An introduction to loss and damage
A dedicated loss and damage financing facility is high on the agenda for COP 27, but what exactly is loss…
The unprecedented shock of COVID-19 on oil prices and the global economy is accelerating conversations on phasing out the already volatile and declining fossil fuel industry. As such, ensuring the protection of workers is currently a pressing issue. Oil firms and contractors are expected to cut about one million jobs in 2020 alone, according to an analysis by Rystad Energy. Ambitious decarbonisation could bring huge employment benefits – there could be 100 million energy sector jobs by 2050, nearly double the 58 million in 2017, according to the International Renewable Energy Agency. But not all workers in the fossil fuel industry will be willing or able to fill these new jobs.
Just labour creation and transition in the fossil fuel sector is part of a larger, urgent conversation as the world faces potentially unparalleled job losses. Globally, the International Labour Organisation (ILO) predicts that 1.6 billion people in the informal economy are at risk of losing their livelihoods due to lockdowns and their economic consequences.
Although there are no precedents for the scale and speed of change needed in cutting carbon emissions, the following examples can give an indication of what a just transition could look like in a variety of industries and geographies.
|What is a ‘just transition’?|
The concept of a ‘just transition’ was developed by unions to ensure that jobs and livelihoods are protected when an industry (or industries) decline and others take over. The aim of a just transition is to achieve “environmentally sustainable economies and societies for all,” following a set of international guidelines negotiated by the International Labour Organisation (ILO). The Paris Agreement, signed by all countries in 2015, requires the international community to take into account “a just transition of the workforce and the creation of decent work and quality jobs” when transitioning to a low carbon economy.
The just transition concept always revolves around an environmental transition – be it a shift away from polluting industries, or a phasing out of harmful and toxic substances – and involve negotiations between workers and their labor unions, employers, governments and communities. Creating space for this social dialogue is essential when working towards a just transition that can secure the future and livelihoods of workers and their communities.
It is critical to account for the implications for workers when discussing the shift from an extractive, fossil-fuel based economy to a regenerative one, especially as the wholesale decarbonisation of the economy is unprecedented in scale and scope., The shift does not have to mean a reduction in overall employment, but it may profoundly change who is employed, where and on what wage.
In the second half of the 19th Century, coal mining changed the Ruhr region of Germany from a largely rural area to one of significant industrial production. By 1900, Germany was the third-largest producer of coal after the US and Britain. After 1945, the Allied powers forced the German coal industry to sell coal at below world prices, prompting German coal production to nearly quadruple between 1945-1956.
But from the mid-1950s, the German coal industry started to decline. Employment dropped from 753,000 in the late 1950s to about 33,500 in 2014 – a 96% fall. The Ruhr suffered from industrial decline as coal mining and steel jobs left the region, as well as a legacy of pollution from mining.
As a part of a deal with workers, the German government created subsidies for the coal industry, so jobs declined slower than they otherwise would have. Between 1970 and 2014, the German government provided about USD 538 billion in subsidies to the industry.
The decline of the coal sector was an important concern for the North Rhine-Westphalia regional government. Under a 1968 development programme, it created an urban plan that focused on building centres of education, including several universities. It also sought to attract new industries, promote new technologies and create training opportunities. The universities formed the basis of the region’s economic development in moving into more high-tech industries.
The regional government also focused on revitalising road and rail links, cleaning up the environment and improving housing. More recently, EUR 4.5 billion has been committed to cleaning up the Emscher river, which has been heavily polluted as a result of coal mining and other industrial activities.
In 2010, the region was a European Capital of Culture. But this does not mean all its problems are solved – in some cities in the Ruhr, unemployment still stands at around 14.5%.
The city of Pittsburgh industrialised rapidly in the late 1800s and became a major supplier of steel. But in the late 1970s and early 1980s, the steel industry collapsed. The collapse had been expected, but the city’s economy had not adapted. As the industry declined, young people left in search of jobs.
