Just Transition Commission Interim Report

5. Opportunities and the need for immediate action

5.1 The scale of ambition set out in the Climate Change (Emissions Reduction Targets)(Scotland) Act 2019 represents a step change from previous targets and necessitates immediate, decisive action. The recent progress report from the Committee on Climate Change stresses that meeting these targets will require increased action from all sectors of the economy.^[27] Alongside the immediate need for action to reduce emissions, there is a pressing need to address existing inequalities in relation to work, housing, and transport.

5.2 Tackling climate change whilst addressing inequity and maximising economic opportunities presents a huge challenge for Government, but it is one that it cannot shy away from. The difficult decisions that will arise will need to be taken in the year ahead. As far as possible, we have argued in this report that Government should be considering action to combine all of these objectives.

5.3 We firmly believe that all decisions taken by Government in the year ahead need to be made with a view to supporting a just transition for Scotland. We don’t want Government to wait for our final report to begin planning how a just transition will be achieved. To help thinking on this matter, we’ve identified a number of preliminary conclusions that we hope will assist the development of the Government’s approach on just transition and where we think there is an opportunity for action in the year ahead.

Opportunities in the near-term

5.4 The following should not be taken as an attempt to pre-empt the final conclusions of the Commission, and are instead a summary of some of the areas we believe merit close attention from Government in the year ahead.

1) Ensure Fair Work is promoted across all climate change programmes receiving public money

5.5 The Scottish Government has made
the concept of ‘Fair Work’ central to economic strategy, with ambitions to be
a world-leading ‘Fair Work Nation’ by 2025. One delivery mechanism for achieving this is the promotion of Fair Work First, which seeks to extend Fair Work criteria to funding streams, business support grants and public contracts. In practice this should mean that to receive support, businesses are asked to commit to:

• Investment in skills and training
• No inappropriate use of zero hours contracts
• Action to tackle the gender pay gap
• Genuine workforce engagement including with trade unions
• Paying the real Living Wage

5.6 Across sectors of the Climate Change Plan, Government spends money supporting businesses to deliver programmes that deliver emission reductions. Whether funding is granted by Government, or through a delivery partner organisation, we would expect the Fair Work First approach to be the norm.

5.7 This is important for several reasons, not least because the promotion of Fair Work has the potential to alleviate all sorts of social concerns. We would also draw attention to the inclusion of just transition principles in the Climate Change Act which, in particular makes reference to the need to reduce net-emissions in a way which:

"creates decent, fair and high-value work in a way which does not negatively affect the current workforce and overall economy," ^[28]

5.8 This commitment in legislation, and the increase in activity resulting from the new targets, mean that ensuring sufficient priority is given to Fair Work as we reduce emissions will become increasingly vital.

2) Development of a Climate Emergency Skills Action Plan

5.9 Last year’s Programme for Government contained a series of new measures relating to climate change. We were encouraged to see the inclusion of a commitment to develop a Climate Emergency Skills Action Plan. The need for strategic planning on skills is likely to be an important factor in delivering a just transition for Scotland. Our current understanding is that this will be completed before the end of 2020.

5.10 As part of this Action Plan, we would expect to see assessment of workforces most likely to be affected by the transition (including those indirectly affected through supply chains), and the most immediate and pressing skills requirements needed to support the net-zero transition. It will need to identify skills for which demand can be expected to increase or decrease, and set out how these will be managed by the skills system in Scotland.

5.11 We would welcome engagement with the Government regarding what we believe the priorities and objectives for this Plan should be.

3) Place equity at the heart of the Climate Change Plan update

5.12 We have said already in this report that we hope the Climate Change Plan update currently being worked on by Government moves beyond being solely a document focused on emission reductions and begins to acknowledge and address equity concerns in a comprehensive way.

5.13 While we have outlined some of the reasons we believe this to be important in this report, we would also draw attention to the inclusion of just transition principles in the Climate Change Act. This commits Government to consideration of matters relating to fairness when preparing new Climate Change Plans under the terms of the Act. We recognise that this is an only an update of an existing Plan and is being completed in a short timescale. However, we believe that the Government should act in the spirit of the legislation and show that it is serious about ensuring just transition principles are central to its approach to tackling climate change.

4) Ensure the future of Agriculture support post-2024 reflects the importance of just transition for the sector

5.14 The Scottish Government intends to bridge the legislative gap left by Brexit through the Agriculture (Retained EU Law and Data) (Scotland) Bill, until future policy is implemented post-2024.

5.15 A group has been convened to consider future policy relating to support for farming and food production.^[29] However, the Committee on Climate Change have highlighted the need for the Scottish Government to define a long-term post-CAP framework that secures emissions reduction from agriculture.^[30] There is an opportunity for the new policy framework to incentivise better land use management rather than focusing narrowly on food production.

