Just Transition Commission call for evidence: analysis report

3.1 Economic opportunities and challenges

3.1.1 The first question in the Call for Evidence asked respondents to consider a just transition from an economic perspective:

What do you see as the main economic opportunities and challenges associated with meeting Scotland's climate change targets?

3.1.12 Almost all respondents answered question one, providing a wide range of responses that sometimes covered multiple themes. Many had an economic focus, but some also wove social opportunities and challenges into their responses. For clarity, this chapter focusses on the economic themes raised in responses to question one. Social issues, such as housing, health and social justice are addressed in the next chapter.

3.1.3 The question asked respondents to reflect on both opportunities and challenges and many explicitly highlighted these in their responses. If this was not the case, analysts exercised judgement to determine the context. The analysis below outlines, where possible, the opportunities and challenges within each theme, but it should also be noted that a challenge described by one respondent was often perceived by another as an opportunity.

3.1.4 Overall, just under three quarters of responses highlighted both opportunities and challenges. The remainder were split relatively equally between those highlighting only opportunities, only challenges, or general commentary on the theme of transition.

Jobs and the economy

3.1.5 Comments about jobs, specifically the opportunity to create new jobs and the associated positive impact on the economy, was a prevalent theme in responses. Several referred to a new workforce of green jobs and highlighted the potential for job creation across multiple sectors. These included: renewable energy generation and distribution; construction and heating; land and environmental management and conservation; tourism; jobs within the circular economy; and public transport. A small number said new industries and jobs would also support supply chains and the service sector, with wages being put back into the wider economy. A few stressed the value of these new green jobs in helping the economic recovery from COVID-19.

3.1.6 The need for jobs to be fulfilling, secure and sustainable long-term was noted. A few described the opportunity to ensure that new roles provide workers with adequate incomes and one called for the use of the Real Living Wage. A small number of individuals and trade unions highlighted other opportunities, which included ensuring workers are involved in decision making around transitions, the chance to introduce better working conditions and a call to raise the minimum wage.

3.1.7 Conversely, the biggest challenge mentioned in relation to employment was managing job losses in industries affected by the transition. Most common were mentions of the impact on the fossil fuel industry, particularly Scotland's oil and gas sector. It was widely suggested many in this workforce could move to new jobs in renewable energy, if sufficient training and re-skilling is available.^[6] A few noted that manufacturing might be affected, but that this could be mitigated by new opportunities in, for example, electric vehicle production.

3.1.8 The most commonly mentioned opportunity for the wider economy was the development of a green economy, specifically a Green New Deal as discussed in the Commission's interim report. This would create new green industries, green jobs and green infrastructure. A key benefit would be Scotland's capacity to export green energy. A few noted the importance of ensuring Scotland is able to manufacture renewable energy technology and to win international contracts, rather than outsourcing overseas.

3.1.9 Some made more general comments about economic opportunities. A few shared a view that the transition would create a broader, more resilient economic base for Scotland. They believe renewable energy provides a steadier and more sustainable source of income than oil and gas extraction. Stronger local economies were cited by a few, due to greater support for small and local businesses from government and from individuals. A few respondents advocated for a focus on local procurement by the public sector to ensure economic gains are reinvested locally. They suggested that the Preston Model - a community wealth building initiative operating in North Ayrshire - is rolled out nationally. Opportunities to support innovative business were also mentioned. One respondent (Industrial Biotechnology Innovation Centre) discussed the contribution Industrial Biotechnology could make to the Scottish economy.

There is potential to create a large number of new well-paid jobs in renewable energy that could more than replace the work currently offered by the oil and gas industry. Research has suggested that clean energy industries could offer three times as many jobs as fossil fuels. Investment in these jobs must form part of the coronavirus recovery package as recognised by the recent report by the Advisory Group on Economic Recovery.

