Just Transition - A Fairer, Greener Scotland: Scottish Government response

Our Response to the Just Transition Commission

Achieving our shared vision for a just transition, ensuring that actions taken to reach net zero improve our wellbeing as a nation, is a long-term mission. No single policy document could possibly map out, in detail, every action we need to take in the coming years. Markets, technologies, and consumer preferences may also shift in ways that are difficult to predict. We will therefore need to be agile in response.

The Commission's approach – building consensus among trade unions, business, academics, and the third sector – is a fine illustration of the role we all have to play and the need to continue to work together. Their report, 'A national mission for a fairer, greener Scotland'^[2] lays out the direction of travel for us all. Responding to the report therefore requires a major programme of work and collaboration, of which this document is just the beginning.

This is still a relatively new agenda for Scotland, and we recognise the value that independent advice and scrutiny can play in guiding us and driving forward progress. That's why we will confirm a refreshed remit for the next Just Transition Commission. This will focus on supporting the delivery of our shared ambition, and in particular, the co-design of Just Transition Plans for specific industries.

The Scottish Government is also committing to giving an annual ministerial statement to Parliament. This will provide a comprehensive update on actions taken by Government relating to just transition, and outline progress against the commitments made in this document.

Taking on board the Commission's key recommendation regarding the need for a planned and managed transition, we have also developed a Just Transition Planning Framework to guide us in our journey. This Framework is described in subsequent sections of this document and in future Just Transition Plans.

In addition to these early commitments, this document will now set out our initial response to the detail of the Commission's report, which has been organised into four overarching themes:

1. Planning for a managed transition;

2. Equipping people with the knowledge and skills they need, while putting in place safety nets to ensure no-one is left behind;

3. Involving those who will be impacted: co-design and collaboration; and

4. Spreading the benefits of the transition widely, while making sure the costs do not burden those least able to pay.

1 Planning for a managed transition to net zero that maximises the economic and social opportunities, while managing the risks

Scotland continues to bear the scars of poorly managed, abrupt and unplanned transitions of the past. Despite decades having passed, many of our coalfield communities remain disadvantaged in relation to education, employment and income levels compared with the rest of the country.^[3] The experience of deindustrialisation has been shown to have long-lasting social impacts, such as poorer health outcomes for people in areas affected by these events.^[4] We won't let history repeat itself.

This period of change must be shaped proactively. A set of Just Transition Plans will be developed, through collaboration and partnership, ensuring that people likely to be impacted by the transition have a voice. This will help us all to manage the inherent trade-offs that come with periods of structural change to ensure the outcome is equitable. The table below shows some of the actions we are taking to do this, over the course of this Parliament.

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

We have published a National Just Transition Planning Framework and will engage widely on this in the year ahead. We will work with industry, workforce and local communities to consult on the best way to develop and implement sectoral Just Transition Plans. This includes sectors such as chemicals, nuclear and other energy intensive industries. We have committed to publishing our first Just Transition Plan as part of the forthcoming Scottish Energy Strategy, in addition to announcing a ten-year £500 million Just Transition Fund for the North East and Moray. Our National Strategy for Economic Transformation will represent a coherent Green Industrial Strategy for Scotland, supported by the Just Transition Plans for industry. Finally, to support businesses in transitioning to net zero, we will consult on applying conditionality to public funding including a requirement for large businesses to complete annual public disclosure on how climate change will affect their business, and the role of Just Transition Plans.

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

We have published a Transition Planning Framework and will engage widely on this in the year ahead. We will continue to work with stakeholders to set out a Just Transition Plan for land and agriculture in time for the post-CAP subsidy regime. In response to the Commission's call to help new entrants to the agriculture sector, we have committed to launching a new fund for new entrants to the industry.

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

We have committed to produce roadmaps for key technologies and to incorporate existing roadmaps as we develop Just Transition Plans. The first of these, our Hydrogen Action Plan, will be published later in the year setting out how we plan to grow this technology in Scotland. We will actively explore opportunities for developing new and emerging net zero technologies and sectors, including those rooted in natural capital and our environmental investments.

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

We will continue to build on our Supply Chains Development Programme, developing a single strategic method for aligning low-carbon funding to deliver maximum economic benefit for supply chains in Scotland. We will commission the Scottish Science Advisory Council to better understand how research and innovation, including from our world-class universities, can help us build competitive advantage in key industries of the future, not least those that take full advantage of net zero technologies and innovation.

