A just transition with people as beneficiaries, not victims
COP26 is an historic occasion to move from recognition to action and deliver on the Paris Agreement commitments. There is a lot to do and the window of opportunity is short: CO2 emissions need to reach net-zero by 2050 to limit the average global temperature rise to 1.5°C.
Delivering the net-zero transition makes economic sense, too: as the COVID-19 pandemic has powerfully demonstrated, there can be no healthy economy without a healthy planet and people. The cost of inaction would be immense. And there are strong benefits to action: the transition is driving a new industrial revolution, generating economic activity and jobs. It is the growth story of the 21st century.
But while the net effect of climate-aligned development is positive, benefits will not always be widely spread unless they are designed that way. Workers and regions dependent on carbon-intensive industries could end up worse-off: skewed returns for green infrastructure in high-income regions could exacerbate regional inequalities; and fixing carbon markets will disproportionately hurt consumers on fixed incomes and those relying on government benefits.
Failing to anticipate and manage these impacts upfront is risky. If the socioeconomic transformations that come with the transition lack social acceptance and prove unpopular, they may be reversed. Parallels can be drawn with globalisation: despite substantial net benefits to the global economy, their unequal distribution gave rise to backlash movements and prompted ‘my country first’ agendas. The gilets jaunes movement’s successful campaign for lower fuel taxes in France indicates that this risk is real with the energy transition, too. It is a risk we cannot afford. Unlike globalisation, climate policy reversal would have existential consequences.
To succeed, then, the post-pandemic recovery and the net-zero transition must be, and must be seen to be, ‘just’: that is, fair and inclusive. Disruptions arising from rapid structural transformation must be carefully managed across sectors and geographical regions, to prevent the widening of within- and across-country inequalities.
Public investment will be critical, not only in its own right but in mobilising private capital, too. To secure a future for the at-risk jobs of today, investments should be targeted towards creating a supportive infrastructure for the industries of tomorrow. They should also be inclusive and based on social dialogue, ensuring that there are no institutional barriers, recruitment bias or discrimination towards those who need to switch jobs. Measures can include targeted hiring subsidies, wage-loss insurance programmes, and retraining and the learning of new skills. And to be truly just, ‘leaving no one behind’ is not good enough. The just transition also means that the jobs of the future are high-quality and well-paid, provide security and decent work, and boost local economies.
Finance should also be targeted towards supporting households coping with change in energy markets. Measures will need to be country-specific, taking account of local circumstances. Incentives to improve energy efficiency will be more appropriate in regions with relatively old housing stock. Adjustments in pensions, unemployment insurance and child benefits will depend on countries’ social security arrangements. In accompanying carbon price adjustments, conditional cash transfers will be more appropriate in emerging markets, while rebates are already showing signs of success in Canada.
The specifics will vary across geographical locations, sectors and economic actors but need to derive from the common motivation that in addressing the climate crisis, the transition must be a just one. Only if this is achieved can countries create truly sustainable growth that puts people at the centre of this transformation as its biggest beneficiaries, not its victims.
This commentary was first published in Spanish in the El País print edition on 24 October 2021 and online, and is reproduced here with permission.