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Chamber and committees

Net Zero, Energy and Transport Committee

Meeting date: Tuesday, September 27, 2022

Agenda: Decision on Taking Business in Private, Role of Local Government in Delivering Net Zero, Programme for Government


Contents


Programme for Government

The Convener

Welcome back. We move on to the programme for government 2022-23, which was published on 6 September. It sets out the actions that the Government states that it will be taking in the coming year, including its legislative programme.

Cabinet secretary, thank you for staying with us for this evidence session. We look forward to discussing the programme with you and your priorities for the Parliament this year. I welcome your Scottish Government officials: Donald Henderson, deputy director of natural resources; Anne Martin, head of transport strategy and co-ordination; David Pratt, head of marine planning and development; and Philip Raines, the deputy director of domestic climate change, who has stayed with us.

We have just over an hour for this item. Cabinet secretary, I know that you are keen to press on with the questions, but I am happy to give you time for a short opening statement.

Michael Matheson

Thank you, convener. This programme for government is set against the backdrop of a cost crisis and is focused on providing help now as well as continuing to build a wealthier, fairer and greener country.

In my portfolio, that has been approached on a number of fronts. On energy, we continue to invest and extend eligibility for the warmer homes Scotland programme to support households’ lower energy costs and help tackle the climate crisis. We are launching the £25 million Clyde mission decarbonisation fund to support zero-emission heat projects. We have published an energy strategy and a just transition plan to guide our path to net zero. The strategy will set out our continued support for the energy sector and plans to maintain Scotland’s position as one of the most advanced nations in the world in the development of wave, wind and tidal technologies. I am determined that we take full advantage of our natural assets and support our burgeoning industries in those sectors.

The scale of our onshore and offshore wind capacity also gives us huge potential in green hydrogen. In the coming months, we will publish our hydrogen action plan, backed by £100 million of capital funding.

The effect of the global climate crisis on nature is also a key feature and builds on the programme that we set out within our Bute house commitments to deliver on Scotland’s climate and nature ambitions. Climate actions range from record investment in active travel, to providing £50 million of funding over the next four years as we move forward with our just transition fund.

To address the nature crisis, we will publish our biodiversity strategy, take steps to meet our commitment on highly protected marine areas and consult on fisheries management measures. We will start the process of developing a new national marine plan, continue work to identify the location of a new national park and develop a land reform bill. We will enhance the forestry grant scheme and introduce a wildlife management bill for grouse. We will introduce a circular economy bill and publish our new national litter and fly-tipping strategy for Scotland later this year. In August next year, we will launch our deposit return scheme, the first of its kind in the UK, which will cut carbon, increase recycling and reduce litter.

On transport, ScotRail fares will be frozen until March 2023 and we will complete the fair fares review, delivering options for a sustainable and integrated approach to all public transport fares. We will also support the continued delivery of free bus travel for those under 22 and over 60, which covers almost half of the population. We will invest in vital improvements in our ferry services and consult on our islands connectivity plan. We will deliver record investment in active travel to continue to support new routes for walking, wheeling and cycling.

Convener, I am of course more than happy to respond to any questions that the committee may have.

The Convener

Thank you very much, cabinet secretary. I will enjoy this session, because the committee and you have such a wide remit. There will have to be a certain amount of mental agility from you and from committee members. I look forward to that. The first questions will come from Monica Lennon.

Monica Lennon

My first question will be about rail, just to give you get a heads-up on the topic. The Government has announced a freeze on ScotRail fares—you told us that—until March 2023. Normally, ScotRail fares increase annually in January. I know that the franchise has been under public ownership since April this year. Can you give a precise date for how long the freeze will last? The fares are not due to increase until January next year anyway. Does that mean that the freeze period itself is rather short? Is there on-going discussion in the wider work on the fair fares review to extend the freeze beyond March 2023?

Michael Matheson

In short, yes. Presently, the freeze is until March 2023 and part of our work on the fair fares review is looking at where we go with that. For example, in January 2023, the fares would have gone up based on July’s retail prices index, which was 12.3 per cent for regulated fares. That rise is clearly not sustainable and we are not taking it forward. We are presently undertaking work on where we go with the fare freeze.

11:00  

We have to keep it in mind that when you freeze fares you create a revenue gap on the rail network that has to be met. The fair fares review and also the work that is being taken forward by the finance secretary for the next financial year is all part of looking at what we should do to help make sure that we minimise the potential increase in any fares.

Instead of a fare freeze that could last between six and eight weeks, could we see a longer freeze period that people could benefit from?

We are looking at whether it would go beyond that time. Part of that would be into any financial settlement for the next financial year, which starts in April next year, which is why it goes up to March 2023.

Monica Lennon

Can you give a date for when the fair fares review will be completed? Also, what is the current thinking around peak time fares? I know that a petition to abolish peak time fares is sitting with the Citizen Participation and Public Petitions Committee. Have you looked at that as part of this review, or is more urgent action needed, given that we are not getting enough people out of cars and on to trains, as we need to do?

Michael Matheson

We have seen recovery in real patronage, although not to the levels that we want. That has been affected by industrial action. I do not know whether Anne Martin can say a bit more about the process of the fair fares review. I am not entirely sure exactly what has happened to that petition but drawing it up into the fair fares review would seem to be the most appropriate way to deal with it. Anne Martin may be able to say a bit more about how we take forward the fair fares review and what its timescale is.

