Making the Future - second Just Transition Commission: initial report

Sectoral planning

Energy

Context

Delivering an energy transition that meets our national emissions targets has consequences for the future for thousands of workers who aspire to high quality, secure employment within the new green economy. The development of a new energy system, with associated manufacturing, design, installation, operation and maintenance activities and jobs may entail initial disruption and costs. But it will ultimately provide a sustainable, resilient, exportable capability which will generate value for future generations.

The first Just Transition Commission concluded that: "A key challenge to energy transition is the need to retain and decarbonise our existing industry, while creating policy that allows for new opportunities to grow. This will involve mobilising investment, changing regulation, stimulating innovation and creating a holistic plan and vision that enables new industries to flourish."

The current cost-of-living crisis, exacerbated by rising energy costs, highlights that a just energy sector transition, provides an opportunity to deliver a fairer energy system for all. This must be a key outcome of a just transition. Low carbon renewable energy production and/or export must benefit local communities as well as the supply chain, government or industry.

The strategic priorities set out below reflect the continuing relevance of these challenges. The Commission will share further advice upon review of the Scottish Government's draft Energy Strategy and Just Transition Plan. We hope this will spell out plainly what the Scottish Government expects to happen in this sector to enable industry and wider society to prepare.

Strategic priorities

An Energy Road Map: The Energy Strategy and Just Transition Plan should have embedded within it an Energy Roadmap to Net Zero, with an associated Investment Plan. This needs to contain annual milestones through to 2045 specifying emissions reductions and quantities of CO2 to be sequestered to compensate for hard-to-abate sectors. An Energy Roadmap should provide clarity on demand so that the supply chain can invest for the future. Clear statements of intent on energy usage, activity level and the fiscal landscape are needed. Without anticipatory investment, solutions will remain costly, the transition will be delayed, and generation projects and equipment manufacture will go elsewhere. Contingency plans should be developed in case preferred solutions turn out not to be feasible.

Transmission and distribution:Rapid and substantial investment is required in transmission and distribution infrastructure across the country. Both industry-led and community-led renewable energy projects are being held back by infrastructure constraints and energy market design. However, investments that provide privileged access and duplicate existing capacity should be avoided.

Workforce planning: We need a clear picture of what the new energy economy will look like. The Energy Roadmap to Net Zero needs to be supported by a Plan on the future of energy sector jobs. This will help identify future opportunities, what skills will be prized, and where jobs will be located. It will allow us to build the workforce required for the new economy, through upskilling and cross-skilling, in a fair and effective way. Targeting locations where there is the greatest need could help in planning and developing the next generation of training facilities and outreach programmes from universities.

Maximising benefits of innovation: The Government must clarify how it sees research and innovation delivering supply chain diversification, and hence domestic job content. Clusters of test and demonstration sites that build on existing capabilities and deliver supply chain diversification should be established to accelerate innovation and develop affordable, job-creating solutions, fit for design, manufacture and installation in Scotland. An updated Industrial Strategy for Scotland should ensure clarity on this.

Enabling delivery: Staffing levels need to be adequate for the delivery of low carbon projects that involve meaningful participation of communities, speedy resolution of issues, and the acceleration of planning processes. Dedicated energy development officers within government and local authorities could help address engagement and development while increasing the speed of delivery and maximising benefits.

Effective planning: The Government needs to provide clarity on the utilisation of land and sea and establish clear processes to resolve any conflicts that may arise. Local government needs sufficient resources to implement and accelerate planning processes.

Tackling fuel poverty: Action on energy efficiency is urgently needed. For low-income households to switch from fossil fuels to clean energy requires both supply and demand measures – addressing pricing barriers for renewable sources, and reducing energy consumption through increased efficiency. Affordable clean energy must be available to all, and government needs to consider how community-led clean energy solutions can build resilience and distribute wealth into the areas that need it most.