In the 1980s, the city authorities created a development plan to put state funds into technology research in local universities. As a result, entrepreneurs started up new businesses and initiatives in computer software and biotechnology. The city’s government used local knowledge to identify particular sites that could be developed or reused.
The medicine, education, technology and banking industries expanded, and are now the major forces in Pittsburgh’s economy. The University of Pittsburgh Medical Center, which consisted of just one psychiatric hospital in 1979, now employs nearly 80,000 people.
Today, Pittsburgh’s workforce is highly educated relative to the rest of the US. Forty-six percent hold college degrees, compared to 31% across the nation as a whole. While average incomes remain low, they are rising faster than in other US cities.
In 1973, more than 90% of Denmark’s energy was supplied from imported oil. The country had no domestic coal, so also relied on imported coal. The 1973 and 1979 oil crises prompted the country to shift from oil to coal and nuclear, before a strong anti-nuclear movement persuaded the government to focus on wind energy.
A series of government energy plans from the 1970s to the 1990s encouraged the development of renewable energy, including through subsidies. Denmark has a history of local co-operatives and many wind farms were built by co-operatives or individual farmers.
The growth of the wind industry therefore came from the bottom up, with the government providing the enabling environment for the development to take place. Wind turbines were often put up as a result of pressure from grassroots activists, who then benefited from sharing in the profits., Unions also played an important role in the rapid expansion of Denmark’s renewables sector. More than two-thirds of the country’s workers are union members and the unions play an important role in forming public opinion and lobbying government. The unions support the wind industry and lobbied in favour of the transition. Wind power delivered 47% of the country’s electricity in 2019 and the industry employed 34,200 people.
Industrial and steel manufacturing in Bilbao developed rapidly during the 20th Century. During the 1950s and 1960s, the demand for labour was met by migration from other parts of Spain – the population almost doubled from 216,000 in 1950 to 410,000 in 1970.
Economic crises during the 1970s and 1980s had a significant impact. The 1973 oil crisis led to an industrial crisis and, from 1975 to 1995, 60,000 manufacturing jobs in industries such as steel, shipbuilding and machine engineering were lost. The city was also heavily polluted and damaged by flooding.
Bilbao agreed a strategic plan for revitalising the area in 1991. The plan sought to promote the city’s urban renewal, rehabilitate the environment, strengthen the city’s cultural identity and develop a knowledge-based high-tech sector. Bilbao Ria 2000, a non-profit founded in 1992, operated on a model that involved all levels of government and worked to recover and redevelop disused land. The Spanish government, regional government and EU provided funds to buy up polluted land, clean it up and sell it at a profit to developers.
New cultural centres including the Guggenheim Museum, the Euskalduna Palace and Music Center, and Bilbao Metro played a major role in revitalising the city. In 2012, the mayor of Bilbao was named World Mayor of the Year for his role in using the Guggenheim Museum to increase visitors to the city from 100,000 to 700,000 a year. The impact the museum had on visitors, income and cultural pride is known as the “Bilbao effect” and it has served as a model for cities elsewhere.,
Bilbao’s economy shifted towards services and tourism. Industrial jobs declined from 48% of total employment in 1975 to 22% by 2005. Some commentators have criticised the shift, arguing that the service-industry jobs created tend to be unstable and low paid.
The Tees Valley in the North East of England suffered the loss of over 93,000 manufacturing jobs with the decline of the steel and chemical industry in the 1970s. Even though the area was fringed by five large universities – Newcastle, Durham, Teesside, Sunderland and Northumbria – links between these knowledge networks and local enterprise and start-ups was lacking.
As a result, the programme ONE North East was established by a regional development agency, investing GBP 3 million into the five universities. The goal was to provide support for developing business skills, strengthening links between universities and industry, and encouraging graduates to stay in the region. Though the regional body has now been closed, the entrepreneurial initiatives continue.
