Just Transition Commission: A National Mission for a fairer, greener Scotland

Delivering a just transition

Scotland has an opportunity to use the transition to net-zero as a catalyst for building a fairer, healthier, greener country. In the previous sections we set out what we see as some of the key challenges and opportunities. These considerations have framed the following recommendations.

Our vision is for a transition that is not solely about mitigating injustices that may arise because of climate change. We also seek to capture opportunities to address existing inequalities, making urgent climate action a driver of positive change that improves wellbeing. Delivering on this requires bold action. People need to see and experience the transition as being fair; pushing ahead without giving attention to a just transition will see progress stalled. Achieving climate targets and a just transition cannot be separated.

Where possible, we have tried to make recommendations that build on existing programmes of work, many of which we have already referred to above. There is much activity already happening that can contribute to a just transition. We urge policymakers to enhance existing work and mechanisms to deliver against the challenges and opportunities we have highlighted here. Where there are gaps we have not hesitated to recommend new initiatives. We recognise that this is a complex area. With all of this action, we will need to carefully assess impacts and have suitable monitoring strategies in place to see that the desired outcomes are being achieved (and that we are avoiding unintended consequences). We make further recommendations about scrutiny in the final section of the report.

While our remit asks us to deliver recommendations to Scottish Ministers, we identify others who have a crucial role in supporting action, or taking a lead. Successful delivery of a just transition will be a national mission, a truly national endeavour. Scottish Government has a vital role to play and must show leadership, but action will be needed from the private sector and all across Scottish society.

Our recommendations are grouped under four key messages. Under each of these, we include headline recommendations or desired outcomes in bold. These are followed by a range of policies and proposals on how they might be delivered, with actions directed at a range of actors. We then include a brief summary of why we feel each recommendation is particularly relevant to just transition.

Some of our recommendations are broad, and we recognise that further development is needed to translate them into actionable policy. In these cases, the headline recommendations are intended to give a sufficient steer on intended outcomes to assist implementation. See below, for a summary table of all of our recommendations.

In addition to all of the recommendations made here, there is a broader message for all citizens of Scotland. We can all contribute by trying to make choices that support a just transition, wherever we can. We can and should make businesses and other organisations aware of what we want from them. We can and should be involved in our local communities, and through our democratic systems, sharing our views and ideas. We can decide where we want to spend (or invest) our money, giving encouragement to the businesses who are already making the shift.

Key message one: Pursue an orderly, managed transition to net-zero that creates benefits and opportunities for people across Scotland

1 Ensure sufficiently developed roadmaps exist for the net-zero transition in Scotland, including for key technology options.

2 The public sector must be more prescriptive and strategic in its use of funding streams to build strong and resilient local supply chains

3 All levers should be used to achieve increased local content and more competitive Scottish offshore wind projects.

4 All public funding for climate action should be conditional on Fair Work terms

5 Just Transition plans for high-emitting industrial sectors of the Scottish economy and include clear milestones out to 2045.

6 Develop a position on the role of a carbon border tax to mitigate against the threat of offshoring emissions and jobs.

7 Establish a Just Transition Plan for Scotland's land and agriculture and include clear milestones out to 2045.

Key message two: Equip people with the skills and education they need to benefit from our transition to net-zero

8 Lay the groundwork for a flexible, accessible skills and education system that can meet the needs of net-zero while addressing existing inequalities in the labour market.

9 Create a skills guarantee for workers in carbon-intensive sectors..

10 Support small and medium sized enterprises to invest in their workforces.

11 Equip farmers and land managers with the skills, training, and advice they need

Key message three: Empower and invigorate our communities and strengthen local economies

12 Conclude the Local Governance Review at the earliest possible date

13 Implement Green Participatory Budgeting with agreed target levels of funding

14 Launch a call to action for engagement with Regional Land Use Partnerships

15 Apply the lessons learned from Scotland's Climate Assembly across the development of all policies for tackling climate change

16 Empower and resource local authorities to deliver a just and green recovery

17 A new "Sustainable Scotland" brand should be created to support Scottish agriculture deliver climate action and to empower consumers to choose sustainably produced food and drink

18 Scottish Government, local authorities and developers must commit to creating communities that embed low-carbon lifestyles, while improving our health and wellbeing

19 A statutory public interest test should be developed for any changes in land ownership over a certain threshold

Key message four: Share the benefits of climate action widely; ensure costs are distributed on the basis of ability to pay.

20 Decisive action must be taken to ensure that all consumers are able to benefit from the increasing availability of new ways of buying and selling electricity

21 Any additional costs for consumers associated with emissions reduction must be linked to ability to pay.

22 The power of public sector pension funds and business support funding must be directed towards ensuring companies align with the just transition to net-zero

23 New methods for funding the transition should be developed that mobilise finance towards local projects

24 We must move beyond GDP as the main measure of national progress. For a just transition to be at the heart of Scotland's response to climate change, Scottish Government must champion frameworks that prioritise wellbeing.

Key message one: Pursue an orderly, managed transition to net-zero that creates benefits and opportunities for people across Scotland

1. To move us from strategy development to delivery at pace, the Scottish Government must ensure sufficiently developed roadmaps exist for the net-zero transition in Scotland, including for key technology options.

a. Develop clear delivery plans and roadmaps setting out how net-zero will be met. These should not be narrowly linked to funding commitments, but address wider enablers such as governance, regulation, the creation of demand, supportive legislation, along with business and finance models.

This is needed to allow the private and public sector to plan, invest in skills and capacity, and lay the foundations for supply chain development in Scotland. We will need substantial levels of investment to reach net-zero. Investors need a high-degree of confidence in our direction of travel and future pipelines of work. We heard this message time and time again from businesses and their representative bodies through the course of our work.

As examples of what we mean by moving from strategy to delivery, we note the Scottish Government's position on offshore wind, hydrogen, and low-carbon heat. The Scottish Government has estimated 8-11GW of offshore wind could be developed by 2030; the Hydrogen Policy Statement^[71] committed to growing production to at least 5GW by 2030, and the heat in buildings strategy aims to substantially increase annual installations of low-carbon heating systems.^[72] These are positive statements of intent, which we welcome. Using road maps to set clearer direction of travel towards these ambitions will help lay the groundwork for Scotland to be at the forefront of the innovation needed for the net-zero transition.

