The socio-economic hardship the global economy has experienced due to the Covid-19 pandemic over the past 18 months has been quite huge and of course devastating. The pandemic has brought in its wake massive job losses, supply chain disruptions, business collapse, revenue decline and disinvestments; aside the huge death toll.
The happenings has once more ignited the call for transitioning from a fossil-based economy to a green economy, with the admission that there can be no sustainable recovery from the pandemic’s widespread devastation by simply returning to economic activities in the pre-Covid sense. That should we maintain the business-as-usual posture, our economies may be vulnerable to similar economic collapse in the event of future unforeseen disruptions.
Before Covid struck, we had climate change issues, air and water pollution problems, and bio-diversity loss, just to name a few. Most of these challenges had to do with commercial activities such as manufacturing, transportation, power generation, and heating with inefficient and unsustainable resources. These named challenges and more, have been magnified by the global pandemic that struck in early 2020.
Covid-19 has offered us the opportunity to reboot the global economy in a more efficient and sustainable manner. As a result, many countries and regional blocks have come to appreciate the need for speedy up the energy transition, a concept that was mooted a decade ago.
Standard and Poor (S&P) Global describes the energy transition as 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, as well as lithium-ion batteries. The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all found by S&P Global as key drivers of the energy transition.
Discussions on the global energy transition started with talks focused on climate change issues. However, the debate have been widened along the way, to come to include the fact that the energy transition for billions of people around the world is the ability to provide energy access for all. The Sustainable Development Goal 7 (SDG-7) which considers access to affordable, sustainable and modern energy for all by 2030 has become so important to ensure that the energy transition supports not alone climate actions, but to also ensure that a just and equitable energy transition that leaves none behind and provides access to basic rights, is achieved.
Since 2015, growth in energy access has been slowed without much change. Latest data from the International Energy Agency (IEA) suggest that the world is not on track to achieve the target of universal access to energy by 2030, and risk missing the target by decades. Thankfully, the global pandemic have brought a painful reminder that energy access saves lives.
The International Renewable Energy Agency (IRENA) finds the energy transition as a pathway toward transformation of the global energy sector from fossil-based to zero-carbon by the second half of this century. The ultimate goal is to reduce energy-related carbon dioxide (CO2) emissions to limit climate change through increased uptake of renewables, energy efficiency and related energy-transition measures, which represent far-sighted investment amid the crisis set off by the global pandemic.
As part of short-term stimulus and recovery plans, the energy transition provides a crucial link to medium and long-term global climate and sustainability goals, according to IRENA.
In IRENA’s first “Global Renewables Outlook” a comprehensive long-term energy transformation strategy as provided, which include among other findings:
- Post-COVID recovery measures could drive a lasting shift in the global energy mix.
- Linking the short-term recovery to medium and long-term strategies is paramount to achieving the Sustainable Development Goals (SDGs) and the Paris Agreement on Climate Change.
- National and regional energy transitions can help to build resilient economies and societies.
- Energy transition investment can boost GDP and create jobs in the 2021-23 recovery phase.
- Green investment will be vital to mobilize upfront finance for the transition.
- Each million dollars invested in renewables or energy flexibility would create at least 25 jobs, while each million invested in efficiency would create about 10 jobs.
- Compared to current plans, an accelerated energy transition could add 5.5 million more jobs by 2023.
- Employment in all regions of the world, even where fossil-fuel jobs are now concentrated.
- Immediate investment increases could put renewable power generation on track to grow five times faster.
- Renewables, although affected along with the rest of the economy, appear more resilient than other parts of the energy sector.
Opportunities and Threats
From the International Renewable Energy Agency (IRENA) outline strategies, one could clearly find the major opportunities the energy transition presents as outlined by the International Labour Organization (ILO), which includes;
- Net gains in total employment from realizing the potential to create significant numbers of additional decent jobs through investments into environmentally sustainable production and consumption and management of natural resources.
- Improvements in job quality and incomes on a large scale from more productive processes, as well as greener products and services in sectors like agriculture, construction, and tourism.
