Renewing the social contract to deliver a just energy transition

Rising poverty levels, challenges of political trust and growing inequalities are not the optimal foundations for delivering a just energy transition in Europe. To quell fears and distrust around the vast transformation, the broken social contract must be renewed to offer clear evidence that support is available to all those who need it.

An unprecedented undertaking

Holding global warming below 2°C, preferably 1.5°C, will require an energy transition of incomparable scope, depth and speed. Energy production and use must change; renewable energy technologies must be scaled up and rolled out; and energy efficiency must improve – all concurrently and at an unparalleled pace. These changes will impact our energy, mobility and food systems; our production and consumption patterns; labour markets; and more.

Coupled with its scope and speed, the duration of the transition also means that the results of some of these massive shifts will not be fully visible for decades. In the face of such dramatic change, it is unsurprising that, as Frans Timmermans phrased it during an EPC event, “the anxiety of loss is now stronger than the hope of improvement.”

A vague promise of improvement, or even aversion of climate catastrophe, will not be sufficient to compel all citizens to support (or at least not oppose) the requisite changes. These are changes that will radically reshape not only our society and economy but also our everyday lives. These prospective improvements are too distant and potentially inaccessible for many to maintain their support for the long term, especially in the face of transitional costs, changing employment and reshaped communities.

For the most vulnerable, more urgent demands of finding food, shelter and work supersede any concern about what may be on the horizon, however threatening it may be. Despite this inability to look beyond the most urgent day-to-day needs, as the EU and national governments push forward their efforts to realise the Green Deal, change will come to them regardless.

Protecting the most vulnerable

The energy transition will require people to alter their habits and invest in, for instance, heating systems or cleaner transport. Those who do not – or cannot – make these changes may ultimately pay a premium. For some, this premium will be an added cost that they can ill afford. The Social Climate Fund promises direct income support for the most vulnerable to assist with these costs, but it will not meet all the demands of the transition.

What would be better for more people and for a longer period would be a more deep-rooted change which improves the starting position of everyone on this journey. Then all citizens will be able to look past the urgency of meeting basic requirements and plan and prepare for the future.

The social contract is broken

Even pre-COVID-19, poverty levels in the EU were unacceptably high. Despite the targets set in the Europe 2020 strategy, by 2020, more than one in five European citizens remained at risk of poverty or social exclusion, with nearly one-quarter of children growing up in poverty. The pandemic exposed the degree to which social safety nets have been hollowed out, particularly in those member states which felt the weight of post-2008 global financial crisis austerity measures most heavily. Public investment levels have plummeted since 2008. During the years of strict austerity (2009-12), net public investment in Greece, Portugal, Italy and Spain dropped by more than 2% of GDP, only stabilising in 2012 at a negative level of around -0.5%. Our infrastructure is creaking.

As a result, the social contract, which outlines the norms around the roles played by the state, individuals and employers, has been eroded. The sense of isolation, of the shrinking state, of welfare merely enabling people to live off the state – all this has increased anxiety, reinforced people’s inherent opposition to change, and strengthened populist and far-right parties.

None of this will smooth the path towards a green transition. In fact, the opposite is true. Fortunately, the solution to strengthening the foundations for a just energy transition is not complex.

Repairing social safety nets

The first element of the solution is prioritising, at every level of government, policies that rebuild and strengthen social safety nets. Efforts must be redoubled to reassure people that help is available, adequate and accessible for all. Welfare should no longer be portrayed as a hand-out but rather a hand-up that will help rebuild our economy and society in the wake of two severe crises and prepare us for climate change.

To support this, investment should be directed towards human capital and universal public services. In particular, investment in education, upskilling and reskilling will play a critical role in delivering the energy transition. The current EU economic governance framework has, at best, not encouraged this spending, and undermined it at worst. Investment in the energy transition must be accompanied by social investment to succeed in the long term. The latter should be excluded from the calculations of both headline earnings and structural deficits so that debt can finance net public investment.

Second, continual dialogue between citizens and policymakers must accompany the energy transition. This dialogue must include honest recognition and debate about the benefits, trade-offs and transitional costs; occur at both national and EU levels; and include a wide spectrum of society, including those most often excluded from policy debates.

Third, continual efforts to measure the social impacts of the transition, especially on the most vulnerable, must be made. Where necessary, policymakers must act swiftly to alleviate these impacts and ensure that the burden of change is shared fairly. The European Commission should introduce an integrated scoreboard that combines economic, social and environmental indicators. This scoreboard would monitor member states’ progress in meeting the targets set out in the European Pillar of Social Rights Action Plan and shape the annual European Semester recommendations accordingly.

Finally, the extension of the Emissions Trading Scheme (ETS) to buildings and transport currently foresees 25% of the eventual revenue being dedicated to the Social Climate Fund. This will not be sufficient. 100% of the revenue accumulated through this extension should be allocated to social issues, with additional top-up funding from current ETS revenues. Renovating and constructing energy-efficient social housing should take priority. Support should also be directed towards the most vulnerable, allowing swift replacement of old windows and installation of insulation, heat pumps and solar panels. This must be accompanied by clear limits on rent increases to avoid renovation costs being passed from landlords to tenants.

Stronger societal resilience has multiple benefits

The benefits of this approach will be manifold: strengthened social cohesion and resilience thanks to less inequality and poverty; strengthened democracy by countering populism, protest votes and the election of weak coalition governments; and a faster COVID-19 economic recovery through increased productivity and growth.

Beyond this, this four-part solution will also provide concrete foundations for a successful energy transition. It will diminish anxiety around the transformation, reassuring people that their fears will be heard and acted upon, that support is available, and that they are partners in this transformation. It will allow citizens to see past the anxiety of loss and focus on the hope of improvement ahead.

Laura Rayner is a Policy Analyst in the Social Europe and Well-Being programme at the European Policy Centre.

The Fair Energy Transition for All project (2020-22) explores the concerns, fears, hopes and expectations of economically and socially disadvantaged people with regard to the transition to energy systems based on environmentally friendly renewable energy and high energy efficiency. The overall project is spearheaded by the King Baudouin Foundation, and together with ifok and Climate Outreach, the European Policy Centre is leading the European track.

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