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As countries shift towards low carbon energy sources, the livelihoods of people in single-industry coal mining regions is uncertain. In the global energy transition, it is important to ensure a fair, "just" transition that enables opportunities for all. In this episode, Christopher Sheldon, expert on the topic, discusses how the right policies can help unlock viable economic opportunities while making the solution socially and environmentally sustainable.
As Global Practice Manager for the World Bank’s Extractive Industries Global Practice, Christopher helps countries sustainably develop and manage their oil, gas, and mining industries for inclusive economic growth and poverty reduction. He has 27 years in the mining sector with extensive experience on mine closure and supporting a "just" transition for coal-mining regions as well as promoting climate-smart mining for minerals required for the clean energy transition. Starting in his home country, Australia, Christopher has worked globally and joined the Bank in 1999.
This podcast series is produced by Fernando Di Laudo and Jonathan Davidar.
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Transcript
Roumeen Islam: In the mid-20th century, the Jiu Valley in Romania, being the source of hard coal and power for the country, was chosen as a location for industrialization. It's a beautiful valley, six towns and surrounded by mountains. Along the valley were multiple coal mines and processing facilities, and in 1997, off its 170,000 residents, over half of the population worked in the coal mines or in related industries. Yet today the Jiu Valley looks very different. Let's find out why and how. Good morning. I am Roumeen Islam, the host of Tell Me How, and today I welcome Christopher Sheldon, energy and mining expert, to talk about just transitions in the energy sector. Welcome, Christopher.
Christopher Sheldon: Hello, Roumeen. it's great to be here, I'm quite passionate about this subject, so I'm really looking forward to our discussion today.
Roumeen Islam: It's very nice to have you here Christopher, for our first episode, and my first question to you is, what is this initiative, Just Transitions, about?
Christopher Sheldon: It's about an energy transition. As the world moves from a more carbon intensive to a lower carbon energy future, we support a transition that's done efficiently and justly. In particular, what we're supporting is the energy transition in the coal mining regions, and one that's going to really consider and take care of the local economy of the impacted workers, the communities, and also the environment.
Roumeen Islam: But where does the adjective "just" come from? Why is it in the title?
Christopher Sheldon: It's about fairness. A "just" transition is a fair one that takes care of the people and supports them through what's often a quite difficult process. It's about people, ultimately about people and about fairness.
Roumeen Islam: You mentioned three distinct aspects of mine closure there. The economic aspects, including that of the local economy, the social aspect, and the environmental aspect. So, we're going to discuss all three. But shall we start with the economic aspect first? What are the issues?
Christopher Sheldon: Yes, that's a good place to start because the low carbon forms of energy are coming in are displacing coal in many regions as they become much more affordable. Now, it does differ around the world, but in Eastern Europe and the Balkans, for example, we're finding that for every megawatt of power there's a subsidy to coal of around five euros. Governments can’t afford to be providing these sorts of subsidies, so there needs to be a transition where that money can be put to better use. And for one example, in the country we looked at, just one year's worth of subsidies would actually pay for the cost of just transition of those coal mines and power plants.
Roumeen Islam: That's a lot of money. That's a rather hefty subsidy, but that's still at the macro level. What are the implications of closure at the local level, say the level of the town or the district?
Christopher Sheldon: That's a very good question because many of these coal regions in transition are mono industrial towns, so closing the coal mines and the power plants can have a devastating impact on the whole economy in that area. The sector’s often most important employer. You know, you talked about the Romania and the Jiu valley. You know, half of the workers working in the sector, but we just did a study in Greece's western Macedonia and we found not only were they the largest formal employer, but actually accounted for 50% of value added in the region so you can imagine if those mines and power plants are closed output drops, and if there's no good alternative identified, then it's going to have pretty serious economic consequences.
Roumeen Islam: Can there really be alternative economic opportunities for these regions that have been dedicated to one activity for so long? I wonder.
Christopher Sheldon: The short answer is yes. But it's certainly difficult, comes at a substantial cost, and takes a long time to implement. Just going back to the example I gave about Western Macedonia when we looked at that region, one of the first things we did is to look at these economic alternatives. We found several, you know, good economic alternatives in the region. One of them was actually to retain that energy-producing-character of the region by adopting cleaner and more fiscally sustainable energy production to replace the coal fire power that was going to be closed.
Roumeen Islam: So, you mean that the assets of the coal mine itself could be used for alternative energy production?
Christopher Sheldon: Absolutely. I mean, you can imagine, you know, in some of these areas and it's not just in this particular area, there's a lot of land, abundant land that could be used for solar power. You've got old mine dams and pits that you could use to create pumped storage with solar power. You can also convert existing power plants, for example, into natural gas which would, you know, have lower carbon emissions than the coal.
Roumeen Islam: So, we're going to, talk about land a bit later on in the podcast. But perhaps we should go back to Romania. The story we started with. Could you tell me what happened then what were some of the alternatives that were identified in Romania?
