Chamber and committees

It is for SEPA to decide what is waste and what is non-waste. However, I might have to bring in my officials, because I am not an expert on feedstocks and what is categorised as waste and non-waste. If Phil Leeks wants to jump in and say anything, he will be most welcome.

There is a more general point here. We want to see innovation in energy generation and a reduction in the emissions associated with hydrocarbons. Anaerobic digestion is a way in which we can decarbonise a lot of our processes—the whisky industry has been mentioned. We should be as supportive as possible on that.

I would say no. Heaven forbid that existing plants are polluting, as I am hopeful that they are not in any way. I come back to my earlier point that any plant that is polluting is probably leeching money as a result.

The regulations will be put in place over a two-year period to allow businesses the flexibility to get ready for them. Providing such wholesale dispensation would not be a level playing field at all; you would not expect to see that in the regulation of any other type of energy production. I am not sure that it would be the right way to go.

I come back to Mr Matheson’s point. Where a healthy business is generating a profit and is one of the businesses that is helping the industry to decarbonise, we want to do everything to support it. We would not want any such business to go out of business. If there are issues with any particular plant coming up to the standard, we have to look at that on a case-by-case basis and allow some flexibility. That is obviously an operational matter for SEPA, but it will be listening to what has been said today.

We do not want a burgeoning sector—and an important sector for our net zero goals and for the decarbonisation of industry—to be put out of business as a result of any regulation.

Yes, I will.

The non-waste AD regulations will come into place on 1 April 2028. That means that, in effect, there will be just under two years of working with the sector to get operators content with what is required.

Well, I did.

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.

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.

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.