What Is The Just Energy Transition and How Can Today’s Businesses Play a Role?

The transition from fossil fuel-based energy systems to renewable and clean energy sources has been gaining momentum globally. While this transition is largely focused on creating a much more climate-conscious energy sector, it also has significant socio-economic implications for communities and governments around the world.

The International Energy Agency (IEA) estimates a sizable net gain in jobs due to energy transition, with an estimated 14 million new jobs added in the clean energy sector by 2030. Over the same period, the IEA reports, fossil fuel production could lose upwards of 5 million jobs. On the whole, a net gain of 9 million jobs is predicted.

While these numbers are encouraging at first glance, this global view does not take into account the regional impact of job loss and economic uncertainty brought about by the closure of vital local industries.

In this post, we’ll explore the importance of justice in energy transition, as well as take a look at the role businesses play in fostering energy equity and creating a just energy transition.

What Is Just Energy Transition?

Just energy transition refers to the process of shifting from fossil fuel-based energy systems to a more sustainable, low-carbon energy infrastructure in a way that is equitable and inclusive, taking into account social, economic, and environmental justice considerations.

The concept recognizes that the transition to renewable and clean energy sources can have significant social and economic implications, particularly for communities that are dependent on fossil fuel industries or face energy poverty.

What makes an energy transition strategy just?

A just energy transition strategy

• Seeks to ensure that the burden and benefits of the transition are distributed fairly and that vulnerable and marginalized communities are not disproportionately affected.
• Aims to create new job opportunities in clean energy sectors, provide support and retraining for workers in declining industries, and address energy affordability and access issues.
• Recognizes the importance of engaging and empowering communities in decision-making processes, including those who may be most affected by the transition.
• Emphasizes the need for participatory approaches, community involvement, and transparent governance to ensure that diverse voices are heard and that principles of social justice and equity guide the transition.

Ultimately, a just energy transition strives to achieve a sustainable and low-carbon energy future while upholding principles of fairness, equality, and inclusivity.

How Governments Are Helping Enact a Just Energy Transition

Governing bodies around the world are aligning with corporations to enable this just transition. With the signing of the Paris Climate Agreement in 2015, a framework was created to guide a global energy transition that is both equitable and sustainable.

In fact, just energy transition is key to meeting the goals of the Paris Agreement. By centering the work of climate action around people, governing bodies can ensure their climate actions aren’t causing social harm in the name of environmental good.

To this end, the International Labor Organization (ILO) has authored guidelines for achieving sustainable  development,  decent  work,  and  green  jobs in the pursuit of just transition.

Global energy equity in action

The Just Transition Mechanism (JTM) is an integral part of the European Union's (EU) efforts to ensure a fair and inclusive transition towards a climate-neutral economy. This framework supports national just transition initiatives, providing dedicated financial resources and technical assistance to EU member states.

The United States Agency for International Development (USAID) is working with governments around the globe to ensure both environmental protection and social inclusion are properly accounted for in the design and implementation of energy infrastructure.

The government of South Africa, in partnership with several other just energy leaders, is working to accelerate the decarbonization of the South African economy. The official statement reads, “The Partnership recognizes the importance of supporting South Africa's efforts to lead a ‘Just Transition' that supports affected workers and vulnerable communities, especially coal miners, women, and youth as the South African economy changes.”

These are only a few of the ways governments are supporting the businesses and communities that are working toward a just transition.

The Role of Business in a Just Energy Transition

Businesses play a crucial role in driving and facilitating a just energy transition. They have the potential to be both catalysts and agents of change in advancing sustainability and social equity within the energy sector.

Investors are demanding greater accountability from businesses, seeking to invest in organizations that proactively take sustainable action in environmental, social, and governance (ESG) issues. This has spurred an increase in ESG reporting mandates around the world.

Just energy transition sits right at the intersection of the “E” and the “S” in ESG, and businesses that are invested in improving their ESG ratings are playing a more active role in ensuring the wellbeing of both the environment and the communities they serve.

The social impact of a just energy transition strategy typically relates to two key business principles: job creation and community engagement.
 

Job creation and economic development

A key principle of a just energy transition is the creation of new job opportunities in renewable energy sectors and related industries. It aims to support the growth of green jobs that offer fair wages, good working conditions, and opportunities for career advancement. The transition also seeks to promote economic diversification and develop sustainable industries that contribute to local economic development and resilience.

Community engagement and participation

A just energy transition emphasizes the active involvement of communities in decision-making processes. It recognizes the importance of local knowledge, perspectives, and needs in shaping the transition. Community engagement ensures that affected communities have a voice in determining the direction of the transition, allowing them to influence policies, projects, and investments that impact their lives. Meaningful participation strengthens social cohesion, builds trust, and facilitates the adoption of sustainable solutions.

Just Energy Transition in Action

The private sector plays a central role in achieving a just energy transition. By recognizing the unique needs of various stakeholders in affected regions, collaborating with those entities, and committing to responsible and sustainable operations, businesses can tailor opportunities for innovation and investment in affected regions.

Proactive measures

An example of a proactive just energy transition in action is Germany’s Commission on Growth, Structural Change, and Employment. Established in 2018, its primary objective was to develop a plan for phasing out coal-fired power generation in Germany while managing the economic and social consequences of the transition. The commission consisted of representatives from the government, industry, labor unions, environmental organizations, and affected regions.

The recommendations of the Coal Commission were subsequently incorporated into German law, and specific measures and policies have been implemented to support the transition away from coal. The Commission played a crucial role in facilitating a just and managed transition, taking into account social, economic, and environmental aspects and balancing the interests of various stakeholders involved in the coal phase-out process.

Innovative ventures

The Futur-e project is an initiative launched by Enel Group, a global energy company, with a focus on facilitating a just energy transition. The program aims to repurpose and redevelop decommissioned or soon-to-be decommissioned power plants and other energy infrastructure to support sustainable projects that generate economic, social, and environmental benefits.

Strong stakeholder support

Uruguay's Energy Policy 2005-2030 is a comprehensive framework that outlines the country's strategic objectives and measures for the development, diversification, and sustainability of its energy sector. The policy, which enjoys strong support from local and international labor unions, aims to ensure energy security, promote renewable energy sources, reduce greenhouse gas emissions, and foster social and economic development.

Through a combination of supportive policies, investment incentives, and a favorable regulatory environment, Uruguay has achieved a significant increase in renewable energy generation, attracting both domestic and international investments in the sector. The policy's focus on sustainability, energy security, and social and economic development has enabled Uruguay to make substantial progress toward a clean and sustainable energy future.

Fostering Energy Equity Through A Just Energy Transition

By embracing sustainable practices, driving innovation, advocating for policy changes, and collaborating with stakeholders, businesses can contribute significantly to a just energy transition and help build a more sustainable and equitable energy future.

Learn how Inogen Alliance is helping businesses on the road to a sustainable future.

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