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Institute for Public Policy ResearchA JUSTTRANSITIONREALISING THEOPPORTUNITIES OFDECARBONISATIONIN THE NORTHOF ENGLANDFINAL REPORTJoshua Emdenand Luke MurphyMarch 2019

ABOUT IPPRIPPR, the Institute for Public Policy Research, is the UK’s leadingprogressive think tank. We are an independent charitable organisationwith our main offices in London. IPPR North, IPPR’s dedicated thinktank for the North of England, operates out of offices in Manchesterand Newcastle, and IPPR Scotland, our dedicated think tank forScotland, is based in Edinburgh.Our purpose is to conduct and promote research into, and theeducation of the public in, the economic, social and political sciences,science and technology, the voluntary sector and social enterprise,public services, and industry and commerce.IPPR14 Buckingham StreetLondonWC2N 6DFT: 44 (0)20 7470 6100E: info@ippr.orgwww.ippr.orgRegistered charity no: 800065 (England and Wales),SC046557 (Scotland)This paper was first published in March 2019. IPPR 2019The contents and opinions expressed in this paper are thoseof the authors only.The progressive policy think tank

CONTENTSSummary.31. Introduction.62. The need for long-term policy certainty in the energy sector.8Political short-termism undermines investment in the low-carbonenergy sector.8A lack of investment undermines the opportunity to create new jobs.10The opportunity to find new employment is crucial to a just transition .11Without long-term policy certainty, businesses will struggle to planfor the future. 11Current attempts at long-term ‘place-based’ policy are inadequate. 11Recommendations: deliver long-term certainty in the low-carbonenergy sector. 123. The need for a just transition.14What is a just transition?.14The need for a just transition. 15Improving the low-carbon energy sector. 17The benefits of a just transition to the UK economy.18Recommendations: delivering a just transition in the North . 194. The skills gap.24Challenges with demand in the skills system.24Challenges with supply.26What transition opportunities are there for different regions in thenorth of England?.29Recommendations: how the skills system can support a just transition. 30Conclusion.33References.34IPPR A just transition Realising the opportunities of decarbonisation in the north of England1

ABOUT THE AUTHORSJoshua Emden is a research fellow at IPPR.Luke Murphy is associate director for for energy, climate, housing andinfrastructure at IPPR.ACKNOWLEDGEMENTSIPPR is grateful to Prospect, Northern Powergrid, EDF and Sellafield Ltd for theirgenerous support for this report and their wider input into the research.The authors would like to thank the following people for their insights, commentsand feedback on the research: Andrew Pakes, Beccy Pleasant, Carolyn Woolway,Colin Reed, David Nash, Elizabeth Smith, Hugh McNeal, Jenny Patient, John Weir,Kate Bell, Kieren Walters, Laura Almond, Mike Macdonald, Patrick Erwin, PeterMcIntosh, Richard Crossick, Rob Murphy, Sally-Ann Garrard-Hughes, StuartKlosinski, Sue Ferns, Teresa Chalmers, Tim Page, and Will Blyth.The authors would also like to thank their colleagues Darren Baxter, CatherineColebrook, Rosie Corrigan, Joe Dromey, Abi Hynes, Sarah Longlands, RichardMaclean, Luke Raikes, Anna Round and Carys Roberts for their contribution tothe research and report.DownloadThis document is available to download as a free PDF and in other formats t-transitionCitationIf you are using this document in your own writing, our preferred citation is:Emden J and Murphy L (2019) A just transition: Realising the opportunities of decarbonisationin the north of England, IPPR. ransitionPermission to shareThis document is published under a creative commons licence:Attribution-NonCommercial-NoDerivs 2.0 /uk/For commercial use, please contact info@ippr.org2IPPR A just transition Realising the opportunities of decarbonisation in the north of England

