The term, “Just Transition,” was originally coined by labour unions looking to incorporate social dialogue and rights in the workplace and to help counter the idea of decent work and environmental protection being at odds (the “jobs versus environment” dichotomy). Internationally, this concept was affirmed at the 2015 Paris Agreement and gained further momentum at the 26th Conference of the Parties Climate meeting (COP26) in 2022.
The hope of a “Just Transition” approach is that the transition to a low-carbon economy will be more positive than those of the past.
The Risks of an “Unjust” Transition
Achieving a low-carbon economy will require economic, industrial, and technological shifts – shifts that a majority of society has yet to ever experience. Such large-scale shifts will require intensive system-wide change, with the largest burden disproportionately placed on Indigenous peoples and frontline communities.
Globally, governments have been looking to securitise key industries needed for the low-carbon transition which could lead to the exacerbation of negative social externalities. Additionally, transitioning out of high carbon industries could lead to economic and workforce instability – with concern for workers and communities on job transferability and community impact . With that in mind, it is evident that the private and public sector will need to collaborate to encourage the transition towards “sustainable” jobs and economy.
The Global Just Transition
As is most likely evident, the Just Transition will differ depending on several factors including, but not limited to, an organization’s size, demographics, strategy/business, and location. Embarking on a “Just Transition” will require the reconciliation of several complex challenges, including job security, rising energy costs and security issues, financing the transition, the impact on Indigenous communities, and equal access to clean energy .
How are North American government/regulatory stakeholders supporting the “Just Transition”?
In Canada, rulemaking around the Just Transition has taken a top-down approach, starting at the federal level, and cascading down to the provinces. Over the past few years, the Federal Government has put forth several regulatory measures to enable a Just Transition, including the release of The Just Transition Act (2021) – strengthening their pledge to transition to a clean and inclusive economy. As Canada has committed to achieving net-zero greenhouse gas (GHG) emissions by 2050, a key piece of the puzzle will be winding down fossil fuel-related projects in a way that considers potential economic impacts. Additionally, Minister Jonathan Wilkinson is progressing with the introduction of “Just Transition” legislation – one of the major mandates meant to be achieved in 2023.
United States of America:
In contrast, the United States has followed a more fragmented approach, with many of the policies and programs originating at the state/regional levels.
Various states within the nation’s largest coal-producing and consuming regions have introduced laws—all within the past 5 years—around the Just Transition to support workers and revitalize local economies. In Colorado, for example, the State’s General Assembly passed a bipartisan House Bill in 2019 that framed the Just Transition as a moral imperative and established a plan for how it will help workers transition to new, green jobs, and to channel investments into coal communities. A handful of other US states have since also followed suit, passing similar laws, and initiating state-level plans for a Just Transition.
In contrast, the US Federal Government has been slower in acting on the Just Transition. In 2021, a Just Transition for Energy Communities Act was introduced by democratic Representatives in Congress but did not receive a vote. The Act aimed to establish a federal program to provide payments to States and Tribes to support transition and economic development efforts. Since then, no further Just Transition bills have been introduced at the federal level.
How Companies and Investors Can Aide the Just Transition
As public transition policy gradually accelerates at the national level, at the corporate level, there is growing expectation for companies to account for, and address, the impact that their climate transition has and will have on their workforce and communities. Companies that fail to do so risk “not only stranded assets but also stranded workers and communities, along with the loss of their social license to operate” . This risk impacts not only individual companies but investment portfolios as well.
As a result, as we move further into the global net zero transition, investors are increasingly expecting companies to disclose and act on their transition impacts (e.g., through reskilling and retraining workers) and to institute policies and governance mechanisms to underpin this process. Although efforts to categorize company progress on the Just Transition remain nascent, Climate Engagement Canada and Climate Action 100+ have both recently updated their respective Net Zero Benchmarks to include new and detailed criteria around this issue.
Supporting a Just Transition is increasingly both a business and moral imperative. Greening the economy must occur in a way that is both fair and inclusive to ensure that no one is left behind. More public policy is needed to support communities and corporations in addressing the transition impacts and to help companies to define medium- and longer-term transition priorities.