The just transition provides an opportunity to reorient economic goals away from continuous growth and towards ensuring wellbeing and preventing environmental destruction, using alternative models such as 'doughnut economics'

Individual

Renewable energy

3.1.10 Another theme prevalent in the responses was the economic opportunities and challenges posed by renewable energy in its various forms. In many instances respondents outlined broad economic opportunities and challenges - for example, job creation, investment and exportable expertise and technologies - and then put forward their thoughts on which technologies might enable those opportunities to be realised.

3.1.11 Most commonly mentioned was the opportunity to invest in, and develop, a strong and resilient renewable energy sector. Several noted that Scotland is rich in natural resources. Respondents cited the full range of renewables: onshore, offshore and floating wind, solar, hydro, wave, tidal and biomass. Developing these would require increased economic activity at all stages - in research and innovation, product design, manufacture and installation and operations and maintenance. Knowledge and expertise gained could be promoted internationally, allowing Scotland to capitalise on its leading position and to develop new export markets for the renewables industry. A few noted the challenge of developing the sector effectively enough to deliver the potential benefits, citing the slow pace of change; resistance to the move away from oil and gas impacting investment in the renewables sector; potential job losses during the transition; and issues around Contracts for Difference.

3.1.12 A few organisations in the energy sector provided detailed responses for the Commission to consider. The Orkney Renewable Energy Forum described economic opportunities and challenges for the renewables industry, highlighting job creation and retention; the potential of increased inward investment; and - in comparison to fossil fuels - economic savings and positive return on investment and better performance in relation to resilience and market volatility. One organisation shared a view on the potential for greater use of solar energy; another provided detailed information around Anaerobic Digestion. One environmental organisation called strongly for an end to biomass burning.

3.1.13 Another example of renewable technology contributing to potential economic opportunities, mentioned by some, was the development of hydrogen. A few respondents specifically noted the importance of focusing on green hydrogen i.e., hydrogen made from electricity from renewable technologies. Suggestions included the use of hydrogen for energy and by industry to aid decarbonisation and hydrogen fuel for cars, trains or ferries. A few noted hydrogen's value to the Highlands due to electricity grid constraints. In addition to hydrogen, a small number cited low-carbon heating systems and battery storage as technologies with a role in progressing decarbonisation.

3.1.14 Carbon Capture and Storage was mentioned by a small number of respondents as a new technology that could be harnessed, but conflicting views were shared. A few highlighted economic opportunities it could bring, such as the creation of highly skilled jobs; for Scotland to be a world leader in this space; and export of the technology and skills required to the benefit of the economy. There was also one mention of potential economic benefit for local communities through community ownership of land being used for Carbon Capture. The few who specifically cautioned against Carbon Capture and Storage made two arguments. First, some did not see it as a sustainable approach as a large amount of land is needed and the required forests and ecosystems need to be developed. Slightly more common were those who strongly argued that it is an unproven technology, has no scientific evidence to support it and would not deliver any societal benefits or help to meet emissions targets. Given the investment that would be needed to realise Carbon Capture, they saw it as a waste of money and argued that a greater emphasis on increasing clean energy generation and use was a better alternative.

3.1.15 The challenge most frequently mentioned about the greater use of renewables was the corresponding need to move away from oil and gas. This was viewed as both an opportunity and challenge. Most called for the sector to be wound down as quickly as possible but recognised the need for this to be done in a planned and structured way. The range of perspectives on how this could be achieved is presented in more detail in relevant sections later in this report.

Transport

3.1.16 Transport was the third most common theme in responses to question one. A range of views were shared and most comments focussed on reducing car use and moving people to cleaner, greener forms of transport. This was described as both a significant challenge and a huge opportunity, given the consequences for health, jobs and the environment. Many made general comments about how travel behaviours and infrastructure should change, without linking this directly to economics. The analysis below therefore focuses primarily on comments where economic opportunities and challenges were identified.

