Just Transition Commission: advice on a green recovery

Priorities for a just green recovery

4.1 All of this builds the case for government intervention in the form of a just, green recovery. The need to create good quality jobs based on Fair Work principles has never been clearer, while at the same time we need to make sure investments support reductions in greenhouse gas emissions and do not lock us into high-carbon infrastructure. We are at a crucial point for delivering both a net-zero economy, and also one which is fair and works for people across the country.

4.2 In developing our thinking for what government should prioritise as part of a green recovery, we have identified a number of Hot Spots that we feel merit particular attention.

Hot Spot 1: Young people are especially at risk

4.3 As the pandemic swept across the country we saw the closure of schools and higher education institutions. At a crucial stage of their development, young people have had to adapt to distance learning and new methods of examination. For those leaving education and entering the job market for the first time, their prospects look very different to those in the same situation a year ago. At the same time, it is our young people that will live with the consequences if we fail to seize the opportunity to build a fairer, net-zero society. It is also our young people who are often the most motivated and vocal in calling for action. A green recovery is not only a response to the economic and climate crisis facing us, but an investment in the future of young people across the country.

4.4 We know from past recessions that young people leaving education and entering the labour market for the first time during a downturn are particularly vulnerable, and likely to experience persistent ‘scarring effects’ in the form of lower earnings and employment.^[16] One recent study has projected that, even three years after leaving education, the employment rate for today’s graduates will be 13% lower than it would have been without the impact of COVID-19.^[17] This effect is likely to be even higher for young people falling into the low and medium skilled category. The UK Government has recognised this threat, and recently announced plans for a Kickstart scheme to create subsidised jobs for people aged 16-24.^[18] In the coming months it will be important to scrutinise these proposals and assess the extent to which they deliver for young people, particularly in relation to the Scottish Government ambitions on just transition.^[19] We should support schemes that can deliver opportunities for young people to make a meaningful contribution to our net-zero transition, while being paid a real Living Wage and earning valuable experience.

4.5 For those remaining in education through the pandemic, there have been concerns raised regarding both the long-term impact of school closures on attainment and social mobility. Prior to lockdown there was evidence of a persistent attainment gap in numeracy and literacy between the most and least deprived areas in Scotland.^[20] There are reasons to believe these patterns will only have been exacerbated by recent events. With schools shut and learning taking place online, the amount of time children spend on school work is influenced by a variety of factors. One recent survey found that while 44% of middle class parents were spending more than four hours a day home-schooling, only one third of working class parents were doing so.^[21] This difference builds up over time and can lead to further diverging outcomes.

4.6 Alongside evidence of the likely impact on attainment and earnings, this period has also affected young people’s wellbeing. Survey work carried out earlier in the year showed that young people in Scotland are already worried about the effect the pandemic will have on their future prospects.^[22] Mental health is also a particular concern. Many with existing mental health needs have found their usual support network disrupted, and there have been warnings that many young people who previously did not require support may require it in the future.^[23]

4.7 All of this points to the need for government to provide continuing tailored support for young people. Failing to do this would risk increased inequality amongst young people and also between generations. Investing in young people, who are key to our country’s future, should form a central part of a green recovery for Scotland. This will help build an economy that is climate-ready and that allows young people to fulfil their potential.

Hot Spot 2: Patterns of transport use have changed, but there is great uncertainty about future behaviour

4.8 Demand for public transport fell dramatically as lockdown was introduced and people shifted towards working from home where possible. Bus and rail operators reduced services relied on by many key workers who did not have an alternative. Personal car use also fell as travel for leisure purposes was restricted.^[24]

4.9 Road traffic and congestion fell as large numbers of people stopped commuting to work, which will have resulted in a reduction in carbon emissions from cars. We have seen an increase in walking and cycling, largely for exercise rather than commuter journeys. This will have had impacts on health, as active travel is known to bring significant health benefits.^[25] Improvements to air quality have also been observed in streets across Scotland, which is known to have positive impact on cardiovascular health.^[26]

4.10 As lockdown eased we began to see a rebound in car use, however. We have also seen evidence that people’s perceptions of public transport may have changed, with the potential for long-term impacts on the viability of services if left unaddressed. While the evidence is still emerging, according to one survey 20% of people in Scotland feel they will use public transport less, even after the pandemic.^[27] This is in part due to messaging from government early in the pandemic which emphasised the dangers of public transport rather than promoting certain positive behaviours to limit risks (wearing face coverings, social distancing etc).

