How can carbon pricing help achieve Scotland’s 2045 targets?

Abstract

In Scotland, the buildings and transport sectors have not seen reductions in carbon emissions at the same rate as other sectors. Using the UK’s 7th carbon budget as a baseline, we model two carbon tax levels (£25/tCO₂ and £75/tCO₂) and two cap-and-trade system scenarios (with and without a soft price cap) in the period 2027 – 2045, with both partial and full cost passthrough to consumers. . The highest anticipated emissions reduction is in the higher £75 carbon tax scenario where costs are fully passed on to customers. The lowest emissions abatements were in the lower £25 carbon tax scenario, where costs are partially passed on. Our modelled ETS prices generate less emissions abatement than steadier price signals under a carbon tax. The model shows that most additional emissions reductions occur in the buildings sector. Costs are more significant for lower-income households. The disproportionate impact on low-income consumers can be alleviated through revenue recycling.