By Nikki Griffiths, RMB
Climate change and growing inequality are two of the greatest challenges of our time.
The transition to a green economy has the potential to deliver a world that is not only low-carbon but one with increased opportunities for social inclusion and reduced inequality. As we enter a critical decade on the path to net zero, strategies to manage the change need to not only include plans to mitigate the effect of the transition but pathways on how to capture the opportunities for inclusive growth.
The United Nations defines a green economy as one which is low carbon, resource efficient and socially inclusive. The metrics for carbon reduction are well-defined and understood but just as important are the metrics and goals for the accompanying socio-economic changes that will take place. The socio-economic contexts in which the energy transition is taking place are vastly different. Developing countries are facing competing priorities of poverty, unemployment and inequality while navigating a rapid energy transition.
Increasingly there is a consensus that these are not competing priorities, but the change triggered by the climate crisis is an opportunity to build an economic model that is more inclusive. Research by the International Labour Organisation has shown that implementing the Paris Agreement on Climate Change can result in a net-gain of 18 million jobs by 2030. In addition, six million more jobs will be created through the circular economy. However, the way we get to Net Zero will matter and the importance of achieving a just transition to a low-carbon economy is increasing. The challenge is two-fold, managing the risks to people’s lives who will be fundamentally affected by the transition and reorientating societies to take advantage of the new opportunities that the change will bring.
A just transition is one where the benefits and the costs of the energy transition are equally distributed. The inclusion of a just transition element in the investment plan for the South African government’s Just Energy Transition Partnership signals an important step in placing people at the centre of the implementation phase of the global transition. The Just Energy Transition Investment Plan (JET IP), which was formally handed over to the International Partners Group (IPG) at COP27 on November 7, will require an estimated investment of R1.5 trillion for the first five years of the implementation phase. The IPG is the group of countries, the UK, US, Germany, France and the EU, who pledged $8.5 billion at COP26 to aid South Africa in its transition.
The speed and scale of the investments and changes required to meet the Paris Agreement targets will unlock new economic opportunities and ways of doing business. The International Energy Agency has estimated that clean energy investment will be US$1.4 trillion in 2022. In South Africa, the World Bank’s recent Country Climate and Development Report (CCDR), estimates that R2.4 trillion of investment is needed in the next decade to fund the transition towards a low-carbon economy. The Integrated Resource Plan 2019 (IRP), which is under review, shows the growth in renewables in South Africa over the next 10 years will be driven largely by increased investment in wind and solar power to meet the demand. The International Renewable Energy Agency (IRENA) notes that these investments have the potential to create over 30,000 jobs if certain barriers are addressed. To capture opportunities linked to these investments, climate finance and transition plans need to be aligned to social and economic initiatives which will support and thrive in a green economy.
New opportunities in a new society
We are entering an era of new jobs and new markets that will be required to not only transition our economies but manage a low-carbon environment. Recently The LinkedIn Global Green Skills Report 2022 highlighted that global demand for jobs requiring green skills and which cover a range of sectors is starting to outstrip supply. The report maps the fastest growing green jobs based on the job listings on the LinkedIn platform. These jobs include wind turbine technicians, farm managers, environmental health safety specialists, regulatory affairs consultants, and sustainability managers.
IRENA has predicted that the energy transition will see 25 million new green jobs created globally by 2030. Expertise will be required however not only in the energy sector, but in all industries from transport, agriculture, manufacturing, and construction to develop new ways of operating which allow adaption to the energy transition and reduce environmental harm. Data scientists, verification agencies and impact evaluators are needed to verify and validate the environmental and social impacts of businesses and projects to ensure that it is a transition that is authentic, and evidence based. The emergence of new green jobs, increased investment in rural areas through renewable energy, improved environments and the prioritization of more sustainable livelihoods are positive developments, if managed well, which can enhance social inclusion and reduce inequality. Addressing the climate crisis offers not only the opportunity to mitigate the risks of climate change but to take advantage of a new economic model which prioritises sustainable development.
The development of new markets to support the green economy will stimulate innovation and generate new revenue sources. The evolving carbon market represents a significant opportunity if it can increase stable income streams for local communities, individuals, and environmental projects. Strategies to include small, medium and micro enterprises (SMMEs) in the evolution of a green economy are important, as in developing economies SMMEs are a source of employment, innovation, and revenue. Jobs which will promote the inclusion of marginalised people need to be identified and pathways into these jobs need to be developed and funded. It is fundamental if the just transition is to be achieved.
The ability of countries to manage and plan for the change will be key to attracting and retaining investment required for growth. Countries that can adapt quickly and provide clear roadmaps to an energy transition will become increasingly attractive to investors.
Finally, the introduction of carbon taxes for both local producers and imports could increase the fiscal revenue available for developmental priorities in developing countries, like access to quality education and the eradication of poverty.
The COVID-19 pandemic was a stark reminder of the interconnectedness of the respective sectors of our societies. To achieve the promise of a green and more inclusive economy, there is a need for a collaborative approach. Multi-sector collaboration and platforms which encourage contributions from all sectors of society will be an essential feature of the transition.
The realisation of the opportunities for growth will require effective policies, strong institutions, and a common vision of what a prosperous, inclusive and sustainable society is. Green and social priorities cannot be seen as competing priorities but as inextricably linked. The delivery of a low-carbon, energy efficient society which continues to be characterised by structural inequality will be a failed transition and one of the lost opportunities of our time.