2. To deliver maximum public benefit from public money, the public sector in Scotland must be more prescriptive and strategic in its use of funding streams to build strong and resilient local supply chains.

a. Continue to build on the enterprise agencies' good work in mapping supply chains for low-carbon technologies, keeping these up-to-date and expanding them to cover new and emerging areas (Scottish Industry Directories^[73]). Applicants for funding should be required to demonstrate how they will use these directories to develop their supply chains. For significant funding bids, a full supply chain statement should be considered.

b. Develop consistent, transparent and public criteria that allows swift funding decisions to be made. This must recognise that, in order to deliver best value from public funding, we must take into account the wider social and economic benefits that arise from the use of local supply chains. Such clarity is needed to allow industry to leverage and match funding at pace.

c. Align broader support for innovation with other funding streams from Scottish Government and enterprise agencies' to develop expertise in the whole-life cycle delivery of projects. Drive investment in innovation which accelerates the delivery of Scottish capability in new energy low carbon solutions or the transformation of the existing energy sector to a net-zero future. This should build on experience from both the recently announced Hydrogen Accelerator and Energy Transition Alliance.^{[74] [75]}

Much can be made of the role of Government in creating conditions to encourage investment. But care must be taken not to place too much confidence in a top-down model of economic development, reliant on a small number of corporate actors. For the transition to be just, and for it to gain any traction with workers and communities, we must be prepared to attach conditionality to funding streams to build and strengthen local supply chains that nurture competitive advantage. This is not a call for protectionism, but rather a more holistic way of defining best value in public sector funding.

Support for inward investment and efforts to make Scotland a good place to do business should ultimately be seen as part of a deal between the public and private sectors. The public sector provides the right conditions and seed funding for low-carbon technologies, while the private sector commits to building local supply chains through their operations. A number of funding streams already support deployment of low-carbon technologies in Scotland.^[76] The above actions should be taken to embed just transition considerations in funding, finance and business cases and ensure these bring with them appropriate supply chain development.

3. The Scottish Government must use all available levers to achieve increased local content and more competitive Scottish offshore wind projects.

a. Continue to make the case to the UK Government for reform of Contracts for Difference, so that it is contingent on a proportion of local content in the capital stage of projects.

b. Leverage the upcoming ScotWind leasing round to both improve the competitiveness of the Scottish offshore wind industry and deliver higher social value.

The UK Government is currently reviewing the support for renewable energy offered through Contracts for Difference. The outcome of this review could help support a thriving supply chain for renewables. Scottish Government must continue to press the case for Contracts for Difference to be reformed so that it is contingent on a proportion of local content in the capital stage of projects. Compliance against any targets should be enforceable, and a transparent method of measuring local content should be established to enable this.

The Scottish Government should also use the leverage offered by upcoming ScotWind leasing round to both improve the competitiveness of the Scottish offshore wind industry and deliver higher social value for projects in Scottish waters.

Case Study – BiFab

Burntisland Fabrications Ltd (BiFab) grew by delivering major fabrication works to the offshore oil and gas industry. The company comprises of three sites – two in Fife, and one in Lewis. It was hoped that Scotland's burgeoning offshore wind sector would offer fresh opportunities for diversification.

Despite some successes, the yards struggled against growing competition from facilities abroad, initially in Europe, and latterly Asia. With the threat of administration looming, workers from the BiFab yards marched on the Scottish Parliament in November 2017, securing financial support for the business from the Scottish Government.

But the yards continued to struggle to win business, and eventually entered administration at the end of last year. We wrote to the Scottish Government at the time, reaffirming the importance of standing by the workers and leaving no stone unturned in pursuit of strengthening the supply chain for renewables here in Scotland.^[77]

The yards are now under new ownership, and hopes are renewed they will be able to service upcoming offshore wind projects. While just one example, the case of BiFab serves as an important reminder: if the transition does not result in tangible opportunities, the concept of just transition will be damaged for workers. This reaffirms the importance of maximising the opportunities of climate action, to the benefit of communities across the country.

4. To avoid a race to the bottom in our net-zero supply chain and embed quality work across the economy, all public funding for climate action must be conditional on Fair Work terms.

a. Apply Fair Work conditions to all climate change funding, as outlined in our interim report.^[78] Defined as 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. Conditionality must keep pace with changes in Fair Work practice, as developed by the Fair Work Convention› This is already in line with Scottish Government commitments, but we would urge all agencies and partner delivery organisations to also apply this rigorously. Where possible, existing national sectoral collective bargaining agreements should be used as a basis for setting expected minimum labour standards.

b. Consult the Fair Work Convention ahead of the next statutory Climate Change Plan in 2023 to help inform the development of monitoring indicators tracking progress towards a just transition.

Certain sectors that will be vital to delivering net-zero targets have traditionally displayed low levels of Fair Work.^[79] Using public money to raise standards will be vital for a fair jobs transition and can also help the skills aspect of the transition. Scotland spends less on retraining than competitor nations. The public sector alone cannot rectify this and so prioritising and supporting employers who provide Fair Work (and who are more likely to support the development of their employees) makes sense.

5. Just Transition plans for high-emitting industrial sectors of the Scottish economy must be created at the earliest possible date with clearly measurable milestones and decision points that align with the Climate Change Plan out to 2045

a. Scottish Government must require, and help facilitate, the development of a shared vision for individual high-emitting industrial sectors out to 2045, identifying the key technology options and infrastructure needed to deliver this (building on recommendation 1). Existing forums such as NECCUS could be effective in driving forward progress, if supplemented by engagement with trade unions. Priority for this action should be attached to those sectors making the most significant contributions to emissions and employment, or offer the most significant opportunities in a net-zero economy.

b. Build on this vision to develop phased, sequenced action plan that gives sufficient direction to public and private investment. This should identify key decision points that will enable the transition. Where possible, make public funding sufficiently long-term to provide certainty and clarity.

c. Commit to co-ordinated action across the public sector in Scotland to support transition planning, including through enablers such as the skills and planning systems, enterprise and infrastructure spending. In recognition of the vital role of UK Government in this space, engage proactively to ensure policy is suited to the unique characteristics of Scottish industry (in line with recommendation 6).

d. For sectors that make particularly strong contributions to their regional economy,^[80] build links between transition planning and place-based economic development programmes. For example, this should include funding aimed at diversification and strengthening of local economies, with communities engaged as partners for change.

e. Outline what commitments will be made by the public sector to people and places at risk of being left behind, should just transition planning fail to achieve a managed transition that protects and grows employment (recommendation for this is in the next section).

