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Explainer: Understanding the just transition

We must act to prevent temperatures from rising further. A just transition would help do so in a way that helps the needs of communities.

By Silvia Pellegrino

Just transition
Graffiti is scattered across the Navajo Nation, with most addressing health problems or the decades of uranium and coal mining on Navajo land. The sovereign state is attempting to transition its economy to renewables. (Photo by David McNew/Getty Images)
  • A just transition is the process of bettering and maximising social and economic approaches to climate action.
  • 14 out of 17 Sustainable Development Goals (SDG) include the concept in their approach.
  • The US and Indonesia, among others, have started to look for ways to go through a just transition.

Extreme weather conditions have brought losses and damages to nature and communities, especially in poorer nations that contribute the least to the rise in global temperatures. Climate change is real.

This is where the concept of a just transition comes into play. According to multiple credible sources, including the International Panel on Climate Change (IPCC), the world needs to act soon to prevent temperatures from rising even more. A just transition would help to do so in a way that addresses the needs of climate goals and less privileged communities. 

Regions that heavily depend on fossil fuels for revenue and employment need long-term solutions, including economic and environmental diversification. According to the latest IPCC report, this is reachable to the principles of just transition.

What is a just transition?

Just transition is the process of bettering and maximising the social and economic approaches to climate action

The process is often met with challenges and obstacles, like financial inequality or critical structural changes that have been made more difficult by globalisation, but a just transition can be mindful and manage them along the way. For instance, by using effective and efficient social dialogue, and respecting fundamental principles and rights of labour. 

The core principles of the just transition are human rights and labour standards, social risks and opportunities, and participation and partnership. 

The Paris Agreement itself mentioned a just transition by highlighting “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”. In addition, 14 out of 17 Sustainable Development Goals (SDG) include the concept too. 

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Measures have been put in place to facilitate the process, such as the European Union’s Just Transition Mechanism which ensures “a fair transition to a climate-neutral economy, leaving no one behind”, mobilising about €150bn between 2021 and 2027. Other initiatives include:

  • The Solidarity and Just Transition Silesia Declaration, which was signed by 50 countries at COP24, says “a just transition of the workforce and the creation of decent work and quality jobs are crucial to ensure an effective and inclusive transition”.
  • Climate Action for Jobs Initiative is headed by 46 countries alongside Spain and Peru.
  • The UNFCCC Gender Action Plan, where members will involve an equal number of women and men to come up with more national climate policies that are gender-responsive.

What examples of just transition are there?

The aspects of just transitions can be divided into three categories:

  • Economic, which sees cleaner energy options become cheaper and consequently more valuable than fossil fuels. 
  • Environmental, to avoid the effects of climate change.
  • Social, where there is a need for energy sector work that offers decent salaries and benefits, alongside training. 

Countries such as the US and Indonesia have started to look for the best ways to go through a just transition. Here are a couple of examples:

Appalachia, US 

The Appalachia region in the US has seen a decline in its coal industry, which historically its economy was built on. Consequently, workers lost their jobs and entire coal businesses had to close their doors.

However, social enterprise Refresh Appalachia and its partner Reclaiming Appalachia Coalition have devised a solution. Workers are now cleaning old and closed coalfields and the sites are becoming farmlands or forestry enterprises, thanks to partial funds from the Abandoned Mine Land Fund.

These initiatives seek to support communities by renovating works on old railroad tracks in West Virginia and restoring outdoor spaces, as well as offering job retraining and educational paths for workers so they can train and transition into different industries.

Navajo Nation, US

This region located between Arizona, New Mexico and Utah, has also been heavily affected by the decline of the coal industry and uranium mining. 

The main coal-fired power plant for the west of the US, situated in Page, Arizona, closed in 2019 and left hundreds of people without a job. The Navajo Nation, a Native American reservation in the US, however, took this as an opportunity to become a hub for renewable energy. It saw to create new job opportunities through more stable and sustainable energy.

Some enterprises like Native Power mostly focus on the production of clean energy for tribal and native communities. The Kayenta Solar Project, the first solar plant in the Navajo Nation, is only one part of this region’s just transition plan.

Indonesia

Indonesia’s President Joko Widodo organised a campaign in 2014 about subsidy reform after realising transport fuel subsidies were out of the national budget.

This reform promised to find better and more sustainable alternatives to expensive fuel and would also aid the country’s development.

Once he was elected, all subsidies were removed and replaced with green investments in infrastructure and better means of transport, alongside programmes and campaigns to promote poverty reduction.

More recently, Indonesia secured a Just Energy Transition Partnership (JETP) which promises $20bn of financial support led by the US and Japan. This also includes other developed countries like Canada, the UK, France and Germany. The investment is aimed at ensuring Indonesia weans itself off its dependency on coal while supporting the communities that are currently dependent on its generated income.

How can finance and investment support change?

The just transition system has different layers of responsibility. Alongside the priority areas, such as restoring ocean ecosystems and ending deforestation, there are also financial action areas. These mainly revolve around strategy and leadership, capital allocation, public dialogue and corporate engagement.

The financial and investment sectors are vital for the advancement of just transitions around the world, as the required progress can only be achieved with great amounts of capital investment

From an investment point of view, impact investing is vital to support a just transition. From investments in clean energy access, sustainable forestry and agriculture, to even green bonds, impact investing could mitigate potential risks and help businesses to become more environmentally friendly, especially in underdeveloped regions where social justice and equality are even more vital. 

As the new 2023 IPCC Report outlines, adaptation planning and implementation have already produced positive outcomes across all sectors and regions. However, maladaptation is happening too, mostly due to the lack of finances in most of the developing countries of the world.

Another way the financial sector can be helpful is through livelihood restorations. Investors can provide assistance to households and families negatively impacted by climate change, through business and agriculture insurance, and directly financing a just transition – which could be particularly useful in underdeveloped regions.

[Read more: SDG 8, Decent work and economic growth]

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