The Scottish Government published its draft Climate Change Plan (CCP) on 6 November 2025, kicking off 120 days of parliamentary scrutiny. The draft Plan covers 2026-2040, with the goal of reaching ‘net zero’ Greenhouse Gas emissions by 2045.
This blog explores the Business and Industry chapter of the Plan. It is part of a series of SPICe blogs on the CCP. Readers may also be interested in SPICe’s summary of responses to the Parliament’s call for views on Industry and Negative Emissions Technologies.
Background
The CCP is split across seven chapters, with each chapter covering a different source of emissions. The Business and Industry chapter includes emissions from:
- Industrial processes, which primarily come from fuel combustion in manufacturing and production processes. Emissions from this sector accounted for 13% of Scotland’s emissions in 2023.
- Non-domestic buildings (not including public sector buildings), which primarily come from heating those buildings. Emissions from non-residential buildings, including public sector buildings, accounted for 5% of Scotland’s territorial emissions in 2023.
- Negative emissions technologies (NETs), which have the potential to extract emissions from the atmosphere and permanently store them underground. While there are several types of NETs, the most significant in the CCP are known as Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Capture with Carbon Storage (DACCS). Essentially, the difference between the two is that the former extracts CO2 from biomass; the latter extracts CO2 directly from the air.
The independent Climate Change Committee (CCC) describes non-residential buildings as ‘mostly devolved’, but Industry and NETs as ‘mainly reserved’.
Progress in reducing emissions to date
Since 1990, emissions from industry have fallen by 57% in Scotland. Emissions reductions have not primarily come from decarbonising industrial processes. Instead, they have largely come from the closure of industrial sites like steelworks and papermills and businesses changing what they manufacture toward less energy-intensive, higher-value output.
Emissions from non-residential buildings (including public sector buildings) accounted for 5% of Scotland’s territorial emissions in 2023. Emissions have fallen by 31% since 1990, primarily due to improved energy efficiency of buildings.
NETs are yet to be deployed at scale. Respondents to the Parliament’s call for views noted that NETs have enormous potential in Scotland, due to its geography. However, there was also concern about relying on technologies that have yet to deliver large scale emissions reductions.
How are emissions planned to fall in the CCP?
The CCP sets out the Scottish Government’s planned level of territorial emissions from Scotland over each of the five-year carbon budgets. For the Business and Industry chapter, emissions are intended to fall by 49% in 2031-35 and by 95% in 2036-40 compared with 2021-25 levels.
The proposed carbon budgets for this chapter are presented below, split out by each of the three components. To provide context, these have been presented alongside the CCC’s balanced pathway. This is the CCC’s view of the most effective and credible route to net zero by 2045 for Scotland. Whilst advisory, it does provide a useful starting point to consider the draft CCP’s carbon budgets.
There are some differences between the Scottish Government’s proposed carbon budgets and those of the CCC’s balanced pathway. It is not made clear in the draft CCP what assumptions these differences are based on (e.g. on what basis does the Scottish Government believe NETs will extract double the emissions as in the CCC’s balanced pathway in 2036-40? (See Figure 3)).
Figure 1: Carbon budgets in the CCC’s balanced pathway and the draft CCP, industrial processes (excluding non-residential buildings)
Source: Scottish Government, draft CCP and CCC advice to the Scottish Government (full dataset)
Figure 2: Carbon budgets in the CCC’s balanced pathway and the draft CCP, non-residential buildings
Source: Scottish Government, draft CCP and CCC advice to the Scottish Government
Figure 3: Carbon budgets in the CCC’s balanced pathway and the draft CCP, negative emissions technologies
Source: Scottish Government, draft CCP and CCC advice to the Scottish Government
How does the Scottish Government intend to deliver this?
In the CCP, the Scottish Government lists the policies and proposals that it believes will deliver the emissions reductions in the carbon budgets.
For the business and industry chapter, the most substantial new policy is a loosely defined ‘New Industrial Decarbonisation Programme’. Also included as new policies are working with the UK Government to “develop a framework for demand-side measures to increase the market for low carbon industrial products”, supporting SEPA to drive energy efficiency and supporting planning and consent for carbon capture projects.
The primary existing policy is the UK Emissions Trading Scheme, which is a cap-and-trade mechanism that produces a carbon price for industry. Two Scottish Government funds to support industry to decarbonise and develop green hydrogen are also highlighted, although no indication of the amount of funding required to deliver the anticipated emissions reductions is given. There is also the inclusion of a GB-wide policy, the Renewable Heat Incentive, which closed to new applicants in 2021, and thus has no scope to increase emissions reductions.
The primary policy listed to facilitate NETs is “support for” carbon capture utilisation and storage. This most notably includes Project Acorn, which is aimed at capturing and storing emissions from Scottish industry.
Financial costs and benefits
The Scottish Government has estimated the financial costs and benefits of some CCP policies.
Estimates of the financial costs and benefits in the Business and Industry chapter are presented at an aggregate level and not provided for individual policies. There is little granularity over who the costs and benefits apply to. For example, it is not stated how much up front investment is expected from the public and private sectors, or how costs and benefits are expected to be distributed by region or sector.
This means, for example, that it will not be possible to assess whether spending plans in any given Scottish budget are consistent with delivering what is set out in the CCP.
The costs and benefits from the Business and Industry chapter, as presented in the draft CCP, are summarised in Table 1.
Table 1: Financial costs and benefits of the Business and Industry chapter, £ million, 2025 prices
2026-2030 | 2031-2035 | 2036-2040 | |
Industrial processes: | |||
Total benefits | 41 | 41 | 41 |
Total costs | 1,114 | 1,492 | 2,538 |
Non-residential buildings: | |||
Total benefits | 0 | 0 | 0 |
Total costs | 162 | 1,674 | 1,607 |
Source: Scottish Government, draft CCP
The financial benefits under industrial processes are described as, “financial benefits to industry from improved energy and resource efficiency”. The costs relate to up front investment in “new climate friendly technologies”.
Regarding non-residential buildings, it is worth noting that the financial benefits from potentially reduced running costs of low carbon heating systems have not been quantified, due to “difficulties with predicting future energy prices”.
It is difficult to assess why financial costs from non-residential buildings policies rise so quickly after the first carbon budget period because costs are not broken down by individual policy. However, the CCP does state that costs associated with reform of Energy Performance Certificates are only included in the second and third carbon budgets.
The impact of recent announcements
Following publication of the draft CCP, ExxonMobil announced its intention to close its ethylene plant in Mossmorran and Storegga announced its intention to sell its stake in Project Acorn. It is not clear what impact these announcements will have on the viability of Project Acorn or on the Business and Industry chapter of the CCP.
What happens next?
Parliament’s Economy and Fair Work Committee will scrutinise the Business and Industry chapter of the CCP. The Committee will write to the Net Zero, Energy and Transport Committee following the conclusion of evidence sessions to be held in January. Industry leaders, trade unions and academic experts are amongst those expected to give evidence.
Rob Watts, Financial Scrutiny Unit, SPICe