Germany’s approach to phasing out coal through a process of just transition holds important lessons for other countries and sectors like farming and transport, as the just transition concept has made it politically possible to debate the options for achieving the much-needed radical departure from fossil fuels. Unfortunately, the idea of a just transition is also being used to delay the timetable according to which coal will be faced out. This risks a scenario where the just transition process ends up being neither just, nor about a transition. Just transition should not mean insufficient ambition.
Germany has long been seen as a leader in the fight against climate change and the shift to a clean energy system. So it comes as little surprise that, with Germany struggling to agree on a new generation of effective climate policies that would put it on track to meet the Paris goals, including a phase out of coal power, the world is watching with even more interest than usual.
What the world is witnessing are two very concerning developments. First, having failed to achieve its 2020 climate targets as a result of highly effective delaying tactics, including but not only on coal power, a political consensus is emerging among its ruling parties that they need to focus on achieving existing targets rather than debating new ones. Second, in the run up to the recently appointed Coal Commission an argument has emerged that pits the development of just transition strategies, stretching over decades, against the achievement of climate goals, while implying the first is more important than the second. As a result of this, Germany finds itself at risk of complacency right at the moment when the world is running out of time to avoid the catastrophic impacts of climate change.
Learning from coal: can the just transition concept deliver political breakthroughs?
Although the outcome of the German debate on a coal phase out and the work of the Coal Commission is still highly uncertain, it should be noted that the prospect of a just transition, or ‘Strukturwandel’ in German, is what made it possible for the debate on a coal phase-out to enter the political mainstream in the first place. Learning from economic transitions of the past, a just transition captures the complexities of the transition towards a low-carbon and climate-resilient economy, highlighting public policy needs and aiming to maximize benefits and minimise hardships for workers and their communities in this transformation.
How relevant is this approach to other sectors that are facing similar political difficulties? For example, in the transport or agriculture sectors where the lack of progress is already being used to argue for a slow coal phase out?
Unlike the energy sector, which has been the focus of climate policies so far, transport and agriculture have been given a relatively easy ride. The current Effort Sharing Regulation includes a number of flexibility mechanisms and loopholes allowing Member States, including Germany, to avoid reducing emissions themselves in the regulated sector through the purchase of emission reduction rights from other countries. Despite a growing recognition among policy makers that this needs to change, and despite the first few steps having been taken, both sectors have shown a remarkable ability to block or slow down the policy process. Much like the coal industry, thanks to a close and well-established [PDF, 2.4MB] relationship to decision makers, their lobbyists have so far been successful in fending off, or significantly watering down, policy initiatives that would require real change.
Could the prospect of a just transition for workers in these sectors help move the political debate forward on the transition towards electrification in the transport sector, or the transition in agriculture to low-meat, agro-ecological production and consumption systems?
Leapfrogging out of Diesel
The transport sector is facing three major trends: a shift from internal combustion engines to electric powertrains; towards more autonomous cars; and from individual car ownership to mobility services. The debate in Germany on the impact this will have for both car manufacturers and their suppliers has only just begun, with most political effort from the sector, and even Germany’s most read and politically influential tabloid the Bild Zeitung, still being directed towards protecting diesel technology.
As transport is not dependent on naturally occurring coal deposits, the impacts of this transition on employment in the sector will be more dispersed geographically and more likely to depend on other factors, such as the willingness and ability of individual firms to adapt and invest in new technologies, such as batteries. A recent paper by Cambridge Econometrics for the European Climate Foundation found for example that although the net effect of decarbonizing passenger cars on employment was positive, it would require retraining for workers currently involved in legacy technologies like internal combustion engines. Another recent study by the union of metalworkers IG Metall found that there would be significant job losses, in particular in the auto supply industry, but was optimistic this could be managed. Another significant difference in car manufacturing compared to coal is the total number of jobs involved: approximately 20,000 in the lignite industry, with 40% of workers over 50 years old, versus 800,000 in the car industry (including its suppliers).
Betting on batteries
Much would therefore depend on how the German manufacturing industry positions itself with respect to battery technologies. For example, will Germany’s car manufacturers still be producing cars in Germany at all, or will they be largely replaced by Asian battery manufacturers, with logistics, marketing and design primarily taking place in Germany? Or will they be overtaken largely by US software firms who will be providing mobility services using, among other things, shared self-driving cars built in Asia? This will be determined by the decisions that German car manufacturers or other major industrial players, who in the end choose their suppliers, take in developing their long term industrial strategies. So far only one German company, Siemens, has made a small investment in a new battery cell production facility, planned in Sweden.
Which brings us to another significant difference between cars and coal: the car industry has money to spend. Volkswagen, for example, despite being in the midst of the diesel scandal and facing significant financial liabilities, delivered a record profit of 2.7 Billion EUR in 2017. The coal industry in contrast is close to bankruptcy and has been kept on a lifeline with subsidies as well as other advantages, including being exempt from paying for Germany’s feed in tariffs for renewables and not being required to pay for its pollution. This matters as it will influence decisions on the extent to which a just transition programme and reskilling of workers would need to be paid for by the tax payer, or whether the companies can be expected to take responsibility. What is clear is that the sector will need to prepare itself to face competitors of a very different kind and invest in the matching technologies, skills and workers.
