Just Transition Commission Interim Report

2. Planning ahead – the need for clear transition plans to be developed

2.1 In some respects, the first theme we’ve identified from our work is partly a restatement of the International Labour Organisation’s principles for a Just Transition.^[7] We believe clear transition plans need to be developed for individual sectors if Scotland is to capture the economic and social opportunities on offer from the move to a net-zero economy. Such plans need to move beyond the sectoral emission reduction proposals laid out in documents such as the Climate Change Plan, and contain a strategic national vision and a plan for how the opportunities and challenges of decarbonisation are going to be managed.

2.2 We believe that development of transition plans now will bring many benefits. Firstly, this will provide certainty for those involved in the transition (be they businesses, consumers, or communities) and ensure everyone understands the productive role that they can play. Secondly, this could provide a catalyst for prompt action to tackle emissions in a fair way by empowering stakeholders. Failure to engage in this sort of advanced planning risks unintended consequences leading to injustice as Scotland continues its transition to net-zero.

2.3 We will consider the exact form transition plans might take in the year ahead. However, we would expect they will likely need to contain a roadmap of actions taken by Scottish Government and industry through specific investments in infrastructure and skills development that will allow transition challenges and opportunities in individual sectors to be addressed. We also believe that such plans would benefit from being jointly developed and owned by Government, industry, trade unions, consumer groups and other relevant stakeholders to make them most effective. In developing these, Government could seek to build on existing sector bodies and associations.

2.4 To date this sort of planning has not been undertaken in as rigorous a manner as might be the case. Emerging examples, such as the industry group NECCUS, are promising and assuming they establish their contribution to a just transition, should be built upon further and spread to other sectors.^[8] The commitment from Government to develop a Green New Deal for Scotland is one promising potential route through which transition planning could be undertaken. We hope this will be investigated as the Green New Deal is developed by Government over the coming year.

2.5 Managing the economic and social implications of decarbonisation requires planning. Government will have a key leadership role to play in the years ahead if opportunities are to be maximised. We need to face up to the need to transform our infrastructure and economy to deliver in a net-zero world. Not doing so risks a repeat of previous badly-managed transitions.

Evidence/Examples

2.6 In developing our thinking in this area, we have drawn on several examples from our work to date.

2.7 During our consideration of the energy sector, we focused in particular on ‘lessons learned’ from the decarbonisation that has already taken place (particularly with regards to electricity generation). The failure to capitalise fully on manufacturing opportunities has been criticised, particularly by the trade union movement in Scotland. While the reasons for this are complex, one contributing factor would appear to be the failure to plan ahead and support the nascent wind power industry with strategic investment and a supportive policy framework in the 80s, when other countries were doing so.^[9]

2.8 There are other reasons for Scotland’s failure to capture opportunities in the renewables sector that we could point to. Trade unions made representations to us that domestic firms are operating on an unfair playing field with foreign competitors, leading to them losing out on potential business. The subsidy mechanism to support renewable energy (Contracts for Difference), operated by the UK Government, was also said to have not been effective at driving local supply chain content in developments. But nonetheless, failure to plan and invest long-term appears to have been a significant factor.

2.9 If we are serious about maximising the economic opportunities associated with decarbonisation, this cannot happen again. Sectors such as heat and transport will have to see significant emissions reduction in future years leading inevitably to a boost in demand for low-carbon technologies. Achieving net-zero emissions will also require increasing deployment of renewable energy generation. Government and industry should be jointly considering how demand can be met in a way which secures economic benefits for Scotland. In the case of low-carbon heat, consideration must be made of how economic activity can match or exceed that currently realised in servicing gas-powered heating systems and the supply of gas.

2.10 We have encountered some examples of this happening in specific areas – such as energy efficiency or in the case of electric vehicles where there is clear potential for economic gain – but we would benefit from application across all sectors and a more rigorous strategic approach.^[10], This task cannot be left to enterprise agencies or indeed companies themselves. There is a crucial need for Government leadership.