Our intended outcome for this recommendation is the development of a shared understanding of how the transition is to be managed for specific circumstances. Our interim report highlighted the heightened risk of injustice emerging through an unmanaged transition. While recognising the split between devolved and reserved competencies in supporting industrial decarbonisation, it is imperative that do all we can to create conditions for a managed transition.

Planning for net-zero needs to happen across a variety of sectors, and at different levels, right down to that of individual companies. Through the course of our work we saw examples of sectors at varying levels of development with regards to their thinking on the net-zero transition. Where such thinking is undeveloped, or not aligned with our ambitions on climate change, there is a need for Scottish Government intervention to stimulate the creation of plans that will help support a just transition. Existing forums that support industrial decarbonisation along with wider engagement with trade unions must drive forward progress where this is the case.

Case Study – Learning From Previous Transitions

The Commission partnered with SEFARI Gateway to undertake a study of lessons learned from managing previous transition processes. In Dr Annabel Pinker's report, lessons were drawn from the analysis of cases from five countries, using both industrial and land-based contexts.^[81]

One of the cases analysed was that of the Ruhr valley, a leading industrial region in Germany which declined through the 60s and 80s, gradually transitioning to a knowledge economy with growing renewable energy generation. The story of how this restructuring happened can be seen to follow a series of inter-dependent waves. Initial efforts were heavily focused on restoring and preserving jobs lost in traditional industries. However, this shifted over time as efforts focused on much more active structural change and support for strengthening the role of SMEs, by promoting technology transfer and diversification.

A series of lessons can be drawn from the case of the Ruhr valley, and other episodes of structural change:

• Planning and investment: develop early strategic planning, to diversify economic activity and address issues beyond job substitution and retraining, looking at, for example, new infrastructure, new industries and educational initiatives.
• Engagement: develop processes for stakeholder participation in planning, and broaden them so they do not focus only on workers in carbon-intense sectors. New projects must speak to people's imagination and help reorganise aspirations.
• Policy development: embed just transition across every bit of relevant legislation, regulation and planning. Recognise that while centralised strategic planning is needed, transitions are context-dependant and accordingly need to draw on local knowledge.

A key question for the creation for sectoral Just Transition plans will be how they will be implemented, and what levers are available to Scottish Government to incentivise disparate actors to play an active role in their creation. While voluntary approaches should be explored, the Scottish Government must consider the full range of levers at its disposal to incentivise collaboration.^[82] Over time, it is vital that such sector plans sit within an overarching industrial strategy.

6. Scottish Government should develop a position on the role of carbon border taxation to mitigate against the threat of offshoring emissions and jobs.

a. Develop a position on the potential and scope of a carbon border tax, taking account the unique characteristics of Scottish industry and wider impacts on the economy, and engage with the UK Government around the future development of any such scheme.

Increasing attention is being paid to the role of carbon border adjustments to protect domestic industry against competition from those subject to less ambitious climate policy requirements. The Climate Change Committee has raised a carbon tax as a possible intervention for the UK Government to consider. We also note that discussions are currently taking place at the EU level.

During the course of our work, we often heard about the potential for such a measure, but acknowledge that the potential for unintended consequences of such interventions must be taken into account. Carbon border taxation (or any carbon pricing) will have a significant impact on a range of prices, and potentially jobs. Distributional impacts need to be explored as well as the need to balance competing priorities (protecting industry as it reduces emissions and protecting low-income households). While reserved to the UK Government, the Scottish Government cannot be a bystander in any debate and must develop a position in the interests of the Scottish economy.

7. The Scottish Government must establish a Just Transition Plan for Scotland's land and agriculture with clearly measureable milestones aligned with the Climate Change Plan out to 2045, recognising the structural transformation already underway as a result of the pandemic, climate change and upcoming reform of rural support schemes.

a. Investigate potential for increasing support offered through the Agriculture Transformation programme. This needs to include provision of tailored advice and crucially, scope for a cash injection that some farmers will need to cope with the upfront costs associated with some mitigation measures.^[83] Alongside this, the regulatory baseline should be strengthened to create a more level playing field for those who are doing the right things already.

b. Inject fresh impetus into programmes that promote new entrants into the agriculture sector in recognition of the aging workforce, and the new ideas and productive practices that new entrants often bring with them.

c. Develop financial support for people in the agriculture industry nearing retirement who decide to leave the industry as a result of changes being introduced. The level of this should be set by Government but consulted on and negotiated with industry bodies.

d. Change planning regulations to allow older people leaving the industry to remain on their property, and not be forced to move from the locality where many will have spent the majority of their lives.

Delivering a just transition for rural Scotland faces distinct challenges. Funding support for agriculture will be reformed by 2024, with promises of rewarding a more holistic approach to stewardship of the land. But this is set against a backdrop of wider changes brought about by the pandemic, including the impact on tourism and changing patterns of work.

There is a need to inject clarity on the journey rural Scotland must embark on to meet net-zero, and set out how the transition will be just. The updated Climate Change Plan recognises the transition agriculture must make and outlines a range of industry-led sub-sector groups to discuss emissions reduction. The output of these groups must be brought together as an overarching plan that sets out how a just transition will be achieved.

