Chamber and committees

Grangemouth is an immediate priority for obvious reasons. The work that we are doing in Grangemouth will help to inform the just transition plan that I have already announced for Mossmorran. It would have been—gosh—more than a year ago that I had a discussion with the operators of Mossmorran, who were open to working with us on a just transition plan. The immediate priority is Grangemouth, and the learning from that just transition plan for Grangemouth will help to inform the Mossmorran just transition plan. Those are active discussions and I know that Mark Ruskell has been having those discussions, too.

I also want to do a just transition plan for Torness, and I have had early discussions with the operators about that. There should be a just transition plan for all those critical large industrial sites.

The allocation that I have outlined is directly related to the circular economy, and that work is spearheaded by Zero Waste Scotland, which is absolutely critical in delivering a lot of the outcomes.

Thank you for the opportunity to talk to the committee about the net zero and energy part of the draft Scottish budget.

The budget for the portfolio is £900 million, which is an increase of £221.1 million from 2024-25. I appreciate the work that the committee is doing in its pre-budget scrutiny; as always, it is an important part of a much longer and wider process.

It might be helpful to set this conversation in the context of the Scottish Government’s overall approach to this year’s budget. The First Minister and the Cabinet Secretary for Finance and Local Government have made it clear that this budget focuses on delivering progress and laying the foundation for Scotland’s long-term success, and that it is set against continued and unprecedented challenges to public finances. The budget focuses resource across the four priorities that are set out in the programme for government, with which we are all familiar: eradicating child poverty, growing the economy, tackling the climate emergency, and ensuring high-quality and sustainable public services.

My joining you today is mainly about the third of those priorities—tackling the climate emergency. In 2025-26, we intend to commit £4.9 billion across all portfolios to investments that will have a positive benefit for climate. The £900 million net zero energy budget will strongly contribute to the other priorities as well, as we scale up renewable energy, restore Scotland’s natural environment and tackle fuel poverty. I hope and strongly believe that we all share those objectives across the Parliament.

I look forward to discussing the net zero and energy budget in detail.

I will use the example of the licence conditions for the ScotWind contracts. The companies and the consortia that bid for those licences have to sign up to the conditions, which include local content with regard to the supply chain. As a result, there is a huge economic benefit to the whole of Scotland—not just the north-east and the Highlands—because we will have companies that are setting up and growing as a result of realising that the supply chain capacity will have to increase. That will not be done by any one region but by the whole of Scotland. By local content, we mean the content of the supply chain in Scotland. Those who were putting the licence conditions together made sure of that. I am looking at Mr Matheson, who was instrumental in that.

The devolution settlement had not happened when most oil and gas was discovered, so we did not have those conditions in place previously. As a result of the devolution of the Crown Estate, we have been able to work with the Crown Estate on licensing the sea bed for offshore wind power generation to ensure that licences come with conditions. However, there will also be conditions around some of the grants and loans that are associated with SNIB and with some of the support that companies get from our enterprise agencies. Some of that is to ensure that there is local content.

You talked about golden handcuffs. The approach is quite light touch, because it is obvious that the supply chain will be anchored in Scotland, as that is where the skills already are. If we get the conditions right, we will have a supply chain that is not just anchored in Scotland; we will potentially have orders from the oil and gas supply chain and orders for ScotWind, so the supply chain will have to vastly increase capacity to be able to serve those two industries. The term “handcuffs” may be overstating it, because it is a no-brainer that the supply chain will be in Scotland, as we already have a very healthy energy supply chain in Scotland, which will have to increase its capacity to serve both sides of the energy sector.

Diarmuid O’Neill has some additional information on that.

The ETS is in place in order to avoid carbon leakage and offshoring.

I saw the comments that Jim Ratcliffe made yesterday on the UK’s regulatory regime. There must be things in place to encourage the decarbonisation of high-emitting sectors. Surely, that is what the committee scrutinises; certainly, part of the drive for my Government portfolio is ensuring that we will not have the same level of industrial emissions in 20 years’ time.

The ETS has been set up to ensure that, too. Those who disagree with it have every right to do so. However, we are trying to get to net zero, to decarbonise our industry as much as possible, and to halt climate change.

I am sorry—I misread it. It is this financial year.

We are taking up that recommendation as a result of our discussion with the committee. Obviously, we want to work with the Scottish Fiscal Commission as much as possible, because it provides an analysis of what we are doing. I am not sure whether there has already been engagement as we put the climate change plan together. [Interruption.] I am now told that there has been engagement.

Mr Doris has given me the opportunity to point to our budget line on energy efficiency and decarbonisation in the heat in buildings part of the portfolio. That line has £349.1 million, in case the committee does not have that information. We are continuing to invest more than £300 million in heat in buildings programmes. That will achieve the aims of a budget line that is very important for the eradication of child poverty, as it will result in not just decarbonisation but a reduction in fuel poverty. That is a very important consideration. I am keen to hear what the Scottish Fiscal Commission thinks about that, because I do not want to do anything in this space that increases fuel poverty or exacerbates child poverty. There have to be the twin goals of a reduction in emissions and a reduction in poverty. That is where discussion with the Scottish Fiscal Commission will be absolutely critical.

The Scottish Fiscal Commission has not made a representation that it has to increase its capacity at all. That is a question that you might want to put to it.

The argument was made very well during the passage of the Climate Change (Emissions Reduction Targets) (Scotland) Act 2024 that the costs and benefits of policies and proposals must align with the budget. I pointed to some of the work that the Government is doing to look at the impact of climate change-related policies in two ways. On one hand, we need to ensure that, as much as possible, what we are doing across the Government has carbon and emissions reduction associated with it. That work was part of the pilot that I was talking about, and a lot of that work has been used in this budget. On the other hand, the other side of things is that the policies, legislation and regulations that we bring forward to put emissions reduction into action must not have unintended and unjust transition consequences, particularly for vulnerable groups but generally for the people of Scotland, who should absolutely not become more fuel poor as a result of what we do. If there is a message going through me like a stick of rock it is to eradicate fuel poverty, so I do not want to do anything that will have unintended consequences of the nature that Mr Doris referred to.

There is already a great deal of demand. As I have said, a lot of the schemes are already struggling to meet the demand that is out there.

Individual allocations to the schemes are still to be decided. My budget asks were based not only on their operation to date, but on the increasing demand for all of them. I might not be able to provide you with that level of detail until ministers have agreed all this, but when we do, I will get that information to the committee.

I am committed to having all these—