This briefing is the second in the Commission’s series of publications to be produced through the people- and place-based approach we have followed in 2024. Previously the Commission published advice on a sectoral basis aligned with the Scottish Government’s just transition planning framework, since its initial phase has centred on the development of just transition plans for four critical economic sectors: energy, land use and agriculture, transport, and the built environment and construction.

Shetland’s experience with the ebb and flow of different forms of economic activity is a singular one, particularly during the past half century. However close analysis of this experience provides significant learnings for whole country. The example of Shetland’s management of oil and gas development shows the long-term social and economic benefits of innovating effective mechanisms whereby communities can exert a measure of local democratic control over energy infrastructure developments.

The current route for Shetland, as we move away from oil and gas through rapid expansion of clean energy, appears unlikely to sustain current levels of investment for meeting local needs, with a risk to the funding model for critical social infrastructure across a rural island community striving to support an ageing population, retain young people and attract new residents.

Changes within marine areas have led to growing competition for space among industries, both ancient and new, as well as ocean recovery measures. Achieving a fair settlement for those whose livelihoods depend upon the marine environment, as the way it is used and protected undergoes rapid and significant changes, will require careful and sustained dialogue to build trust, as well as planning that anticipates adverse impacts and puts in place meaningful measures to mitigate these.

Peatland restoration is another major issue. An estimated 77% of Shetland peatland is damaged (over 40,000 hectares), and a very significant emitter of carbon dioxide. The Viking wind farm will be the UK’s largest onshore wind farm in terms of annual electricity output. It also sits on eroding peatland and a programme of extensive peatland reinstatement is underway. In the context of clear advice from the Committee on Climate Change on the need for rapid expansion of activity nationally to restore peatland, the question is what changes are now required to put in place a delivery model that achieves the required speed of restoration while maximising the potential social and economic benefits.

The transition to a net zero economy is underway, with all key sectors of the economy planning for, or undergoing, a degree of transformation. The Just Transition Commission is concerned for the impact of that transition on people: on workers, consumers and their communities. Its focus up to 2024 was largely to consider that transition on a sector by sector basis. Through 2024, the JTC has deliberately chosen to take a cross sectoral approach and listen keenly to the voices of local people in the place they live. In Grangemouth, Scotland, Dumfries and soon, in Aberdeen.

1. The evidence gleaned so far, particularly on Shetland, demonstrates the importance of empowering local people to make the most of the opportunities the transition offers for community wealth building, and ameliorate any negative impacts on lives or livelihoods. Shetland’s singular experience with both fossil fuels and renewables shows how, at its best, enduring value can be created for communities when local democratic structures have the power, legitimacy, knowledge and capacity to negotiate and partner effectively with industry. This helps to drive local meaningful wealth-building and ensure public consent for economic development to safeguard community cohesion via local oversight, monitoring and mitigation of negative impacts and the securing of appropriate compensation for disturbance and displacement as required. The nature of the transition, particularly its frequently highly concentrated local impacts, means structured dialogue is needed between different levels of government to ensure local authorities and communities have the ability to take key decisions and the capacity to effectively safeguard the retention of long term social and economic value. Unlike fossil fuels, renewable energy can be developed at both large and small scale.
2. The ability for communities to own smaller scale developments and have a share in the revenues from larger scale projects can super-charge the creation of community wealth. Community ownership will make a significant contribution to the fair distribution of value in the local and public interest. With very large-scale renewable developments critical to achieving net zero, there is a danger that grid capacity is dominated by ‘big renewables’, leaving little space for local ambitions. Space must therefore be reserved on the grid for local and community renewables development. Furthermore, a mechanism for local communities, in the form of local councils or community-based associations, to purchase an appropriate share of a developer’s large scale renewable development should become the norm. However, as the experience of Shetland tells us, even when there is a right, the inability for communities to access project finance thwarts ambition. It must therefore be an imperative to institutions such as the Scottish National Investment Bank, alongside GB Energy and others, to establish structures that communities can access project finance in the public interest.
3. Establishing a statutory right for communities to purchase an appropriate share of a renewables development will make a very significant impact on community wealth in remote places, as exemplified by the Northern and Western Islands. Until governments north and south of the border can develop a mechanism to afford that right, the Scottish Government should develop, alongside industry, practical guidance that enables community ownership of revenues, supported by access to finance for local communities.
4. Reserve grid capacity for community energy. As new connections between islands and other communities without current grid access continue to be developed to enable large renewable energy projects, connection rules set by Ofgem should be adapted to reserve a proportion of grid capacity so the development of community-led renewable generation is not constrained.
5. Community benefit, a voluntary industry norm, plays a role in building up local capacity to enable community wealth-building success. Community benefit funding, whereby a renewables operator makes a direct financial contribution to local communities, annually and for the lifetime of a windfarm, is a feature of the renewables industry across Scotland. This is an important feature and must remain, regardless of whether communities have an ownership share in the asset. The principle that these funds belong to local people and therefore it is for local people to decide how those resources are allocated is fundamental, including by supporting measures to achieve a robust process of community wealth building for the long term if they so choose. Given the scale of those funds, there is a case for standards to be developed, and assurance mechanisms to be introduced to demonstrate the quality of the consultation and the legitimacy of the decisions being made. Enhanced disclosure of funds allocated and governance structures ensures scrutiny and accountability with a role for oversight by local and national authorities.
6. As part of the development of the Scottish Government’s Just Transition Planning Framework for economic sectors and regions, consistent and equitable compensatory mechanisms need to be developed for those whose livelihoods are directly impinged upon by infrastructure development and other changes required for Net Zero. This could include, for example, fishers, crofters, and farmers whose access to natural resources is constrained. Such mechanisms should follow established principles around disturbance payments and compensation for income foregone, so as to ameliorate negative impacts and speed the transition by building consent for major developments through fair, transparent and consistent dealing. As a general principle, infrastructure developments should seek to ensure they do not threaten the sustainability of existing locally based economic activity, such as fisheries, agriculture, and tourism, developing positive relationships and actively working with local stakeholders, utilising highly-valued local knowledge.
7. Restore trust between key groups working in the marine environment. As transition activities intensify the ‘spatial squeeze’ in the marine environment, trade-offs must be managed on the basis of a robust and credible evidence base, particularly as regards the environmental impact of relevant activities, as part of a concerted effort to rebuild trust among all stakeholders. The example of the governance and outputs of the Shetland Oil Terminal Environmental Advisory Group (SOTEAG) provides a compelling example of the kind of innovative approach that may be required.
8. Local climate strategies should overtly address just transition challenges. These should assess potential impacts in terms of the just transition principles, and including plans to monitor and evaluate progress towards delivery of a just transition for the relevant locality

To view the Annexed content of the report, please follow the hyperlink or PDFs below. 

Annex A – “Shetland, Community Benefit, and the Energy Transition“, a report by Voar, produced for the Just Transition Commission

Annex B – Commission pre-briefing pack 

Annex C – “Subsea Tunnels Are We Crazy?” a report by Unst Tunnel Action Group and Yell Tunnel Action Group