Episode 1: Asia Pacific's Just Transition

Full transcript

Ivy Kuo: Hello, I'm Ivy Kuo, PwC Asia Pacific ESG Leader and you're listening to ESG: Defining Asia Pacific's Future. This podcast series provides insights on the latest sustainability trends in the region to help you solve today's challenges and prepare to take on tomorrow's. 

In this second season, we focus on Asia Pacific's just transition to net-zero and I'm delighted to introduce you to PwC's expert in this topic, Kirsty Haymon.

Kirsty Haymon: Thanks Ivy for the introduction. There's an increasing call to action to ensure that the shift to net-zero is fair and inclusive. In this second season, we'll be exploring how stakeholders can achieve an environmentally sustainable global economy, while also ensuring no one gets left behind. 

We have a great lineup of speakers covering topics from energy, justice and human rights, to community resilience and workforce transformation. Our guests will be sharing their views on Asia Pacific's just transition and the strategies being deployed in the region to drive inclusive opportunities for those most impacted by the shift away from carbon intensive activities. 

Please note that the opinions expressed in this podcast are solely those of the speakers and do not reflect the views or opinions of any organisations with which they may be affiliated. Let's get started.

So welcome to this first episode on Asia Pacific's just transition. In this podcast we'll be discussing the fundamentals of a just transition, what it is? Why is it important? And what can we expect in this emerging area in a region as diverse as Asia Pacific? 

My name is Kirsty Haymon and I've spent over two decades working in the region advising governments, developers and investors on managing their environmental and social performance. 

With me today is Kate Hughes from the Asian Development Bank and Haley St. Dennis from the Institute of Human Rights and Business. 

Kate, thanks for joining me and for taking the time to share your experience, not only in developing ADB's institutional agenda, but also leading the bank's support platform. We understand that it was launched late last year. Can you tell us a little bit about why ADB is investing in the just transition space and the objectives of the platform?

Kate Hughes: Sure, thanks Kirsty and thanks for having me on board. So ADB has really strong commitments on climate, including a $100 billion climate finance target. We are the climate bank for the Asia Pacific region, but it's really important that as part of that, we ensure that we also take account of social and economic development needs of our member countries and that we fulfil our mandate as a development bank. 

And just transition is a really critical part of that because it's where we can bring together those climate objectives and supporting our member countries in their transformational change for climate change, but while also prioritising those social and economic development objectives at the same time.

Kirsty:My second guest is Haley St. Dennis, Head of the Institute of Human Rights and Business just transition portfolio. Haley, amongst your many achievements, you've worked on sector guidelines for the UN guiding principles, the establishment of Myanmar Centre for Responsible Business and the pilot methodology for the Corporate Human Rights Benchmark. 

You bring a substantial background of human rights related experience even in the region. So welcome. Tell us a little bit about the scope and focus of IHRB's just transitions programme?

Haley St. Dennis: Thanks very much for having me. Our scope is one that's really rooted in the premise that social disruption is really the greatest threat to climate action at this point, right? That we need to cut emissions deep and fast and with that comes enormous disruption to people, to communities, to workers and workplaces. And if that is not managed and not managed well, it will actually threaten our climate goals themselves. And so this term just transition is one that really tries to encapsulate that premise of doing things right from the get-go.

Kirsty: I know IHRB looks at the risks of both the transition out and on the other hand the transition in. Can you just talk us through about the risks associated with both of those?

Haley: Absolutely. I think to date and especially over the last few years, much of the emphasis has been on the transition out, and by that we mean the transition out of fossil fuels, particularly coal in the first instance. And that's in part because of some of the recent breakthroughs within global climate conferences that have established stronger language around the need to actually phase down and hopefully eventually phase out coal operations entirely, some of our highest carbon emitting sectors, but eventually also bringing in questions of oil and gas and other types of fossil fuels, and there's obviously very deep physical footprints that go into that infrastructure.

There's also a lot of jobs and so it brings from a social dimension, both workers and communities front and centre into how to manage the closure of those assets. And there are, of course, from our perspective, rights-based approaches that we think are central to doing that very well.

