Fossil Fuel Industry Phase-Out: Three Critical Worker Guarantees for a Just Transition

Yves here. I must confess that the lack of an integrated approach to weaning economies off fossil fuel has me deeply discouraged, independent of the inherent difficulty of the project. It raises the specter that whatever does get done will be haphazard and even potentially counterproductive. Nevertheless, some are trying to take more integrated approaches, witness the “just transition” concept.

It’s always easy to be a critic, but sadly if Pollin’s presentation here is accurate (I must confess to not having read the underlying research) it is sorely wanting, starting with defining Trump voters in fossil fuel producing communities as a key obstacle. It apparently does not consider a much bigger problem, the wealthy, who consume vastly more in fossil fuels than middle and lower income households. For instance, this “just transition” does not appear to address the need to restrict air travel severely, particularly private jets. Where are the subsidies for those workers? And what about one of the biggest fossil fuel users on the planet, the US armed services, which has a huge base of fossil fuel gobbling equipment? Where is the talk of an energy transition for that?

Similarly, the PERI study appears to look only at the need to replace the incomes of fossil fuel industry employees. But their employers are often the foundation of communities. They pay property taxes. They buy services, like electricity and garbage haulage. They sometimes upgrade or repair facilities, which provides income beyond that of the mine/facility workers. So the income to the county or town from a fossil fuel operation is greater than that of laborer incomes, so the loss of the additional revenues will hurt tax bases and local business incomes, an effect the PERI study appears not to have considered.

By Lynn Fries. Originally published at GPE Newsdocs

LYNN FRIES: Hello and welcome. I’m Lynn Fries producer of Global Political Economy or GPEnewsdocs. Today I am joined by PERI’s Robert Pollin.

As part of PERI’s global project to fight climate change, Pollin will be talking about just transition policies. PERI has long researched how robust Just Transition policies are imperative to advance a comprehensive global climate stabilization program that offers any serious prospect of success.

Today we will look into evidence that these just transition policies should also be understood as an entirely realistic prospect for all high-income countries. This based on new PERI research findings released this February in the paper titled Fossil Fuel Industry Phase-Out and Just Transition. This is a preliminary working paper that extends PERI’s published studies on Just Transition programs in the U.S. into other major high income economies notably Germany, the UK, the European Union and more briefly Japan and Canada.

Joining us from Massachusetts, Robert Pollin is Distinguished University Professor of Economics and Co-Director of PERI, the Political Economy Research Institute at the University of Massachusetts-Amherst.

Welcome, Bob.

ROBERT POLLIN: Thank you for having me Lynn. Happy to be on.

FRIES: Bob we will be talking about PERI research findings on what is needed for fossil fuel industry dependent workers and communities to make a just transition from one kind of an economy to another. Let’s start on why this is imperative for a successful climate stabilization plan.

POLLIN: Yeah. So, we face this situation where and the Intergovernmental Panel on Climate Change/IPCC, just put out another study Monday which has summarized what they’ve been saying at least since 2018. That we have to basically be at zero fossil fuel emissions by 2050. We have to be at a 50% reduction relative to 2005 by 2030 which is only six and a half years from now. Now that means we have to dramatically consumption of oil, coal, and natural gas to produce energy and by 2050 phase it out basically entirely.

So that is an imperative with respect to the climate crisis. Now, it obviously impacts a lot of different entities, organizations, governments, people, communities. So one of the big factors here is that there are people, not just rich shareholders of the fossil fuel companies or oil sheiks, there are ordinary people whose lives and communities are currently dependent on the fossil fuel industry.

And so what do we do about that? What do we say about?

Well, as a basic, simple matter of ethics, we have to be able to offer something like a fair transition, a just transition for all the workers and communities. That’s an ethical imperative. But even if you have no ethics, even if you don’t care at all about the people that are currently dependent on the fossil fuel industry and the communities, there’s no way politically we can advance a robust and adequate fossil fuel phase out, in other words, a adequate climate stabilization program, unless we do something to address the needs of this community and these people, because justifiably, they’re going put up political resistance.

Now we’ve seen in the United States just how far that resistance can go. Because I mean, there are several factors that are behind the Trump phenomenon. But a big one was him saying: you know, the environmentalists don’t care about you workers in West Virginia, in Pennsylvania. They want to destroy your communities. And whether that’s true or not, it had a lot of resonance.

And so it is absolutely as just a mere political reality. We have to show that if we’re going to phase out fossil fuels to save the planet, which we have to, we also have to mount a vigorous, robust just transition for the workers and communities whose jobs are going to get phased out.

FRIES: So in discussing what is needed for as just transition, you say in the paper that the first questions we need to ask are what should be the overall goal of just transition policies. And then the next questions should be what specific measures need to be implemented to accomplish that. Briefly comment on that.