Recommendations

• An Energy Roadmap to Net Zero, with an associated Investment Plan, should be embedded within the Energy Strategy and Just Transition Plan to enable workforce planning, supply chain investment and diversification, infrastructure planning and planning at the regional level.
• A plan on the future of energy sector jobs must provide a clear picture of what the new energy economy will look like. This will help identify future opportunities, what skills will be prized, and where jobs will be located.
• The Energy Strategy and Just Transition Plan should identify actions to test and deploy innovative solutions that make the transition more affordable. Clusters of test and demonstration sites that build on existing capabilities and deliver supply chain diversification should be established to accelerate innovation, and develop affordable solutions fit for design, manufacture and installation in Scotland.
• The current transmission charging scheme militates against investment in Scottish solutions and inflates costs for Scottish communities. It needs urgent reform. The Scottish Government should bring the full weight of its influence to bear on this matter, which remains reserved to Westminster.

Buildings and construction

Context

In 2015, Scottish Ministers rightly acknowledged the need to ramp up long-term action to combat fuel poverty and reduce carbon emissions from our homes and buildings, by designating energy efficiency as a national infrastructure priority.

Since that time, the Scottish Government has committed increasing amounts of multi-year funding to address fuel poverty, reduce the energy demand of, and decarbonise the heat supply to, our residential, services and industrial sectors.

This investment has helped; however even with this increased investment, the pace of delivery is not yet commensurate with the action needed. Worse still, the current rise in energy prices and cost-of-living crisis is already massively increasing the number of those in fuel poverty.

An independent panel has recently been established to advise Ministers on the steps needed to ensure a fair heat transition throughout Scotland. The Commission looks forward to engaging with this group.

Strategic priorities

Tackling fuel poverty: With the number of households living in fuel poverty dramatically increasing, there is a need to ramp up further schemes to tackle fuel poverty. There needs to be a continued focus on targeting support at those most in need, both in the immediate term and the longer-term, by improving the energy efficiency of homes and replacing fossil fuel heating systems with renewable alternatives where this directly benefits those in fuel poverty by reducing energy costs. Enhanced investment at scale is required for 'fabric first' approaches to meet the scale of the energy efficiency challenge, including investment for increased staff resource to reach those in most need, which will have far reaching benefits in the shorter and longer term.

Supporting those who can contribute: Those who can afford to contribute something toward decarbonisation of their homes and buildings should be eligible for improved support programmes (not dissimilar to those offered by existing Scottish Government fuel poverty alleviation schemes) to enable them to navigate their way through the issues, receive bespoke advice, and give them certainty that they are dealing with reputable and accredited suppliers and installers. More broadly, scaling up of the retrofit industry is required to enable workforce planning and the development of appropriate financing products.

Addressing barriers to low-carbon heat: Heat pumps will be an essential technology to decarbonise most homes, as well as enabling low-carbon heat networks. The latter are likely to be the only viable solution for flats tenements and large buildings and there is an urgent need to accelerate heat network development to avoid such buildings being left behind. In all cases, market and policy distortions that increase the price of electricity (and therefore heat pumps) must urgently be addressed by UK Government.

Bringing clarity of the direction of travel: Households, landlords and businesses want to know what they must do to reduce the climate impact of their homes and buildings. The best way to do this is through minimum standards (such as those set out in the Scottish Government's Heat in Buildings Strategy), instructing and requiring building owners to make improvements to insulation and replace fossil fuel heating systems; but ensuring these minimum standards are place-based and fit for purpose. Similar levels of clarity are needed on the role and timeframes in which hydrogen can be expected to play, if any, in decarbonising domestic heating systems. The current situation, in which too many new homes continue to be built to the very minimum level of energy efficiency, needs to end. These homes will need to be retrofitted within the next decade.

Creating good jobs: Addressing fuel poverty and cutting carbon in our homes and buildings provides a fantastic opportunity to sustain existing jobs as well as create tens of thousands of new jobs right across the country. However, in addition to investing in domestic supply chains and the necessary skilling-up of those who could be employed, there is a need to make sure the work they do is fair and rewarding. A recent independent review of working practices in Scotland's construction industry by the Fair Work Convention found that while many employers' have taken steps to embed fair work in their business, the construction industry is not consistently delivering fair work.