Key message two: Equip people with the skills and education they need to benefit from the transition

8. Lay the groundwork for a flexible, accessible skills and education system that can meet the needs of net-zero, while addressing existing inequalities in the labour market.

a. Review how climate change is embedded in learning across all school ages. This should build on the experience of the Learning for Sustainability programme to ensure all children are taught about climate change, and that teachers are equipped with the necessary training needed to do so.

b. Leverage the transition as an opportunity to help address existing labour market inequalities. This can be achieved by building on existing sector initiatives that aim to increase employment of women, BAME and disabled people recognising that this is the socially just, and economically sensible thing to do.^[84]

c. Address the gender imbalance in STEM subjects and careers in digital skills jobs, and the recruitment practices of industry employers, particularly with regard to entry-level jobs.^[85] Public procurement contracts should include binding clauses for greater equality and diversity in modern apprenticeships.^[86]

d. Explore changes to funding so that Universities and Colleges are supported to introduce new courses related to climate change, even where applicant numbers may initially be low.

e. Undertake research to better understand the impact of under-utilisation of skills on achieving a just transition to net-zero in Scotland. Where any issues are identified, interventions should be designed that will encourage and facilitate employers to utilise existing skills in the workplace.

Climate change is one of a number of structural shifts that will affect our labour market, alongside wider trends such as digitalisation and the impact of the UK's exit from the European Union. Some have estimated that 10% of all jobs in Scotland could face some retraining needs as a result of the transition to net-zero, with variation around the country.^[87] Businesses in Scotland – like the rest of UK – have historically invested less in skills development than competitor countries.^[88] Research has also consistently demonstrated the underutilisation of existing skills in Scotland.^[89]

Persistent gender disparities exist in relation to digital and STEM skills,^[90] both of which are key to delivering a net-zero economy. If we look at specific industries such as offshore wind, we see that as recently as 2019 only 16% of the workforce are women.^[91] A recent study found 'environment professionals' to be the second least racially diverse occupation in UK.^[92] These issues will need consistent attention over a number of years, if we are to build a more inclusive workforce across key net-zero sectors.

We need to identify ways to build a more flexible, responsive, accessible skills and education system that can deliver an inclusive transition. Relying on the post-school education and skills system and employers to address this would be difficult and expensive. The behaviours and skills that will become increasingly important over time should be nurtured in early years education, as far as possible.

9. Scottish Government, working with its agencies, should establish a skills guarantee for those whose livelihoods are negatively affected by the transition to net-zero enabling them to seek employment in low-carbon sectors.

a. Establish a long-term commitment to support retraining for workers in carbon-intensive sectors, beyond the horizon of the pandemic, in recognition of the strategic importance of utilising the skills of our workforce for meeting net-zero. Direct public funding should be combined with careers guidance support, to ensure that the burden of retraining costs do not fall solely on those impacted.

b. Advertise the offer 'on-the-ground' to ensure a high degree of visibility, and promote it through social partnership with trade unions and industry. Employers should actively promote the service to all workers in advance of any redundancy or significant strategic change process. Recognising the importance of the wider supply chain, the service must be open to the self-employed too.

c. Achieve the labour mobility we need to deliver a just transition by taking action to increase the portability of skills, across the energy sector in particular.

Carbon-intensive sectors continue to support a large number of jobs, and are especially important contributors to certain regions such as the north east and central Scotland. The economy will shift and change as we transition to net-zero. New opportunities will emerge, while employment in certain sectors may decline. Some workers in carbon-intensive industries will find it relatively easy to move towards new opportunities. However, certain occupations may be at risk of being left behind in the absence of support.

Alongside targeted support for retraining, action to increase the portability of skills within the energy sector will be fundamental in achieving improved labour mobility. This could be delivered in several ways: the idea of a skills passport was frequently suggested to us during our work. Workers and their representatives frequently told us about the problems caused by differing qualifications between offshore sectors, with the significant costs of gaining these typically borne by the worker.^[93]

Work is underway through the Energy Skills Alliance to address some of these issues. We hope this engages widely, across carbon-intensive and low-carbon sectors. Scottish Government, working with UK Government and bodies such as the Health and Safety Executive, must press industry for speedy action on the portability of skills between sectors and make clear the importance of this as a demonstration of industry's commitment toward Scotland's ambition to deliver a just transition. The cost of portability of skills must not fall solely on workers.

10. Support small and medium sized enterprises to invest in their workforces and drive a just transition to net-zero.

a. Examine the effectiveness of existing sectoral and regional outreach mechanisms in informing business owners, managers and workers of the training opportunities available to them.

b. Boost funding opportunities to help smaller companies release their business owners, managers and workers for training.

c. Identify opportunities to support accreditation regimes that create incentives for small companies to invest in training themselves, building on the good example set by the Energy Efficient Scotland programme and the power of public procurement.

Small and medium sized enterprises (SMEs) are the lifeblood of the Scottish economy, making up 99% of all private sector businesses and supporting 56% of private sector employment.^[94] They will be key to driving our transition to net-zero and delivering a just transition. As an example of this, many of the actions needed to support the widespread roll-out of energy efficiency and low-carbon heat will be undertaken by small construction businesses. The servicing of electric vehicles will have an impact on the demand for services currently offered by the motor trade, often small businesses.

Small businesses, including the self-employed, consistently identify more barriers to accessing training than larger firms.^[95] To address this, Skills Development Scotland and Scottish Government should continue to build on the commitments in the Climate Emergency Skills Action Plan^[96] and review the areas above.

Case Study – A.C Whyte Skills Academy

A.C Whyte are based in East Renfrewshire and specialise in delivering major refurbishment and external wall insulation projects throughout the UK. They work closely with Local Authorities and Housing Associations to improve energy efficiency of social housing, as well as supporting clients to access funding for upgrades that will improve the energy efficiency of privately owned properties.

In 2018, A.C Whyte launched their flagship Skills Academy in partnership with West College Scotland to support securing a long-term, sustainable workforce. A.C. Whyte and have since announced their second Academy with South Lanarkshire College in early March of this year. The Skills Academy curriculums are industry-led and provide a diverse group of students with the opportunity to learn the skills and techniques to become fully qualified external wall insulation installers, who graduate with a recognised qualification. They are also guaranteed a permanent job with A.C. Whyte on successful completion of the course.

Examples like these, where SME's have taken ownership of their skills needs, should be celebrated. Many more such examples will be required if we are to have the workforce needed to reach net-zero, and the public sector will need to focus on making it as easy as possible for businesses to do the right thing and invest in their workforce.