Great. Thank you.

Anne Martin (Scottish Government)

The fair fares review is looking to ensure a sustainable and integrated approach to public transport fares, so we are looking at all the various fares across the various public modes. It includes consideration of the increasing inflationary pressures and the cost of living crisis. We are considering the availability of services, the range of discounts available and the concessionary schemes. We will develop and assess options and we will also work with local authorities and delivery partners to develop demonstration projects to introduce measures that encourage more people to use public transport and to walk and cycle locally as part of this cohesive programme. We hope that the full review will conclude sometime in early 2023, but there is no set date yet and it will depend on the evidence that we gather as part of the actual review.

Thank you. That was helpful.

Fiona Hyslop

Can the cabinet secretary explain the rationale and also the timing of the commitment to enhance the forestry grant scheme to deliver improved outcomes? What will those outcomes be? Will that address the serious concerns that people have about large-scale investors buying significant land for forestry and getting the benefit of carbon offsetting at the same time as they are paid by the public purse for forestry, as well as address the issues around good farmland being sold increasingly off-market, when combined forestry and farming may be a better solution?

Michael Matheson

We are moving across to forestry. You will be aware that we are reforming the forestry grant scheme to help to deliver our woodland creation targets. That is in part to make sure that the scheme delivers better public value and also helps to support our biodiversity strategy and our community wealth-building programmes. We are also looking to make sure that the scheme is more aligned with helping farmers to understand the benefits that they would gain from growing trees and supporting their farming business—we want to assist them in recognising the value that using part of their farmland for forestry may have to them as a business. Doing that will also help us to achieve our biodiversity and woodland creation targets.

In our land reform bill, we will propose reforms that will hopefully help to address some of the issues that you have highlighted. Overall, on the forestry side, we are trying to take an approach that makes it attractive to farmers and aligns more with their own thinking and helps to support them as businesses in taking forward any forestry support grant that they are provided with.

Donald Henderson might be able to say a bit more about the use of land and how that can be developed to help to support some of our nature-based solutions and tackle biodiversity loss. He may also be able to say a bit more about the forestry grant.

Donald Henderson (Scottish Government)

I could perhaps helpfully add a couple of things. On the use of land, although there is forestry and woodland planting on better quality land, the majority of it is on land that is not high-grade agricultural land, so the substitution effect is less than you might think if you look only at the hectarage involved. About half of the woodland grants have been for quite small plantations.

The cabinet secretary mentioned activity that can benefit farmers. An example of that would be the gullies in upland country where streams run down. That is not good land for agricultural purposes but can be very good land for forestry—native forestry in particular—and for improving biodiversity. Indeed, in some areas, such planting can improve water retention in the landscape and help towards flood management. A wide diversity of approaches are being taken, recognising the different land that is involved in the different parts of the country to try to tune it.

For our interest, do you know when the revised grant scheme will be delivered?

Donald Henderson

I do not have that to hand, I am afraid. It is not my area within the directorate.

We will be happy to come back to the committee to give you some more specifics on the timeframe.

The Convener

Thanks, cabinet secretary. I have a couple of quick questions on forestry. I remind the committee that I own part of a family farming partnership, farming barley and cattle, but very few trees.

The Scottish Government set planting targets in 2016 up to the current day and they are increasing. We failed to plant 10,000 hectares in the period 2016 to 2022. In fact, we were nearly 3,000 hectares below the target for 2021-22. Is there not a real need for a new forestry grant scheme to make up the deficit and to make sure that we do not fall further behind the targets, which are increasing year on year from last year, cabinet secretary?

Michael Matheson

Part of the reform of the grant scheme is about that. It is about trying to help to make it more of an attractive proposition, particularly for farmers who might be considering the possibility of using existing farmland for forestry purposes.

We agree that there is a need for it. I was concerned that Donald Henderson said to the committee just now that he did not have a timescale for it. I am trying to push you on the timescale.

I will have to come back to the committee on the specific timescale. I do not have that to hand.

I will push. Mark Ruskell will ask the next question and I may follow up on that. Do you want to ask your question on this subject and I will follow up on that, if I may?

My question is in this general area. Cabinet secretary, what will be in the wildlife management (grouse) bill and what is the scope of the bill?

Michael Matheson

The details of the bill are still to be published and I do not want to pre-empt what must be agreed through Government and published. However, grouse management is a key aspect of the bill, as is how to balance it with biodiversity challenges. I hope that it will help to provide a more modern framework for grouse management and how that balances with the need to tackle biodiversity loss.

Will the bill include reforms to the powers of the Scottish Society for Prevention of Cruelty to Animals, which are currently restricted to domestic animals rather than wildlife?

Michael Matheson

You will need to wait to see what is in the draft bill. I will not pre-empt it. We also need to make sure that when we provide any additional powers, particularly regulatory powers like this, to third-party bodies that we are satisfied that there is the appropriate regulatory function for managing that. For example, powers that are exercised by the police have a stringent range of challenges around them if they are seen to be inappropriately used and so on, in a way that the SSPCA’s powers may not have.