2.11 As an example of the potential added value of Government leadership, in Aberdeen we were pleased to meet with senior figures in the oil and gas industry who talked us through the industry’s Vision 2035 and related Roadmap 2035. While this was welcomed as an attempt by industry to come together and plan strategically for the future, we were left with several questions:

Whether the industry-led plan would sufficiently account for a smooth transition of workers in the sector as production in the North Sea basin evolved in the decades ahead. This is naturally a key concern for Government. The benefit of Government leadership and involvement in developing such plans therefore becomes apparent, enabling them to adequately account for matters of public interest.

We believe such plans would be most effective if they are jointly developed and owned by a range of stakeholders. While Vision 2035 came about as the result of significant engagement by companies in the sector by Oil and Gas UK, our discussions with trade unions highlighted a lack of awareness among the workforce.^[12] Government can play a role in defining who has an empowered role in these discussions, making sure that voices of workers and communities are properly accounted for and weighted in decision-making.

Transition plans need to set out how economic opportunities and challenges will be secured and managed in future, but crucially they must also set out how emissions will be reduced. Scottish Government should be involved in such planning to ensure consistency with statutory targets and that Climate Change is central to these plans and adequately accounted for. The mix of devolved and reserved responsibilities may make this challenging at times, particularly in the case of oil and gas, but nonetheless leadership from Scottish Government is required.

2.12 We also recognise the need to acknowledge the challenges for firms, that must align commitments to decarbonise with the need to retain international competitiveness. Evidence from industry association representatives at one of our recent meetings made clear that there is a real risk of offshoring not only jobs but emissions also if the actions required cannot be delivered competitively. Transition planning must face up to this reality and confront the challenge of reducing emissions in ways that do not see high quality jobs leave the country.

2.13 We would also stress some of the positive examples we encountered during the last year which can be built on further. For example, the plans to expand Aberdeen Harbour as part of the City Region Deal, and the developing plans to repurpose the site of the former Longannet Power Station by Talgo.^[13] In November, we also visited Rumbletonrig Farm, which took part in the Farming for a Better Climate initiative.^[14] This demonstrated how, with support, one farm had begun to reduce its emissions while increasing profitability. Such positive examples can serve as a reminder of what is possible when support is in place and a clear vision is articulated by Government and implemented in partnership with businesses.^[15] However, while these plans are encouraging, we are in no doubt that a more rigorous and joined-up approach is needed that ensures all agencies are working with stakeholders towards a shared, common goal.

Future plans

2.14 In light of the importance we place on transition plans, we would recommend Government begins the ground work for developing these over the next year. As a starting point, a programme of engagement should be undertaken with businesses, workers, consumer groups and communities to clarify the role that different sectors will play in the transition to net-zero. This could build on engagement already taking place, but should also link to development of Scotland’s economic strategy. It may also be beneficial to begin to map the support provided to businesses, by Government, enterprise agencies, and local authorities to begin to consider whether these could be better coordinated as part of transition plans and a Green New Deal. It will be important to consider the way in which this transition planning interacts with policy frameworks that operate at the UK level, such as Sector Deals.^[16]

2.15 Over the next year we will consider in more detail what we think transition plans should contain, who should be involved in creating them, and the appropriate mechanisms for delivery. We also like to resolve whether planning could, or should, in any way be made mandatory by Government (and the possible levers for implementing such an approach), or whether they should be implemented on a voluntary basis through collaborative engagement with stakeholders.

2.16 Our work plan for 2020 is currently structured around a range of cross-cutting themes such as finance, skills and technology innovation which will help inform our considerations. We have also recently had a report prepared for us by SEFARI Gateway which profiles approaches to just transition internationally. We will use this as a basis for consideration of other approaches to just transition to consider whether these could be transferred to the development of transition plans in Scotland.^[17]