11. Equip farmers and land managers with the skills, training and advice they need to deliver the sustainable land management required to reduce climate impact and address the nature emergency.

a. Develop on-going professional development so that it is increasingly targeted at better efficiency and emissions reduction.

b. Explore the potential for regular professional development to be a precondition for accessing the new rural support mechanism post-2024.

c. Building on current good practice, the Farming for a Better Climate service should be expanded.

d. Scale up rural advisory service and upskill rural advisors to deliver a programme of advice tailored to delivering emissions reductions. This should increase the provision of one-to-one advice. Specialist ecological, climate and integrated land use expertise and advice should be widely available to identify farm level interventions and support farmers to deliver changes.

Scotland's farmers and land managers face many of the same challenges faced by smaller companies, as outlined above. New further and higher education courses are needed to train the next generation of land managers in climate-friendly farming techniques. They need support to upskill and adapt to new techniques that will help us respond to climate change, biodiversity loss and our need for sustainably produced food.

Case Study – Farming For A Better Climate

Farming for a Better Climate works with a number of "climate change focus farms" across Scotland, providing a hub of information and ideas and support for farmers seeking practical ways of reducing the carbon footprint of their farm, and adapting to a changing climate.

Stephen and Sheena MacKenzie were participants in the second round of climate change focus farms, working closely with two other focus farms in the region. All three farms had extensive upland ground, supporting sheep and beef cattle on their holdings. Through the project, Stephen and Sheena explored a range of measures, including improving soil quality, grazing patterns, reducing reliance on inorganic fertilisers, and changes to their livestock operation.

Through the initiative, Stephen and Sheena reduced total emissions from their farm by 18% over the duration of the project, while saving around £9,000 across their business.

Continued effort across the sector will be needed, but initiatives like this demonstrate the potential of collaborative working for both reducing emissions, and delivering a just transition.

Key message three: As we take climate action we need to empower and invigorate our communities and strengthen local economies

12. In recognition of the vital role it could play in empowering communities and giving them greater control over how we transition to net-zero, Scottish Government and COSLA ^[97] must work together to conclude the Local Governance Review at the earliest possible date.

a. Speedily conclude the Local Governance Review, taking bold action to agree concrete steps that will support participation and local democracy.

b. Recognise the role of Community Councils - or any equivalent resulting bodies from the review - as a key part of our social infrastructure, and investigate the potential for increased powers and resources to be directed at community level to ensure any new arrangements support wider participation and become more representative of local people.^[98]

c. Set out measures to raise capacity across the country, recognising the importance of local circumstances and differing stages of development that exist.

Most people will experience national climate change policies through the impact they have on local services, such as how and when their waste is collected, the transport options available to them and increasingly, what options are available to them to heat their home. Reaching our emission reduction targets implies far-reaching changes to all of these things.

Without finding ways to give greater power to communities over decisions that affect them, opportunities to find the most effective solutions for local circumstances will be missed. Throughout the pandemic, we have seen the impact that communities and the community sector can have, stepping in to deliver vital support and often working innovatively in incredibly challenging circumstances.

We need to capitalise on this as we emerge from the pandemic, and turn the power and attention of communities towards delivering a just transition to net-zero. Any efforts to increase participation in climate policy are likely to need strong, empowered, local democracy across the country, supported by organisations such as Development Trusts and local Trades Councils.

13. To place people at the centre of local climate action, Scottish Government and COSLA should implement Green Participatory Budgeting with explicit recognition of just transition principles, and agree to target levels of funding.

a. Set a target level of funding allocated through Participatory Budgeting for projects that support a just transition to net-zero. This builds on the current agreement between Scottish Government and COSLA to work towards allocating £100 million through Participatory Budgeting.

Meeting our aspiration of a transition that has people and places at its heart requires the meaningful involvement of Scotland's citizens in decisions that affect them. One approach attracting attention in this space is Participatory Budgeting.^[99] This involves members of a community deliberating on the allocation of public funding for a service area, and is an effective way of bringing together a range of service users to air competing needs and find consensus.

Any target level of funding will need to recognise the varying capacity that currently exists in local authorities across the country, but would serve as a powerful aspirational signal from which good practice could be developed and shared.

14. Scottish Government should launch a call to action for people to get involved with the new Regional Land Use Partnerships in order to build consensus around how land is put to use for our net-zero transition.

a. Launch a call to action for people – particularly rural land users – to get involved in the work of these Partnerships when they are initiated.

b. Prepare clear guidance for these Partnerships to ensure consistency with the national net-zero transition.^[100]

c. Ensure that these Partnerships are adequately supported and resourced to produce regional land use frameworks by 2023, and that the remaining Partnerships are established as a matter of urgency.

We have mentioned the need for robust systems of governance to manage land use in Scotland, bearing in mind that the transition to net-zero will see more and more demanded of our land. The introduction of Regional Land Use Partnerships has the potential to be a positive development in this space. Given the particular contribution these Partnerships could make to managing land use change equitably in rural areas, we urge the Scottish Government to ensure they are in place across the country before the future rural support scheme is established in 2024.

For these Partnerships to be effective in promoting a just transition, membership will need to be truly representative. These Partnerships are an opportunity to meaningfully engage with those actively work and manage the land, as well as those who are impacted by land use decisions.

15. Scottish Government must learn from the experience of deliberative forums such as Scotland's Climate Assembly, and apply the lessons widely across the development of policies for tackling climate change.

a. Take prompt action to apply the lessons learned from the Assembly when it publishes its final report later in the year and consider opportunities to run similar 'mini-publics', or other innovative participatory approaches, as part of an overall strategy to broaden and deepen opportunities for people to participate in shaping climate policy.

b. Develop a set of principles to underpin fair and inclusive climate action based on the Assembly's final report and embed these across policy development to drive just transition.

Our interim report highlighted the potential for new participatory models such as the Climate Assembly to inform Scotland's transition to net-zero. The Assembly was given the open question, "How should Scotland change to tackle the climate emergency in an effective and fair way?". Such deliberative forums are useful for cancelling out the 'noise' that often exists in difficult debates around climate action. They can be helpful in agreeing important principles for action, based on the best available evidence and the priorities of communities across Scotland.