SUMMARYDecarbonisation holds huge opportunities for the north of England. The energysector is one of the North’s ‘prime capabilities’. The region has a leading low-carbongoods and services sector - accounting for around a third of all jobs in the sectorin England. It has world-renowned universities and leading expertise in technologiessuch as nuclear power, hydrogen and offshore wind. This is matched by the manyhistoric, geographic and geological advantages that exist in the region.In short, there is substantial potential for the north of England to become the newheartland for a low-carbon energy economy. According to IPPR's interim report,Risk or Reward, up to 46,000 jobs could be created by 2030 just in the powersector, the focus of this report, alone.And yet, such an outcome is not guaranteed. Decarbonising the economy, if managedbadly, carries significant risks for the North. As home to the majority of coal andgas power stations in England, the North could suffer approximately 28,000 joblosses in the coal, oil and gas industries by 2030, IPPR analysis has shown. This iswithout considering the other potential job losses in high-carbon energy intensiveindustries and the wider economic and social implications that the loss of industrycan bring about.In the past, industrial change has been poorly managed, including in the north ofEngland, resulting in regional inequalities. But a well-managed ‘just transition’ couldbuild on the economic strengths of the north of England and deliver a high-skill,high-wage, low-carbon economy of the future.We have identified three key challenges that exist in delivering a just transition. Lack of policy certainty and ambition: without long-term certainty for thelow-carbon energy industry, growth in this sector will be stunted which couldlimit the transition opportunities for workers in carbon-based generation. Failure to put a ‘just transition’ at the heart of decarbonisation policy andindustrial strategy: the government is failing to embed the idea of a justtransition across government policy. Consequently, decarbonisation couldnegatively impact the future livelihoods and communities of workers inhigh-carbon industries and will see the North disproportionately impacted. An ill-equipped skills system: skills gaps exist throughout the low-carbonenergy sector, but the UK’s skills system is failing to meet demand, nor doesit provide adequate training to support a transition for workers who have thepotential to move from high to low-carbon employment.In this report we discuss these challenges in more detail and make the case fora new approach that puts economic and social justice at the heart of energy andskills policy in the North. To achieve this, we set out a range of recommendationsthat are crucial to this ambition and ultimately form the components of a JustTransition Strategy for the north of England.IPPR A just transition Realising the opportunities of decarbonisation in the north of England3

RECOMMENDATIONSStep 1: Long-term certainty and devolved powers1.Long-term capacity targets: The government should set capacity targets foreach low-carbon technology it intends to support and devolve these targets.2.Government subsidies and regulatory reform: The government should providea combination of subsidies and regulatory reforms to support relevantindustries' progress towards the targets that have been set.3.Energy for the North: The government should devolve carbon budgets to thenorth of England and create a new ‘Energy for the North’ body which wouldbe linked to the work of the NP11, and coordinate efforts to lead a low-carbonrevolution in the north of England.4.National policy coordination: The government should create a cross-departmental‘Decarbonisation Mission Unit’ that ensures a system-wide approach to realisingthe overall mission of decarbonising the UK.Step 2: A Just Transition Commission and Just Transition Funds for the North41.Embedding the concept of ‘just transition’ across government policy: Theconcept of just transition must urgently be incorporated into an updatednational industrial strategy as well as the strategic economic plans andlocal industrial strategies being developed by local enterprise partnerships(LEPs) and combined authorities. Involving trade unions in the process ofdetermining just transition policy will also be crucial.2.A Just Transition Commission for the north of England: A Just TransitionCommission should be set-up for the north of England, following Scotland’sexample. It should involve all relevant stakeholders including metro mayors,local authorities, LEP representatives, local community representatives, localbusinesses, businesses interested in investing in the region, civil society andtrade unions.3.A Just Transition Fund for the north of England: A Just Transition Fund shouldbe established as part of regional economic development funding to helpthe drive towards a low-carbon economy and to mitigate against the negativeimpacts of decarbonisation. A number of mechanisms and activities to achievea just transition are recommended, including:-- clustering of new industries, academia and technical colleges onexisting sites-- boosting local development through inward investment, includingin education, training and local infrastructure, entrepreneurship andsmall businesses-- investing in local low-carbon energy projects-- repurposing carbon-based assets for new industries-- funding to support workers close to retirement to use theirskills productively-- wage subsidies for those workers who may be made unemployed asa result of transition-- just transition ‘toolkits’ for affected industries-- travel assistance for workers-- additional support for mental health and wellbeing services.IPPR A just transition Realising the opportunities of decarbonisation in the north of England

