Fossil Fuel Industry Phase-Out and Just Transition: Designing Policies to Protect Workers’ Living Standards

ABSTRACT

This paper focuses on transition policies targeted at supporting workers now employed in the fossil fuel industries and ancillary sectors within high-income economies. As a general normative principle, I argue that the overarching aim of such policies should be to protect workers against major losses in their living standards resulting through the fossil fuel industry phase-out. The impacted workers should be provided with guarantees to accomplish this, in the areas of jobs, compensation and pensions. Just transition policies should also include job search, retraining and relocation programs, but these forms of support should be recognized as supplementary. The overall set of just transition policies is fully aligned with the Energy Justice and Capabilities Approach as well as the UN's Sustainable Development Goals. Within this framework, the paper first reviews experiences with transitional policies in Germany, the UK, the EU and, more briefly, Japan and Canada. The policies either implemented or discussed in these cases do not provide the needed guarantees. The paper then presents an illustrative robust just transition program for the heavily fossil fuel-dependent U.S. state of West Virginia. This program will cost, as an annual average, about $42,000 per impacted worker, or about 0.2 percent of West Virginia's current GDP. I briefly summarize results for seven other U.S. states and for the overall U.S. economy. For the U.S. economy overall, the just transition program's costs would total to about 0.015 percent of GDP. These findings demonstrate the financial viability of robust just transition programs for high-income economies.

KEYWORDS:

• Fossil
• fuel
• phase out
• workers
• transition

JEL CLASSIFICATIONS:

• J88
• Q54

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 This estimate is derived in Pollin (2020).

2 I discuss community and regional industrial transition policies in Pollin, Wicks-Lim, and Chakraborty (2020), among other studies.

3 Green and Gambhir (2020) and Abram et al. (2022) provide extensive discussions of what should constitute the aims of just transition policies. As their overarching perspective, Abram et al. write “The transition to net-zero will be neither sustainable nor credible if it creates or worsens social inequalities; a backlash is likely if the transition is not perceived to be just.”

4 United Nations Department of Economic and Social Affairs (2023), https://sdgs.un.org/goals.

5 Unless otherwise noted, the discussion on Germany draws from Furnaro et al. (2021), Oei, Brauers, and Herpich (2020), and Kretschmann, Efromenkov, and Kooreshok (2017).

6 The general descriptions in this paragraph is based on Galgóczi (2014) and Dohmen and Schmid (2011).

7 See, for example, Chow (2017).

8 Unless otherwise noted, the discussion on the UK draws from Rising et al. (2021).

9 https://climateactiontracker.org/countries/japan/.

10 https://climateactiontracker.org/countries/canada/.

11 https://www.rncanengagenrcan.ca/sites/default/files/pictures/home/just_transition_discussion_paper_-_en_-_july_15.pdf.

12 https://www.iisd.org/events/canadas-just-transition-legislation-time-now.

13 World Resources Institute (2021). https://www.wri.org/update/european-unions-just-transition-mechanism-transnational-funding-and-support-just-transition; https://www.bruegel.org/policy-brief/how-good-european-commissions-just-transition-fund-proposal.

14 According to data published by the U.S. Labor Department, 20 percent of 65+ year-olds remain in the workforce. See: https://www.bls.gov/cps/cpsaat03.htm.

15 See more detailed discussions on these pension fund policies in, for example, Pollin and Callaci (2019).

16 https://www.univstats.com/community-colleges/?state=WV

17 According to the 2020 article in Moneyzine “Job Relocation Expenses”, these expenses for an average family range between $25,000 and $75,000 (https://www.money-zine.com/career-development/finding-a-job/job-relocation-expenses/). The costs include: selling and buying a home, including closing costs; moving furniture and other personal belongings; and renting a temporary home or apartment while house-hunting for a more permanent residence. For our calculations, we assume the upper-end figure of $75,000.

Additional information

Notes on contributors

Robert Pollin

Robert Pollin is Distinguished University Professor of Economics and Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst. His books include Back to Full Employment (2012), Greening the Global Economy (2015), and Climate Crisis and the Global Green New Deal: The Political Economy of Saving the Planet (co-authored 2020). He has worked as a consultant for the U.S. Department of Energy, the International Labour Organization, the United Nations Industrial Development Organization and numerous non-governmental organisations in several countries and in U.S. states and municipalities on various aspects of building high-employment green economies. Between 2011 and 2016, he was a member of the Scientific Advisory Committee of the European Commission project on Financialization, Economy, Society, and Sustainable Development (FESSUD). He was selected by Foreign Policy magazine as one of the “100 Leading Global Thinkers for 2013”.