2 The emerging new growth model has the potential to deliver incredible economic and development benefits together with climate goals, leveraging recent technological advances, new business models, and innovative financing mechanisms. This Report highlights a range of examples of successes in countries and sectors around the world that are delivering real benefits to communities today and will do so for generations to come.
The scale and pace of the broader economic transition that the world is now facing is unprecedented. We are already in the midst of major structural changes, including rapid urbanisation, increasing globalisation, a shift to service-based economies, and increasing automation. As with major economic and technological transitions of the past, this one will not necessarily be easy. New markets, business opportunities, and jobs will open up, but there will also be a shift away from the current high carbon-emitting industries and modes of energy, transport, and land use. Unless this transition is carefully and responsibly managed, there is a real potential for stranded assets, communities, and workers, as well as the risk of exacerbating the social exclusion of the poorest and most vulnerable. The transition to a low-carbon, resilient economy is just one part of this much broader transformation, and – if managed well – has the potential to deliver more equitable and prosperous growth. This transition is not only about phasing out polluting and unsustainable activities in various sectors, but also about diversifying local economies, generating new jobs and new industries, new services and new skills, all of which requires new types of investment and accompanying policies.3
Open and transparent dialogues to plan for the transition will be essential, bringing together government, business, trade unions, civil society, and communities.4 Local universities and trade schools can also play a key role in envisaging and training for a more diversified economy in affected regions. Such broad-based and inclusive dialogues can help to identify specific measures to ensure a just transition, helping to reduce fears, opposition, and both inter-community and inter-generational conflict. Dialogues can bring together trade unions, government, and industry representatives to find common ground and ways forward to ease the transition.5 According to the International Labour Organisation (ILO), a just transition is a bridge from where we are today to a future where all jobs are green and decent, poverty is eradicated, and communities are thriving and resilient.6 Green jobs are those which support improving energy and resource material efficiency, limiting GHG emissions, minimising waste and pollution, protecting and restoring ecosystems, and supporting adaptation to climate change.
As noted, the shift to a low-carbon and climate-resilient economy is only one – potentially small – part of a much broader economic transition that is under way, including the so-called ‘Fourth Industrial Revolution,’ characterised by increasing globalisation and the rise of automation.7 Indeed, the growth of new technologies and artificial intelligence (AI) is having a profound effect on labour markets, with some economists suggesting that automation could potentially replace over half of all jobs by 2055.8 Traditionally middle-skill jobs (such as machine operators or clerical workers) are already declining compared to high- and low-skill jobs: across 24 OECD countries, all but two experienced some degree of job polarisation between 1995 and 2015.9 Some of this shift can be explained by globalisation and offshoring, but there is also an important element related to technological process and growing automation of middle-skill jobs in manufacturing.
Growing social inequality and lack of inclusion in the old economic growth model is of particular concern and addressing it will be a necessary part of any just transition towards a new growth approach that minimises climate risks. In 2017, an estimated 82% of the wealth created globally went to the top 1% of the world’s population.10 Wages in many parts of the world remain flat. Despite important recent progress in tackling poverty, just under half of Africa’s population still lacks access to electricity today.11 Women continue to be under-represented and under-paid compared to male counterparts in the workforce in most sectors of the economy. Some studies suggest that growing automation may serve to exacerbate these inequalities, unless policies are implemented to actively manage the impacts.12
A well-managed and just transition is needed to ensure that the new growth agenda delivers not only economic growth, but also alleviates poverty, strengthens social inclusion, improves biodiversity and ecosystem services, and reduces the risks that a changing climate will pose to development prospects. A just transition requires social dialogues, clear plans, and pro-active policies. It requires active labour market policies and enhanced social security systems, while minimising disincentives to work. Robust social protection systems are essential, enabling the necessary support for the poor and vulnerable to improve livelihoods and seek formal employment and for workers and their families to meet basic needs during periods of unemployment, re-training, or education.13 The more inclusive the social protection system, the more likely disenfranchised and displaced workers will feel empowered to move into new jobs, and the better communities will be at supporting economic diversification.
