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Economy and Fair Work Committee

Meeting date: Wednesday, November 23, 2022

Agenda: Decision on Taking Business in Private, Just Transition Commission


Contents


Just Transition Commission

The Convener

Our next item of business is an evidence session with the Just Transition Commission, the purpose of which is to provide members with an introduction to its work. Professor Jim Skea, its chair, is joined by Elliot Ross, who is the head of the commission secretariat. Welcome.

As always, I ask members and witnesses to keep answers and questions as concise as possible. I invite Professor Skea to make an opening statement.

Professor Jim Skea (Just Transition Commission)

Thank you very much, convener. We welcome this opportunity to speak to the committee. I apologise for not being there in person—five members of the commission were in Egypt last week for the United Nations climate change conference of the parties—COP27—and, frankly, we are still in recovery mode.

I thought that I would use these introductory remarks to say what we think about the concept of just transition and then to talk a little bit about how we are planning to take that forward.

The surprising thing is that, if you look for a definition of “just transition” on the internet, you will not find one. The International Labour Organisation, which led on the concept, has a set of principles that are about fairness of outcome and process, but it does not trouble itself with a definition. In our first report, we said:

“The imperative of a just transition is that”

we have policies that ensure that

“the benefits of climate change action are shared widely, while the costs do not unfairly burden those least able to pay, or whose livelihoods are directly or indirectly at risk as the economy shifts and changes.”

The key point about that is that it emphasises opportunities from the net zero transition as well as potential difficulties and risks. It also implies a wider scope. It is not just about getting out of coal or getting out of oil and gas; we would cover, for example, the agriculture and land use sectors, and the impacts of the change on consumers and their ability to pay. That is quite a wide scope.

When we produced our first report 18 months ago, we had 24 recommendations that were clustered around four themes. The first theme is the need for planning so that everybody is operating off the same page. The second one is on the importance of upskilling and the transference of skills. The third is on engagement with affected stakeholders. The fourth is consideration of the distribution of costs and benefits. Importantly, we also made a recommendation that there should be a minister for just transition. The Scottish Government accepted all the recommendations, and we now have Richard Lochhead in the role as the Minister for Just Transition, Employment and Fair Work.

As we have moved into the second phase, the game has changed a bit. In phase 1, things were essentially operating at a strategic level. Now, we are talking much more about implementation and delivery. That provides a new set of challenges; it is also a busier landscape, given that we have a responsible minister and the commission.

On how the commission positions itself, my personal appointment letter from the minister talks about having a strong and healthy challenge function, and carefully scrutinising plans and underlying assumptions before decisions are taken. Basically, the function of the commission in this new phase is to provide advice to the Scottish Government and to scrutinise progress with advancing things.

On the elements of our work plan, the Government is working towards just transition sectoral plans, which will cover energy, buildings and construction, transport, and agriculture and land use. There will also be a place-based one for the Grangemouth cluster.

The question of engagement is still on our agenda. We have had five meetings this year, and the latter three, which were in Aberdeen, Blantyre and the Outer Hebrides, were place based. We are paying big attention to monitoring and evaluation—that is, how we measure the progress towards just transition. We are also asked to co-ordinate with other relevant bodies, including the Climate Change Committee and the Fair Work Convention.

On where we have got to, I think we are still finding our feet in this new phase, but three challenges have come up. First, we had originally anticipated that the just transition sectoral plans would come sequentially and the minister appointed membership on that basis. We had a number of commission members who would be there for the entire session of Parliament and some who would be on a fixed term to cover the production of each just transition sectoral plan. However, the sectoral plans will all now be in parallel rather than being sequential. Consequently, we have had to rethink our governance a little, and we are placing a bit more emphasis on establishing working groups for each topic, for which we can then co-opt members.

Secondly, I think that we are once again struggling with the breadth of the just transition agenda, which we might get on to. In 2023, we will be very busy with the sectoral plans. That leaves less scope for the cross-cutting topics that we had hoped that we would be able to cover. Therefore, we will need to be a bit more selective, and, at the beginning of next month, we will have a strategy meeting to work through those issues.

The third challenge is the relationship with the new minister. We did not have that issue in the first phase. We are working through the extent to which the advice that we are giving is proactive, whether we are defining the agenda and the extent to which we are responding to requests from the Scottish Government.

I have probably gone on a bit too long, but I will make one more remark that is related to our returning from Egypt last week. It is remarkable how Scotland is still in the international spotlight. We had five commission members at the conference. Our activities were spontaneously mentioned in the context of the global stocktake for the Paris agreement by various countries and also by members of international organisations such as the ILO. So, no pressure on us, then. People have quite a lot of high expectations and we know that we must deliver over the next three to four years. I will stop here.

The Convener

Thank you very much, Professor Skea. You have raised a number of issues about which I am sure that members will want to ask questions.

You mentioned sectoral plans. It is anticipated that the first plan, which is on energy, is due towards the end of this year, I think. You also spoke about commission members, strategies and all those kinds of things. Is enough action and activity taking place, or are we still very much at the planning stage? We must reach the targets by 2045. Is there enough focus on actions? Is the balance right between actions and strategies?

Professor Skea

I think that it is fair to say that there is a big sense of urgency about the work. That is an explanation as to why it might be that the first plans need to be produced in parallel rather than sequentially. We are expecting a skeleton just transition sectoral plan for energy by the end of the year, on which we will be providing advice when we see what that looks like. The expectation is that all four of the first sectoral plans will come out in 2023. Elliot Ross is in day-to-day touch with the Scottish Government on those issues and he might have more to add.

Elliot Ross (Just Transition Commission Secretariat)

Good morning. My expectation is that the draft plan for energy will be published before the end of the year. At that point, a formal consultation period will be opened and the JTC will make a submission to it. I think that there will be further engagement before the plan is finally published at the end of next year.

The Convener

Okay—thank you.

Professor Skea, towards the end of your comments you raised some questions around the role of the JTC and you mentioned that there is a lack of clarity on what is expected of commission members.

