National Economic Forum: June 2021

Host: Michael Matheson, Cabinet Secretary for Net Zero, Energy and Transport / Richard Lochhead, Minister for Just Transition, Employment and Fair Work

Facilitator: Tracy Black, Scotland Director, CBI

Scribe: Chris Guest, Scottish Government

Summary

The discussion centred around the economic opportunities of Scotland’s just transition to net zero, the barriers to realising these opportunities, and the importance of COP26 in accelerating climate action.

Introduction and background

Mr Matheson welcomed participants to the discussion. He explained that the just transition to net zero presents opportunities for Scottish businesses, for example through harnessing innovation, attracting innovation, and increased international profile. He noted that partnership between government and business will be critical in realising the opportunities of this transition, through the leveraging of Scotland’s strengths in energy, natural capital, innovation, and our skilled workforce and universities. He outlined the purpose of the session was to generate ideas, share experience, and influence policy and actions being taken forward by government, as well as how government can help attendees take the actions their organisations need to reach net zero

Tracy Black provided a short introduction, explaining that the CBI welcomed the publication of the Scottish Government’s Climate Change Plan update and UK Government’s Ten Point Plan. She made clear that this is a great start but that businesses need further detail and clear timeframes for the delivery of these plans. She also highlighted the role of businesses, individuals, and consumers in making the changes required to achieve Scotland’s net zero ambitions, flagging the importance of affordability, finance, and shared learning.

Mr Lochhead also provided a short introduction, reflecting that his appointment as the first minister for just transition in Scotland highlights the broad consensus that a just transition is a key element of delivering a net zero society. He explained that his role is to work with ministerial colleagues to ensure the move to net zero is fair, and all industries and businesses are supported as we move forward. He noted the importance of private and public sector, as well as academia, third sector and other actors, in delivering a just transition and highlighted that fair work and recovery from COVID-19 are both critical elements of the just transition agenda.

Topics discussed

Technology and innovation

Several participants noted the importance of technology and innovation in delivering a net zero society. Some, including Mr Matheson, noted that many of the technologies required do not yet exist, but that the scale and pace of technological development has been significant. However, it was also noted that whilst the required technology is available over the short-term, there is insufficient investment to ensure the level of affordability of new technologies required for a just transition. In addition, it was suggested that current models of innovation are insufficient to deliver solutions at scale, quickly enough, to achieve Scotland’s net zero ambitions, and that routes to market should be shortened for new technologies.

Specific technologies and innovations discussed included the potential to generate hydrogen at scale and speed, industrial biotechnology, energy efficiency measures, heat pumps, and the carbon footprint associated with the import of liquid natural gas (relative to domestic production). The maintenance of existing carbon intensive infrastructure was also mentioned as an opportunity for retaining jobs and promoting innovation whilst minimising pollution.

Mr Matheson explained that there is an opportunity to capitalise on the development, production, manufacture and deployment of new technologies, noting that Scotland can become an exporter, as well as an importer of net zero technologies. He noted the importance of tackling emissions in the business and transport sectors as a means of delivering Scotland’s climate targets, and asked that businesses continue considering how to reduce emissions from their own operations and processes as well as developing new technologies for commercialisation.

Skills and employment

Several delegates raised the point that the oil, gas, energy, and construction, industries will be critical in delivering the speed of change required for a just transition to net zero due to the transferability of skills amongst the existing workforce. It was also flagged that technology and innovation must be delivered at pace to ensure we do not begin to lose jobs from across the Scottish economy.

Where there are skills gaps, it was noted that communities and schools must be involved in a ‘skills transition’ to ensure no one is left behind as we decarbonise. The question was subsequently posed as to whether there is clarity on which skills are in short supply and which sectors are facing shortages. The Just Transition Commission final report was recommended as helping to address this question. The role of cross-UK recruitment was noted as having a role in addressing skills shortages, as was the need to incentivise our small- and medium-sized enterprises to speculatively invest in the scale and type of core skills needed for the transition.

The rail sector, specifically, was flagged as experiencing an existing shortage of skills required for net zero, which has been exacerbated by COVID-19, an ageing workforce, and Brexit. It was noted that decisions taken now regarding apprenticeships will have a significant impact for years to come.

Mr Matheson agreed that the transferability of skillsets in the oil and gas sector into renewable and low carbon roles will be critical to supporting the transition, referencing recent research by Robert Gordon University. He agreed that there is a role here for government to work with the sector and look at what we can do to support that transition and to match up skillsets with the needs that the sector requires. 

Communities and partnerships

The importance of partnerships was a recurring theme throughout the discussion, and ensuring that the transition to net zero involves all groups. For example it was noted that engagement with customers will be essential in ensuring the transition is affordable for all, whilst third sector and social enterprise groups were highlighted for their role in delivering a just transition through addressing inequalities in some of the most disadvantaged communities.

The importance of international collaboration, especially across the North Sea, was also highlighted as being critical to ensuring affordability. It was also suggested that businesses must find better ways of working cross-sector, using industry leadership groups where possible, and that real impact is delivered by businesses working with and across adjacent sectors. It was noted that businesses rarely consider themselves as part of a single sector, and that there is a role for government and trade associations in bringing together adjacent sectors to develop solutions.

Mr Lochhead agreed that delivering a just transition is about working together, and that government and the private sector must work with local communities, customers, and the wider public. Mr Matheson explained that a just transition cannot be a top down process, and that it must be an individual, organisational, and national responsibility.

Finance

The role of finance in delivering a just transition to net zero was raised by several participants. ‘Green’ finance was seen as particularly important for the oil and gas sector, which will be needed as a source of skills and expertise for the transition but that may increasingly struggle to acquire capital due to historic links to fossil fuels.

It was noted that the scale of private finance required for a net zero transition, over and above planned levels of public investment, is extremely large. It was felt by participants and Mr Matheson that there is sufficient capital available, but there are challenges in ensuring that this capital is allocated to where it is needed most, in the form that it is needed most. The question was posed as to how to enable a step-change in mobilising private capital, and the advent of the Scottish National Investment Bank was welcomed. Mr Matheson noted that he will be discussing this in detail with the Scottish Futures Trust and that he welcomed further ideas from participants as to how government can better support.

Connectivity and planning

The importance of connectivity in enabling business to recover from the pandemic was raised, especially for regions hit hardest by the economic impacts of the pandemic. A request was made of the Scottish Government to accelerate planned investments into low carbon transport infrastructure to support economic recovery across Scotland.

Specific requests were made of the Scottish Government to ensure that the National Planning Framework 4 delivers low carbon power that keeps bills affordable for consumers and strongly promotes the role of renewable energy in the Scottish economy.

COP26

Mr Matheson agreed with a participant that COP26 should be a ‘bridge’ event, whereby we move away from questions of why and when action on climate change is required, to how do we deliver the required action?

Mr Matheson explained that he is keen that the Scottish Government creates as much space and opportunity as possible for businesses to demonstrating what action they are taking to support the delivery of a just transition to net zero.

It was noted by participants that COP26 is a significant opportunity to put Scotland in the ‘shop window’. Several delegates noted that they had applied and been rejected to be part of the UK Government managed ‘Green Zone’ during COP26 in Glasgow. Requests were made for businesses to work with the Scottish Government, Scottish enterprise agencies, and CBI to capitalise on the opportunities presented by the event.