Step 3: Skills audits, skills standards and devolved skills funding1.Comprehensive devolved skills audits: More granular labour market informationis crucial to understand how well the skills system will be able to supplyanticipated growth in the low-carbon energy sector.2.Making training standards available to the unemployed: Training standardsbeing developed by the likes of the Engineering Construction Industry TrainingBoard (ECITB) should be made available to those who are unemployed.3.A consistent approach to training across the energy sector: We recommendthe creation of an Energy Skills Competency Accord. This accord would needto be supported by legislation and regulations that required certain technicalstandards and outcomes to be met rather than prescribing method.4.T level courses must reflect skills needs: There must be greater consistencyacross policy such that in-demand occupations are included within the rangeof courses which T levels are intended to cover.5.Devolving education and skills funding: Both the adult education budgetand any unspent levy funds should be fully devolved to LEPs without anylegally-obligated spending rather than being retained by the Treasury ordirected by it.6.Reforming the apprenticeship levy: The apprenticeship levy should bereformed so that it would be set at 0.5 per cent of payroll for mid-sizedfirms and 1 per cent for firms with 250 or more employees in order to widenthe net of employers that make a contribution.7.Promoting diversity with the low-carbon energy sector: To raise the profileof the sector, promote diversity, and help graduate retention in the northof England, companies above a certain size should be required to activelypromote STEM subjects in schools.IPPR A just transition Realising the opportunities of decarbonisation in the north of England5

1.INTRODUCTIONDecarbonising the economy is one of the biggest challenges that the UK faces.But despite some progress, the UK government is set to fall well short of meetingits long-term commitments as set out in the Climate Change Act. According to theCommittee on Climate Change, the UK’s current energy policy is insufficient to staywithin its fifth carbon budget, which runs from 2028-2032, never mind meeting itscontribution to limiting global warming to below 1.5 C.While challenging, decarbonisation holds the possibility of huge opportunities forthe north of England which already has a leading low-carbon goods and servicessector. The region accounted for 35 per cent of all jobs in the low-carbon goodsand services (LCGS) sector in England in 2013. This equates to 21 LCGS jobs per1,000 jobs in the North, compared to 16 per 1,000 in England as a whole (Baxterand Cox 2017) and the region is one of the leading employers in major low-carbontechnologies such as nuclear, offshore wind and biomass.FIGURE 1.1The north of England makes a substantial contribution to the total number of jobs in thelow-carbon energy sector, particularly in nuclear, offshore wind and biomassDirect and indirect full time equivalent (FTE) employment by region and by sector inlow-carbon energy generation eWindOffshoreWindSolar PVHydroNuclearSource: IPPR analysis of BEIS 2018a and ONS 2018a6IPPR A just transition Realising the opportunities of decarbonisation in the north of EnglandWalesScotlandNorthern IrelandYorkshire andthe HumberWest MidlandsSouth WestSouth EastLondonNorth WestNorth EastEast of EnglandEast Midlands0Waste andBiomass