The Climate Assembly will report later this year and the Scottish Government must commit to applying the lessons learned to the development of climate change policy in Scotland. In particular, Scottish Government should use the final report of the Climate Assembly as a tool for understanding the essential principles that need to underpin fair and just climate action. Once developed these should be embedded across the policy development process to help drive a just transition, particularly leading up the next full statutory Climate Change Plan, due for publication in 2023.

Case Study: Scotland's Climate Assembly

Climate change legislation passed by the Scottish Parliament in 2019 required Scottish Ministers to establish of a Citizens Assembly. In our interim report we highlighted the potential of this in helping to inform and frame Scotland's response to climate change.

Comprising of around 100 members, selected to be broadly representative of Scotland's adult population, the Assembly was tasked with making recommendations around the question, 'how should Scotland change to tackle the climate emergency in an effective and fair way?'.

Several members of our Commission have provided input to the discussions of the Assembly, and the outputs when published should help further inform the delivery of climate action in Scotland that is firmly rooted in principles of fairness.

16. Scottish Government should empower and resource local authorities to deliver a just and green recovery in recognition of the need to rebuild and strengthen local economies.

a. Establish the delayed Publicly-Owned Energy Company at pace with a broad remit. This must include capacity to provide technical assistance to local authorities and social enterprises looking to invest in energy projects. There is a window of opportunity with the passage of the recent Heat Networks Bill for this to have genuine social impact.^[101]

b. Explore financial vehicles that could facilitate investment in small-scale local climate action as part of community wealth building approach, including working with credit union bodies, social investor organisations, and Development Trust Association Scotland.

c. Support sustainable produce by:

• Launching a call to action (with support, and potentially new infrastructure) for farmers to build thriving local supply chains; and
• Align the power of the public sector, including procurement, to support local, climate-friendly, healthy produce at every opportunity. The public sector feeds some of our most vulnerable in society, in schools, hospitals and prison, this is a chance to demonstrate what a Good Food Nation looks like, where people are interested in the food they eat and that quality, healthy food is available to those who need it.

d. Identify opportunities to support community-managed, or owned, woodlands in a way similar to support given for community energy, to drive action and help spread the benefits of climate action.

Local action makes an essential contribution to the delivery of national priorities on climate change and can support a just transition. Through our work we saw many examples of this, with councils and social enterprises taking the lead and combining climate action with social impact. These included Aberdeen Heat and Power, a not-for-profit company providing district heat networks. We also learned about North Ayrshire's approach to a green recovery based firmly on Community Wealth Building principles, and East Ayrshire's National Energy Research and Demonstrator.^[101] Growing this "social economy" should be a fundamental part of delivering a just transition in Scotland.

Case Study – North Ayrshire Council Community Wealth Building

North Ayrshire Council launched Scotland's first Community Wealth Building strategy in May 2020. It sets out how the council will work in partnership with local communities, businesses and wider regional anchor institutions to create a fairer local economy.

Earlier this year, the Cabinet of North Ayrshire Council approved the development of a solar PV farm, near Kilwinning, with the council funding £4.5 million of total £6.8 million project. The solar PV farm will provide opportunities for local suppliers, making best use of the public sector land, keeping finance in the area, while supporting wider ambitions around municipalisation.

Other initiatives are being progressed in a similar vein by the council. These include a tree planting strategy, along with the creation of a dedicated green jobs fund. All this is being done against a backdrop of the pandemic and challenging funding landscape for the public sector as a whole in Scotland. These projects remind us of the importance of locally-driven action, both for responding to climate change, and delivering an inclusive transition.

Local delivery will be vital for meeting our ambition in areas such as buildings and the natural environment. As we emerge from the pandemic, the Scottish Government should look to strengthen support to local authorities and community groups to enable them to tackle climate change and rebuild local economies.

17. A new "Sustainable Scotland" brand should be created to support Scottish agriculture in delivering climate action and empower consumers to choose sustainably produced food and drink.

a. Work with Scotland Food and Drink to develop new branding which identifies domestic, sustainable and locally produced food, and its climate impact, either as part of existing brands or, more ambitiously, as part of an over-arching Scottish brand.

b. Partner with an independent environmental organisation to develop metrics, validate, and provide confidence in this brand.

c. Press the UK Government to reform country of origin labelling to further support the development of a trusted and respected Sustainable Scotland brand.

d. Bring forward the delayed Good Food Nation Bill in the new Parliament at the earliest opportunity. This will help to develop an integrated food policy that involves consumers in the transition and addresses the social, health, and climate challenges of our current food system.

Our farmers need to be supported through the transition, just like workers in other sectors. The risk of offshoring emissions is a real threat and must be avoided if we are to have a truly just transition. Increasingly, consumers are demanding sustainably produced food.^[103] Empowering individuals to make positive choices would be a powerful signal and help reward climate-conscious farmers. It would also place Scotland at the forefront of consumer demands for sustainable produce, supporting our Food and Drink sector's exports. Given the importance of the UK internal market, building upon existing initiatives or adopting a UK-wide metric, such as that being developed by the Sustainable Food Trust, should be considered.^[104]

18. Scottish Government, local authorities and developers must commit to creating communities that embed low-carbon lifestyles, while improving our health and wellbeing.

a. Partner with local authorities (at least one largely-urban and one rural authority) to pilot targeted expansion of access to free public transport in order to fully evaluate whether impacts on emissions and social inclusion would justify the cost of such a policy nationally.

b. Include a clear and thorough definition of 20-minute neighbourhoods and their characteristics in National Planning Framework 4, along with a strong steer from Scottish Ministers to support them as a priority.

c. Support planners with adequate provision of spatial data to help inform planning decisions supporting the principle of 20-minute neighbourhoods, and defend them against challenges.

d. Enable participation and discussion regarding creation of 20-minute neighbourhoods, for both new and existing developments, using the Place Principle and Standard.^[105] This should be strengthened through full implementation of recommendations 12 and 13.

e. Place a duty on planners, when challenged, to publicly outline how decisions they have made are compatible with national planning guidance relating to 20-minute neighbourhoods.

f. Undertake a rolling programme of improvements to rapidly increase capacity and to entirely decarbonise all of the nation's existing public transport systems (bus, rail, and ferry), in order to widen access to more modern, reliable, sustainable alternatives to single-occupancy car use.

