Policy - 09/July/2018

A fair and just energy transition

Coal-reliant regions around the world have been generally resistant to the energy transition and regulators have tended to defend the status quo. But they are slowly starting to realise that clear plans and financial support for disrupted societies are more important

Coal-reliant regions around the world have been generally resistant to the energy transition. But as it becomes clear that renewables and energy efficiency can create decent jobs and economic growth they are starting to show greater interest. In an effort to ensure the transition in these regions is socially and economically fair, regulators are slowly waking up to the fact that clear plans and financial support for disrupted societies are more important than protecting the status quo

 

Punch and Judy is a traditional puppet show, familiar to British children, at least of a certain generation, as a seaside attraction. Mr Punch, a jester with a squawking voice and a big stick, repeatedly shouts, “That’s the way to do it,” at various characters, most notably his long suffering wife, while children in the audience are expected to shout back, “Oh no, it isn’t!” Discussions between energy transition advocates and coal-reliant countries can often sound a lot like this.

Hit by the big stick of change, societies reliant on coal see moving to a clean-energy economy as nigh impossible. They argue that closing coal mines in favour of wind and solar power will leave swathes of people unemployed and push up energy prices. Slowly, though, the two sides are seeing the benefit of listening to each other, a process made easier as the social and economic benefits of renewables become increasingly clear and clean energy supporters start to talk seriously about the need for a transition that is just for the climate and for workers.

Those pushing back against the energy transition underestimate how much technology and economics are impacting the energy sector, making the transformation “unstoppable,” says Katrina Kelly-Pitou, an environmental economist at the University of Pittsburgh, US. Arguments by populist parties and leaders, such as the Law and Justice party in Poland and Donald Trump in the US, that phasing out fossil fuels, in particular coal, will mean GDP and job losses are “theoretical” and based on “little numerical credibility,” she says. “Around the globe coal-based economies are arguing that workers are being isolated, that energy is getting expensive and that we are punishing the poor for the wishes of the rich,” she comments.

Study after study, however, shows that clean energy offers significant potential to create new jobs. In Pittsburgh only 1% of energy is currently provided by renewables, but jobs associated with the sector are growing quickly and many are permanent posts. “Why… push for more temporary jobs associated with building new wells and pipelines, when our mining and extraction economy has not grown in revenue over the past ten years,” asks Kelly-Pitou. “We can already see huge benefits from the transition both in manufacturing jobs and in the knowledge sector.”

Trump is unlikely to reveal plans to help coal-rich regions move away from fossil fuels, but Poland, where coal still represents 82% of the energy mix, and other coal-heavy EU countries have greater impetus to change given they remain, unlike the US, committed to the 2015 Paris climate agreement. As part of its Clean Energy for All Europeans package, the European Commission, the EU’s executive body, created a Coal Regions In Transition platform in December 2017. This offers help with transition strategies and draws attention to financial support available from existing EU funds. Via two working groups, experts from the Commission, regions, national representatives, NGOs, trade unions and industry come together to share best practice and peer-to-peer learnings, says Anna Colucci from the executive’s energy directorate. “Each region is different, but there are learnings that can be shared.”

 

Concentrated workers

While only around 250,000 to 300,000 people are employed in the coal industry in Europe, it is highly concentrated in certain regions. Many of them see energy as part of their identity and want to preserve this, says Colucci. Part of the work of the platform is showing that the transition does not necessarily mean a move away from energy; it highlights possibilities to create new industries based around clean air, eco-innovation and the technologies, projects and strategies needed for long-term decarbonisation, she adds. The European Parliament recently voted to set aside €3 million to create a secretariat for the platform and the development of “practical toolkits,” but no dedicated funding has been approved to support coal regions with their transition.

This is an important missing piece of the puzzle for Benjamin Denis, climate and energy adviser at the European Trade Union Confederation, who references Canada’s recently created just transition task force as a model that Europe and others could follow. Launched in April, the task force was announced along with a plan to phase out coal-based electricity production by 2030. The government acknowledges this will lead to the loss of 3500 jobs and has put a budget of C$35 million at the disposal of the initiative, which must report back to the government on its ideas within nine months. Denis compares this to the EU where regions that are “already struggling” economically have no coal phase out deadline and no specific funding for the transition.

It is not only the Paris agreement that is putting pressure on these regions to diversify their economies. Economics is also playing a role as coal becomes increasingly expensive. “In the near future, the regulatory risks, such as carbon pricing and tightening cap and trade systems, will unavoidably affect coal and other fossil-fuel assets,” says Aleksander Śniegocki from WISE Europa, a think-tank based in Warsaw. Likewise, a report published in June 2018 by the US-headquartered Institute for Energy Economics and Financial Analysis finds that Poland’s biggest utility, PGE, is putting itself at risk of “financial disarray” by pursuing a coal-heavy strategy and recommends a shift towards a renewable energy-based portfolio. The report did not analyse job losses, but it is not too much of a leap to presume that “financial disarray” would not bode well for PGE’s employees.

On the ground, things are slowly changing, too. Indeed, Bloomberg’s New Energy Outlook 2018 forecasts that coal will shrink to just 11% of global electricity generation by 2050, from 38% currently, while predicting that wind and solar will surge to almost 50% of world generation by the same date.

In Poland, while leaders continue to glorify coal production as an issue of national pride, renewables are making an inroad. Mainly wind energy and biomass now account for around 14% of the energy mix and the country is planning about $30 billion worth of wind projects in the Baltic and a 1000 MW onshore auction by the end of 2018. Janusz Piechocki, mayor of Margonin, a former coal-reliant municipality and now home to Poland’s largest wind farm, is enthusiastic about the local benefits of the energy transition. Wind power has helped him increase the public budget to enable major infrastructure investments, creating jobs and cleaning the local environment.

