Glossary term
Just Transition
Subject: Sustainability and ESG, Climate Risk
Also known as: Just energy transition
A just transition is a shift to a low-carbon economy that is planned to be fair, protecting the workers, communities and regions that depend on high-emission industries and sharing the costs and benefits.
Explanation
Moving away from coal, oil or heavy industry removes jobs and local income, often in places with few alternatives. The idea of a just transition is that this change should be managed, not left to markets alone. Typical elements are retraining and redeployment, early notice for workers, support for local economies, new investment in affected regions and a voice for unions and communities in the plan. The concept appears in the preamble of the Paris Agreement and in many national and company plans. For businesses it links climate goals to labour practices and human rights. For financiers it adds social conditions to transition lending. Critics note the term is defined differently in different places. Plans that ignore workers and communities lose public support and tend to stall.
Example
A power company plans to close a coal station employing 1,200 people in a small town. Before announcing the date, it agrees a plan with unions and the local council: paid retraining, jobs at a new solar site nearby, and a fund for local suppliers.
Not to be confused with
- Transition Risk
- Transition risk is the financial exposure of a firm to the low-carbon shift. A just transition concerns fairness to affected people.