The necessity of coal phase-out in addressing climate change is undeniable. However, such transitions can adversely affect workers and communities reliant on coal for their livelihoods.
Researchers from Chalmers University of Technology in Sweden and Central European University in Austria have scrutinized global government strategies for coal phase-out and found that over half include financial compensation for affected stakeholders.
This compensation, globally totaling USD 200 billion, excludes China and India, the largest coal consumers without phase-out plans. Should these countries commit to rapid coal phase-out in line with Paris Agreement targets and offer similar compensation, the projected cost would exceed USD 2 trillion.
To mitigate global warming, discontinuing coal use is imperative. While many governments, particularly in Europe, have initiated coal phase-outs, these policies can disrupt businesses, raise unemployment rates, and inflict economic hardship on coal-dependent regions.
In response, several nations have embraced ‘just transition’ approaches, wherein governments support impacted companies, workers, and locales. For instance, Germany has pledged over EUR 40 billion to assist those affected by coal phase-out.
Jessica Jewell, Associate Professor at Chalmers University of Technology and one of the study’s authors, highlights that financial support through ‘just transition’ strategies has facilitated the political feasibility of coal phase-out, which was often obstructed by vested interests.
The researchers discovered that countries with substantial coal power production and rapid phase-out plans have compensation mechanisms in place.
These 23 nations, representing 16 percent of global coal power plants, have committed around USD 209 billion in compensation.
Although seemingly substantial, this figure translates to approximately 6 gigatons of avoided CO2 emissions, making the cost per tonne of avoided CO2 emissions (USD 29-46 per tonne) lower than recent carbon prices in Europe (~USD 64-80 per tonne).
Jewell emphasizes the alignment of current ‘just transition’ policies with or below carbon prices within the EU, indicating their viability in addressing climate change.
However, additional funding may be necessary to achieve Paris Agreement goals, particularly considering the crucial role of major coal consumers like China and India, which account for over half of global coal plants without phase-out plans.
According to Lola Nacke, a doctoral student at Chalmers University of Technology and study co-author, estimating compensation for China and India poses a significant challenge due to their economic capacities.
Funding for such substantial compensation remains uncertain, with current international finance mechanisms potentially insufficient. The estimated compensation for China and India alone rivals total international climate finance commitments made in Paris, surpassing current international development aid to these nations.
Lola Nacke emphasizes the importance of addressing both the financial aspects of climate change mitigation, such as investments in renewable energy technologies, and the social implications of declining fossil fuel industries. This comprehensive approach is crucial for facilitating swift transitions towards sustainable energy solutions.