Net Zero

Net Zero for All: Addressing the Social Costs of a Green Transition

While climate change is an adversary to all, are Net Zero solutions for the rich only? Science shows achieving it by mid-century is necessary to avoid 1.5 degrees Celsius above pre-industrial levels, yet there are claims the science is not accurate, and the issue is milder than the projections. While another camp agrees on the necessity for climate action but are concerned about the socio-economic implications of adopting net zero solutions at the pace that is required to align with the aforementioned science. Unfortunately, it does not seem like time is our friend either considering that mid-century is only 26 years from the time of this article. 

Despite the urgency, we also see the latest Climate Action Tracker reports from just before COP 28 indicate that most of the indicators (41 out of 42) are off track, with only adoption of electric vehicles expanding due to recent increase of EV’s market share. That being said, almost 90% of global emissions are at least pledged to be addressed globally including China, US, India, and Europe. However, a key challenge is that “net zero targets are formulated vaguely and do not yet conform with good practice across different design elements-CAT.

This underscores the serious complexity of the goal we’re striving for from economic, social, and political perspectives. We have previously covered economic aspects in our earlier Economies of Net Zero whitepaper, and in this article, we highlight some of the key complexities from a social aspect. 

The transition towards net zero targets necessitates a major shift in the energy mix, industrial processes, way of life, technology, and infrastructure. The shift from fossil fuels for example is expected to cause significant job displacements with current high-demand jobs becoming more and more obsolete. On the other hand, jobs in the renewable energy industry would be on the rise, but that mostly provides opportunities for future generations as opposed to current and previous generations. The heaviest toll is expected to be paid by the blue-collar workers of the oil and gas industry.  

Furthermore, many communities globally and especially in rural areas or industrial zones have strong economic ties to high-emission industries. As policies impact these industries at different levels, either elimination, or compounding costs, the livelihood of these communities would be directly adversely affected. 

Climate action not only requires new infrastructure to support greener energy mix, facilitate circular economy initiatives, and address greenhouse gas emissions which create socio-economic challenges, there is also a need for policies and financial tools such as carbon markers, and taxes which can lead to a redistribution of wealth and resources as a by-product of introducing artificial inflation. This would disproportionately affect lower-income households. 

Another necessary measure for the net zero goal is the development of sustainable built-environment, and many argue that this should extend to the existing building stock through renovations and energy saving contracts. However, one of the key selling points for sustainable buildings to their owners is the fact “they sell better” essentially providing the developers/owners with financial incentives to invest marginally higher capital to achieve sustainable building targets and labels. However, this incentive can lead to disproportionate increases in housing and property rents, much like how a luxury brand’s logo on a wallet “justifies” triple digit margins.  

The same phenomenon is observed in the car industry, with higher initial costs of EVs, their sale value creates a significant barrier for lower-income households, which inadvertently delays their transition to cleaner transportation options (assuming again, a green grid infrastructure is available to support the transition). If only higher-income individuals can afford EVs, lower-income groups may continue to use older, more polluting vehicles. And this is especially true when looking at disparities between urban and rural areas in both purchase power, but also the availability of charging infrastructure to facilitate the use of EVs. 

To conclude, there is no denying the necessity for the different net zero strategies and initiatives, those discussed here, amongst the various others. However, it is crucial that the implementation, adoption, and availability of these strategies is studied meticulously and backed by just and fair policies and financial instruments that can facilitate the transition and provide the necessary socio-economic support. From helping workers through retraining programs and adoption to new roles in greener industries to Initiatives like the Just Transition Mechanism in the European Union that aims to support regions most affected by the transition to a green economy. Ensuring that the economic benefits of green policies are shared equitably is paramount to maintain social cohesion and support for climate action. 


The article is written by Farah Ghanem, Head of Climate Change and Policy at Alpin Limited.