WELCOME to the brave new world of Scotland under climate change legislation.
Last week's Climate Change Act was referred to by minister Stewart Stevenson as the "most ambitious and comprehensive piece of climate change legislation anywhere in the world".
Great timing, some might say, in the same week as we hear the economy
contracted 2.4 per cent in the first quarter of 2009 and jobs continue to be lost.
With Scotland contributing only 0.2 per cent of global greenhouse gases (GHGs), are these measures justified when companies need every bit of help to get out of the mire?
There are many obligations in the act. Holyrood, like Westminster, has committed itself to reduce GHGs by 80 per cent by 2050. However, it has also committed (pending talks at Copenhagen later in the year) to achieving a world-leading interim target of 42 per cent by 2020.
Where Westminster uses five-year carbon budgets (allowing good and bad years as long as the five-year target is met), Holyrood has committed to annual targets.
These will underpin all Scottish Government policy, and all public bodies must exercise their functions in a way that best contributes to the targets being met. The government must set out its policies for ensuring land use contributes to the targets in a land-use strategy. New duties are imposed on the government to promote energy efficiency and renewable heat.
But what will this mean in practice? More details are in the powers given to ministers. They must produce laws requiring assessment and improvement of the energy efficiency of non-domestic buildings (estimated cost: up to £64.7 million). Planning and building regulations and policy must be updated to ensure new buildings source a proportion of their energy from low and zero-carbon generation. Ministers are given the power to set targets for reduction of packaging (£250,000 pa), establish deposit and return schemes (£15-20m) and require businesses to produce waste prevention and management plans and provide recycling facilities. These are significant obligations, with potentially significant costs for business. The government acknowledges the costs of these policies are likely to result in structural adjustments to the economy, with employment re-allocated from energy-intensive to non-energy-intensive sectors.
But it is not all bad for business. The act provides some certainty on long-term government policy, allowing businesses to plan.
And there are incentives: ministers have power to introduce lower categories of rates for energy-efficient business premises. Many of the measures – improved efficiency, better site waste management and recycling – aim at greater efficiency and can actually improve the bottom line.
There are major openings in renewable energy and low-carbon technologies, carbon capture and storage, energy efficiency and distribution services and transport.
The low-carbon economy in Scotland was worth £8.5 billion in 2007, accounting for 73,000 jobs. It was estimated to have grown by 5.1 per cent in 2007-8, more than twice the rate of the Scottish economy as a whole. It is this potential, further accentuated by the new act, that leads the Scottish Government to talk of a green economic revival.
Given the 40-year target, the overall economic costs of the act are uncertain. Even taking into account the expected growth in the sectors above, costs are estimated at 1 to 2 per cent of Scottish GDP in 2050, or £1bn to £2bn at today's prices.
When you look at the alternative – a reduction of 5 to 20 per cent in global GDP from unchecked climate change, according to the Stern Review – it is difficult to argue against it.
The real test will be in how and when the government uses its new powers. There is a lot more law-making to come, and it is clear the impact on business must be an integral part of the government's reasoning. Business ought to lobby for the costs-saving measures to be phased in first.
Businesses should be looking at Scottish and UK law and policy, as well as future proposals. If they do not, they risk being unprepared and, more importantly, missing opportunities to be part of the green economic revival.
• Gordon McCreath is a partner with the law firm Pinsent Masons LLP.
The full article contains 719 words and appears in The Scotsman newspaper.