The pandemic has been a stark reminder of the important link between housing and health, and the inequality faced in the provision of quality housing, transport links and access to greenspace.^{[106] [107]} As we emerge from the pandemic we need a commitment to prioritise the creation of quality communities, firmly rooted in place-making principles. Continuing with sprawling, car-dependent developments on greenfield land cannot continue to be the norm. At the same time we also need to rethink the layout of our existing neighbourhoods.^[108]

During the course of our work we heard about the potential of 20-minute neighbourhoods, which aim to give people the ability to meet most of their daily needs within a 20-minute walk from their home. We were pleased that commitment to these was included in the last Programme for Government. The effective application of this policy offers much promise – in urban areas at least - to contribute towards a reduction of transport emissions while improving social inclusion. The actions outlined above will enable our planning system to support the development of 20-minute neighbourhoods by giving sufficient power to withstand challenge from developers, while holding them to account after decisions have been made.

Short-term measures must also be identified to support low-carbon lifestyles, and good public transport will underpin the 20-minute neighbourhood concept. Transport Scotland have made a number of commitments that will help, such as funding for bus priority infrastructure and we have welcomed these in previous reports. Given the trend of declining bus passengers, radical interventions to address this must be considered.

19. To hand power back to our communities, the Scottish Government should develop a statutory public interest test for any changes in land ownership above a certain threshold.

a. Develop and implement a statutory public interest test for land transfers over a certain threshold, in line with proposals suggested by the Scottish Land Commission.^[109]

Forums for deliberating land use management will be vital and Regional Land Use Partnerships can be a key tool towards forging a consensus-driven approach, particularly for rural areas. However, we recognise there is also need to give communities statutory power to influence major land use decisions that affect them.

This will be increasingly important, as more and more is demanded of our land through the transition to net-zero. We believe this would be a valuable way of placing power in the hands of communities, and complement governance forums such as the Regional Land Use Partnerships in helping to make sure we have a just transition for Scotland's land.

Key message four: Share the benefits of climate action widely, while ensuring that the costs are distributed on the basis of ability to pay

20. The benefits arising from the transition must not go to a privileged few: decisive action must be taken to ensure that all consumers are able to benefit from new ways of buying and selling electricity.

a. Give Consumer Scotland a direct obligation to track key indicators regarding the distribution of costs related to the net-zero transition, including but not limited to electricity, heat and transport. This should identify any emerging consumer injustice or disproportionate allocation of costs, as they emerge.

b. Partner with Distribution Network Operators to support (with funding and evaluation) a programme of pilot interventions in order to gather a greater understanding of how to increase take-up and widen access to participation in smart energy, in recognition of the many barriers that consumers may otherwise face.

c. Review and align a range of enabling factors to ensure they support greater participation in the energy market, particularly by consumers who may otherwise be at risk of being left behind. This includes housing regulations, building standards, and broadband provision.^[110]

d. Address impacts on consumers in the next statutory Climate Change Plan, in a manner similar to that prescribed for workers, employers and communities in the legislation.^[111]We envisage that this would require household distributional analysis of any policies and proposals that have a direct impact on consumers.

Our energy system will need to become smarter and more flexible if we are to meet our target of net-zero emissions in a cost-effective manner. New ways of buying and selling electricity will increasingly become available to consumers, such as battery storage and local peer-to-peer trading, alongside new technologies for heat and transport.

Through the course of our work we heard that many consumers are not actively engaged in the energy market. There are a number of reasons for this, including availability of finance, tenancy conditions (such as for housing associations), or even factors as simple as the lack of a good broadband connection. Because of this, there is a risk that new injustices will emerge as the energy market rapidly evolves. While recognising the split between devolved and reserved capacities in this space, Scottish Government can still take meaningful steps to make the transition more inclusive by taking the actions outlined above.

Case Study – Centre For Sustainable Energy Smart And Fair Project

The Centre for Sustainable Energy, supported by two electricity network operators, established the research programme "Smart and Fair?" in June 2019 aiming to explore social justice through the energy transition.^[112]

Phase one of the research programme has concluded, and resulted in development of an analytical framework to help understand the nature of requirements being placed on consumers in order for them to benefit from smart energy offers, how these are distributed across the population, and the types of interventions that might be needed to reduce the likelihood of some being left behind by the market.

Analysis to date has revealed two important conclusions. Smart innovation in the energy market will bring with it new ways of generating unfairness and leaving people behind, but the innovation we need is unlikely to occur if we insist on every offer being fair from the outset.

Smart and fair outcomes will not emerge from the market without deliberate and purposeful action from policymakers. Engaging in this kind of analytical work here in Scotland could be a productive first step in setting out how to do so.

21. Any additional costs for consumers associated with emissions reduction must be linked to ability to pay.

a. Recognising that action may be constrained by devolved and reserved competencies, the Scottish Government should proactively engage with the Department for Business, Energy and Industrial Strategy regarding the upcoming Call for Evidence^[113] that is intended to begin strategic dialogue on fairness in the energy system, along with any other changes to UK-wide environmental taxation.

b. Continue to increase the pace of existing energy efficiency programmes, particularly those aimed at the most vulnerable, recognising that one of the most effective ways of preventing increased fuel poverty will be reducing the energy demand of our housing stock.

c. Investigate how devolved Social Security powers could be used to fund transfers to vulnerable consumers, as a last resort, to ensure no-one suffers from fuel poverty directly as a result of the net-zero transition.

d. Publish distributional analysis demonstrating that any revenue-raising powers devolved to local authorities to pay for climate action will be progressive.

To sustain climate action, it will be imperative that the transition is both fair and perceived as being fair. When it comes to paying for the transition, we believe this means ensuring that it is based, as far as possible, on ability to pay. Paying for decarbonisation via charges on consumer bills – as we have done to date – is increasingly recognised as regressive. Research has shown this method has resulted in lower-income households shouldering a disproportionate burden.^[114]

However, we recognise that care is needed with many other suggested approaches, such as moving towards paying for decarbonisation through income tax. While more directly progressive, the wider distributional impacts would need to be fully considered. For instance, any resulting changes to consumer spending may have knock-on impacts on employment.

