Who pays for our new ways? The cost and casualties of the energy transition

As the energy transition advances and our reliance on renewables grows ever more urgent, there is increasing awareness that the industries on the way out are taking livelihoods with them. Such industries, like coal mining and legacy energy fuels, however, are being considered in the EU's recent implementation of the "Just Transition", a movement that seeks to recognise those that have fallen casualty to the necessity of the decarbonisation process. Major energy companies are seemingly adopting the cause, pledging to take positive action where they can. There is a question, however, as to whether the public or private sector has a greater responsibility to implement a Just Transition

Taking the UK as an example, the country plans to have closed the last eight remaining mines by 2024, a year earlier than previously planned. The government confirmed in 2017 that it would regulate the closure of all the UK's coal power plants by October 2025, and in February 2020 Prime Minister Boris Johnson announced plans to advance the deadline to 2024. Once a thriving British trade, coal mining quickly collapsed after 1972 and had practically disappeared by the 21st century. While these closures were driven by the discovery of energy alternatives like oil and gas, as well as broader economic restructuring, many once-thriving communities were dismantled by the closures. Decades of poverty ensued, a shift that exacerbated a class divide and bred resentment as those affected watched the south of the country, primarily London, become a hub of economic prosperity and employment. The Just Transition poses an opportunity to rescue communities experiencing similar displacement at the hands of today's changes, offering an alternative industry unavailable to those gone before.

Just Transition Fund

Across the channel, the European mining industry has experienced similar decline. In 2018, the metals and minerals mining sector employed over 200,000 people, a drastic decrease compared with 7 million in 2012. In western Europe, about 182,000 jobs in coal-mining were lost between 1988 and 1993, a reduction in employment by 40%.

The European Council officially launched the €17.5 billion (£14.8bn US$20.5bn) Just Transition fund in June, one of three branches of the Just Transition Mechanism striving to make the green transition "fair and inclusive". At the time of the launch, executive vice-president of the European Commission Frans Timmermans announced that, "We must show solidarity with the most affected regions in Europe, such as coal mining regions and others."

The €17.5 billion (£14.8bn US$20.5bn) fund comprises €7.5 billion (£6.3bn US$8.8bn) for budgetary commitment between 2021-2027 and €10 billion (£8.4bn US$11.7bn) from the recovery instrument (Next Generation EU), available between 2021-2023. Part of the fund will be allocated towards helping people adapt to new employment opportunities in the sector; implementing the training and retraining of workers and job seekers, job-search assistance and measures for social inclusion.

The overall mechanism is aiming to mobilise at least €150 billion (£127.1bn US$176.2bn) between 2021-2027 in the most affected regions to alleviate the socio-economic impact of the transition.

Spreading the cost  

The EU's Fit for 55 package is another instance of governmental action, seeking to reduce net greenhouse gas emissions by at least 55% by 2030, while implementing a "socially fair transition". Launched on 14 July, the design of the policies attempt to "fairly" spread the cost of tackling climate change by alleviating pressure on vulnerable households, micro-enterprises and transport users. For example, to reduce energy usage, the public sector will renovate 3% of its buildings each year to drive the "renovation wave", which in theory will create jobs, bring down energy usage and reduce costs to the taxpayer. In this instance, the public sector is attempting to alleviate the financial implications of the energy transition, recognising the expense of all the necessary changes.

Within the package, a new Social Climate Fund was also proposed to help citizens finance investments in energy efficiency, new heating and cooling systems and cleaner mobility. Financed by the EU budget, the fund would provide €72.2 billion (£61.1bn US$84.8bn) to member states, for the period 2025-2032. With a proposal to draw on matching member state funding, the fund would also mobilise €144.4 billion (£122.3bn US$169.6bn) for a socially fair transition. Through this fund, the EU is being careful that the pace of change is sufficient, but not overly disruptive. This is demonstrated in the new requirement for all member states to expand EV charging capacity in line with zero-emission car sales, considering that all new cars registered as of 2035 will be zero-emission. To ensure that drivers are able to charge or fuel their vehicles at a reliable network across Europe, the revised Alternative Fuels Infrastructure Regulation will enforce the installation of charging and fuelling points at regular intervals on major highways, reducing inconvenience for drivers.

