Scotland has a significant oil and gas sector in the North Sea. It is a major employer, contributing around five per cent of total Scottish GDP (2019), and accounts for around 90 per cent of the country’s total primary energy (2015) (Scottish Government 2022c). It also has some of the most ambitious greenhouse gas reduction commitments among advanced economies. The Scottish government’s planning for a just transition started in 2019, and it is now ramping up a national strategy for economic transformation, with specific plans for high-emitting industries. The energy sector is the first to be tackled. Swift progress on these plans will be critical for Scotland to meet its ambitious climate commitments and build a just transition.

Context

In 2019, the United Kingdom (U.K.) became the first major economy to establish and pass a legally binding target of net zero emissions by 2050. Scotland—a devolved regional government under the U.K.’s Westminster government—has made even more ambitious commitments: a 75 per cent reduction in greenhouse gas emissions by 2030 (relative to base year 1990), and net zero greenhouse gas      emissions by 2045. Just transition principles are baked into these targets. Scotland’s climate change plan calls for a rapid transformation across all sectors of the economy and society while “ensuring the journey is fair and creates a better future for everyone—regardless of where they live, what they do, and who they are” (Scottish Government 2022b). However, there is no planned phase out of oil and gas, but rather a commitment to continued exploration and production with the hope that investments in sustainable energy and carbon capture, utilization and storage (CCUS) technologies reduce sectoral emissions. 

Major industrial transitions are not a new phenomenon in Scotland. Poorly managed transitions in the coal sector in the 1980s led to entrenched inequalities in those regions decades on. The North Sea oil sector has experienced intermittent declines since the 1990s and jobs connected to the oil and gas industry have fallen nearly 40 per cent over the last five years alone (Oil and Gas U.K. 2021), further entrenching those inequalities. In 2017, the Just Transitions Partnership (JTP)—a coalition of unions and environmental NGOs—formed to advocate for a long-term, independent, focused commission with statutory authority to track and monitor the government’s Climate Bill and ensure its alignment with just transition principles. In response, the Scottish Government established a Just Transition Commission in 2019 for a two-year term to provide “practical, affordable, actionable” recommendations to Scottish ministers on how to achieve those principles. It also mandated that climate action targets align with just transition principles. 

Over their two-year term, the Just Transition Commission engaged the public and key stakeholders in meetings, town hall events, and site visits across Scotland. These were overarching conversations related to the whole of the economy and society. The Commission’s final report to the Scottish government was submitted in 2021 with four main recommendations:

1. Pursue an orderly, managed transition to net zero that creates benefits and opportunities for people across Scotland.
2. Equip people with the skills and education they need to benefit from Scotland’s transition to net      zero.
3. Empower and invigorate communities and strengthen local economies.
4. Share the benefits of climate action widely and ensure costs are distributed on the basis of ability to pay (Just Transition Commission 2021).

The Scottish government accepted the recommendations of the Commission in full and will create a national Just Transition Planning Framework to set out how it will transition to a net zero economy. The framework will include detailed plans for specific industries. A junior ministerial post—Minister for Just Transition, Employment, and Fair Work—has been created to coordinate these actions. A new, permanent, statutory Just Transition Commission will advise, monitor, and evaluate progress on key targets¹.

Policy response and transitions management

Developing a transition plan for the energy sector was the first priority. Like many jurisdictions, Canada included, Scotland’s target of reaching a net zero economy by 2045 exists alongside a commitment to “maximise oil and gas recovery” for the foreseeable future. Government financial support for oil and gas exploration and production is conditional on sustainable energy transition investments. It supports sequestration (CCUS technologies), alternative energy (hydrogen and hydrogen fuel cells), decommissioning oil and gas capacity, and helping workers transition to new jobs. 

A U.K.-wide Oil and Gas Industry Leadership Group (ILG) convenes private and public sector leaders to coordinate on these matters. The U.K.’s oil and gas industry group has created their own greenhouse gas reductions roadmap to 2035 with key actions in areas such as skills development, technology, and innovation and emissions reductions (Oil and Gas U.K. 2022). Scotland’s Just Transition Commission has noted that while these efforts are valuable, it is important that they are consistent with statutory emissions reductions targets (Just Transition Commission 2020). Devolved and reserved responsibilities make accountability challenging. For example, licensing for offshore oil and gas is a reserved matter for the UK government while onshore licensing and extraction was devolved to Scotland in 2016². There are also concerns that the industry-led plan does not adequately address workers. 

While these initiatives continue to ramp up, the sector is already transitioning. Declines in the price of crude oil from 2015-2020 have spurred employment losses; these have in turn been compounded by economic contraction due to the COVID-19 pandemic. Even when gas prices recovered in 2022 employment has not recovered to previous levels. There are some ongoing initiatives to address these shifts. The U.K. Government’s Oil and Gas Workforce Plan (2016) supports displaced workers through online jobs platforms that help them find work in other sectors that require similar skillsets³. Scotland’s recent (2020) climate change commitments include a C$165 million (£100 million) Green Jobs Fund, to support investment in low-carbon businesses, and a Green Workforce Academy—a hub for job seekers in green industries.