- Improved access to affordable, environmentally sustainable energy and payments for environmental services, for instance, which are of particular relevance to women and residents in rural areas.
In spite of the massive opportunities presented by the energy transition, there are equally negative impacts accompanying the transition as found by the ILO, and which includes;
- Economic restructuring, resulting in the displacement of workers and possible job losses and job creation attributable to the greening of enterprises and workplaces.
- The need for enterprises, workplaces and communities to adapt to climate change to avoid loss of assets and livelihoods and involuntary migration; and
- Adverse effects on the incomes of poor households from higher energy and commodity prices.
Given the scale and urgency of these environmental and employment challenges, it is clear that the world will have neither the resources nor the time to tackle the opportunities and threats separately or consecutively.
A Just Transition
The experiences over the past one and a half year has clearly shown that the fight against climate change and the commitment to clean and inclusive energy transition have become clear guidelines for the global agenda, as many countries and regional blocks prioritize them in their agendas. The objective is to achieve the goals of the energy transition, while at the same time minimizing negative impacts. So the two- energy transition and just transition, must go hand in hand.
According to the International Institute for Sustainable Development (IISD), the energy transitions are about people: those who make the decisions and the ones affected by those decisions. A “just transition” approach ensures that the affected people are considered by those making decisions.
IISD asserts that the world has seen many transitions in the past, from automation to the decline or relocation of entire industries, leading to job losses and economic hardship. This to them has created a fear that future transitions will be similarly painful. Low-carbon energy transitions are already happening in many countries, often due to economic factors or health concerns, but also supported and accelerated by climate change policies. Nevertheless, the actors involved, including governments, businesses, workers, and communities have a tendency to protect the status quo and keep carbon-intensive industries alive.
The IISD is of the view that early action on a just transition can minimize the negative impacts and maximize positive opportunities. According to IISD, just transition is not a fixed set of rules, but a vision and a process based on dialogue and an agenda shared by workers, industry, and governments that need to be negotiated and implemented in their geographical, political, cultural, and social contexts, with a set of guiding principles.
The International Labour Organization (ILO) provides guidelines for a just transition towards environmentally sustainable economies and societies for all;
- Strong social consensus on the goal and pathways to sustainability is fundamental. Social dialogue has to be an integral part of the institutional framework for policy-making and implementation at all levels.
- Policies must respect, promote and realize fundamental principles and rights at work.
- Policies and programmes need to take into account the strong gender dimension of many environmental challenges and opportunities.
- Coherent policies across the economic, environmental, social, education/training and labour portfolios need to provide an enabling environment for enterprises, workers, investors and consumers to embrace and drive the transition towards the green economy.
- These coherent policies also need to provide a just transition framework for all to promote the creation of more decent jobs, including as appropriate: anticipating impacts on employment, adequate and sustainable social protection for job losses and displacement, skills development and social dialogue, including the effective exercise of the right to organize and bargain collectively.
- In implementing sustainable development strategies, it is important to foster international cooperation among countries.
Key policy areas and Institutional Arrangements
The ILO provides the following elements constitute a basic framework to address the challenges of a just transition for all:
(1) The greening of economies in the context of sustainable development and poverty eradication will require a country-specific mix of macroeconomic, industrial, sectoral and labour policies that create an enabling environment for sustainable enterprises to prosper and create decent work opportunities by mobilizing and directing public and private investment towards environmentally sustainable activities.
(2) As the challenge cuts across several domains, there is a need for mainstreaming sustainable development across all areas and for cooperation and coordination between employment authorities and their counterparts in various fields, including finance, planning, environment, energy, transport, health and economic and social development.
(3) Key policy areas to address environmental, economic and social sustainability simultaneously include macroeconomic and growth policies, industrial and sectoral policies, enterprise policies, skills development, occupational safety and health, social protection, active labour market policies, rights, social dialogue and tri-partism.
Written by Nana Amoasi VII, Institute for Energy Security ©2021
The 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.