3.1.17 Respondents outlined multiple alternatives to car use - public transport such as bus and rail, active travel (walking, wheeling and cycling) and new electric vehicles. Comments noted that significant investment is required across all of these alternatives, for example to fund more and better integrated bus and rail routes serviced by new, clean and efficient vehicles; to create and maintain the infrastructure of paths and cycle lanes to make active travel a safe and attractive option and to enable people to access stations and bus stops; and to develop efficient electric or hydrogen vehicles and a network of charging points. Some also noted that these alternative modes of travel must be affordable to encourage people to change their travel behaviours. A few also called for more integrated ticketing. A few went further, calling for incentives to drive the uptake of electric vehicles.

Transport and energy infrastructure will require substantial restructuring to meet Scotland's climate change targets, which will increase employment. It may also establish a more circular economy through the potential to utilise greater repurposing of materials. As businesses adopt electric transport, and clean energy sources, their more efficient operation and reduction in costs may make for greater profitability.

Continuing restrictions of car use, and incentivising public transport in urban areas, could lead to a greater uptake in public transport. For island and rural communities who are disconnected from the mainland, battery operated, or hydrogen planes may boost their economies, promoting more affordable and accessible transport links. To develop these areas, there is a need for enablers and infrastructure to support electric and hydrogen car technologies.

Frazer-Nash Consultancy Ltd

3.1.18 The importance of upgraded transport links to rural economies was referenced by some. Specific challenges included difficulties faced by older people in those areas and local grids accommodating electric vehicle charging infrastructure. A response from the Community Transport Association highlighted that a lack of affordable transport is a factor in depopulation of rural communities and that shared transport and lift-sharing options can help maintain jobs in these areas and contribute towards the creation of sustainable rural communities.

3.1.19 A few respondents reflected on how COVID-19 has presented opportunities and challenges for transport. More people have been walking and cycling and could potentially be encouraged to continue. However, the dramatically reduced use of public transport could lead to some services being permanently removed and has already reduced revenues and the potential to fund improvements. One commented that an increase in road building should not be part of any economic recovery plan.

3.1.20 Other comments around transport mentioned by small numbers included the need to move more freight to rail; greater use of ferries and rail for international travel; greener shipping (both commercial and leisure e.g., cruise liners); taxing aviation to pay for environmental costs; and a call for a detailed plan for the decarbonisation of transport. One organisation made a specific point about the need to decarbonise Heavy Goods Vehicles, given their disproportionate level of emissions. A small number of organisations in the transport sector, including Strathclyde Partnership for Transport, provided detailed responses for the Commission to read.

Training and skills development

3.1.21 Another theme discussed by many respondents was the importance of training and skills development in facilitating a just transition to net-zero. Concerns were frequently expressed about workers transitioning between sectors, in particular those in oil and gas or the wider fossil fuel sector. Some argued these workers should be well placed to fill new green jobs in renewable energy, but respondents also noted the need for support and investment in growth sectors to ensure new jobs are created and the role of education, training, re-skilling and up-skilling to ease this move.

3.1.22 More broadly, some noted the challenge of ensuring a pipeline of skilled workers to fill the roles needed to achieve a successful transition. The breadth of potential new jobs means training is needed in several sectors, for example in renewables, energy infrastructure, heating installation and transport. A few noted that many of these roles may require specialist expertise, for example engineering, data science or robotics. In addition to training, a few called for more apprenticeships, accreditation and future-proofing of new jobs and qualifications.

Land use, agriculture and food

3.1.23 A variety of comments related to land use and agriculture were provided by many respondents. In relation to economic opportunities, several referenced the potential growth of industries such as forestry. They also noted the creation of new jobs in sustainable agriculture, land and wildlife management and tourism, resulting from improved landscapes and biodiversity.

3.1.24 A detailed submission by NFU Scotland outlined the economic opportunities and challenges facing agriculture in transition. This included scope to introduce changes that improve competitiveness, make practices more efficient, and benefit businesses. Challenges were summarised as the difficulty of ensuring a profitable and productive sector while reducing emissions. This response also emphasised the importance of tackling climate change and highlighted the wider role of farming in rural communities and agriculture's significant contribution to Scotland's economy.

