Net Zero: Can We Have Winners Without Losers?

If we succeed in meeting net zero targets, we stand to shield billions of people around the world from the worst ravages of climate change, safeguarding our built and natural environments into the second half of this century. But there is little doubt that the unprecedented, economy-wide transformation will impact all industries and communities, potentially destabilizing entire segments of society and falling hardest on the most socioeconomically vulnerable.

The Paris Agreement highlighted a “just transition and the creation of decent work” as essential dimensions of our climate change response. But how do we ensure that those whose livelihoods depend on cheap and plentiful hydrocarbon-based energy are not left behind? According to the International Energy Agency, over 20 million people globally were employed in the production, transport and distribution of fossil fuels in 2019, including 6 million unskilled labourers working in coalmining in low-income regions such as China and India. Many millions more are employed in industries that rely, directly or indirectly, on these products.

The stakes could not be higher, says Elliott Cappell, climate change and resilience director at WSP Canada. “Everything that was achieved in the Paris Agreement will be jeopardized if we blindly focus on the environmental, even economic, imperatives, but fail to recognise wider social and political elements that question that logic.”

Climate change is a problem rooted in social inequality. A recent study by Oxfam found that, between 1990 and 2015, the richest 1% of the world’s population were accountable for 15% of climate-changing emissions, more than twice that generated by the 3.1 billion people comprising the poorest half of humanity. By creating climate-resilient communities and jobs in renewable energy, we have an opportunity to bridge this divide. But without careful planning, there is also the danger that inequality is yet further entrenched.

Historically, periods of major economic transformation – from the Industrial Revolution to the rise of e-commerce – have always been tumultuous, driving privation as well as prosperity. For Jim Coleman, head of economics at WSP, the current predicament is reminiscent of the restructuring seen in the UK in the 1980s, when the economy shifted from industry and manufacturing to services. “It prompted a huge decline in the industrial north against huge growth in financial services in London and the south-east, leaving a north-south divide that persists to this day,” he says. Crucially, there was an absence of coordinated planning for the communities most dependent on heavy industries such as coalmining and shipbuilding: “There was an assumption that somehow the market would self-correct and that people would leave declining industries and go into growth industries, but that didn’t happen.”

The COVID-19 crisis has provided a foretaste of the societal challenges ahead. Industries such as retail, hospitality, travel and leisure have been disproportionately hit by shutdowns, and these are sectors upon which some of the more socioeconomically disadvantaged are reliant, including women, young people and minority groups. The pandemic has brought deep-rooted inequities into sharp relief, Coleman says, but has also given us a unique chance to shape the next transition with the benefit of hindsight and greater awareness. “This structural net zero transition represents an opportunity for a fast and inclusive economic recovery from COVID-19 – the opportunity to generate new types of jobs in emerging industries and to re-engage people from sunset industries.”

Addressing climate change could create 65 million new low-carbon jobs by 2030, according to the International Labour Organisation (ILO), a United Nations agency that seeks to advance social and economic justice by setting globally recognized standards. It argues that these new opportunities, in sectors such as construction, electrical machinery manufacturing, copper mining, renewable energy production and biomass crop cultivation, could offset those lost in hydrocarbon energy, and provide a better standard of living.

Moustapha Kamal Gueye, the ILO’s Green Jobs Programme global coordinator, says: “We can use [addressing climate change] to improve job quality and incomes on the back of more productive processes and greener products and services, and social inclusion through improved access to affordable, environmentally sustainable energy and payments for environmental services, notably for women and residents in rural areas.”

Our chances of achieving net zero by mid-century will depend on striking a delicate balance between environmental, social and economic priorities, and learning from the mistakes of the past. It could be argued, for example, that the failure of the UK economy to “auto-correct” in the 1980s was because of a mismatch between social and economic factors: the jobs lost were often in very different parts of the country to the jobs created, and required very different skillsets.

Achieving an equitable green transition will require careful stewardship, says Gregory Richards, who leads corporate engagements on sustainability issues on behalf of institutional investors: “The shift to a zero-carbon economy means upsetting the economic groundings that have guided society for generations. It's incumbent on policymakers, with the support of industry and other stakeholders, to ensure that all workers can contribute to this transformation.”

