Asian Development Bank aims to counter risk of just energy transitions

In the year since high-income nations agreed to pay South Africa to wean itself off coal power, worldwide interest in the concept of just energy transitions has soared. At the 26th United Nations Climate Change Conference, COP 26, in Glasgow last year, Group of Seven donors pledged $8.5 billion to help South Africa transition from coal to renewable energy while also creating new jobs. Although the scheme has encountered a number of hurdles, at this year's COP 27 in Egypt, South Africa signed two major loan agreements to implement the plan. While South Africa has received much of the attention, the Asia-Pacific region is where the Just Energy Transition Partnership, or JETP, model will evolve further, with a $20 billion agreement announced on Tuesday for Indonesia — a potentially even more challenging prospect, as the country’s coal-fired power plants have many more years on them. More JETPs, to be funded by donors and multilateral development banks, are being discussed for India and Vietnam but no agreements have been made. The Asia-Pacific is both vulnerable to climate change and produces more than half of the world’s greenhouse gas emissions. While anti-poverty efforts in the region have made great strides, up to 80 million people were pushed into extreme poverty by the COVID-19 pandemic, on top of the roughly 200 million people already living in extreme poverty in the region. Devex spoke with Kate Hughes, senior climate change specialist at the Asian Development Bank, on the sidelines of COP 27 in Egypt to discuss the multilateral lender’s approach to just energy transitions. Hughes said there are inherent risks in embracing such a fundamental societal change, but there are opportunities as well. “The social fabric and local politics of towns and communities is often closely built around this sense of identity. Taking this away can change the dynamics in communities ...” --— Kate Hughes, senior climate change specialist, Asian Development Bank And those opportunities are as broad as potentially reshaping an entire country, according to Hughes. “We know economies need to change and diversify what type of economic sectors can countries go into, what type of future jobs do they want, how to build the right skills, prepare education systems to align with those skills with new economic opportunities,” said Hughes. “Where do they actually want to see their country?” But just transitions are not straightforward. South Africa’s JETP has been plagued by challenges, and it was unclear if the country would present an investment plan in time for COP 27. Hughes warned the process was also riddled with “politically difficult” risk. “Financing and technology are always issues [with just transitions] but the actual socio-economic issues are the ones that are the really challenging ones to address,” said Hughes. The prospect of losing jobs associated with fossil fuel industries is the most well-known, and “definitely a core part” of the risk, said Hughes. But there are other dangers, which are harder to quantify, including “social risks” like the “loss of identity” among communities where work in the fossil fuel industry has long been a way of life. “The social fabric and local politics of towns and communities is often closely built around this sense of identity. Taking this away can change the dynamics in communities, leading to lost confidence and changes in how people perceive themselves,” said Hughes. Social risks associated with job losses and employment changes include mental health issues, increases in gender-based violence, and the disruption of family dynamics, like child care arrangements if new jobs are further away from home, according to Hughes. Local economies that have developed around polluting industries to support the fossil fuel industry, like the companies that transport and feed workers, are also affected. But there are also macro risks, such as the potential loss of fossil fuel-related revenue, which could be compounded if the energy transition also increases the need for social spending to support newly unemployed people. “But the scale of that will depend upon the country and the sector and the circumstance and the speed they are closing these industries,” Hughes said. In South Africa, the need for cash transfers to support miners was greater than expected, said Hughes, and getting political support for the transition was also challenging — though eventually successful. The Asian Development Bank is aiming to support governments to minimize those risks with its Just Transition Support Platform, which launched at COP 27 and will provide technical support to an initial seven countries: Fiji, Kazakhstan, Indonesia, India, Pakistan, Philippines, and Vietnam. “Often there’s a perception of risk … but no sense of scale,” said Hughes. One of the tasks of the platform will be to conduct analysis prior to implementation “to put numbers and thinking into what the scale is, what the timing of impacts might be, where in the country they might occur, how they’re going to be different in different parts of the country.” While the transition will ultimately be the government’s job, Hughes said ADB can help with “mobilizing other types of support” like lending in education and health as well as social safety net reforms. Government coordination could also be a problem. ADB consultations found “there will be a lot of good programs ongoing but they are not necessarily connected to the transition agenda,” said Hughes. For example, a ministry of energy might run a program supporting renewable energy skills but might not be coordinating with the ministry in charge of the transition agenda. While just energy transitions have achieved “conceptual buy-in,” Hughes said there is still limited understanding of what it actually means to practically implement them. She said it was important to ensure they don’t “become an agenda to cover every development issue that countries are facing. Not to say those issues shouldn’t be dealt with, but we’re going to have to put some boundaries around … discussion or nothing will ever be achieved. I see that as a risk — some of the issues people bring into the discussion are part of a just development but not necessarily part of a just [energy] transition.”