Who Pays for the Transition?

Core Concepts

What "Just Transition" Actually Means

The phrase "just transition" is everywhere in climate policy — but it has a specific, contested history that shapes what it actually demands.

The ILO defines just transition as "a conceptual framework in which the labor movement captures the complexities of the transition toward a low-carbon and climate-resilient economy, highlighting public policy needs and aiming to maximize benefits and minimize hardships for workers and their communities." That definition was formally adopted at the ILO's 111th International Labour Conference in 2023, establishing these guidelines as the central reference for policymakers globally.

Notice the framing: the labor movement captures the complexities. That is not accidental. Just transition did not originate with climate scientists or environmental NGOs. It came from unions.

Origins in the Labor Movement

The concept emerged in the United States during the 1970s through 1990s, as labor unions and environmental justice groups began working together to address a shared problem: harmful industries were being shut down or cleaned up, but no one was protecting the workers inside them.

The pivotal figure was Tony Mazzocchi, leader of the Oil, Chemical, and Atomic Workers Union. In the early 1990s, he proposed what he called a "Superfund for Workers" — a direct analogy to the U.S. EPA's Superfund program for remediating toxic sites. His argument was simple: if society was willing to spend billions cleaning up polluted land, it should be equally willing to support the workers displaced by the same industrial phase-outs. You clean up the environment and the workers' lives, or you haven't really cleaned anything up.

From this foundation, labor unions and environmental justice movements forged strategic alliances that repositioned labor rights as intrinsic to — not in tension with — environmental sustainability. This alliance-building is why just transition frameworks now explicitly link worker protections with environmental protection, rather than treating them as competing priorities.

Over time, the concept expanded beyond its original focus on individual workers to encompass racial equity, community self-determination, and equitable access to the benefits of the green economy.

The ILO's Four Core Elements

The ILO's 2023 framework organizes just transition policy around four core supportive elements:

1. Promoting inclusive, sustainable, and job-rich economies — the transition should generate quality employment, not just eliminate bad jobs.
2. Advancing social justice — transition costs and benefits must be distributed fairly, not borne disproportionately by the most vulnerable.
3. Managing transition through social dialogue — effective just transition requires real participation by workers, unions, communities, businesses, education providers, and civil society.
4. Financing just transition — meaningful change requires purpose-built funding, not ad hoc charity from general development budgets.

Each element has teeth. The financing element, in particular, is often where frameworks collapse: inadequate or wrongly structured financing is consistently identified as a primary barrier to realizing just transition objectives.

Social Dialogue as a Governance Mechanism

The ILO places social dialogue at the center of just transition governance — not as a nice-to-have consultation exercise, but as the mechanism through which transition policies acquire legitimacy and durability. Meaningful participation from workers, labor unions, communities, enterprises, education and training providers, and civil society organizations serves two functions: it ensures policies actually reflect the needs and knowledge of affected people, and it builds the social license required to sustain long-term transition efforts.

This matters especially because transitions take years or decades. A policy that displaces affected communities from decision-making may survive a funding cycle but is unlikely to survive the political dynamics of a region living through economic disruption.

Stranded Workers, Stranded Communities

Fossil fuel jobs are extraordinarily concentrated geographically. Many coal regions function as single-industry economies: the coal company provides jobs, tax revenue for schools and infrastructure, and anchors the service economy around it. When the mine closes, everything closes with it.

This is not an abstract concern. Coal-dependent regions present particular challenges because their narrow economic bases, geographic isolation, and the scale of employment affected — including direct workers, service workers, and transportation employees — mean that "worker retraining" alone is insufficient. What is needed is the rebuilding of entire regional economies. The Powder River Basin and similar U.S. regions illustrate how complex managing these concentrated resource-dependent transitions becomes in practice.

A compounding factor is geographic mismatch: alternative jobs — particularly in renewable energy — may simply not be available where fossil fuel workers currently live. Many coal mining regions lack sufficient solar or wind resources for large-scale renewable projects, forcing workers to choose between relocating, accepting an occupational change in place, or unemployment. This is not a minor logistical detail; it is a structural constraint that requires just transition policies to include relocation support, remote work opportunities, or investment in locally appropriate alternative industries specific to regional geography.

Annotated Case Study

Two Models: The EU and South Africa

The EU Just Transition Fund and South Africa's Just Energy Transition Partnership were launched within years of each other and both claim the just transition mantle. They are instructive in contrast.

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The EU Just Transition Fund (JTF)

The EU's Just Transition Fund provides EUR 17.5 billion for 2021–2027 as part of the broader Just Transition Mechanism under the European Green Deal — mobilizing approximately EUR 55 billion total when other instruments are included.

The mechanism is operationalized through Territorial Just Transition Plans (TJTPs), prepared by each EU Member State. These plans must:

• Identify which territories are expected to face the most severe transition impacts.
• Propose economic diversification strategies tailored to regional economic structures.
• Outline reskilling and active labor market inclusion measures.

Allocation criteria prioritize regions based on industrial emissions, carbon intensity, employment in carbon-intensive industries, coal and lignite mining employment, and overall economic development levels. This territorial targeting is a key design feature: funding follows impact geography, not just national budgets.

