Glossary entry

Just Transition

Definitions

Option 1

Just Transition means that before implementing Mitigation Measures, [the Company/ Party] will:

(a) conduct a risk assessment of the proposed measure(s) on affected stakeholders, including its employees, value chain partners and their workers, and communities impacted by its business activities;

(b) consult the affected stakeholders; and

(c) implement measures that will avoid, or if not possible, mitigate any negative outcomes caused by the Mitigation Measures.

Option 2

Just Transition of the Workforce means addressing existing and potential social and economic inequalities that affect a workforce as an organisation decarbonises. This can include:

(a) consulting employees and/or trade unions to understand their concerns and priorities;

(b) training employees in new skills and work practices;

(c) providing financial compensation for job losses or other inequalities that may arise; and

(d) helping employees relocate to access replacement work.

Option 3

Transition Finance means financial assistance (such as loans or other financial products) that supports the just transition of organisations in carbon-intensive sectors or sectors that face high decarbonisation costs.

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Drafting notes

Just transition means the shift to a decarbonised and climate resilient global economy in a manner that is fair, equitable and inclusive for all involved, including by creating quality jobs, facilitating social inclusion and aiming to eradicate poverty.

For more information on how to implement just transition concepts in contracts and company operations, please see our Just Transition Resources.

Just transition litigation Just transition litigation includes cases that rely in whole or in part on human rights arguments to question the distribution of the benefits and burdens of the transition away from fossil fuels and towards net-zero emissions. For example, States and companies are being sued for allowing the building of renewable energy infrastructure on land traditionally owned by indigenous peoples or land over which traditional people have cultural rights.

Option 3 – Transition finance

Transition finance may be needed where decarbonisation costs are high. This includes sectors that lack decarbonised technological solutions or where the cost of the transition is significantly higher than current technologies. These sectors are often described as hard-to-abate. They include heavy industry (cement, steel, chemicals and aluminium) and heavy duty transport (shipping, long-distance haulage and aviation), which together account for nearly one-third of global CO2 emissions.

Examples of transition finance include:

  • The Just Transition Fund Mechanism is a key tool to ensure the transition towards a climate-neutral economy in a fair way. It mobilises 55bn EUR of targeted support from 2021 to 2027. EU regulation (EU 2021/1229) creates a public sector loan facility to provide grants to regions that are the most carbon-intensive or with the most people working in fossil fuels.
  • The Scottish Oil and Gas Transition Training Fund was established to provide grants to workers in the oil and gas sector. This is to ensure they can undertake training and re-skilling to help them transition to employment in more in-demand green sectors.

Application

Loan facility agreements, employment contracts, company articles, ESG commitments, projects, infrastructure and project finance facilities, asset purchase agreements, share purchase agreements, TUPE transfers.

References

International Labour Organization: ‘Guidelines for a just transition towards environmentally sustainable economies and societies for all’ (2015)

Ivetta Gerasimchuk, Cleo Verkuijl, Niklas Hagelberg, ‘After the Oil Crash, We Need a Managed Wind-Down of Fossil Fuel Production’ (International Institute for Sustainable Development, 11 May 2020)

Just Transition Centre: ‘Just Transition – A Report for the OECD’ (Just Transition Centre, May 2017)

Kate Hooper, ‘The Carbon Trust: Zoning in on Net Zero – A just transition that leaves no one behind (The Carbon Trust, 5 November 2021)

The Climate Justice Alliance, ‘What Do We Mean by Just Transition’

The European Commission, ‘The Just Transition Mechanism: Making sure no one is left behind’

UKCOP 2021, ‘Supporting the Conditions for a Just Transition Internationally’ (4 November 2021)

United Nations: Framework Convention on Climate Change, ‘Just Transition of the Workforce, and the Creation of Decent work and Quality Jobs’ (UNFCC, 21 April 2020)

United Nations: Framework Convention on Climate Change, Scotland’s Just Transition Commission

World Resources Institute: ‘Alberta, Canada: Supporting Both Workers and Communities to Ensure a Just Transition’ (World Resources Institute, 1 April 2021)

World Resources Institute: ‘Scotland: Re-skilling through the Oil and Gas Transition Training Fund’ (World Resources Institute, 1 April 2021)

Council Regulation (EU) 2021/1229 on the public sector loan facility under the Just Transition Mechanism [2021] OJ L274

A first global mapping of rights-based climate litigation reveals a need to explore just transition cases in more depth