Just Transition: draft plan for transport in Scotland

5. Businesses and Organisations

By 2045, a successful just transition will mean:

• Businesses and organisations have benefitted from innovative financing models to decarbonise their fleets and have access to affordable zero emission vehicles and infrastructure.
• Scotland’s SMEs have taken advantage of the opportunities of net zero, and the industry has maintained its position in the zero emission mobility markets where we have a competitive advantage.
• Scotland has become a global destination for innovation and investment in sustainable transport.

Businesses and Organisations: Context

The transition in transport has implications for businesses and organisations across our economy. Whether they are in the private, public or third sector, these organisations need to reduce their emissions and the other negative impacts caused by their use of transport, and adapt to a changing climate. In practice, this means becoming more sustainable and more efficient in the ways in which they operate.

Perhaps the biggest change for this broad group will come from the switch to decarbonised vehicles. Figure 4 shows the scale of vehicle use, and progress towards decarbonised alternatives, across Scotland’s economy. For many businesses and organisations, making this switch will offer savings – for example, electric vehicle charging at a depot can be cheaper than purchasing petrol or diesel fuel, and maintenance costs are generally lower for electric vehicles. However, there are also additional costs associated with switching to decarbonised forms of transport, including the up-front costs of replacement vehicles. In many cases, there will also be a need for new skills and infrastructure to support their use.

*Note, data for cars, LGVs, HGVs, buses and coaches is for end June 2024; data for ferries is for May 2024; data for train tracks is for end March 2023; data for air routes is for February 2024.

These different costs and benefits are relevant to all businesses and organisations. However, we know that the impact of the transition will be felt most keenly by those operating in the transport sector - including the 7,470 businesses that the sector sustains – as well as those for whom transport is a central part of their operations.

Among this latter category are public sector organisations who operate fleets – such as local authorities, health boards and ‘blue light’ services. Previous surveys indicate that the size of the Scottish public sector fleet is around 30,000 vehicles, which comprises various vehicle types. In 2023, 17% of this fleet were zero emission vehicles (the vast majority being cars and vans) which is an increase from 12% in 2022 and 5% in 2020.

Challenges

The Scottish Government is continuing to work with industry and others to assess the challenges and opportunities facing these businesses and organisations, and the areas that need to be prioritised. As set out in the Workers section, we are making that assessment by considering three key factors:

• The approximate timeframes for sub-sector decarbonisation
• The size of each sub-sector (Figure 2)
• The particular challenges that businesses in each sub-sector face when it comes to decarbonising their vehicles.

On the basis of these factors, we have assessed that the most pressing area for action is Road transport.

We know that the transition to EVs will have a particular impact on small and independent businesses working in the road transport sector – for example garages and dealerships. The skills implications for employers and employees are covered in Section 4. However, for most businesses and organisations in Scotland, the transition in road transport will simply mean a shift to electric cars and vans. Significant progress is being made in this regard – supported by government action (set out in later sections of this plan), and the fact that the costs of these vehicles are moving closer to petrol or diesel vehicles.

The evidence suggests, however, that a much greater challenge, in the short term, lies in the transition of HDVs. Across this sub-sector, businesses and operators face a range of issues – from the high initial costs of decarbonising their vehicles; to the challenge of procuring appropriate replacements; to uncertainties about which technologies will prove most viable. There are also significant costs associated with the infrastructure needed to support decarbonised vehicles – including the expense of accessing land and grid connections. This can be difficult and time consuming to put in place, particularly for early adopters.

On this basis, it is clear that HDV fleet operators will need access to finance to cover upfront costs. The challenge is made more acute by the makeup of the HDV sub-sector in Scotland. Our country has approximately 52,000 HDVs, many of which are operated by small businesses or other organisations with limited available capital to invest in the transition.^[43]

While the up-front costs of decarbonisation are high for this sub-sector, the running costs of new decarbonised HDVs may be relatively low. It therefore makes sense for these up-front costs to be paid instead over the lifetime of the vehicle. This requires access to capital – which we know is a challenge for many of the businesses and organisations who own and operate HDVs.

Addressing this challenge is central to ensuring a just transition. It is a challenge on a greater scale to that faced by our Rail sector, which is smaller in size, and has already made important progress in decarbonising. It is also more urgent than the challenges facing our Port and Maritime and Aviation sectors, where the timeframes for decarbonisation are further out. Nonetheless, businesses in these sectors need to take action now to ensure that they understand the requirements facing their sector, and are taking appropriate action to prepare.