I hope that once you have seen the bill, you will be in a position where you can determine whether the powers that we provide are sufficient or not. We also need to be mindful of the regulatory aspect of providing any additional powers to a third-party body.

Mark Ruskell

I will ask an additional question about highly protected marine areas, if I may. It is good to see those mentioned in this one-year PFG. Can you detail what exactly will happen to develop such areas in the next 12 months? There is quite a timescale here, out to 2026. I imagine a lot of stakeholder negotiations and discussions are needed and a lot of lines on maps. It would be good to know what is happening in the next year.

Yes. I will ask David Pratt to come in. He will give you a bit more detail on how we will take that forward.

David Pratt (Scottish Government)

The standard processes will be followed, which requires strategic environmental assessment, relative socioeconomic assessments and other related assessments that will seek to inform the network. We can get you a written update on the actual process breakdown. In effect, it is much like the planning process for offshore wind, when we look to designate spatial areas for the activity; there will be all the related assessment and consultation. Obviously, stakeholder groups with all the affected stakeholders will be involved through that and with that screening and scoping generally. Those are the key initial stages that you would expect in the first 12 months.

Natalie Don

The public consultation on “Land Reform in a Net Zero Nation” closes on 30 October but I understand that that has recently been extended by five weeks. What has the response rate to the consultation been like to date?

Michael Matheson

Six public events took place over the course of August. Five of them were in person and one was virtual. I do not know the exact details of the number of responses that we have had, but we received representation looking to extend the consultation period for an additional amount of time to allow other stakeholders to engage in that process, which is why we agreed to an extension of the timeframe.

I am more than happy to ask officials to provide an update on the quantity of feedback that we have received so far and pass that on to the committee, if that would be useful.

Natalie Don

That would be fantastic. Thank you. I was going to ask why the consultation has been extended, but you covered that in your response.

Can you confirm whether there will be a knock-on effect on the timing for introducing the proposed legislation, which I believe is to be introduced before the end of 2023?

Michael Matheson

No. The extension will not have any impact on the timeframe. It will allow stakeholders a bit more time to make their submissions and representations, but it will not have any material impact on the planned timeline for the legislation.

Okay, fantastic. Thank you.

Liam Kerr

I want to ask a few questions about fisheries and marine issues. Fishing industry representatives such as the Scottish Fishermen’s Federation have expressed concern about spatial squeeze in Scotland’s waters due to expanding marine renewables and conservation measures. The current national marine plan has not been updated since 2015. Although the programme for government says that a new one will be developed, we do not yet know what its status is. Given the climate emergency, new developments such ScotWind and general competition for marine space, when will the plan be updated?

11:15  

Michael Matheson

I recognise the challenges that some people in our fishing communities face. Marine protected areas, highly protected marine areas, renewables and offshore oil and gas all impact on fishing communities and fishing grounds, which is in addition to the challenges that they have around accessing certain fish. It is important that, as we move forward with the development of the marine plan, we fully engage them in that process. You will recognise that we must manage a lot of competing interests, but their concerns and the issues that they have must be a central part of our consideration.

I will ask David Pratt to say a bit more about how we will take forward the marine plan, but there is no doubt in my mind that we must ensure that our fishing communities are a key part of how we consult and engage in that process, given the many competing challenges that we face in our marine sector.

David Pratt

Spatial squeeze is reflective of the general issue of prioritisation. One of our big challenges with the current national marine plan is that, since we developed it, we have seen an acceleration in activities that relate to a number of the priorities. The biodiversity crisis, the drive for net zero and the offshore wind programme have contributed to the need to set a clear framework on decision making so that all relevant stakeholders understand the marine management policies.

We hope to take forward the national marine plan as fast as possible. We are aware that big decisions will be required in line with the ScotWind development programme and that stakeholders will need to have a clear idea of how they operate in that system. I expect that, in the coming weeks, we will set out a statement of public participation that will provide a breakdown on the process and timeline that will be followed.

Liam Kerr

I am grateful. Cabinet secretary, you mentioned highly protected marine areas in your answer. Last year’s programme for government said that it would establish

“a world-leading suite of Highly Protected Marine Areas”,

which would eventually cover 10 per cent of Scotland’s seas. I believe that, to date, none has been established. Why is that, and what progress can we expect imminently?

Michael Matheson

Some of the progress that we wanted to make during last year was not possible. We are looking to do that as part of a whole range of other requirements. For example, more issues arose from ScotWind than had been originally expected, which meant that additional resources had to be deployed from Marine Scotland to deal with that. It is clear that highly protected marine areas will be one of the key aspects of protecting our marine environment, which has an important part to play in tackling climate change and biodiversity loss. I hope that the work that could not be taken forward last year can be taken forward in the coming year.

I want to come back to your point about the marine plan and to offer you some reassurance. When we were progressing our sectoral marine plan for offshore wind energy—that piece of work, which took place over a two-year period, predates my current ministerial role—there was extensive engagement with fishing communities and stakeholders. I hope that, given our track record in taking forward that plan, fishing communities can be reassured that we will look to undertake a similar level of engagement with them in the process.

As I said, the work that we had hoped and planned to take forward last year will be done in the coming year as we progress our work on highly protected marine areas.