3.1.25 Respondents highlighted the opportunity for more responsible land use and management to generate sustainable development. Suggestions included rewilding, forestry, peatland restoration and conservation, and the protection of other natural environments as ways to improve biodiversity. Some noted that these steps would reduce emissions, sequester carbon and mitigate other effects of climate change, for example by reducing flooding.

3.1.26 Respondents raised a number of other issues in response to this question which were less directly linked to economics. Changes to agricultural practices to reduce emissions and improve sustainability were suggested by several. These included new farming methods such as vertical farming; shifting from large agricultural enterprises to smaller holdings; more investment in agro-ecology and permaculture; and agroforestry. A small number described the difficulties of making these changes, for example perceived resistance to environmentalism by farmers and crofters and a preference for traditional ways of working. One respondent cautioned against idealism and stressed the importance of understanding the realities of life in rural Scotland.

3.1.27 In relation to agricultural produce, respondents highlighted two key themes: the benefits of local food production and a need to transition to a plant-based diet. They suggested that increased local food production increases the resilience of the food supply chain, reduces emissions from transport, and supports the farming economy, arguing that a plant-based diet would see a reduced need for high emitting livestock farming.

3.1.28 One land use organisation and a marine environment organisation provided detailed responses for the Commission to read, about the forestry and fishing industries respectively.

Forestry & peatland preservation/restoration will be critical in meeting 2045 ambition, and if scaled up as required, will create significant opportunities for new jobs and/or to transfer economic opportunities over from traditional Highland crofting/agriculture.

Agriculture is also a challenge - attitudes to environmentalism amongst crofters and farmers are not universally positive, and there is therefore a need to try to support and encourage behaviour change through positive agri-environment schemes. There is an understanding across the agriculture sector that the success or otherwise of any agri-environment schemes will be a function of what financial resource is on offer - historically, agriculture will do whatever it takes to bring in the most money, and future policy must be cognisant of this.

The Highland Council

Housing

3.1.29 Many described the challenges and opportunities inherent in improving Scotland's housing stock. From an economic perspective, three themes emerged. Firstly, that such a large undertaking is likely to generate a large number of jobs in construction, manufacturing, installation and maintenance. Secondly, the reduction in heating and electricity costs would have a positive economic impact for individuals. Thirdly, respondents highlighted the challenge of funding these improvements, particularly given those in the poorest quality housing tend to be least able to afford to take action.

3.1.30 One organisation - the Existing Homes Alliance Scotland - provided a detailed response for the Commission to read. This outlined economic arguments for upgrading housing stock, and challenges such as developing a sustainable supply chain and a robust quality assurance scheme. They highlighted the importance of the Energy Efficient Scotland programme, which was supported by other organisations representing different sectors.

Existing business interests and subsidies

3.1.31 A desire among some businesses and sectors to maintain the status quo and to slow or prevent change was noted as a challenge by many and seen to be proving a barrier to economic (and social) benefits being realised. Individuals and organisations who currently profit or benefit were perceived as reluctant to change, given their likely losses. Respondents highlighted the potential for those with vested interests to lobby government as a further challenge.

3.1.32 Several of these comments were directed at the fossil fuel industry and specifically oil and gas. A few noted the involvement of the sector in local authority and government planning and advisory groups and called for this to end. Fishing, agriculture and large landowners were also referenced in relation to their use of natural resources. Singular comments about existing interests described the limitations of existing global trade deals and delays to Low Emission Zones.

3.1.33 Related to this, some respondents called for subsidies currently given to these organisations to be reduced or stopped, redirected into industries and organisations who support decarbonisation, or given to existing recipients but redirected to developing new or renewable technologies.

A different economic model

3.1.34 Many respondents argued for a fundamental change to Scotland's economy and to how economic success is measured, explaining how the transition to net-zero creates the opportunity to do so. This included a call for an end to focusing on continued economic growth and consumerism, with GDP as the main indicator of progress. Instead, respondents championed an economy which puts people first and is measured on the basis of wellbeing, with indicators around UN Sustainable Development Goals. Another minor theme was the need to appreciate work that is currently not seen as economically valuable, for example key workers and carers, and pay these workers according to how their work benefits society. Some respondents shared their view that COVID-19 offers the opportunity to consider such a restructuring.

