Green stimulus, jobs and the post-pandemic green recovery

This blog was first published on VoxEU & CEPR

Many governments worldwide are currently considering fiscal recovery packages to address the Covid-19 crisis. This column analyses the impact of past green fiscal stimulus on employment. Focusing on the American Recovery and Reinvestment Act after the Global Crisis, it finds that that the green stimulus was particularly effective in creating jobs in the long run, but not in the short run. Hence, while green stimulus packages are useful to reorient the economy and direct it onto a green trajectory in the longer run, they are less effective in restarting the economy quickly.

The many proposals for the COVID-19 recovery also include calls for green stimulus packages. Such packages are thought to both restart the economy as well as help it transition to a cleaner, more sustainable path (e.g. Helm 2020, Agrawala et al. 2020). Lockdown policies have had adverse impacts on labour markets and economic growth (Bick and Blandin 2020) and governments may be tempted to use green fiscal packages to stimulate short-run activity and create jobs, while at the same time preserving environmental goals. Green stimulus packages, just as the ones implemented during the 2008 Global Crisis, typically include government spending on building retrofits, green infrastructure programs as well as large-scale support for clean R&D. We summarize recent evidence on the impact of the 2008 American Recovery and Reinvestment Act (ARRA) green fiscal stimulus and discuss policy implications for a post-pandemic green recovery.

No evidence for short-term employment gains

How effective is a green stimulus at jumpstarting the economy? In a recent study (Popp et al. 2020), we conduct an ex-post evaluation of the employment impact of the green stimulus under the ARRA implemented during the Global Crisis. Green investments, which constituted approximately 17% of all direct government spending in ARRA, included spending on renewable energy, public transport and clean vehicles, energy efficiency, building retrofitting, and modernizing the electric grid (Aldy 2013). We analyse how local US labour markets benefited from green and non-green ARRA funding and carefully address endogeneity issues that may arise in the distribution of spending.

Figure 1 illustrates the main finding of the impact of green ARRA investments on total employment. While green ARRA investments had a large positive effect on job creation, there is little evidence of significant employment gains in the short-run.  Instead, nearly all the jobs created were created in the long-run during the post ARRA 2013-2017 period. The employment effect during this period amounts to approximately 15 jobs created per $1 million of green ARRA spending. These results suggest that the green ARRA worked more slowly than other stimulus programs, such as construction and highway infrastructure, which had significant effects on short-run job creation (e.g. Wilson 2012, Garin 2019). Hence, green stimulus investments may be less suited as a tool for an immediate restart of the economy.

Reshaping the economy in the long-run

Rather than boosting overall economic activity in the short-run, green ARRA investments were more successful at reshaping the economy towards green sectors by increasing the local demand for green skills. We find that the ARRA green stimulus appeared to be most effective in communities which had workers who already possessed the skills required for green jobs. These skills are mostly technical and engineering skills needed to operate, maintain and develop green technologies (Vona et al. 2018). We find that in such communities, ARRA created jobs in both the short- and the long-run, where nearly all of the new jobs were manual labour positions.

Implications for policymakers

For policymakers in countries committed to reducing emissions, these results imply that green investments may be particularly effective at reorienting the economy and directing it onto a green path during the post-pandemic recovery. The key challenge is a careful selection of the types of technological and infrastructure investments that can bring both job creation and environmental benefits in the medium to long-run. For instance, investments in green R&D are not a useful policy tool to boost job growth immediately, but transport electrification, recycling equipment and power sector infrastructures may have a faster while still only middle-term impact.

For policymakers in countries not yet on a green path, the role of green investments for reshaping the economy must not be ignored either. While the focus of a first round of stimulus spending will be on investments best able to restart each country’s economy quickly, subsequent investment rounds can be used as an opportunity to invest in resilient infrastructure. It would not make sense to massively invest in dirty assets, which run the risk of becoming ‘stranded’ due to technological, market or policy changes (van der Ploeg 2016). The Covid-19 crisis may trigger long-term structural transformations in the economy that are largely unpredictable now. For instance, demand for fossil fuels might fall as business travellers realize the potential of replacing face-to-face gatherings with video conferencing.  This implies that creating a ‘just transition’ fund to retrain workers for the green economy should remain a high priority in an ambitious green Covid-19 stimulus package. Bringing workers back to jobs in industries soon to become obsolete is not a good long-term investment. 

Aligning incentives with complementary carbon pricing measures

Green stimulus programs may have larger environmental benefits when complemented with carbon pricing policies, such as carbon taxes or cap-and-trade systems. Agrawal et al. (2020) summarize the concerns over the environmental effects of past green stimulus packages and highlight that ambitious carbon pricing policies were a missing ingredient of the US green ARRA package. Carbon pricing mechanisms create demand for new clean technologies, such as electric vehicles powered in part by a charging infrastructure developed using green stimulus funds. Strong carbon pricing signals also help mitigate the rebound effects of energy-efficient investments. In other words, accompanying green stimulus packages with carbon pricing can contribute to a better alignment of incentives for a post-pandemic green recovery.

Just as carbon pricing can enhance green stimulus investments, a green stimulus will enhance the prospects of carbon pricing.  While the net effect of carbon pricing on employment may be small (Yamzaki 2017, Metcalf and Stock 2020), new studies suggest that carbon pricing may reduce jobs in specific sectors, particularly for lower skilled manual labour (Marin and Vona 2019, Yip 2019).  The good news is that jobs created by green investments often employ workers who are left behind by carbon pricing. Moreover, carbon pricing schemes generate revenues for governments which help finance recovery plans with minimal distortions to the economy as a whole (Benassy-Quéré and Weder di Mauro 2020). Part of these revenues can also be returned to households as direct lump-sum transfers, which can help mitigate the impact of the economic crisis, especially for low-income households (Goulder et al. 2019).

Written by David Popp, Francesco Vona and Joëlle Noailly 

You can read the original blog here.

References

Agrawala, S, D Dussaux and N Monti (2020), “What policies for greening the crisis response and economic recovery?: Lessons learned from past green stimulus measures and implications for the COVID-19 crisis”, OECD Environment Working Papers No. 164.

Aldy, J E (2013), “Policy Monitor: A Preliminary Assessment of the American Recovery and Reinvestment Act’s Clean Energy Package”, Review of Environmental Economics and Policy 7(1): 136-155.

Benassy-Quéré, A, and B Weder di Mauro (2020), “Europe in the time of Covid-19: A new crash test and a new opportunity”, VoxEU.org, 26 May.

Bick, A and A Blandin (2020), “Real-time labour market estimates during the 2020 coronavirus outbreak”, VoxEU.org, 6 May.