Christopher Sheldon: Well, we went to Romania from around 1999 to 2011 and I worked there for a quite a number of years myself, and we supported the government on closing uneconomic mines across the whole country. The hard coal center was the Jiu Valley that you mentioned earlier. And when we looked at that valley, we had to try to help them identify other alternatives. Nowadays they're looking at reinventing themselves with new investment in skiing and tourism. At that time, I remember one of the old mines being converted into a logging facility. Another mine which was closer to the city, was taking the old mine buildings and breaking them into smaller work space centers to support small and medium enterprises that were being created. Outside of the Jiu Valley I remember another mine in Romania being turned into a factory for fiber optic cabling and others just returned back to agricultural uses.
Roumeen Islam: So, it seems like they're just so many choices. But from 1991 to 2011, that's 12 years and new businesses take time to develop and workers are left without jobs in the transition. How does the government handle these social dimensions?
Christopher Sheldon: Yeah, that's really the most central question, and there's more than one set of people affected. Obviously, there's the workers there directly impacted by closure. But there's also other community members in the region that get affected. The workers typically receive other early retirement if they're close to retirement or packages to support them for re training or developing new skills for new jobs. Some even start new business ventures. In fact, in Romania, after doing a number of these different programs, we found that 60 percent of the workers who wanted to stay in the workforce actually found a job of equal or higher pay than when they were mining.
Roumeen Islam: So, for these people that found jobs for many of them, they got more pay. That's very good. Higher pay is always good. But I wonder, are these types of direct support workers enough for the region?
Christopher Sheldon: No. And that's a really good question, you asked, and we did learn that the hard way there. So, while initially we focused on the workers, we found that it was important to expand beyond that, to really go to their families, extended families, even the wider community. Because if our goal is to help maintain incomes not only in the household but that community in that region, then if you support the wider community, they might even employ miners. A miner may not start a new business, but someone else might start a business that can employ that miner. And through doing that, you can bring in, you know, economic transformation into that economy.
Roumeen Islam: Yes, I'm glad we're talking about that because you did say that only 60 percent of workers who stayed in the workforce had a job paying equal or better. So, there are others who didn't stay. And then there are those who didn't get us much pay. So, what you just said is very important and an important new insight that the assistance should not just be targeted to the miner, but to the wider community if we want to maintain incomes in the local community, Is that right, Christopher?
Christopher Sheldon: That's right. Yeah, that that's exactly the point. That was a good lesson learned and something that will apply to all of our future work in this sector.
Roumeen Islam: And this is not something that countries have automatically done in response to restructuring. When we're speaking of the wider community, could you talk a bit about the types of issues that you dealt with? Were there for example, gender specific issues that we need to look out for? I know coal miners are mostly men but how are women's employment affected.
Christopher Sheldon: Now this is a really important point and unfortunately, often overlooked. Take an example of Poland where we were, when we were designing the packages to support the workers when the mines were closed, almost all, actually all of the underground mine workers were men. But when you look at the surface workers, administrative workers, many of them were women, so it was very important that the government provided financial support not only to men but also to women, so that when the mine closed, everybody was able to receive the right kind of support on ending employment.
Roumeen Islam: We should move on to environmental considerations associated with closing a coal mine. I assume there are quite a few of these. Could you perhaps take us through some of them?
Christopher Sheldon: Yeah, that there's a lot. So, you know, you could just imagine a mining area. You've got a lot of buildings, you've got big shafts, lots of heavy equipment. So, when you close the mine, you've got to ensure that all those unwanted buildings and equipment that they are all removed, that the impacted land is cleaned up and rehabilitated. That the site secure that it's safe, and particularly in coal mining, that any methane issues are addressed. I've literally seen, you know, whole mining areas transformed into recreational areas, really turning something ugly into something beautiful.
Roumeen Islam: Yes, that's a nice vision, but could you go into the methane issues a bit more? Methane is almost 30 times worse as a greenhouse gas than is carbon dioxide. And I understand that methane is trapped in between coal layers. So, what happens when you close off the mine? Does this all escape?
Christopher Sheldon: If the mine is not properly closed and sealed, then that methane it can escape through cracks or vents into the atmosphere. And we have to avoid that. So, you can address that through proper sealing of the mine shafts or in some cases, actually natural flooding will seal it naturally. But in particularly gassy mines, methane can actually be captured and used, and you just have to stop it being vented up into the atmosphere. In some cases, it is actually burned before it goes, to avoid that. But the ultimate thing is to stop methane just simply escaping because of the environmental impact.
Roumeen Islam: Well, I promised that we would go back to land issues, so why don't we do that now? This is an important area because land is linked to all three aspects of coal mine closure. Whether it be the economic, the social or the environmental, how do you determine potential land uses?