And at the same time, there's also a very interesting state of play developing around the transition into renewables, both from the perspective that a number of the fossil fuel majors are actually integrating into diversified energy companies. So that out and in question somewhat blurs or becomes one that a single company is needing to manage. But then also on that flip side of the transition into a green economy powered through renewables, there are still enormous risks from the social perspective that come with that growth of renewables in its industry.

Kate: Maybe if I could just build on something that Haley said about the in and out. I actually think to add another perspective, that this is really one of the most powerful potentials of the just transition agenda. 

In terms of helping countries to see the potential for the in means that they're more willing to transition out. So I absolutely agree that the process needs to be managed well and that all those potential risks and potential impacts need to be understood and mitigated, but helping countries to understand that opportunity agenda and where there is that potential for green economic diversification is such a powerful driver to actually increase climate action and increase the activity on the outside. 

And I think that's where the just transition can play a really important role in helping countries to see how they can make that transition well so that they are then more willing or able to take on more ambitious climate action.

Kirsty: We've talked about it already so many times just now. What is a just transition? Is there a universally agreed definition or some key concepts? Is that important? Is that necessary? And how does that translate into a region like Asia Pacific, particularly when we've got developing economies where the principles and the processes that we see coming from developed economies may not actually fit the realities of the region? Haley, can I come to you first on that point?

Haley: Sure. I suppose I think it's quite helpful to go back to the origins and roots of this concept. It's grown in popularity very quickly, but it actually goes back decades and it's rooted in the labour movement and the trade union movement who all the way back in the 70s in fact realised that it'd actually be quite useful to join forces with the environmentalists. And that was really an intent to pincer some of the oil and gas companies around health and safety issues. So it was quite a specific campaign, but it evolved from there to really reflect the fact that our dependence on carbon economies and carbon intensive production and consumption of course needs to be reduced from a climate imperative, but with that premise comes a lot of disruption as I said. A lot of people who stand to lose or gain a great deal depending on how that's managed. So that needs to be just, and that's where this concept came from.

And so in terms of international policy architecture, your question is, is there a definition or not? The answer is no, essentially. 

We have a reference to just transitions embedded directly into the 2015 Paris Agreement, which was an enormous deal, still is, the fact that it's right there within a climate agreement. And timed with that reference were the release of the 2015 ILO (International Labour Organization) just transition Guidelines, and those provide national policy makers, especially with guiding principles and a high level framework for action that's particularly oriented around how to shape industrial policy.

So it was a strategic decision made at the time not to essentially adopt a definition to bog things down with potentially drafting by committee of a very visionary concept that could in many ways potentially be seen, especially at the time in the context of 2015, as a complication to the fundamental premise of the fact that we just need to reduce emissions. So let's not make it too complex, let's keep it high level so that people can make it what they will and ideally mainstream it along the way.

And I think that was a very smart decision. It was very strategic. It has led to this concept becoming much more mainstream, but it's also led to this current state of play we're seeing now where there's an increasing number of businesses, financial institutions and industry associations committing to just transitions, but with really varying definitions and interpretations of what that means. 

And so it's created the state of play today where at best there's a bit of confusion, and at worse there's a risk of co-option, of this term actually being used in ways it was never intended and potentially to actually slow climate action because of the complexity that it can bring and the ability to say, "Oh, this is hard, we need to slow things down."

Kirsty: Yeah. It's certainly a challenge and it's certainly a difficult one. I don't think we've seen something of this scale in our lifetimes. How do we break this down so that we can provide support, guidance, advice, again back to the principles and processes and make them relevant for those particular issues?

Kate: Yeah, absolutely. It is really difficult and this issue of a definition is something that we've thought about a lot. And on the one hand, as Haley said, because it wasn't well-defined, it's actually had space to evolve. And you've seen some really good evolutions in terms of how it has gone from an agenda quite, more narrowly focused on workers and jobs, to now looking at some of the broader issues like economic diversification or trade policy, for example, private sector mobilisation, some of those broader issues. 