Garin, A (2019), “Putting America to work, where? Evidence on the effectiveness of infrastructure construction as a locally targeted employment policy”, Journal of Urban Economics  111(C): 108-131.

Goulder, L H, M A C Hafstead, G Kim and X Long (2019), “Impacts of a carbon tax across US household income groups: What are the equity-efficiency trade-offs?”, Journal of Public Economics 175: 44–64.

Helm, D (2020), “The Environmental Impacts of the Coronoavirus”, Environmental and Resource Economics 76: 21-38.

Marin, G and F Vona (2019), “Climate policies and skill-biased employment dynamics: Evidence from EU countries”, Journal of Environmental Economics and Management 98: 102-253.

Metcalf, G E and J H Stock (2020), “Measuring the Macroeconomic Impact of Carbon Taxes”, AEA Papers and Proceedings 110: 101–106.

Popp, D, F Vona, G Marin and Z Chen (2020), “The Employment Impact of Green Fiscal Push: Evidence from the American Recovery Act”, NBER working paper No w27321.

van der Ploeg, F (2016), “Fossil fuel producers under threat”, Oxford Review of Economic Policy 32(2): 206–222.

Vona, F, G Marin, D Consoli, D Popp (2018), “Environmental Regulation and Green Skills: an empirical exploration”, Journal of the Association of Environmental and Resource Economists 5(4): 713–753.

Yamazaki, A (2017), “Jobs and climate policy: Evidence from British Columbia’s revenue-neutral carbon tax”, Journal of Environmental Economics and Management 83: 197-216.

Yip, C M (2018), “On the labor market consequences of environmental taxes”, Journal of Environmental Economics and Management 89: 136-152.

Wilson, D J (2012), “Fiscal spending jobs multipliers: Evidence from the 2009 American Recovery and Reinvestment Act”, American Economic Journal: Economic Policy 4(3): 251-82.

Photo by Allen Lee on Unsplash

Large impact of efficient technologies and behaviours on energy demand in buildings

The energy-consuming activities carried out in buildings are extremely diverse. Examples spread from boiling water for a cup of tea in the UK and working on a computer in an American bank to using an air conditioner in India or cooking with traditional biomass in Africa. Due to this diversity, there will be no one-size-fits-all solution to decrease energy demand in buildings. Instead, reducing energy demand requires a flurry of solutions to be explored, mixing both technological and behavioural approaches. In a recent study, we analyse the manifold opportunities that buildings offer to reduce energy demand, and compute their potential at the global level.

Reducing demand for space heating and space cooling can take many forms. Improved insulation and the use of efficient air conditioners or heat pumps have the greatest potential to reduce energy consumption for these purposes. Currently, only a small proportion of buildings are properly insulated and the standard materials used to improve building shells are much less efficient than state-of-the-art materials. Similarly with air conditioners and heat pumps: these appliances remain far from their theoretical maximum efficiency. By using best-practice insulation practices and improving the efficiency of heating and cooling technologies, a lot can be achieved. Additionally, by reducing the indoor temperature in cold climates or increasing it in hot climates, energy consumption can significantly fall. Decreasing the demand for floorspace also has an impact, but it remains modest in comparison to the other factors.

Figure 1 The figure shows three scenarios for global energy demand in buildings and their outcome in 2050 and 2100 (grey columns). In the Low and Very Low energy demand scenarios, we assumed ambitious measures to decrease energy demand. The coloured area attributes the reductions to individual actions. The red line shows the level of global demand in 2015.

Hot water plays an important role in our daily tasks, be it for personal hygiene or washing clothes and dishes. By reducing the number and length of showers, our energy requirements can be lowered notably. Hot water needs can also be reduced by using efficient showerheads with a flow of only 2.8 L/min compared to the current US standard of 9.5 L/min. Other ways of reducing hot water needs include using more efficient washing machines and wearing the same clothes more often before washing them.

Overall, we show that energy demand could be halved in the long term by taking advantage of the numerous opportunities to cut down the need for energy in buildings. Because of the ambitious measures assumed in this study, we consider this potential to be close to its maximum.

The future might be bright for energy efficiency in buildings, but there are also important reasons for concern. Some of the measures mentioned above require new technologies to break efficiency thresholds: for instance aerogels or vacuum-insulation panels are very promising materials for insulation, but they are currently at development stage in laboratories. A huge effort in research is needed to bring very efficient technologies onto the markets, and supporting schemes will be necessary to raise their market shares and reduce their costs. Unfortunately, the construction sector is not famous for its propensity to innovate; it is one the most conservative sectors in the economy, investing a very low share of its revenues in research and development. Considering top companies alone, the construction sector spends around 1% of its gross turnover on R&D, only a tenth of what companies in pharmaceutics and information technologies invest.

Changes in behaviours and practices also bear their level of challenges. It is difficult to think of policies that could have a significant and sustainable effect on people’s preferences and habits. For instance, experiments have been conducted to measure the impact of alternative energy bills on electricity consumption, but the effect was modest and not sustained in time. Furthermore, these policies touch on sensitive ethical issues: to what extent should decision-makers try to influence citizens’ preferences?

Despite these caveats, the potential for energy demand reduction is large and concerns many activities carried out in buildings. There is a lot of freedom in the way people arrange their energy practices, combining technologies and behaviours, and individuals as well as policy makers should make use of it.

Levesque A., Pietzcker R. C., Luderer G. (2019), Halving energy demand from buildings: the impact of low consumption practices, Technological Forecasting and Social Change

Central banking and the energy transition

Continuous renewable energy deployment may be less certain than previously thought. If interest rates rise, the cost of renewable energy is disproportionately affected compared to fossil fuel alternatives. Thermostatic policies can help ensuring renewable energy deployment in such environments.

Image above: Continuous deployment of wind farms may be less certain than previously thought. Aerial take from a wind farm. Photo by Thomas Richter on Unsplash

Unfortunately, no rooftop bar in Singapore and no conference dinner in the foothills of Tuscany mark the beginning of this research project. Instead, the development of this paper demonstrates the gradual nature of research. Over the last two years, we spent an awful lot of time discussing the role of finance in the energy transition as part of the EU Horizon 2020 research project INNOPATHS. We met with investors to try to understand their behaviour, we interviewed policymakers to figure out what their intentions and constraints were in designing policy and we collaborated with academics to find out what exactly we already know about the enabling role of finance in energy transitions.