POLLIN: So just transition policies have been around in various forms for a long time. This particular paper focuses on high income countries. I’ve done work in developing countries as well. But this one is focused on high income countries.

So we have had phase out programs, maybe the, the most advanced have been in Germany for decades because of the phase out of the coal industry in Germany. The United Kingdom has phased out its coal industry without doing a whole lot for the workers. In the United States we’ve had just transition or transition, let’s say, policies around the workers who are impacted by changes in trade policy opening of free trade.

And for the most part, those policies have been minimal. They have not provided any significant support. In fact, in the US what are called transition policies officially, unofficially by union members are called burial insurance. In other words here, go off and die. Here’s a few thousand dollars. And that is generally what has been provided to date including in Germany, though somewhat better.

So those policies have really focused on providing retraining for other jobs. They’ve provided some minimal level of job placement support to find a new job; some modest level of relocation support if people have to move to get another job. And that’s basically it.

Even the European Union with their Green Deal has at least in rhetoric made very strong statements as to the significance, the centrality of just transition policies. Uh, Franz Timmermans, the Vice Chair of the European Commission, he himself says, you know: just transitions are central. We need everybody’s support for this movement out of fossil fuels.

Yet the policies that they are implementing to date are, they are better than others, but they’re basically focused only on job search, retraining, and relocation. What I’ve been advocating now as you mentioned, thank you, for several years, is the development ofjust transition policies that are much more robust. It includes simple things, not just job retraining but a job guarantee. Not just any old job, but the jobs that will pay at least for a few years the difference between any salary loss that a worker will have faced. And then finally, critically, is guarantees for worker’s pensions.

Because if we’re phasing out this industry, obviously, these companies are facing financial challenges. And we cannot assume that the first thing that they’re going to do is guarantee their workers’ pensions. And so the policy has to guarantee the pensions.

I should just say as a personal anecdote, I’ve had several interesting stories are around this issue, but the most interesting, the most valuable…I had done a study in 2014, a big study on Green Transition for the United States. And in doing that study we were looking for endorsements from respective people. And one of them was somebody named Bill Spriggs, who’s the chief economist of the AFL CIO. He was at the time, and he still is. And he’s also a friend mine.

We asked many people for endorsements. They all wrote nice things except for Bill Spriggs. And he said: I can’t endorse this because your transition policy is just fluff. It’s just like nice words, platitudes and it doesn’t address the real needs of workers. And he was right. He was right. And at that time, I said: okay, you’re right, Bill. And from now on I’m going take this issue much more seriously. So that’s really how I got into the issue. Recognizing that the kinds of things that I was saying, the kinds of things that were out there in the policy world are not serious.

FRIES: We’re talking about fossil fuel industry phase out and just transition in high income economies. The working paper released this February covers PERI’s study of Germany, the UK, the European Union, Japan, and Canada. It also connects the dots between all the above high income economies and that of the US. Talk more about read-throughs in your findings across all high income countries.

POLLIN: Yeah, so basically in the US as well, I mean, the just transition policies that are in place right now are slim to nothing. In the case of Canada, they had a big commission, study. They interviewed workers; they interviewed people in the community. It was an official government commission.

And again, they say nice things but there is no commitment of anything to date. At least as far as I know and I was looking at it pretty carefully. That’s also true in Japan. Nice phrases not much. UK, Germany, better. Germany as I said has had some significant commitment for a long time with respect to the phase out of the coal industry in the Ruhr Valley. It’s often held up as a really valuable example and it is relative to the alternatives. But even there in Germany, the level of financial commitment and the types of commitments: there is no job guarantee; there is no pension guarantee; there’s no wage guarantee. And those are the three critical things I think that are central.

So the work that I’ve been doing on this question subsequent to my friend Bill Spriggs fairly criticizing me, fairly criticizing me, was to figure out, well, what actually would constitute robust just transition policy that you could present to workers in their communities and keep a straight face in saying that this actually is a just transition.

So, we’ve done it for several states. West Virginia is one of them. And so for the case of West Virginia, we go through this exercise. How many workers in the state are currently dependent on the fossil fuel industry? And the number in West Virginia is about 40,000. And not just coal miners but people in the coal industry; everyone in the fossil fuel, in the oil and gas industry; plus everyone in ancillary sectors  anything to do that are feeding into coal and oil and gas production.

So that’s 40,000 people. So then we say, well, okay, 40,000 people. Then what does a realistic phase out look like for those 40,000 people if we assume by 2050 all their jobs are going to be gone? But it’s critical that not all of their jobs are going be gone tomorrow. They’re going to be gone over a generation basically by 2050.

