What does a ‘just energy transition’ for Europe actually mean? Does natural gas have a place? And what role can private sector companies play? Dina Darshini offers some answers.
As Europe navigates the energy transition and shifts away from fossil fuels, how do we ensure we as a collective do it in a fair way, leaving no one behind?
The term ‘just transition’ raises several key questions:
How do we define and measure ‘just’?
Should the costs and benefits of moving to a low carbon economy be shared equally or proportionately across society?
Should sector-specific indicators be developed to assess corporate contributions, given that e.g. the automotive manufacturing sector has different impacts and supply chain structures from the electricity generation sector and oil & gas sector?
‘Just’ for whom?
Do we simply mean ensuring that there are policies and channels in place to support workers who will lose their livelihoods because of the decline in fossil fuel-linked industries?
Should we extend this support to communities who will be directly and indirectly affected by changes in their local economy or environment? Should large corporations that have benefitted financially and thrived in the previous fossil fuel era be eligible for public funds – or should they dive into their own cash to adapt?
On the consumer end, should mechanisms be in place to identify and support those who may be disproportionately affected by fuel poverty due to changes in final end-use energy prices or utility provision?
2030? 2040? 2050?
Can there be a parallel end-goal?
Should we be using the momentum and resources here to also address some broader inequalities through social and economic restructuring?
Local, national, regional, or global?
Given global supply chains, the interdependencies and integration of various industries and nations – it may be more effective to also consider the wider picture.
Making way for a just transition in one area, but ‘outsourcing’ issues or the worst of effects somewhere else, is arguably not fair.
For example, as demand for batteries in electric vehicles and energy storage solutions increase in Europe, so will the mining of minerals needed for these batteries.
‘Just’ supplier engagement is essential in ensuring that these minerals are sourced sustainably, and not from politically unstable areas linked to pervasive poor labour rights.
To conceptualise and be able to implement a universal policy approach that is fair in all contexts is extremely difficult, and arguably impossible. Each community, industry, and nation’s ‘transitions’ will feel and look different based on their existing dependence on fossil fuels – not only as an energy source, but as a livelihood.
The EU Commission, Parliament, and Council faced such a dilemma last year when negotiating the €17.5 billion ($20.45 billion) EU Just Transition Fund (JTF) which aims to support currently fossil fuel-dependent regions to decarbonise their economies – leaving no one behind.
The hope is that the JTF will also mobilise further private capital into green industries and retrain workers from high-carbon emitting sectors such as coal mining and power generation.
Poland, one of the most coal-reliant countries in Europe, along with Germany, Romania, and the Czech Republic, are likely to be the main beneficiaries of the funding.
The EU Commission made clear that the JTF funding cannot be used for the fossil fuel (including natural gas) and nuclear industries.
However, it conceded to introduce a separate 1% allowance for natural gas in the €200 billion ($232 billion) packaged EU Regional Development Fund and Cohesion Fund under strict conditions – that money used for natural gas cannot lead to emissions above 270g CO2e/KWh; and funding will be focused on coal-reliant regions only and cut off after 2025.
The decision has received mixed response. The views of associations, industries, environmentalists, and EU member states fall into two camps: for natural gas inclusion; and against it.
For natural gas inclusion
Natural gas can be used as a transition fuel, as we build our capability to decarbonise fully by 2050. It is currently economically viable and technologically-mature.
It can be used in high-efficiency cogeneration plants and offer flexibility when intermittent renewables (like solar and wind power) are not generating enough electricity.
It is particularly useful in coal-, lignite-, and peat-intensive regions in Central and Eastern Europe – as the larger leap to renewables, battery storage, hydrogen, carbon capture & storage, etc. can be too costly today.
Against natural gas inclusion
Pouring investments into the natural gas industry, albeit a less carbon-emitting fuel source compared to coal, will slow down Europe’s move to climate neutrality by 2050.
Investing in natural gas infrastructure now would produce stranded assets for these regions, putting them at a financial and technological disadvantage down the line. Instead of new-build gas grids, efforts should be focused on decarbonising the existing gas grid.
For Delta-EE, natural gas will clearly have a role to play for many years, but using gas in the way we currently do is not consistent with a 2050 net-zero future, so any role for natural gas needs to have a clear roadmap and pathway for phasing out natural gas in line with the EU’s goals.
For many in the natural gas value chain, opportunities in the energy transition can lie with transitioning to zero-carbon fuels such as hydrogen and biomethane.
About the author
Dina Darshini is Principal Analyst at research and consulting firm Delta-EE