Securing a clean and inclusive energy transition (Part: II)

Today many areas of the planet are experiencing what is described as energy poverty, the condition in which people are unable to ensure the adequate heating (or cooling) of their homes. At the same time, they don’t have an adequate supply of energy for domestic uses.

In its recent report in October 2020, the International Energy Agency (IEA) notes with dismay the high number of people living without access to energy in Africa. The report stated that 592 people in Africa are without access to electricity. In Nigeria alone, the number of people without electricity is estimated to be about 80.1 million, out of a population of roughly 206 million persons. According to the most recent estimates, 2.6 billion people worldwide lack access to modern cooking fuels and technologies (IEA et al, 2021).

The problem of energy poverty not only concerns developing countries, such as those in sub-Saharan, but affects developed economies too. In the European Union today energy poverty affects a population of 40-45 million people, representing around 9 percent of the European populationIn both cases, energy poverty represents an obstacle to achieving the Sustainable Development Goal 7 (SDG7) of ensuring access to affordable, reliable, sustainable and modern energy for all. Thema et al, (2017) find that the eradication of energy poverty provides a number of health, economic, and climate co-benefits while also building resilience of societies and economies when faced with health or climate emergencies.

The Covid-19 pandemic has clearly illustrated the need for building greater energy resilience in our societies and economies in order to provide households, community services and productive uses with affordable access to uninterrupted and quality energy services (Lackner et al, 2021). The global energy sector’s shift from fossil-based systems of energy production and consumption— including oil, natural gas and coal— to renewable energy sources like wind and solar, offers a great opportunity to reboot the global economy from the massive destructions of the Covid-19 pandemic, in a more efficient and sustainable manner. It is one-off opportunity to tackle the energy poverty imbalances sooner rather than later.

The pandemic has presented us with a unique opportunity to accelerate action and allow countries to recover better from the pandemic to change the SDG7 trajectory and enable allow countries to reap the rewards of sustainable energy for all. These rewards, according to Ogunbiyi (2021) come in the form of resilient economic growth, new jobs, and a cleaner environment. For example, investments in clean energy produce three times the number of jobs as the same size investment in fossil fuels, and for every US dollar invested in the transition towards renewable energy, an additional 93 US cents of additional gross domestic product (GDP) growth is expected to occur.

The Challenges

The most delicate aspect concerns the regions whose economies are based mainly on fossil fuels, where the disappearance of some jobs is inevitable. Saha and Neuberger (2021) notes that transitions of this magnitude not only displaces individual workers, they disrupt local communities due to foregone tax revenues from the closure of fossil fuel facilities and reduced local spending. Effective transition support will therefore be key to maintaining thriving communities in the coming decades.

In the United States, a Sustainable Development Solutions Network Report found that about 12,000 workers in coal mining and related industries will face job displacement every year over the next nine years (2021 – 2030) as coal is phased out. The report found that about 34,000 workers will lose their jobs each year (2031 – 2050) as oil and gas use decreases.

Within the context of the EU regions, the most at risk of socio-economic disruption from this emissions reduction process are those that depend on fossil fuel extraction and production, particularly coal and oil. The World Resources Institute (WRI) notes that as of 2018, there were 207 coal-fired power plants in 103 regions across 21 EU countries, accounting for 15 percent of Europe’s power generation capacity, and 128 active coal mines in 41 regions across 12 EU countries.

Additionally, in 2018 the coal sector directly employed about 237,000 people, including 185,000 in coal mining. It also indirectly supported 215,000 jobs. Two-thirds of coal power plants in the EU are expected to retire by 2030, leading to the loss of about 33,000 direct jobs between 2020 and 2030. This is expected to accelerate the closure of European coal mines, which had already been shutting down due to lack of competitiveness. And by 2030, cumulative job losses in coal power and coal mining are expected to reach 160,000 direct jobs.

Inclusive Transition

For the energy transition to be considered “inclusive”, the processes must ensure fairness through equal distribution, full recognition of rights and labour contributions, and equal participation in decision-making procedures, particularly vulnerable stakeholders.

To deliver a just and inclusive transition it will be necessary to play fair by those whose livelihoods and environments are impacted, most obviously, those employed in the shrinking fossil fuel industries. There must be interventions to reskill employees and provide professional training to offer new job opportunities, beginning with the redeployment to new activities linked to green energy sources. Also, a system of social welfare support capable of absorbing the shocks of the transition is crucial.