Recommendations

• Access to fuel poverty schemes should be broadened. More homes are in fuel poverty but their entitlement to benefits may not have changed, so eligibility criteria should be less strict to help more homes. This can only be achieved with increased public funding, including for energy efficiency grant based schemes.
• Minimum energy efficiency and zero emission heat standards should be applied to all homes, ensuring that grants and other support is available for those unable to afford improvements. We urgently need to develop and implement similar standards for publicly and privately owned non-domestic buildings, with a focus on driving heat network development. Investment is needed in engagement at the street, community, neighbourhood level to enable these initiatives to be designed with citizens at their heart.
• The Scottish Government should engage with the UK Government as it considers reforming the UK's electricity market to decouple energy bills from wholesale gas and electricity prices, and support other reforms to enable all forms of efficient electric heat to compete fairly with natural gas.
• To help embed fair work into Scotland's construction industry, the recommendations of the Fair Work Convention's independent review of working practices must be adopted in full.

Transport

Context

Transport is the largest contributor to climate emissions in Scotland; therefore, to achieve net zero there must be a wholesale renewal of Scotland's transport system, with significant, focused investment where it is needed most. The major opportunity before us now, as we rebuild our broken transport system, is to deliver a decarbonised transport network that supports and promotes equality, opening up a host of economic opportunities for businesses and consumers and improvements to lifestyle and wellbeing. This will require significant investment from government and re-prioritisation of funds to where they are needed most, in order to deliver a fair and just transition.

Strategic priorities

High quality, affordable public transportation: Scotland's public transport network requires vast improvement and must be made more affordable. The rapid improvement and broadening of mass public transport must be a priority for government, in order to deliver a much higher quality of service and well-paid, secure employment for transit workers. If done right, a public transport system fit for the new green economy will deliver major benefits in terms of access, fairness, well-being and social inclusion, as well as the expansion of local supply chains in low carbon transport technologies. Continued failure here guarantees locking-in and worsening existing inequalities as we decarbonise.

Targeting investment: Public investment in transport must be geared to deliver clear benefits for those most at risk of being negatively impacted by the transition to net zero, primarily those in lower household income brackets who rely most heavily on public transport. The systemic change required will be underpinned by prioritising buses and trains, with some parallel investment in active travel and electric vehicles to ensure a fair transition of domestic transportation is available to everyone.

A transport system that meets remote and rural needs: Remote and rural areas are particularly underserved by Scotland's existing transport infrastructure (highlighted by chronic ongoing problems with ferry services), and this poses major barriers to investment and workforce mobility, risking depopulation, isolation, additional costs borne disproportionately by local communitie, and failure across a host of Just Transition Outcomes. Expansion of electric vehicle ownership will not suffice, given the limitations of car infrastructure in serving all parts of our communities. This will require an overhaul of regional and local public transport provision and infrastructure and significant investment to make these more affordable, higher quality and better designed for citizens.

Recommendations

• ScotRail capacity must be expanded, not diminished, in order to provide a quality service for the whole country, avoid widening inequalities and share social and economic benefits of high-quality, low-carbon transit.
• Low-emissions transport infrastructure for underserved regions with critical roles to play in Scotland's net zero must be invested in as a priority. The lack of quality transport infrastructure in the North East poses a significant risk to investment in the region. Peterhead is the hub of Scotland's energy generation network and remains a key site within the future landscape. However, it is also the largest town in Scotland without a rail link, meaning construction of new energy infrastructure will currently rely heavily on road haulage. Transport links, especially rail, should be extended and restored to the region in order to minimise risks to investment and deliver the benefits of clean energy technologies.
• While recognising the limitations of an EV-focused strategy to decarbonise Scottish transport fairly, we nonetheless need robust and comprehensive infrastructure across Scotland to support electric vehicles, and a fair funding model for delivery. The lack of such infrastructure currently prohibits widespread uptake by the public.

