Just Transition Planning Toolbox

Labor market disruption is an inevitable part of any economic transition. Transitions will create new jobs, eliminate some, and transform others. In the energy sector, for example, many jobs in fossil fuel production and related sectors (such as manufacturing conventional automobiles) are likely to become redundant. The growth in renewable energy and energy efficiency will create many new direct and indirect jobs, including for occupations such as plumbers, electricians, and carpenters. They will have opportunities to shift their skills and businesses toward these emerging sectors.

To plan a just transition, you should understand how a transition might affect workers, and how different transition strategies can impact employment outcomes.

Consider performing the following types of analysis:

• An employment impact assessment.

  In the context of the closure or phasing down of a company or industry, use this to help anticipate job losses and related outcomes, such as changes in the quality of employment.

• A green jobs analysis.

  Use this to help identify emerging employment opportunities, in line with proposed economic diversification strategies, for example.

• Broader labor market analyses and labor mobility analyses.

  Use this to help identify job supply or education gaps; monitor the changing character of employment conditions; and understand the mobility of workers in different regions and sectors.

The assessment of impacts and opportunities should include the outcomes for direct, indirect, and induced employment (categories defined by the International Labor Organization [ILO]).

Low-carbon and climate resilience transitions can create a range of social impacts that go beyond changes in employment.

Those can impact individuals and households in terms of financial security and livelihoods, personal or property rights, the safety of household members (for instance, if it leads to a greater risk of domestic violence), or mental health and well-being. New practices that are introduced as part of the transition, such as wider conservation of forests, might impact households’ access to natural resources that they rely on for food, fuel, or medicine. Some stakeholders may even be forced to relocate.

At the community level, a transition could create conflicts that disrupt social cohesion. It also may have demographic impacts, for example, if significant job losses trigger migration flows from a region.

For these reasons, social impact assessment is an important element of just transition planning.

While there is much evidence to suggest that, overall, the transition to a low-carbon economy will be net positive for the economy, the distribution of these benefits – and the economic costs of transition – will not be evenly spread locally or nationally.

Economic impacts include aggregated effects on different variables: gross domestic product (GDP), employment, production, consumption, and household income (wages). These effects differ at the national versus regional and local scale, or public versus private income and expenditure.

An analysis of economic impacts needs to cover a broad spectrum of effects. It should also recognize that economic effects may stretch farther than the areas undergoing a transition.

Local Level

At a local level, reduced employment and declining income can lead to reduced spending in the local economy. This in turn impacts small businesses in the retail and service sectors in the region.

Small firms tied in with local production may experience significant business losses for which they are unprepared. Municipal public revenue might decline, impacting local governments’ service delivery and ability to invest in new infrastructure, for example, which may be needed to support economic diversification.

National Level

At the national level, a transition might lower production in economically important sectors or in foreign export earnings that have contributed significantly through taxes and royalties. The loss of these revenues could affect a government’s fiscal position and ability to fund social programs and municipal governments, or its ability to borrow.

Diversification

Transition planning requires analysis of potential opportunities for economic diversification or scaling up other sectors, or both. This is particularly important in regions most affected by the closure or phasing down of an industry.

Smart specialization and asset repurposing assessments can be used to explore new economic activities.

In some contexts, past environmental degradation can undermine the equity of a transition. This legacy could include lingering land or water pollution that poses health risks to local communities; the loss of productive land that cannot be used for local economic activities; or the creation of dangerous areas (like mining voids) if they are not secured and well maintained.

Land repurposing can be an important strategic element of planning for regional economic transition, since land is an asset for redevelopment and can also be used as collateral to raise finance. The potential to repurpose land and assets links closely with other transition objectives, including the creation of jobs and new economic activities.

The types of environmental problems – and the options available to address them –vary depending on the topographic, hydrographic, geological, geotechnical, environmental, and socioeconomic context. The same is true of the potential for repurposing rehabilitated sites.

The “polluter pays” principle is an important element of any just transition. This means that those who are responsible for, or have benefited from, environmental degradation should bear the costs of remediation to the greatest extent possible (see Module 5.2).

You can use both qualitative and quantitative methodologies to inform transition planning; often the methods are complementary.

• Qualitative methodologies use data from sources such as interviews, group discussions, literature reviews, and surveys.
• Quantitative methods often use input-output models, computerized general equilibrium (CGE) models, macroeconomic models, or integrated assessment models.

General methodologies for analysis include the following:

• Multi-criteria analysis (MCA)

  This method usually combines various types of impacts (costs or benefits) from a policy or project into a single, systematic assessment framework. It tends not to rely solely on monetary valuations. Instead, the assessment of impacts often combines some criteria that are valued in monetary terms and others that may be quantified, but not so easily valued in monetary terms. It may incorporate the results from cost-benefit analysis or other financial-based analysis.

• Various types of financial and economic cost-benefit analysis

  These methods help to compare the financial or economic costs and benefits of a proposed project or reform.

  • Simple cost-benefit analysis approaches identify and quantify all the expected costs and benefits of a project or reform, and then compare total costs with total benefits over a given period. They can help to clarify the “business case” in financial terms and provide a financial comparison between different projects or programs.
  • Assessments of net present values (applying discount rates to future benefits) and internal rates of return (to identify the break-even point) help assess the financial merits of more complex or expensive projects or reforms.
  • Cost-effectiveness analysis and economic cost-benefit analysis (like accounting for CO2 emissions and local air pollutant savings via shadow prices) are other approaches to support decision-making.

  Sometimes, methods for comparing costs and benefits have limited reliability by themselves, as it is difficult to accurately estimate revenue (or benefits). That is especially true for benefits that are intangible or not monetized (like access to nature), which are subjective and can be perceived very differently by different stakeholders.

• Distributional analysis

  A distributional analysis is used to calculate how the various costs and benefits of reforms can be distributed across different segments of the population – which is essential to understand as part of just transition planning. It assesses how impacts can vary for different people or groups depending on gender, age, income level, disability, geographic location, size of business, and cultural background, including indigeneity.