Just Transition? Fossil fuel industries must pay the entire cost

Aug 3, 2023
Oil refinery plant from industry zone, Aerial view oil and gas industrial, Refinery factory oil storage tank and pipeline steel at night.

For a transition to a low carbon economy to be just, the Australian government should force the fossil fuel industries to pay the entire cost.

Just Transition refers to the measures needed to support workers and communities during a transition away from carbon-intensive industries. The concept has been adopted by many organisations including the Intergovernmental Panel on Climate Change, the United Nations, the European Union, and various development banks.

A rapid transition is needed because of decades of inaction. Consequently, industries such as logging native forests, coal and gas extraction and coal-fired power stations have no future. The extraction of gas and coal from existing operations must also be quickly reduced.

The “just” part of Just Transition is contentious.

Fossil fuel corporations are significant donors to both sides of parliament. They get what they want at the expense of everyone else. This is unjust. Even if some fossil fuel companies have not been directly involved, all have benefitted from the systematic disinformation campaign to discredit climate science.

Many fossil fuel companies are artful tax-dodgers. For a transition to be just, the Australian government should force the fossil fuel industries to pay the entire cost of the transition.

The German program of Kurzarbeit (shorter working hours) is relevant to Just Transition. It was successful during the Global Financial Crisis and was re-implemented during the COVID pandemic.

How would Kurzarbeit provide a Just Transition in Australia?

The government needs to:

  • Ban new fossil fuel projects.
  • Rapidly and progressively reduce production from current fossil fuel projects.
  • Calculate what workforce is required for the reduced production targets, based on the intentions of workers and information from the industry. Production must remain safe and viable.
  • Implement Kurzarbeit for the remaining fossil fuel workforce and other workers in the affected communities. Flexibility is essential. Even though many workers, particularly in mining, work more than a 40-hour week, the following example is based on a 40-hour week. A 50% reduction in working hours is around 1000 hours per year or a 20-hour week. A worker might not work for 6 months of the year, spending the time elsewhere for retraining, and work a 40-hour week in the other six months.
  • Annual wages per worker should be maintained to at least 70% of the existing level. Workers who started the year on a 40-hour week, would “bank” their wages in advance, perhaps in their superannuation account. The money should then be accessible for the weeks later in the year when they are not working.
  • Means-test additional financial support to affected workers but make retraining free.
  • Provide support to small business.
  • Consider adopting Kurzarbeit in other industries. Kurzarbeit is not just a pathway to a better quality of life for everyone. It will make serious climate action more desirable and politically achievable.

The Australian economy will be affected by rapid action on climate change. Because our economy is undiversified, Australia is vulnerable to a reduction in fossil fuel exports and income. However, much of the profits of the industry go overseas and the workforce is small.

A Just Transition in Australia should aim for cooperation with other fossil fuel exporting countries to reduce production in step with one another. This cooperation could include stabilising the international prices of coal, gas and oil. At the same time a Just Transition should consider the particular circumstances of the Global South, which has contributed little to carbon emissions and whose people are highly vulnerable to both the effects of climate change and increasing energy costs.

Fossil fuel companies operating in Australia have opposed any measures that affect their income and profitability. If pushed, they might transfer their money capital overseas and close their operations without warning. Government action to combat this needs to be pro-active. Full nationalisation of fossil fuel industries has the virtue of simplicity. Other options could be the forced unwinding of complex corporate structures or making the government the only buyer of fossil fuels and non-renewable energy. In the latter case, the fossil fuel companies could still make some profit. Certainly, if a company closes its operations, it should be legislated that the physical capital and extraction rights should instantly revert to the government, so that the business can continue, under government ownership. Such measures will lead to the inevitable cries of “sovereign risk”. So what? The fossil fuel industry threatens humanity and the entire ecosystem. It has been wilfully dishonest. It continues to expand and has no interest in a Just Transition.

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