The Scottish Government acknowledges that the challenges that businesses and organisations face will vary, depending on the nature of the work being carried out. We know, for example, that businesses in coastal and rural communities face particular issues in decarbonising the equipment they use in their operations – whether that is a fishing vessel, rural machinery, or other non-road mobile machinery. As part of our just transition planning across other key sectors, we will continue to engage with businesses, to develop our understanding and response to these specific challenges.

Opportunities

As well as challenges, the transport transition also presents potential new opportunities for businesses – to create jobs, grow, and increase trade and investment. Based on our engagement, and a review of the evidence, we have identified three areas of potential economic advantage for Scotland.

The first relates to decarbonisation of HDVs. Scotland currently has a base of companies in the Heavy Duty and Niche vehicle manufacturing sector, some of which have already begun to take advantage of the opportunities presented by the transition. As the markets for zero emission technology mature, we know that short-term demand is critical for the ongoing success of these employers. The Scottish Government has put in place a range of support mechanisms to encourage the transition to net zero alternatives and support demand. Based on the demand that will be driven by Scotland’s decarbonisation targets – as well as the targets in potential export markets – we believe Scotland’s HDV sector has significant potential for supply chain growth in the medium to long term.

The second key opportunity for Scotland relates to Sustainable Aviation Fuel (SAF). Until hydrogen and electric aircraft become fully available for commercial routes, SAF will play a crucial role in reducing transport emissions over at least the short and medium term. Due to Scotland’s particular strengths – specifically, our skills base, natural resources (which support renewable power generation and our ambitions for hydrogen production), and existing infrastructure – our country has a potential advantage in this area.

The third area of opportunity relates to the charging and refuelling infrastructure that will be required for net zero. There are already a small number of Scottish businesses positioned to take advantage of the Scottish and UK demand for EV charging technology. Scotland’s strong focus on electric and hydrogen charging/refuelling, as part of our net zero transition, will create more opportunities for businesses involved in providing and supporting the necessary technology and infrastructure.

The Scottish Government has continued to make strategic investments to realise these economic opportunities. However, in order for Scottish businesses to maximise their potential in these areas, the UK Government must play an active role.

Summary of Key Points

• For businesses across our economy, the transition will require a switch to new ultra-low emission vehicles, which will create long-term benefits but also bring short-term costs.
• The most immediate impacts may be felt in the transition in road transport. In particular, the switch to decarbonised HDVs presents a significant challenge, particularly to smaller operators.
• The transition also presents economic opportunities for Scotland – in the manufacture of decarbonised HDVs, the production of SAF, and the installation and servicing of charging and refuelling infrastructure.

Businesses and Organisations: Action to date

Since the publication of our National Transport Strategy, the Scottish Government has continued to work with businesses and other organisations - to take climate action and help deliver inclusive economic growth. Previously, this has included significant action to kick-start the decarbonisation of road transport – for example:

• through our Low Carbon Transport Loan Scheme, offering interest free loans to domestic drivers and businesses for the purchase of vehicles;
• providing over £80m to support public sector fleet decarbonisation, which has helped to ensure more than 5,000 zero or low emission vehicles are in operation across the public sector.
• through our Domestic And Business Charge Point Grant Fund, providing over £16m for the installation of more than 20,000 EV chargers at people’s homes and workplaces.
• helping microbusinesses and sole traders adapt to LEZs through the Low Emission Zone Support Fund. It provides grants of up to £2000 for disposing of a non-LEZ compliant vehicle, and Wheelchair accessible vehicles such as taxis can also receive up to £10,000 towards the cost of retrofitting their vehicle to LEZ standards. In addition, our new LEZ Retrofit Fund has so far supported the retrofitting of 560 taxis in becoming LEZ-compliant.

As part of our current approach, we are continuing to use public money strategically in order to support a just transition. This includes:

• reprioritising funding for our Low Carbon Transport Loan Scheme, so that it now provides loans focussed on lower income households, households in rural and island locations and the taxi sector. Since 2011, the scheme, in its different forms, has provided loans to more than 1,300 businesses and sole traders, worth £39 million, for the purchase of nearly 1,400 vehicles.
• investing in our EV Infrastructure Fund, which helps local authorities leverage additional private investment in the electric charging network for cars and vans. It has been designed to address the barriers that rural and island communities face and will particularly benefit businesses operating in those areas.
• encouraging and supporting modal shift to rail with investment in recent years of over £40 million in rail freight specific projects and over £403 million in rail projects with benefits for freight. This helps to make rail more accessible to businesses by reducing the cost of distribution, and its sustainability improves brand value for Scottish businesses.