In this process, we discovered the pivotal role of experience in the financial sector, which led to a paper in Nature Energy (free read-only) demonstrating that decreasing financing costs contributed a large share to making renewable energy cost competitive with fossil fuel alternatives. In fact we discovered not only the importance of experience, but even more so the decisive role that general interest rates play in determining the competitiveness of renewable energy. Our analysis showed that lower general interest rates decreased the levelised cost of electricity (LCOE) by 4% to 20% for utility-scale German solar photovoltaics and onshore wind respectively between the period of 2000-2005 and 2017. Soon we asked ourselves; to what extent does large-scale renewable energy deployment depend on extremely expansive monetary policy as we have seen it in the aftermath of the 2008/09 financial crisis?

So we set off to find out. In a new paper in Nature Sustainability (free read-only), we looked at the same two technologies, onshore wind and solar PV, in Germany and developed three scenarios. A flat scenario, where interest rates stay at the current record-low levels. A moderate scenario, where interest rates recover with the same speed as they declined after the financial crisis. And an extreme scenario, where interest rates rise to pre-crisis levels at twice the speed they declined before. In the extreme scenario, LCOEs for the two technologies increase by 11% (solar photovoltaics) and 25% (onshore wind) over just five years (2018 to 2023). Even in the moderate scenario, the higher financing costs outweigh the expected decreases of hardware cost for onshore wind (LCOE +9%) and almost entirely eat up these technology cost reductions due to learning (LCOE -2%) for solar photovoltaics. As a result, we show that adding new renewable energy capacity becomes economically unviable compared to hard coal power plants takes a severe hit if interest rates rise again.

In light of the recent EU decision to scrap binding renewable energy deployment targets for member states these results may announce difficult times for renewable electricity deployment and hence climate targets. However, one may ask, are these scenarios realistic? The temptation is to respond with a sounding no. Just this month, the European Central Bank confirmed record-low interest rates, its president Mario Draghi openly speaks of evaluating new ideas, such as venturing more into fiscal domains using the Modern Monetary Theory, and there is an ongoing debate about expanding the toolkit of central banks to provide cheap liquidity. In the United States, the central bank acted differently: it steadily increased interest rates since December 2015, until it changed course in August 2019 and lowered the interest rate twice. Some commentators see more structural factors (e.g., aging population, low immigration, few investment opportunities) behind the ongoing struggle to unleash economic growth and judge expansionary monetary policy as the wrong remedy for the curse. Proponents of the secular stagnation, like Larry Summers, would favour rising interest rates in combination with rising government spending in education and infrastructure and potentially more liberal immigration laws.

Image 2: The decision hub for European monetary policy – and renewable energy policy too? Night shot of the European Central Bank’s headquarters in Frankfurt. Photo by Paul Fiedler on Unsplash

In sum, the discussions around appropriate monetary policy and hence future interest rate levels are far from being resolved. While interest rates currently remain low in the European context, it is far from certain that this will be the case in the future too. Consequently, climate policy and renewable energy policy in particular need to keep an eye on interest rate developments. Ideally, thermostatic policies would be in place that automatically adjust given the current interest rate environment. In the short run, renewable energy auctions fulfil this criteria and counter potential cost hits on renewables due to interest rate increases. In the longer run however, a transition away from renewable specific support policies seems likely. In such a case, existing emission trading schemes, such as the EU or the Californian ETS, could be equipped with a price floor to ensure renewable energy deployment even in high interest rates environments.

Unfortunately, even countries such as Germany, which used to be known for progressive renewable energy policies, remain rather far from this ideal. For example, to reach its Paris target, Germany would need to install about 5 new wind turbines a day, but only connected 35 to the grid so far this year. A natural next step for research would hence be to investigate, how significant interest groups can be formed to support thermostatic policies and how these policies can be designed in order to survive government changes after elections. Comparing the results of our paper with reality, we circle back to the start and find the next exciting research question… Perhaps we should have a kick-off meeting at a fancy place this time!

Originally published on the Nature Sustainability Research Community page, Wednesday 25th September 2019.

Unheard voices across the lifecycle of digital technologies and low-carbon transitions

Lived experiences of cobalt miners in the DRC and e-waste workers in Ghana

We are living in a society that relies heavily on digital technology, and these technologies have become so engrained in our everyday lives that we rarely question where they come from, whose labour contributes to their existence and what happens after we dispose of it. Some technologies, such as electric vehicles, solar panels, and heat pumps, also rely on both degrees of digitization and many of the same metals, minerals, and components as digital technologies.

How many of us have thought about purchasing an electric vehicle, or installing solar panels on our home? Or, perhaps more commonly, how many of us have found ourselves automatically agreeing to an “upgrade” with our phone network provider after our smartphone stopped working shortly after the end of a two-year contract?  

A transition to a more sustainable economy will require joint efforts from corporations and governments to work towards a circular economy, to decrease the impact of products on our planet across their lifecycle, starting from what raw materials we use to how waste is handled. But how will this impact people working at different stages of the product’s lifecycle—especially the front end (mining and extractive industries) and back end (recycling and waste management)— in parts of the world with weak governance structures and lack of policy enforcement and accountability?

A set of two recent twin studies have looked at cobalt mining in the Democratic Republic of Congo, and toxic electronic waste  (e-waste) processing in Ghana. These two studies set out to humanise the challenges of both these sectors by revealing the lived experiences of cobalt miners and e-waste workers.

Cobalt miners and scrapyard workers in the DRC and Ghana, 2019

The photo on the left shows an artisanal cobalt mining team near Kolwezi, mining on the Kasulu concession in the Democratic Republic of the Congo. Note the young age of most of the miners, the use of manual tools as well as the lack of any women present. The photo on the right shows a scrapyard worker at Agbogbloshie, near Accra, Ghana, using fire to melt down electronic and digital appliances so that copper can be extracted. Note the lack of any protective equipment as well as the thick black smoke.

Giving a voice to people whose experiences are rarely considered in decision-making processes put the impact of our addiction to digital technologies into stark light.

The Democratic Republic of Congo produces roughly 60% of the global supply of cobalt, which is used in our phones and computers, as well as other technologies such as electric vehicles, wind turbines and solar panels. Despite having vast natural resources, 63% of Congolese citizens live below the national poverty line of less than $1 per day.

In the DRC, corporate firms and mining associations operate with perhaps as much power as government actors, with miners finding themselves at the bottom of the hierarchy of interests. Many of these miners work in conditions that harms their health and even endangers their life. In many cases they have no protective equipment or tools to work with, so they have to dig by hand. There are no trade unions to protect their interests or cooperatives that could fight for improved conditions.

The situation is similar with toxic e-waste workers in Ghana. Negative health impacts among scrapyard residents and workers, child labour and environmental pollution are ubiquitous.