Liam Kerr

I am grateful. The Scottish Government is making decisions on management of Scotland’s fisheries, but it has yet to provide a response to the Environment, Climate Change and Land Reform Committee inquiry’s report from December 2020 on exactly that issue. Cabinet secretary, why has that response not been published when Scotland’s fishing industry needs confidence that livelihoods are being managed? When will it be published?

Michael Matheson

If I recall correctly, the challenge around that is that we had intended to respond to the committee’s report with our work on developing a new marine plan. That work was paused and delayed, which meant that we were not able to provide a full response. I am more than happy to ensure that we look at providing that response as part of our work to develop the new marine plan.

I am grateful. I have no further questions.

Jackie Dunbar

The programme for government includes a commitment to consult on a new flooding strategy for Scotland. Will the cabinet secretary provide more details on that commitment? How will that improve resilience in relation to the impacts of climate change?

Michael Matheson

As part of climate adaptation, there is a need for better planning and management around flooding. We can see that that is increasingly becoming a challenge for some local authority areas. Part of the challenge to date is that flood management has often been focused on a particular flooding event. A key part of what we are looking to do with the revision of the strategy—or with the plan around the strategy—is to take a much more holistic approach in dealing with flood management, so that we look at the wider issues that impact on and cause flooding, rather than just at individual instances and events. That is why we are taking this piece of work forward, which will be in partnership with local authorities and other stakeholders, including the Scottish Environment Protection Agency, which all have a part to play in tackling that increasing problem.

The other part to this is how flooding occurs. There are now many more localised intense weather events that last short periods. Those events often overwhelm the existing flood management infrastructure. That is why we must look at some of the wider measures that need to be put in place around that. We intend to achieve that through our work on how we can better develop flood planning with stakeholders.

Jackie Dunbar

Okay. With this summer’s high temperatures, we saw water scarcity in some parts of Scotland. Are you able to provide an update on Scotland’s water levels, and on how you are working with SEPA to help to improve resilience to water scarcity?

Michael Matheson

Sure. We had a period when we had some water scarcity issues on a number of watercourses in Fife and in the south of Scotland. Presently, we have a single watercourse with a scarcity warning—the River Enrick is at a lower level. The others are no longer at levels that are of concern. If I recall correctly, people who have abstractors on the Enrick route already have in place a process to manage abstraction levels, so no orders have been made to tackle that issue at this stage.

I have found in my notes the other rivers that were affected. The Eden, the Tyne and the Tweed reached levels of significant scarcity due to the dry conditions, which resulted in the national water scarcity plan being activated. That meant that, for the first time in Scotland, abstraction licences had to be suspended, given the seriousness of the situation. As I said, only the River Enrick catchment area has a level of significant scarcity and arrangements are in place to manage that. The rest of the rivers are at levels of moderate scarcity or better.

The Convener

Thanks, cabinet secretary. I have a quick question on that. I have declared that I have interests on the Spey. If we look across the Highlands, we have rivers such as the Farrar, which is used for generation. All the burns at the top end of it are drained off into Loch Monar. However, there is no water; those are dried up. The Brora takes water from other rivers. Some 40 per cent of the Spey’s water flow above Aviemore goes to the Tay and down to Lochaber. Those are almost intercatchment transfers of water.

It has been feast or famine this summer. Should SEPA look at catchment transfers of water, and at whether those are denuding the catchments from where the water is taken?

Michael Matheson

We will be taking forward a piece of work to look at how we can better manage where scarcity issues arise. We have the framework in place, but we will consider whether there are ways that we can better manage that.

One of the issues that we want to look at is whether abstractors could be more efficient in their use of abstraction from river basins. I will give an example. A soft fruit business will probably have a trickle system, whereas a vegetable business will need a much greater quantity of water. The type of soil might require that they do that to a routine. I might be wrong, but I think that the volumes that they bring works to a cycle.

Soft fruit operators are much more efficient in how they use water abstraction than some other operators are. One of the areas that SEPA wants to look at is whether there are ways in which we could become much more efficient, including whether there is a better way in which we could manage the abstraction process when levels start to reduce to a slightly lower level.

On the transferring of water, I am not sure about the technical aspects of that or about whether SEPA would have to consider issues around the environmental impact of that. We are taking forward working to ensure that, when levels drop to certain levels, we are getting greater efficiency from abstraction and looking to minimise the amount that abstractors have to take at particular points.

The Convener

I think that intercatchment transfers mainly date from 1950s legislation, so they are perhaps not relevant in 2022. That is not a great approach to take in terms of biodiversity and disease transfer. I am delighted to hear that you are looking at it.

Liam Kerr

Jackie Dunbar asked a question on flooding. I expect that you will have seen The Courier yesterday. It has a good report on coastal erosion and flooding. For years, I have raised that issue. I have also raised the issue of the impact of the policy of managed retreat, especially around Montrose, and some possible solutions that the local community proposes, such as having a sand engine.

Cabinet secretary, you talked about taking a holistic approach in your response to Jackie Dunbar. Is the intention to create a one-size-fits-all approach towards coastal erosion, or can we expect a bespoke approach to be taken for places that need urgent attention such as Montrose?

