As COP27 begins in Egypt, the Royal Bank of Scotland has released a report which suggests that meeting net zero targets would give Scotland’s economy a £22bn revenue boost between now and 2030.
To realise this revenue opportunity, new businesses need to retrofit homes across the country, as well as servicing the nation's renewable electricity infrastructure.
The renewable energy sector is the largest source of potential revenue for Scottish small and medium-sized enterprises (SMEs), accounting for 53% of the £22bn total.
However, current projections show the number of SMEs working in renewables delivering infrastructure - such as electric vehicle charging points, wind turbines and solar panels - will need to more than double (124% growth) by 2030, in order to realise this opportunity
Scotland’s buildings sector accounts for 44% of the revenue opportunity that could be realised through the delivery of improvements to premises such as insulation and the installation of heat pumps. But, as with the renewable electricity sector, current projections show the trade will be required to achieve a 109% growth rate in the number of SMEs in the market by 2030.
At a UK level, the economy could benefit from a potential £175bn revenue opportunity by 2030, with more than 260,000 new jobs created in the process. With the right support, RBS estimated that SMEs could contribute up to half of UK 2030 emission targets through pursuing decarbonisation.
The report argues that the business case for decarbonisation has strengthened, as the dramatic rise in energy prices and uptake of transition commitments - such as energy efficiency standards - mean that many decarbonisation investments could make more financial sense for Scottish SMEs in 2022, than in 2021.
For example, installing a heat pump pays back today in half the time that it would have taken in 2021, because gas prices have increased more than electricity prices.
RBS chief executive Alison Rose said: “The imperative to tackle climate change - still the biggest single issue facing humanity - is more pressing than ever.
“But in the context of a turbulent macroeconomic environment, with the prospect of a recession in the UK, and the increase cost of living due to rising prices, SMEs in Scotland face tighter case flows and fears for the future of their business.
“Yet against this backdrop, we find that Scottish SMEs are well placed and pivotal to drive the next decade of decarbonisation in the UK, and to harness growing revenue opportunities.”
The investment requirements to decarbonise Europe in the next decade will be around five times the size of the investments required in the UK - and the global requirements will be around 30 times.
The report also found that UK SMEs already export nearly £200bn of products and services today, including in many sectors critical to decarbonisation, such as chemicals, electrical equipment and low carbon services.
Separately, Scotland’s largest construction trade body has warned that “significant investment” is needed to ensure there is a sufficiently skilled workforce to install new domestic heating technology and meet net zero targets safely.
SELECT stated that investment in “proper” apprenticeships and up-skilling the existing workforce is essential, as it responded to a Scottish Government consultation into the New Build Heat Standard, which is due for launch in April 2024, to reduce carbon emissions from the Scottish building stock.
Bob Cairney, director of technical services at SELECT, said: “We all understand the importance of making the move to a net zero society and reducing our carbon footprint, but at the same time it is important to be realistic and recognise the impact on all householders.
“In this consultation, we are suggesting that all plans are looked at and revised properly and the practical timescales and costings are taken into account when developing targets to ensure Scotland is ready for the technology of tomorrow.”
The Scottish Government opened the New Build Heat Standard Consultation in anticipation of the standard’s launch.
It aims to remove direct emission heating (DEH) systems from new buildings and conversions to reduce carbon emissions - which currently create 20% of Scottish emissions - and move completely to zero direct emission heating systems (ZDEH).
In 2020, it was determined through EPC certificates that 80% of new buildings were heated using gas, 3% being oil or LPG and 10% being ZDEH.
The pathway to 2024 will be paved through the use of the Building (Scotland) Regulations 2004, with the new build heating standards being implemented through the building standards.
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