Alongside these targeted investments, we are particularly prioritising support for businesses and organisations when it comes to the transition of their HDV fleets. To that end, we have collaborated closely with industry to support them in breaking down barriers to financing.

Key examples include:

• Zero Emission Truck Taskforce – in 2022, we convened industry representatives from across haulage, energy, manufacturing, and finance, with the aim of understanding and addressing the barriers to Heavy Goods Vehicles (HGV) decarbonisation. The Taskforce published the HGV Decarbonisation Pathway for Scotland, which sets out joint actions for industry and government. It covers issues like skills development but also building the sector’s confidence in using the necessary financing models to enable its transition.
• Bus Decarbonisation – we have supported the acquisition of 800 zero emission buses and their supporting infrastructure, through a combined investment of £150 million via the Scottish Ultra-Low Emission Bus Scheme (SULEBS), and the Scottish Zero Emission Bus Challenge Fund (ScotZEB). While these schemes support the transition across the sector, they are also designed to support small operators, and those delivering vital services, who might otherwise struggle to decarbonise. Our £41 million investment in ScotZEB 2 is also due to leverage more than three times the amount in private investment in vehicles and infrastructure, creating significant supply chain opportunities and demonstrating an effective model for private sector funding.

These initiatives are also important to seizing the economic opportunities for the transition, as they will support demand in HDV manufacturing, and create the need for additional charging and refuelling infrastructure. They sit alongside the support that we provide to businesses directly via Scotland’s Enterprise Agencies and via the Scottish Manufacturing Advisory Service.

Businesses and Organisations: Future Priorities

Our short- to medium-term priority is to build on our efforts to date – which includes developing sustainable private finance models for the sector. At the same time, we will continue to work with fleet operators and other investors to plan the charging and refuelling infrastructure that is needed for the transition. Transport Scotland is taking a convening role for the sector, bringing together key actors to address infrastructure issues such as grid connection.

Areas of future activity include:

• Electricity network engagement – we will develop a transport-specific group to explore and improve strategic and operational processes relating to transport electrification. This will include both Scottish Distribution Network Operators (DNOs - the bodies responsible for electricity distribution networks in Scotland) and the new National Energy System Operator representative for Scotland. It will help ensure utilities have the information they need to prepare for strategic investments that support the electrification of transport.
• A Fleet Financing Forum – we will set up a forum bringing together businesses, finance providers, chargepoint operators and others to discuss the opportunities and barriers to more financing across the HDV sector in Scotland.
• Public Sector Fleet Decarbonisation – Working with the public sector, including local authorities, health boards and emergency services, and others, we will develop a Fleet Decarbonisation Action Plan that reflects the current fiscal operational environment, and the scale of emission reduction required.
• Research on HDV recharging / refuelling infrastructure requirements – Transport Scotland have commissioned Heriot-Watt University to work with industry in identifying locations required for charging and refuelling infrastructure for zero-emission heavy duty vehicles across Scotland. The project is employing advanced analytics on real-world data from fleet operators’ Scottish activities and currently reflects around 1% of Scottish HGVs. It will continue into 2025 and extend to coaches. This work will give the private sector an assessment of the scale, timing and location of charging infrastructure needed for a zero-emissions freight network in Scotland, enabling investors to make decisions now to develop charging and refuelling stations. (We would welcome HGV and coach fleets’ involvement in phase 2 of this work. Please contact cls-info@hw.ac.uk to learn more.)

Another priority will be working to ensure that UK Government initiatives support Scotland’s manufacturing opportunities. This includes supporting Scottish businesses to engage in initiatives such as:

• the £2 billion ‘Auto2030’ programme announced by the former UK Government, designed to unlock strategic investments in zero emission vehicles, batteries and their supply chains
• the UK Hydrogen Automotive Manufacturing Taskforce
• the recently announced UK Bus Manufacturing Expert Panel.

Case Study 6 – Ember

Founded in Edinburgh with just a single electric coach in 2019, Ember Buses is one of the UK’s first all-electric intercity bus networks, and currently has 38 buses in service.

Beginning with a connection between Edinburgh and Dundee, the company has had a positive impact on rural connectivity in central Scotland. For example, in 2022 Ember began serving Bridge of Earn in Perthshire. At the time, the only other public transport option was infrequent, required an inconvenient change in Perth City Centre, was consequently costly, and took over two hours to reach Edinburgh.

Ember’s current service from Bridge of Earn to Edinburgh runs 24/7 and will soon call at the village every 30 minutes, takes around an hour to reach Edinburgh directly and at a quarter of the cost.^[44]

Around 250 people use the service on a daily basis, replacing journeys made by private vehicles – thereby decarbonising and decongesting local roads.