Agriculture, a very European affair
The agriculture sector is even more complex. Like other sectors, it has already been through a major transition towards more energy intensive, specialized and mechanized production systems. What sets agriculture apart is that since the 1960’s this process was incentivized by European subsidies under the Common Agricultural Policy (CAP) and has been under full EU competence. Despite a successive series of reforms, the farmers and landowners who moved furthest in this process have remained to this day the primary beneficiaries of this subsidy system [PDF, 2.1MB]. This has created a number of perverse effects, one of which is that it has become virtually impossible to effectively integrate climate and other environmental objectives into the system and thereby adjust the policy, and farm practices, to new political and bio-physical realities.
The current Agriculture Commissioner Hogan’s strategy is to largely renationalize the CAP, concentrate budget cuts in the most effective and targeted rural development schemes, and give Member States more responsibility for ensuring delivery. Another way in which the agriculture sector differs from others is that there is little consensus on what the process of transitioning to climate friendly, sustainable farming practices would look like. Views range from high tech ‘climatesmart’ scenarios to a 100% switch to organic production, to pretty much everything in between. It is therefore not only a question of how fast the sector will adjust but also in which direction. This makes it difficult to assess the impacts on employment of such a process. Processes of mechanization and intensification so far has meant a significant loss of employment in the agricultural sector and led to a reduction in the number of farms; but it is far from clear that a transition to different production and consumption systems would continue this trend. That said, a number of important trends can be observed, in particular in the sector with the highest impact on climate change: livestock.
Beyond meat and dairy
One major trend is the emergence of largely or completely meat-free diets including the development and rapid growth of new technologies that produce plant-based alternatives which are becoming indistinguishable from actual meat. And while most parts of the agriculture sector are still trying to protect existing investments by opening up new markets through trade agreements and campaigning for more meat consumption, including the compulsory supply of pork in public canteens, there are also more forward looking initiatives that open up the debate on the future of the livestock sector and the need for a just transition process. This has so far focused mostly on farmers who have made significant investments to scale up production capacities, encouraged by policies and banks, to provide them with the support for an early write off of their assets and to encourage investment in new, more sustainable forms of production.
Discharging the fox that guards the henhouse
The agriculture sector stands out for another reason in the context of just transition. It is one of the very few sectors which, in most countries, enjoys the privilege of having its own Ministry, Parliamentary Committee, and, at the EU level, a Council Formation and Directorate General. This has made it particularly difficult to initiate and agree on effective new policy proposals that drive a process of change. Most decision makers involved see it as their job description to maintain the status quo and maximize the benefits they can bring home to their constituency. Over time these constituencies have come to consider these benefits as an entitlement, or even a fundamental right.
Developing an effective just transition strategy for the agricultural sector will therefore only succeed after a deep reform of the way the sector is governed. The de-facto renationalization of the CAP as proposed by Commissioner Hogan and the forthcoming debate on a new EU Budget opens a window of opportunity for such a reform since it effectively eliminates the need to maintain a specific Directorate General for Agriculture.
With most responsibility for delivery held at the national level, the proposed programming approach towards all agricultural spending can be managed and controlled in a more integrated and effective manner by the departments for regional development overseeing regional funds, as well as the environment and climate department to ensure delivery towards environmental goals. Market regulation could be dealt with by competition authorities, as in any other sector. Finally, it should help create a more appropriate distance between the regulator and the regulated and send an important political signal to EU member states to start considering similar changes in governance at national level.
Speed and quality, the new horse and carriage
Returning to the coal phase out issue, it is not just the scale of the transition but the speed that matters. Unlike past transitions in the energy system and economy, this is driven not only by technological developments and market forces but also by our knowledge about what a failure to stop using fossils will entail. And second, it is driven and managed in part by forms of international cooperation and governance, like International Conventions and EU Climate and Energy policies, that did not exist during previous transitions.
Success is not impossible but it requires a continuous and unprecedented acceleration of renewable, storage and efficiency technologies, combined with an active policy of a rapid winding down of fossil infrastructure as well as persuasive just transition concepts and policies.
An expiry date to a just transition
The opportunity and prospect of a just transition has relevance well beyond coal, although it will have to account for the specific conditions of each sector. In all cases, however, the deal that supports the just transition needs to be clear. The environmental outcome, and more importantly, the moment this needs to be achieved, should remain central throughout the process.
For the work of the German Coal Commission this means that further financial and other support for a just transition process for its regions needs to be strictly conditional to an ambitious and steep phase out plan with the last power plant disconnecting from the grid by 2030.
After decades of delaying tactics by the fossil industry and its political allies we are now at a point where any further delay in achieving our climate goals simply means failure. The only just transition available now is one that has a strict deadline.