing a Scottish committee on climate change, the Scottish Government provided further details of how it had arrived at its estimated annual cost of £2.5m. Against the UKCCC’s annual cost of £2.7m, the Government identified a number of possible savings: through an information sharing arrangement with the UKCCC; employing a slightly smaller secretariat; lower remuneration for committee members; and reduced accommodation costs as a result of co-location. In response to the views expressed in evidence to the Transport, Infrastructure and Climate Change Committee3 that the cost of a Scottish Committee would be less than estimated in the Financial Memorandum, the Government stated that—

“While we acknowledge that our estimates are not precise sums, we remain convinced that the figures [presented in the Financial Memorandum] indicate the scale of the cost difference between contributing to the UKCCC and establishing a Scottish Committee.”

Forestry (Part 5, Chapter 2)
33. In written evidence, the Confederation of Forest Industries (ConFor) considered that insufficient information is available in the Financial Memorandum to be able to assess the likely impact of the proposals on joint ventures and leasing rights.

34. ConFor stated that there is no information publicly available on which to judge the accuracy of the cost estimates for income from joint ventures. It said that, without specifying the areas proposed to be leased and the terms of the lease, it is not possible to estimate the potential income available, the impact of spending this income on planting new forests, or of the impact on wood processing businesses. ConFor acknowledged, however, that further details on joint ventures and leasing arrangements would be provided alongside forthcoming secondary legislation and that at that point, an understanding of the cost impacts would be better known.

35. In evidence to the Committee, Scottish Government officials provided some explanation of the likely costs under the forestry provisions. Regarding joint ventures for renewable energy projects, officials suggested that the estimated income was based on a 150MW wind farm delivering around £3m per year.

36. In relation to the letting of timber cutting rights, officials indicated that the level of income generated depended upon the area that is let and the terms of the lease. They said, however, that any lease arrangement would have a reserve price that would take into account the value of the assets to the FCS and any additional costs that might be associated with leasing, such as paying grants to the lessee. Subject to these factors, officials suggested that the option of a 75-year lease of 100,000 hectares, as mentioned in the Financial Memorandum, could be expected to generate an income in the region of £150m-£200m.4

37. The Government also confirmed that the consultation on the forestry provisions in the Bill has just concluded and that it is collating the responses. In parallel, officials have undertaken work on an options review, on which they will report to Ministers by the end of February 2009. It is understood that the review will provide financial analysis of joint ventures, the leasing of forest land and details of costs associated with setting up a membership-led body to which cutting rights receipts could be transferred.5

Energy performance of non-domestic buildings (Part 5, Chapter 3)
38. Concern was raised in evidence to the Committee about the wide-ranging nature of the enabling powers in the Bill relating to enhanced Energy Performance Certificates (EPCs). In supplementary written evidence, the FSB considered the scope of the Government action to be unclear which, it said, made it difficult to ascertain the potential impact of the Bill. It referred to the seven scenarios for enhanced EPCs as “having severe cost and practicality implications” for business and public bodies (the potential cost to businesses ranges from £5.3m to £64.7m p.a.).

39. A similar point was made regarding the potential costs to local authorities, which the Financial Memorandum states could range from zero (paragraph 193) to £37m p.a. (Table 6 on page 39). Glasgow City Council criticised the Financial Memorandum and suggested that it did not enable an authority the size of Glasgow, which has in excess of 1000 buildings, to accurately compile the increased level of spending and resources that will be required. In relation to the information that will be included in future secondary legislation and a fully costed RIA, East Ayrshire Council stated that—

“it is not until this information is available that local authorities will be able to comment on whether any financial implications are reflected and whether the costs associated with the Bill can be met or made self-financing through the levy of penalty charges.”

40. In other evidence, SEPA recognised that the enhanced EPC provisions in the Bill would likely be a much bigger issue for local authorities, due to the size of their building stock compared with that of SEPA.6 On the cost estimates themselves, SEPA stated that it was difficult for it to comment on the accuracy of the figures given that it does not get involved in areas such as building regulation.7

41. The Scottish Government acknowledged that the seven scenarios for the energy performance of non-domestic buildings covered a wide range of possibilities, which could have significant financial impacts on public bodies, local authorities and businesses.8 Government officials confirmed that no policy decision had been taken to exclude any of the seven scenarios and highlighted the various factors on which the costs were based. They said that they were currently taking advice on the responses received to their consultation on the different scenarios (which closed on 25 November 2008) with the intention of reporting back to Ministers, and hoped to find a way forward for the next stage of the Bill.9

42. The Government also confirmed its intention to address all costs associated with the chosen policy on enhanced EPCs in a detailed RIA, which would accompany the regulations. It was stated that there is every possibility that the regulations will be included within the first 10 years of annual targets and could come in shortly after the end of the current spending review period which ends in 2011. In addition, the Government explained that it would carry out a rigorous review of these regulations (within 10 years of the introduction) to assess their impact.

Waste reduction and recycling (Part 5, Chapter 4)
43. SEPA’s view was that, as a first cut, the costs relating to the provisions on waste reduction and recycling (presented in Table 8 on page 51 of the Financial Memorandum) are a reasonable set of assumptions. Despite this, however, SEPA accepted in written evidence that “the cost of the waste provisions cannot be fully anticipated because it is not yet known whether the voluntary agreements will be sufficient, thus rendering the provisions unnecessary.”

44. Other evidence was more critical of the information contained in the Financial Memorandum. The FSB referred to inconsistencies in the presentation of costs in the Financial Memorandum and suggested that it would have been helpful if all of the costs had been calculated to give a total figure for businesses across Scotland.10 (The costs given in relation to waste prevention and management plans refer only to the cost of preparing an individual plan.) Whilst the FSB imagined that it would be asked to contribute to modelling work for any future RIA on these proposals, it stated that it would much rather that the Government had already done this work.11

45. Also, the FSB noted the different types of plans that could be required under the regulations for waste reduction and management plans. The Policy Memorandum describes them as ranging from plans for an individual construction project to plans for waste generated by a business on an ongoing, day-to-day basis (e.g. office waste).12 The FSB considered the cost implications of these options to vary considerably and suggested that until the Government was clear about its chosen approach, it was difficult to be able to judge the likely cost impact of the proposals in the Bill.13

46. Glasgow City Council also found the lack of detail contained in the Financial Memorandum to be problematic. The Council referred to the information on carrier bags, deposit and return schemes and waste management plans and stated that it was difficult for the Council to assess the likely cost of widespread introduction of these initiatives.

47. Other evidence queried certain specific cost estimates contained in the Financial Memorandum. SEPA considered the enforcement costs relating to duties to provide recycling facilities (estimated at £15 per hour) to be insufficient and suggested that a more senior member of staff would be required for such a task. East Ayrshire Council made a similar point in relation to the estimated staff costs of registering waste prevention and management plans (estimated at £15 per plan).

48. Fife Council questioned the appropriateness of the £3.5m p.a. cost of enforcing carrier bag charges on the basis that many large retailers already implement such schemes on a voluntary basis. It also, along with the FSB, suggested that Victoria Quay was not a particularly helpful example to use as an indicator of the cost of providing recycling facilities in business premises across Scotland.

49. In relation to the provisions on recycling, the FSB commented on the omission of “the inevitable cost implications to local authorities of providing the necessary infrastructure to support additional recycling.” It suggested that if local authorities – as the main bodies that collect waste from small businesses – do not have the facilities to cope with that task then small businesses will not be able to save money through increased recycling.14

50. In written evidence, the Scottish Retail Consortium (SRC) expressed concern that the waste and recycling provisions would have a very serious impact on the operational costs for retailers in Scotland, irrespective of size or location.

51. The Scottish Government acknowledged that the enabling powers in the Bill relating to waste reduction and recycling could have a potentially significant financial impact on public bodies, local authorities and businesses. However, as officials explained, the Government hopes that voluntary work might achieve a lot of the outcomes sought by the Bill, in which case these powers might not need to be implemented.15 Officials explained that it was conceivable that the backstop of potential secondary legislation (and the related duties that would fall on public bodies and businesses) could encourage people to think more carefully about taking voluntary action to reduce waste. The Government confirmed that if it is decided that regulations are required then the associated financial issues that they raise will be addressed in a supporting RIA.

General issues

Adequacy of cost estimates
52. The Financial Memorandum recognises that, in relation to the action necessary to meet the various emissions reduction targets, there is considerable uncertainty about the cost implications of the Bill. It suggests that where these costs will fall and how they will impact on output by sector will depend upon the paths chosen to deliver the emissions reductions.16

53. SEPA told the Committee that, as far as it could see and given the available information, the cost estimates contained in the Financial Memorandum are appropriate and reflect the likely range of uncertainty associated with the proposals—

“We think that the financial memorandum is a reasonable first stab at some of the costs, bearing in mind that the actual costs will depend on the detail. The devil will be in the detail of how the measures are framed, the scope of the duties and powers, and the enforcement regime that is put in place. With all that in mind, we think that the Scottish Government made a good attempt.”17

54. Whilst SEPA recorded a slight hesitation about some of the costs which it considered to be underestimations (relating to carbon accounting and enforcement duties relating to the provision of recycling facilities), it was comfortable that greater clarity would be achieved at the regulation stage.

