This was the question at hand as more than 500 practitioners in sustainability, climate and finance from across the region came together at the Just Transition Forum in Asia (JTFA) organized by the Friedrich-Ebert-Stiftung Regional Climate and Energy Project in Asia and Climate Action Network Southeast Asia (CANSEA) in September.
Many countries in the region are feeling the impacts of rising food and energy prices, and growing debt. Sri Lanka was the first to go into a full-blown economic and humanitarian crisis; Pakistan, Laos, and others could soon be on the brink of a financial crisis.
We are now facing not just a climate crisis, but also an inequality crisis. Simply transitioning energy systems toward green renewable sources will not address the latter. Resource inequality, and the deeply rooted inequities that have caused it, are at the heart of this issue.
Financing a Just Transition
The idea of a just transition is powerful because it brings together the goals of social and economic development with the goals of sustainability, according to Washington, D.C.-based Neha Sharma, senior specialist and evaluation lead at the Climate Investment Funds (CIF).
“It is an opportunity to address our climate targets as well as the Sustainable Development Goals (SDGs) by ensuring that we transition to a green economy while providing opportunities and benefits especially to those who are the most vulnerable to climate and economic impacts,” she said.
To fund this greening of the economy, a significant amount of capital is required for just transitions. This type of finance, which we will call “just climate finance,” is not just any type of finance going into renewable and other green investments. Sharma notes that “just climate finance behaves differently to climate finance that often goes to the most bankable and highest return projects. It stresses on social equality and aims to challenge existing power structures versus operate within them. This in turn implies creating new models of decision-making, decentralization and ownership.”
There are a number of challenges inherent in the current model of financing climate action in the Global South that prevent this from happening. One problem is that rating agencies have systematically undervalued developing countries. They give these countries higher risk profiles and downgrade them more frequently; their financial tools fail to recognize the specific challenges in developing countries. It makes it a lot more difficult for developing countries to take advantage of the opportunities that green investments present.
The disproportionate economic reliance on commodities for developing countries, specifically on agriculture and mining, does not help either. This dependence renders them vulnerable to commodity shocks – but this, too, is the result of historical global inequalities.
What Does ‘Just’ Mean in Climate Finance?
Speaking from Bangkok, Jenny Yi-Chen Han, a researcher at the Stockholm Environment Institute, emphasized that in order to facilitate a just transition, we need to shift away from the trend of large-scale privatizations, especially within the energy and agriculture sectors. We need to be cautious against demanding profits for essential services, as well as cases of “green grabbing,” which is the enclosure of land and resources for environmental ends through large-scale renewables and biofuels that are motivated by corporate interests.
“Oftentimes it is easy to assume that energy transitions will automatically lead to fairer outcomes,” said Han. She urged people to be critical of the impacts of the energy transition not just on jobs, but also its social implications, citing research she has done with partners. Without confronting the power asymmetries embedded within existing systems, transitions may exacerbate and replicate inequalities. Thus, we need to go beyond technical solutions and also highlight the socio-political dimensions of transitions, including looking deeper into the intersectional inequalities embedded within energy systems.
We must broaden existing funding mechanisms that are targeted toward emissions reduction and adaptation, and begin funding support programs and interventions that help affected regions and communities manage the impacts of the transition.
For example, CIF offers grant funding that is long-term and is based on inclusivity and the principles of a just transition. Sharma said that one way to achieve this is through place-based planning and place-based finance so governments and municipalities can access funding sources in designing just transitions underpinned by context-specific consideration of the various dimensions of transformational change.
Another critical way is to ensure those who are impacted the most by climate change and the actions to adapt to climate change have the power to make decisions on the use of climate funds. This calls for the scaling up of models such as the CIF’s dedicated grant mechanism and other such direct access mechanisms.
COP27: Beyond the Just Transition Declaration
More than 30 countries committed to the Just Transition Declaration at COP26 last year, which aimed to ensure that the transition to a net zero and climate resilient future leaves no one behind, especially those in sectors, regions, and communities that depend on high carbon-emitting sectors and livelihoods.
At COP27 and beyond, aside from driving more action on climate finance to support this, Han emphasized that “we must also bring in the voices of the most impacted communities and be critical of how financed projects affect them on a deeper and structural level – it must strengthen the Free, Prior, Informed, Consent (FPIC) of communities in climate action plans as the Glasgow Climate Pact has failed to do.” Sharma also highlighted the “need to put workers and communities at the front and center of decision-making processes.”
Han and Sharma’s work in climate finance and social justice, respectively, underscore the critical overlap between the two. There is a need to shift power in these processes in order for just transition – with just climate finance – to be transformative. If it does not interrogate existing power structures in order to promote fundamental systems-level change, “just transition” will only be a buzz word in negotiation halls and we will have missed the opportunity to redress past harms and do things differently.