Unheard voices can also help highlight the other side of the story. People trapped in poverty in areas with almost no opportunities for formal employment have lower expectations when it comes to working conditions. Cobalt mining in the DRG and work on the scrapyard in Agbogbloshie, Accra have provided a route out of poverty for the community. When you are offered two and a half times above the average income of informal economic workers in the country and you have a family to feed, you don’t think about the health impacts.

Many workers we spoke as part of our research showed pride in their work, which has become a key part of their cultural identity. One of our expert interviewees in Ghana explained

“We call it e-waste, but people on the ground do not call it that … Scrap dealers do not identify as waste managers, they instead see themselves as harvesting commodities as part of a lively value chain. They are community stewards”.

Discontinuing cobalt mining or e-waste processing in these countries without thinking about the people who will be impacted on the ground will have disastrous consequences. We don’t have to look too far to see, how, phasing out certain industries without thinking about providing alternative employment opportunities can destroy a community.  

A thoughtful response to a challenging situation is needed. Our research explores what policy makers can do at a global as well as national level to tackle the challenges arising. One thing is key: when thinking about a sustainable future, we need to remember the unheard voices, lives sacrificed at the altar of consumerism. Solutions need to consider their future and how we can shift away from harmful practices while also offering alternative pathways out of poverty in a way that preserves the community’s pride and identity.

Finally, you might ask, what we can do as consumers. We can remember that our phones and EVs don’t come from nowhere and don’t just go away. The “away” is a very real, living, breathing, suffering “place”). But also, it is a place with pride.

The research summarized here is published in the following two studies, both peer-reviewed academic journals, and both a part of the INNOPATHS project:

Sovacool, BK. “The precarious political economy of cobalt: Balancing prosperity, poverty, and brutality in artisanal and industrial mining in the Democratic Republic of the Congo,” Extractive Industries & Society 6(3) (July, 2019), pp. 915-939.  Available at https://authors.elsevier.com/a/1ZjZH_,52Irqxfa

Sovacool, BK. “Toxic transitions in the lifecycle externalities of a digital society: The complex afterlives of electronic waste in Ghana,” Resources Policy 64 (December, 2019), 101459, pp-1-21.  Available at https://authors.elsevier.com/a/1ZrGM14YFwvkMb

Political acceptability of climate policies: do we need a “just transition” or simply less unequal societies?

This blog post is partly based on the policy paper “Job Losses and the Political Acceptability of Climate Policies: why the job killing argument is so persistent and how to overturn it.”

Concerns for a “just transition” towards a low-carbon economy are now part of mainstream political debates as well as of international negotiations on climate change. Key political concerns centre on the distributional impacts of climate policies. On the one hand, the “job killing” argument has been repeatedly used to undermine the political acceptability of climate policy and to ensure generous exemptions to polluting industries in most countries. On the other hand, the rising populist parties point to carbon taxes as another enhancer of socio-economic inequalities. For instance, the Gilets Jaunes (Yellow vest) movement in France is a classic example of the perceived tension between social justice and environmental sustainability. 

Demand for a fairer distribution of carbon-related fuel taxes and of subsidies for electric vehicles mirrors the political demand for income compensation to ‘brown sector’ workers displaced by climate policies. Such increased demand for redistribution depends on the fact that main winners of climate policies (e.g. those with the right set of skills to perform emerging green jobs or with enough income to consider buying a subsidized electric car) are fundamentally different from the main losers (e.g. those who work in polluting industries and drive long distances with diesel cars). Importantly, the identity of the winners and losers coincides with that of the winners and losers of other, more pervasive, structural transformations, such as automation and globalization. Indeed, the winners are wealthier, more educated and living in nicer neighbourhoods than the losers. The spatial sorting of winners and losers polarizes not only the perception of the costs and benefits of climate policies, but leads also to the emergence of apparently irrational behaviour. In several cases such as Taranto in Italy or Dunkirk in France, employees in polluting activities, whose families are the first to be exposed to such pollution, are willing to accept health risks to preserve their jobs.

Absurd as it may appear, such opposition against ambitious climate policies from the left-behind is the tip of the iceberg of more fundamental problems of our societies, namely, the enormous increase in income inequality. For both the left-behind and an increasingly fragile middle class, it may be more important to satisfy basic needs such as “work”, “food”, “shelter”, “communicating” than eating organic food or supporting climate policies. For a given level of income per capita, citizens’ support for green policies is likely to be significantly lower the more unequal the society because the median voter’s income may be just enough to satisfy the basic needs mentioned above. Likewise, a lower level support for climate policies is concentrated in regions that depend more on carbon-intensive industries.

Fortunately, there are well-known solutions to restore the right support to an ambitious plan to fight climate change. Politicians can easily identify the right amount of subsidies to neutralize the distributional effects of climate policies either on displaced workers, or on most affected consumers. Several solutions have been discussed and implemented ranging from direct transfers of the revenues of a carbon tax to recycling schemes to reduce taxes on labour and capital. In its operational definition, the just transition is thus a policy package whose aim is to mitigate the negative distributional effects of climate policies for those at the bottom of the income distribution.

There is, however, a powerful ethical argument that undermines the viability of these well-known solutions. Why should a worker displaced by a carbon tax have more rights than a worker displaced by a robot? The ethical bases to justify the special status of any policies inspired by the just transition are at best weak, and special policy solutions for brown sector workers may fuel the resentment of those left behind by automation and globalization. An alternative and far more radical solution appears to be to think at the high level of inequality of our societies as a main constraint to fight climate change. The threat posed by growing tension between inequality and environmental sustainability should thus push reforms of our welfare and fiscal systems that protect the workers left behind by trade, globalization and climate policies, thus weakening one of the main constraints to ensure a broad political support to the low-carbon transition.

Low-carbon transition in European carbon-intensive regions: mission impossible or indispensability?

The role of carbon-intensive regions in the EU

Coal production has been in decline in the EU in recent years; production decreased by over 30% between 2000 and 2015. However, unlike renewables, solid fossil fuel production is not evenly distributed on the continent. Coal is mined in more than 40 EU regions across 12 Member States and it is burnt in over 200 power plants. Approximately a quarter of a million Europeans are directly employed in the coal mining and coal power sector. In terms of employment, Silesia – located in southern Poland – is the largest coal-based region in the EU.