Another challenge is to address our current addiction and dependence on consumption and growth. As the head of SEPA said on taking up his post, we have to move from 3 planets to 1 because there is only 1. GDP growth is no longer a desirable goal because it is unsustainable. It should be replaced by a regenerative economic model which recognises many other measures of outcome which are of great public benefit such as clean air and water, health and wellbeing, a thriving natural environment and a more even distribution of income for all.

Individual

Technology and innovation

3.1.35 Several respondents outlined how new technologies could be developed and used to enable a transition that delivers economic benefits. Examples included low carbon and battery storage technology, district heating schemes, hydrogen fuel, satellite launch and technology to make negative-carbon hydrocarbons. A few specifically noted that these need to be green/sustainable technologies. There was also discussion of economic and social benefits arising from research and innovation undertaken by Scotland's education sector and small businesses. This was in the context of maximising and building on the existing knowledge base, ensuring the fastest possible development of new and emerging technologies across the whole economy, and establishing Scotland as a leader in the field.

3.1.36 Another theme mentioned by some was greater digital connectivity i.e., broadband and mobile access, particularly in remote and rural areas. This was seen as a challenge, but necessary to unlock a multitude of economic and social benefits. One respondent raised a very specific point about consumer protection in relation to data collected by new technology e.g., smart meters.

The cost and pace of transition

3.1.37 The cost of the transition was generally described as an economic challenge - for individuals, businesses and society as a whole. Several respondents highlighted that significant investment is needed to facilitate change at the scale and pace required. Some noted a need for up-front investment in new and renewable technologies and supporting infrastructure. A few highlighted the additional challenge of COVID-19 potentially reducing public funds and limiting the appetite for the private sector to invest. In relation to the cost of addressing specific social challenges, singular comments included that the promotion of healthier lifestyles has not been reflected in spending; the need for investment in Public Health Scotland; and financial constraints in the public sector. One respondent noted the importance of balancing the cost of taking action with potential savings, for example it costs less to heat a warm insulated home.

3.1.38 Some respondents called for consideration of the economic impacts for individuals, for example in considering who pays for housing improvements. A few also noted the transition may cause prices to rise, for example for food and transport, affecting individuals and businesses.

3.1.39 A number of respondents took the opportunity to share their views on the timescales for a just transition. Most frequent were suggestions that currently the pace of change is slow, and that Scotland needs to move more quickly. A few indicated that the 2045 target is not ambitious enough. Some specifically noted that while the pace of change remains slow, the economic benefits are unlikely to be fully realised e.g., taking advantage of economic opportunities arising from Scotland being at the forefront of decarbonisation. A small number specifically cited the Scottish Government's lack of commitment or the public's lack of understanding of the urgency of the situation. One respondent noted that a successful transition would take place in stages, evolving as people gain more confidence.

3.1.40 Beyond this, a small number described the long lead-times required to make the necessary changes and the difficulty of doing so by 2045. Conversely, a few cited the speed and scale of response to COVID-19 as evidence of the ability to change. One made the specific point that the delay to the COP26 climate conference until late 2021 risks prolonging a period of inaction on climate policy.

The scale of the change necessary will require radical changes to business and consumer behaviours. History has shown that the first mover advantage in new and disruptive business and community operational models, can create significant benefit. Sadly, the UK has often been the creator of such disruptive ideas, but equally often has been slow to benefit. Any approach therefore should recognise that not only do new things need to be done, but that to maximise the benefits there should be overt consideration of how the plans to achieve these should be created and delivered.

Caithness and North Sutherland Regeneration Partnership

Circular economies

3.1.41 Several noted the opportunity to create a circular economy in Scotland, though a few reflected on the challenge of moving away from a 'throw-away' culture and cheap goods. Respondents described how greater recycling and a zero-waste approach could lead to more self-sufficiency and a reduced need for transporting and importing goods, as well as creating jobs.

