Nabila Putri Salsabila
Decarbonizing our energy system is imperative, nonetheless, low-carbon energy transition alone is not sufficient. There is an urgent need to ensure that the transition is fair and inclusive, able to create decent work opportunities by leaving no one behind. Just transition framework must be designed by incorporating public consultation and social dialogue, social protection and skill development, economic diversification, and just transition fund mechanism.
The latest IPCC report sent a crystal clear message: we have to end our addiction to fossil fuel. Extreme weather events such as heatwaves, droughts, and floods are occurring simultaneously, causing cascading and unmanageable impacts, while exposing millions of people to critical food and water insecurity (Intergovernmental Panel on Climate Change [IPCC], 2022). Realistically speaking, global temperature has risen for 1.2°C (Climate Action Tracker [CAT], 2021), and with the current emission rate, it leaves us with a mere 300 Gigaton carbon budget that would be exhausted before passing the 1.5°C tipping points. Correspondingly, humankind only has 7 years to forestall the irreversible damage of climate catastrophe (Mercator Research Institute on Global Commons and Climate Change, 2022).
One of the main culprits to the rising temperature is the energy sector, which is responsible for 73% of global greenhouse gas (GHG) emissions, yet still 80% dominated by fossil fuel (Ritchie et al., 2020). Coal, oil, and gas generate considerably higher GHG per unit electricity produced than other renewable energy sources. It is also responsible for deaths due to environmental pollution (Ritchie, 2020). Decarbonizing our energy system is imperative, nonetheless, low-carbon energy transition alone is not sufficient. There is an urgent need to ensure that the transition is fair and inclusive, and able to create decent work opportunities by leaving no one behind. Coined by International Labor Organization (ILO), the concept of just transition emerges to assure that the benefits of transitioning towards green economy are shared widely, while also supporting those who are likely to lose economically (European Bank for Reconstruction and Development [EBRD], 2022) .
Case study of a coal-dependent country: Indonesia
Indonesia’s coal industry employs roughly 1.1 million workers (Simamora & Gabriella, 2020). Despite being a major coal-dependent country (from both production and consumption standpoint), there is no formal just energy transition framework or body in place (CAT et al., 2021), as only two ministries were familiar with the concept; while, non-governmental actors (including labor unions) were already familiar (Błachowicz et al., 2021). Stakeholders at risk from the transition (coal industry), have been able to influence the regulatory framework in their favor, for example, by lobbying for government coal subsidies. Shifting away from coal is politically challenging mainly because, the industry contributes to 1.5–2% of total national revenue annually (around USD 37.2 billion) through land rent, royalty/tax, product sales, and exports, and is a funding source for political campaigns (Simamora & Gabriella, 2020; Arinaldo & Adiatma, 2019; Carbon Trust et al., 2021). Furthermore, 90% of coal production is concentrated in only 3 (out of 34) provinces.
Way out: designing a just transition framework
To guide the transition process and mitigate the social costs, governmental ministries shall coordinate to develop a just transition framework, and form a dedicated task force or authority to take charge of the implementation. To be inclusive and sustainable, the framework has to incorporate the following elements:
- Public consultation and social dialogue (tripartism)
Formulating equitable policies that share the costs and benefits among diverse stakeholders will require gathering their needs and aspirations. As millions of jobs will be displaced due to the closure of mines or retirement of power plants, there is a need to encourage collaboration between central government, local government, private sectors, international actors, worker and communities, and civil society organizations to find a consensus on transition pathways (Simamora & Gabriella, 2020). - Social protection and skill development programme
Reducing unemployment for displaced workers can be done through reskilling/retraining programme and job-matching services, hence productive workforce can be redirected to other low-carbon emerging industries that can absorb these workers. For people nearing retirement age, providing early retirement incentives can also be an option. Just as importantly, unemployment benefits and social safety net measures for impacted low-income households must be anticipated (Simamora & Gabriella, 2020). - Economic transition and diversification
In order to minimize the risk of economic slowdown caused by shifting away from coal, the framework has to incorporate local economies diversification by promoting sustainable, non-resource based sectors (Simamora & Gabriella, 2020). Boosting green jobs by accelerating renewable energy deployment is one way to achieve such goal, as it could create 2.1–3.7 million direct green jobs, while coal creates the least number of jobs per unit of capacity and USD investment (Grafakos et al., 2020). - Just transition fund mechanism for coal-reliant regions
Establishing a just transition endowment fund is crucial to support displaced workers and economic diversification. This fund can be sourced from financial instruments such as carbon tax, green bonds, fiscal transfer, fossil fuel revenue, or fossil subsidies reform (Simamora & Gabriella, 2020). One of the renowned funds to be used as a benchmark is The European Union’s Just Transition Mechanism as part of the EU’s Green Deal (EBRD, 2022).
