Who stands to lose out in a low carbon transition?

The transition towards a net zero economy requires the phasing out of carbon-intensive industries. Large industries are heavily reliant on fossil fuels for energy and the production of resources such as iron, steel and chemicals (OECD, 2019). Turning these industries away from fossil-fuel heavy processes will impact not only the organisations and individuals working directly in these industries, but all stakeholders in the value chain including investors and suppliers. Figure 1 shows a worker managing an oil pump at an oil refinery. These jobs in the oil industry will be impacted in the net zero transition.

The photograph shows a worker managing an oil  pump at an oil refinery. Jobs in the oil industry will be impacted in the net zero transition.

Figure 1: The type of industry that will be impacted in the net zero transition.
(Source: Shutterstock)

It is essential that businesses and policymakers are not only aware of the impact that the transition will have on these industries, but proactively address the risks to carbon-intensive jobs, regions and sectors. Some sectors and jobs will vanish as they will not be compatible with a net zero economy, while others will be severely disrupted, especially those organisations and sectors that fail to align their actions to the transition in a timely manner.

If the transition is managed poorly, regions, sectors and organisations could encounter not only stranded assets, but stranded workers and communities (Robins & Rydge, 2019). The transition could destabilise communities, especially in regions where fossil-fuel-intensive industries are concentrated (OECD, 2019). Past deindustrialisation and ill-planned climate policies provide stark examples as to why it is important to address the impact of the transition towards net zero and bring those that will be affected on board.

For example, in Australia, the Liberal Party was re-elected in 2019 due, in part, to its promise to protect and invest in coal economies as opposed to its opposition, who failed to explain how they would protect those made vulnerable by the transition away from fossil-fuel generated energy (OECD, 2019). Additionally, in 2018, France experienced widespread protesting and social disruption against the fuel tax implemented (see Figure 2). This was largely as a result of the government failing to address the needs of workers who felt that these environmental policies infringed on their livelihood because poorer households are more likely to spend a larger percentage of their income on gas or transportation (Timsit, 2018).

This photograph shows tear gas being used to disperse 'yellow vest' protesters who protested the implementation of a fuel tax in France in 2018.

Figure 2: A ‘yellow vests’ protest in France against the implementation of a fuel tax in 2018.
(Source: Shutterstock)

The most vulnerable in society are likely to be disproportionately affected by the transition towards a net zero future, and as such it is essential that the transition is just. Failing to understand and address the direct and immediate impact that the transition will have on affected communities will delay the transition and result in increased economic and political instability (Robins & Rydge, 2019).

Moreover, it is also important to realise that even organisations that do not have significant existential concerns in relation to the low carbon transition may still face opposition in relation to decarbonisation. This is because employees or stakeholders may feel that their role or livelihood is at stake. As such, it is important for business leaders to identify where resistance may lie and implement proactive measures to address it.

How do you bring them with you?

It is clear that there will be stakeholders who will lose out in the transition towards a net zero future if no provisions are put in place to address this. Relevant support across all levels of society is required to facilitate the transition. In particular, supportive policies and clear regulation are necessary to guide the transition and communicate expectations for a net zero future.

Several core climate policies should be implemented to guide the transition. Examples include carbon pricing, investment in low carbon infrastructure and innovation to encourage competitive low carbon investment. However, accompanying supportive policies are also needed to ensure that opportunities and compensation are in place to aid individuals and communities most vulnerable to these changes (OECD, 2019). In contrast to the examples above, where governments failed to account for the needs of coal communities that would lose out in the transition, coal workers in Spain were incorporated into plans that would affect their industry (Robins & Rydge, 2019). By including these workers in negotiations and the design of plans to shut down the coal industry, coal communities were brought on-side and even voted in the election for the government, which then instigated the closure of the industry.

Therefore, supportive policy and including those who will lose out in the transition to a net zero future is essential. However, governments are only part of the solution and it is important that businesses and business leaders play a role in reassuring and planning for the futures of those who will lose out. The following subsections outline how business leaders can facilitate the low carbon transition and ensure that all stakeholders are considered and brought on-side.