4.11 Government has made funding available to local authorities for pop-up active travel infrastructure in an effort to lock-in some of the behaviour change seen during lockdown. Funding has also been made available to support the rapid deployment of bus priority infrastructure, which we support.^[28] In addition, funding has been provided to support the bus and rail sectors, which have faced serious loss of revenue as a result of reduced passenger numbers.^[29] Government will need to continue providing support and intervene in bus and rail services until passenger numbers recover if we are to retain routes.

4.12 While the outlook remains uncertain, there is no doubt the current situation is a potential turning point for the transport system in Scotland. People have experienced cleaner air in their streets and have adapted to travelling less. However, we must also recognise some of the risks. Firstly, there could be significant implications arising from the change in perceptions towards public transport and greater home working. Bus services in particular are more frequently used by those on lower incomes and women.^[30] Any threat to the viability of these services therefore carries huge equity implications. Secondly, domestic bus manufacturing and the associated jobs are at risk due to weakened demand from operators, both at home and abroad. We have already seen these risks translate into job losses for some.^[31] This manufacturing base was one of the positive examples we could previously point to in relation to Scotland’s net-zero economy.

4.13 Government intervention to support a green recovery must seek not only to reduce emissions and embed the more positive trends we have seen in transport use in recent months, but crucially it must also address the equity and economic impacts that these changes may bring. There is an opportunity to improve the lives of the key workers we have depended on through this crisis and others who rely on our public transport system. While this undoubtedly represents a huge challenge, it is equally a rare opportunity to make a step change in delivering a fair and net-zero compliant transport system in Scotland.

Hot Spot 3: An accelerated transition is unfolding in the Oil and Gas sector

4.14 The North Sea oil and gas sector has been struggling with lower prices, caused in part by a reduced demand for its products resulting from the pandemic. This will undoubtedly have a significant impact on activity in the North Sea, with one study estimating roughly a third of known reserves will be uneconomic to extract unless the price recovers.^[32] While much of the focus is on the north east, the impacts of this will be felt throughout the supply chain which stretches across the country.

4.15 The hope for the sector had been that the increased deployment of offshore wind, decommissioning, hydrogen and carbon capture, utilisation and storage (CCUS) would see investment and workers transitioning to new emerging sectors and the economy of the north east gradually diversifying away from oil and gas. This was set out in the industry strategy, Roadmap 2035, which the Scottish Government was working with industry to implement prior to the pandemic. For there to be a smooth transition for the workforce, we are likely to need to see domestic manufacturing opportunities result from these new technologies. To date these have been limited, and whether Roadmap 2035 is fit for the current context of accelerated transition remains to be seen.

4.16 The industry has always suffered from periodic downturns. Increasingly there is debate as to whether the current crisis should be viewed as a structural rather than a cyclical shock, with the possibility of lower prices persisting for the foreseeable future.^[33] There is increased evidence from investors of the risk of ‘stranded assets’.^[34] When we visited Aberdeen in 2019 we noted the risk that Vision 2035 would not deliver a stable transition for workers should price assumptions prove optimistic.^[35]

4.17 Current events have shown that the need for diversification in the industry has never been greater, but this comes at a time when companies may be less able to invest in the transition. The supply chain would benefit from greater certainty and a strong sense of direction from government in the coming months if it is to invest in the next generation of technologies that will be the building blocks for a net-zero energy system. While technologies such as CCUS and hydrogen have long-term potential, the extent to which they can deliver support for jobs in the short-term has been questioned. Decommissioning offers more obvious opportunities for creating jobs in the near-term. Investment is also happening now, and with more to come, in offshore wind.