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

We will use the current ScotWind leasing round to secure new opportunities for the Scottish supply chain, by holding successful developers to account on the commitments made in their Supply Chain Development Statements. To further support this, we commissioned the Scottish Offshore Wind Council to undertake an independent Strategic Investment Analysis to guide our activities and help Scottish firms invest develop competitive advantage and benefit from this growing global market.^[5]

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

We are consulting in the Autumn on the vision for Scotland becoming a Fair Work Nation, including our ambitions for a just transition to net zero. Furthermore we will apply criteria on real Living Wage and channels for effective workers' voice by summer 2022 and consider how the conditions can be applied to NDPBs. We will introduce Fair Work standards as a condition to public sector heat and energy efficiency contracts. We will consult with the Fair Work Convention regarding development of a monitoring framework for just transition ahead of the next Climate Change Plan.

2 People in Scotland will grow up equipped with the knowledge and skills they need to engage with and benefit from the net zero transition, while putting in place safety nets so that no-one is left behind

A just transition will demand a steady adaptation of skills and workforce practices in a way that protects jobs and meets employer demand, while contributing to tackling inequality. The impact of the transition will differ across occupations; for some, there may be limited impact on their day-to-day work. Others may find a need to adapt their existing skills, while a smaller number may need to reskill entirely.^[6] These impacts will occur against an already challenging backdrop of Brexit and COVID-19 recovery, and alongside other trends such as digitisation which will also fundamentally change the nature of work.

This Government, with partners, is already designing and delivering the suite of interventions that will ensure the skills and education systems are capable of managing this period of change. In doing so we are making sure that people in Scotland can benefit from new opportunities brought about by the transition.

The Climate Emergency Skills Action Plan (CESAP), published at the end of 2020, set out an overarching approach for managing this skills transition, in addition to identifying a series of immediate actions. Skills Development Scotland is implementing this Plan, and we will work with them to fully integrate the recommendations of the Commission into the programme to secure wide-ranging impact. Our initial actions against these recommendations are shown below.

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

The CESAP Implementation Plan outlines an ambitious, cohesive approach to green skills and green jobs. We will refresh our internationally-recognised Learning for Sustainability Action Plan in partnership with campaigners. This cross-curricular entitlement for all learners aims to ensure a whole school approach to the climate emergency. Additionally, as part of our STEM strategy we are working across all sectors of education to change perceptions about STEM and challenge assumptions about who does what job in relation to gender and wider inequalities.

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

We will work with our agencies and other stakeholders to design and implement a skills guarantee for workers in carbon-intense sectors and deliver this as part of the Green Jobs Workforce Academy. We will continue to support the Energy Skills Alliance and press for the issue of skills transferability between energy sub-sectors to be resolved.

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

We will pilot and evaluate new models of apprenticeship in sectors central to the transition, to help address barriers faced by SME's. We will also build a 'toolkit' to help small/micro businesses develop the skills and knowledge they need for net zero. Collectively, this will inform our understanding of the challenges SME's face and inform future action and funding.

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

In our first 100 days, we have launched a full and comprehensive review of land based learning. The aim is to increase opportunities for more people, particularly more women, to gain qualifications, training and employment in the land-based and aquaculture sectors.

Spotlight – Delivery of a Skills Guarantee through the Green Jobs Workforce Academy

The Commission recommended the creation of a Skills Guarantee for workers in carbon-intense sectors, who may find demand for their skills decline or even disappear as the economy changes. Recent studies of sectors such as oil and gas have shown a high degree of skills transferability to low-carbon sectors such as offshore wind, CCUS, and Hydrogen.^[7] But there is a need for a 'safety-net' to support people and ensure that skills and experience built up over many years are retained within the Scottish economy.

We have committed to design and implement a Skills Guarantee for workers in carbon-intense sectors as part of our Green Jobs Workforce Academy. Initially this will take the form of careers and skills assessment. It will then match people to opportunities, and make funding available to retrain or upskill where required. We are imagining this process to broadly follow the steps outlined below:

• Approach to Green Jobs Workforce Academy (from individual, referral from company / trade union)
• Guarantee of skills assessment and advice
  • Offer of funding to support retraining where no skills crossover
  • Individual leaves service and pursues opportunities identified

3 People with a stake in the transition will be involved in designing how we manage it, and action taken to reduce emissions and respond to a changing climate will build more resilient, healthy communities

The Commission's focus on participation and involvement is already reflected in our approach to policymaking. The transition will affect our day-to-day lives in all sorts of ways and we are committed to ensuring that people can play a decisive role in shaping these changes, for example, with regard to how we heat our homes, develop our transport system and use our land.