Michael Matheson

You might be aware that I visited Montrose last year when we were publishing our coastal erosion plan. You cannot take a one-size-fits-all approach. We now have much better data and understanding of where coastal erosion is taking place in Scotland. As part of the plan, we published a map of coastal erosion, so that we know where the particular challenges are. Montrose is a clear example of that. Some of the measures that have been put in there previously have had a positive impact; some have not been so positive.

You cannot take a one-size-fits-all approach in tackling coastal erosion. It must be based on what the local circumstances are and what the local environment is like. Some of the work around the coastal erosion planning was to make sure that we were taking a bespoke approach to how we meet some of those challenges.

I am grateful.

Monica Lennon

I want to reflect on the recent refuse worker strikes, which laid bare the amount of single-use waste that we generate in our towns and cities. We know that household recycling rates have declined in recent years. How will the Scottish Government’s forthcoming circular economy bill and deposit return scheme seek to improve recycling and reduce reliance on single-use products?

Michael Matheson

Through a combination of the bill proposals and our waste route map consultation, which closed just last month, we have set out some of the measures that we look to take forward to tackle the issue that Ms Lennon has raised. Those look at how we can transition much more effectively to a circular economy, how to increase reuse and recycling rates and how to modernise and improve the way in which waste and recycling services are provided.

Our approach will be a combination of the route map, which we will take forward with local authorities to help to drive forward improvements in waste management and recycling, and the circular economy bill, through which we will look at putting in place statutory provisions on targets and approaches that should be taken to help to reduce waste and increase recycling rates.

11:30  

Monica Lennon

Do you have any thoughts and ideas on the procurement aspect? I touched on the opportunity to align with community wealth building strategies, but we have also heard a lot in the committee’s inquiry on local government about the need to do procurement better and to ensure that it is net zero focused. Are there any opportunities in the work on the circular economy legislation and the deposit return scheme that could help with that agenda?

Michael Matheson

There is a requirement on local authorities, as part of the procurement process, to consider how they can ensure that they are taking an approach that is in line with our net zero ambitions and the requirements on them to meet net zero. Can we try to do more? I see companies becoming increasingly mindful in recognising their carbon footprint or contribution to tackling climate change. Some of that is feeding through into the procurement process, in which they are highlighting that they can do things much more efficiently and effectively. However, procurement has an important part to play in helping to encourage more of that, and local authorities, particularly in relation to their contracts, have an important role in helping to ensure that that happens.

I am not sure whether we make specific requirements on procurement as part of the circular economy bill as it is proposed at the moment, but I am more than happy to check that.

Monica Lennon

That would be helpful, because the committee will have a big interest in that bill, as the lead committee on it. There will, no doubt, be amendments, so it would be good to have such discussions early on.

We have talked a lot about waste, but in a previous session we talked about environmental crime and particularly fly-tipping, which happens on an industrial scale. I know that the Government is considering a new litter and fly-tipping strategy. Will that be sufficient to discourage and prevent waste crime, or is the Government considering other measures?

Michael Matheson

There are different levels of waste crime. There are the folk who undertake fly-tipping, and there are those who are involved in waste management activities that might be a cover for other criminal activity. When I was Cabinet Secretary for Justice, Police Scotland and our enforcement agencies carried out a lot of work on the involvement of serious and organised crime in waste management. That is not to say that there is a big issue in the sector, but some activities were suspected and investigated. There is a wider enforcement issue that is important in tackling serious and organised crime.

We aim to set out a range of commitments in the strategy to deliver on the policy. The strategy has three key themes or components, which are behaviour change, services and infrastructure, and enforcement. We seek to address the enforcement aspect that you mentioned, but also to change people’s behaviour, such as fly-tipping. The intention is that the strategy will have a six-year lifespan, with actions that will be rolled out and taken forward as part of the strategy over a two-year, four-year and six-year period. We will then assess that after the completion of the six-year period.

Monica Lennon

I have a final brief question. You have reminded us of your previous role in justice, which is helpful to you with your current responsibilities. Thinking about the most extreme examples where serious and organised crime plays a part, is the Government aware of the international movement and campaign on criminalising ecocide? That was discussed in New York recently, and the minister Màiri McAllan has been over there. Is the Government open minded about whether we should criminalise ecocide in Scotland?

Michael Matheson

I am aware of that issue and the international movement on it. The reality is that any criminalisation is a justice matter, rather than being for my portfolio. I am not aware whether justice colleagues are pursuing the issue, but I can get back to the committee to say whether they are considering it. I am certainly aware of the issue and the international campaign on it.

Great. I have had written answers on the issue from Màiri McAllan, who directly reports to you, cabinet secretary, but it is good to know who in Government is best to speak to.

Fiona Hyslop

I want to move on to the much-anticipated energy strategy. Will you give us an update on the timing of the publication of the energy strategy and the associated energy just transition plan? What impact has the energy price crisis had on that? What are your views on the UK Government’s announcements on reserved energy matters and on the implications for Scotland’s future economic and energy strategy?

Michael Matheson

The work on our energy strategy refresh and just transition plan has already started and will be published by the end of this year. Some of the documentation and consultation processes have already started to be put in place, and the draft strategy will be published by the end of this year. We have already had engagement with some stakeholders to help to shape that work.

It will be a whole-system approach, looking at every aspect of the system over the years ahead and how we can maximise economic benefits to Scotland in delivering energy decarbonisation. Of course, there will also be the first of our just transition plans, which will be energy specific and will sit alongside the strategy. Engagement work on that has already started with key stakeholders to inform the process.