Professor Skea

There are just a few lines in the terms of reference for the commission, which talk about the need to provide advice and scrutiny. The broad direction is quite clear. The scrutiny will come mainly on the just transition sectoral plans—that is quite clear. We need something from the Government to which we can react. I think that the debate is around how proactive a role we should play in providing advice on questions that the Scottish Government has not posed to us. At its previous meeting, the mood of the commission was very much that we should take up that proactive role.

The Convener

You also mentioned measuring progress. How do we do that? We have a target of 2045, but how do we chart and measure progress towards that? When will things start? We will have the sectoral plans, on which there will be consultation, in 2023, so we are probably looking towards 2025 before activity starts, which means a 20-year timescale. Will there be targets to meet during that time? How will progress be measured during that period?

Professor Skea

We need to work on the monitoring and evaluation aspect. The Scottish Government has held one stakeholder meeting with a set of consultants. I understand that a second meeting was postponed while it is worked out where precisely to take things next.

The commission has offered the Scottish Government assistance in identifying benchmarks and indicators that would help us to measure progress, and we have had a positive response from the Government on that. It is critical that we have indicators on very specific things. Those might be, for example, changes in labour markets, changes in training, and the impacts of electricity and gas prices on different classes of consumer—the kind of things that would enable us to measure the fairness and the distribution of the opportunities and the risks that are associated with the transition. It is important to do that.

The analogy in that regard is with the role that the Climate Change Committee plays in the more quantitative aspects around emission indicators and so on, whereas the indicators that we will be pursuing will be much more about how you get there and what the impacts are on fairness and equity.

I do not know whether Elliot wants to add anything to that.

Elliot Ross

I will just underline that there is a section on the high-level priorities that the commission has set out around the work that it hopes that the Scottish Government will be taking forward on monitoring and evaluation.

Also, the commission, as currently constituted, is not a monitoring body per se. However, I suspect that there could be a space for such a body on just transition outcomes and processes in the future.

The Convener

I have a final question tied to benchmarking before Maggie Chapman comes in. The decision on what to benchmark leads to an understanding of what just transition means. Is there a shared understanding across Government and policymakers on what the benchmarks are expected to be? Is “just transition” too broad a term, or is there an understanding of what we should be looking to measure?

Professor Skea

The understanding is still at a very broad level at the moment, and we really need to get down to very specific indicators.

One of the things that the commission has discussed internally is that the monitoring and evaluation must be quite closely tied to stakeholder engagement. We need indicators that people feel are relevant to them, not just indicators that are cooked up by consultants or other people. We see a strong link between the monitoring and evaluation side and the stakeholder engagement side.

09:45  

Professor Skea, you referred to an engagement event in Aberdeen. Is that part of that work?

Professor Skea

It was not part of that work. For each of the commission meetings, we try to get out of Edinburgh and Glasgow—the central belt—and hold the meetings in places that are relevant to the topic under consideration. When we went to Aberdeen and Peterhead, we were looking at the issue of carbon capture, utilisation and storage. That was the theme of the meeting and that was the location. We visited the Built Environment-Sustainable Transformation—BE-ST—centre at Blantyre, where we were thinking about building and construction. I think that we would need different kinds of events to open up the monitoring and evaluation agenda.

Maggie Chapman (North East Scotland) (Green)

Good morning, Professor Skea. Thank you very much for your opening remarks and what you have said so far. I am interested in exploring an issue that you raised. You said that planning and strategic thinking for the future were a focus in the first phase of your work. In addition to the calls that you have made, we have heard calls for clarity—given the potential lack of clarity at present—on the pipeline of work that we need in order to transition to net zero.

Do you believe that we have done the work that is needed to understand the detail across the different sectors and elements? Do we have that detail or is a lot of work still needed for us to understand where we want to get to, never mind how we will get there?

Professor Skea

To be frank, I think that a lot more work is needed on that. We produced a report in July this year because we were keen to get an initial report out in order to set out our stall in the early stages of the commission. In that report, we call for an energy road map as part of an energy sector just transition plan. That should contain quite a lot of specificity with, for example, annual indicators so that people will understand where they are going. That is the kind of thing that we will be looking for when the draft just transition plan for energy comes out.

Elliot Ross

I think that, from the perspective of most of the commissioners and what is in our report, quite a lot more work needs to be done in that space.

Maggie Chapman

I am conscious of a potential pitfall or problem if we see just transition as something separate rather than as something that sits alongside Scotland’s other economic and social priorities. Are there dangers in viewing it as something that is not foundational and core to our entire economic planning and strategic thinking? Similarly, are there dangers in viewing the work that we need to do around adaptation as a separate, distinct thing and not something that we see in the just transition space?

Professor Skea

We have already established a number of working groups that are looking at cross-cutting issues apart from the sectoral plans, and one of those is on social infrastructure. It will try to connect the just transition agenda to wider concepts of wellbeing, for example, which will tie it in elsewhere in the economy. We have a separate group on finance that will also be cross cutting. One of our challenges for next year is the limited time that we will have available to invest in those cross-cutting topics, given the pressure of work that will come from scrutinising the just transition sectoral plans.

The subject of adaptation has been raised, and I note that a conversation has been taking place about that. In a conversation that I have had with the Scottish Government, there was a keenness to bring adaptation within the framework of just transition, as well as the mitigation and emission reduction opportunities. We will need to discuss that a bit more in the commission in order to understand whether we have the expertise to do that work. It might well tie in to the question of social infrastructure and the ability to cope with the physical impacts of climate change as well. The subject is on the agenda, but it is not built into our work plan at the moment.

Maggie Chapman

My last question for now is about the conversations that you have had in the commission, but also more broadly with the Scottish Government and other stakeholders. Are there any policies or proposals that are potentially red herrings, given the time pressures and what we know are going to be financially constrained times? Are there things that we may need to move away from doing because we know that we can get better impacts and outcomes from focusing on other things?

Professor Skea

One of the challenges is that the 2045 net zero target is so ambitious. There is a tendency to throw the phrase “just transition” around as though it is magic dust that makes everything easy. It is not easy, and we need to be clear about that.