5.16 Like other sectors, agriculture needs to be supported to reduce emissions in a way which is fair – if not accompanied by dietary change, reducing livestock numbers may simply lead to emissions being offshored.^[31] This would clearly represent an unacceptable outcome for both the Scottish economy, farmers, and the environment. The Scottish Government should look at opportunities within the Agriculture Bill shaping support arrangements post-2024 to reflect the importance of a just transition for the sector.

5) Establishment of a Citizens Assembly in Scotland on climate change

5.17 A Citizens Assembly on climate change will be convened in the year ahead, operating independently of the Scottish Government. We have outlined in this report the need of an on-going, proactive, social dialogue with communities across the country to help define and address society’s concerns.

5.18 The creation of a Citizens Assembly is chance to inform the kind of dialogue that will have to take place in future. The remit of the Assembly should be established so as to reflect and support the Government’s desire to apply just transition principles to Scotland.

5.19 We would welcome further engagement with the Assembly regarding how this might be done.

6) Promoting Scotland’s approach to just transition at COP 26 and taking the opportunity to learn from others

5.20 COP 26 coming to Glasgow presents a unique opportunity for Scotland to demonstrate its leadership on this agenda. The potential to increase the profile of Scotland’s experience of planning for a just transition with not only an international audience but also the Scottish public is huge and an opportunity that cannot be missed. It will also be an opportunity to learn from others and strike partnerships that can support us through this challenge in future.

5.21 In the year ahead, we would like to work with the Scottish Government to develop plans to capitalise on the unique opportunity presented by COP 26.

7) Building on the success of energy efficiency initiatives and support them to expand

5.22 During our consideration of housing, we heard how existing energy efficiency schemes are delivering multiple benefits, in the form of reductions to fuel poverty, reductions to emissions, improvements to health, and the generation of new jobs. In doing so, energy efficiency provides a good example of just transition in action, particularly once efficiency gains enable sustained real income and spending gains.^[32] We are in agreement with the Climate Emergency Response Group that funding for these schemes should be expanded. The increase in funding announced in the Scottish Budget is a welcome step in the right direction.^[33],

5.23 Government has recently published a consultation on mandatory standards of energy efficiency for owner occupiers.^[35] We welcome the intention to improve the energy efficiency of Scotland’s housing stock, and we hope it will be matched by increased investment in supply chain support and skills development. We would also draw attention to the need to support consumers through this transition as being equally vital.

5.24 With regards to the question of how this is paid for, it seems clear to us that targeted finance must be prioritised on those least able to pay. Government must explore the scale of finance that will likely be required and the most appropriate mechanism for delivery. In particular, the role of the Scottish National Investment Bank must be considered. Other national banks, such as the KfW in Germany have had success in financing large-scale energy efficiency programmes, and the potential for this should be fully explored.^[36] Energy efficiency joins together many aspects of a just transition, and given that government has said delivering a just transition will be central to the new Bank there is even more reason to explore this in full.

8) Managing the opportunities and challenges of the transition to low-carbon heating

5.25 During the course of our work, we discussed the scale of the challenge relating to decarbonising domestic heating. There is uncertainty regarding the pathway to reduce emissions from heating, due in part to the need for UK Government to determine the future of the gas grid. But there is no doubt about the scale of the challenge regardless of which pathway is taken.

5.26 The Scottish Government should begin building the evidence base now that will allow it to identify which parts of the transition to low-carbon heating Scotland has specific advantages or opportunities in, and where it can secure additional economic opportunities. Lessons can be learned from the transition in the electricity sector. Some of this is already known – companies in Scotland are already involved in the manufacture of heat pumps, while there is emerging expertise in places like Orkney regarding the production and use of hydrogen. But we consider that it is crucial that planning is undertaken to determine how these opportunities will be maximised.

5.27 In addition to this, the question of who ultimately bears the cost for the transition must also be urgently addressed. While there is no reason to think that in the long-term that low-carbon heating will be more expensive than alternatives, it is likely that there will be transitional costs as new industries and technologies mature and they are deployed at scale.^[37] Government must consider and set out the policy mechanisms that will be used to best secure an equitable distribution of costs for the decarbonisation of heat during this transition.

9) Begin planning for and delivering inclusive low-carbon infrastructure now

5.28 Achieving Scotland’s climate change targets will require significant investments to be made (from both public and private sectors). While different estimates exist regarding the likely size of the investment that will be required, there is no doubt that we will need to see a significant change in our infrastructure so that it supports a net-zero economy. Government formed an Infrastructure Commission to advise on priorities for Scotland. Their recent report recommends that all Scottish Government funded projects in its 2020 Infrastructure Investment Plan should be prioritised against available inclusive net-zero economy outcomes, and that an updated assessment framework methodology be developed to assist prioritisation of infrastructure investments.^[38]

5.29 We would strongly agree with this recommendation, and make the point that infrastructure investment from Government should avoid locking in emissions and inequality in the years ahead. Doing so will also make the overall investment required to get to net-zero cheaper over the long-run, by avoiding the need to replace high-carbon infrastructure twice. Consideration of both emissions and equity will mean investments made by the public sector can help support a just transition.