So, when we calculate the rate of annual job loss and incorporate the demographics of the age levels of the workers so we are able to take account of voluntary retirements. What we’re really looking at is about 1400 workers per year who are going to lose their jobs and want another. So the focus of the study then is okay, we’re going to give these people: guarantee them a new job; guarantee them a wage equivalent to what they’re making now; and guarantee their pensions in addition to the other things. I’m not against helping people with job search retraining or relocation. It’s just those should be seen as supplemental to: Yes, you will have a job; yes, you will not face a significant income loss; and yes, you will not lose your pension. That’s the critical thing.

So, we do all that and we take account of these workers and how much they’re making now. We also do this as part of a green transition in West Virginia. And we say, well yes West Virginia is going to be getting investments to build a clean energy economy that’s going to create jobs. And we estimate that that will create 25,000 jobs in the state. Meanwhile, we’re losing about 1400 jobs in the state.

So one simple way to think about a transition is, well, as many as possible, move people from the fossil industry into the emerging nascent green energy industry.

And so then we did all that and we said, okay, you know what? It’s going to cost about $40,000 per year per worker to do everything. And that ends up being when we added up for the 1400 workers per year, it ends up being equal to about 0.2% of the GDP of West Virginia. And this is the most fossil fuel dependent region in the country. So it’s 0.2%. When I’ve done the same exercise for the whole United States, the cost as a share of the overall economy as a share of GDP is one 10th that of West Virginia, 0.002%; yeah, two 100ths  of 1%.

So this is eminently affordable even in West Virginia. West Virginia is the test case because the costs proportionally will be higher. Anyway, so those are the main results. And so the point that we conclude with is this a robust just transition is viable and it is the ethical right thing to do.

FRIES: I should note for viewers that the US findings you refer to are based on studies of Just Transition programs PERI has published for the US states of California, West Virginia, Pennsylvania, Ohio, Maine, Colorado, Washington State and New York State. So the West Virginia study is one of a series that PERI has published on eight states and the US economy overall. In the paper released this February, the West Virginia just transition program features prominently as a case study drawn from Peril’s research findings. Why so much focus on West Virginia?

POLLIN:It’s like if you can tell a story that’s reasonable for West Virginia, you can tell a story basically for any place.As I said thinking about say Trump. Trump got 70% of the votes in West Virginia in 2016 and again in 2020, 67%. And a lot of his appeal is, you know, he’s against all these environmentalists that want to take away our jobs. So how can we tell a story that is convincing, that is really credible for the workers and the communities in West Virginia?

That really was our aim. And I think, who knows in the end, but we did have success in the sense that we did present this in accordance with the the mine workers Union. And the overall leadership of the union movement, AFL CIO, in the state.

We were commissioned by a wonderful organization called Reimagine Appalachia. So it is really trying to think about not just West Virginia, but the four states Pennsylvania, Ohio, Kentucky, and West Virginia all transitioning out of their dependence on fossil fuels and into a new clean energy economy. They certainly can do it. And if we can do it there, again, we can do it anywhere.

FRIES: Bob as we sum up, round off on some key implications and conclusions of your findings on Just Transition programs in high income economies.

POLLIN: So again West Virginia has a very high concentration of fossil fuel workers. Ten times the level relative to the overall country, the US economy. And so again, the implication is actually analytically financially it is easy to do a robust, fair transition that is not, quote, burial insurance. That it is treating people with respect, understanding that their livelihoods are dependent.

This is not the same as if you are a shareholder of a fossil fuel company. If you’re a shareholder of a fossil fuel company and you know the company is going to be phased out, well sell your shares, and buy something else. The fossil fuel companies last year made $200 billion, the six biggest. So it’s a fine time to sell and recognize that this is going to be a phase out. And it’s not going to affect your home. It is not going affect your pension. It’s not going to affect anything about your life if you’re a shareholder of one of these companies.

On the other hand, if you are a worker and this is your full-time job or you’re a member of the community, let’s say you’re a school teacher in a community whose tax revenue is dependent on fossil fuels, you know, this is massive. Your livelihood, your community is facing a threatening of ending all the things that you’re used to. And that this has to be seen as a front and center critical feature of any overall climate program.

Yes, we obviously have to think about how we get off of fossil fuels. We have to think about how we stop destroying the Amazon Rain Forest. Those are good starters but an equally important starter is to think about the workers and communities who are going to face major negative impacts unless there is a just transition program.

FRIES: This then brings us back to the point at the open of our conversation on why just transition programs are so imperative not only on ethical grounds but for achieving the level of political support needed to move onto a viable global climate stabilization path. In other words, for achieving the political support to phase out the burning of fossil fuels to produce energy and to replace the global fossil fuel energy infrastructure with a zero emission, renewables dominant infrastructure.