Based on this existing expertise and if the right policy framework is put in place,the power sector, on which this report is focused, could grow substantially in thecoming years. As our interim report found, up to 46,000 jobs could be created in thelow-carbon power sector1 alone in the north of England by 2030 (Emden and Murphy2018), second only to Scotland in terms of job creation. The north of England hasthe potential to be the thriving hub of a fully decarbonised UK economy.However, decarbonising the economy, if managed badly, also carries significantrisks for the North and other parts of the UK. As home to most of the coal and gaspower stations in England, IPPR analysis has shown that approximately 28,000 jobsin the coal, oil and gas industries could be lost in the north of England by 2030(Emden and Murphy 2018). This is in the power sector alone, without consideringthe other potential job losses in high-carbon energy intensive industries and thewider economic and social implications of poorly managed industrial change.Designing policy which recognises the wider implications of decarbonising oureconomy requires what is known as a ‘just transition’. This term describes theneed to secure “the future and livelihoods of workers and their communities inthe transition to a low-carbon economy” (ITUC 2018a) as carbon-based generationis phased out in favour of renewable alternatives across the world.Securing a just transition will require learning from the past, and a concertedattempt to minimise the negative impacts and maximise the opportunities forworkers and local communities that the push towards a low-carbon economy willbring. There are also wider economic reasons to pursue a just transition includingdelivering high-quality jobs for workers, raising productivity and securing inwardinvestment into the north of England and elsewhere.This report, focused on the power sector, sets out in detail how a just transitioncould be achieved in the north of England. We argue that a number of actionsare required including: offering long-term policy certainty across energy policy;embedding just transition policy across all areas of policy; and for the skills systemto be reformed to ensure we have a workforce ready for a low-carbon economy.Central to our proposed approach is the creation of the appropriate governancemechanisms through further devolution which will enable the North to respondproactively and on its own terms to create a just transition. In doing so, we willbe able to ensure that decarbonisation doesn’t just deliver on our climate changetargets but also creates prosperity for everyone in the north of England.1ie not including other low-carbon goods and services sectors beyond electricity generation.IPPR A just transition Realising the opportunities of decarbonisation in the north of England7

2.THE NEED FOR LONG-TERMPOLICY CERTAINTY IN THEENERGY SECTORLong-term policy certainty is essential to ensuring a prosperous energy sector, aneffective skills policy and a successful just transition strategy. The absence of a cleardirection in government policy undermines investment, which in turn underminesthe creation of new jobs and damages the ability of businesses to plan for theskills they need in future. These issues are further compounded by Brexit whichhas increased uncertainty among many investors in the energy sector. In thischapter, we set out why policy certainty is so important for decarbonisation anda just transition, and how the government can deliver both.POLITICAL SHORT-TERMISM UNDERMINES INVESTMENT IN THE LOW-CARBONENERGY SECTORThe Climate Change Act 2008 created a legally binding target in the UK, requiringat least an 80 per cent cut in greenhouse gas emissions by 2050 and in the nearerterm, a reduction in emissions of at least 34 per cent by 2020, compared with 1990levels (Climate Change Act 2008). The introduction of a legally binding target hashelped to drive policy action which has yielded a degree of success.Emissions from the UK power sector fell by 59 per cent between 2008 and 2017and renewable generation increased from 6.1 per cent to 28.7 per cent of all powergenerated over the same period (Ofgem 2019). Thanks largely to the introductionof the emissions performance standard on carbon-based generation as part ofthe Energy Act 2013 (DECC 2015), coal power generation has also experienced adramatic decrease from 40 per cent of generation at the start of 2013 to 9 percent in Q1 of 2018 (Ofgem 2019).Despite this success, the UK is currently on track to exceed its carbon budget,set by the Committee on Climate Change for 2028-2032 by anywhere between 23MtCO2e and 180 MtCO2e (BEIS 2018b). Between 2017 and 2030, the power sectorwill need to reduce its emissions intensity by a further 61-81 per cent dependingon the level of policy ambition (CCC 2018).A key reason for the failure to decarbonise at the scale and pace that is requiredwithin the power sector, and in other sectors, has been an inconsistent approach.Successive governments have stated that it was not their policy to back certaintechnologies, or to ‘pick winners’ but in reality support has been provided, suchas in the case of ‘contracts for difference’ auctions for offshore wind. This policyprovided industry with a degree of certainty by agreeing to a strike price to be paidfor energy which was set via an auction. The result for the offshore wind industryhas seen costs fall dramatically from an average of 117.40/MWh in 2015 to 57.50/MWh in 2017 (Cuff and Murray 2017). Other interventions have been less successful,not least because of short-term decisions to pull government support. For instance,the cancellation of the 1 billion carbon capture and storage (CCS) competition andthe reduction in feed-in tariffs for solar panels and onshore wind.8IPPR A just transition Realising the opportunities of decarbonisation in the north of England