The current energy price crisis predates the illegal invasion of Ukraine. It began when the economy started opening up last year, when demand increased to a level that started to push up wholesale gas prices internationally. The issue intensified and became even more acute with the illegal invasion of and war in Ukraine. The reality is that, given the way in which wholesale gas prices are set, there is very little that any individual country can do to offset the issue by increasing its gas output.

As things stand, the North Sea Transition Authority says that everything in the North Sea is at capacity—there is nothing spare. To bring anything online will take years. Will it have an impact on wholesale gas prices? No, because the wholesale gas price is set at international level. While the market remains tight and demand remains high, the issue will continue, no matter what. We do not have sufficient supplies to alter the situation—that view is widely held and recognised as being the case.

How do we reduce dependency on fossil fuels such as gas? How do we reduce the risk in that regard, given the international forces that set the price? The way to do that is to decarbonise at a faster rate, and that is about rolling out renewables much more quickly and reducing our dependency on fuels for which the price is set at an international level. Making ourselves more dependent on renewable energy will help to give us energy security and to reduce the cost, because it is a cheaper form of energy production.

I agree with the view of the then UK Government energy secretary, Kwasi Kwarteng, who is now the Chancellor of the Exchequer, who said that the answer is faster decarbonisation of our energy system. That remains the case, and that is the way to address the issue.

On the reserved issues and the announcement of a new licensing round for offshore oil and gas in the UK sector, my challenge—the UK Government disputes this—is that, although the measure is presented as being necessary to address energy security and high energy prices, it will not have an impact on either of those, because of the timeline. The Climate Change Committee has said that the average time that it takes to go from an exploration licence to a production licence is about 28 years, so that approach will not help with energy costs now or in the near future. At the same time, it is producing a form of energy where the price is set at an international level.

Therefore, faster decarbonisation is the answer, and the quickest way to do that is through renewables. Onshore and offshore wind is the fastest way to deploy renewable generation across the UK and across Europe as a whole. Scotland is blessed by having some fantastic natural resources to be able to do that, to help to decarbonise not just Scotland and the rest of the UK but potentially other parts of Europe, through the export opportunities.

There needs to be a clearer focus on the ramping up and roll-out of renewable energy as the way to tackle the cost of energy and to deliver energy security in future.

Fiona Hyslop

I want to look at how we get the economic benefits from renewables. I agree with the comments that you have just made, cabinet secretary, but the oil and gas sector has said to us that, if it is to invest in upskilling and reskilling its staff to move into renewables, it needs certainty on renewables and what is likely to come down the track. That is what it is looking for from the energy strategy. Given that some of that work might not come on stream for maybe five years, how can we help support the transition? Will the whole-system approach that you have said that you are taking to the energy strategy make it clear how the economic opportunity for Scotland will be realised for manufacturing and, in particular, for the skill base?

Michael Matheson

Our intention in the strategy is to give certainty and a very clear sense of direction and to show how we are moving forward. That is why we are taking a whole-system approach. The strategy will look at our need for oil and gas in the future, too, as that will continue to be the case for many years to come. However, although the oil and gas sector will play an important part in our energy mix, that does not mean that we should not be looking to decarbonise our energy systems. The two things go hand in hand. In that sense, and from my perspective as I move forward in this policy area, they are not in competition.

The key question is how Scotland gets the economic benefits. One thing that we cannot be—and which we cannot allow ourselves to be—is purely a production basin. We cannot be a place where energy is produced and then literally flows by our door, and we see no economic and social benefits from it. Therefore, we need to take an approach that helps secure the manufacturing and expertise that goes alongside the energy transition, whether it be in offshore or onshore wind. We lost a big opportunity in onshore wind through changes made back in the 1980s and 1990s—way before I was involved directly in politics—that countries such as Denmark were able to capitalise on. Of course, those countries are now world leaders in the development of onshore—and, to some degree, offshore—wind technologies.

That said, given the scale of the opportunity that we have in Scotland, we need to be able to create a pathway that gives industry confidence that there will be projects not just this year, next year or the year after but for many years to come and that it is worth investing in the manufacturing capability here in Scotland, because it can not only meet demand in Scotland and the UK but potentially export to other parts of the world.

More than half—actually, about two-thirds—of ScotWind projects use floating wind technology, but the sector itself has not yet settled on what the floating wind technology of the future will be. Many countries—for example, Norway and the USA—will have to look at floating wind technology, but with ScotWind, we have the advantage of being ahead. We have lease agreements in place so that we can be at the forefront not just in developing that technology but potentially in manufacturing it here for export to other countries. That is one of the advantages that we have with ScotWind and where we are in comparison with other countries. As I have said, we are ahead of Norway and the USA in this technology, and we need to capitalise on that.

As a result, our manufacturing capability and the pipeline of opportunity for developments in Scotland alone are critical to ensuring that we do not simply become a production basin and that we get the benefit of delivering these things. A key part of facilitating that will be the creation of the skills reservoir, which will be necessary in all this. Again, our oil and gas sector is a strength to us in that respect, because a lot of the sector’s technical skills and knowledge can be used in renewables, too.