It is difficult to drop some of the challenges off the agenda without posing risks to the achievement of the 2045 target. If we consider the big topics for 2045, an obvious one is the further development of renewable energy, which is well under way. A tricky but major one is energy efficiency in buildings and the implications for fuel poverty. A further topic that many of the commissioners are still struggling with is agriculture and land use, and particularly the interaction with land reform. There are some interesting incentives and disincentives in that area that need to be addressed.

Of course, all those dimensions have implications for equity and labour markets, and particularly the movement away from old energy to new energy, if I can put it in that way—from oil and gas to renewables, where there are challenges. To be honest, the 2045 net zero target is so ambitious that it is very hard to leave anything off the table.

Michelle Thomson (Falkirk East) (SNP)

Good morning. I absolutely appreciate the complexity and the challenge of what you are trying to do. I am entirely sympathetic in that regard.

One of the two areas that I often major on is the inclusion of women. I recall that, in relation to COP26, the First Minister described the Scottish Government as a “commitment maker”, and that commitment included enabling women and girls to lead a just transition to a green economy. I am fully cognisant of the complexity of this, so I really just ask you for an update on progress in that regard. I note the eminent women that you have on your advisory committee, but an update would be appreciated.

Professor Skea

We are gender balanced in the commission. That was consciously striven for and, from my perspective, it is working really well. The question is how gender works into some of the substantive topics that the commission is addressing.

In skills and education, it is important to make sure that girls are brought into science, technology, engineering and mathematics, where the demand for skills is very high. In some of the initial discussions on social infrastructure that I talked about, it was noted that women are quite well represented in sectors such as social work.

Believe me that the subject has been hot in the commission. We are gender balanced, but we are also talking about the subject in a conscious way.

Following on from that, will there be a specific measurement outcome that references gender equality? Another approach would be for it to cut through all your outcomes, but will there be specific measures?

Professor Skea

I think that the way to approach this is with specific measures. For example, if we were looking at labour market outcomes or progress on skills and training, introducing a specific gender element would make absolute sense to me. Once we have the underlying facts, we can perhaps put together a larger narrative about where further progress is needed.

Michelle Thomson

I will look forward to following that up. My last question on that subject—I have another question in a different area—is about conditionality. Can you see a set of circumstances in which you would advise the Scottish Government to introduce conditionality in relation to gender parity? It is often hard measures and real financial outcomes that make the difference. Do you have any thoughts on that?

Professor Skea

We have not discussed that issue in the commission so far, but I thank you for planting the thought, because we could well do that. We have discussed local content requirements in public procurement, so the subject of conditionality has been on the table for us. It has not yet been applied to gender equality, but you have helpfully planted that thought.

Michelle Thomson

I have a completely different question on financing. Everybody is well aware of the significant challenges in that regard, particularly given that the Scottish Government has a fixed budget. There are even challenges around financing in the private sector, and risk appetites change where there is a shortage of resources.

I am well aware of the challenge that you face, and you have made it clear how ambitious the 2045 target is. However, what are your current reflections on the challenges, specifically to do with how the Scottish Government will be able to finance things or any other areas you see across the piece? Retrofitting might be an example that you will pull out.

Professor Skea

The financing requirements are large and investment levels will need to go up for us to get to the 2045 target. To be frank, we know that the Scottish Government does not have deep enough pockets to pay for everything. Indeed, no Government could do that.

I think my commission colleague Nick Robins, who specialises in finance, would emphasise that the challenge is to use public sector finance cleverly to leverage financing from the private sector. That needs some attention to the risk. Basically, the public sector would need to take some of the risk out of the projects in order to provide confidence for the private sector finance to come in.

There are a lot of tricky issues to be addressed here. In Scotland, some of the best progress has been made in social housing, where there are housing trusts that can be very active. It is much tougher in relation to owner-occupiers and the private rented sector, where the challenges are bigger. To be frank, if we are going to be fair about it, because some owner-occupiers will get the benefits of lower bills in the future, they should be expected to put up some of the money.

We look forward to discussing those challenges when we see the draft plan on building and construction and we can really get our teeth into it.

I feel that that is a massive area. I will not labour it, because I know that other committee members have questions. Thank you.

Graham Simpson (Central Scotland) (Con)

Good morning to the witnesses. It has been incredibly refreshing to read two reports from the commission that were written in plain English and that say what is wrong and what should be done. We are not used to seeing such reports from bodies such as yours. That is a note of praise.

I want to ask you about transport, as transport is mentioned in your reports from 2020 and this year. In “Making the Future: Initial Report of the 2nd Just Transition Commission”, which was produced this year, a “broken transport system” is mentioned. The language is quite tough. The report says:

“Scotland’s public transport network requires vast improvement and must be made more affordable”

and that it requires

“significant investment from government and re-prioritisation of funds”.

Will you expand on that?

I will ask you some more questions about what you have said.

10:00  

Professor Skea

I will pass that question over to Elliot Ross shortly.

Moving to electric vehicles is, of course, part of the solution, but it is absolutely not all of the solution. We are paying attention to who pays in relation to electric vehicles, because they are expensive to buy up front, and people who are on lower incomes might not be able to take their benefits, as they find raising the money more difficult.

There is the issue of the electrification of transport, but a lot of the comments came from perceptions about the public transport system. Obviously, one of the threats after the Covid crisis was that confidence in public transport went down. We think that, if we are going to get to net zero in 2045 and get a credible contribution from the transport sector, public transport will have to play a significant part in that. That is a very important part of the picture. With rural bus services, for example, it may be less appropriate for people to have electric vehicles.

One of the prompts was from the visit to Peterhead in the north-east earlier this year. It was noted that Peterhead is one of the largest towns in the United Kingdom without access to the rail network. Not having that kind of rail access could have implications if people are trying to develop big projects.

I do not know whether Elliot Ross wants to come in on that. He was more closely involved with the transport working group, which made some of those recommendations.

Elliot Ross

I will underline a couple of other factors that were front and centre in the working group’s deliberations. As members will have seen from the report, the commission was able to see some of the opportunities in thinking about what a decarbonised transport system looks like for Scotland and what it should look like for Scotland. As well as the issues that Jim Skea mentioned, there are issues relating to accessibility and having a transport system that is fit for purpose for door-to-door journeys for people with disabilities. The north-east was highlighted as a structural risk, and the lack of a rail link to Peterhead in particular was pinpointed.