55. A number of local authorities acknowledged the statement in the Financial Memorandum that the cost assumptions cannot be accurately predicted at this time and that many uncertainties exist. Dundee City Council, for example, considered that it had no basis on which to disagree with the figures.

56. Other evidence from local authorities – whilst recognising the inherent difficulties in making such long-term cost estimates – suggested that the information contained in the Financial Memorandum did not go far enough. For example, Fife Council said that it appreciated the difficulty in making cost projections in the face of changing markets and behaviours and unproven technologies, but called for the Scottish Government to provide more detailed and robust estimates. East Lothian Council highlighted what it referred to as the broad brush approach of the Financial Memorandum and added that it required clearer guidance from Government.

57. Aberdeen City Council went further and described the cost estimates provided in the Financial Memorandum as “too vague” and “merely a best guess based on uncertainties”. The Council also suggested that “the costs are difficult to trust since they are only proxy figures based on disaggregating UK costs” and called for greater transparency in the methodologies used to make the projections.

58. Other evidence highlighted the fact that some of the measures, such as carbon capture and storage (CCS) technologies, would require significant investment in the short term with savings periods not being achieved until later. SEPA stated that many of the technological improvements necessary to head towards a lower carbon infrastructure will bring costs and noted that the Financial Memorandum does not include anything on invest-to-save or funding for the promotion of reduced carbon emissions programmes for public sector bodies. It suggested that this omission could discourage organisations from taking necessary, timeous action.18

59. A number of councils considered that the investment required in, for example, carbon reductions projects, would be challenging when other competing priorities and service needs also have to be met.19 For example, East Lothian Council considered it to be problematic that some of these technologies will not have financial pay back until several years beyond the current council budget and election cycles making it difficult to approve long-term projects.

60. Fife Council called on the Government to take a more realistic approach and suggested that some of the costings be revised to separate efficiency savings from anticipated outlay costs. The Council referred to CCS technologies and advocated a more cautious approach to the potential savings that could be derived from them until their value in meeting the annual targets has been proven.

61. In relation to their particular circumstances, Glasgow City Council and Highland Council considered that they could experience greater challenges and costs in meeting the Bill’s targets. Glasgow City Council considered that the predicted impact on Scottish GDP of the Bill would have a disproportionate impact on Glasgow. Highland Council suggested that its unique geography, climatic conditions and transient population could lead to higher costs.

62. In evidence to the Committee, Scottish Government officials stated that they have taken a macro approach to the Bill, but accepted that “this only takes us so far and we are now looking to put in place secondary legislation and a more detailed analysis”.20

63. Officials confirmed that, whilst the costings for delivering the 2050 emissions reductions targets are based on UK figures, work is underway – in the shape of a strategic overview – to consider whether they are appropriate using Scotland-specific data.21 They considered that—

“Many pieces of information are part of the jigsaw, and it is difficult for us to leap-frog over things that are not yet in place. That is why it is a challenging task for the committee to consider the financial memorandum as it stands. We will be more informed as things progress. When the strategic overview is finished and we know what the UK emissions budgets will be, we will have a much clearer idea of the pace of activity that will be needed. We will be able to add another level when we bring forward our annual targets, which we hope will be put in place through regulations in June 2010.”22

64. In response to some of the concerns raised by local authorities about the lack of financial detail in the Bill, officials confirmed that “local authorities will have a contribution to make, but we do not quite know what form that contribution will take.” They said that Part 5 of the Bill, without being overly specific, sets out some of the policies that might in future contribute to reducing emissions.23

65. Government officials also responded to the suggestion that Ministers report to Parliament on the impact of the Bill on GDP. They said that because GDP figures are generally UK based it is difficult to extrapolate to obtain Scottish GDP numbers. They also referred to a further difficulty that could arise in attempting to define (in legislation) exactly what is meant by UK and Scottish GDP.24

Detail to be included in secondary legislation
66. The Bill confers various regulation-making powers on the Scottish Ministers, particularly in relation to the provisions contained in Part 5. The Financial Memorandum states that such regulations will be supported by a fully costed RIA.

67. In evidence to the Committee, the FSB said that it was primarily concerned about the nature of secondary legislation enabled by the Bill. In its supplementary written evidence it stated—

“We of course appreciate the benefits of using secondary legislation, however, this should be of a supporting nature; the intention of the legislation having been set out in the primary legislation. We believe that the measures currently outlined are extremely wide-reaching and the scope of government action unclear. This means it is very difficult to ascertain the potential impact of these measures.”

68. The FSB asserted that—

“With some of the proposals having severe cost and practicality implications… for both business and public bodies, we do not think it is appropriate for Parliament to be asked to vote to allow Ministers such a wide range of legislative powers without more detailed intentions and costings.”

69. As well as seeking clarity of approach from the Government to enable judgements to be made on the costs involved, the FSB considered that “better regulation” would allow an opportunity to design a regime that has the most streamlined impact. It suggested that such an approach would increase efficiency, simplify compliance and mitigate the impact on small businesses and other vulnerable groups. The FSB explained that, as the Bill is set out, those opportunities have not been fully exploited—

“For example, if all business premises are to have energy performance certificates—if that is the option that the Government goes for—and waste management plans, that will be an opportunity to consider streamlining such regulations for business premises. In the waste and energy efficiency sections of the Bill, I have counted about six or seven regimes that would require enforcement, paperwork and record keeping. As drafted, the Bill makes it extremely costly both to business and to the public purse.”25

70. Other evidence reflected some of the issues raised by the FSB. For example, East Lothian Council commented that it was difficult to comment on the costs of the proposals in the Financial Memorandum ahead of the detailed secondary legislation. Also, Dundee City Council said that it was not possible for it to quantify the likely costs to be contained within secondary legislation.

71. SEPA, however, told the Committee that it was reasonably comfortable for some of the costs to be firmed up by the regulations and accompanying RIAs. It referred to its experience of implementing European legislation and stated that “it is not unusual for us to narrow down on costs as time goes on.”26 SEPA also confirmed that it is reasonably confident that, as progress is made towards the detail of the RIAs, there will be ample opportunity to establish (with the Scottish Government) what the costs might be and to carry out any modelling that might be required.27

72. In evidence to the Committee, Scottish Government officials confirmed that the Bill provides a framework and essentially represents the introduction of enabling powers. They stated that it is not possible at the moment to state with precision the cost implications for local authorities and others as this depends on the exact nature of the regulations that may be made 10 or 20 years down the line, if they are made at all.28

73. Officials considered that as it becomes more difficult to meet the emissions reductions targets in the next 30 or 40 years, “we might have to turn to more regulatory measures and enforcement action to squeeze out the necessary carbon to achieve the 80% reduction.”29

conclusions

74. The Committee acknowledges the uncertainty over some of the costs associated with the Bill, particular in relation to the performance of unproven technologies and methods for reducing carbon emissions. The Committee accepts that the Financial Memorandum adequately reflects these margins of uncertainty.

75. The Committee notes the enabling nature of the Bill, particularly regarding the provisions contained in Part 5. Significant concern was raised, however, in evidence that not enough details have been made available on the likely cost impacts of these possible, future regulations. The Committee considers that the Financial Memorandum would have been stronger if modelling work had been carried out on the potential financial impact of the measures on businesses and public bodies. The Committee also considers that in a number of areas insufficient policy direction has been provided, which has made it difficult for local authorities and businesses to be able to assess the financial impact of the proposals.

76. The Committee notes that the Scottish Government is currently undertaking significant pieces of work to finalise some aspects of its policy, namely, the Scottish Government’s strategic overview project, an options review on the forestry proposals and the consideration of energy efficiency scenarios. The Committee considers that this work will provide vital indications of future costs. Given the significant implications of this work, the Committee would have preferred that it had been completed in time for its consideration of the Financial Memorandum to the Bill. As a result, the Committee expects to take an interest in scrutinising the financial impact of the outcomes of this work.

77. The Committee, nonetheless, welcomes the Government’s commitment that all substantive regulations will be accompanied by a fully costed regulatory impact assessment.

78. Where significant expenditure associated with a bill will only become apparent with subordinate legislation, the Committee has in the past noted that it will track the subsequent statutory instruments and seek to scrutinise the financial implications. The Committee gives notice that it may seek to do so for instruments arising from this Bill.

79. Given the long-term perspective of the Bill, and the wide range of policy streams that may contribute to its implementation, the Committee recommends that the Scottish Government should consider how it will monitor and control the cumulative costs of implementation.

AnnexE: submissions received

This annexe contains submissions from—

  • Aberdeen City Council;
  • Confederation of Forest Industries;
  • Dundee City Council;
  • East Ayrshire Council;
  • East Lothian Council;
  • Fife Council;
  • Glasgow City Council;
  • Highland Council;
  • Scottish Retail Consortium;
  • SEPA;
  • UK Committee on Climate Change;
  • The Scottish Government (supplementary – dated 18 February 2009);
  • The Scottish Government (supplementary – dated 25 February 2009); and
  • The Federation of Small Businesses (supplementary).