We already have the building blocks in place for this participatory approach with Community Empowerment set as a National Outcome that guides all our work.^[8] Our draft Public Engagement

Strategy for climate change also sets out an approach for involving the people of Scotland in our response to the Global Climate Emergency.^[9] More recently, our Climate Assembly provided a platform for the voices of people across the country, including those of young people.

We will build on these and through implementation of the Commission's recommendations we will continue to develop ways to empower people to shape our transition. This process will strengthen our existing commitment to participatory policy design. The initial actions being taken forward are detailed in the table below, while our Planning Framework in the subsequent section outlines how we will involve communities in this process.

Conclude the Local Governance Review at the earliest possible date.

We will conclude the Local Governance Review and introduce a Local Democracy Bill within this Parliament. The next phases of the review will provide communities with opportunities to pinpoint the powers and resources they need to help tackle climate change.

Implement Green Participatory Budgeting with agreed target levels of funding.

We will explore the use of Participatory Budgeting in 2021/22 as part of our wider support for community-led climate action. We will also identify opportunities at COP26 to develop the concept of Participatory Budgeting for climate action – both in Scotland and abroad – and identify opportunities to develop programmes specifically involving schools and young people. We will work with local authorities to embed climate principles into wider participatory budgeting initiatives, building on the agreement between the Scottish Government and CoSLA that at least 1% of council budgets will be subject to Participatory Budgeting by 2021-22.

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

Regional Land Use Partnerships pilots have been established during 2021 across five areas of Scotland. If the pilots can demonstrate that they meet expectations relating to national outcomes on the environment and climate change, and show that they have taken a democratic, local approach, we will develop plans for a second phase from 2023 building on learning from the five pilots. In areas where Regional Land Use Partnerships have been established, we will launch a call for action to ensure broad membership and participation, and commit to learning from the partnerships to optimise our approach going forwards.

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

We will continue to consider the range of mechanisms such as Citizens Assemblies, climate conversations and other community climate initiatives, to help inform and support the development of Just Transition Plans and build on the legacy of Scotland's Climate Assembly.

Empower and resource Local Authorities to deliver a just and green recovery.

We will establish an Energy Agency focused on energy efficiency and the heat transition. We will seek new opportunities to prioritise local and organic produce in public sector menus while bringing forward the Good Food Nation Bill this year which will place duties on Ministers and certain public authorities. We recently published a draft local food strategy for public consultation and will further develop this in support of our vision for healthy, sustainable and local food.

A new 'sustainable Scotland' brand should be created to support Scottish agriculture that delivers climate action and to empower consumers to choose sustainably produced food and drink.

We will work with Scotland Food and Drink and industry to design and implement a new brand promoting sustainable produce over the life of this Parliament. In the immediate term, we have commissioned Scottish Agriculture Organisation Society to undertake market research to establish demand for a new brand and possible options.

Scottish Government, Local Authorities and Developers must commit to creating communities that embed low-carbon lifestyles, while improving our health and wellbeing.

Subject to Parliamentary approval, we will introduce free bus travel to young people aged under 22 who are resident in Scotland and commission a Fair Fares Review to ensure a sustainable and integrated approach to transport fares. The upcoming National Planning Framework 4 (NPF4) will define 20 minute neighbourhoods, setting out priorities on planning our places with a new emphasis on living locally, giving life to the Place Principle, supporting public health and wellbeing, reducing inequality and strengthening community resilience to the impacts of climate change. We will lay a draft of NPF4 in the Scottish Parliament this autumn for scrutiny and carry out extensive public consultation on it. Furthermore we will support planners with spatial data, research and tools to work collaboratively in delivering 20 minute neighbourhood principles. We will continue to promote the Place Standard Tool for community engagement in placemaking, including spreading learning from our climate lens Place Standard to help inform the roll out of 20 minute neighbourhoods across Scotland. Once approved and adopted, NPF4 will have development plan status, meaning its policies have a stronger role in informing day to day decision making in planning.

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

We will develop and implement plans for a statutory public interest test as part of the forthcoming Land Reform Bill, scheduled for this Parliamentary term.