11:45  

I see the convener indicating that I should hurry up, but I just want to say that, later this month or next month, I will be hosting an event on the whole issue of skills transfer. There are certain issues with transferring some skill qualifications from the oil and gas sector into the renewables sector as well as other regulatory issues to consider, and we will be looking at some of those matters to ensure that those who want to transfer can do so and know what skills will be needed, too.

The Convener

You drew attention to my trying to hurry you up, cabinet secretary. I was trying to do it subtly, but I obviously failed.

I will bring in Jackie Dunbar and then Liam Kerr, after which I will come back to Fiona Hyslop for any follow-up questions.

If you do not mind, convener, I want to go back Fiona Hyslop’s first question. Cabinet secretary, are you able to provide an update on the Scottish Government’s work on carbon capture and storage?

Michael Matheson

Carbon capture and storage and negative emission technologies will be mission critical to delivering our climate change targets. That is not just my view—it is the view of the Committee on Climate Change, who are expert independent advisers on these matters. Indeed, such approaches will be critical not just to Scotland but to the whole of the UK. For the whole of the UK to achieve the UK Government’s target of net zero by 2050, it will need negative emission technologies such as carbon capture, utilisation and storage.

The Scottish cluster lost out on track 1 status, and we have continued to make representations to the UK Government on reversing that decision, simply because the UK Government’s own net zero strategy and carbon capture targets cannot be achieved without the Scottish cluster in the mix. We need to move forward with carbon capture, because it represents an important opportunity for us here to meet not just our climate targets but our energy transition, too.

As I have said, we continue to engage with the UK Government on this matter. It had been planning a track 2 process possibly this year, but perhaps into next; however, there have been ministerial changes and I do not know whether that timeline has changed.

Just last month, I met Scottish cluster representatives at St Fergus. What we need to understand is that not only is this approach mission critical, it is costing a lot of money to keep the partners together, and unless there is a very clear indication that this work will materialise soon, it will become increasingly difficult to make that happen. That is what worries me the most, and it is why we have offered £80 million of financial support. However, we need to get the regulatory agreement for it to move forward. The danger is that we lose the opportunity and the time slot to keep the partners together and ensure that we deliver on the Scottish cluster.

There is unanimous agreement on this matter across the Scottish Parliament; indeed, I know that Liam Kerr is a supporter of the Scottish cluster. We all want to see it happen but it needs to happen sooner rather than later, because it is costing money. The longer the process takes, the more difficult it will be to hold the partners together in order to make this a success.

I call Liam Kerr.

Liam Kerr

I will be very brief. The three new ScotWind developments in Shetland that were announced last month will reportedly raise £56 million in option fees. As you will know, ScotWind money is key to just transition and the skills transfer that you have mentioned, but in the public sector pay and emergency budget review, the Deputy First Minister specifically said that he would take £56 million generated by ScotWind to plug holes in budgets elsewhere. What impact do you envisage taking that £56 million will have on just transition and developing the pathway and skills that you have just talked to the deputy convener about?

Michael Matheson

It will not have an immediate impact, because the money was not ring fenced specifically for that purpose, and the Deputy First Minister also said that the money would be returned to the ScotWind pot in the next couple of years when the finances allowed for it.

However, the decision is a recognition of the very serious and difficult financial circumstances that we are facing. The Deputy First Minister took the decision on the basis of the financial pressures that we are facing, but he also committed to returning that money in the years ahead as we look to use the ScotWind investment not just for just transition but to support us in meeting our climate change targets. Indeed—and this brings me back to the inquiry that you have been holding over the past year—it will also be for effecting these things at a local level and for supporting our local authority colleagues and partners in meeting their climate change obligations. In short, the decision is a reflection of the challenging financial environment in which we are operating.

Thank you.

The Convener

Can I push you a little bit on that, cabinet secretary? I think that £750 million was generated in the option agreement for ScotWind. If only 9 per cent remains with the Crown Estate, because the money is classed as revenue rather than capital, it still gives you just shy of £700 million. Are you saying that all of that £700 million will be kept in the pot to help with transition?

Michael Matheson

The way in which offshore wind lease options operate is that, if a development is within 12km of a local authority area, the revenue generated from that lease option goes to that local authority. The difference with ScotWind is that many of the developments are beyond that point, so the money will go into what is intended to be a central fund, and we want to work with local authorities and use that money to support them in achieving their climate change objectives. That is the purpose behind what we are trying to achieve with ScotWind; we want to ensure that it provides a wider community benefit right across the country.

Will 9 per cent remain with the Crown Estate as per the agreement?

Michael Matheson

I am not entirely sure where that stands with regard to the emergency budget review. However, what comes into ScotWind might well be way in excess of what the Crown Estate had been expecting and it might well be that the level that you have indicated is not necessary.

The Convener

Thank you. It is good that the money is classed as revenue, not capital, because if it had been capital, it would, under the agreement, have all had to stay with the Crown Estate.

We will park that issue there. I think that Mark Ruskell has some questions.

Mark Ruskell

The session has been really interesting. There is definitely a sense of a pipeline of opportunities for renewables.