The remote and rural areas point was underlined in the commission’s visit to Lewis back in October, when we heard about the issues that islanders consistently experience with transportation, and particularly the risk that that poses to businesses—particularly shellfish businesses, for example. There is a high level of risk there when transport systems cannot be relied on to deliver for them.

Graham Simpson

I read the section in the report that focuses on the rural parts of Scotland and how poorly served they are in many respects. The report mentions ferry services. Obviously, you have been out to an island. It cannot all be about money, can it? Do you have any thoughts about how we might restructure the transport system? That is a big question, of course.

Professor Skea

Can Elliot throw me a lifeline on that very big question?

Elliot Ross

As Jim Skea has said in relation to one of the other plans, the commission needs to do further work on such questions, particularly on how it will respond to the draft transition plan for transport, so that it is clear about what the Scottish Government has in mind. It can then look to push the Scottish Government further.

That was a very short answer, Elliot. You tried to wriggle out of that one.

Elliot Ross

As head of the secretariat, I can only convey the views of the commission as they have been discussed and agreed. I really would not want to go beyond that into anything that is more speculative territory for me.

Professor Skea

I will add to that. Even as the chair of the commission, it is not possible to give the commission’s views on things that we have not talked about. The initial report that we sent out in the summer was very much to stake out the territory. We thought that it would be wrong to wait for 18 months for our first annual report to come out. The report is not a deep dive into particular topics. The transport working group, for example, might have discussed the transport issues in a bit more detail, but what is in the initial report is pretty much what we have so far.

Graham Simpson

Okay. That is fair enough.

I will ask one more question about transport. The report says that the commission thinks that there should be

“an overhaul of regional and local public transport provision and infrastructure”.

Did you go into any detail on that? What did you mean by that?

Professor Skea

I am afraid that, again, I will have to pass that question to Elliot Ross. He was involved with the transport working group much more than I was.

Elliot Ross

Again, those are initial very high-level strategic ideas from the commission. The intention is to dig into a lot more detail as we review the transport transition plan from the Scottish Government.

Okay. I will leave it there.

Colin Smyth (South Scotland) (Lab)

Good morning to the panel. The commission and many others have consistently called for greater clarity around the pipeline of work that is required to transition to net zero. Do we have a good understanding of the level of detail that is necessary to deliver the certainty that the industry is calling for on what work will be needed to deliver that?

Professor Skea

Let us take the energy sector as an example. We will need to know about the roll-out of offshore and onshore wind energy, so that we get a clear idea of the amount of construction activity that will be needed. It is possible to do that. It depends on the leasing process that we see because, obviously, that is done competitively. Once that is in place, there will be a few years ahead in which to plan things.

It is fair to say that, although there has been big success on the gigawatts of wind energy that have been put up, there has been much more disappointment for our union colleagues on the commission about the extent to which that has resulted in high-quality jobs in Scotland as opposed to elsewhere. Getting that planning and specificity is important, as that would allow people in Scotland to make appropriate plans for scaling up activity and bidding for contracts and, equally, would allow procurement to take account of local content issues, to ensure that jobs arrive. As part of the new energy transition, we will see jobs becoming available in Scotland. It is perfectly possible to project the number of jobs and the skill levels that would be associated with the roll-out of offshore and onshore wind energy, for example.

Colin Smyth

So the main issue is certainty about the pipeline of work. Is there anything else that we need to do to ensure that we do not make the mistakes of the past on energy in particular, which the unions are rightly concerned about? Renewable companies say, “We would like to use Scottish businesses, but ... ”. They then award the contracts to companies abroad. Apart from giving certainty about work, what other barriers do we need to break down?

Professor Skea

I think that the companies that have been contracting have developed a sense of contrition about some of the things that have happened so far and that they have started to modify procurement practices to take more account of local content and ensure that there are community benefits from the work that they do.

It is very important to look at not just the demand for projects but the supply of skills. To match that, it is also important that a lot of attention is paid to the skills agenda so that Scottish companies are in a good place to bid for contracts when they come through. It is a matter of a plug in the socket. We need to ensure that we have the skills to succeed in those competitions, and the competitions themselves need to be more sensitive to the need for local content and the impact on local communities.

Colin Smyth

That is interesting. Obviously, skills are one barrier, but are there any other barriers that supply chain businesses currently face in ensuring that they can access the huge work potential and that they have the workforce in place? Are there any other barriers that need to be broken down in the supply chain to ensure that they can fulfil those things?

You mentioned local content. ScotWind probably provides the best example of the opportunities that we have. The focus has been on companies effectively coming up with development plans around supply chain jobs, but I was interested in your earlier point about conditionality around local content. Should we be driving that a lot more, or should we just continue to leave it to the companies to decide how much local content they want? That appears to be the approach to ScotWind.

Professor Skea

On the conditionality elements, there are issues relating to compliance with World Trade Organization rules. There were also conditions about that when we were part of the European Union. People need to be quite careful about how far they go to avoid breaching state aid rules, which still apply at the WTO level as well as at the European Union level.

Does Elliot Ross have anything to add to that?

Elliot Ross

A phrase that has resonated in the commission’s deliberations on those topics came from Rachel McEwen from SSE, who likes to talk about Scotland over the coming decades as “a workshop”. On broad planning, her challenge is to think about who is doing what and where. There is the locational element to the issue. It is a matter of ensuring that there is an appropriate regional distribution in the new areas of the economy that are emerging and new industries, to make sure that there is not an overconcentration in familiar areas and that remote and rural communities in particular benefit in the long term.

Colin Smyth

I represent a very rural area—South Scotland—and I agree entirely with what Rachel McEwen said. How do we deliver that? We have a conflict. The rules might suggest that we cannot put huge conditionality on that, so how do we do that? Is it just about ensuring that our supply chains are fit for purpose and that we are investing in the ports and in companies? Is that the only route?