As of 2018, unemployment levels had halved over the previous five years. The Tees Valley combined authority reported that 74% of local businesses had recruited staff in 2018, and it projects that around 17,000 new jobs will need filling by 2024. Though these improvements cannot be directly linked to the programme’s efforts, they show a general picture of improvements through numerous local initiatives and investments into knowledge hubs.
The province of South Chungcheong is home to 30 coal power stations, half of South Korea’s total. Coal currently generates 40% of the country’s electricity. Major successes in lobbying the national government to close plants early has led to the region being hailed as an example of how transitioning from coal to renewables can be led by the communities affected.
Motivated by protecting the health of its two million inhabitants – who are 1.5 times more likely to die from respiratory disease than the rest of South Korea – the province became the first Asian region and heaviest coal user to join the Powering Past Coal Alliance in 2018, which is a network of governments, businesses and organisations working to advance the transition away from coal.
The move came after the citizens of South Chungcheong expressed grave concerns about air pollution, and strong support for transitioning to clean energy sources. The effort to phase-out coal has been spearheaded by local government officials. The provincial governor, Seung-Jo Yang, has outlined plans to retire 14 coal plants by as early as 2026 and scale up clean energy, while continuing to lobby for similar policies nationwide.
As the province does not have full regulatory authority, it has worked to build relationships with other subnational authorities in pushing for national action. Their efforts have already seen results. In November 2019, the Korean government decided that South Chungcheong’s two oldest coal power plants, which have been in operation for over 35 years, would close two years ahead of schedule.
Importantly, the closures will be accompanied by measures to minimize the impact on the local economy and stabilize employment, such as social responsibility practice agreements, reflecting the concerns of the people who are championing the phase-out.
In 2014, Scotland’s North Sea oil and gas industry was faced with slumping oil prices and increasing unemployment. As a result, the Scottish Government decided to invest in renewable energy as a way to create long-term sustainable jobs and accelerate the transition to a low-carbon economy.
Scotland experienced an economic boom in the early 80s from North Sea oil and gas revenues. The boom was followed by a significant drop in revenues, until a comeback in the early 2000s. But after the price of North Sea Oil (Brent Crude) peaked in 2012, at USD 112 a barrel, prices declined rapidly to a low of USD 44 in 2016. Between 2014 and 2017, 34% of the jobs in the UK oil and gas industry were lost, accounting for a total of 161,000 jobs. The slumping oil prices and declining revenues from oil and gas seen over the last decade has had a substantial impact on Scotland, which used to be home to 44% of the UK’s oil and gas jobs.
The government invested GBP 12 million in a ‘transitioning fund’, offering support to the unemployed and providing the opportunity for workers to upskill and retrain. The fund had, as of 2018, 3,184 applications and the rate of success in finding new employment was 85%. The transition fund is part of the government’s long-term strategy to achieve “a future-proofed, high-tech, low-carbon economy”, and for the country to produce 50% of its energy from renewable sources by 2030 and achieve a net-zero economy by 2045.
The effects of these progressive policies are already being felt. By 2016, the annual turnover from renewable energy in Scotland was GBP 5.46 billion, with some renewable energy sectors seeing up to a 300% increase in employment. In 2018, more than 23,000 people in Scotland were employed by the low-carbon and renewable-energy economy. A local example is the transition on the Orkney Islands, which used to import all their power. Now the islands produce 120% of their own needs from clean wave and tidal power, selling the excess to the mainland. The investment created 300 new jobs on the island, which is now a leading knowledge hub for research and development in wave and tidal energy. The islands now have one of the lowest unemployment levels in Scotland.
Scotland is paving the way on climate change and just transitions, having established a Just Transition Commission to gather expert advice and insight on how to address climate change without leaving people behind. It illustrates the value of long-term investments in local skills development alongside the renewable energy transition, driven by strategic government choices and investments, benefiting local workforces and contributing to emissions reductions.