Christopher Sheldon: So, during our recent work in Greece, we actually developed a tool, a land utilization repurposing application. We call it LURA that looked at factors like the location, the topography, the presence of water, etcetera and then categorize that whether the land is whether was best suited for agriculture or for industry, for forestry or some other uses. So, using the tool, along with consultation with the community I have to stress, is very important. You can actually develop some optimal solutions for the post mining lands rather than just leaving it up to guesswork.
Roumeen Islam: But this sounds like an amazing tool actually, has this tool being used often. I mean, how do people find out more about it?
Christopher Sheldon: It's being used by us on a pilot basis in a couple of client countries. So, when we engage with the client with government with the mining area, we work with them, explain the tool, and then help them use it and link it to all of their own data systems. So, it's something they can own and manage themselves.
Roumeen Islam: So, it's not something that I could get just by clicking on a link somewhere.
Christopher Sheldon: No, it's something that we work with clients to use and help them to apply to their own specific circumstances through our projects with their client countries.
Roumeen Islam: Okay, so let's go back a bit and look at the whole process. How long does this just transition process take? It’s very complex, so it cannot be done fast.
Christopher Sheldon: It's complex, and it does take a long time, but I think it's important just to break it down into bite size stages. So, the very first stage that we identified, we call it PRE-closure. So that's a lot of early planning preparedness, a lot of consultation with a diverse group of stakeholders. That's more of a 12 to 18 months-type process, then secondly, you have that closure of the mind or the coal plant safely and justly. That's a 2- to 3-year process and then, lastly, the regional transition with the programs and projects that really support that over a longer period of time after the mine and the power plant are closed. That's something that takes five or more years.
Roumeen Islam: I think it's very helpful that you broke it down into three parts, but it just highlights even more how many aspects there are to closing a mine justly, and I wonder how all these arms of the process are implemented. Who leads such a process and who's involved?
Christopher Sheldon: This governance of the process is actually one of the most important questions and where we provide a lot of support so it doesn't succeed if it's all top down from central government, nor does it really work totally bottom up without that high level support. So, you need a clear governance structure that involves all of the stakeholders. That's absolutely critical for success. So, the overall responsibility is usually with the national government, but the mine, the local community, the local and regional leaders, they've all got to be involved to guide that process. The national government often sets policy and provides a lot of financial support, but everybody has to work together to make this successful.
Roumeen Islam: Christopher, in countries where the World Bank group has been involved in restructuring sectors, big sectors or even economies, we've sometimes advised our clients to create a separate organization that is dedicated to the task at hand that focuses only on that particular task. Would you recommend that?
Christopher Sheldon: Well, it does depend, but we think a special purpose entity by government can be a very effective way to help coordinate the actions of these different state calls and actually manage a complex process like this. They can, for example, manage the labor transition. You know, packages to the workers, the training that I talked about earlier. They can also facilitate pre permitting for environmental assessments so that potential new investments can come in and there's already a bit of a baseline on the environment. They can even liaise with those investors and potentially even help facilitate financing to those investments. So, special purpose entities can really be pretty effective.
Roumeen Islam: So, in some cases you would recommend that?
Christopher Sheldon: Yes, it depends on the scale and the complexity, but it can actually work quite well in these more complex situations.
Roumeen Islam: And the approach taken here is not just about closing mines, but about restructuring the local economy in response to economic and technological changes. So, in that sense, it's applicable to other sectors. So, what do you think are the lessons for non-coal industries, non-coal sectors?
Christopher Sheldon: You're very right. This thing is quite applicable. I mean, coal mines have some very specific environmental considerations. But these general lessons that we talked about, you know, dependent on a single economic activity, the need for government and other stakeholders to work together having a plan for the longer term, looking at the cost associated with that, looking at alternative economic activity, all those things are applicable in the non-coal sector. So, we think there's a lot of lessons here that could be applied elsewhere.
Roumeen Islam: Thank you, Christopher. That's good to know. Is there anything else you would like to say before the end? You've already told us a lot. We've learned a lot. But is there anything else you'd like to say?
Christopher Sheldon: Thank you for the opportunity. First of all, but I think the last thing is that even though I've said this is difficult process, I just do want to leave a message that there is hope. While it's difficult, we really do believe with that proper planning, just transition can be achieved.
Roumeen Islam: I like to end with hope. Thank you, Christopher. It was very nice having you here.
Christopher Sheldon: Thank you. Roumeen it’s a real pleasure.
Roumeen Islam: I hope listeners, you learn something because I learned many things, and what really stuck in my mind are these things:
- When local economies are disrupted as with coal mine closure, it is good policy to help miners make the transition but it's also important to consider the opportunities for other potential income earners in the community;
- Mining assets can and have been put to alternative, economically viable uses; and
- With the right policies, one can limit damage to the environment.
So, let me end here with those thoughts till next time when we discuss how countries are going about reducing the digital divide.
If you have questions or comments, we’d love to hear from you. You can reach us at tellmehow@worldbank.org. Don’t forget to subscribe and thanks for listening!
View all episodes on our Tell Me How: The Infrastructure Podcast Series homepage