For Gueye, the need for social consensus is paramount, and at the heart of the ILO’s tripartite approach, which brings together governments, workers and employers. “It is imperative that leaders and decision makers of these three groups align social measures with climate policies targeting net zero,” he says. “Social dialogue has to be an integral part of policymaking and implementation at all levels — otherwise what could be drivers become obstacles to action.”

This tension is clearly illustrated by the “yellow vests” movement, which erupted in France in 2018. This populist protest for economic justice was triggered by the government’s Contribution Climat Énergie carbon tax, introduced in 2013, which had disproportionately hit individuals on low incomes by increasing fuel prices while leaving some industrial sectors exempt.

Issues such as social justice are inherently political — and therefore inherently divisive. But WSP’s Cappell believes that it should be possible to depoliticize the net zero transition. “If you focus too heavily on the social justice aspect, you risk accusations of being a ‘watermelon’ — that is, green on the outside but red on the inside.” To avoid this, he says, every policy or investment decision should be presented not just in terms of long-term climate goals or social equality, but also tangible day-to-day benefits, which could be less divisive. “For example, we know that addressing our ageing building stock is a key area in terms of cutting emissions. The biggest concerns for people living in decades-old apartment towers are the broken elevators, the lack of air conditioning, the cold and draughts. By leveraging energy retrofits, we can rapidly create easily accessible jobs, cut emissions and provide more liveable cities. Ultimately that's what most people want.”

A similar approach has been taken in Chile, where climate change is not presented as the main driver for decarbonization. The country’s historic dependence on imported fossil fuels has helped drive domestic renewable energy initiatives, notably solar and hydro, and more recently hydrogen, which has created jobs and business opportunities. But it is the improvements in living standards for Chileans up and down the country that has made it an easy sell.

“Access to cheap, clean energy from solar installations is particularly attractive in Chile’s colder, less affluent southern regions, where highly polluting timber is commonly used for heating homes, with a huge impact on air quality,” says Juan Pablo Negroni, WSP Chile’s energy, gas and desalination manager. He points out similarly tangible benefits in the deployment of a fleet of 1,000 electric buses in the nation’s capital, Santiago. “It has required investment to reinforce the reliability of the city’s blackout-prone electricity grid, simultaneously benefiting the residents while creating employment openings in terms of maintaining the electrical charging apparatus.”

This awareness of the need to maximize benefits that will secure popular buy-in is gaining traction elsewhere too. The West Midlands Combined Authority (WMCA) — which includes the UK’s second largest city, Birmingham — has enlisted WSP to craft its first five-year plan, guided by five principles: ensuring no one is left behind in the transition; investing in the resilience of places; using its industrial past to create a new future; creating places and connections that help meet the climate challenge; and decoupling prosperity from the consumption of energy and resources.

“There are a lot of technical components around decarbonizing an entire region, but WMCA is clear that they want to have a strong labour market to support it,” says WSP’s Coleman. “They want to know what sort of jobs it will generate, where they will come from, when they will appear, and how to get the population skilled up.”

This is potentially where the problem lies. Ensuring the workforce is fit for purpose will depend on both reskilling existing workers and putting in place the educational avenues for future generations. “To date, the skills agenda has been an under-developed element of the net zero economic story,” says Coleman. “There is a huge disjoint between people coming out of declining sectors and the jobs opening up in new ones. You don't walk out of retail one day and into electric vehicle charging or installation the next.”

The further education sector could play a significant role, both for young people still in education and, perhaps more importantly, those already in work whose skills will become obsolete. It could also address the challenges for those groups that have always struggled to be active in the workforce, for health, geographical or other reasons. Coleman suggests that net zero could be used to help address persistent issues of economic inactivity across some communities.

So far, few employers have created detailed action plans in terms of worker training and upskilling. However, this is an area increasingly scrutinized by investors, particularly as the disclosure of transition risks through mechanisms such as the Task Force on Climate-Related Financial Disclosures (TCFD) and CDP is now extending to workforce considerations. The need for social safeguards for workers is also a key part of the new EU Sustainable Finance Taxonomy, which seeks to set a common language between investors, issuers, project promoters and policymakers. 

If, as the ILO argues, social consensus is critical to a just green transition, then sustainable employment must surely be one of its cornerstones. Achieve that, and not only will we be protecting the natural and built environments for generations to come, but also creating more harmonious, equitable and healthier societies for the people who live in them.