Ultimately, price will be the driver for renewable companies. That will be the main driver. We have the desire to see electricity produced as cheaply as possible. There is a conflict there in producing electricity cheaply and trying to use a local supply chain that is more expensive. How do we ensure that we get what Rachel McEwen and others are asking for? What policy interventions do we fundamentally need?

I appreciate that those are very detailed questions that are probably for a commission in itself.

Professor Skea

I will try to address those questions. It is really interesting that, globally, SSE is, as far as I know, almost the only company to have a just transition plan and strategy. Obviously, that drives the company to be more sensitive to issues relating to local content and the distribution of benefits than a company that does not have such a strategy.

There is potentially a role for Government. Companies cannot be made to do such things—although legislation could perhaps be introduced to require a just transition to be formalised in company plans. However, there are ways of encouraging, nudging and shaming companies into paying more attention to just transition principles when they are implementing their strategies.

SSE is very interesting. It paraded its just transition planning all around COP27 in Egypt last week, and it got attention globally for doing that. That is the kind of pressure that is involved. If momentum can be built around that trend, where private companies are engaged with it, that would be a good platform for success.

10:15  

Gordon MacDonald (Edinburgh Pentlands) (SNP)

In your July report, I noticed that one of the items in the list of strategic priorities is tackling fuel poverty and that

“Action on energy efficiency is urgently needed.”

What are the current bottlenecks that are holding back progress on energy efficiency improvements? Is it shortage of labour, shortage of materials or finance?

Professor Skea

I will turn to Elliot Ross in a second on that, but it is an area that ought to be easy because there is a triple win there. You can reduce emissions, reduce fuel poverty and create highly skilled jobs by making progress in this area, but the challenges are in the bottlenecks.

The first is that the level of retrofit that you need to aim for net zero is much more ambitious than just putting a few extra centimetres of insulation into the attic. It is much more ambitious than that and there needs to be greater skills in the building and construction sector to do that. Therefore, skills is one part of it.

The finance issue is interesting as well. We have had successes in the social housing sector, which we saw on the first Just Transition Commission. However, there is the challenge of getting owner-occupiers ready to put up some of their own money through the right incentives. Perhaps in the private rented sector, there might be a possibility for more regulatory interventions when tenancies turn over. We need a big push on that to make it happen.

I have been in the business so long; I have watched ministers come in, look at energy efficiency and say, “This is so obvious; why has nobody thought of this before?”. They are full of confidence about how to do it, but two years later, they retire defeated because of the social institutional challenges in the sector. It is such an obvious one to fix. We need to address it urgently, otherwise we will not get to net zero in Scotland.

One other point to flag is that we had a session with building professionals at Built Environment-Smarter Transformation in Blantyre, and the message that came through there was that it should be fabric first. We should concentrate on the energy efficiency aspect of buildings, and then we can make a choice about which heating system we want to do, whether it is district heating in dense urban areas or perhaps heat pumps in other places. We must get the efficiency sorted first, because it is the key to unlocking everything.

Elliot Ross

I will add a couple of things, particularly reflections off the back of the most recent visit to the Isle of Lewis, where we heard not only from local organisations that are engaged in energy efficiency measures but from local citizens when we held a town-hall event in Stornoway. One of the main themes of that event was the growing frustration of local people that an enormous amount of power is being generated in their local area but the rate of fuel poverty on Lewis is climbing towards an estimate of 80 per cent plus. Clearly, there is a disjuncture there between how power is being generated and how the local community is able to benefit from that in a sustainable way.

The other key issue that was highlighted was access to skills in remote and rural areas. People told us about experiences of trying to retrofit homes but being right at the bottom of the list of providers that were operating in the central belt, for which the cost of going to a remote island community such as Lewis was prohibitive relative to what they could do closer to home. There are a number of issues to highlight on that.

Gordon MacDonald

We have touched on finance a couple of times this morning. You quite rightly pointed out that owner-occupiers should contribute something. In Wester Hailes in my constituency, 180 blocks are currently being retrofitted with external cladding as part of an improvement to the area. However, home owners, many of whom are retired, are being asked for between £40,000 and £60,000, which is a substantial element of the value of the property. The only option that they are being given is to sell the property back to the council. I was interested in the minutes of your June meeting, which say:

“There was discussion on ‘who pays’ for retrofit work, particularly those ineligible for Warmworks support at present due to benefit criteria. It was suggested government should look at other countries for solutions, such as Germany and Italy who both operate effective incentive schemes.”

Will you expand on that?

Professor Skea

I think that the reference to Germany was to the KfW Bank, which provides funding. Basically, Germany has spent roughly the same amount of money on energy efficiency as the UK has in aggregate, but it has strategised it very differently. Germany has focused on doing very deep retrofits on a smaller number of buildings rather than doing modest retrofits, such as attic insulation, on a large number of buildings, which has been the Scottish and the UK pattern so far. It is a while since I looked at that but, if I recall, KfW was providing zero-interest loans of up to about €60,000 or €70,000 for deep retrofits on buildings. It was taking a rather different approach to it.

KfW is probably in the same bracket as the Scottish National Investment Bank, in that it gets its funds from social security payments and is not entirely part of the private market. Those are the examples that we need to look to.

The other point on the owner-occupier issue is to look at the points of intervention where you can make a difference. When someone buys or sells a house, is there something that can be put in there? Can someone get a discounted mortgage if more energy-efficient measures are put in? We need to look at the intervention points and for cleverer ways of setting the incentives for people.

I can entirely sympathise. As I am approaching that age myself—getting into retirement and facing big retrofit costs—I wonder how you actually manage it. That is the very reason why we need to be sensitive about who pays and who will gain the benefits, which is one of our main themes for the just transition.

Colin Beattie (Midlothian North and Musselburgh) (SNP)

I have a couple of related questions. We are all aware that Scotland has an ageing population. The latest projections seem to indicate that the working age population will shrink over the medium to long term. What additional challenges does that bring to achieving the upskilling and reskilling that we need in the workforce? Is it ready to take new jobs and learn new market skills to support the transition? How will it work?

Professor Skea

I will be honest; we have not discussed ageing population issues in the commission, although it would be part of our social infrastructure theme.