3.1.42 A detailed response from the waste management sector outlining steps being taken was provided for the Commission to read. CIWM Scotland cited effective waste management as a health issue and described opportunities and challenges in achieving this.

Tourism

3.1.43 Comments on tourism were provided by a small number of respondents, who described the challenge of over-reliance on tourism and the impact of mass tourism. A few called for more holidaying in the UK. However, most comments reflected on the opportunities afforded by a just transition. Respondents felt a greater focus and appreciation of Scotland's landscapes and wildlife would boost tourism and help the hospitality industry. A few talked of eco and adventure tourism. There were, however, calls for future tourism to be managed sustainably, with one arguing that the environmental costs of tourism should be built into the prices paid by travellers.

Scotland as a leader

3.1.44 Some noted the opportunity for Scotland to be seen as a global leader. Becoming a net-zero country in a fair way would improve Scotland's credibility and provide an example for other countries to emulate. The ability to export knowledge and expertise was also referenced in relation to energy, satellite launch, and equipment manufacturing. One noted the opportunity to work with countries with similar goals, citing Slovenia as an example.

It represents an opportunity for Scotland to show global leadership in respects of transition to a sustainable way of life. I believe that the rest of the world has a right to expect this from us. Our natural and human resources mean that we are in a much better position to negotiate the difficulties that will arise in the next few decades, compared to other parts of the world. We should be able to develop technological and social solutions, and participate in international initiatives, in ways that should reinforce our economic security.

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General comments and additional themes

3.1.45 In addition to the themes detailed above, some respondents made additional comments that did not specifically link to economic opportunities and challenges. These are briefly summarised below.

General comments

3.1.46 Some respondents used their response to this first question to introduce themselves or their organisation, or to provide general comments or background information on the transition and the need for change. A small number made general comments suggesting that there were many opportunities and challenges, without providing any detail.

Importance of change

3.1.47 Several respondents stressed the need for significant change to achieve Scotland's net-zero ambitions and a just transition. These comments described the overarching impact of climate change on the planet and our society, and how action is required for both to survive. They highlighted the importance of increased understanding and appreciation of our planet and its ecosystems. Others argued for reducing carbon emissions in a way which allows current and future generations to live better, healthier, more sustainable lives.

COVID-19

3.1.48 A few referred to COVID-19, describing how the pandemic has highlighted a lack of resilience and the need for meaningful change. However, experiences during the pandemic have also demonstrated that it is possible to change.

Infrastructure and planning

3.1.49 A small number commented on infrastructure and planning. These comments included the challenge of regulatory and planning networks, the need for better energy distribution networks, a call for better management or modernisation of existing infrastructure, greater use of brownfield sites and better urban planning.

The political climate

3.1.50 While not a direct link to economic opportunities and challenges, several respondents expressed views in relation to the political, policy and legislative issues around the transition. They mostly highlighted challenges, including:

• A perceived lack of political leadership, vision, courage or ambition, and a reluctance to consider long-term commitments. A few specifically noted the Scottish and UK Government's tacit support of oil and gas through the policy of 'Maximise Economic Recovery' which appeared in conflict with the desire for a net-zero economy
• The control of certain policy areas and resources by Westminster
• Ensuring there is a co-ordinated approach across government, that all policy areas are linked in a coherent way and that a cross-departmental approach is taken
• Brexit, a reduction of EU funding, and challenges around new trading arrangements
• The impact of austerity and limited resources at all levels of government

3.1.51 A few argued that to achieve the transition, actions should be embodied in legislation. For example, legislating that all new homes should have solar panels.

3.1.52 Other bodies who could be more involved in managing the transition were mentioned by a small number, for example: the Scottish National Investment Bank; Scottish Enterprise; Highland and Islands Enterprise; Skills Development Scotland and the Scottish Funding Council. One respondent argued for local authorities to strengthen their role in leading change in communities.