Ensuring the Just in Energy Transitions

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Global emissions are on the rise again after hitting a low in 2020 due to the pandemic induced worldwide lockdowns. As per the International Energy Agency (IEA), world emissions were 2% or 60 million tonnes higher in December 2020 than they were in the same month a year earlier. This is attributed to the re-start of economic activities post-lockdowns in major economies which in turn has led to an increased energy demand. With expectations of a further rise in energy demand alongside economic growth, the focus comes back to the transition towards a carbon neutral future. With net zero and carbon neutral targets being declared in plenty, the global community still struggles to deal with the arch nemesis of climate, coal. Coal burning is the single largest contributor to climate change.

Transitioning to a low-carbon economy is essential to limit global warming. A crucial role will be played by the transition away from coal towards renewables to achieve a considerable reduction in emission levels, but the key question is to ensure ‘just’ transitions with minimum negative impacts.

The social dilemma of coal exit

While the share of renewables in the world energy profile has been accelerating, the world dependency on coal for a dominant proportion of energy demand needs is still very much in existence. More so for the developing set of countries like India, where energy demand is increasing at an accelerating pace and coal is considered vital for the nation’s energy security as well as is a key source of revenue for the government.

Further, the coal mining sector supports a large number of direct and indirect jobs. This comprises of not just desk jobs but also the low skilled and often uneducated miners, for whom the sole source of bread earning is the coal sector. They are not aware, and frankly do not care about big conferences like COP26 that happen to take major decisions of their lives by phasing out coal. Thus, while an inevitable coal exit is what the world is looking at, the threat of job losses and the associated livelihoods is pretty much real. For this very reason, it is vital for the world leaders to frame and implement policies supporting a just transition away from coal to ensure that those associated or dependent on the sector are taken care of.

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Possibilities

The idea of just transitions is basically not to exacerbate existing inequalities, nor to create new ones. Ensuring the just factor in transition strategy thus lies in providing access to modern technologies, ensuring capacity building for a smoother transition process, and in appropriate availability of finance.

Looking at an inclusive transition, there have been numerous talks about the absorption of coal sector jobs in renewable energy. IRENA pointed to a worldwide renewable energy employment level to be at 12 million in 2020. Furthermore, IEA has also predicted a creation of 14 million new clean energy jobs by 2030 with the global transition to net zero. With the tremendous rise in solar and wind energy sectors around the world, along with rising employment numbers and falling prices, this could then serve to be a viable route for coal transitions. However, the concept of equity requires this to be considered with certain caveats. A further analysis of the type of workers involved in different phases of coal sector jobs would help to plan better, pointing to the more vulnerable sectors to decarbonization. Pai et al. (2021) found the dominant share of jobs in the fossil fuel sector to be in the extraction segment, focusing on coal mining and oil & gas extraction. The study has pointed towards energy sector jobs to grow to 26 million under a WB2C scenario by 2050. While the fossil fuel extraction jobs are expected to rapidly decline, the losses will be compensated by gains in solar and wind employment, particularly in the manufacturing sector.

Another vital link in the just transition story is the provision of adequate skills. Coal is a traditional energy sector and has been there for decades. While the renewable sector is capable of absorbing coal sector jobs, it might not have the capacity to take care of it all. This brings us to the most important necessity, skilling. This would serve twin benefits. First, it would make the transitioning coal sector workers comfortable and equipped to secure and maintain the new job in renewable sector. Secondly, relevant skilling would enable them to prepare not just for the renewable sector profile but will also open other avenues in the economy. Thus, even if the renewable sector is not their ultimate destination, they will have other skills to earn a living, making them self-reliant and not dependents. This would essentially mean that to ensure a just transition, skill sets will need to be imparted according to the needs of the workers in the sector, by involving them in discussions and the decision-making process.

Furthermore, coal transition cannot be a cold turkey, but is a gradual process that will need to be maintained. A stop gap arrangement like clean coal technologies will be needed to take place to cover for the period to a complete transition away from fossil fuels. In addition, focus needs to also be drawn on the arrangement of low carbon technology cooperation between countries. The available technologies need to be shared and the knowledge should be imparted to better prepare countries for the incoming changes in the energy landscape.

The road ahead

COP26 witnessed more than 40 countries with some major coal intensive economies, to have committed to shift away from coal. However, the world’s biggest coal-dependent countries, including China and the US were not a part of this pledge. Moreover, a separate commitment of 20 countries, including the US, did support a pledge to stop the financing of fossil fuel projects abroad by the end of 2022. Furthermore, a collaboration of France, Germany, the United kingdom, the US, and the European Union announced an International Just Energy Transition Partnership with South Africa of providing an initial USD 8.5 billion climate finance to scale up their decarbonisation efforts.

There are however, a few gaps in these commitments. First, why are major coal intensive economies like China being led off the hook and not pressurised for committing to an end to coal. China has faced backlash in the global community with respect to the intensive domestic coal usage, irrespective of its carbon neutral pledge (read further on this in ICRIER’s previous COP26 blog). However, it has still not signed up for ending use of coal power. Second, the plethora of goals, pledges, and financial commitments have different timelines, with no bindings to the commitments made. This raises concerns over the timely delivery of the finance and on the goals. Further, the movement of finance away from fossil fuels is also not ensured. With new coal power plants coming up in a host of committed member countries, it is vital that perhaps an earmarked source of funding identified for green and just transition is put in place to secure a committed fund for a committed goal. Third, question could also be raised that if by providing developing countries the finance to switch over to renewables and away from coal, are countries like the US and China also trying to dodge responsibility of struggling with the same domestically. Greater accountability is not only needed at the finance level, but at the level of ensuring action.

Coal exit is inescapable to avoid a climate catastrophe, but it needs to be made through just transitions. Just transitions offer the lens of development, energy and climate considerations woven together. However, it is a complex issue with many elaborate considerations that need to be understood. From the whole concept of ensuring equity, to the right match of labour demand and supply, and to the appropriate mechanisms that compensate losers while incentivising winners, all require invested collaborative international efforts. The speed and the mechanism of the transition will vary between countries but there is an urgent need to take bold decisions and ensure implementation, while ensuring accountability to pave the way for an equitable, sustainable, and thus a just future for the planet.

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Views expressed are the author’s own and don’t necessarily reflect those of ICRIER.

Published by Sajal Jain

Sajal Jain is a Research Associate at ICRIER. She holds a master’s degree in Economics and International Financial Economics from University of Warwick, United Kingdom. At ICRIER she has been working on issues related to climate change and sustainable development. Among other projects, she has worked on renewable energy and industrial competitiveness for a project with IDFC foundation, and previously on climate financing for a project of the Department of Economic Affairs, Ministry of Finance (MoF). She has also worked on the MSME sector, studying the dearth of finance availability for a project with German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE). Her research interests include sustainable environment, green financing, climate negotiations and international impact, and renewable technology. Her co-authored works include ‘Analysing the Electricity Consumption Patterns in High Value Manufacturing Industries: Case-Study of Three Indian States’ and ‘Drivers and Constraints for Adopting Sustainability Standards in Small and Medium-sized Enterprises (SMEs) and the Demand for Finance’.

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