Land use and agriculture

Context

The previous Commission noted that "our land will be vital in delivering our climate change ambition, providing us with sustainably farmed local produce, vastly increased woodland cover, and restored peatlands, which in turn will all improve biodiversity."

In Scotland, agriculture is the dominant land use and is responsible for almost a fifth of the country's greenhouse gas emissions. Farmers and crofters are impacted by climate change but also have a huge role to play in reducing emissions, storing carbon, and restoring nature.

The current pressures faced by many in the sector, because of rising costs of inputs, go to underline the urgent need to transform how we produce food for a fairer deal for producers, consumers, and the planet.

However, Scotland's land use is also defined by extreme asymmetries in ownership which presents a major barrier to a just transition where the costs and benefits of climate action are fairly distributed. In delivering a just transition, the Scottish Government must aim to tackle the root causes of these severe inequalities in land ownership and governance, which are fundamental to issues facing nature, economic development, housing, and food systems.

Strategic priorities

Delivering robust land reform: Expected rises in prices in the voluntary carbon market in the coming decades will deepen inequalities in the absence of policy intervention, with potentially large financial rewards for landowners from the generation of carbon credits and upwards pressure on land values. To this end, we welcome the Scottish Government's consultation on land reform proposals ahead of a new Bill in 2023.

Enabling community leadership: Community ownership of environmentally beneficial land use activities can deliver the strongest alignment with just transition and community wealth building principles, thanks to being rooted in place; generating positive local multiplier effects; embedding collaboration into decision making; and delivering inclusive, well-paid jobs. Community-led land management therefore provides an effective means of ensuring that the wealth generated by Scotland's natural assets are retained and redirected back into local communities in contrast to absentee corporate and individual ownership.
Supporting greater climate action today: Even though methods already exist that would increase production efficiency whilst reducing inputs and emissions, greenhouse gas emissions from agriculture have, until this year, not fallen in the last decade. Several welcome initiatives have been launched recently, but more is needed to engage with and support farmers and crofters to reduce these emissions, secure low-carbon investment, and generate new income streams while creating high-quality rural jobs and fairly distributing benefits. As the previous Commission noted: "We need a new model of farm advice, with advisory services upscaled and upskilled to help farmers and land managers identify suitable climate action for their land holdings and the funding streams to deliver them."

Reforming future farm support: Over £600m of public money annually is spent on supporting farmers and crofters, but payments currently favour the most agriculturally productive and intensively farmed areas. To achieve a just transition, an ambitious future farm support regime should ensure businesses and communities remain viable while carrying out actions to reduce emissions, protect and restore nature, as well as supporting producers to diversify their incomes while ensuring benefits do not simply accrue to wealthy landowners.

Restoring nature: The Scottish Government is rightly investing in restoring peatlands, tree planting and woodland management. However, the Committee on Climate Change has urged greater ambition. Given the opportunity costs of moving away from existing crops, support will be needed to scale up these initiatives. While these restoration activities have the potential to create jobs in rural and island areas, further work should ensure benefits genuinely flow to local communities, and that communities who have a strong cultural connection to peat can build a new relationship with it as a carbon sink.

Recommendations

• An ambitious Land Reform Bill should tackle concentrations in ownership and enshrine transparency, equality, and public good into the future of Scotland's land use.
• Community Right to Buy powers need to be strengthened, including removing barriers to financing and increasing technical support, throughout both the purchase phase and during the management of the land.
• Delivery of a just transition should be a central priority in the forthcoming reform of future farm support, and an Agriculture Just Transition Plan needs to be developed at the same time as the Agriculture Bill progresses.
• Scottish Government must ensure farmers and crofters are prepared and supported well in advance of changes to future farm support, by increasing public investment in technology and training, including expanded capacity for rural advisory services and training for advisors.
• The public spending commitment to peatland restoration must be retained, and drive further investment from large landowners by strengthening regulation of peat management to create jobs and increase climate ambition while considering place-based, community, cultural and socio-economic needs.
• A mandatory system of certification for carbon credits needs to be established to provide credible scrutiny of sellers and buyers.