5.30 One example of where Government can demonstrate its commitment to delivering inclusive low-carbon infrastructure is the delivery of the over £500 million investment promised in the Programme for Government to support bus priority infrastructure. We welcome this as an attempt to address the decline in bus passengers and reduce emissions in a problem sector.^[39] However, we would stress the importance of ensuring this investment is delivered in a way that boosts the connectedness of rural communities, and helps better support people reliant on these networks to access employment and local services.

10) Place the climate emergency at the heart of spending decisions

5.31 Scottish Government recently published its Budget for 2020-21. This contained a number of new spending commitments for tackling the climate emergency covering sectors including heating, industry, transport, agriculture and land use. We welcome these new funding commitments, but would make the point that managing a successful transition will require this to be sustained and built upon in the years ahead.

5.32 The Budget also confirmed that the previously announced review of resource spending will be postponed due to political, economic and fiscal uncertainty. When this does take place we would expect tackling the climate emergency in a way that is fair to be firmly at the heart of spending decisions. Government has stated that the upcoming Capital spending review will build on the work of the Infrastructure Commission for Scotland and Climate Change Plan, which we fully support.

5.33 Alongside changes to spending, we would highlight that just transition must be a central component of the Scottish Government’s inclusive economic approach. We recommend that the next update to the Scottish Government’s Economic Strategy should support the delivery of net-zero commitments and the just transition principles contained in the Climate Change (Emission Reduction Targets)(Scotland) Act.

11) Improved modelling and research to help understand the transition

5.34 We would also highlight the research gaps that exist in relation to the net-zero transition in Scotland. Filling these gaps could assist the development of evidence-based policy and make a real contribution to delivering a fair net-zero society. Some of the gaps we identified include:

There is a great deal of information and research regarding the number of jobs that may result from investment in a net-zero economy. However, what these job numbers mean in terms of job quality (contractual security, skills, earnings, voice), and the extent to which they offer fair work, is too often unclear.

More understanding is also needed on the scope of the ‘just transition challenge’ in Scotland – for instance, detailed mapping of jobs and skills in both existing and emerging industries will help shape transition plans.

We also believe a greater understanding is needed of the allocation of costs and benefits in relation to the net-zero transition. Needless to say, the way in which these are shared by consumers, businesses and the public sector will have significant implications for the equity of any transition.

5.35 While we plan to fill some of these gaps ourselves through commissioning of independent research in the year ahead, we would hope the topics identified above act to provide helpful direction to Government policymakers and researchers who are involved in this area.

12) Support to enable the oil and gas industry to transition

5.36 Bodies such as the Committee on Climate Change have made clear that there will still be a requirement for oil and gas in 2045, though that requirement will be much reduced compared to what it is today. The oil and gas industry currently provides and supports a large number of high quality jobs meaning any transition for the sector and its supply chain in the decades ahead will need to be carefully managed. Strategies such as Roadmap 2035 from Oil and Gas UK have begun to set out the role industry believe they can play in a net-zero economy.^[40]

5.37 There is a need to inject a degree of urgency and pace into the transition that industry needs to undergo. The Scottish Government have stated that support for the oil and gas industry is “conditional upon a sustainable, secure and inclusive energy transition”. The recent Budget provided funding to help the North Sea develop to become the first net-zero carbon hydrocarbon basin. To further support the deployment of CCUS and hydrogen, Government should consider supporting a programme of focussed research in collaboration with industry, with the aim of delivering a reduction in the costs of deploying these energy solutions in a way that secures a just transition for workers and stakeholders. Government must also push industry to ensure that sufficient concrete actions are being taken to deliver a just energy transition.

Future plans

5.38 We will continue to follow through with our work plan in the year ahead, and refine and expand our recommendations to Government. We have highlighted a number of areas in this report that we believe offer promise and could make an important contribution towards delivering a just transition for Scotland. We would welcome engagement with Government as these are developed in the year ahead.

5.39 It is important to us that our final recommendations accurately reflect the concerns and aspirations of individuals, communities and businesses across the country. We have heard from a range of voices over the last year, but we are conscious that we need to ensure everyone has had an opportunity to feed in their thoughts before we finish our work.

5.40 To support, this we are launching an open call for evidence. The questions we are asking are broad and hopefully give the opportunity for interested parties to outline their views and inform our final recommendations.

5.41 We want to hear your view on the just transition challenge in Scotland and what you think Government should do to manage the net-zero transition. Delivering on the opportunity of a low-emission, fairer society is a unique challenge that will need to be the focus of Government for years into the future. This is your opportunity to shape how Government should approach this challenge and we look forward to hearing your views.