Quite clearly, it may be that people will work beyond current retirement ages and change the balance of people who are in retirement or are part of the working population. I am past the state retirement age and not showing any signs of slowing up at the moment, but I would not give myself as an example in that regard.

It is something that we ought to discuss, because we have not covered it specifically in the commission discussions. Elliot, has anything come up in the thinking of some of the working groups?

Elliot Ross

With regard to how the just transition is to be understood and worked towards in the Scottish context, the commission has taken a very strong steer that the social infrastructure piece—which includes care, health and other factors that we all rely on, particularly as we get older—has to be part of the picture, not a marginal concern.

In that sense, the work of the commission is more about the horizon-scanning, agenda-setting advisory piece that Jim was talking about earlier. As yet, it does not align with Scottish Government’s just transition plans. As far as we are aware, there is not a just transition plan for health, for example, but it has been highlighted by the commission that part of what a new economy looks like involves valuing the low-emission sectors that sustain the economy and help it to reproduce and function well.

Colin Beattie

I think that it would be unwise to assume that older workers will come back to the workforce to make up the shortage. I realise that the cost of living crisis is forcing many to continue beyond retirement age, but that might not prevail in the future. It is not something that we can plan.

Again, all the projections show that we have a shrinking working-age population. That will have a direct impact on the jobs and so on around the transition. How will that work? How will the workforce be managed?

Professor Skea

One of the first things that we did on the first Just Transition Commission was to commission a piece of work on what Scotland might look like in 2030 in relation to overall economic and social structures. I have to say that we could not make much use of the report because it was a business-as-usual projection. However, with 2045 and net zero, it is just not business as usual.

I have to confess that we have not thought through those issues, but I think that we need to put just transition in the wider context of where Scottish economy and society are going over that period. Net zero is not the only thing that is happening; we need to take account of the other factors.

I am afraid that we do not have answers at the moment, but as with some of the other questions, you are setting an agenda for us, which is rather useful.

Colin Beattie

I will ask another question that is somewhat related to what I was talking about. Do we have an understanding of the skills that will be in demand and do we have enough confidence that a pipeline will exist to deliver those in time for investment in the coming years?

Professor Skea

I will turn to Elliot again on that question, but I think that we can develop very good ideas of what skills will be needed, and people are doing the skills mapping that is associated with net zero. The bigger challenge is getting the plans and the pipeline in place to make sure that those skills needs can be met. It is a message that we are getting about shortages of skills in some of the critical areas, so it is absolutely something that needs to be worked on.

Elliot Ross

To underline that, one of the clearest messages that the commission, particularly this second commission, has sent to Government is on the critical question of workforce planning. The commission thinks that we need to have a lot more detail and clarity from Government on the age profile of the workforce, the skills that are required, and where and when they will be required.

At this point, is it correct to say that overall workplace planning across the country has not really taken place yet?

Professor Skea

I would say that it is work in progress. People have acknowledged the need to do it and we are pressing Government on it, but there is still work to be done.

10:30  

It is certainly an area that could threaten the effective delivery of the transition if we do not have the right people with the right skills in the right numbers.

Professor Skea

We can only agree with you on that.

We appreciate that James Withers is currently undertaking a skills inquiry and is due to produce a report in April. Has he managed to have time to engage with the Just Transition Commission yet?

Professor Skea

Elliot, do you have any information on that?

Elliot Ross

No, we have not had a connection just yet, but I suspect that it is something that we will be exploring.

The Convener

I have one more question before I move to Jamie Halcro Johnston. We have had a very broad discussion. It was the commission’s recommendation that a minister be appointed. This is not a reflection on the minister personally, but do you think that the ministerial role has enough weight to have influence across Government, given that it is a very cross-cutting area?

Professor Skea

Basically, it is too early to tell. This is a real experiment in governance, given that, as we have described, just transition has a very wide scope, so the minister has to delve into all sorts of areas. It is important that the commission engages not only with the just transition portfolio but with other areas such as economy and fair work. Environment and land reform is another area in which I have engaged with the cabinet secretary—we need to go in there.

The combination of a critical friend in the commission and having a minister is potentially very powerful, but we need to come back in two or three years to check. This is a genuine experiment in governance for just transition. For example, I do not know of any other country in the world that has a just transition minister—and I asked people from a few countries about that when I was in Egypt last week.

We have to wait and see, but it is worth trying. We were keen to see just transition elevated and given a specific spotlight in the governance system, and we will find out in two or three years whether that has worked.

That is not something on which I should turn to Elliot Ross, as he is part of the secretariat.

Yes—we do not want to compromise him in any way.

Jamie Halcro Johnston (Highlands and Islands) (Con)

Good morning to both the witnesses. Before I go on to my main points, I want to ask about fuel poverty and the issues around owner-occupiers and social housing. I represent the Highlands and Islands, which includes Lewis, which you mentioned, as well as Orkney and Shetland, where there are high levels of fuel poverty. As you mentioned, there is frustration about the huge amount of renewables generation in those areas.

One issue that has come up in my time as an MSP has been a lack of clarity on how owner-occupiers can access support. There are lots of different pots, and there are issues related to income and health, the age of houses and all sorts of other things. Particularly in relation to fuel poverty but perhaps other areas, how important will it be to have clarity, a streamlined process, easy access to the right information and good signposting if we are to meet the targets?

Professor Skea

I will give my personal view. I do not think that we talked about that specific issue when we were over in Stornoway but, for me, clarity is absolutely critical, because complex administrative processes and bureaucracies simply discourage people from applying. We are well aware that people end up not taking benefits to which they are entitled if the obstacles and administrative hurdles are too high.

I can say only that clarity is very important. You have to accept that, if you simplify procedures, there may be a little more rough justice in the decisions that are made, but that is the kind of choice that we need to make. Maybe a bit more rough justice would be acceptable if we can make greater progress and get more people engaged.

Jamie Halcro Johnston

Another area in which there have been concerns is the involvement of small and medium-sized enterprises, and particularly how we engage with small businesses. Will you talk more about concerns that you have about that? How important is that issue?

Professor Skea

I will ask Elliot Ross whether he can deal with that one. It is not one of the topics that I have done a deep dive into on the commission. Do you have any ideas on that, Elliot?