Saha and Neuberger (2021) finds that the rehabilitation of abandoned coal mines can be an important component of a just transition to a post-coal future. Cleaning up coal mine sites requires a sizeable and well-trained workforce. It provides significant opportunities for former miners and other coal workers, many of whom already have the required skills or can be quickly trained for these positions.

The Sierra Club of the United States estimates that federal support for rehabilitating abandoned coal mines can create more than 13,000 jobs in Appalachia alone. According to the authors, Mine Reclamation Projects which involve restoring land that has been mined to its natural or economically usable state, can improve the day-to-day safety of those living near abandoned mines and create new spaces that provide commercial and recreational value.

The quest to achieving a just and inclusive energy transition must be pursued on a global scale and have emerging economies at its heart. Many developing regions, such as sub-Saharan Africa, are extremely fertile grounds for smart tech start-ups and entrepreneurs developing sustainable solutions to address the energy inequality in those regions. A just transition in Sub-Saharan Africa will not only be a transition from fossil-fuels but also the diversification of the existing renewable energy mix.

Internationally, we have seen some countries and regional economic blocks begin to address the vulnerability of fossil fuel jobs through “just transition” initiatives.

The Europe and US Examples

With a view to making the energy transition cohesive and socially just, the European Union (EU) has established the Just Transition Mechanism (JTM), aimed at providing dedicated financial resources and technical assistance to EU member states with the requirement that recipients develop national just transition plans. It includes mobilizing at least €150 billion during the period 2021-2027 in grants and loans through other channels to support just transition programs and investments, in addition to co-financing and matching requirements for most affected regions.

And so the JTM is aimed at compensating regions that are most dependent on fossil fuels to cope with both the economic and social implications of the transition to a sustainable economy.

According to the World Resources Institute, the Just Transition Mechanism consists of three pillars;

Pillar 1: Just Transition Fund (JTF) is to support the economic diversification and conversion of affected regions, including by investing in small and medium-size enterprises (SMEs), the creation of new firms, research and innovation, environmental restoration, clean energy, reskilling of workers, job search assistance, and the transformation of carbon-intensive industries.

Pillar 2: Just transition scheme under InvestEU provides another €1.8 billion for investments in a wider range of projects than the JTF, including investments in energy and transport infrastructure, digitalization and digital connectivity, and the circular economy. These investments will be made by private and public sector entities, with financial products proposed by the InvestEU implementing partners, such as the European Investment Bank Group or national banks.

Pillar 3: A public sector loan facility that combines €1.5 billion grant component from the EU budget and a loan component of up to €10 billion from the European Investment Bank, which is expected to mobilize €25 billion to 30 billion of public investment in energy and transport infrastructure, district heating networks, energy efficiency measures including renovation of buildings, and social infrastructure.

All EU countries are eligible for funding, but resources will be concentrated in regions facing the biggest challenges, focusing on those that need to phase out production and use of coal, lignite, peat and oil shale, or transform carbon-intensive industries.

In the United States, efforts to ensure a just transition for fossil fuel workers are nascent, mostly happening at the state or local levels and focused on coal workers. Promising advancements include Colorado’s Just Transition Office and Just Transition Advisory Committee, and New Mexico’s recent legislation on a renewable energy standard that includes millions of dollars for impacted coal communities. Nationally, the Obama administration launched the multi-agency POWER Plus Plan in 2015 to alleviate the economic impacts of the energy transition on coal workers and communities.

Other examples of existing economic development programs in the United States include the Appalachian Regional Commission’s (ARC) Partnerships for Opportunity and Workforce Economic Revitalization (POWER) Initiative, and the Economic Development Administration’s (EDA) Assistance to Coal Communities (ACC) program.

These two projects are inter-agency effort to address economic and labor dislocations affecting coal workers and communities due to the energy transition. In 2018, the POWER Initiative received requests for US$329 million in grants, but ultimately only awarded US$49 million. The EDA ACC provides grants to support distressed communities. Between 2015 and 2019, funds appropriated to that program grew by 300 percent (Saha and Neuberger, 2021).

he writer has over 24 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector. He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and CNBC Africa.