The coal path of Silesia – widening the road or striving for a cul-de-sac

Poland is the largest European coal-based economy with hard coal being the main energy resource, although its share has been decreasing. The latest governmental draft on “Energy Policy for Poland till 2040” assumes a 60% share of coal in the energy mix in 2040 as well as an increase in energy generation from offshore wind farms and the replacement of lignite by nuclear energy after 2030. It is crystal clear that in the next two decades, coal will still be a major source of energy although its consumption by the power sector is to decline by nearly 20%. For years, Silesia has been the region with the second highest contribution to the national GDP, exceeded only by the Masovia Voivodeship with Warsaw – the capital city of Poland. Nevertheless, the importance of Silesia for the Polish economy has been gradually decreasing. Similar to other carbon-intensive regions, a low-carbon transition entails more risks than opportunities according to regional stakeholders. Limited technical potential to deploy renewable power plants, poor air quality, regional dependence on traditional industries as well as limited financial resources pose significant challenges to the low-carbon transition in this Polish region. Let us not forget big politics behind the screen and politicians who have always played a key role in favouring or depreciating Polish mining and to whom coal is alternatively ‘black gold’, or ‘not everything that glitters is gold’. At present, Polish authorities seem to be a guardian angel of Polish coal as they perceive it as a natural and strategic resource and a guarantor of the Polish national interest. Perhaps, it is only a political gambit to hush down Polish miners’ discontent and their worrying about losing employment or benefits (after all promises to keep Polish mining safe and sound were made in 2015 during the election campaign). Yet, isn’t it a bit symptomatic that the Polish President stated adamantly that he will not allow the decline (actually, he used the verb “murder”) of Polish mining, and this statement is being made at the very same time COP24 in Katowice is being held?

So is a low-carbon transition of carbon-intensive regions feasible?

At first glance, the answer to the above question is affirmative, but it will take time to make it happen. From the very beginning reforms in the energy sector should be an essential part of a sustainable transition of coal-dependent regions where the costs may be high, especially in the short-term perspective. The reforms must be wide-ranging, based on a left-to-right political consensus and not biased against the coal sector. To have success in this bold and long-awaited endeavour, the future energy mix and corresponding technologies should be carefully designed, matched and should remain stable in the long-term. At the same time, the right incentives for the energy transition should be clear and acceptable for all stakeholders.

Looking at the future (because there must be one…)

The multi-stakeholder approach is widely promoted by the Paris Agreement and the European Union. The implementation of this policy line is supported by numerous international measures aimed at helping the countries to meet their obligations. These include mainly financing instruments targeted at the activities streamlining the low-carbon transition and the ones to relieve financial barriers of the process and to bring benefits to the society. According to the European Commission, the transition to clean energy in the European Union will require €177 billion in additional investment per year from 2021 onwards. If the right investments are not stimulated now, there is a risk of locked-in high-carbon infrastructure and stranded assets. Moreover, the cost of delaying this transition may be much higher that the costs of the transition itself.

How to step this path to success?

The path to success in the field of decarbonizing European regions deeply laced with coal seems to be bumpy with all its uncertainties and question marks, with dos and don’ts, with negotiations and settlements. The experience and mistakes made by many countries have proved that the energy mix and the technological transition should be designed and implemented on the basis of transparent and well-thought-out schemes and it should remain stable for long time. It is crucial to gain the willingness of the whole coal-based industry to actively participate in the transition with a prerequisite for success being a full political and social consensus over a coal-based regional transition. However, no matter how painful or backbreaking the process turns out to be, we owe this to young and future generations, to people like 16-year old Greta Thunberg, a worldwide known Swedish activist, who in one of her thought-provoking speeches on climate change and the detrimental influence of coal to the environment states that we (“we” read as adults, policy-makers, lobbyists, governments) are stealing our children’s future in front of these children’s eyes and it is a crisis which, if unsolvable on the basis of the existing system, should be managed and overcome by new rules embedded in a new system. Don’t we see that Greta has just thrown down a gauntlet? Should we feel chided or embarrassed by this young and climate-conscious person? The former may not be Greta’s intention but the latter for us to feel is definitely right. Once our cheeks lose the redness of embarrassment, we should stand up, pick up the gauntlet and act. Perhaps, no one will feel like a thief any more.

No simple answer to carbon complexity

“These are the times that try men’s soul” wrote Thomas Paine in his famous pamphlet American Crisis in the heat of the American Revolution. These words well describe the present time too – in their broadest meaning. The political systems in the western world are under unprecedented pressure not witnessed since the dark times of the 1930’s.

But we also see the raise of a quite new kind of awareness among people and businesses on climate change. The public discourse on emissions has jumped to another level compared to just a few years ago. Our leaders are being challenged to move from just talking about the issue, to undertaking stronger measures to cut carbon emissions quickly.

At the same time, bottom-up popular movements are entering the political arena reflecting our political systems’ inability to adequately reflect on timely issues. However, they also reflect the failure of our politicians to equip the people with the tools and skills required to handle with wicked problems such as climate change.

The climate change movement is obviously getting stronger in several member states of the EU, and also resonated in the recent European Parliament elections. It may, however, still be too early to claim a coming leapfrog in climate policies due to the shifting political landscape in Europe, though all scientific evidence univocally speaks for its urgency.

But let’s make a ‘gedankenexperiment’ by assuming that in spite of all the uncertainties, Europe would soon make a shift towards a stricter climate policy. Instruments for emission cuts are in place (e.g. the price of emission allowances in ETS could be better regulated, among others). Scenario tools such as those used in the Horizon 2020 INNOPATHS project can help to construct least-cost technology trajectories to reach a zero-carbon energy sector in Europe. From a techno-economic point-of-view, we could well find a feasible deep decarbonization solution for Europe.

But would society be prepared for such a quick energy transition?  Deep decarbonization equates in practice to a huge technology disruption similar to the industrial revolution. It goes beyond the techno-economic realm. It involves profound social issues. It is essentially a social-technical transition in which institutions and business models supporting present technologies need to be changed to enable adoption of new clean technologies and practices.

Consumers also need to adapt and engage in new ways. How to deal with distributional effects? A change involves winners and losers. For example, a high carbon tax may sound like a perfect tool for cutting emissions as it forces those who pollute to pay and it could motivate the polluters to change their behaviours. But from a justice point of view, it could also legitimize those who can afford to pay to pollute (even more) and not to change their lifestyles, whereas those who cannot pay or afford non-polluting solutions, could face large challenges in their everyday lives. A just climate legislation would therefore strive for measures which treat each of us equally in relation to our capabilities.

There are multiple ways to frame the energy and climate problem1. Importantly, the way we frame it would also prioritize the values and factors against which we make our decisions, which in turn will shape the solutions. Personally, I would prefer to see the more fundamental factors being prioritized in any type of climate framing, namely the Science (laws of nature), the Planet (planetary boundaries), and the Ethics (universal values).

Though a lot of research has already been done on policy and social dimensions, also within the INNOPATHS project, the complexity of the issues involved is so profound that this would call for much stronger efforts for this area of research in the coming Horizon Europe R&D programme.

