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Electricity generation and transmission charges

Jamie Cox is an undergraduate economics student at the University of Strathclyde, about to start his fourth year, and has a summer internship in the Fraser of Allander Institute supported by the Research Interns@Strathclyde scheme. This blog summarises some of Jamie’s research into how electricity charges vary geographically, and in particular, how the closure of the Longannet coal fired power station in Fife in 2016 may affect the economics of renewable energy in Scotland.

In late March 2016, Longannet power station closed after providing energy for nearly half a century. The station’s closure brought about the loss of 236 jobs, with an estimated 800 indirect supply jobs also affected (figures from the Longannet Task Force Report, March 2017).

So while the closure of a coal-fired power station may be viewed as positive environmental news, on the face of it, this was negative economic news. This blog describes some research conducted at the Fraser of Allander Institute, which investigates whether there is an economic as well as environmental upside to Longannet’s closure.

The mechanism by which Longannet’s closure could have positive economic effects, is via its impact upon transmission charges.Continue reading

GERS day 2018

Next week (Wednesday 22^nd August) will see the annual publication of the GERS statistics.

As usual, it’ll no doubt spark a frenzied debate about Scotland’s finances and the prospects for constitutional change. If you can’t bear the hullabaloo and choose to avoid social media for a week here’s a quick summary:

Today’s GDP revisions – significant upward revision to Scotland’s growth

Today the Scottish Government published revised estimates of Scottish economic growth. The updates were contained in the Quarterly National Accounts publication available here.

Normally, statistical revisions are relatively minor. But on this occasion they are much more significant than usual. Indeed, the revisions significantly revise up Scotland’s economic growth performance over the last couple of years (and bring it down in earlier years).

Whilst the changes do not change Scotland’s long-term growth profile (with GDP per head still rising by just under 2% over the last decade), it has had a major impact on the time profile of growth.

Examining the economic case for a reduction in Air Departure Tax

Daniel Borbely is a PhD student in the Department of Economics. In this post he examines the potential economic impacts of a reduction in the rate of Air Departure Tax in Scotland.

Following devolution of Air Passenger Duty (APD), the Scottish Government has set out its plan to introduce a new Scottish version of the tax, the Air Departure Tax (ADT).[1] The ADT would be levied on passengers departing from Scottish airports.

As part of this, the Government has committed to reduce ADT by 50% by the end of this parliament, and abolish it, in the long-run, “when finances allow”. The aim is to increase the connectivity of Scottish airports and to make them more competitive.

But there remains debate over the evidence base to support (or argue against) the notion that cutting ADT will deliver the expected economic, budgetary and environmental benefits hoped for.Continue reading

August nowcast update!

We have updated our nowcasting model for the Scottish economy with the latest official statistics and survey data to produce new estimates of economic growth in Scotland in Q2 and Q3 of 2018.

Our nowcast for GVA growth in 2018 Q2 is 0.33% which, at an annual rate, is 1.34%.
Our first nowcast for GVA growth in 2018 Q3 is 0.39% which, at an annual rate, is 1.57%.

Relative to our last nowcast update our estimate for Q2 2018 has improved very slightly (up from 0.32%), but on balance the figures still suggest relatively weak growth.

This week, we’ll get revised official data for the Scottish economy when the next set of National Accounts are published. Summer is usually when more substantial revisions are put through the economic accounts – following publication of the latest Input-Output tables for Scotland in July each year – and these are likely to alter the pattern of past growth in Scotland. We’ll provide a short blog summarising these key changes.

All of this will be followed by – on the 19th of next month – the first set of official data covering the performance of the Scottish economy over the period March – June (Q2).

We’ll pick this issue up in more detail, as well as review the wider economic landscape, in the next Fraser Economic Commentary to be published in late September.