Elliot Ross

Could you tell us a bit more about what you have in mind on that, Mr Halcro Johnston? One way that just transition is playing out is through different organisations at different levels developing their own just transition plans. Is that the kind of thing that you are getting at?

Jamie Halcro Johnston

Historically, with areas such as energy efficiency measures, the focus has tended to be on larger organisations that can deliver projects or initiatives Scotland-wide. However, obviously, encouraging small businesses to play their role in reducing energy use and the like will be key to meeting some of the wider targets. How do we encourage small businesses to be involved? How can they be engaged and play a role in that?

Elliot Ross

As Jim Skea suggested, the commission has not looked at that in a huge amount of detail yet, but I think that we will consider it down the road. On the same question of scale, there was an interesting discussion on Lewis about the relationship between community wind generation and much larger corporate wind generation. There is an interesting balance to consider between smaller operations and larger ones right across the just transition question in Scotland.

Professor Skea

I have just recalled a conversation that we had when we were on Lewis about the issue of energy efficiency. That related to a requirement in Scottish Government procurement processes for suppliers of energy efficiency services to use, I think, the PAS 2060 standard. We heard a lot of grief that that is very difficult and is not suited to smaller to medium-sized enterprises to deal with, which tilts the process towards larger suppliers that can put in place more elaborate procedures. It is clear from looking at the British Standards Institution documentation that it was very much the intention to have larger and potentially more sophisticated operators involved in the process.

We identified that as an issue. Perhaps there is the possibility for a slightly more streamlined approach to the application of such standards in procurement processes so that smaller to medium-sized enterprises, which tend to dominate in places such as Lewis, would not be so disadvantaged by those more bureaucratic kinds of interventions. We took that point back with us, and it is likely to appear as an issue in some of the reports that we produce next year.

Jamie Halcro Johnston

We might want to keep an eye on that.

I think that we are all agreed, or we all understand, the need for just transition around energy, because of the impact on key areas of the energy sector from the changes and how the sector might shift in Scotland. However, we have mentioned other sectors such as housing and agriculture. I am a partner in a farming business, and I can see the changes that are already being made. In housing, we need to build more houses and we need to provide more homes for people. In agriculture, we have spent many years incorporating environmental issues in farming practices, but we now see food prices increasing and pressure on supply. How will those perhaps conflicting interests impact on the work to deliver a just transition and on your work and recommendations?

Professor Skea

I will have a go at that and then pass to Elliot Ross.

On housing, it is absolutely essential that when new build takes place, it is built to the absolutely highest standards. I was involved in the Intergovernmental Panel on Climate Change report on reducing emissions that came out this year. That report is clear that, in all parts of the world, it is possible to build almost net zero buildings and we should be aspiring to that. I know that Lord Deben, who is chair of the Climate Change Committee is quite scathing about the major house builders and the kind of housing that we are putting up at the moment that is locking in carbon dioxide emissions for decades into the future—those are his words rather than mine. It is important that we get a grip on the standards for new build.

On agriculture and land use, there are an awful lot of townies, if I can put it that way, on the commission—we hold up our hands on that. We are actually humbled by the complexity of some of the issues on agriculture and land use. When a tenancy comes to an end, who do the trees or the cattle belong to? Those are the kinds of issues that arise. Agriculture and land use are very much tied up with the land reform issue, which we need to get our heads round. We have experts in agriculture and land use on the commission who will help us to think our way through those problems.

Elliot, do you have anything to add on housing and land?

Elliot Ross

Very quickly on housing, I appreciated the earlier comments from members earlier about how accessible our July report is, as it is in plain English. As Jim Skea might remember, there was some rather unparliamentary language on the standards for new house building that had to be judiciously edited, but I will not quote that now.

On agriculture and land use, the challenge for the commission is to take account of the different scales at which businesses and operations are working. It was great to hear from local crofters on Lewis, who were pushing the notion of peripherality as an important principle when thinking about the development of plans for just transition. Obviously, no one can invent a perfect new system, but it is about identifying the key risks and making sure that the burden of the changes does not fall on those who are least able to shoulder them, as well as identifying where there might be particular vulnerabilities that can be recognised, addressed and mitigated.

Jamie Halcro Johnston

The issue of who has inherited trees is probably less of a concern in places such as Orkney and Shetland, where I am from. I am sure that the local sectors would welcome a visit, because those are important issues. I am also interested in a freedom of information request to find out about that unparliamentary language, so that we get a good honest appraisal of your thoughts. [Laughter.] However, I will leave it there for now. Thank you.

Fiona Hyslop (Linlithgow) (SNP)

I should probably point out that I am the only MSP who sits on the Economy and Fair Work Committee and on the Net Zero, Energy and Transport Committee, to which Professor Skea has also given evidence. I am interested in how we dial up the just transition focus in this committee and respect what that other committee might be looking at, such as land use, land reform and transport. It is about how we get that read-across.

I want to ask specifically about the just transition fund that exists for the north-east and Moray, which obviously involves focusing and making a decision on a place-based approach to just transition. Did your commission advise the Government in advance of the announcement of the initial £50 million funding for the 24 projects in the first tranche?

Professor Skea

On the point about the intersection with this committee, for me, the focus will be on the classic just transition issues of labour market, skills and training. There is obviously some intersection with other committees in relation to training and skills needs and so on, which will be very specific for individual sectors. There is a crossover there but, for me, the issues for this committee are classic just transition ones—they are about skills, training and the labour market.

On the just transition fund, only yesterday, I looked at the projects that are being funded. I personally have had no involvement with the way that the individual projects were selected. It is a significant amount of money—about £50 million altogether—with quite a big variation in the size of the awards. I think that they vary from about £100,000 to £7 million or £8 million at the top end of the range. We have had no involvement in that so far.

Talking personally and off the top of my head, although we cannot get involved in discussing the merits of individual projects, I think that we would have an interest in the criteria that are used to select which projects go forward, and perhaps also some of the governance issues around how the selection process works.

Elliot Ross may have heard something, because he is closer to the Scottish Government than I am.

