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How can carbon pricing help achieve Scotland’s 2045 targets?
Achieving Scotland’s target of net zero greenhouse gas emissions by 2045 will require significant emissions reductions across all sectors of the economy. Road transport and building heating remain among the most challenging sectors to decarbonise, despite progress elsewhere. Carbon pricing is a mechanism that can incentivise emissions reductions by increasing the cost of carbon-intensive fuels and encouraging the uptake of lower-carbon alternatives.
This research explores the potential role that carbon pricing instruments could play in reducing emissions from Scotland’s transport and building heating sectors. It reviews evidence on the effectiveness of carbon pricing and models the potential impacts of different carbon pricing scenarios in Scotland. The analysis is intended to provide early-stage evidence to inform future discussion and does not contain or assess policy proposals.
Key findings
- The literature indicates that carbon pricing can contribute to emissions reductions in transport and building heating, but the impact tends to be uncertain and relatively modest.
- Carbon pricing could reduce emissions by an additional 2.9–11 MtCO₂ between 2027 and 2045, with higher carbon tax producing the largest emissions reductions.
- Most emissions savings arise from reduced fuel use, particularly in buildings, rather than large-scale switching to electric vehicles or heat pumps.
- Carbon pricing could result in additional direct costs to Scottish consumers of between £1 billion and £8 billion between 2027 and 2045, primarily through higher fossil fuel prices.
- The average additional cost to households is relatively modest, estimated at £29–£172 per year.
- Lower-income households are more affected, with costs representing up to 1.4% of median income for the lowest-income groups.
- The disproportionate impact on low-income consumers can be alleviated through revenue recycling, which should be further investigated as a next step.
For further information, please read the full report.
If you require the report in an alternative format, such as a Word document, please contact info@climatexchange.org.uk or 0131 651 4783.