Spotlight – Green Participatory Budgeting

For a number of years the Scottish Government has supported Participatory Budgeting as a tool for community engagement and as a resource to build on the wider development of participatory democracy in Scotland. Working in partnership with COSLA, the National Participatory Budgeting Strategic group and others, we are committed to continuing to promote the use of Participatory Budgeting.

At its heart, Participatory Budgeting is about placing power in the hands of people by giving them control over how a part of a public budget is spent in their communities. This process can take place at a small scale, with individual neighbourhoods coming together, right up to larger scale exercises involving cities or local authorities. Experience to date, both in Scotland and internationally, has shown Participatory Budgeting has the potential to empower and energise communities in ways that traditional consultations or engagement activities cannot.

The Commission's report recognised our commitment to take forward an ambitious programme of Participatory Budgeting as a tool to foster greater community involvement in the transition, building on Scotland's significant experience in this area. This will allow people to have a say in how the climate emergency is tackled like never before. The following actions have been identified for 2021-22, as means of establishing a framework for Green Participatory Budgeting that we can build on in years to come:

• Pilot Green Participatory Budgeting using community climate action initiatives, such as Climate Action Towns, to support delivery where appropriate.
• Explore options to introduce a Green Participatory Budgeting programme targeted at young people.
• Identify opportunities to co-fund projects with a local authority that can act as further demonstrators of how Green Participatory Budgeting can be used to empower communities and tackle the climate emergency.
• Explore the potential to build Participatory Budgeting into our climate justice programme.

4 Spreading the benefits of the transition widely, while making sure the costs do not burden those least able to pay

As with any period of structural change to our economy and society, the transition will generate costs and benefits for consumers and businesses. The overall costs of reaching net zero are now estimated to be far less than previously thought.^[10] It is also acknowledged that the costs associated with global inaction would be far greater. We need to consider distributional and competitiveness impacts that may be obscured by these whole-economy projections.

Often, debate about securing a just transition has focussed on workers in carbon-intensive industries. Fairness for this group is important (and addressed in this document in many places), but the wider consideration of a fair distribution of costs and benefits is equally important if we are to achieve our vision for climate action that improves the wellbeing of our country, as a whole.

We are already taking action on this, such as through our record investment in energy efficiency and fuel poverty programmes, and the establishment of Consumer Scotland. Our commitment to balancing the costs and benefits is outlined in the table below.

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.

We will ask Consumer Scotland to consider tracking the impact of decarbonisation on households as part of their workplan for 2022/23, with the Energy Consumers Commission taking this forward in the interim. Our forthcoming Energy Strategy will consider methods of increasing participation in the energy market.

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

We will publish guiding principles to underpin our commitment that no one is left behind in the heat transition, which will include the effective design and targeting of our fuel poverty and heat in buildings programmes. We will commission further analysis to consider the distributional impacts of decarbonising our homes and buildings, including quantifying the scale of impact and looking at options available to Scottish Government to mitigate these impacts.

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.

We will launch a consultation on climate risk reporting and ESG standards for local authority pension funds, in line with the Task Force on Climate-related Financial Disclosures (TCFD). We will consider possible guidelines for voluntary financial disclosures about climate risk for Local Government Pension Fund Investments and continue to engage with Scotland's financial sector regarding how they can support our net zero transition. We will convene a tripartite group to develop new standards of corporate governance, and explore the possibility of these being used as a precondition for Government funding.

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

We will explore the potential for local climate bonds, that raise capital while allowing citizens to invest in our transition to net zero. In setting the missions for the Scottish National Investment Bank we have directed the Bank to support a just transition to net zero, using its programme of investments to help rebalance our economy towards sustainable technology and industries of the future.

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

We have set out our approach to carbon pricing as part of this document. Maintaining the competitiveness of Scotland's businesses and preventing the offshoring of jobs are key components of this approach. Through our role in the jointly-administered UK Emissions Trading Scheme, we will ensure that the Free Allocation system continues to appropriately protect Scottish industries from the risk of carbon leakage. We have also commissioned research to better understand the impacts and potential benefits for Scottish industry of carbon border adjustment mechanisms and will publish a position in the year ahead.

We must move beyond GDP as the only 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.