 

We are well on the way with a vision for the energy transition, but we now need a political process,” says Paul Hodson, head of the European Commission’s energy efficient unit. “This should show how, for example, well paid coal miners can become well paid heat pump installers, include the creation of national energy and climate funds, and set out long-term infrastructure planning for the whole transition.

 

Renewable jobs

Margonin is one of the examples showcased by WindEurope, the EU wind lobby organisation, in its recently launched Local Impact, Global Leadership web-based tool. It showcases the positive impact of the wind industry on jobs and the economy across Europe. The story is the same globally, says the Global Wind Energy Council, which credits the industry with creating, “Local jobs that give the younger generation an opportunity for good jobs near home, rather than migrating to the big city”. In particular, it notes how shipbuilding areas in northern Spain and northern Poland now produce towers, foundations, cranes and the jack-up vessels needed to install offshore wind turbines. Oil and gas-driven economies are also benefitting — New Mexico is investing €2.4 billion in wind, with the sector supporting 4000 jobs.

Similar success stories and potential are cited from across the renewables industries. Global renewable energy employment reached 10.3 million jobs in 2017, an increase of 5.3% compared with the previous year, according to the International Renewable Energy Agency (IRENA) 2018 jobs report. Similarly, moving from fossil-fuel vehicles to transport powered by renewable energy will create 206,000 net additional jobs in Europe by 2030, concludes an analysis by Cambridge Econometrics for the European Climate Foundation.

All of this, however, comes with a warning. In 2006, the wind energy industry accounted for nearly 263,000 jobs in the EU. In 2020, just over 287,000 jobs are expected to be created to manage the 204 gigawatt capacity that is forecast to be up and running by then. This figure could, however, be as high as 569,049 if decision makers were more ambitious and aimed to double installed wind capacity compared with today, says WindEurope. Slowing job creation in renewable energy is not just a European problem. IRENA highlights that employment in wind power and in solar heating and cooling declined globally last year as the pace of new capacity additions slowed. Fewer jobs are bad news for the energy transition and emissions reductions and also for workers.

 

Originally a trade union concept, the just energy transition, according to the European Trade Union Confederation should include five strands:

  • Promote economic diversification in regions and industries most affected by the transition
  • Negotiate agreements at sectoral and company level to map future skills needs and the creation of sectoral skills councils
  • Establish dialogue with all relevant stakeholders and regional authorities to identify and manage the social impacts of climate policies
  • Promote the establishment of adequate social protection systems
  • Unions and workers should assess the risks linked to the “stranded assets” represented by earlier investments in fossil fuel supply and generation resources that no longer offer an economic return because of changes related to the energy transition

 

Political processes

The right frameworks and support need to be in place if the world is to ensure a timely and socially just energy transition. Yet, most governments have, until now, been more focused on defending the coal industry than giving enough attention to this concern.

Germany, seen by many as a leader of the transition, may have significantly increased its renewable energy capacity in recent years, but its production of lignite and hard coal have stayed the same for the last 25 years. In 2016, about 20,000 people were directly employed in Germany’s lignite industry and almost 12,000 in the hard coal industry. In comparison, roughly 340,000 people were employed in the country’s renewable energy generation sector. Germany knows that if it is to reach its emissions reduction goals, coal has to go. It has now set up a coal exit commission, charged by the end of 2018 with detailing the economic perspectives for coal workers and regions, measures to reduce carbon emissions in line with Germany’s climate targets and naming an end date for all coal-fired power.

Other initiatives are emerging in Europe. Western Macedonia, Greece, another coal heavy region now has an energy transition roadmap thanks to funding from the German government and support from the environmental NGO WWF. Greece has also become the first country to create a National Just Transition Fund from auctioning carbon dioxide allowances under the EU Emissions Trading System. “Only €20 million a year will be given from this fund [to the transition] and more than €50 million a year will go to energy intensive industries and €100 million a year to electricity producers,” says Nikos Mantzaris from WWF Greece. But it is a start.

For Stefan Gartner from the Institute Work and Technology in Germany, it is a question of “not if, but how structural change will take place” to ensure that neither individual workers nor whole regions get left behind in the transition. Speaking about the experience of the industrial Ruhr region, where certain areas are still suffering high unemployment as a result of the loss of coal and steel industries in the middle of the twentieth century, Gartner urges all actors to get to grips immediately with the consequences of industry changes and potential job losses. He advises long-term planning and a focus on infrastructure, education, empowerment and regional identity.

Many of the coal-rich regions in Europe are in the centre and east of the region. As Svetoslav Malinov, a centre-right Member of the European Parliament from Bulgaria, highlights, they underwent another significant transition not that long ago from a state-controlled economy to a market economy. Leaving behind communism and the prize of joining the EU were easier sells than climate targets, he admits, but suggests that with the right planning and measures the energy transition can win over hearts and minds. The just transition is, for him, a helpful term to further this process by showing that the energy transition can create permanent jobs.

This political process is urgently needed if the global energy transition is to avoid being slowed by workers who have been excluded from this brave new world. Nobody wants a repeat of the violence that accompanied the miners’ strikes in the UK in the 1980s nor the poverty and raging unemployment that followed in certain regions. To avoid this, politicians, industries old and new, and workers can put their heads together to find the best ways to create a speedy and just transition where everybody agrees: “That’s the way to do it.”

 

Writer: Philippa Nuttall Jones

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