Guide for Achieving Fair and Sustainable Green Transitions

In 2023, the world’s average temperatures increased to 1.45°C above pre-industrial levels, making it the hottest year ever. The current year, 2024, punctuated by intense heatwaves and deadly storms, is set to become the warmest year ever, surpassing last year’s record, according to projections by Copernicus, the European climate service.

The latest report by the United Nations Environment Programme (UNEP) reveals that current policies will warm the earth by up to 3.1°C by 2100, leading to catastrophic results. For countries to stay on track to a warming of 1.5°C in keeping with the Paris Agreement, they will have to slash emissions by 42% by 2030 and 57% by 2035.

Climate change impacts the world, disproportionately affecting the most vulnerable and poorer countries and deepening existing inequalities. A green transition, decarbonisation, and strengthening climate policies are promoted to address these critical issues.

However, the business community fears that applying these solutions without considering equity in poorer and developing countries could exacerbate existing inequalities, making the green transition ineffective.

While climate mitigation has economic benefits, there are stark differences between countries. Given that climate change effects are already disproportionately impacting the communities least equipped to cope and least responsible for causing them, how can governments ensure that their mitigation efforts do not deepen inequalities?

The November 2024 report “Accelerating an Equitable Transition: Policy Guidelines for Impact” by the World Economic Forum (WEF) shows that equity can be balanced with climate action if policymakers factor in the impacts of risks, such as job displacement and higher living costs, in their formulation.

According to the report, nearly 80% of executives surveyed worldwide as part of the Forum’s Executive Opinion Survey expect that unequal access to capital and financing will characterise the transition of at least one primary economic sector in their country.

Additionally, 50% of respondents expect increased living costs, and 33% fear some form of job displacement will happen across the economy. The paper presents five key guiding principles for policy development to address these potential economic equity risks.

WEF’s Equitable Transition Initiative grouped countries according to their shared characteristics to ensure that green transition policies would not exacerbate inequalities in their country.

These countries are classified as green Developers, Inclusive Green Adopters, Growth Economies, Fossil Fuel Exporters, Frontier Economies, and Emerging Green Adopters.

Below is the infographic from WEF’s report showing the categories these countries belong to and the perception of their business community on the impact of climate mitigation policies on their economy.

WEF’s five policy guidelines are on how countries could address some potential economic risks of climate policies.

1. Context specificity. Factors such as a country’s development level, sectoral makeup, technological capacity and governance structures can significantly influence the distributional impacts of climate policies. Considering these factors ensures that climate measures do not disproportionately burden vulnerable groups.
2. Targeted support. Targeted support programmes such as cash transfers, tax incentives, and subsidies for clean technologies are vital to helping low-income households and workers cope with and mitigate the impacts of disruptions from climate policies.
3. Policy sequencing. Policies to transition to net zero emissions should be phased in to build political support and minimise disruption. This includes synchronising policies with infrastructure development, for example, developing charging infrastructure alongside mandates to increase electric vehicles to enable easy adoption by the wider community.
4. Stakeholder engagement and social dialogue. Experience suggests that the social impacts of climate change policies are more likely to be appropriately addressed when stakeholders are thoroughly consulted throughout the policy cycle, from design and implementation to monitoring and evaluation.
5. Communication and awareness. Communications about the benefits of climate action should be clear and consistent, cultural norms and local conditions should be considered, and equitable access to information should be ensured. This can help build broader public support and engagement in the green transition.

This paper is part of a series of insights developed by the Equitable Transition Initiative of the World Economic Forum, with the support of the Laudes Foundation, to provide tools and frameworks and shape country-level action towards a green and fair net-zero transition. It draws on extensive consultations and the knowledge and insight of the Global Future Council on the Economics of Equitable Transition.

Learn more about the Accelerating an Equitable Transition: Policy Guidelines for Impact Insight Report November 2024.