We will further develop the use of our National Performance Framework through the upcoming review of National Outcomes and through consultation on a Wellbeing and Sustainable Development Bill. We will publish the National Strategy for Economic Transformation in autumn this year, with the just transition to net zero and maximising economic, social and environmental wellbeing embedded as key themes. To monitor how we are performing as a wellbeing economy we will also develop and publish a Wellbeing Economy Monitor.

Spotlight – Carbon Pricing

The climate emergency requires governments to use all the powers at their disposal. Despite the limits of the Scottish Parliament's taxation powers, pricing policies are one of the most powerful levers we have available to help shape a fairer, more prosperous and net zero Scotland. The Scottish Government has used pricing policies successfully before to reshape markets and deliver fairer and better outcomes – through Minimum Unit Pricing for alcohol, plastic bag and single-use cup charging, and the Scottish Landfill Tax. Our approach to carbon pricing is no different.

Putting a price on carbon will incentivise technological switches and behaviour changes, rewarding those who take advantage of the low-carbon alternatives already available. We'll use carbon pricing to support the business case for low-carbon technologies, driving private investment into Scotland's growing net zero economy, and helping to balance the investment requirements for net zero fairly between the private and public sectors.

To support a just transition, fairness will be at the heart of our carbon pricing approach. Under the 'polluter pays' principle, big companies that choose not to embrace low-carbon technologies and efficiency will pay more for the climate pollution they produce, and they should expect those carbon prices to continue to steadily increase as the climate emergency becomes ever more urgent.

However, without supporting measures, this could have unjust consequences for those currently unable to avoid the additional costs. As part of a just transition, we'll ensure that upfront costs are not a barrier to accessing the climate-friendly, lower-running cost technologies of the future and ensure the benefits of the net zero economy are available to all.

Ensuring any revenue generated from carbon pricing schemes is used to further support a just transition will be critical to the success of this approach. This will build on the approach taken with existing initiatives like our heat-pump grant programme, zero-emission vehicle loan schemes, and home energy efficiency programmes – so that we put the benefits of climate action back into people's pockets.

It's also critical to the just transition that we don't simply 'offshore' our industrial emissions, through 'carbon leakage'. That's a lose-lose. Scotland loses the jobs and economic benefits of our industries, and the climate loses, as the climate emissions simply carry on somewhere else.

Scotland's tradition of innovation, our natural advantages, and the Scottish Government's ambitious policy support for decarbonisation mean that our economy, businesses and industries are well-placed to compete and thrive in a global net zero policy environment that has higher carbon prices that more closely reflect the social and economic costs of climate pollution. However, as our economy goes through a process of transition, and whilst climate policy is less ambitious in other jurisdictions, we will take the necessary steps to protect jobs, the competitiveness of our industries, and the development of our net zero economy. As many of the potential measures to address carbon leakage – such as trade policy – are reserved, we will continue to call on the UK Government to use these levers to effectively support a just transition.

To support our developing approach to carbon pricing in the year ahead we will continue to pursue the following:

• The UK Emissions Trading Scheme (UK ETS) is currently the key carbon pricing tool available to us, with the Scottish Government jointly responsible for the scheme alongside the UK Government and the other devolved authorities. We have a collective commitment to consulting in the coming months on aligning the scheme with our net zero legislation, reviewing our programme of free allocations to ensure that they are appropriately protecting against carbon leakage in light of our climate change commitments, and considering expanding the scheme to other sources of significant emissions. Through our joint responsibility for this UK-wide scheme, it is our ambition that the development of the scheme supports our just transition, addresses fuel poverty and our climate change objectives, and that the proceeds of the scheme are channelled back into supporting businesses and consumers to switch to net zero alternatives. We'll also continue to press the UK Government, who hold the relevant power, to start negotiations immediately on the linking of the UK ETS with the EU ETS, to protect against carbon leakage. In the meantime, it remains our intention that the UK ETS at least matches the environmental, economic and social ambitions of the EU's scheme.
• Our main approach to preventing the offshoring of emissions will be continuing to take every opportunity to highlight the shared global ambition to the Paris Climate Agreement, and to press other nations to follow our lead by putting in place strong and ambitious plans and policies for achieving net zero. In the meantime we will use free allocations in the UK ETS in a way which prevents carbon leakage. We are following proposals for a Carbon Border Adjustment Mechanism at EU level with interest, and are undertaking research to better understand how it will affect Scotland's exporting industries. We will continue to engage with the UK Government in relation to its approach to trade and climate matters within their reserved responsibilities.