Figure 49.1 – Direct job creation per unit of electricity generation (GWh) from new capacity and per unit of investment (USD million) Source: Grafakos et al., 2020
Governance toolbox – SWOT analysis
The following table serves as a governance toolbox that assesses the Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T) of the proposed recommendations.
Table 1. SWOT analysis of the just transition framework recommendations
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Conclusion and call-to-action
Humankind’s addiction to fossil fuel has caused the global temperature to rise. Mitigating climate change would imply phasing out fossil fuels as soon as possible. Nevertheless, it is inevitable that economically speaking, some stakeholders will be negatively impacted, particularly those who depend their livelihoods on fossil fuels. Fossil-fuel-dependent economies need to rethink the impact of energy transition on their workforce. They have to start designing a just transition framework that incorporates the following element: public consultation and social dialogue, social protection and skill development, economic diversification, and a just transition fund mechanism. The author calls upon the government (particularly the Indonesian government) to ensure that the energy transition is fair and inclusive, and able to create decent work opportunities by leaving no one behind.
References
Arinaldo, D. & Adiatma, J.C. (2019). (rep.) Indonesia’s Coal Dynamics: Toward A Just Energy Transition. Institute for Essential Services Reform (IESR) Indonesia. Retrieved May 3, 2022, from http://iesr.or.id/wp-content/uploads/2019/08/Indonesias-Coal-Dynamics_Toward-a-Just-Energy-Transition.pdf
Błachowicz, A., et al. (2021). (rep.) Incorporating just transition strategies into developing countries NDCs and Covid-19 responses: comparing insights from Ghana, Colombia and Indonesia. Climate Strategies. Retrieved May 3, 2022, from https://climatestrategies.org/wp-content/uploads/2021/07/Incorporating-just-transition-strategies-into-developing-countries-NDCs-and-Covid-19-responses.pdf
Carbon Trust, Asia Group Advisors and Climate Smart Ventures. (2021). (rep.) Opportunities to Accelerate Coal to Clean Power Transition in Selected Southeast Asian Developing Member Countries. Asian Development Bank (ADB). Retrieved May 3, 2022, from https://www.adb.org/sites/default/files/project-documents/55024/55024-001-tacr-en.pdf
Climate Action Tracker. (2021, November 9). Glasgow’s 2030 credibility gap: Net zero’s Lip Service to Climate Action. Retrieved May 3, 2022, from https://climateactiontracker.org/publications/glasgows-2030-credibility-gap-net-zeros-lip-service-to-climate-action/
Climate Action Tracker, NewClimate Institute, and Climate Analytics. (2021). CAT climate governance series – Indonesia. Climate Action Tracker (CAT). Retrieved May 3, 2022, from https://www.indonesiawaterportal.com/storage/eb/articles/616/2021_10_CAT_Governance_Report_Indonesia.pdf
European Bank for Reconstruction and Development (EBRD). (2022). What is a just transition? Retrieved May 3, 2022, from https://www.ebrd.com/what-we-do/just-transition
Grafakos, S., Senshaw, D., Quezada, D., & Toro, A. (2020). (rep.) Employment assessment of renewable energy: Indonesian power sector pathways. Global Green Growth Institute (GGGI). Retrieved May 3, 2022, from http://greengrowth.bappenas.go.id/wp-content/uploads/2020/07/Employment-assessment-of-renewable-energy-Indonesian-power-sector-pathways-NEAR-NDC.pdf
Intergovernmental Panel on Climate Change (IPCC). (2022, February 28). Climate change: a threat to human wellbeing and health of the planet. IPCC Sixth Assessment Report. Retrieved May 3, 2022, from https://www.ipcc.ch/report/ar6/wg2/resources/press/press-release/.
Mercator Research Institute on Global Commons and Climate Change. (2022). That’s how fast the carbon clock is ticking. Retrieved May 3, 2022, from https://www.mcc-berlin.net/en/research/co2-budget.html
Ritchie, H. (2020, February 10). What are the safest and cleanest sources of energy? Our World in Data. Retrieved May 3, 2022, from https://ourworldindata.org/safest-sources-of-energy
Ritchie, H., Roser, M., & Rosado, P. (2020, November 28). Energy mix. Our World in Data. Retrieved May 3, 2022, from https://ourworldindata.org/energy-mix
Simamora, P. & Gabriella, M. (2020). (rep.) Ensuring a Just Energy Transition: Lessons learned from country case studies. Institute for Essential Services Reform (IESR) Indonesia. Retrieved May 3, 2022, from https://iesr.or.id/en/pustaka/ensuring-a-just-energy-transition-in-indonesia-lessons-learned-from-country-case-studies-iesr-2020