The JTF model represents a high-institutional-capacity approach — it works through an existing federal structure (the EU), with clear eligibility rules, administrative systems, and legal accountability. It is expensive, bureaucratic, and slow. But it is also legible: affected regions and workers can see what is being done and hold governments to it.

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South Africa's JET Partnership

South Africa's approach emerged from a different context entirely. The country's Just Energy Transition Investment Plan (JET IP), covering 2023–2027, is built on a Just Transition Framework approved in 2022. It explicitly grounds the energy transition in three forms of justice:

• Procedural justice — who gets to participate in decisions.
• Distributive justice — how costs and benefits are shared.
• Restorative justice — addressing historical harms, particularly for coal-dependent communities in Mpumalanga that already bear the legacy of extractive industry.

The plan was backed by an international partnership agreement reached at COP26 in 2021, with USD 8.5 billion pledged by the EU, France, Germany, the UK, and the United States. Priority sectors include electricity, new energy vehicles, and green hydrogen.

The gap between a framework's stated principles and its actual financing structure tells you most of what you need to know about whether justice is the goal or the branding.

The implementation challenges that have emerged reveal structural tensions. By 2024, only 4% of JET IP financing took the form of grants — the remainder was structured as loans, creating debt obligations for a country already facing fiscal constraints. A 2024 survey by the Southern Centre for Inequality Studies at Wits University found that 76% of grant funds had been distributed to foreign entities for implementation, raising serious concerns about local benefit capture, domestic capacity building, and whether frontline communities retain meaningful agency over their own transition.

South Africa's JET IP illustrates a pattern that research on Global South just transitions identifies consistently: financing mechanisms and implementation structures designed with developed-country institutional contexts in mind can undermine the very justice principles they claim to serve when transplanted to lower-capacity contexts.

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What the contrast reveals

Dimension	EU JTF	South Africa JET IP
Funding type	EU budget (grants)	Mixed loans + grants
Implementation structure	National + regional institutions	International partnership
Territorial targeting	Mandatory TJTPs	Sector-based priorities
Community agency	Consultative, via national plans	Contested — foreign implementers dominant
Institutional capacity	High (EU administrative systems)	Variable, capacity gaps present

Neither model is a template. The EU's approach requires institutional infrastructure most countries do not have. South Africa's approach demonstrates what happens when ambitious frameworks meet inadequate or poorly structured financing — and when international partners retain more control over implementation than the communities supposedly being served.

Key Principles

1. Start with social dialogue, not just with plans

Inclusive participation is not a procedural formality — it is the mechanism that makes transition plans durable. Workers, unions, communities, and civil society need to be inside decision-making processes, not consulted after major decisions have been made. The social license required to sustain a decade-long transition cannot be manufactured retroactively.

2. Recognize that worker retraining is necessary but not sufficient

Workforce development programs — technical skill development, wraparound support services, partnerships with local employers — are core tools. But they only work if there are jobs to transition into in the places workers actually live. Geographic mismatch is a structural problem, not a training problem. Plans that address retraining without addressing where jobs exist will produce retraining programs with no employment outcomes.

3. Income support is the floor, not the ceiling

Unemployment insurance extensions, wage supplements during retraining, income maintenance for workers who cannot transition to equivalent employment, and early retirement options for older workers are baseline requirements — not generous extras. Without income support, displacement becomes immiseration, and political opposition to the transition becomes entrenched.

4. Economic diversification must precede or accompany closures

Regions with heavy dependence on single carbon-intensive industries face serious long-term economic decline without deliberate diversification planning. Diversified economies absorb industry decline far better than concentrated economies. Investment in alternative sectors suited to local economic structures should begin before, not after, plant closures.

5. The tension between speed and justice is real and cannot be wished away

6. Financing must be purpose-built

Inadequate or wrongly structured financing is a primary barrier to just transition implementation. General economic development funds are not substitutes. The composition of financing matters: grants versus loans creates different obligations for recipient governments. Who administers funds determines who captures benefits. Just transition financing must be designed specifically for transition costs and structured so that affected communities retain meaningful agency over how it is spent.

Active Exercise

Evaluating a Just Transition Plan

The following scenario is drawn from the structural patterns in the claims, not a real plan — but it reflects real tensions.

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Scenario: A national government announces a coal phase-out to be completed by 2032. It publishes a Just Transition Plan with the following components:

• A retraining fund of USD 200 million for coal workers over 5 years.
• A commitment to "consult with affected communities" before finalizing regional transition strategies.
• A pledge to attract renewable energy investment to affected regions.
• 80% of the plan financed through concessional loans from international development banks.
• Implementation contracted to an international consulting firm with experience in renewable energy deployment.

Your task:

Work through each component using the ILO's four elements and the principles from this module:

1. Social dialogue: Does "consult before finalizing" meet the standard for inclusive social dialogue? What is missing, and what would a stronger version look like?

2. Financing structure: 80% loans — what does this mean for the government's fiscal position over the 10 years following the phase-out? Who carries the risk?

3. Implementation control: Who captures the benefit of the implementation contract? What does this tell you about whether affected communities have agency in the transition?

4. Geographic matching: Attracting renewable energy investment sounds like economic diversification. What questions would you need to answer before knowing whether this addresses the geographic mismatch problem?

5. Income support: What is missing from this plan that the ILO framework would consider essential?

There is no single correct answer to any of these questions — but work toward specific, claim-grounded responses rather than general observations.