Column: Ensuring the energy transition is equitable | Reuters

Column: Ensuring the energy transition is equitable | Reuters

Phasing out consumption of fossil fuels in favour of zero-emission sources of energy will cause major social and economic disruption, creating a large number of losers as well as winners.

Policymakers have begun to focus on the need for a just or equitable transition to address some of these impacts and broaden political support for ambitious decarbonisation.

Like any welfare-improving public policy, it should in theory be possible for the winners to compensate the losers through taxes, subsidies, transfer payments and other government programmes.

In practice, government help to cope with the costs of industrial transition and adjustment has rarely been enough to offset the losses of the worst-affected groups.

Structural economic changes caused by industrial transformation and changes in international trade have often created significant numbers of losers who have been hard to help through retraining and other policies.

The zero-emissions energy transition is likely to have a similar impact. Providing transitional assistance to those individuals and communities hardest hit by the energy transition is likely to prove harder than policymakers anticipate and needs to be a major sustained focus.