SUBMISSION FROM ABERDEEN CITY COUNCIL

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Yes, Aberdeen City Council submitted a formal response to the Climate Change Bill Consultation in April 2008.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

No, the financial implications were not readily investigated within the original consultation document. Instead there was a greater focus on
carbon trading.

3. Did you have sufficient time to contribute to the consultation exercise for the Bill?

Yes.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The Financial Memorandum document has taken certain issues further than in our original consultation response. For example the issues of waste, energy performance certificates, and ensuring compliance were not previously discussed in great detail.

Also the costs to a Local Authority have been mentioned in the Financial Memorandum but again, not in sufficient detail. For example, it is worth considering that in the future Local Authorities may incur penalties and fines for not meeting legislation e.g. Energy Performance Certificates.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

At this time, Aberdeen City Council are uncertain whether the financial costs can be met due to the vague methodologies used and immeasurable financial uncertainties in the document.

Plus, it is stated that it is not possible to predict cost profiles in the period leading up to 2050. Surely this is the most important and most costly period for any organisation given the level of work required to meet the 2050 target of an 80% carbon reduction.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

The figures given relating to Scotland’s associated costs are difficult to rust since they are only proxy figures based on disaggregating UK costs.

The estimates provided in the document are vague and the assumptions made are merely a best guess based on uncertainties. There is also very little transparency of the chosen methodology.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

No, Aberdeen City Council believes that the associated costs are too vague and not accurately reflected in the Financial Memorandum.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

Yes, Aberdeen City Council believe that there will be future costs associated with the Bill, as the role of ensuring compliance and enforcement often falls to Local Authorities. Therefore there will be costs associated with this.

SUBMISSION FROM THE CONFEDERATION OF FOREST INDUSTRIES

Questionnaire

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

A. The recently introduced measures for forestry - joint ventures and leasing on the National Forest Estate - were not contained in the original consultation.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

A. Not appropriate.

3. Did you have sufficient time to contribute to the consultation exercise?

A. Not appropriate, so far as the consultation on the original Bill is concerned, but the time allowed for consulting on the newly introduced Sections relating to Forestry Provisions was insufficient, particularly as the period spanned the Christmas holidays.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

A. There may be implications for private sector companies who enter into a joint venture or lease with the Forestry Commission, and there could be an impact on wood processing companies from a change in management of 100,000 hectares of the NFE, but it is not possible to make any estimate of that given the limited information currently available.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

A. As referred to in the answer to the previous question, there is too little information available on which to make any meaningful estimation.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

A. The figure for income from joint ventures is presumably based on information from the Forestry Commission. There is no publicly available information on which to judge the accuracy of the sums quoted, and no mechanism for estimating the impact on private sector businesses.

There is no income figure given for the leasing proposal, simply a recognition that this would depend on a range of factors. Without specifying the areas proposed to be leased and the terms of the lease, it is not possible to make any estimation of the potential income available, the impact of spending this money on increased new planting of forests or of the impact on wood processing businesses.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

A. The forestry element of the Bill is potentially significant within the context of the future growth and development of Scotland’s forestry and wood using businesses and the role they can play in helping to deliver a low-carbon economy in Scotland.

The sector contributes nearly £1 billion a year to Scotland’s economy30, provides employment for 20,000, in particular in rural areas, and has capacity for growth. The sector is one of the few in Scotland that can boast that the more it expands the greater carbon benefit it provides.

The proposal to raise income from joint ventures and leasing of public forests could, at best, provide an important stimulus to the sector, and, at worst, reduce investment in wood processing businesses. Much depends on whether any income raised is spent on supporting new planting of forests and whether effective safeguards are put in place to ensure that the current security of supply provided by the Forestry Commission is retained effectively in any leasing proposal.

If security of supply was ensured and income raised recycled into new planting then there would be no cost to private sector businesses, and indeed the opposite would be the case as the stimulus would deliver greater activity.

If security of supply was not ensured and income raised was not recycled into forestry then there would be a negative impact on wood processing businesses and a likely reduction in investment.

There may be a cost to the Forestry Commission, but this would depend on whether it retained any income from joint ventures or whether leasing income was realised annually and a portion retained by the FC. Present financial information provided is very brief (Forestry Commission Scotland Annual Report and Accounts) and this makes any interpretation of business performance on the national Forest Estate difficult for any outside organisation. Greater transparency and more detailed management cost information would be helpful, and necessary if the further very significant sums of money which might be generated through the Bill’s forestry provisions are to accrue in the accounts of FCS / FES.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

A. It is understood that the forestry proposals would be delivered through secondary legislation and further detail on leasing and joint ventures would be prepared. At this point an understanding of the impacts would be better known.
Other information
The forestry related proposals contain insufficient information on which to determine their impact on Scotland’s forestry and wood-using businesses. ConFor would wish to reiterate the central message from its response to the consultation, that:

  • there is benefit in delivering increased new planting;
  • this could be delivered by a variety of mechanisms and requires improvements to the Scottish Rural Development Programme;
  • ConFor is keen to utilise both its and its membership’s expertise in developing a way forward that addresses legitimate concerns raised.

In terms of delivering new planting we would note that good information is available on where and how best to establish new forests to maximise carbon sequestration while securing other economic and environmental benefits. Current sustainable management standards provide a firm basis for Scotland to really begin to achieve a target of 25% forest cover.

ConFor recognises the benefit of delivering this within the context of a broad land-use policy. However, there is land currently available and planting a very small part of this now while developing a policy to guide future activity is vital to help secure jobs in the sector at a time of economic downturn.

Internationally agreed climate change targets focus on 2050. If Scotland planted 15,000 hectares a year with 9,000 ha being productive softwood forests then it would deliver the Government’s target of 25% forest cover by 2050 and provide significant, additional carbon benefits - up to 33.5 MtC.

TABLE: Estimated carbon sequestration for additional productive and broadleaf forest under new planting regimes of 10,000 ha/yr and 15,000 ha/yr from 2010 to 2050

Planting regime
over period
2010-2050 inc.
Productive softwoods Broadleaves Total Total
New planting
(ha/yr)
Carbon sequestration (MtC) New planting
(ha/yr)
Carbon sequestration (MtC) New planting (ha/yr) Est. carbon sequestration to 2050 (MtC)*
10,000 ha/yr 6000 15.5 4000 6.9 10000 22.4
15,000 ha/yr 9000 23.2 6000 10.3 15000 33.5

NB On a sustainably managed basis, at 10,000 ha/yr, the total additional forest would continue to sequester 1.1MtC/yr after 2050, and 1.6MtC/yr on a 15,000 ha/yr planting regime.

Such a planting programme would secure significant jobs and investment benefits. For productive softwood forests this is estimated at around 180 new jobs in planting and up to 900 for harvesting, transport and wood processing. Current investment in the sector is running at £100m a year and this would increase significantly.

Increased use of Scottish wood

Wood products are low energy materials that can save significant amounts of carbon when substituted for other building materials. Research shows that average savings of 0.8tCO2e can be achieved by replacing 1m3 of concrete/bloc/bricks with 1m3 of sawn timber31. Long-term wood products also provide a benefit through their potential storage capacity, estimated at 0.9tCO2 in 1m3 of wood32.

ConFor calculates that over the period to 2050 the additional productive forest area achieved from planting 9,000 ha/yr of productive softwoods could provide, based on current proportions, an additional 33.5M m3 timber available to the construction market. This then gives the potential for substitution of materials delivering emissions savings of 27mtCO2. This would be a tremendous resource for Scotland.

Wood can also be used to generate renewable energy. ConFor has campaigned for this to focus on wood that currently has no market, and to promote its use locally and in generating heat. It has also noted that carbon and jobs benefits are higher in solid wood products, not least because these can be used and re-used, and then be made available to generate energy at the end of their useful life. There is a danger that current and evolving public policy could provide such large incentives to burn wood that jobs are lost and the carbon emissions potential of wood is not fully realised.

Scottish broadleaves and softwoods

ConFor represents people who own and work with broadleaf woods. We support efforts to manage broadleaf woods sustainably and to develop markets for hardwoods. It is important, however, when talking about climate change mitigation, jobs and investment to recognise the scale and potential of Scotland’s diverse forest and wood-using businesses.

Including Scots Pine, Scotland produces over 6 million tonnes of softwood each year, while hardwood production, including non-native species, is just over 400,000 tonnes for the whole of the UK with the majority of this estimated to be in England.

Scotland is internationally competitive in growing softwoods and producing wood products that have a large market and where there is scope for significant growth. The businesses in the sector are mainly Scottish owned or headquartered.

The sector is unusual in that it combines successful, modern manufacturing with land management that is governed by environmental standards that are second to none.

The sector suffers from an image hang-over from the planting of last century, driven by the FC which did not deliver the multi-purpose forests that are being established today. Those single-species, forest blocks are now being restructured to improve their biodiversity and visual impact. Using lessons learnt from the past there is scope now for a modern forestry and wood-using sector that all Scotland can be proud of.