Thomas Paine ended his pamphlet with the words “…the harder the conflict, the more glorious the triumph”. For me his inspirational words sound in today’s terms more like where there’s a will, there’s a way – also in the quest of solving the carbon question.

1 Sun-Jin Yun, John Byrne, Lucy Baker, Patrick Bond, Goetz Kaufmann, Hans-Jochen Luhmann, Peter Lund, Joan Martinez-Alier, and Fuqiang Yang. 2018. Energy and Climate Change. In: Rethinking Environmentalism: Linking Justice, Sustainability, and Diversity, ed. S. Lele, E. S. Brondizio, J. Byrne, G. M. Mace, and J. Martinez-Alier. Strüngmann Forum Reports, vol. 23, J. Lupp, series editor. Cambridge, MA: MIT Press, 2018 ISBN 9780262038966.

Modelling the EU’s Long-Term Strategy towards a carbon-neutral energy system

The COP21 UNFCCC conference in Paris in December 2015 flagged a new era for energy and climate policy. Climate change mitigation turned from being the wish of a few, to the reality of almost all nations around the globe. The signed agreement has invited all parties to submit, by 2020, mid-century low-emission strategies compatible with the goal of limiting the rise in average global temperatures to well below 2oC above pre-industrial levels and pursuing efforts to limit it to 1.5oC.

The aim of a low carbon economy has been on the EU policy agenda since the release of its “Low carbon economy roadmap” in 2011 that introduced an 80% GHG emission reduction target for the year 2050 relative to 1990 levels. However, pursuing the 1.5oC temperature increase limit requires boosting even more the ambitious climate target and aiming at a carbon-neutral economy by mid-century. Given the new climate policy regime, the discussions around low, zero, or even negative carbon policy options have been intensified in the years following the Paris milestone; new quantitative analysis, in the form of detailed policy scenarios, strategies and quantitative pathways, is necessary to assist EU policy makers in assessing the available options from both a technological and economic perspective, while also considering societal and governance issues. Many research discussions, debates and synergies in the modelling communities, have been triggered after the COP21 conference, as new innovative concepts need to be introduced and enrich existing modelling frameworks, in order for the latter to be able to perform the appropriate deep decarbonisation scenarios and provide sound input to impact assessment studies.

Certain key policy elements and technologies are considered pillars of the low-carbon transition and are treated as “no-regret” options in all recent EU climate and energy policy discussions. Such policy options are the strong electrification of final energy demand sectors, accelerated energy efficiency mainly via the renovation of the existing buildings’ stock, advanced appliances, heat recovery in the industrial sector and intelligent transportation, and the strong push of variable renewable energy sources (RES) in the power system. From a modelling point of view, their assessment is well established in the literature, and does not pose any considerable, unpresented difficulties. However, the modelling of disruptive technologies and policy instruments that could be proven essential for the transition towards a carbon-neutral EU economy (a case that requires GHG emission reductions beyond the 80% target) is far from being considered as mature in the existing literature or academic research. Modelling a power sector with renewables above 80% is a challenge as it requires representing variability in some detail along with the various balancing resources including cross-border trade. Modelling strong energy efficiency in buildings implies representing the decision of individuals about renovating the buildings deeply; this is also a challenging modelling task give the large variety of building cases and idiosyncrasies of the individuals in decision making. Electrifying heat and mobility in market segments where this is cost-efficient is among the no-regrets option. Modelling the pace of transition and the role of policy drivers from internal combustion engines to electric cars and from boilers to heat pumps are also challenging tasks due to the large heterogeneity of circumstances that the modelling will have to capture. So, the amplitude of the three main no-regrets options is challenging the modelling despite the significant experience accumulated so far. 

The carbon-neutrality target poses considerable additional challenges for the modelling. The no-regrets options are not sufficient to deliver carbon-neutrality by mid-century. Mobility, heating, high-temperature industrial uses and the industrial processes would emit significant amounts of CO2 by 2050 if conventional wisdom policies and measures only apply. To abate the remaining emissions in these sectors, disruptive changes are necessary, regarding the origin of primary energy and the way energy is used and distributed. The disruptive options are surrounded by high uncertainty due to the low technology readiness levels of the technologies involved. The disruptive options are antagonistic to each other because they require large funding resources to achieve industrial maturity and economies of scale of the yet immature technologies. Such concentration of resources requires long-term visibility for the investors and infrastructure investment, which both require clear strategic choices among the disruptive options.

We consider the “disruptive” options grouped in stylised categories, as shown below. The modelling has to include assumptions regarding the future evolution of costs and performance of a plethora of technologies and options for alternative sets of disruptive changes had to represent. Each stylized category of disruptive changes has its own challenges in terms of modelling considerations, as presented below:

