The just transition first emerged as a labour-oriented concept from North American unions in the 1970s. It has since broadened and found particular traction in the climate change context. This is because the impacts of climate change on people are uneven and so too are the impacts of attempts to mitigate carbon emissions, such as closing down fossil fuel plants and expanding renewable energy. Action to enable a ‘just’ transition tries to combat this inequality to bring about fairer outcomes as the world transitions to net zero carbon emissions, maximising “the benefits of climate action” and minimising “the negative impacts for workers and their communities”. The importance of the just transition is recognised at the international level through its inclusion in the 2015 Paris Agreement.

The just transition addresses various dimensions of inequality, vulnerability and opportunity. It frames the transition with a human rights lens with the aim of eliminating existing inequalities, enabling social inclusion and promoting different forms of equity. From the climate justice perspective, relevant issues include: the disproportionate impacts of climate change on underrepresented and vulnerable communities; the injustices incurred by richer countries being the significant contributors to historical greenhouse gas emissions and poorer countries being the most vulnerable to the impacts of climate change; intergenerational injustices; loss and damage from climate change impacts; and unequal access to clean and affordable energy, green finance and to a sustainable and healthy diet.

The just transition is a crucial enabler to implementing the net zero transition: involving all affected parties and responding to injustices serves to ensure political acceptability for climate action, mitigate the risk of ‘just transition litigation’, and ultimately avoid delays in achieving net zero globally. To achieve its varied aims, a just transition is considered to require fundamental restructuring of the socioeconomic systems that have created these inequalities and the climate crisis.

Who does the just transition prioritise and how?

The just transition seeks to centre the interests of those that are most affected by the low-carbon transition, including workers, vulnerable communities, suppliers of goods and services, specifically small and medium-sized enterprises (SMEs), and consumers (see Figure 1). This approach strongly advocates the inclusion of these stakeholders in shaping the net zero transition so that no one is ‘left behind’. Successful just transition planning would involve these stakeholders, for example through ongoing participation processes and channels, including social forums, consultations and citizens’ assemblies.

Figure 1. Principal groups affected by the net zero transition and how they can be involved and supported through action to secure a just transition

Source: Making Transition Plans Just (Grantham Research Institute, 2022)

Reflecting its main focus to date on workers in sectors and regions affected by decarbonisation (e.g. coal mining regions), commonly recognised principles of a just transition include: social dialogue between workers, businesses and governments in the form of negotiation, consultation or information-sharing on issues of common interest; social protection policies to tackle the adverse impacts of job losses and provide compensation; and decent jobs and skill development to maximise new employment opportunities, that also considers gender equality. These are aspects of an inclusive approach to decarbonisation that recognises different local (‘place-based’) needs and circumstances. This approach would seek coordinated strategic action at multiple scales and levels, including companies, regions and governments.

National-level action

Governments can assess the impacts of current net zero-related policies on vulnerable segments of the population, align their policies with just transition principles such as those in the International Labour Organization’s Guidelines for a just transition, and introduce targeted policies to rectify any existing and potential injustices. Guidance to support governments to set policy priorities is proliferating: this ‘blueprint‘ is one example, and this framework that sets out a series of phases is another.

Measures countries are taking include compensating for the unequal impacts of macroeconomic policies such as carbon pricing (e.g. some part of revenues generated by the EU ETS are allocated to the Social Climate Fund to support vulnerable households) or subsidy reform (e.g. Morocco’s fuel subsidy reform kept butane subsidies to protect lower income households). Countries are also supporting the creation of green jobs and industries to replace high-carbon jobs lost in the transition (e.g. Canada’s Sustainable Jobs Plan outlines the measures to identify, track and address the needs for a sustainable labour market).

Several countries have established Just Transition Commissions as legal tools to advise governments on just transition planning, monitor the impacts of other policies on just transition and enable stakeholder engagement. For example, South Africa’s Presidential Climate Commission has developed a Just Transition Framework that identifies job market risks and opportunities and recommends skills programmes and social protection measures. Its development included stakeholder engagement and community consultation facilitated through the involvement of National Economic Development and Labour Council (NEDLAC).

Regional-level action

Given that many high-carbon activities are concentrated in certain regions, decarbonisation risks reinforcing existing inequalities within and between regions. These regions can be targeted for action to manage the social impacts of sectoral transitions. Examples of this can be seen in transitioning coal regions: in Alberta, Canada, governmental and non-governmental engagement channels informed the relevant financial support mechanisms for affected workers and communities; in the Ruhr region of Germany, coal companies’ and workers’ resistance to top-down phase-out policies resulted in a regionalised structural policy supported by the state government, the federal government and the EU; in the Brazilian state of Santa Catarina, the federal government introduced a law creating a state-level Just Energy Transition Programme following communication from a major electricity utility and the governments’ assessments on the region.