When Longannet Power Station closed in 2016, it brought to the end not just 46 years of production but coal-fired power generation in Scotland. At the time, the power station employed 236 people directly and about 800 people indirectly, and had an estimated GBP 51-61 million in coal contracts and a further GBP 47.5 million in non-fuel contracts.
As a response, the Scottish government immediately set up the Longannet Task Force to develop an inclusive plan to mitigate the economic impacts of closure. The task force developed a clear scope and brought together key players from the public and private sectors to meet with trade unions.
After eight meetings and a total of GBP 4.7 million of stimulus funds channeled to Clackmannanshire and Fife council from the Scottish government, the task force ended. Of the 370 people who enlisted in the re-employment scheme, 99% found “positive” destinations in new work or training. There have, however, been some backlashes from the neighbouring village Kincardine, indicating the need for a broad inclusive approach when thinking about transition.
The Spanish train maker Talgo has since announced that it will be turning the old power plant site into a train manufacturing facility, news that will benefit both local economies and Scotland’s commitment to transition into a net-zero economy by 2050.
To align with the country’s climate targets, Germany launched a commission for just transitions in 2018. The goal of the commission was to ensure a just transition for industry workers while maintaining Germany’s CO2 emissions-reduction targets, and to set a final date for the complete phase out of coal.
Over seven months, the commission discussed how to transition away from coal while ensuring a just transition for the mining sector and for areas where coal power plants were located. The process involved expert hearings from a broad range of parties, including representatives from affected industry sectors, regions and employees.
A 278 page report was accepted almost unanimously at the end of the negotiation period, with support from all stakeholders and the political sphere. Three union organizations were at the table – The German Trade Union Confederation (DGB) and two stakeholder unions, The Industrial Workers’ Union for Mining, Energy and Chemistry (IGBCE) and the United Services Trade Union (ver. di).
The final outcome outlined timelines and measures to ensure that workers rights were not only respected but central to the phasing out and reshaping of the conventional power industry. Among other measures, it set a goal of complete coal phase-out by 2038 (with the option of 2035), to create as many good jobs as those that will be phased out, and the provision of structural aid of EUR 2 billion each year over the next 20 years.
The Taranaki region is located on the west coast of New Zealand’s North Island, fringing the Tasman Sea, and home to the volcano Mt. Taranaki. It is home to over 100,000 people. It is also the centre of the country’s oil and gas industry. In 2018, New Zealand announced that it would end any new licences for offshore exploration, jeopardizing jobs in the region – at the time, the Energy industry represented 28% of the region’s economic output.
The government also announced a Just Transition Unit to support the country’s transition to a low-emissions economy. Transitioning to a clean, green and carbon neutral New Zealand is a key outcome of the government’s strategy for a more productive, sustainable and inclusive economy, with the first area of focus being the Taranaki region.
Here the government set up a USD 17 million clean-energy centre, granting USD 12.7 million for research and development and directly employing 45 people. The transition aims to be as inclusive and participatory as possible, with the government committed to working directly with five central society pillars – workers, businesses, central government, local government and indigenous people.
During February to April 2019, a roadmap for 2050 was created through a large-scale, co-design process. In total, more than 700 people took part through 28 workshops, including a specialised youth workshop where 11 of the region’s high schools sent students. More than 360 people added their voices through online surveys.
This case study shows how participatory processes can lead to plans that include and account for local workers. The roadmap launched in May 2019 and was presented by consultants directly in over 40 locations. A programme of work is now being developed to decide on next steps (in the long- and short-term) and how to achieve the region’s low-emissions vision by 2050.
On 23 July, Prime Minister Jacinda Arend officially opened the new NZD 27 million energy centre, Ara Ake, in Taranaki. The move marked a huge step forward to implementing change in the region – Ara Ake will lead the development of new clean energy technologies, creating projects and employment in Taranaki and the country as a whole.
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