  1. Extreme Efficiency and Circularity: The aim of the options included in this category is to push energy efficiency savings close to its maximum potential, introducing circularity aspects and further improving material efficiency in the EU economy, increasing the intelligence of the transport system, sharing of vehicles, achieving near-zero energy building stock, etc. Even though these concepts are present in the literature, introducing them in a large-scale applied modelling framework poses significant difficulties as, for instance, estimating the maximum industrial output reductions that can be realised at a sectoral level. It also required estimating the upper boundaries of the impact of behavioural and restructuring changes in the transport sector in reducing transport activity. Similarly, modelling a near-zero energy building stock involves great difficulties regarding the driving policies and the idiosyncratic behaviours of individuals. Almost all options included in this category are associated with non-linearly increasing costs, beyond a certain level of deployment that needs to be captured in the quantitative assessment. Some of the options might also create so-called “disutility” to the consumers, as they alter their behaviour to an eventually less “comfortable” patterns. Not capturing such effects, would underestimate the difficulty in the introduction of such policy options.
  1. Extreme Electrification: Strong electrification is a “no-regret” option, but extreme electrification is a relative newly established concept. This category adopts electricity as the single energy vector in all sectors in the long-term, with bioenergy complementing electricity only in sectors where full electrification is not technically feasible with currently known technologies, such as aviation and maritime. From a modelling perspective, deep electrification requires to studying the technoeconomic of innovative technological options such as full-electric long-distance road freight vehicles, electric aircrafts for short-haul flights and high temperature heat pumps. Using electricity as the only vector for the heating of buildings will broaden the seasonal demand gap between the summer and winter seasons for many regions, requiring either significant investments in power storage solutions or in power capacity that will have low utilisation. Capturing this in the modelling requires establishing electricity load patterns that differ by scenario at an appropriate time resolution.
  1. Hydrogen as a carrier: This category assumes that hydrogen production and distribution infrastructure will develop allowing hydrogen to become a universal energy commodity, covering all end-uses including transport and high-temperature industrial uses. Hydrogen can also provide a versatile electricity storage service with daily up to seasonal storage cycles. Hydrogen is assumed to replace distributed gas after an extensive overhaul of the pipeline system and gas storage facilities. From a modelling perspective it requires identifying the industrial processes that can be decarbonised using hydrogen-based solutions (and the relative boundary conditions), assessing the techno-economics of a variety of carbon-free hydrogen production facilities (for both blue and green hydrogen) and the costs associated with the upgrade of the gas distribution and storage system. All the above, should be established in a modelling framework that is available to co-optimise the operation of the power system and the hydrogen production facilities, enhancing in this way energy storage and coupling various sectors of the energy system and the economy.
  1. GHG-neutral hydrocarbons (liquid and gaseous): In this case, the paradigm of using and distributing energy commodities, along with the respective infrastructure, is maintained. The nature and origin of the hydrocarbon molecules is modified in order to ensure carbon neutrality from a lifecycle emissions perspective, using synthetic molecules rather than fossil ones. The production of synthetic methane and liquid fuels requires carbon-free hydrogen production and an appropriate carbon dioxide (CO2) feedstock source. The last element hints at the emergence of CO2 as a commodity, therefore it is important that energy-economy models are modified in order to treat CO2 not only as a by-product of fossil fuel combustion, as it was done till recently, but as a product that can be used for different purposes (e.g. apart from producing GHG-neutral fuels, creating carbon sinks and inducing net negative emissions via embodying it in materials or storing it underground). The origin of CO2 can either “from air” via using Direct Air Capture (DAC) technologies or by biogenic sources; both of them have uncertainties related to its learning potential and maximum availability potential, respectively. For the production of hydrogen, similar modelling considerations as in the previous case apply. A model able to represent effectively this strategy should have a rich technology database that explicitly includes the major pathways for the production of synthetic fuels; in turn populating such a database is a difficult and time-consuming exercise given the uncertainty regarding the learning potential of the various technologies. Ideally, a model should be in a position to optimise of the location of clean-fuel production facilities in Europe or elsewhere, as it is more likely that such commodities will be traded extensively.

The analytical assessment, which has provided input to the “Clean Planet for All” strategy by the European Commission in November 2018, has confirmed that a carbon-neutral EU economy by mid-century (2050) is viable both from a technological but also an economic perspective, should a number of key technologies evolve as anticipated. The analysis should be perceived as the first step of a complex assessment procedure to bolster the decision-making process regarding the definition of the EU’s long term energy and climate strategy.

Next steps should focus on the assessment of several uncertainties associated with the various pathways studied. For instance, emphasis should be given to identifying the appropriate policy instruments that could be used to materialise the emergence of technologies and energy carriers as long-term visibility of future markets is crucial for their deployment. The characteristics and costs of several disruptive technologies are also worthy of further research with emphasis on the potential of learning and economies of scale. The modelling and data improvements to be realised in INNOPATHS will enhance the model representation of disruptive options and sectoral transformation, and will enable further improvement of the design of deep decarbonisation pathways.

For more information on the analytical work behind the “Clean Planet for All” communications, please click here.

Ratcheting up policy stringency through sequencing

While in the EU the past decade can be characterized mostly by getting climate policies into place and refining them, the challenge ahead for the next decade is to substantially increase their stringency. In the first decade of this century, many of the policies considered to become the backbone for achieving these targets were developed and implemented. First of all the EU’s Emission Trading Scheme became operational in 2005, although with very weak reduction targets and primarily to achieve the Kyoto protocol obligations. In 2008 the EU adopted the 2020 climate & energy package, which entailed relatively modest targets for GHG emission reductions, renewable energy use, and energy efficiency. Around ten years later the ETS is expected to have overcome its long lasting “prices crisis” (in the wake of the 2018 reform), CO2 emission standards for cars and trucks are being tightened, and a new governance mechanisms for renewable support with complementary EU mechanisms has been agreed upon as part of the “Clean Energy for All Europeans” package.

Yet the targets of the next decades are considerably more ambitious and require even more stringent policies. For the EU Long Term Strategy, a number of scenarios were developed that project the achievement of the 2030 targets as agreed in June 2018, and aim at long-term emission reductions of at least 85% by 2050 (from 1990 levels). While these scenarios are underpinned by a range of assumed policies, it is by no means clear that these policies can be implemented and ratcheted up as needed. For instance, the current price in the EU ETS – even though it has quadrupled in the last two years – still seems to be far away from driving decarbonization in the power and industry sectors at the rate required. A core question is thus: how must policies be designed in order to allow for such ‘ratcheting’?

Climate policies as sequences that can overcome barriers to higher ambition
In recent work (Pahle et al) we examined how climate policy today may be effectively designed to lay the groundwork for more stringent climate policy in the future—what we call policy ‘sequencing’. Such advance thinking is essential, because as the Roman emperor and philosopher Marcus Aurelius put it: “the impediment to action advances action. What stands in the way becomes the way.”

The core mechanism is illustrated in the figure below: the effects of policies implemented at an initial stage (t1) remove or relax stringency barriers over time so that policymakers can ratchet up stringency at the subsequent stage (t2).

In this work we also identify at least four categories of barriers: costs (both due to the cost of new forms of decarbonization technology, and due to the economic costs of more or less efficient policy choices); distributional effects (the winners and losers of any specific climate policy choice); institutions and governance (where capacity limits and veto points might prevent the enactment of more stringent policy) and free-riding concerns (where some jurisdictions may not adopt climate policies in the hope of free-riding off of the climate policy achievements of other jurisdictions). After exploring ways in which those barriers might be reduced or eliminated, we finally draw on the cases of Germany and California to provide specific examples of how sequencing works.

Applying sequencing to strengthen the EU ETS.
The concept of sequencing is not only a useful approach for explaining what has enabled ratcheting in the past – it can also be used strategically to design current and future policies. In the following we apply the sequencing framework to the EU ETS to illustrate the concept and discuss implications for policy choices. A first aspect is that strong myopia of market participants could lead to persistently lower ETS price, which eventually might rise sharply towards the end of the next trading period (“hockey stick”). Such a sharp rise would face strong political opposition, possibly jeopardizing the ratcheting up of the policy. A remedy could be a minimum carbon price, which would balance prices over time as described for example by Flachsland et al.