Emerging regional examples in other sectors include the case of land use and rural agri-food systems that aim to ensure a just transition for rural communities, as seen in Brazil, India and South Africa.

Other official initiatives include the United States’ Climate and Economic Justice Screening Tool, which helps to identify disadvantaged communities, and the EU’s Just Transition Mechanism, which supports the development of just transition plans in regions of member states most negatively affected by the transition.

Private sector action

The private sector can support the just transition through company-level just transition practices and by facilitating corporate investments in the just transition. The UN Global Compact and the Just Transition Finance Tool guide businesses and the financial sector on how to incorporate just transition principles into their corporate strategies and practices. Various financial sector institutions refer to the just transition in their annual reports and some companies have developed just transition plans (e.g. SSE in the UK).

Firms may be required to adhere to government standards or can work to a voluntary code of best practice aligned with a just transition. For example, for companies building renewable energy projects and mining for transition-critical materials this would mean reducing harm to the environment and local communities, including Indigenous Peoples and land-connected peoples.

The just transition on the international climate agenda

The just transition was recognised in the international climate policy arena with its inclusion in the preamble to the 2015 Paris Agreement, which refers to “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities”. A declaration on the just transition was made at the 2018 meeting of the Conference of the Parties to the UN Framework Convention on Climate Change (COP24), and countries signed up to a set of just transition principles at the 2021 meeting, COP26. At COP28 in 2023, countries established a work programme on the implementation of just transition pathways through international cooperation.

Prior to the explicit inclusion of the just transition in the Paris Agreement, the principle of common but differentiated responsibilities (CBDR) had been employed in the international climate change regime to address macro-level injustices between countries through climate finance, technology and capacity-building support from developed countries to developing countries.

The role of climate finance

Financial flows are needed for the just transition at the company, regional, national and international levels. Finance needs to come from both public and private sources and the uptake of just transition principles is being encouraged within the financial system. Public finance solutions include thematic funds and support systems like the EU Just Transition Fund, Scotland Just Transition Fund and Alberta Coal Workforce Transition Programme. This guidance prepared for banks and insurance companies outlines key recommendations to adapt a just transition lens, including developing products that would meet just transition-related financing needs and customised solutions for vulnerable and impacted groups.

Initiatives to enable climate finance to reach those that are most negatively affected by climate change and the transition include a joint commitment by the multilateral development banks (MDBs) to support a just transition and the launch of targeted financing mechanisms like the Just Energy Transition Partnerships (JETPs). 

Just transition assessment frameworks and tools

While there is no one-size-fits-all formula for a just transition, there is a growing body of guidance and tools, including frameworks to assess progress towards a just transition. A selection of these is presented in the table below:

Business for Inclusive Growth (B4IG)Indicators to guide companiesCorporate
Climate Action 100+An indicator (see Disclosure Indicator 9 on just transition) to assess companiesCorporate 
Council for Inclusive CapitalismFramework for the energy sectorCorporate
International Labour Organization (ILO) and the United Nations Environment Programme Finance Initiative (UNEP FI)A guidance for banks and insurance companiesCorporate
ILO and LSE Grantham Research Institute on Climate Change and the EnvironmentA Just Transition Finance Tool for banking and investing activitiesCorporate
Transition Pathway Initiative (TPI) CentreAn indicator to assess banks [see indicator 9.1 on just transition]Corporate
World Benchmarking AllianceIndicators to assess companiesCorporate
World Wide Fund for Nature (WWF)Assessment Tool for Territorial Just Transition PlansRegional
International Labour Organization (ILO)Guidelines to help countries’ just transition to low-carbon economiesNational
Social Progress ImperativeA Just Transition Score on social progress and carbon emissionsNational
Assessing Sovereign Climate-related Opportunities and Risks (ASCOR)Indicators for just transition policies and international climate finance contributionsNational and international
Overseas Development Institute (ODI)A fair share of climate finance and adaptation financeInternational
Climate Investment Funds (CIF)A Just Transition Planning Toolbox for different kinds of stakeholdersVarious
Impact Investing InstituteA just transition criteria for major asset classes and investment strategiesVarious
Stockholm Environment InstituteSeven principles for a just transitionVarious

This Explainer was written by Setenay Hizliok and Antonina Scheer with review by Jodi-Ann Wang, Tiffanie Chan, Natalie Pearson and Georgina Kyriacou.

For more information about the just transition in the context of the financial system, visit the website of the new Just Transition Finance Lab, launched by the Grantham Research Institute in 2024.

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