There are also high hopes that sustainable energy investments will support the labour transition. A recent report from Robert Gordon University estimates around 200,000 people will be needed in 2030 to develop the offshore wind, hydrogen, and CCUS industries, alongside existing oil and gas activities. However, investments in skills development and retraining have been limited to date and the focus on online services may have limited reach as not all employees are comfortable using them. 

Regional development is also critical to Scotland’s just transition response. Employment declines have disproportionately hit certain regions, such as Aberdeenshire in the northeast, where employment is highly concentrated in the offshore oil and gas sector. Post-Brexit, the U.K. and Scotland have needed to reinvent their regional development approaches. To date, Scotland has established a C$827 million (£500 million) regional development fund to support the energy transition in the northeast and Moray regions. This includes investment guarantees and loans to small- to-mid-sized firms. 

All Scottish regions now have city region and regional growth deals—agreements between the Scottish and U.K. Governments and local governments to support long-term economic growth. Some of these agreements also support just transition objectives. For example, under the Aberdeen City Region Deal (now in its fifth year), the Oil and Gas Technology Centre has been rebranded as a Net Zero Technology Centre and is shifting its focus to develop tools that can speed up the North Sea oil industry’s transition to net zero (Invest Aberdeen 2022). However, as city and regional deals have been developed separately from the Just Transition Planning Framework process, they do not all necessarily correspond to just transition objectives.      

Other initiatives that could be used to meet just transition objectives include expanding the U.K.’s “levelling up” agenda to Scotland—an approach that aims to boost investment in lagging regions and reduce territorial inequalities. Finally, the Scottish government plans to create “green freeports.” These are large, zoned areas with rail, sea, or airport links where operators and businesses benefit from tax and other incentives. To qualify, they need to support the “just transition to net zero emissions by 2045 and the creation of high-quality employment opportunities with good salaries and conditions” (Scottish Government 2022a). It represents an attempt to bake just transition concepts into business investment zones and to develop competitive clusters of manufacturing excellence in green technologies.

Progress to date

Scotland is only now implementing a Just Transition Framework and it is too soon to assess its impact. The new national framework approach, with ministerial accountability and an independent commission to advise and evaluate progress, appears to be a robust structure for such a complex and encompassing challenge. Already, there has been nation-wide engagements to facilitate dialogue, and stakeholders and rights holders were identified by the first Just Transition Commission. The Scottish government has also committed to this engagement and defines the just transition as both an outcome—a fairer, greener future for all—and a process that must be undertaken in partnership (Scottish Government 2021). It will be important that the new framework expands and strengthens the engagement of the first Just Transition Commission as it develops new sectoral just transition plans.

The U.K. has made considerable progress in reducing its greenhouse gas emissions. The Climate Action Tracker rates the U.K.’s overall progress as “almost sufficient”—with commitments that are consistent with keeping the average global temperature rise to below 2 degrees Celsius (Climate Action Tracker 2021). Scotland has decarbonised faster than the U.K. average, and the speed and scale of electricity sector decarbonisation has been the main reason for its progress (U.K. Climate Change Committee 2021). The Climate Change (Scotland) Act 2009 and the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 set annual emissions targets to ensure Scotland is on track to reach its net zero greenhouse gas emissions goal; there are independent annual reports from the U.K.’s Climate Change Committee tracking its progress. And, while Scotland is making progress, the committee’s latest (2021) assessment finds that Scotland is not doing enough on adaptation, which plays an important role in just transition processes (U.K. Climate Change Committee 2022).  

There are also contradictions in Scotland’s approach to transitioning the oil and gas sector, even though this is critical in meeting net zero targets. As previously mentioned, there is no timeline to end oil and gas exploration and production, creating significant uncertainty on the timing of the sector’s phase-out, which does not support a just transition approach. External factors, like the Russian invasion of Ukraine and the cancellation of the Nordstream 2 pipeline, could continue to put upward pressure on global oil and gas prices making new investments in the sector more attractive. 

It is also unclear how local community plans will be developed and whether they will align with broader sectoral reforms. Community-driven just transition plans that identify local assets and opportunities, and establish coalitions for action have yet to be developed. However, there is a framework that Scotland could use for this process. Regional Economic Partnerships are collaborations between local government, the private sector, education and skills providers, enterprise and skills agencies, NGOs, and civil society. The government has supported several to date and this format could be used to support regional just transition planning. The new permanent Just Transition Commission will likely play a role in monitoring distributional elements of justice—looking at how different groups benefit or experience impacts from the transition—to hold government to account.      

