Transition to a low-carbon economy Avoiding stranded assets and stranded communities

1. Transition to a low-carboneconomyAvoidingstrandedassets and strandedcommunities Anthony COX DeputyDirector EnvironmentDirectorate Nur-Sultan, Kazakhstan10 September2019

4. Coal is not compatible with a low-carbon future …. … but there are real challenges for coal-rich countries

5. The energy mix is shifting, but coal is still 1/5 of planned capacities in Kazakhstan Currentelectricity mix in Kazakhstan Capacities planned/under construction (as of 04/2019)

6. The global aggregate impact on employment is expected to be limited… Job reallocations by region(Global carbon tax of USD 50t/CO2) Million jobs Source: Chateau, et al. 2018. Impact of green growth polices on labour markets and wage income distribution: a general equilibrium application to climate and energy policies.

7. …but will be challenging for coal mining regions Job losses are often geographically clustered Mono-sectoral economies Geographical mismatch between new “green” jobs and mining jobs? Higher levels of pay than for other workers with similar education Community identity and social cohesion at risk Source: Alves Dias et al. (2018). EU coal regions: opportunities and challenges ahead

8. Carbon entanglement presents a risk to countries’ long-term fiscal sustainability as economies shift away from reliance on fossil fuels. • Carbon entanglement of government budgets is a major challenge

9. Making the transition progressive, inclusive and good for business • “Carbon entanglement” of governments: reducing dependence on fossil fuel royalties and taxes • Stranded assets – depending on how you measure, up to USD 1 trillion to 2050 (3x more if the transition is delayed) – can be strong influencer for governments to be cautious • Heavy industry – uncertain future in a low-carbon world, role for governments in innovation and creating markets (e.g through public procurement) • Jobs and a “just transition” for workers: importance of employers-unions-government discussion  exit strategies, re-skilling, etc.

10. Agenda

11. A successful “past” transition - Limburg Region, Netherlands Example of economic diversification away from coal mining in the 90’s, to face international competition • Key success factors • Policy vision • Significant funding for regional education (skills) • Investment in infrastructure • Workers protection (skills again) Source: IRRC, 2018. “The Ruhr or Appalachia? Report for CFMMEU Mining and Energy”

12. A planned closure - Alberta, Canada Climate Leadership Plan (2015) Accelerate the phasing-out of coal-fired power generators and associated mines (2029) • Objective:. • Key measures • Multi stakeholders engagement • Economic diversification • Programme to upgrade skills • Targeted social benefits to protect workers Source: Botta, E. 2018. IISD, 2018. The End of Coal: Alberta’s coal phase-out

13. A sudden closure - The Latrobe valley, Australia Closure of Hazelwood coal power plant (announcement 5 months before the closure) Source: CCEP, 2017. “Prospects for a “just transition” away from coal-fired power generation in Australia: Learning from the closure of the Hazelwood Power Station” • Key measures: • Rehabilitation works • Large sources of funding (federal and regional level) • local infrastructure, • labourmarket structural adjustment package • Regional Jobs and Investment Package • Establishment of the Latrobe Valley Authority

14. A recent diversification strategy – Antofagasta, Chile OECD case study for economic diversification away from copper mining (65% of GDP) • OECD Recommendations • Leverage existing economic assets to diversify (mining and port network) • Attract and retain skilled workforce (Improve urban quality of life) • Empower local authorities • strengthen capacity to secure financing not linked to central-level funding sources Source: OECD, 2013. “OECD Territorial Reviews: Antofagasta, Chile 2013”

15. Agenda

16. The pillars to enable structural adjustment Enabling a ‘Just Transition’ Skills policies Structural policies Labour market policies Support new skills development Collaboration between local government, universities, business Job-search training Entrepreneurial training Retraining Ease of doing business Strengthen market competition Housing policies Long-term vision Identify areas of competitive advantages for diversification

17. Long-term low-emission development strategies, at the centre of a smooth process for a just transition • Support from highest levels of government • Legal backing • Long-standing national policy debate • Clear allocation of responsibilities • With other ministries, across sectors: policy consistency • Build on existing (climate and non-climate related) strategies • Involving subnational and local authorities • Transparent stakeholder engagement process • Clear timeline for the engagement phase • Early public engagement and regular feedback solicitation • Integrate with other policy priorities (e.g. air quality, water, biodiversity, jobs, etc.) • Scientifically sound modelling • Transparency with respect to assumptions used and pathways • Quantifypolicyeffects • Backed by scientific expertise

18. Thank you www.oecd.org/env anthony.cox@oecd.org