POLLIN: It is a major, major challenge. I mean, we’ve seen what happened even with the Biden administration, which overall in my opinion, has been better on these issues than I would’ve thought they were going to be. But they did a major backsliding just this past week or last week when

They agreed to allow the development of oil exploration in Alaska on public land. Which they, you know, Biden had said: no way I’m never going to do this. Well, somehow now he’s doing it.

So, obviously he was intensively lobbied. We have to be able to fight back. And one of the tools for fighting back is to say to the workers and their communities this is a program, a just transition program for you. And that you do not face this loss of income, employment, pensions that would be devastating for people’s livelihoods.

FRIES: Among other corporate tactics to block the phasing out of the fossil fuel industry, we see the financing card get played. The argument being in the case of a just transition that: oh we can’t afford it. So for high income countries, this study tables evidence that effectively shows that argument does not hold water. Is that a key takeaway?

POLLIN: That is the key takeaway. I mean, again, I think a lot of people say: yes definitely just transition we’re all for it. As I said Frans Timmermans made that quite explicit in the documents of the European Green Deal. It’s all in there now. That is a new development but it’s in there.

But the point is what does it really mean? And if we’re really going do it in a way that protects people’s livelihoods and communities is the cost just outrageous, unaffordable? And the answer is clearly no.

Again, if you can do it in West Virginia, you can do it in Canada, you can do it in the UK. And if we’re talking about in the US overall, two 100ths of 1% of GDP, you don’t even notice it. In West Virginia it’s 10 times more as a share of GDP. That means it’s two tenths of 1%. These are funds that are available. I mean, just in the last year the subsidies for fossil fuel companies when the price of oil went up due to the COVID shortages and the war in Ukraine fossil fuel subsidies doubled from about $500 billion to $1 trillion. So $500 billion for subsidizing fossil fuel companies when we’re supposed to be phasing them out. That was found immediately. There was no question.

FRIES: You’ve been informing policy makers at the state level, at the federal level and holding town hall meetings across the United States. Do you find you are getting much traction?

POLLIN: Well, actually, I’ve been in discussions even with people in the White House. So yeah, I think so. Yeah it’s not easy because obviously this isn’t simply a matter of: oh, that sounds good. That’s logical. There are huge interests involved. And I’m sure the fossil fuel industry itself recognizes that if there is a robust set of just transition policies, well then that undermines their own lobbying in behalf of themselves. Because they’re saying: Hey, we’re the ones that are keeping this economy alive.

You know, there was a piece in the Financial Times a couple weeks ago with respect to this doubling the 200 billion in profits and the CEO of Chevron, whose name I can’t remember now, he just says: fossil fuels run the world and we’re going to keep running the world. We’re running the world now. We’re going to run the world in 10 years. We’re going to run the world in 20 years. He just out and out says it. And if he’s right, then you know what, then we’re facing a climate disaster. There’s no question about it.

FRIES: And at the town hall level do you see resistance building?

POLLIN: One of the tests is I’ve, you know, I’ve presented this to working people, union meetings and so forth. And there has been serious criticism and I understand it. The most honest telling criticism I’ve gotten is: gee, professor, these are great numbers, look really good, and you’re going to keep writing your papers and you’ve got a job and you’ve got a pension and you’ve written these numbers and that’s fine. But, you know, nobody’s going to pay attention and we’re not going to get this policy and we’re going to lose our jobs. And what am I supposed to say to that? The best thing we can say is, you know, people are fighting on your side, including you on this show by having me on, thank you.

What we have seen, let’s say the most dramatic, I would say, traction has been in California where our study, our equivalent study was commissioned by the union movement in California, by the actual union movement. And about 20 unions explicitly endorsed the program that we had laid out. Including the oil refinery workers, the oil refinery workers union endorsed our study.

And the leader wrote a brilliant article in the Los Angeles Times saying: we know just transition policies are usually a bunch of just rhetoric that mean nothing and people forget. We know that. But if we’re going to be serious, this program laid out by the PER researchers is real and we endorse it. And if this is the kind of thing that our policy makers are willing to put in place, then we’re for a just transition. And we know we have to get our fossil fuels.

FRIES: This California study and of course all PERI’s studies on Just Transition programs are available online at peri.umass.edu including the new paper on high income economies featured in today’s conversation. For now, we are going to have to leave it there. Robert Pollin, thank you.

POLLIN: Thank you very much, Lynn

FRIES: And thank you for joining us in this segment on Fossil Fuel Phase Out and Just Transition with Robert Pollin.

Robert Pollin is Distinguished University Professor of Economics and co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst. He is also the founder and President of PEAR (Pollin Energy and Retrofits), an Amherst, MA-based green energy company operating throughout the United States.