10:45  

Elliot Ross

I just underscore that the commission’s remit is focused on the development of just transition plans, so there is not a specific aspect of the remit that tasks the commission with providing an oversight of the just transition fund. The commissioners and the commission as a whole will follow the issue with interest, and we would be happy to provide scrutiny and advice if that is what the Scottish Government would like from us.

Fiona Hyslop

The plans and projects that exist are all very good and worthy in and of themselves, but some of them are probably focused more on delivery of net zero than necessarily on a just transition. There will be an obvious fault line between trying to generate the transition and focusing on the “just” aspect of it in relation to fairness and the principles that you have established.

If there is to be funding for a just transition, should it be mainstreamed in the areas that have already been mentioned—housing, energy and transport, for example—with private companies involved, or would there be merit in having stand-alone just transition plans that were supported by funds? If criteria had to be met for those funds, would the commission advise on that? If you are advising on the sector just transition plans, are you also advising on the criteria for funding, or is that still work in progress?

Professor Skea

I will start, as chair of the commission, rather than Elliot Ross, who is on the secretariat. The commission is independent of the Scottish Government so, if we chose to provide proactive advice on such a topic, I do not see any obstacle to our doing so. The commission has not met since that funding was announced, but I am perfectly sure that the issue will come up at the next commission meeting. The matter is relevant, and it is within the commission’s broad remit to consider how funding is being applied and the degree to which the justice bit or the transition bit is being addressed through the funding streams.

You asked whether there should be a labelled just transition fund as opposed to merging just transition principles into all funding sources. We need to kick around that issue. The commission has not considered it yet; the information about what the portfolio of projects will look like is new to us.

Fiona Hyslop

The committee would be interested in that. We have to determine what we, as a committee, want to do, and you might want to advise us on what it would be most useful for us to do. There is no point in our repeating work that you are doing, but we need to work in synergy somehow.

If we are being quite innovative, in a global sense, in our approach to the just transition, the challenge is that we have to make difficult choices. Will we need to make big, bold decisions relating to the just transition in Scotland, or will piecemeal, segmented activity with seedcorn funding provide a way forward? That is a genuine dilemma. Has the commission discussed that?

Professor Skea

No, we have not discussed that. It is worth while saying that it was surprising how little the first commission talked about funding and how much more we talked about doing things smarter or better. That is in sharp contrast to discussions about a just transition through the EU green deal, which are completely dominated by the issue of financial flows.

We have a finance working group, which Nick Robins leads for us, and those are the kinds of issues that we need to pick up. So far, that group has focused much more on the role of bodies such as the Scottish National Investment Bank and how private funding can be leveraged. However, as far as I can see, the just transition funding is based on straight grants. That is a different approach to finance, and we need to get our heads around it. I will certainly raise the matter with the commission at our next meeting.

Fiona Hyslop

The committee could focus on skills. Some of the skills that need to be developed might not be used to deliver projects until five years’ time, for example, but if we do not start investing in the supply chain and developing those skills now, we will not necessarily be able to deliver and scale up, particularly in relation to renewables, when work needs to be done at pace. The issue is how we support supply chain companies that use engineering skills, for example, to make those investments and decisions now, given that they might not necessarily reap the rewards for five years. A genuine transition challenge relates to how we support companies to do that, and that might require state subsidy. We need to think about the issue in those terms. Will the commission look at that, and should the committee potentially look at it?

Professor Skea

We think that it is absolutely within our remit. We obviously have slightly different functions: the committee scrutinises on behalf of the Scottish Parliament, and we have been given an independent role.

We need to follow up on that issue. We have emphasised the need for sector plans and road maps to take us forward, because we cannot wait until needs manifest themselves before investing in the supply chain. Given the short length of time until 2045, we need to be anticipatory, and that means scaling up in advance in relation to supply chains.

I cannot recall addressing such issues specifically at a commission meeting yet, but they are absolutely on the agenda. Many issues have been raised in the past hour or so, and it has been very helpful for us to hear the concerns of MSPs about particular topics that might be relevant. Elliot Ross and I will take those issues back to the commission when we next meet.

Elliot Ross

I hope that there will be a really productive relationship between the commission and the committee. From our conversation, it has emerged that there is significant overlap in our priorities on a just transition, and there could be productive opportunities for further exchange and collaboration.

Thank you very much.

Maggie Chapman has a supplementary question.

Maggie Chapman

I have a final brief question. Jim Skea has spoken quite a lot about social infrastructure, and I am mindful of the task relating to having meaningful engagement with those who are most likely to be affected by the just transition, so that they have the opportunity to shape it. Is there a role for the committee in doing something that the commission has not done or is not planning to do in that regard, or vice versa? There is a need for engagement, particularly with people who are not the usual suspects—those who will be affected directly but who might not have an industry voice or be able to input into the structures that we have.

Professor Skea

We have talked explicitly about the “not the usual suspects” issue, which is why we go to town hall meetings, for example, during our various site visits. The question of social infrastructure, which I mentioned, has been the subject of some debate within the commission. There is a question about whether we take a broader and more conceptual approach to social infrastructure or whether the issue relates specifically to the social care sector, which, for other reasons, might well become more important to the Scottish economy. We need to look at that and clarify our thinking on it, because we have received queries from the Scottish Government about what we mean precisely when we talk about social infrastructure. We need our thinking to be a little more rigorous on that topic.

We have emphasised one area that could be quite important in that regard. In relation to climate change adaptation, given the physical impacts of climate change, the question of social infrastructure could become much more important.

Elliot Ross

On the engagement question, we have our equalities, participation and engagement working group. There is the need to ensure that, in developing plans and in monitoring and evaluation, we have input not only from the usual suspects. In the July report, the commission gave the Government specific advice on how to take forward its work on M and E. We said that there should be specific and focused work to ensure that those who are most likely to be at the sharp end of the transition are part of the decision-making process and are heard from. The working group will look to take that work forward by finding new ways of engaging in that way.

Thank you.

The Convener

I very much thank Professor Skea and Elliot Ross for giving us evidence, which has been very helpful, and I look forward to continuing our working relationship with the commission.

10:56 Meeting continued in private until 11:31.