Just Transition, States and Businesses

This contribution is published as part of the Just Transition Research Collaborative's online forum Just Transition(s) to a Low-Carbon World. Bringing together a range of experts working on different aspects of this transition, it showcases different case studies, narratives and approaches to the Just Transition and their implications for equity and social justice.

One reason why climate change is such a complex and fascinating issue is that it affects everyone everywhere. It simultaneously touches upon a wide range of interests, both private and public. Within the climate negotiations space, Just Transition is a contentious issue for the various actors involved, primarily states and firms, as well as NGOs, social movements and trade unions that do their best to monitor and influence the negotiation outcomes.

Diego Azzi is Professor of International Relations at Federal University of ABC (UFABC) in Brazil, where he teaches courses on international trade, financial regimes and global civil society movements.

Public and private sectors working together?

Different understandings of and approaches to the concept of Just Transition have surfaced at the international level, each associated with a variety of approaches rather than a single "one size fits all" transition package. Despite these differences, they have one thing in common: a strong demand for carefully planned policies and strong multilateral cooperation efforts by states and businesses. Having the public and private sectors working together toward transitioning to a sustainable low-carbon economy, if possible, "leaving no one behind" is the ambition in the process to achieve a Just Transition.

The trade union movement’s understanding of the employment-related factors of climate change has evolved over time. It has gone from an original approach, linking labour and environmental/climate issues in a progressive manner, to one that simultaneously addresses workers’ vulnerabilities (that is, Just Transition of the workforce) and the need to rethink and shift the development trajectory as a whole (that is, Just Transition to a low-carbon economy). Neither of these transitions is inevitable and neither should be taken for granted.

The concept of Just Transition has evolved from a campaigning tool to raise union affiliates’ awareness of environmental issues into a lobbying tool in international climate negotiations and, more recently, into a series of comprehensive policy plans to be implemented at the national and local levels. The most important obstacles in this path will be found in the process of moving from the planning to the action phase and, of course, in actually achieving the necessary emissions reductions.

It is worth revisiting two basic questions. First, are states capable of solving the climate crisis by promoting a Just Transition? If the answer is yes, as suggested by the signing of the Paris Agreement, then what kind of state would be appropriate and what role should it play in achieving the Just Transition goals? One initial feature should be that these states count on the means to plan and promote Just Transition public policies and the commitments that result from international negotiations.

Second, and equally as important, is it possible for corporate actors to play a role in solving the climate crisis by promoting a Just Transition? If the answer is yes, then what kind of corporate actions and behaviour would be needed for this to happen? One initial step should certainly be to ensure that companies commit to the Decent Work Agenda. Additionally, accepting trade union freedom to organize at the workplace should be paramount.

It is possible to identify good corporate practices around the world, but they are usually small scale and specific to local contexts, making them difficult to replicate elsewhere. As both public and private investment in fossil fuels keeps rising globally, one can hardly say that even the beginning of a global transition is under way, let alone a Just Transition. In fact, global trends in international negotiations point towards a global shift away from Just Transition policies and the required deep cooperation between states and corporations.

Reality check

The tough reality check for Just Transition policies nowadays is that moves towards neither improved justice for the workforce nor a low-carbon economy transition are taking place at the required scale or speed. At least, not in accordance with the trade union movement’s understanding of the Just Transition, forged in the lead-up to the Paris climate conference (COP21).

Attempts to develop political and economic solutions to the climate crisis have been thwarted by national self-interest, whether of carbon-intensive developed countries, or increasingly carbon-intensive emerging economies, or of typically small, low-carbon developing countries that are the most vulnerable to the impacts of climate change. Effective social dialogue and tripartite decision making are often a distant reality for the labour movement in most parts of the world. Since the 1970s, the neoliberal retreat of the welfare state has not only harmed workers and weakened unions but has also created space for increasingly deregulated industrial and financial markets, which have further weakened states in the face of increasingly powerful private economic interests.

At the domestic level, corporate interests regularly lobby against public regulation that promotes decent work, better wages and labour rights. Governments in developing countries are certainly more vulnerable to these kinds of pressures, but they are not alone.