The need for greater long-term policy certainty is routinely cited as crucial tothe investment decisions made by industry, particularly against the backdrop ofuncertainty caused by Brexit. According to analysis by Bloomberg New EnergyFinance, investment in renewables in the UK dropped by 63 per cent or 8.3billion between 2015 and 2017, the largest drop of any country in Europe (Louw2018). The falling costs of renewables only accounts for some of this fall, withthe stop-start nature of policy support being seen as one of the leading causesby developers (Vaughan 2018). This is supported by IPPR’s energy skills survey,2in which the vast majority of respondents said that policy certainty was ‘extremelyimportant’ to the future of the industry, yet none of the respondents thought itwas currently sufficient.In many cases, low-carbon technologies are still dependent on financial supportfrom government and, in the absence of long-term guarantees of support,investment in low-carbon energy projects becomes a riskier proposition. This isparticularly important for large energy infrastructure projects like new nuclearpower plants that have construction phases that are longer than the lifespan ofone parliament (see box 2.1).BOX 2.1: HOW UNCERTAINTY HAS UNDERMINED THENUCLEAR INDUSTRYBy 2030, 87 per cent per cent of the UK’s current nuclear capacity will bedue for decommissioning, leaving a 7.7GW gap, equating to approximately5 per cent of estimated peak demand by 2030, that will need to be filled(National Grid 2018), in part by new nuclear projects (NIA 2019). Yet theoutlook for new nuclear projects is becoming ever bleaker. The falling costof offshore wind has raised questions about the cost-effectiveness of theHinkley Point C strike price of 92.50/MWh. Disputes over financing betweenprivate developers and the UK government have put the NuGen project inMoorside and the Wylfa project in Wales on the brink of collapse.Moreover, in either a no-deal Brexit scenario or even the currently unpopularwithdrawal proposal, the UK would no longer be part of Euratom. As IPPR’sreport Brexit and the UK’s environmental ambitions shows, a no-dealscenario would be highly disruptive to the nuclear sector as all of Euratom’ssafeguarding arrangements over the trade of nuclear fuels and materialswould need to be replaced. Even under the current proposal for a bilateralNuclear Cooperation Agreement there would not be any formal regulatoryalignment (Morris and Emden 2018).Combined, these factors threaten to undermine the attractiveness ofinvestment in the UK nuclear industry with little plan to replace itscontribution to the UK’s energy supply. This will have a disproportionatelynegative impact on the north of England, particularly in the North West,which employed over 26,000 people across the UK civil nuclear supplychain3 in 2018, by far the largest (41 per cent) of any region (NIA 2018).While the government’s industrial strategy white paper (HM Government 2017) andits Clean Growth Strategy (BEIS 2017a) identify low-carbon energy policies as a keychallenge for future governments, the acknowledgement is not substantiated byclear commitments. The Committee on Climate Change (CCC) notes that ‘policies23IPPR conducted a small survey aimed at a range of stakeholders involved in the low-carbon energy sectorincluding companies working in the sector, academia, trade unions, NGOs and charitable organisations.The survey received 14 respondents and, though a small sample size, respondents came fromorganisations representing a total of at least 2,000 employees.Including decommissioning, waste management and the nuclear fuel cycle.IPPR A just transition Realising the opportunities of decarbonisation in the north of England9