Ember is now preparing for a wider expansion across Scotland – with charging hubs planned for Inverness, Fort William and Oban. Ember are also looking to expand to England in the medium term.

Alongside this work, we will also continue our efforts to ensure a just transition, and economic benefits, for businesses in other sub-sectors. This includes:

• ongoing delivery of our Rail Services Decarbonisation Action Plan which continues to provide investment certainty in the rail industry, so the supply chain can prepare to seize opportunities with confidence.
• funding for the Rail Cluster Builder which aims to facilitate connections between SME’s with the existing rail supply chain and to communicate and raise awareness of the opportunities in the rail sector in Scotland. 711 individuals, 483 organisations and 296 SMEs are registered with the rail cluster with 6 supply chain workshops held to date.
• through our Small Vessels Replacement Scheme, regenerating and decarbonising Scotland’s ferries, which are essential to our island communities. Stage 1 of this scheme involves a £175 million investment in new vessels. The programme, and the necessary port and harbour improvements, are creating opportunities for Scottish companies to be part of the supply chain.
• in line with our Aviation Statement (published in 2024), taking advice from the expert working group we have established, on how the Scottish Government could support opportunities for increasing the production and use of Sustainable Aviation Fuel in Scotland.

Summary of Future Priorities:

• The Scottish Government will, through a convening role, support the transition of the road sector, and ensure opportunities reach smaller businesses which are more likely to face barriers in the transition of their fleets.
• The Scottish Government will work closely with industry to ensure Scotland is able to seize the opportunity to become a leader in greener technology, including SAF production and production of efficient, accessible vehicles.
• The Scottish Government will work closely with the UK Government to ensure that financial and legislative support are delivered to enhance investments and innovation in Scotland.

Case Study 7 – Allied Vehicles

The Glasgow-based company Allied Vehicles, under its Allied Mobility brand, has been a pioneer in adapting vehicles for wheelchair users. Traditionally, this work has focussed on converting internal combustion engine vehicles for wheelchair accessibility. However, in response to the transition, Allied Vehicles has invested heavily in training and equipment to meet this new demand for electric vehicles that are wheelchair-accessible.

This has involved acquiring advanced engineering tools, such as a specialist battery lifting table and electrical testing equipment, to facilitate safe and efficient adaptations. The company has also trained 16 members of staff in EV safety protocols.

In July 2023, Allied Vehicles secured Scottish Enterprise funding with a grant of £1.3 million to support the company in its commitment to ensure all disabled people can travel with ‘freedom, choice, dignity and opportunity’. By October 2024, Allied were able to streamline the manufacturing process to adapt two vehicles per week.

By focussing on long-term investments in training, equipment, and processes, Allied is helping to ensure that wheelchair users are not left behind in the electric vehicle revolution. As infrastructure and technology continue to evolve, the company is now well-placed to meet growing demand for accessible and sustainable transportation.

Businesses and Organisations Consultation Questions:

Aim: To seek views on the priorities we have set out to address the challenges and opportunities of decarbonising transport. To gauge how effectively we are engaging all businesses, including non-transport businesses, social enterprises and public/non-profit sector, in just transition planning.

Audience: We think these questions are most relevant to all private and public organisations, including local authorities and businesses which manufacture, provide or use any form of transport. We also invite responses from social enterprises, charities and non-profit organisations.

Question 13 (Everyone): This question relates to all the content in the section on Businesses and Organisations. Are there any gaps in our approach to setting out opportunities and priorities for businesses and other organisations in the transition of the transport sector?

Question 14 (All organisations):

14A: What does just transition planning mean for your organisation or industry?

• A just transition for the transport sector is important
• Just Transition planning is important for my organisation
• Just Transition planning is happening in my organisation
• My organisation needs more support for just transition planning.

14B: Please tell us more about just transition planning in your organisation

14C: Is your sector/organisation doing something others could learn from?

Question 15 (All organisations): Which of the following priorities would you consider to be most important to enable you to transition your vehicles to zero emissions alternatives? Please rate your choices from highest to lowest priority, where 1 is the highest priority. Please only give one ranking to each option.

• Access to low-cost finance
• Cost of replacement vehicles needs to come down
• Technology for replacing vehicles needs to be proven
• Mechanism to work with other businesses on fleet transition
• Reliable infrastructure for vehicles (such as fuel or charging networks)
• Certainty about availability of parts and maintenance services
• Other