But it does risk going a little bit broad because if it goes too broad then it becomes something that is impossible to implement.

And because of its strong tie to the development agenda, it also runs the risk of becoming an agenda about good development, which is still a critical agenda, but not necessarily every aspect of good development needs to be captured under just transition.

I think one of the things we try to do to anchor it a bit is to go back to countries' NDCs, their Nationally Determined Contributions because under the Paris Agreement that is the instrument where they articulate the sectors or the areas that they're planning to focus on in terms of climate action.

So one of the interesting things with just transition is I really see it as an agenda that needs joint processes. It really needs cooperation between different entities involved in a particular project or a particular activity, and that includes the proponent of the project. So whether that's the owner of a particular power station or it's an entity that's planning to implement a decarbonization project, the government, and then in a lot of cases an institution like ADB that's needed to support both on the technical capacity side and also on the financing.

If we look at the type of support that I think countries in the region need at the moment, the first I would say is upstream analytics. There's a lot of discussion on the just transition agenda. There's a lot of growing awareness, but there's not a lot of quantitative analysis to actually help to support the decision-making and help to really identify where the impactful interventions are going to be.

One of the other critical things that ADB focuses on in terms of just transition, is it being an enabling agenda and that actually, the social and economic side of the support in terms of timing actually needs to come ahead of a lot of the climate related activities. 

So for example, if you are transitioning away from a particular industry in an area, then the support for re-skilling for the creation of quality jobs for promoting green industry crowding in private sector, that needs to be done in advance of when the industry actually winds down rather than a risk mitigation agenda that comes afterwards as a kind of cleanup approach. 

But in order to do that, you really need to understand what the impacts are going to be and what the needs for that type of support and where that support going to be effective.

Then the second is, I think, policy dialogue or how a country's actually going to implement the just transition as part of their climate policy. One of the things about just transition is, and I think Haley made reference to this, is it's not actually all new. So the term might be new, but a huge number of the activities or what's required to implement a just transition is actually already occurring. So in a lot of countries there's policy, labour policy, there's policy on retrenchment, there's policy ongoing or programmes ongoing on supporting greater gender inclusion. 

There's policies or programmes to support development of green innovation business incubators, but they're not well coordinated and brought together. And also, those areas of policy or programmes don't necessarily respond to the drivers that will arise as a result of climate action.

So helping countries to understand what just transition is and then look at what they already have in place and a gap approach, and then seeing how they want to actually implement that in a policy framework is really critical. And then making sure that that is done in a participatory way. So alongside that, supporting all the stakeholder mapping, the stakeholder engagement process and making sure that that participatory approach is there, is the second.

Kirsty: Yeah, absolutely. Haley, can I just throw to you, and if you can pick up, I think also just on the participatory aspect that Kate referenced. We often talk about what's the role of the public sector, what policy reforms, what can the private sector be doing, but actually the people who are being impacted are largely not included in the development of some of these frameworks. And then when it comes to implementation, there's the risk of it not being successful because they haven't had a voice. 

What do we do about that? What are the practical steps? What's being done in that regard or what needs to be done?

Haley: Yeah, really well put and very much I think reflects the state of play we're seeing right now where we all know, I like to think we all know that the engagement of those potentially affected is highly valuable to the decision-making that needs to happen and informing it in a way that you as a company or as a decision-maker, say within a Ministry, can know that you are mitigating risks to people and maximising the opportunities. And yet that isn't really happening in practice, at least as far as we're seeing on a scaled level.

And you mentioned earlier, JETPs, this new acronym JETP, Just Energy Transition Partnerships, the first of which was announced under very splashy headlines at COP26 and Glasgow for eight-and-a-half billion to go to South Africa's national decarbonization initiatives. Five Western sovereigns pooling what's actually quite a small amount of capital, but intended very much to catalyse the much greater levels of private sector investment required just to transition that one coal economy into a net-zero future. And it has a very inspiring just transition framework that the PCC, the Presidential Climate Commission developed in great consultation with local civil society and industry and many other actors in-between.