and proposals need to be firmed up’ as there are still policy gaps that remain ifthe UK is to meet its fourth and fifth carbon budgets (CCC 2018).However, the CCC also suggests that, at least in the power sector, if the governmentcan provide ‘a long-term view of future low-carbon power auctions and continue torun auctions beyond the Spring 2019 contract for difference auction’, then it shouldbe possible to reach the required emissions intensity target of 100gCO2/kWh in thepower sector by 2030 (CCC 2018). While much more work is needed to decarboniseother parts of the economy such as in heat, transport, agriculture, industry andbuildings, the relative progress in the power sector suggests that the UK’s targetscan be met if only the government is prepared to commit to long-term policymaking.A LACK OF INVESTMENT UNDERMINES THE OPPORTUNITY TO CREATENEW JOBSInvestment in energy infrastructure can initiate substantial job creation in theconstruction and maintenance of new low-carbon assets. As our interim reportRisk or Reward found, if the government were to meet scenarios set out by theCommittee on Climate Change, up to 46,000 jobs could be created in the north ofEngland by 2030 from investment into new low-carbon energy projects (Emden andMurphy 2018). The jobs which could be created represent the largest potential ofany region, with the exception of Scotland, which, unlike the North, has a degreeof legislative power to provide its own supportive policy environment (House ofCommons 2016).Conversely, without investment, this industry growth and job creation could wellbe squandered, causing a disproportionate impact on the north of England, where28,000 jobs are set to be lost in carbon-based generation (coal, oil and gas) by 2030.At present the UK is going in the wrong direction. As a result of policy uncertainty,as figure 2.1 shows, between 2014 and 2017 the number of people working in thelow-carbon economy as a whole was relatively stagnant and the number of businessesfell despite the need for a substantial increase in the deployment of low-carbontechnologies throughout the UK economy.FIGURE 2.1Employment in the low-carbon economy stagnated between 2014-2017 and the number ofbusinesses has been slowly fallingEmployment (FTE) and business in the low-carbon economy loyment (FTE)Source: ONS 201910IPPR A just transition Realising the opportunities of decarbonisation in the north of England2017201620150201450,000

THE OPPORTUNITY TO FIND NEW EMPLOYMENT IS CRUCIAL TO AJUST TRANSITIONDisjointed policy risks exacerbating potential job losses. Policies to phase out powerproduced by coal by 2025 are already underway and the proportion of gas beinggenerated in the UK’s power sector will need to be reduced by 31-63 per centbetween 2017 and 2030 depending on the scale of ambition, and almost entirelyeliminated in the heating system by 2050 (CCC 2018) (BEIS 2018c). Yet insufficientprogress in the low-carbon energy sector means that the government is failingto provide alternatives. Without policies to phase out fossil fuels and promotelow-carbon alternatives working in tandem, the north of England in particular isset to realise the risks of decarbonisation rather than to reap the rewards (Emdenand Murphy 2018).WITHOUT LONG-TERM POLICY CERTAINTY, BUSINESSES WILL STRUGGLETO PLAN FOR THE FUTUREMany of the skills demanded by the low-carbon energy sector take a long-timeto train (as table 2.1 shows). As will be discussed in chapter 3, this is particularlyproblematic given that companies in the low-carbon energy sector already appearto be struggling to fill vacancies. A majority of respondents to our survey said thatvacancies were partly a result of a lack of applicants with high-level skills such asengineering. The length of time required to train people with the right skills to fillthese gaps will further delay growth in the low-carbon energy sector as a whole.TABLE 2.1Many of the skills needs in the low-carbon energy sector require long periods of studyand/or trainingNVQ levelrequiredRoleLength of trainingWork experience commonlyrequiredEngineer4 3-4 years (undergraduatestudy)4-8 years (to become achartered engineer)Project manager4 Up to 3 years (if taking adegree in management)Approximately 3 yearsSales andmarketing manager4 Up to 3 years(undergraduate study)3-5 yearsTechnician3-4Up to 4 years (undergraduatestudy or apprenticeship)Work experience can sometimesbe gained as part of trainingOverhead linesworker3Up to 4 years(apprenticeship)Work experience gained as partof trainingSource: IPPR analysis of Brennan and Limmer 2015Furthermore, a survey of firms by the Institution of Engineering and Technologyfound that 42 per cent of companies working in the energy sector were concernedabout Brexit for their recruitment and training, with 36 per cent saying it wouldimpact their future plans negatively, and only 5 per cent saying it would have apositive impact (IET 2017).CURRENT ATTEMPTS AT LONG-TERM ‘PLACE-BASED’ POLICYARE INADEQUATEThe question of where low-carbon energy technologies should be deployed is justas important as which ones and how much of each. This is not just about selectingthe most geographically and geologically advantageous regions, but also becauseof the opportunity to redress the deeply imbal

Step 2: A Just Transition Commission and Just Transition Funds for the North 1. Embedding the concept of 'just transition' across government policy: The concept of just transition must urgently be incorporated into an updated national industrial strategy as well as the strategic economic plans and

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