Unfortunately Scotland’s broadleaf woods are largely unmanaged and provide limited amounts of timber for wood fuel and for small businesses that produce furniture, flooring, etc. The potential for use in construction is limited by the lack of quality trees and the established, highly competitive operations on mainland Europe that dominate the hardwood market. This will not change in the near future as hardwoods take up to 150 years to grow (against 40 for softwoods).

There is scope for development of the broadleaved resource and of hardwood markets, but by far the largest opportunity for sustainable growth and climate change mitigation sits with the softwood resource, and public policy and its delivery must reflect that.

Jamie Farquhar

National Manager for Scotland
ConFor

February 2009

SUBMISSION FROM DUNDEE CITY COUNCIL

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Comment: Dundee City Council responded to the Scottish Government consultation on 'Proposals for a Scottish Climate Change Bill' in April 2008. No comments were made on financial assumptions.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Comment: N/A

3. Did you have sufficient time to contribute to the consultation exercise for the Bill?

Comment: Yes, although limited knowledge curtails detailed comments.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

Comment: The Bill has financial implications for local authorities but there is no basis for disagreeing with the figures in the Memorandum or identifying the likely impact on Dundee City Council.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

Comment: Local authorities are currently struggling to balance budgets with the level of Scottish Government funding available and any further statutory responsibilities will inevitably lead to savings requirements in other budgets unless further Scottish Government funding is made available.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

Comment: The Council has no basis for disagreeing with the estimates and timescales included in the Memorandum.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

Comment: The Council has no basis for disputing whether the costs of a wider policy initiative are accurate or not.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

Comment: It is to be assumed that there will be future costs through subordinate legislation but it is not possible for Dundee City Council to quantify these costs.

SUBMISSION FROM EAST AYRSHIRE COUNCIL

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Yes – financial assumptions were made in relation to carbon budgeting rather than monetary units.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Not applicable.

3. Did you have sufficient time to contribute to the consultation exercise for the Bill?

Yes

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

It is difficult to comment fully as the memorandum itself states that costs are not fully available due to uncertainty surrounding the exact amount of annual targets, who will be responsible for enforcement, and a lack of evidence to accurately identify what the costs associated with the terms of the bill are likely to be. For example under the provisions relating to “improving the energy performance of existing non-domestic buildings” the estimated costs to local authorities range from £3.4m to £37m depending on how the menu of provisions contained within the Bill is assembled within secondary legislation. Such secondary legislation will be accompanied by a costed regulatory impact assessment. It is not until this information is available that local authorities will be fully able to comment on whether any financial implications are reflected and whether the costs associated with the Bill can be met or made self-financing through the levy of penalty charges.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

As per comment under question 4.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

Yes - the memorandum does reflect the margins of uncertainty associated with the estimates and the timescales over which costs would be expected to arise.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

In terms of the Council’s ability to meet the financial costs with regards to mitigation and adaptation measures encompassed within the Bill, it is necessary to determine whether there are any resource implications arising. These can only be costed once service departments have established actions to fulfil these obligations.

The Council would contest the accuracy of the costings contained within section 219. By assuming that a full time employee works 2,000 hours per annum, the memorandum fails to account for the employees statutory and annual leave. Further, once on-costs are subtracted from the average salary, the take home wage is unlikely to be commensurate with employees level of responsibility.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

Given the scope and range of activities contained within the Bill it likely that there will be future associated costs. Again, until these measures are specified it is not possible to accurately quantify potential costs.

SUBMISSIOM FROM EAST LOTHIAN COUNCIL

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

East Lothian Council sent a consultation response. Officers from the Council were involved in some of the consultation workshop events. There were no specific comments made on the financial assumptions.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

N/A

3. Did you have sufficient time to contribute to the consultation exercise for the Bill?

Yes within the limited knowledge available to the Council on a very complex topic.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

Clearly the bill has financial implications for the Council. The substantive matter in the Bill is setting the 2050, 2030 emission reduction targets and providing the framework for annual targets. Other than stating a broad brush approach of 1-2% GDP expenditure (across the Scottish Economy, including local authorities) to meet climate change the financial memorandum is not particularly helpful to local authorities.

East Lothian Council does not know what its costs will be in meeting the proposed emissions reductions. We are working through the Carbon Trust Carbon Management Programme which will assist that process for the Council’s own emissions in the short term, but longer term is an unknown. The memorandum itself makes frequent reference to the uncertainties of predicting costs for example:

“It is not possible to accurately predict when technologies will be introduced or the rates of reductions that will occur from changing behaviours and shifting demand. Overall with all these factors in play, it is impossible to accurately predict what will happen and when. That is why it is not possible to predict cost profiles during the period of change in the years out to 2050. (para 147)”

Council’s require clearer guidance from government than this.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

The Council cannot say it can meet these costs. Clearly some costs will be met through existing budgets, but significant investment will be required in energy efficiency measures, renewable energy development, waste management etc to deliver the bill objectives. This will either require a re-alignment of Council budgets to the potential detriment of other Council Services, or increased public expenditure and associated tax increase.

In addition there is uncertainty about the implications of the Carbon Reduction Commitment for Councils – as well as having to find money to invest, some Council’s may also be penalised.

A significant issue for local authorities is that many carbon reduction projects eg renewable energy investment, have financial pay back periods several years beyond current Council budget and election cycles, which means that Councils will find it very difficult to approve these longer term projects which will have to compete with the annual pressures of paying for existing public services within the already tight public finance settlement. This situation is not going to get any easier within the current economic downturn and uncertainties about future public finance settlements. Investment in Climate change mitigation (and adaptation) is as much about political and societal choices as financial ones.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

While there is clearly an imperative to act, and the cost of not acting now will be considerably higher in the future (Stern), there remains considerable uncertainty about estimated costs and timescales for action as identified in the memorandum (see also comment 4 above), other than identify that uncertainty the memorandum is not particularly helpful to Councils in framing financial implications.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

It is not clear what wider policy initiative is being referred to. If it is assumed that this refers to the sections in the Bill about waste management, energy efficiency etc then there will be implications for Councils and local businesses in particular. It is difficult to comment on the costs of the proposals in the financial memorandum ahead of the detailed secondary legislation required to introduce the measures.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

There are more than likely to be other unidentified costs, but what they are is an unknown at the moment, particularly in terms of broader societal consequences of climate change impact and response.

David Evans
Environment
East Lothian Council

SUBMISSION FROM FIFE COUNCIL

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Fife Council responded to the Government Consultation in April 08, but did not highlight financial implications. We are currently compiling a response to the Transport, Infrastructure and Climate Change Committee’s Call for Views (deadline 27 February), and will highlight financial implications.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

N/A

3. Did you have sufficient time to contribute to the consultation exercise for the Bill?

The deadline of 2 February for comments on the Financial Memorandum necessitates brief input, as our understanding of financial implications will be further informed through the compilation of input to the policy Call for Views by 27 February.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

No, costs that appear to be omitted include:

  • The Bill refers to requirements for secondary legislation and regulations throughout, all of which will have cost implications.
  • The Financial Memorandum seems to focus on costs incurred by the Scottish Government, for instance referring to the analysis of reports, to the exclusion of the costs associated with the scrutiny, measurement and reporting incurred by those made responsible for compiling reports. Fife Council urges the consideration of full costs associated with the Bill, and not rely on market changes or efficiencies savings making it possible for public bodies (or others) to cover the costs incurred in execution, monitoring and compilation of the reports to be analysed by the Scottish Government.
  • The Financial Memorandum contains numerous references to areas of costs which are not possible to predict. While Fife Council appreciates the difficulties in cost projections in the face of changing markets and behaviours, and unproven technologies, we encourage an attempt to include fuller costings, and a realistic view of technologies such as Carbon Capture and Storage, which will incur considerable costs in advance of any financial savings achieved.
  • Inconsistent levels of cost estimates are used across chapters. For example the apparent omission of transportation costs related to carbon emissions reduction, use of standardised costs in energy, and then very detailed (yet not full) costs related to waste. Fife Council requests that such inconsistencies be addressed to provide clarity and consistency across all areas.

    Fife Council also questions the priorities that the Financial Memorandum could be seen to suggest. Again referring to the waste costs, table 8 on page 51 suggests £3.5m for the enforcement of carrier bag charges, while many large retailers are already implementing such schemes voluntarily. Moreover, the emissions reductions to be achieved by such efforts, would not necessarily merit the level of investment proposed, considering the assertion made in paragraph 146 that “the Scottish Government intends to use the cost information… ie 1-2% of GDP in 2050”.
  • Implementation costs are excluded from the Financial Memorandum. In meeting the requirements for mitigation, adaptation, monitoring, scrutiny and reporting related to the Climate Change Bill, local authorities face substantial costs, and it is unlikely that any gain from efficiencies will be achieved at a time, or sufficient level to compensate for such costs even if in some cases whole life costs are reduced. The Scottish Government could consider spelling out clearly that tackling climate change cannot be achieved at no cost, even though the cost of inaction will be substantially higher.
  • Fife Council is concerned that some costs quoted may underestimate the true costs that would be incurred by Scotland. For example, the waste reduction and recycling costs in paragraph 210 appear to be based on very limited experience of a single office complex in Edinburgh that is unlikely to be representative of the facilities to which this provision may apply. Significantly more work is required to provide credible cost estimates in this area.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

The memorandum does not provide sufficient information to assist Fife Council in estimating the costs that it may incur. Accordingly we ask that the Scottish Government provides more detailed and robust estimates to enable the Council to form an objective view on this.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

While the Financial Memorandum does make numerous references to areas of costs that cannot be predicted, it excludes consideration of costs incurred should named technologies not meet the targets yet to be set. For example, referring to carbon capture and storage in paragraph 140 in relation to the decarbonisation of the power sector, assumes that once the technology is developed, trials are undertaken and a monitoring is reviewed, that this will be successful. While Fife Council would support the trial and monitoring of carbon capture and storage once required technology is developed, and support the implementation of such technology once its value is proven, we advocate a more cautious approach to such assumptions.