But we're now starting to see about two years in, the challenges of actually bringing that to life in a meaningful way. And in part that's because so much of this is done on a commercial confidential basis.

I think you mentioned this earlier, Kate, the investment plan that actually lays out how this eight-and-a-half billion is spent is negotiated behind closed doors for in many cases very good reasons, but then that imperative of participatory approaches of ensuring that the workers and the communities that stand to lose or gain from all of this have agency in the process and actually get a say over the trade-offs that are being negotiated aren't in the room and therefore finding out quite after the fact the decisions that have been made.

And we're beginning to see that same process now playing out in Indonesia, in Vietnam, which are a little newer to this JETP game, but nonetheless, JETPs becoming this emerging model for national level decarbonization initiatives. And so raising even bigger questions about whether and how that decarbonization as a development model might need to be institutionalised because at the moment it's very ad hoc. 

The J in JETP itself is being interpreted very differently across the JETP countries that currently have these partnerships. And there are many others I think waiting in the wings trying to attract that level of catalytic investment essentially to kickstart their own renewables revolution and close out of their carbon economies.

So that question of participatory approaches and agency of affected groups is absolutely fundamental to the solution from our perspective. But at the moment, we're not really seeing that play out in practice.

For me, the just transition is the only way we will achieve net-zero in time. It is the answer to preventing the social disruption that will halt and delay the deep, hard, fast emissions cuts we need to Kate's point around speed and scale. Forget 2050, we need to be halfway there within the next seven years. And I think time horizons are very difficult to internalise when it comes to this sort of decision-making. And so it feels a bit counterintuitive perhaps from the social perspective to say we need to go harder, faster, deeper, and yet we do in order for society and also future generations to thrive.

And so again, just underlining that point that the just transition agenda and the principles therein are absolutely the key to doing that well, doing that right and meeting our climate targets. And there are tremendous opportunities for the various types of groups that could potentially be affected by the various industrial change to come, but that needs to be intentionally designed and it needs to be done with them at the table and really moving them from a frontline position of often protest because that is the only way for them to be heard, to being really at the head of the table.

And that's easier said than done of course, but until you try, you won't know. And that multi-stakeholder engagement approach is hard, but it's incredibly enriching and incredibly valuable and it will build enormous amounts of trust for your business. 

And so I guess I really just wanted to encourage those listening in those roles within practitioner seats to take their bravery pills. You just have to roll up your sleeves and get on with it because there is no best practice blueprint right now. There is no established practice to point to essentially to say what works well and what doesn't because we are all in a learning by doing state, and that does require bravery. It does require I think a frankness about not just what worked well, but what didn't.

And I think also an understanding from those that have maybe historically been in maybe antagonistic positions for good reasons, but this new paradigm of the need to work together and understand that mistakes will be made, but if that genuine commitment to engagement and dialogue is there and that those affected are heard and seen, that those lessons can be learned and that those actions can be corrected in order to ensure improvement is continual and that practise gets better, and overall that playing field gets raised along the way.

Kate: Building on what Hailey was just talking about. I think one of the key things about just transition in terms of how we approach it, and we support stakeholders to understand is the concept of direct, indirect and induced impacts. And when we look at a change, the direct impacts are comparatively better understood. So for example, workers in a particular industry or project that will be impacted, and even the immediate communities surrounding them. And we have processes for consultation that can be well-built for that.

But the challenge of a just transition, what it really needs to look at is beyond that, at the more structural changes that will occur and that's rare talk about the indirect and then even the induced impacts. 

For example, like change in government revenue as a result of one industry declining and what type of induced job loss that would result in. And that actually also is when it becomes more a systematic change and when you get compounding impacts across a number of activities. And when you're talking about compounding impacts, it might go beyond the responsibility of the stakeholders or actors involved in an individual project because it's actually how their project may interact with another project and how their impacts across the two projects may compound.

