In Episode 8, we focus on the concept of a “Just Transition". Mafalda Duarte, Head of the Climate Investment Funds, discusses the need for countries to make radical changes to meet our climate goals. Drawing on case studies of South Africa and India, she explains why the transition away from polluting practices such as fossil fuels must be socially inclusive and fair.
What is a Just Transition, why is it so important, and what challenges do we face in achieving it?
To achieve our climate goals of net zero by 2050 or 50% emissions reduction by 2030, every sector of our economies needs to transform. These are not light changes but disruptive transformations. They are very likely to impact large groups of people, particularly workers in communities that are reliant on fossil fuels and other natural resources for their livelihoods. 40 fossil fuel dependent governments could suffer an average 51% drop in oil and gas revenues if the global climate targets are met, which would significantly impact the capability of these governments to provide services to their populations.
A major risk to achieving our climate goals is what people perceive as the impacts of these transitions. We have already seen governments trying to put in place policy measures aligned with the climate accords that their population does not accept, and the policies are rejected. This is because people do not see themselves being supported to be able to make the transition, and that is what Just Transition is all about.
How do we overcome these challenges to achieve a Just Transition?
At CIF, we have launched a dedicated Just Transition Initiative to go deeper and try to understand issues around Just Transitions. We will ask what we can learn from work that has been done in the past and transitions that have happened in the past anchored on social and environmental justice. What can we learn from that to bring to our climate challenges? Then we will apply that thinking to specific countries and specific sectors that face these challenges.
When we think about Just Transition, there are two fundamental issues. One is what we might call the distributional impacts: the social outcomes that we want to see. Who will be impacted positively and negatively from transitions? The second is about procedural justice and social inclusion. How representative and participatory are the processes of identifying stakeholders who should have a voice in deciding what the investments for a transition are and how they are implemented. The reason we are seeing some countries rejecting reforms is because of weaknesses in this particular element of procedural justice.
As to how we overcome the challenges, we have to pay close attention to these two dimensions and are ourselves: who stands to benefit from a transition? Who stands to lose? How do we distribute the benefits and mitigate the losses in ways that are safe and just? How can we include different groups in these decision-making processes?
How could that work in practice? What lessons or solutions can you offer to countries undergoing a transition?
So far we have released two country case studies through our Just Transition Initiative: one for India and one for South Africa. We are working on more in the forestry and water sectors. We want everyone to understand that Just Transitions are important not just for the energy sector but they will happen in all sectors.
The case study on India has demonstrated that we have to go beyond the boundaries of specific sectors and regions where coal fired power plants are or where coal mines are located. In India there tend to be quite dedicated, mono-industrial regions that are dependent on the coal industry. The case study demonstrated the inter-linkages with other sectors, in particular the transport sector. A significant portion of the revenues of Indian Railways depends on coal and coal transportation, and Indian Railways is a big employer. So we need to go beyond the immediate impacts and see all the linkages to other parts of the economy and sectors where there could be high social impacts, and tackle them in a more holistic way.
In the case of South Africa, it is among the top 15 countries that emit carbon dioxide, it relies on coal for 80% of its electricity, and it faces significant social inequality. They have had episodes of power outages related to their ageing coal-fired power stations, and more than 2,000 people die from air pollution from these plants every year. The populations understand there are impacts on them in terms of air quality and other environmental costs, but they don't really have alternatives in terms of jobs and economic opportunities.
Where renewable energy investments have been made and continue to be made, they benefit the communities around them. But the regions where the coal industry is mostly located are mono-industrial and people there are not necessarily seeing alternative sources for their livelihoods or new economic opportunities. In thinking about the process of coal transition, there has to be a very clear socio-economic development plan for those specific regions. There has to be a very deliberate focus on job opportunities, retraining, upskilling and other social protection mechanisms to help people. This is why our new investment program, the Accelerating Coal Transition program, looks at transition in an integrated way. A cornerstone of that program is about people and communities.
How widely can these lessons be applied?
They can be applied to all countries, not just developing countries. For example in the US and Europe where there is talk about a ‘Green New Deal' and green infrastructure development. But developing countries will need a lot of support with dedicated initiatives and resources for Just Transitions in specific countries and regions. At CIF, we are looking forward to making very deliberate efforts to support a Just Transition in delivering our future investments.
Read more about Just Transition and CIF's initiative here.