4.18 All of this will, of course, have a major impact on the workforce. Focused action with clarity of intent will be needed to avoid loss of capacity and capability in the sector. Oil and Gas UK have estimated as many as 30,000 jobs could be lost over the next year and a half,^[36] while trade union leaders have warned that the current crisis risks “extinguishing prospects of a just transition for oil and gas workers”.^[37] Digitalisation of the industry has accelerated, and while in many ways this is good, it could further contribute to lower demand for workers offshore. While much focus has been on the North Sea, we should also note that the downstream oil and gas sector and petrochemicals operations in central Scotland, also a source of high-paid quality employment over a long period, is faced with similar pressures .

4.19 To date, the Scottish Government has responded by announcing a £62 million Energy Transition Fund, focussed on supporting a programme of projects developed with industry to drive the transition to net-zero. The Strategic Leadership group convened by government also continues to meet, with a renewed focus on identifying actions to support the sector and its workforce through the crisis.^[38] However, as the situation continues to unfold there will be a need to support further diversification and provide targeted support for displaced workers. The scale of the challenge presented is immense, but ultimately there is also an opportunity to build long-term prosperity in both the north east and central Scotland based on new, net-zero investments.

Hot spot 4: Some rural sectors and regions are especially hard hit

4.20 While the challenges facing rural Scotland are not homogenous, areas that are proportionally more reliant on sectors such as hospitality and tourism look likely to be especially hard hit by the pandemic. As lockdown is eased and the hospitality sector begins to reopen it seems unlikely that employment will recover rapidly. Rural Scotland has a higher proportion of SMEs (especially micro-enterprises) and self-employed, while employment in tourism and hospitality is often precarious and below the standards of Fair Work, which heighten these vulnerabilities.^[39]

4.21 Events unfolding in these communities have occurred against an already challenging backdrop, which includes long-standing issues such as depopulation, lack of affordable housing, and concentrated land ownership in some areas. This is combined with the impending challenges posed by Brexit for important sectors such as food and drink.

4.22 In addition to the pressure on these areas from the downturn in key sectors, the crisis has also exposed a lack of resilience in rural infrastructure, particularly broadband. While just over 4% of households in Scotland do not have access to a decent broadband connection, this percentage is notably higher in rural and island local authorities. People in these areas will have found it more difficult to work from home and adapt to new ways of working made necessary by lockdown.^[40]

4.23 Concerns have also been raised regarding the impact of the lockdown on households living in fuel poverty. Housing in rural areas is less energy efficient, while also more likely to be off-gas grid meaning a greater reliance on electricity, oil and wood for heating.^[41] One estimate suggests that a lockdown during winter months could elevate heating bills by up to an average of £124 per month.^[42] This is likely to be particularly acute in rural areas, where households living in fuel poverty are already much more common.

4.24 A green recovery for Scotland must address the challenges facing the most vulnerable aspects of the rural economy. While the crisis has highlighted the need to strengthen the resilience of the rural economy so as to not be so reliant on individual sectors such as tourism, better quality infrastructure will be a key enabling factor. The green recovery is an opportunity to improve infrastructure such as broadband and transport links. The provision of energy efficient housing (with a mix of housing type to meet need) combined with improved broadband access can provide opportunities for employment, given the greater proportion of home working that can be found in rural Scotland. Creating business hubs to enable networking and collaboration will stimulate inclusive economic growth. A green recovery can also support new employment opportunities in areas such as forestry and peatland restoration. To do this, we will need to see both investment in rural communities and in Scotland’s natural capital which is not only a key asset in our fight against climate change but a potential source of prosperity.