And that's where governments and other stakeholders will have to take a critical role because they have to have that oversight across all of the related activities happening and how that's going to build up into a more structural change. And when you start to look at it that way and start to think about the more structural changes, then that's when you get different stakeholders as well. And that's when that participatory process needs to think about different parties in the engagement as well. Not just those directly involved in either the geographic region or the particular industry that's being impacted, but those that may also be impacted as a result of the induced impacts or the longer term changes that will result.

Kirsty: Yeah, absolutely. I think if we look at areas like East Kalimantan that's been developed over decades from coal mining, the supporting infrastructure, so the value and the supply chains around that, transportation, logistics vehicles, and then the communities that support those workers. And then you look at the potential decline of the industry and what those communities are going to do. And it takes considerable foresight for the government to plan in that regard in a way that they've really not needed to plan before. And as you mentioned, the systemic requirements, systematic change that's going to be needed is substantial.

What key policy areas might need to be looked at? And I think in particular, again for the developing economies in the region around even the social protections for those induced and cumulative impacts of for example, supporting communities, what are the policy frameworks that are going to need to be looked at? What key areas?

Kate: What's key I think is making sure that that reform and that strengthening process is taking account of the changes that will occur as a result of climate change action and making sure that you get the alignment between the work ongoing on strengthening social protection and the drivers that are increasingly becoming evident if we implement the scale of climate action that we actually need to implement and at the speed that we need to implement it.

Then the other social policies are also critical. Education is obviously a critical area and in terms of short-term and more targeted, you have tertiary and vocational education or skilling and reskilling and what type of work is being done on that. So for example, in one of the member countries that I was recently in, they have job standards, they have technical training standards for jobs. So looking at those suites of technical training standards and ensuring that that suite includes technical standards for new industries, for renewable energy, for that type of thing, that the skills that are needed are there, is really critical.

And then longer term reform of education. So looking at university degrees, looking at pathways for youth, making sure that their education and their pathways to jobs will correspond to the future that we expect under a net-zero scenario. Gender policies are also really critical, and I think you mentioned it in your introduction, but we have a real opportunity here to achieve or to address some of those really difficult barriers as a part of climate action if we are proactive and if we bring those policies and those stakeholders into the conversation, and gender equality is one of those really important areas where it can be done. If it's deeply embedded into just transition approaches, then it gives us an opportunity to try to address that very challenging area at the same time as addressing climate change.

So I'd say social policies is one suite of policies that we need to look at. Obviously the climate policies is where it starts in the NDCs, long-term strategies, national adaptation plans and the suite of climate policies that a country may have in terms of how they interact with just transition, how they integrate concepts of just transition. And then the last set I would say is more around some of these structural changes. What macroeconomic policy, what economic diversification plans does the country have?

Trade policy, it gets complex and it's different sets of actors, but for example, you look at new drivers like the European Union's Carbon Border Adjustment Mechanism, and for countries for example, in the central western region that ADB supports. If that policy really takes off, then their green economy policies and their potential industrial reform and industrial change will respond to a driver like that. So then that's a third set of policies that I think you need to take into account when you are thinking about just transition, and not necessarily all of them all at the same time. It depends what you're targeting under a just transition agenda, which part of it you are doing, but making sure that you have that holistic overview.

And then I think lastly, to make sure that those sets of policies and those sets of activities are not looked at in isolation. What the really critical bit of the just transition is, is to coordinate these and to make sure that they're done together and cross-Ministerial coordination is really critical to that. 

We see in a lot of countries that they established working groups for the preparation of their nationally determined contributions. So they may have set up a committee or a consultative process across government where perhaps they had people nominated, representatives nominated from different industries, but in a lot of cases those structures were dissolved once the nationally determined contribution was submitted. So making sure that cross-Ministerial structure to really bring together the different Ministries on pursuing a just transition is really critical for taking it forward.

Kirsty: I think we've, between us, agreed that obviously the stakeholder engagement and the collaboration, cooperation are probably the fundamental ways of which we need to go about this change and the collaboration between stakeholders really needs to be around those principles as well. 