Case Study – Reflex Orkney

The ReFLEX Orkney project aims to demonstrate the capabilities of a renewables dominated smart energy network, using advanced software to balance supply and demand.

Orkney has huge renewable energy resources, already generating more electricity than it needs. Despite this, energy prices remain high for residents. With no connection to the gas network, and older housing stock, the island has high rates of fuel poverty.

Orkney's location means it is the ideal location to demonstrate the operation of a smart energy network. The opportunity to harness the excess renewable energy generated that is currently untapped, along with a will to increase the amount of low carbon energy and reduce fuel poverty, were some of the drivers for the Reflex demonstration project.

The Orkney energy revolution has been led, inspired and supported by the local community. The Orkney Renewable Energy Forum (OREF) and its membership have supported and been engaged throughout the ReFLEX project. OREF has provided a valuable forum for people to debate and discuss issues, and find solutions that work for the common good.

Balancing the overall costs of decarbonisation will depend to a large extent on actions taken by the UK Government. The conclusion of the HM Treasury net-zero costs review offers an opportunity to set out how this will be managed at a strategic level. In Scotland we must do what we can to ensure the distribution of costs associated with decarbonisation are based on ability to pay: where it is in our power, we must take action, and where it is not we should offer productive solutions.

22. The power of public sector pension funds and business support funding must be directed towards ensuring companies align with the just transition to net-zero.

a. Commit all Scottish public sector pensions to a programme of corporate engagement that influences the companies in which they hold investments to develop public-facing, credible just transition strategies.

b. Commit public sector pension funds to maintaining the highest level of ESG^[115] standards offered by independent organisations such as the UN Principles for Responsible Investment.^[116]

c. Work with Scotland's finance sector to spread corporate engagement on a just transition to privately-managed funds.

d. Consider divestment as a strategy, if companies refuse to align business models with a just transition to net-zero (recognising this is a last resort, should constructive engagement fail to yield results).

e. Establish a task force to bring together Government, business, and trade unions to propose new business models that are aligned with our national ambition on climate change. This would agree the characteristics expected of environmentally and socially sustainable businesses, with alignment to these standards a precondition for business support.

Reaching net-zero will require a huge reallocation of capital: companies that do not adapt will ultimately fail. If we are to have a managed transition, with social inclusion at its heart, we will need companies to take action. Investors have a vital role to play in ensuring that companies they hold investments in are fully aligned to this national mission. In Scotland, public sector pension funds hold significant levels of equity investments, while the Scottish Government provides various forms of funding for business support. The full power of both must be turned toward ensuring that companies in Scotland support a just transition to net-zero.

Case Study – Royal London Asset Management

Royal London Asset Management (RLAM) manages assets of around £148 billion (as at December 2020). Throughout 2020, RLAM met with several electricity utility companies to discuss how they could contribute towards a just transition to net zero.^[117]

Throughout engagement with SSE, they scrutinised the company's targets and alignment with national commitments to net-zero, as well as expectations of key technologies, strategies to influence public policy, and views on OFGEM regulatory plans.

RLAM proposed that SSE develop a Just Transition strategy, which was welcomed and committed to at its August 2020 AGM and published in November 2020. The strategy is the first of its kind and a testament to the impact active engagement and stewardship by investors can have as a key business driver.

It serves as great example of just transition in action, and we hope it is one that the Scottish public sector and others take on board in the lead up to COP26.

23. New methods for funding the transition should be developed that mobilise finance towards local projects.

a. Work with local authorities to explore the potential for new innovative funding models, such as Community Municipal Bonds, that allow people to contribute towards climate action in their area.^[118]

b. Explore the scope to coordinate the aggregation of climate change projects across local authorities so as to offer suitable scale to investors. This should seek to learn from a growing number of examples internationally, such as Sweden.^[119]

c. Commit to refining the scope of the Scottish National Investment Bank's missions to ensure they are sufficiently focused, as our understanding of delivering a just transition continues to develop over time. The transition to net-zero must remain its overarching mission, in recognition of the pivotal role of the Bank in Scotland's public finance landscape.

Our third key message addressed the potential for local action to deliver climate action with wider social impact. Recognising that finance is often a barrier to driving forward local action, a number of actions should be taken to help finance flow to community level projects, and create opportunities for individuals who are able to contribute towards funding projects that advance a just transition.

24. We must move beyond GDP as the main measure of national progress. For a just transition to be at the heart of Scotland's response to climate change, Scottish Government must champion frameworks that prioritise wellbeing.

a. Continue to develop and encourage the use of robust frameworks for measuring wellbeing, building on experience to date with the National Performance Framework. This would support joined-up Government action by having a shared analytical framework, as well as being a useful tool in informing debate about trade-offs that inevitably exist in setting policy.

b. Current economic strategy must also be updated to reflect priorities on wellbeing, with a central focus placed on realising the opportunities presented by delivering a just transition.

c. Explore the potential for new legislation to achieve this ambition of a shared and embedded framework for measuring wellbeing, should efforts towards this ambition stall. This could learn from and build on the example that has been set by Wales.^[120]

Tackling the climate emergency and delivering a just transition is a challenge unlike any we have faced before. It requires us to complement traditional measures of success (such as GDP) with more holistic frameworks that attach greater value to environmental and social outcomes. This was one of the points that was argued for most consistently in submissions to our open call for evidence.^[121] While all of Government would benefit from this, we highlight two areas in particular as examples of current thinking in this space:

• The recent Dasgupta Review outlined why there is a need to look beyond GDP to address biodiversity loss.^[122] Investment in more woodland and peatland restoration will help tackle climate change, and monitoring the impacts this has on biodiversity will be vital.
• As the Infrastructure Commission for Scotland has highlighted, there is a need to update Scottish Transport Appraisal Guidance. The recent Strategic Transport Projects Review is a sign that this is moving in the right direction, but updated guidance outlining how to balance the objectives of net-zero, wellbeing and health should be produced.^[123] In line with our Advice for a Green Recovery, any existing transport spend earmarked for increased road capacity should be redirected toward creating communities that embed low-carbon lifestyles.