The Energy Transition and the Extractives Sector

6. A sustainable and just energy transition

The transition will not only have to be sustainable, it will also have to be just and fair especially for those who stand to lose most. A delicate balance between continuing the exploration and exploitation of natural resources and the development of renewable energies and energy efficiency will have to be achieved.  The UN Social Institute for Social Development highlights that the energy transition should not be about demonising declining sectors, but should instead treat both the fossil fuel and the emerging clean energy sectors as fundamental components of the political economy.

It will be important to avoid any economic and social disruptions resulting from the energy transition. It offers tangible opportunities for extractives resource exporting countries. However, fears of revenue and job losses may slow down the process. Many fossil fuel sector workers will need to find alternative sources of incomes and revenues. A just transition requires an effective social dialogue to explore and invest in new jobs, new industries, new skills, new investment and the opportunity to create a more equal and resilient economy. The International Labour Organisation underlines that:

“Managed well, transitions to environmentally and socially sustainable economies can become a strong driver of job creation, job upgrading, social justice and poverty eradication. Greening all enterprises and jobs by introducing more energy and resource efficient practices, avoiding pollution and managing natural resources sustainably leads to innovation, enhances resilience and generates savings which drive new investment and employment.”

ILO also predicts that the Paris Agreement will bring about 24 million new jobs! This provides a positive response to fears that a zero-carbon economy could produce not just ‘stranded assets’, but ‘stranded workers’ and ‘stranded communities’. There is significant awareness of the need for a just transition – implying that no one is left behind. The Grantham Institute has even named 2018 the year of the “just transition”!

Both governments and business are working to understand the implications of a just energy transition. Recently, the Scottish Government established a Just Transition Commission to ensure that the transition is technically and economically possible, and to consider how to leverage transition to deliver important social benefits and economic benefits, including improved local air quality leading to longer and healthier lives and the development of new industries and business models. Major businesses such as Enel and Unilever are working through what a just transition means for them.

The Investing in a Just Transition project  identifies 10 strategic dimensions of the just transition that could help frame the investor response.

Transparency and accountability in energy transitions

The role of accountability and transparency in energy and extractives sector has gained new momentum in the last decade, and has become more prominent, with increasing concerns over climate change, the depletion of conventional resources, energy poverty, economic competitiveness and competition in technology and innovation.

Mandatory and voluntary carbon reporting policies are becoming widespread. Many countries translated mandatory reporting of GHG reporting into legislation, including the UK, EU Member States, the US, Australia, Japan and South Africa. These reports are published in relevant GHG inventories that exists in many parts of the world.