While the transition to a low-carbon economy is only a part of this much broader economic transformation, it is often an easy target to ‘blame’ for some of the job losses or dislocations that are taking place. Disentangling the impacts of climate-related policies from this broader transition can help to build political support for climate action and identify where there are real impacts that need to be carefully managed.
This Report highlights some of the examples where processes are facilitating a just transition to a new climate economy, identifying some of the barriers and challenges faced, as well as some of the factors that are leading to progress and successes. A number of examples are highlighted throughout the Report in more depth, a few of which include measures such as:
- Commitments to phase out coal use in the energy system and successful experiences in phasing out subsidies to fossil fuel production and exploration, including policies and approaches to carefully manage the transition for affected workers and communities. For example, following their 2016 and 2018 commitments to the phase-out of coal, the Province of Alberta and the Government of Canada have established social dialogues with coal workers and their communities (see also Box 17); Alberta’s carbon price revenues were allocated to support the transition for coal communities and others;14 and China established a dedicated multi-billion-dollar fund for retraining, reallocating, and the early retirement of workers laid off due to coal and steel overcapacity as part of its 13th Five-Year Plan (2016-2020). Most recently, in 2018 Germany launched its “Commission on Growth, Structural Change and Employment” to develop an overarching approach to managing the full range of impacts of the phase-out of coal in line with national climate commitments. It is seen as a potential model for just transition dialogues (see also Box 17).15 The new Powering Past Coal Alliance, with over 60 members including governments and leading businesses, has the potential to galvanise social dialogues, building on experiences to date, and manage the transition in over 30 signatory countries or states (see also Section 1.C).16
- Clean energy access policies typically target the urban poor and hard-to-reach rural communities and can offer huge economic and social benefits, notably for women and children. These policies can also provide important sources of income for locals providing the services. Brazil’s successful approach to achieve near universal access to clean cooking in urban areas included the development of national infrastructure for liquefied petroleum gas (LPG) production and distribution, involving private entrepreneurs and subsidies to the poorest families to ensure affordability.17 In rural Bangladesh, a government-led results-based financing programme supports private operators in implementing solar home systems in rural communities; small subsidies are offered to the poorest households, and the largest private operator made the training and employment of local women a pillar of its business model (see Section 1.D).18
- Approaches to restoring degraded lands back into productive use in countries from Ethiopia to Niger to China have ensured these efforts successfully lifted millions of people out of poverty and raised local farmer incomes (See Section 3.D).
- An economy-wide approach to the transition was launched in Norway through the Expert Committee on Green Competitiveness, which delivered its recommendations to the Prime Minister in October 2016 after extensive consultations amongst business, workers, and civil society. As part of this process, 11 key sectors – including transport, industry, petroleum and agriculture – developed long-term road maps to transition their sectors to a low-carbon growth model while maintaining global competitiveness. This has helped business, government leaders, and society more broadly overcome inertia and identify together the opportunities to transition more rapidly from a heavily fossil fuel-dependent economy to a more diversified, low-carbon economy (see Section 1.C).
- Uruguay’s rapid energy transition in recent years shows the country moving from dependence on fossil fuel-based electricity and oil imports to having enough renewable power not only to supply over 94% of their own electricity system, but also to be able to export one third of the power they generate to Argentina. Uruguay has implemented ILO guidelines for a “just transition towards environmentally sustainable economies and societies for all” as part of this process, to assist the country in creating employment, ensuring decent work opportunities and social well-being in the process of a just transition towards a greener economy.19
As this Report illustrates, sector by sector, the low-carbon, climate-resilient aspects of the broader transition to a new growth model can unlock multiple benefits – a boost to growth in countries at all stages of development, new jobs in innovative industries, poverty alleviation, and improvements in other key indicators of quality of life. Ensuring that the transition is just is fundamental to building a safer, more sustainable, and prosperous world for all.
The 2018 Report of the Global Commission on the Economy and Climate