While initiatives are ongoing, the Just Transition Partnership that spurred the creation of Scotland’s first Just Transition Commission has expressed skepticism that the government’s approach is sufficient. In fact, they have described the lack of regional investment or local jobs in the renewables industry as “unjust” (Mercier 2020, 125). Their 2021 Manifesto called on the government to provide immediate support, through a Green Public Works program, to workers facing redundancy. This program would ensure that any government support to the private sector would include requirements for emissions reductions and job creation and establish clear targets for decarbonisation, investment, and job creation. It remains to be seen how these demands will be met (Just Transition Partnership 2020).

National trade unions and the Just Transition Partnership have both called for greater state intervention. The Partnership would like to see “state-led economic planning, and public ownership of energy and state investment in industrial policy such as manufacturing” (Mercier 2020, 125). The North Sea oil fields are geographically and equally divided between the U.K. and Norway, offering a study in contrasts of how to manage oil assets for a just transition⁴. On the U.K. side, Scotland’s North Sea state revenues stood at C$33.74 million (£22 million) in 2021, while Norway’s revenues were C$14.74 billion (£9 billion) for roughly the same production (McKay 2021). Norway’s oil industry is state-owned while the U.K.’s is privatised. Norway’s world-renowned sovereign wealth fund today stands at around C$1.69 trillion. The U.K. has no such Sovereign Wealth Fund, which could have been used to support a just transition⁵. The union and Partnership members view this as a missed opportunity and a setback to transition management. They advocate for much stronger public sector involvement, and even ownership in sustainable energy, to accelerate a just transition and ensure new high-quality jobs (Just Transition Partnership 2020, Prospect 2022). For example, the Scottish Trades Union Congress has argued that the recent private sector offshore wind development (17 ScotWind projects) would have delivered thousands more jobs had it been set up as a national Scottish energy company (Williams 2022).

Lessons for Canada

Scotland’s calls for a rapid transformation across all sectors of the economy and society are ambitious.  While outcomes largely remain to be seen, Scotland’s just transitions planning framework offers three      lessons for Canadian governments:       

• Define the scope and parameters of “just transition.” Just transition is a contested concept. The word means different things to different communities, stakeholders, and rights holders. The first Just Transition Commission’s national engagement efforts unpacked what “just transition” meant to different groups in order to reflect a wide range of views back to the Scottish government on the main priorities for action. This brings clarity to what is often an amorphous concept and can help establish common priorities.
• Concrete commitments relating to job retention, quality, and pay can help reduce the risks to transitioning workers. Key stakeholders are often looking for clear commitments from the public sector and industry to mediate the risk and potential harm associated with transition. For example, the Scottish government has indicated that public funding for climate action will be conditional on fair work terms, and is looking to apply real living wage criteria to non-departmental public bodies alongside fair work standards as a condition of public sector heat and energy efficiency contracts (Scottish Government 2021). A major concern of many energy workers is that the jobs that they may transition to will be of a lower quality and pay. Fair work and living pay standards are one way of addressing this. 
• Frameworks and accountability are necessary. Scotland set up a process to deliver on its just transition commitments. The national Just Transition Planning Framework will set out the objectives; sectoral plans will provide the details; the Minister for Just Transition will provide accountability; and the Just Transition Commission will advise, monitor, and evaluate. How “justice” is interpreted and applied in these contexts will be important, as will co-ordination between sectoral plans and regional development. How these groups ultimately work together is still developing, and their coordination will be critical for its success.

Conclusion

As a devolved government within the U.K., just transition initiatives in Scotland must be coordinated between levels of government. Scotland’s sectoral plans set a strong signal to the U.K. government on their priorities for investment. As sectoral plans roll out, the robustness and inclusivity of the government’s framework will be put to the test. This will continue to be an important country to watch. 

All opinions, errors, and omissions are the sole responsibility of the author.

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¹ Among devolved U.K. governments, the Welsh Government has also created a new cabinet position, Minister for Climate Change, with responsibilities for decarbonising transport, the housing sector, and energy generation in 2021.

² Licensing of offshore oil and gas extraction is a reserved matter for the U.K. government as is the legislative competence for health and safety. The 2016 Scotland Act devolves the regime for licensing onshore exploration and extraction of oil and gas to Scotland (exploration).

³ The “Talent Retention Solution” U.K. web-based platform, puts skilled individuals looking for work and companies searching for new employees in direct contact with each other. A “Skills Connect” web-based tool supports the oil and gas sector experiencing skills shortages.

⁴ Norway has committed to reduce net emissions by 55 per cent by 2030, but the current government aims to continue oil and gas developments.

⁵ Arguably Norway is not doing this as their current government uses revenue from the fund for general purpose revenue; the country also aims to continue oil and gas developments.