Similarly, the implementation of efforts to reduce carbon emissions and achieve efficiency savings in related energy costs would require upfront investment. The Financial Memorandum currently appears to omit such costs as would be applied across energy, waste and transport to mitigate climate change. Therefore Fife Council encourages the Scottish Government to revise the assumption of finance ‘freed’ by efficiency savings.

Fife Council highlights the Stern Report’s identification of the cost of inaction, and the necessity of accepting the need for actual investment. While we welcome a range of methodologies to meet the financial costs associated with the Climate Change Bill, Fife Council encourages full and transparent consideration of alternative methods of financing the Climate Change Bill. For example, while it may be financially desirable to promote self-financing carbon reduction schemes, such as the proposed leasing of forestry, other associated costs and impacts may make the financial bottom line less acceptable.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

As mentioned above, Fife Council does not believe that the costs which will be incurred by Scotland’s public bodies, businesses, and citizens in the efforts to meet the requirements of the Climate Change Bill are fully reflected in the Financial Memorandum. The Scottish Government has not yet issued guidance on climate change adaptation, and it is anticipated this will include a new set of roles and reporting for local authorities, all incurring costs and unlikely to lead to efficiencies savings at least in the short to medium term.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

Fife Council believe there may be considerable costs associated with the subordinate legislation and future guidance related to the Climate Change Bill. However based on the information currently available, we are unable to quantify such costs and would rely on the Scottish Government’s continued efforts with COSLA to redress this.

Sustainability Team
Environment and Development Services
Fife Council

SUBMISSION FROM GLASGOW CITY COUNCIL

Consultation

Question 1 - Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

Glasgow City Council (GCC) took part in the consultation for a Scottish Climate Change Bill responding in April 2008 but did not make any comments relating to possible financial implications. It should be noted that the Bill should contain enabling powers to allow Local Authorities to take specific action on Climate Change.

Question 2 - Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Not applicable

Question 3 - Did you have sufficient time to contribute to the consultation exercise for the Bill?

Yes, The City Council’s officers attended Scottish Government and SSN’s workshops prior to submitting a response. There was however limited time to respond to these questions on the financial memorandum. Given the lack of detail in the Memorandum it would have been useful if guidance through workshops or briefing sessions had been provided.

Costs

Question 4 - If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The Bill will definitely have financial implications for GCC. Although the Financial Memorandum attempts to provide the likely costs to Local Authorities these are generic estimates and while it is appreciated that this in itself is a difficult exercise, these do not enable an authority the size of Glasgow to accurately compile the increased level of spending and resources that will be required.

Two examples of this relate to the requirement for enhanced Energy Performance Certificates and the possible introduction of a charge for carrier bags. A number of the other estimates detailed in the memorandum such as those of deposit and return schemes and waste management plans lack detail to afford GCC the ability to assess the likely cost of widespread introduction of these initiatives. This includes those actions envisaged as cost neutral.

The implication of the predicted impact on GDP is also of concern to Glasgow. Given the contribution the City makes to the Scottish GDP any reduction is likely to have a disproportionate consequence for Glasgow. This needs to be taken into account in considering financial implications.

Question 5 - Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

Like all Scottish Local Authorities, the Council is currently facing a significant overspend. The implications of the current economic climate will make it extremely difficult to introduce City wide measures of the kind specified in the Bill and the financial memorandum without additional funding.

The costs associated with the forthcoming Carbon Reduction Commitment are currently being calculated on the basis of incomplete information. Without funding support the range of measures and estimated costs detailed the memorandum will exert a further severe budget pressure. If these measures are to be implemented then central government funding will be required if cuts to essential services are to be avoided.

Question 6 - Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

The Financial Memorandum notes the uncertainty associated with the 2050, 2030 and annual targets. This is reflected in the lack of precise financial detail in how the targets will be achieved. Glasgow City Council will have difficulty in utilising the current information to establish the likely costs of such a process

For example, for an authority the size of Glasgow with well in excess of 1,000 properties the memorandum, although providing the indicative expenditure of different scenarios, does not allow the Council to calculate the likely cost of an extension of the current Energy Performance of Buildings requirement.

Furthermore, although it was prudent to provide a range of possible costs, such as £3.5 million for the introduction of carrier bags charges, at this early stage it is difficult to calculate the burden of this overall cost to Glasgow, the second largest retail city in the UK.

Wider Issues

Question 7 - If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

Additional information would be required as to the nature or direction of the policy initiative referred to before a response to this question could be provided. It was assumed that the Bill would be the umbrella policy vehicle (enabling legislation) under which other policies would be introduced. Additional policy and regulation is likely to be required and, as such, result in additional costs.

Question 8 - Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

GCC are of the opinion that there will be unavoidable future costs associated with the Bill but also the potential for cost saving if introduced in an effective manner, reflecting the main financial observation contained in the Stern Report. Although attempts must be made to quantify these costs, we suggest that this will be an extensive exercise both for the Scottish Government and local authorities

SUBMISSION FROM HIGHLAND COUNCIL

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

The Highland Council did provide a consultation response to the Bill. Reference was made in the consultation response for the need to take account of economic and social impacts when considering areas including international credits and setting budget periods to develop infrastructure. No direct commentary on financial assumptions was made in the response.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Not applicable.

3. Did you have sufficient time to contribute to the consultation exercise for the Bill?

The Highland Council considered the consultation period designated for the Bill to be appropriate.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The Financial Memorandum is largely drafted on the basis of estimated costs on a macro-economic basis. As the Memorandum acknowledges, how these costs will impact on individual organisations, and the profile over years, cannot be accurately predicted at this time.

While there will clearly be financial implications, at this time the Highland Council is not in a position where at this stage it could easily estimate the financial implications of the Bill. One aspect that will be critical for the implementation of the Bill is recognition of the local factors that will have a significant bearing on relative costs of addressing the Bill. In Highland, the geography, climatic conditions and transient population will all have a bearing on costs relative to other Councils, for example in comparison to urban-based authorities.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

The financial costs of the Bill will be challenging for all organisations, and as highlighted in the previous question, Highland’s unique geography and other local factors may result in even greater challenges and cost. Financial support from Central Government, whether direct financial support or through incentivisation, will be critical. While investment should lead to reduced cost, or avoided cost, payback periods can be considerable and therefore the front-loaded investment necessary will be challenging when other competing priorities and service needs also have to be met.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

Yes, the Memorandum is clear on the uncertainty that relates to the estimated costs.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

The Financial Memorandum acknowledges that the likely cost and resource implications of the Bill for local authorities are presently difficult to estimate as they will be dependent on secondary legislation. Both the Bill and Memorandum outline potential areas of impact for local government including imposition of duties, improving energy performance, waste reduction and recycling. Costs for the Highland Council are likely to be significant in reduction of greenhouse gases through its role in climate change as a manager of its own estate and practices; as an employer; as a service provider; as a community leader and in partnership with other statutory, voluntary and private sector organistations.

Additional key areas of impact include implementation of the Council’s renewable energy strategy; promotion of higher design standards internally and externally, supporting healthier and environmental transport options, how the Council procures its goods and services and can influence the procurement practices of others and adherence to the Carbon Reduction Commitment (CRC). The projected costs associated with the CRC scheme in particular will have clear implications for the targets and delivery of the Councils Carbon Management Strategy. Based on current figures the Council will have to purchase approximately £500 000 of allowances for each of the first fixed price years of the scheme. Further implications associated with the CRC include the risks associated with failing to meet targets in the form of financial penalties and the requirement to purchase extra allowances and the removal of fixed price allowances after year 3 of the scheme to coincide with the introduction of the open market auctioning process.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

There is a considerable amount of uncertainty around costs. The memorandum acknowledges that how the costs will impact on individual organisations cannot currently be accurately predicted. It is likely that further costs may apply. It is not possible to take a view on these costs at this time.

SUBMISSION FROM THE SCOTTISH RETAIL CONSORTIUM

Further to your letter of 15 January 2009 requesting that the SRC complete the Committee’s questionnaire in relation to the scrutiny of the Climate Change (Scotland) Bill, we are happy to provide comments as detailed below. Our comments are limited to the provisions of the Bill that where consulted on as part of the Scottish Government ‘Consultation Paper on Potential Legislative Measures to Implement Zero Waste’ (July 2008).