Collaboration between public and private sector

In practise, Spain has been quite active in the space, recently allocating 1.3GW of renewables projects in Aragon to replace a redundant coal-fired power station. First announced in May, Spain's Ministry for the Ecological Transition and the Demographic Challenge (MITECO) is currently requesting public tender offers to create a solar PV plant at the 400kV Mudejar connection point in the north-east of Spain, the former site of the Andorra-Teuler power plant. The Mudejar area became vacant in June 2020 after the plant's closure and has since been designated a "node of the fair transition". Crucially, this scheme is expected to be the first in a series of tenders, held in areas at risk from job losses and depopulation due to the closure of coal-fired power plants. In 2000, 1.015 million people were employed at the Teruel mining basin in Aragon, falling to just 260 workers when it was still open in 2017. By way of considering locals, potential developers will need to meet a range of socioeconomic criteria to be awarded the grid connection. This includes having a job creation plan for surplus employees, strike agreements with local businesses, all while presenting a mature project with visible investment.

Beyond Aragon, the private sector has expressed much verbal enthusiasm for the cause. Spanish energy company Iberdrola claims to be working with governments to support the transition, having closed all its coal and oil plants globally over the last two decades. The developer believes that the EU Fit for 55 package could be the catalyst to unlock major investment and employment opportunities across the continent. However, while the company has spoken in support of the Just Transition, concrete action is more ambiguous. The company claims to be investing billions in new clean energy and smarter networks, which will indirectly generate "hundreds of thousands of jobs". In detail, Iberdrola is looking to invest €75 billion (£63.5bn US$87.9bn) until 2025, and €150 billion (£127bn US$175.9bn) by 2030. With this injection of capital, Iberdrola expects to reach a global capacity of almost 100GW of renewables in operation by 2030 (currently 35GW). While much of Iberdrola's investment aligns with the energy transition, the extent to which will be 'just' is yet to be seen.

"Everyone has a role to play"

The public sector has -in theory- a greater direct duty to serve society, but it is apparent that private sector initiative is necessary to minimise unemployment. In Canada, the government is supporting a pilot project by graphite mining company Nouveau Monde to build the world's first all-electric open pit mine. In April, the company announced that its pending Matawinie mine is expected to emit 82% less direct greenhouse gas emissions than a conventional mine. The company is working with engineering firm Caterpillar to develop, test and deploy an all-electric, zero-emission fleet. If actualised, this will aid Nouveau Monde's mission to produce the greenest advanced graphite materials with a carbon-neutral footprint for a sustainable world. 

Not only is this project aiding the energy transition by diversifying a polluting industry, the Matawinie mine is an example of how local economies could be rejuvenated, rather than left behind, in this global shift. Nouveau Monde's new mine is expected to generate approximately 150-175 jobs in an area which has been seriously impacted by down-cycles in the wood industry. Expected to cost Ca$276 million (£158m €186m US$219m), the project is being supported by the Quebec and Canadian governments through loans, grants, and financing through Investissement Québec.

On a larger scale, the electrification of Nouveau Monde's mine signals a lifeline for the entire industry. Not only is the diversification of mines crucial for those employed, but to the success of our transition. The mining industry is instrumental in the manufacturing of wind, solar, electric vehicles, storage and transmission systems. Arne H Frandsen, chairman of Nouveau Monde, believes that the Matawinie mine will supply the continent with the critical anode materials required for the batteries needed for the global electrification of mobility.

Therefore, it would appear that partnership between the private and public sectors to implement new projects in areas with redundant industries, is paramount to a fair transition. Nouveau Monde's reputation will undoubtedly benefit from this new tactic but regardless of whether the private sector is diversifying for its own gain, buy-in is crucial for the success of the transition. Both private companies, Iberdrola and Nouveau Monde, echo the sentiment that "everyone has a role to play to ensure no one is left behind." Whether both sectors will fulfil their parts is not yet certain, but a truly transformative performance is required, rather than a continuation of the play acting hitherto seen.