I'm just mindful of the time, so I'm just going to phrase one last question to you both. Where are we at? What can we envisage in the next two to five years in the Asia Pacific region? What challenges might we need to overcome and what are the possibilities that we've got to make a difference? Kate?

Kate: Okay. To take a really positive outlook on this, I think we're at a really exciting point. So there's definite growing agreement on the need for a just transition, and I think the growth in attention to the subject has been exponential in the last 12, 18 months. So you now have a lot of groups of stakeholders, very visible groups discussing it, the GFANZ group, you have the JETP platforms, you have the work that the ILO is doing. There's a lot of discussion and discourse on the need. What the challenge is, is the practical implementation of that, and there are not a lot of precedents in terms of practical implementation.

There is in terms of the components of a just transition, but in terms of an integrated approach tied to climate action, it is a challenge, but there is progress. There is actually a lot of work ongoing in many countries in Asia Pacific. In Indonesia, the ADB is doing a lot of practical work in terms of how we actually implement this, how do we build it into legal agreements, how do we build it into financing, how do we differentiate who's responsible for paying for which aspect of a just transition? Those really thorny questions about how to practically implement it.

There is some progress, but it's not on the scale where it's well understood and it's not on a global scale and where it can be easily replicated without a lot of intense support alongside it. So I think we need to continue, but we need to really push forward on agreeing conceptually that it's really critical and just trying to do it on a practical sense and putting financing behind those trying to do it so that we can get more practical examples of what works and what doesn't.

Kirsty: Haley, if we can go back to the original question that I posed to Kate around what are we seeing, what's going to happen, what can we expect in the short to midterm around this? What are the challenges? What are the opportunities?

Haley: Thank you. Big closing question. I think I would put up three pretty interrelated challenges that in many ways sum up everything we've touched on, but in terms of where we're at right now, I think the first challenge is deeply political in that we are not seeing the mitigation that we need to right now at the speed and scale required to meet our climate imperatives and to keep the 1.5C (rise in temperature above pre-industrial levels) threshold viable. And in that sense, we're really at the moment seeing more of an energy addition than an energy transition. And so we're still waiting for that, I think, reality of actual transition to come and with that again, will come significant disruption. So it needs to happen. We need to be ready for it, but it's still on the way.

I think the second is very much around power and participation and the need for this transition. It's almost a misnomer, the word transition. It almost would be better to use the word transformation because that is what's required and we've touched on that a lot in terms of the power imbalances that have led to the kind of climate crisis that we're in. The fact that poverty and development levels are at the state they are. And so this very visionary concept that promises to essentially flip all that on its head and to use decarbonization as a development transformation is very much dependent on those power dynamics being completely restructured, and that will require significant bravery from those in power willing to actually change their approaches and allow others in.

I think the third is really around this question of standards or a lack thereof, defining and therefore guiding what is and is not a just transition, a technical project, but also more of a national and macro level and the need for much greater quality control around the J (Just) and JT (just transition). And so from our perspective, much more monitoring, engagement, and ultimately accountability is needed around just transition commitments and claims. In the same way that we're now seeing, a real backlash to greenwashing, I think we will begin to increasingly see a backlash to JT washing, where these glossy claims are being put up on corporate websites or otherwise, but with no real substance backing them up.

Kirsty:Our thanks again to Kate and Hailey for their insights. Today we’ve heard from two organisations that are driving the just transition agenda. We’ve heard how countries need to see the potential and opportunities associated with the transition in, to ensure they're more willing to transition out; this is an essential driver to increase both climate action and the investment needed to make this a reality. 

There are a growing number of national, regional and international initiatives that are seeking to create guidance that moves us from theory to practise, and in understanding by doing. We need holistic, cross-ministerial action from the public sector and investment in innovation and people from the private sector. A participatory approach is essential, which will very much disrupt the existing power dynamic but ultimately lead to more successful outcomes. In our next podcast we’ll be hearing from two energy sector companies in the midst of this challenge, and what practical and meaningful action they’re taking to drive this important agenda forward.

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