Questionnaire

Background:

The Scottish Retail Consortium (SRC) is the lead trade association representing the whole range of retailers in Scotland, from the large multiples and department stores through to independents, selling a wide selection of products through centre of town, out of town, rural and virtual stores.

Retailers are making huge strides in reducing the environmental impact of their operations. The retail sector has, for example, committed to sending less than 50 per cent of waste to landfill by 2013. Retailers recognise their part in achieving a zero waste society but cannot accomplish this in isolation. It is crucially important that Government and customers play their part as well.

Consultation:

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

The SRC took part in the consultation exercise and commented on the financial assumptions (‘Costs and Benefits’) made in relation to the ‘Potential Legislative Measures to Implement Zero Waste’ (July 2008).

In general, the SRC welcomed the positive nature of the consultation, the aspirational quality of the ideas as well as the aim to address the fundamental issue of how the nation regards its waste and resources, and the ambition to achieve a zero waste society.

However we believe that some of the assumptions upon which proposals have been based are flawed, especially in relation to costs to the sector and environmental impact.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

See above response.

3. Did you have sufficient time to contribute to the consultation exercise?

Yes, however we had a number of concerns on the approach taken by the consultation as follows:

a. Packaging amounts to only 1.5% of total waste to landfill yet the majority of the zero waste consultation proposals focus on packaging.

b. Packaging regulations already exist. If they are not working they need to be addressed rather than introducing new legislation.

c. The proposals seem driven by weight rather than net environmental impact of materials and associated supply chains. For example the impact of minimizing packaging without incorporating food waste into the equation.

d. The consultation fails to assess and address the greatest waste streams in Scotland.

e. The consultation does not feature, as a major proposal, the need for societal education (led by Government) on waste.

f. The impact assessments, as they were presented in their partial state, do not reflect the impact of the proposed measures on the retail sector.

Costs:

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The provisions of the Bill as they relate to waste (Chapter 4, Waste Reduction and Recycling) will have substantial impact on retailers, large and small.

The impact assessments (and associated costs) as set out in the consultation contained very limited information on which to comment. Furthermore, the ‘Costs and Benefits’ section did not adequately reflect the impact of the proposed measures on the retail sector.

For example, the assumption was made that if targets on retailers in relation to packaging reduction and information were laid down in regulations, there would be no costs to retailers in relation to this proposal and in fact there could be cost savings to retailers. We strongly disagree with this assumption. The ‘Costs and Benefits’ analysis also states that the introduction of waste prevention plans and specifying recyclate would either represent a cost saving to business or would be of no significant cost. Once again we strongly oppose the assumptions upon which these judgements have been made.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

If all the provisions of the Bill relating to waste reduction and recycling were brought forward, there would be a very serious impact on the operational costs for all retailers in Scotland, irrespective of size or location.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

No. See above response.

Wider Issues:

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

See above responses.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

There will undoubtedly be further costs associated with the Bill, however will limited scheme data it is extremely hard to quantify what these costs are likely to be.

Fiona Moriarty
Director
Scottish Retail Consortium

SUBMISSION FROM SEPA

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

SEPA provided a full response to the consultation which is available on our website 33 but did not comment directly on the Financial Memorandum.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

-

3. Did you have sufficient time to contribute to the consultation exercise?

The 12 week consultation process provided ample opportunity for SEPA to consider the Bill. SEPA organised several internal seminars to discuss the Bill and its implications; SEPA’s response was also considered by the SEPA Board in April 2008.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

The Bill has the potential to have significant financial implications across many, if not all, of SEPA’s business activities. It is not yet precisely clear what additional responsibilities SEPA will have, however some of the estimated costs in the Memorandum do not concur with SEPA’s own experiences and estimates. With that in mind SEPA welcomes the commitment to a fully costed RIA for any new duties. Examining the constituent parts of the Bill suggests the following cost implications.

Cost of meeting SEPA’s own targets and introducing lower carbon technologies

Many of the technological improvements necessary to head towards a lower carbon infrastructure will bring costs – sometimes significant costs for SEPA (and for other public or private sector bodies). There appears to be nothing extant in the financial memo on invest-to-save or funding for the promotion of reduced carbon emissions programmes for public sector bodies. This may discourage organisations to take necessary, timeous action.

As an example, SEPA is participating in the local authority carbon management programme for 5 years from 2006-2007 to 2011-2012 and has published a 25% reduction target for CO2. To achieve this target it is necessary to invest heavily in lower carbon technologies e.g. more efficient boilers and plant as well as retro-fitting e.g. insulation on older buildings. SEPA’s strategic implementation plan (SIP) (see table 1), intends to invest £790k over five years to reduce CO2 emissions by 537 tonnes annually by 2012. This investment has to come from within existing budgets and is expected to generate savings of c.£62k per year.

There are also costs associated with calculating Energy Performance Certificates (EPC) for non-domestic buildings. These certificates have to be produced by third parties using specialist software. In addition the buildings with lower scores have to be improved over time. The Memorandum only says (at 186 p36) that the Bill will clarify the role of who pays and goes on to suggest seven different future scenarios for EPCs.

Table 1- SEPA’s Strategic Implementation Plan

Short listed actions and emission reduction opportunities

SEPA Carbon Reduction
Opportunity
Detailed
Description
Financial
Cost
Carbon
Saving
(per annum)
KgCO2
Date to
be implemented
Responsible
Owner
1. Improve insulation within 11 owned SEPA Premises By replacing roof insulation and cavity wall insulation in the SEPA owned premises heat loss can be drastically reduced. £19,000 14,190 Dec 2008 Head of Procurement, Facilities and Estates
2. Swap out all existing fluorescent lights and replace with efficient T5 lamps During annual maintenance of luminaries retrofit existing light fittings to accept T5energy efficient lamps and replace. £150,000 77,400 Oct 2009 Head of Procurement, Facilities and Estates
3. Install voltage regulators across the campus to reduce power consumption Further to a detailed site survey we have identified a voltage regulator that will meet the requirements of our estate and systems, not impact operational performance and reduce power. £175,000 154,800 Dec 2009 Head of Procurement, Facilities and Estates
4. Install Building Management System (BMS) By installing a BMS system we can minute by minute obtain a view of our electrical, gas and water consumption and use this data to manage the estate efficiently. £173,000 47,700 Dec 2010 Head of Procurement, Facilities and Estates
5. Replace Gas Boilers at Riccarton As part of our analysis of the gas usage it was identified that almost 44% of total gas used was at our Riccarton Office and laboratory. By replacing the existing boilers with new, more fuel efficient boilers a 25% fuel saving is anticipated. £27,500 38,000 Nov 2007 Head of Procurement, Facilities and Estates
6. Decreasing UK Mainland flights by 50% A 50% reduction in UK mainland flights for 2007-2008 compared to figures for 2006-2007, and maintaining UK mainland flights at that level going forward. £000 22,060 May 2007 SEPA Transport Group, Chaired by Dave Gorman Head of Environmental Strategy
7. Reduce lease cars CO2 ceiling Reduce the lease car ceiling for new lease cars to less than 150gCO2/Km. £000 14,574 Dec 2012 SEPA Transport Group,
8. Increase the use of video-conferencing Substitute the travel to meetings by increasing the use of videoconference by 20% per year. £000 10,000 By end 2008 IEPEG
9. Replace the proposed heating system in the new Aberdeen office and Laboratory with a biomass equivalent heating system SEPA is constructing a new office and laboratory in Aberdeen that is scheduled for completion in May 2009.
By replacing the proposed combination of gas boilers significant reductions in CO2 can be achieved.
£250,000 158,000 May 2009 SEPA New Aberdeen Building
10. Implement Transport Initiatives SEPA are currently investigating all modes of transport with a view of reducing CO2 emissions. Not Known To be agreed 2008 – 2013 SEPA Transport Group
TOTAL   £794,500 536,724    

Potential Advisory Role

The Bill makes provision for additional Scottish advisory functions if required. Clearly at this stage it is difficult to comment on the scale of additional charges that might result for such a future decision.

It is also not clear which existing body might be deemed suitable for advisory functions to be given to, though an obvious candidate may be SEPA. SEPA has not had any formal discussions with the Scottish Government on this point, but if asked to carry out such a function, it would expect the costs to be substantial, requiring expertise in climate change science and environmental technology, economic assessment and modelling, and understanding of social impacts.

Carbon Accounting

SEPA warmly welcomes the establishment of the carbon accounting scheme for tracking carbon units and maintaining a database. The costs given on page 28 in the Memorandum, although perhaps a little low, do appear to be of the right order of magnitude.

However SEPA believes that a more fundamental point is the need to establish a more detailed, faster and more accurate picture of emissions of climate change gases within Scotland. SEPA believes that this will need to involve both increased physical monitoring and assessment of some gases (e.g. nitrous oxide) and an increased capacity to assemble, verify and publish data. SEPA has not assessed these costs in any detail, but considers that they could be considerable.