In the energy sector — an area crucial to the debates on Just Transition — the technological advances that made fracking possible and profitable have subsequently contributed to lowering gas prices in the US and oil prices worldwide. The present geopolitical scenario is thus one of fossil fuel-based energy abundance, which might also lead to a decline in investors’ interest in clean energy sources and in the energy transition itself, preferring instead the financial returns on fossil fuel companies’ assets. According to UNEP (the United Nations Environment Program), renewable energy investments have plummeted by more than 20% from 2015 to 2016.

The fact that the United States has developed into an energy powerhouse through massive shale oil and gas extraction cannot be overstated. It is in this context of domestic energy abundance that Donald Trump has pulled the US out of the Paris Agreement and the associated (voluntary) commitments, adopting a unilateral foreign policy approach. While many countries and even several US states and cities have reaffirmed their commitments to tackle climate change, the US Administration’s retreat has put other governments in an uncomfortable position, since no systemic transition will really take place without the strong engagement of the United States government and its companies. It remains to be seen, however, to what extent states and companies will ultimately prioritize Just Transition policies over short-term concerns (usually in the form of either profits or votes).

Bright prospects?

Currently, prospects do not seem to be very bright. As in other negotiating arenas, such as global trade, finance or investment, there should be no misleading assumptions concerning the good will of governments and corporations in committing to Just Transition policies. Just Transition policies involve costs that neither governments nor corporations are willing to pay — even when it is a proven fact that the future cost of inaction is far greater than the cost of acting now.

Since the signing of the Paris Climate Agreement, peak momentum has passed. We are now living in a very different context compared to just three or four years ago. While discussing Just Transition policy documents within the ILO and the OECD is relevant, the climate emergency appears to have lost importance in the public opinion debate and corporate media. At present, the global economy and industrial relations seem to be heading in the opposite direction than the Paris Agreement.

We are currently witnessing a slow but steady industrial transformation toward an increasingly robotized economy in which automation is going to both shift and eliminate jobs at an accelerated pace. This is the transition that companies are actually paying attention to and investing in, as noted by the World Economic Forum’s emphasis on this issue in its recent publications.

At the same time, this fourth industrial revolution will be firmly backed by strengthened protection of intellectual property rights (going further than the already problematic trade-related aspects of the intellectual property rights (TRIPs) agreement at the World Trade Organization (WTO)), and resistance from developed countries to promoting meaningful technology transfer policies to developing economies. Automation transition is, in fact, increasing the knowledge gap between developed and developing economies. It is vindicating the fears of developing countries that "high Just Transition standards" may either increase dependency or be used against them as non-tariff barriers in trade relations or as conditionalities in extra-UNFCCC (United Nations Framework Convention on Climate Change) agreements, treaties or loans. If technology is not transferred, is it not reasonable to grant developing countries — the least responsible for the climate crisis — waivers or special treatment in the implementation of Just Transition policies?

With regard to foreign direct investment protections, since at least the 1960s multinational corporations have been lobbying for Investor-State Dispute Settlement (ISDS) mechanisms in bilateral investment treaties and trade deals (such as the Investor Court System now promoted by the European Commission in deals with Canada and Mexico). Those provisions severely affect the ability of receptor countries to preserve their national sovereignty and an autonomous domestic policy space without being subjected to the constant threat of being sued by a corporation for causing (even estimated) profit losses — which will eventually be compensated through public funding.

The fact that (northern) mining and oil companies are reported to be among the most frequent ISDS plaintiffs, often suing (southern) countries for policy regulations that hurt their profits, does not help attempts to build a scenario for significant cooperation and social dialogue aiming to bring about a Just Transition. According to Public Citizen, US Tobie Mining and Canadian Cosigo Resources have sued Colombia for creating a national park in an area in the Amazon forest where they planned gold mining. The companies have asked a private tribunal to order Colombia to pay USD16.5 billion — over 25 percent of Colombia’s national budget. The USD16.5 billion sum is related to what the corporation said it hypothetically could have earned if allowed to extract all the gold and iron believed to lie beneath the rainforest land.

In this sense, any progressive and well-intended Just Transition framework must be clearly opposed to ISDS tribunals, which limit the ability of the state to adopt sound social and climate policies, and thereby undermine the democratic rights of citizens to freely choose policies that benefit workers and their communities. These are just some of the issues that must be dealt with to truly begin advancing Just Transition policies in both developed and developing contexts.

Photo: Elizabeth Stilwell (Creative Commons via Flickr)