Overcoming the waterbed effect
In a similar vein, the EU ETS has long been challenged by the problem of overlapping policies on the national level, which reduce demand for certificates, thus depressing ETS prices, and thereby inducing the ‘waterbed effect’ that other countries emit more. Again, a minimum carbon price could alleviate this problem, an EU-wide minimum price seems to be politically infeasible at least in the near future. Suitable policy sequencing could over time reduce this barrier. For example, recent work (Osorio et al) with a focus on the German coal phase out, examined how a coalition of ambitious countries could implement such a price floor to reduce the short-term waterbed effect. In order to prevent leakage to future trading periods, they would have to cancel allowances equivalent to the level of additional mitigation the price floor would induce – an option that was made more prominent in the last reform of the ETS,. Such a coalition could grow over time and eventually create a majority to also implement a carbon price floor in the full EU ETS.

Energy decarbonization & Coal phase-out: financial, technological and policy drivers

The 24th Conference of the Parties (COP) closed in Katowice on December 15th, 2018. After two intense weeks of talks and crunch negotiations (with ‘overtime’), the almost 200 parties in the conference managed to agree on a 133-page rule-book which guides the implementation of the Paris Agreement. These guidelines specify how the Paris commitments will be measured, implemented and monitored. The “Katowice package” represents an important achievement ensuring a high degree of transparency in decarbonization, especially in light of recent geo-political challenges to this process. Yet, the parties could not see eye-to-eye on several key issues, including the rules for voluntary carbon markets of Article 6 of the Paris Treaty.

Indeed, the slow and convoluted negotiation process clashed with the call for urgency by the scientific community. According to the latest Special Report of the IPCC on 1.5 degrees, time is of the essence. Inaction has high costs. At current rates, by 2040 the world mean global temperature will be 1 degree higher than in 1990. And this could happen even sooner, with greenhouse gas emissions rising again this year after a couple of years of stagnation. Furthermore, limiting temperature increase to 1.5 degrees (rather than simply ‘well below’ 2 degrees as called for in the Paris Agreement) would significantly lower the risk of negative climate impacts. But the more we wait to take mitigation – and adaption – actions, the more expensive it will be to tackle these problems.

The need to find political consensus to push forward the decarbonization agenda is only one of the barriers to decarbonization. Other crucial financial, technological and policy barriers exist, especially with respect to the need to phase out fossil fuels, and coal in particular. Some of these barriers were presented and discussed at the COP side event “Energy decarbonization & Coal phase-out: financial, technological and policy drivers” held on December 3rd, 2018 in the EU Pavilion. The session showcased the latest research insights from ongoing research projects and from practitioners engaged in promoting decarbonization on the ground in energy and carbon intensive European countries.


Crucial role of technologies, policies and finance

Elena Verdolini from the RFF-CMCC European Institute on Economics and the Environment, presented initial results from the INNOPATHS project, a four-year EU H2020 project that aims to work with key economic and societal actors to generate new, state-of-the-art low-carbon pathways for the European Union. Her presentation was structured around three key INNOPATHS outputs. First, the “Technology Matrix”, an online database presenting information on the cost of low-carbon technologies and their performance, including both historic and current data, and future estimates. The key feature of this database is the collection of a wide variety of data from different data sources, and the computation of metrics to measure the uncertainty around values. The matrix will thus contribute to mapping technological improvements (and associated uncertainty) in key economic sectors, including energy, buildings and industry. It will show that many low-carbon technologies options are available in certain sectors, but also the specific technological gaps characterizing many hard-to-decarbonize sectors, including aviation, or energy-intensive manufacturing sectors such as chemicals and heavy metals. For these technologies, additional and dedicated Research, Development, Demonstration and Deployment funding will need to be a priority.

The second key output is the “Policy Evaluation Tool”; an online repository of evidence on the effect of policy interventions against key metrics, such as environmental impact (i.e. emission reductions), labour market and competitiveness outcomes. The tool will become a repository of evidence on what approaches and policy instruments work, or do not work, helping policy makers to understand how best to achieve various goals related to the energy transition.

The third key output are insights from INNOPATHS researchers focusing on the financing of the decarbonization process. First, similarly to the process of industrial production, financing costs benefit from “learning-by-financing”, as lenders develop in-house abilities and experience in the selection of renewable energy projects. Second, researchers focus on the importance that public investments can play in signaling change and promoting a shift of investments away from fossil and towards low- and zero-carbon technologies. In this respect, public banks are crucial actors, which can act as catalysts for private investments.


A shrinking role for coal

Laurence Watson, from Carbon Tracker, summarized the main insights from a recently-released report and online portal that provides a well-rounded assessment of the economics of coal-fired power plants across the world. The key point emerging from this analysis is that coal is that nearly half of all coal plants are currently unprofitable, set to rise to three quarters by 2040. Prevailing economics, nascent carbon pricing and an increased focus on the impacts of air pollution are driving this trend. In many regions renewables are rapidly approaching a cost that will be cheaper than operating existing coal plants, and by 2030 this will be the case in most markets. This means stranded assets in the power sector, and pressure on policymakers to not subsidize ailing coal fleets.

There is good evidence that coal’s contribution to gross domestic product and employment has shrunk over time – including in coal-intensive regions. This novel analysis provides important evidence for policy-makers and investors willing to align with the Paris Agreement climate targets. All the data is easily accessible through a data-driven interactive web-based tool which shows the cost and profitability of almost all of global coal-fired capacity.


Coal decline visible also for Silesia

Oskar Kulik of WWF Poland presented the impact of the declining role of coal through the example of Silesia, Poland, the largest hard coal mining area in the EU. While coal mining does still play an important role in the regional economy, its role is declining: from over 15% of the regional GDP in 1995 down to 6% currently, and from 300,000 jobs in the early 1990s, to around. 75,000 today (while maintaining unemployment rates below the national average).

Based on recent research by WiseEuropa the most important factors in this decline are the growing costs of coal extraction, driven by factors largely independent of low-carbon policy. Irrespective of the drivers, the region will be faced with socio-economic challenges as a result of such pressures. As such, the main recommendation is to plan for this transition in a way that will be just for the local communities and region as a whole.


Supporting stakeholder in the low-carbon transition

Alexandru Mustață from CEE Bankwatch Network discussed some of the challenges of the low-carbon transition encountered at the grassroots in six coal-intensive Eastern European countries, but also possible solutions. Through a project supported by the European Climate Initiative (www.EUKI.de), CEE Bankwatch Network is able to support knowledge between post-Soviet countries (such as through study tours in to the Czech Republic and Poland during the COP), and by collecting resources from researchers, trade unions, political parties or NGOs on a central platform. Many stakeholders from these regions are ready for alternative growth pathways, but lack the support (in the form of politics, policy, experience or infrastructure) to make it happen.

The common thread across all contributions was the importance of focusing on how macro-level decarbonization goals and commitment are presented, communicated and implemented at the local level. The core concern underlying COP24 was the need to tackle climate change but ensuring a just, inclusive transition that supports those groups and regions that may be hit hardest.