Two years ago, I did a webinar on climate change, with an audience primarily comprised of energy executives. After the webinar, one audience member approached me, saying he was a 55-year-old geologist who had worked in the oil and gas industry all his life. I will never forget his words – he said, "I get this whole climate change thing, but what does it mean for me with my age and background?" That was the day the just energy transition became real for me.
While there are many different areas of the climate agenda which must be addressed, KPMG is convinced that the just transition is of critical importance. It is a topic that requires much more attention, especially as there is a more intense focus on implementing climate solutions. At the 2023 annual general meeting of the World Economic Forum in Davos, KPMG will host a session on the Just Energy Transformation – looking at critical social, political, and economic pillars of sustainable development.
KPMG firms are currently focusing on the energy sector, where the just transition is most relevant, though it will also need to be considered across all sectors.
There are two specific reasons why KPMG professionals feel so passionately about the just energy transition:
- The world is finally seeing an actual acceleration in the energy transition, particularly in converting the global energy system to 100 percent renewable. This is vital for social justice. It will help to protect vulnerable communities from the impacts of climate change and it has the potential to help to generate opportunities for new employment.
However, there is a flip side to this. The accelerated transition to clean energy solutions has the potential to negatively impact people and communities whose livelihoods depend on the fossil fuel industry. While replacing a coal plant, for example, with a more automated renewable energy source may dramatically reduce carbon emissions, it will do very little to support social justice. Therefore, if the social impacts of the transition are not adequately considered, it will ultimately slow down the world’s progress toward a net zero future. Nobody wants this result. - Apart from the net zero question, many people are in the climate business because we are concerned about the impact on the future of humanity. What is the point of doing all these things about climate if, simultaneously, the result is that people's livelihoods and economic futures are destroyed?
Recently, there has been an increasing focus on the issue of a just energy transition. Nevertheless, there are several reasons why moving from discussion of a just transition to real action can be challenging.
(a) The Complexity of the Just Transition
One of the critical issues of the just transition is that it encompasses many different aspects, including, but not limited to:
Climate justice
Capacity building in developing countries
Financing projects in developing countries
Energy access for all
Technology transfer
Incorporating biodiversity and nature considerations
Therefore, addressing it as a single issue can be difficult. Rather, it should be viewed as an intersectional compass, where all constituent areas should be explored concurrently to drive equitable and effective change.
(b) Bringing the private sector into the discussion.
A scenario must be created where the narrative around the just transition does not only involve governments and the public sector. It is critical that investors and energy companies actively engage in this discussion. With the complexity of the just transition, the private sector, including investors and energy companies themselves, need a roadmap and tangible set of actions to take to help ensure a fair transition.
Launch of the Alliance for a Just Energy Transformation
At COP27, the United Nations Development Programme (UNDP) and the World Wildlife Fund for Nature (WWF) launched the Alliance for a Just Energy Transformation (AJET). KPMG firms actively supported UNDP and WWF in creating this Alliance and became founding members.
The AJET is a voluntary initiative to mobilize stakeholders, including communities, civil society, policymakers, and the private sector, to drive the successful implementation of just energy transition policies worldwide. KPMG firms will be actively involved in developing this Alliance and helping to increase membership of the Alliance.
This is a critical initiative to bring key stakeholders together to address the issues I have outlined above. The Alliance does not yet have all the answers as to how a just transition may be implemented, but it will first start by asking some of the right questions. Participating in the Alliance will help organizations develop a cohesive framework for the energy sector, investors, and wider stakeholders.
If you are interested in joining the Alliance for a Just Energy Transformation or would like to hear more about it, please don't hesitate to contact Mike Hayes.