Waste regulation

The cost of the waste provisions cannot be fully anticipated because it is not yet known whether the voluntary agreements will be sufficient thus rendering implementation of the provisions unnecessary. For the same reason, the Scottish Government has not estimated enforcement costs. However, should enforcement be necessary, the Government anticipates that enforcement will be carried out by existing public bodies.

As a first cut SEPA believes the costs presented in table 8 on page 51 are a reasonable set of assumptions.

Scottish Ministers will be enabled to make regulations to require businesses and public bodies to provide information to SEPA about the waste that they produce. The cost to government and local authorities of providing this information is considered to be marginal. However, there may be additional costs for SEPA should enforcement be required and costs to other bodies, individuals and businesses will depend on the detail of the regulations. The Policy Memorandum states that “it will be difficult to move to a zero waste society without much better information”. In addition, the Government and SEPA “currently lack reliable data” to assess compliance with elements of Article 11 of the Revised Waste Framework Directive.

Offices could be required to have facilities to collect paper etc. Section 55 empowers local authorities to issue notices requiring organisers of temporary public events to provide recycling facilities. Both sections require the waste collected to be, as far as practicable, recycled. There will be costs involved for providing the receptacles and for ensuring that the waste is collected and recycled. However, the Financial Memorandum states that costs will “benefit society through the more efficient use of resources and a reduction in waste disposed of by landfill”. Again, should legislation be required there will be enforcement costs for SEPA.

Please note that the staffing costs used in table 8 do not reflect those of SEPA.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

In general, on the specific policy measures discussed, SEPA believes that the Memorandum reflects the likely range of uncertainty associated with the proposals.

However, based on SEPA’s experience of full cost recovery, it would appear than many of the adopted numbers could lead to a modest underestimate of the costs.For example, for enforcement, SEPA would use a more senior member of staff than that allowed for at £15/hr.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

There will clearly be implementation costs arising from existing and new policy initiatives required to implement the Bill’s targets. These will arise for the Scottish Government, public bodies, businesses, private organisations and individuals. SEPA is aware of some planned initiatives, but understands that the Scottish Government intends to publish a Strategic Overview in due course, setting out policy costs in more detail. SEPA is also aware of published material that sets out some of these costs in more detail.34

It is important to bear in mind that in addition to direct and policy costs on society, there would be costs arising from not taking action to address climate change. These costs are set out in the reports mentioned above. In addition, SEPA believes that there are clear benefits to Scottish society from taking early action to address climate change- protecting the environment, reducing the costs of adaptation, maintaining biodiversity and ecosystem services, and business benefits from reducing waste and energy use, and seizing opportunities in the green technology and climate change mitigation sector.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

SEPA believes that there are likely to be additional costs depending on its role. The uncertainty of the role and the activities necessary to achieve that role make accurate costing problematic. The fully costed RIA would provide an accurate indication of the most likely cost and SEPA welcomes the Scottish Government’s commitment to using this to quantify and inform funding of any addition to SEPA’s duties.

SUBMISSION FROM THE UK COMMITTEE ON CLIMATE CHANGE

Consultation

1. Did you take part in the consultation exercise for the Bill, if applicable, and if so did you comment on the financial assumptions made?

The Committee on Climate Change did not take part in the consultation exercise for the Bill; it was operating in shadow form at the time of the consultation.

2. Do you believe your comments on the financial assumptions have been accurately reflected in the Financial Memorandum?

Not applicable.

3. Did you have sufficient time to contribute to the consultation exercise?

Not applicable.

Costs

4. If the Bill has any financial implications for your organisation, do you believe that these have been accurately reflected in the Financial Memorandum? If not, please provide details.

The Financial Memorandum recognises that in order for the Committee on Climate Change to fulfil the advisory functions ‘additional funding may be required if the Committee are commissioned to provide advice and the cost of that task is particularly expensive’. This is likely to be the case, though the costs to the Committee on Climate Change and the timing of any funding required have not yet been established.


5. Are you content that your organisation can meet the financial costs associated with the Bill? If not, how do you think these costs should be met?

The Financial Memorandum identifies that the Scottish Government may be required to supply additional funding to cover the financial costs to the Committee on Climate Change associated with providing advice and analysis relating to the Scottish targets.

6. Does the Financial Memorandum accurately reflect the margins of uncertainty associated with the estimates and the timescales over which such costs would be expected to arise?

Future contributions are likely to be in line with Scotland’s contribution in 2008-09, exclusive of any additional funding required to support the delivery of the advisory functions in the Climate Change (Scotland) Bill.

Wider Issues

7. If the Bill is part of a wider policy initiative, do you believe that these associated costs are accurately reflected in the Financial Memorandum?

No comment.

8. Do you believe that there may be future costs associated with the Bill, for example through subordinate legislation or more developed guidance? If so, is it possible to quantify these costs?

No comment.

SUPPLEMENTARY SUBMISSION FROM THE SCOTTISH GOVERNMENT, DATED 18 FEBRUARY 2009

Part 2 - In written evidence, the UKCCC suggested that it would be likely that additional funding would be required for Scottish-commissioned research and advice. How likely is it that the Scottish Government’s annual contribution of £275k to the UKCCC will be exceeded in future years?

The Scottish Government’s annual contribution to the funding for the UK Committee on Climate Change is expected to vary from year to year. For example, the costings of £275k cover work under the provisions of the UK Climate Change Act and include an element of initial start-up expenditure which is not expected to recur in future years. For information, the Committee is currently reviewing its funding requirements for 2009-10 with the UK administrations as its work programme develops.

As noted in the Financial Memorandum to the Bill, additional funding may be required for the Committee in respect of the Scottish Bill if the Committee is requested to provide advice and the cost of providing that advice is particularly expensive, for example, because the Committee requires to recruit more staff or commission external research in order to develop the advice. Analysis related to the annual Scottish targets and trajectory can be anticipated to give rise to additional work for the Committee and additional expenditure is therefore expected. If this work requires, for example, an additional analyst and perhaps some additional research to build on the analysis work already undertaken by the Committee, this could be estimated to be in the region of up to £100k. The Committee is currently considering the resource implications of work in support of the Scottish Bill.

Evidence received by the Transport, Infrastructure and Climate Change Committee suggested that the cost of establishing a Scottish committee would be less than the FM suggests, i.e. £2.5m p.a. How does the Scottish Government respond to this?

The Scottish Government believes that establishing a Scottish Committee would require considerable funding. The £2.5m estimate for the potential annual costs of a Scottish Climate Change Committee is based on the following assumptions:

♦ A Scottish Climate Change Committee could be expected to have six members (the same number as the UK Committee on Climate Change) – additional members would be anticipated to increase costs beyond those provided in the Financial Memorandum.
♦ A Scottish Climate Change Committee could be anticipated to manage with a slightly smaller secretariat – 20 persons instead of 25.
♦ The nature of the advice required and the range of expertise necessary suggests it would be difficult to save costs by adopting a significantly scaled down operation for Scotland.
♦ The UK CCC conducts a wide range of climate change analysis which would need to be replicated for Scottish purposes. The Scottish Government estimate allows for some scope for efficiencies from an information sharing arrangement and is based on the following considerations:

o The UK CCC has detailed sectoral expertise to address specific economic questions, commission and peer review detailed econometric modelling frameworks and synthesise this work into an economy wide analysis.
o The UK CCC has already built up significant understanding while operating in shadow format and in preparing their initial report, published in December 2008.
o A Scottish Committee secretariat would need to replicate this understanding and further develop models and frameworks to address Scottish specific issues without direct input from the UK CCC.
o The range of sectoral issues is significant and would include energy and power generation, transport including international aviation and shipping, the technology path to the 2050 target, business opportunities, climate change impacts, competitiveness issues, demand side responses, social research and development of modelling and methodologies.
o It would be important also to consider the international dimension including likely future climate change agreements, market developments (financial and carbon), international aviation and shipping negotiations and technology transfer scenarios.

♦ The scale of fees generally paid to Scottish NDPB members is lower than the current rate for the Committee on Climate Change therefore some efficiencies can be anticipated in terms of remuneration for members of a Scottish Committee.
♦ Accommodation costs could be reduced by locating a Scottish Committee on the government estate.

The Scottish Government has concluded that utilising the expertise of the UK Committee on Climate Change is likely to be the most cost effective option for obtaining expert advice on climate change for the Scottish Ministers, but would reconsider the arrangement if it should be demonstrated otherwise.

While we acknowledge that our estimates are not precise sums, we remain convinced that they indicate the scale of the cost difference between contributing to the UK Committee and establishing a Scottish Committee.

Part 5 - Considerable costs will be associated with subordinate legislation under the Bill, which will have significant financial impacts on public bodies, local authorities and businesses. How does the Scottish Government intend to monitor the costs arising from the large number of future regulations?

The two subject areas in Part 5 which could have significant financial impacts on public bodies, local authorities and businesses are considered to be the waste provisions and the non domestic energy efficiency provisions. In terms of the waste provisions, costs will arise only if subordinate legislation is actually enacted under the powers in the Bill, and then the nature of those costs, and the bodies on whom they will fall, will depend on the regulations themselves. As is always the case with regulations, the financial issues they raise, including monitoring would be addressed in a Regulatory Impact Assessment (RIA) specific to those regulations.