Coming back to public transport, I note in the PFG a range of commitments, including reinforcing the roll-out of free bus travel for the under-22s. Can you say a bit more about the Government’s vision for buses? How does it cut across your work on capital investment, concessionary travel or better regulation or opportunities for local authorities to regulate bus travel? People have written to me to say that although free bus travel for the under-22s is great, there are still issues with the reliability of local bus services, and they are frustrated about how bus services are being run and the quality of service. What is the Government’s vision for bus services, particularly the work that will be taking place in the next year beyond concessionary travel?

Michael Matheson

The importance of buses in tackling some of the challenges that we face in getting folk to move to public transport is often underestimated. After all, 80 per cent of public transport journeys are by bus, and buses play a huge role in getting folk out. That said, I recognise the challenges that communities face; indeed, I suspect that we all have the same challenges in our communities with regard to the quality of bus services, services being withdrawn and so on. I certainly have those challenges in my own constituency.

We want our bus services to be sustainable. One of the provisions in the Transport (Scotland) Act 2019, which the convener will be very familiar with, was a suite of options for local authorities to play a more effective regulatory role in managing and delivering bus services, whether that be through bus improvement partnerships, running bus services on their own or a franchise model. I sense that a number of local authorities are looking at franchises, which give them much more direct control over specifying the services that will be delivered within their communities.

I want buses to play an important part in the public transport offer in urban and rural areas, but I recognise the challenges in that respect. As I have said, though, there are now regulatory provisions that will allow local authorities to start looking at the models that might work best for them in delivering bus services in their area and which will be more reflective of what the local community is looking for as well as the council’s expectations for those communities. We still have some work to complete on the statutory guidance that will go alongside that, but we hope to do that this year.

Do you see the community bus fund as a way of building up the business case for more transformational change?

Michael Matheson

Potentially. I would just point out that what works in Edinburgh will not necessarily work in west Stirlingshire, and a community bus model for somewhere like west Stirlingshire might look very different from what you might want to provide in Edinburgh, Glasgow, Aberdeen or Dundee. However, the community bus fund could support some of the work on that.

Anne Martin might want to say a bit more about the operation of the community bus fund but I have to say that I do not want it to be used for only this purpose and no other purpose beyond this particular model. There will be different models, and different approaches will work in different areas.

Anne Martin

I do not have much detail in front of me, but I can provide some written material to the committee.

That is a good idea. A written response to the committee would be very helpful. If you could forward it to the clerk, that would be very useful.

I am happy to do that.

Have you finished, Mark?

I am never finished when it comes to buses, but I am finished with my questions for the time being, convener.

I have time for one more question. Does anybody have a burning question? Monica, you put your hand up first, so the final question is yours.

Monica Lennon

Sticking with buses, I note that the committee has received a written submission from the Confederation of Passenger Transport Scotland, which is concerned about the network support grant and the bus recovery funding coming to an end in October. It has set out in a paper the current state of the bus sector, and it does not make good reading. For a start, it talks about the impact of Brexit, for example, on driver shortages. Can you give us any update on the situation since we received this submission, which I am sure has come in your direction, too? Things sound pretty bleak. We have all had concerns about uptake of the concessionary travel scheme; after all, there is not a lot of incentive for people to take it up if their local bus services are diminishing and buses have disappeared. Is there anything that you can say to reassure us with regard to the CPT submission?

Michael Matheson

It is part of the emergency budget review that the cabinet secretary with responsibility for finance is taking forward at the moment and in which all portfolios are engaged. We are looking at whether further provision can be made for bus services through the support grant.

Because you were so quick, cabinet secretary, I am going to allow a last question from Liam Kerr.

A last, last question.

It might be a mistake, but go ahead, Liam.

Liam Kerr

I will be very brief.

In your opening remarks, cabinet secretary, you said that the hydrogen plan was coming out in the next couple of months. Can you be any more precise than that?

Michael Matheson

It will be out by the end of this year—I cannot be any more precise than that.

However, we also have our hydrogen investment proposition, which I published last week and launched at our hydrogen supply chain event for stakeholders in Edinburgh. The proposition is quite important, because a lot of the initial investment and opportunities around hydrogen will be driven largely by export potential rather than by domestic demand. There is huge interest in Scotland’s capability to produce large quantities of green hydrogen not just for our own domestic consumption but for export potential. The UK Government has an objective of producing 5GW between now and 2030; Scotland alone is looking to do 5GW, and there is a lot of interest from mainland European countries that will need to import green hydrogen and are therefore looking at import opportunities.

The investment proposition and supply chain event were important in starting to set out Scotland’s potential opportunity with regard to manufacturing and producing green hydrogen for our own needs and for export. We published the proposition last week, and I will publish the action plan by the end of this year. I cannot give you a specific date, but it will certainly be by the end of the year.

I am very grateful for that response.

The Convener

Thank you, cabinet secretary. I find it amazing that, in this session, we have managed to cover recycling, marine planning, trees, farming, floodwater, gas prices, railway tickets, railways, fly-tipping, land reform, the skills basis for achieving climate targets, buses, carbon capture and green hydrogen. If that is not a wide portfolio of subject areas for a committee, I do not know what is.

Cabinet secretary, I thank you and your team for giving evidence today. The committee will discuss your evidence later in the meeting.

That concludes the public part of the meeting. We now move into private session.

12:00 Meeting continued in private until 12:37.