In respect of the non domestic building energy efficiency provisions, the costs associated with subordinate legislation will also be addressed in a detailed RIA specific to the regulations. A rigorous review (in the form of a Review RIA) will be carried out within 10 years of the introduction of the regulations and will consequently be able to provide an accurate assessment of the impact.

It may be helpful to take this opportunity to clarify that the one-off costs for the Scottish Government for the non domestic building energy efficiency provisions include staff costs to develop secondary legislation, impact assessments and guidance, media campaigns to create public awareness, training and research and vary depending on the scope of the secondary legislation. There are no one-off costs envisaged for local authorities as enforcement is intended to be self financing based on penalty charges.

The average annual costs for Scottish Government, local authorities and other bodies, individuals and businesses are identified in respect of implementation of the policy - i.e. commissioning of building surveys, calculating energy and carbon performance of buildings, formulating action plans and carrying out building work. The wide variation in the annual costs relates to the type and size of buildings covered, whether operational ratings are included, the trigger points for assessments, the lifespan of the certificates and whether implementation of the recommendations is discretionary or mandatory.

Philip Wright
Deputy Director
Climate Change Division

SUPPLEMENTARY SUBMISSION FROM THE SCOTTISH GOVERNMENT, DATED 25 FEBRUARY 2009

Advisory body – Can the Scottish Government clarify its earlier comment on deriving efficiencies?

My earlier letter referred to the estimates of the potential costs of operating a Scottish Climate Change Committee allowing for ‘some scope for efficiencies from an information sharing arrangement’. The UK Committee on Climate Change (UK CCC) built up significant understanding while operating in shadow form to December 2008 and continues to develop this now that it has constituted statutorily. If a separate Scottish Committee on Climate Change were to be established in the future we envisage that arrangements may be made whereby the Scottish Committee could draw on the UK CCC’s knowledge of data and research sources, modelling methodologies and analytical output. The precise arrangements for information sharing would, of course, have to be agreed with the UK Committee and the other sponsor administrations at the appropriate time.

The extent to which information sharing would aid a Scottish Committee would also depend on the nature of the issue as well as the structure and approach of a Scottish Committee. It is therefore not possible to place precise estimates on the extent of efficiencies. For example, a Scottish Committee could be helpfully informed by any analysis undertaken the by the UK CCC on what is an appropriate global climate objective. Beyond specifics, it can be expected that information sharing would also be useful more broadly.

Forestry – Can the Scottish Government confirm whether the options review on forestry will include financial information on joint ventures?

The options review on forestry will include financial information on both joint ventures and the leasing of forest land, but with more detail on the latter issue

Energy Efficiency – can the Scottish Government confirm if local authorities will be given enforcement duties in respect of the non-domestic building energy efficiency provisions?

In terms of Section 50 (3) of the Bill, no decision has been taken yet as to whether enforcement will be carried out by local authorities or “such other person or body”.

Philip Wright
Deputy Director
Climate Change Division

SUPPLMENTARY SUBMISSION FROM THE FEDERATION OF SMALL BUSINESSES

Thank you for allowing the FSB in Scotland the opportunity to present our concerns about the Financial Memorandum of the Climate Change Bill to the committee. As discussed at the evidence session, we are pleased to provide some additional written evidence. I hope you find these comments helpful.
As outlined at the committee meeting, the FSB in Scotland is primarily concerned about the nature of the secondary legislation enabled by the bill. Issues relating to waste, recycling and energy efficiency are clearly of interest to a large number of our 20,000 members.

We of course appreciate the benefits of using secondary legislation, however this should be of a supporting nature; the intention of the legislation having been set out in the primary legislation. We believe that the measures currently outlined are extremely wide-reaching and the scope of government action unclear. This means it is very difficult to ascertain the potential impact of these measures. With some of the proposals having severe cost and practicality implications (e.g. Energy Performance Certificate options range from £6.7m pa to £64.7m pa) for both business and public bodies, we do not think it is appropriate for parliament to be asked to vote to allow ministers such a wide range of legislative powers without more detailed intentions and costings.

In addition to our concern about the nature of the legislation, please find below comments on the Financial Memorandum.

1. Impact Assessment
The development of the Regulatory Impact Assessment (RIA) alongside the Financial Memorandum would have been helpful. The partial RIA was completed at the time of the government’s consultation, however it would be a useful tool to aid scrutiny and development of the legislation. We would also like to see some mention of the use of the Business Impact Assessment (BIA) as recommended by the Regulatory Review Group. Where differences appear in information in both the Financial Memorandum and RIA, it is unclear which is the most up–to-date. References to costs which, in the absence of any detail, vaguely conclude ‘benefits are likely to outweigh costs’ are simply unhelpful in a Financial Memorandum.

2. Assessing Costs
Costs to business are assessed under the ‘agencies, other bodies’ section of the Financial Memorandum. Since SEPA is a key agency, much of this section focuses on costs to SEPA and there is not enough focus on costs to business. For example, the summary cost table relating to waste data returns lists £250,000 under the ‘other bodies’ section, but this only relates to costs to SEPA. Using more case studies would be a helpful way to illustrate the impact of proposals. While we appreciate the intention and understand it is representative of a large office complex, Victoria Quay is probably not representative of most business premises in Scotland and is therefore not the idea example with which to illustrate costs of providing recycling facilities to staff.

We do appreciate the difficulties involved in estimating cumulative costs, however this is key to understanding the impact on business. Where a number of different regimes are mentioned (and currently there is potential for at least six different sets of paperwork, monitoring and inspection with no mention of cost recovery through fees), it would make sense to look at the potential to streamline regimes thereby increasing efficiency and simplifying compliance. If we are to achieve better regulation, discussion of these ideas at an early stage is important e.g. if waste plans and energy efficiency plans are both required for business premises, why not have one combined plan? If there is to be improved waste data returns from business, can the existing regime be removed to prevent duplication? The differentiation of roles between SEPA and local authorities has clearly yet to be decided – here too there are opportunities to ensure duplication and overlap does not occur.

There is also little reference to the difference between policy and administrative costs in the Financial Memorandum. In assessing costs, is important to understand where there are opportunities to reduce administrative costs, as outlined above, and where there are unavoidable policy compliance costs.

3. Infrastructure & Resources
As discussed at committee, we see no reference in the Financial Memorandum to the inevitable cost implications to local authorities (and to private waste industry who require certainty of government intentions if they are to invest) of providing the necessary infrastructure to support additional recycling. In the 2007 mapping exercise into local authority provision of recycling services to SMEs, carried out by SEPA, lack of resources was frequently cited as the main reason for not improving services to small businesses. At that time there were still four local authorities offering no recycling services to business. This clearly presents difficulties if we are looking at legislation which will place duties to recycle on businesses.
In addition, a threat to the financing of existing kerbside recycling schemes has been highlighted by many in relation to the introduction of a deposit and return scheme – this cost implication should be reflected in the Financial Memorandum.

Andy Willox OBE
Scottish Policy Convener


Footnotes:

1 Information on the Committee’s three-level system of scrutiny for Financial Memoranda is available at: http://www.scottish.parliament.uk/s3/committees/finance/financialMemo.htm

2 Scottish Parliament Finance Committee, Official Report, 10 February 2009 available at: http://www.scottish.parliament.uk/s3/committees/finance/or-09/fi09-0401.htm

3 Scottish Parliament Transport, Infrastructure and Climate Change Committee, Official Report, 3 February 2009, col. 1438.

4 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 979.

5 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 979 and supplementary written evidence.

6 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 951.

7 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 955.

8 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 974 and supplementary written evidence.

9 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 974.

10 Scottish Parliament Finance Committee, Official Report, 10 February 2009, cols. 961-2.

11 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 962.

12 Climate Change (Scotland) Bill, Policy Memorandum, paragraph 119.

13 Scottish Parliament Finance Committee, Official Report, 10 February 2009, cols. 958 and 961.

14 Scottish Parliament Finance Committee, Official Report, 10 February 2009, cols. 958-9.

15 Scottish Parliament Finance Committee, Official Report, 10 February 2009, cols. 975-6.

16 Climate Change (Scotland) Bill, Financial Memorandum, paragraph 148.

17 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 953.

18 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 948.

19 Highland Council, Glasgow City Council, Dundee City Council

20 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 966.

21 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 967.

22 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 969.

23 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 966.

24 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 971.

25 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 958.

26 Scottish Parliament Finance Committee, Official Report, 10 February 2009, cols. 949 and 953.

27 Scottish Parliament Finance Committee, Official Report, 10 February 2009, cols. 953-4.

28 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 976.

29 Scottish Parliament Finance Committee, Official Report, 10 February 2009, col. 976.

30 cebr report for the Forestry Commission and ConFor (2006)

31 Reid H et al (2004). Using wood products to mitigate climate change: a review of evidence and key issues for sustainable development. January 2004. IIED/ECCM.

32 Dr A Fruhwald, Hamburg University in CEI-Bois (2006) Tackle Climate Change: Use Wood