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Results Briefs November 10, 2020

Coal Mine Closure and a Just Transition for All

As the world transitions away from coal, the challenges associated with closing mines and their associated thermal power plants, along with regenerating coal-dependent communities, continues to slow the rate at which this transition can take place. To overcome these barriers and assist governments in preparing and planning for a managed transition out of coal, we analyzed in 2017 11 World Bank lending operations on coal sector adjustment from the early 1990s to early 2000s, alongside 5 other country-level coal transitions, to arrive at 9 major lessons for contemporary energy transition in coal regions. These lessons and the analysis underpinning them can be found in the report entitled “Managing Coal Mine Closure: A Just Transition for All.” The lessons formed the basis of a subsequent Coal Sector Transition Assessment Framework, developed by the team in 2018, which guides our current dialogue and operations on coal transition with government clients around the world. The framework, first applied in Western Macedonia’s major lignite operations with support from the European Commission (EC), outlines a practical, step-by-step series of actions undertaken by government with the support from relevant third parties. The framework has three pillars: Pillar 1—governance structure; 2) Pillar 2—people and communities; 3) Pillar 3—environmental reclamation, and repurposing of former mining land and other assets. It considers interventions required along these three pillars over three distinct phases of coal sector transition: (i) pre-closure; (ii) closure; and (iii) regional transformation. By working upstream to turn many assets often considered risks – mining lands, thermal power plant investments, and job—into opportunities, the approach moves beyond a simple risk mitigation approach to one that is transformational, dynamic, forward-looking and optimistic about the future of present-day coal dependent regions.

Coal remains a mainstay of the power sector globally, heavily concentrated in many countries that either produce and/or consume coal.  But coal is increasingly being displaced by gas and renewables, and the transition to a lower carbon future, away from coal, is inevitable.  However, in many countries there are whole regions—such as the Western Macedonia region of Greece, Shanxi Province in China— dependent on coal mining, usually directly integrated with the power sector. Closing these mines and transitioning away from coal can induce significant socioeconomic and environmental impacts, if not managed well. Some important questions to be asked early on in the planning phase include: “how can coal mine closure be managed to ensure no one is left behind?” and “what might be the lessons from past coal mine sector adjustment or from contemporary transitions to inform government decision-making on energy transition pathways? Given the World Bank’s past support to coal mine transition in the 1990s/early 2000s and valuable lessons learned are being harnessed to assist our clients meet this growing challenge. This ground-breaking, cross-cutting work forms the analytic basis of a new global work program in the World Bank “Support to Energy Transition in Coal Regions”. Following the analytical work in FY19 (July 2018 – June 2019) and the release of the Managing Coal Mine Closure: A Just Transition for All report at the United Nations Conference of the Parties (COP) 24 in Katowice, Poland; the World Bank launched in August 2019 a global program entitled Support to Energy Transition in Coal Regions housed within the Energy and Extractives Global Practice, with activities already underway in a first phase in Western Balkans and Ukraine. In addition, the team has on-going work in China, Poland, Romania, Bulgaria and South Africa. 

In the Managing Coal Mine Closure, Achieving a Just Transition report, two Global Practices (Energy and Extractives; and Jobs and Social Protection) and one Global Theme (Climate Change) worked together to review 11 past coal mine closure investment loans delivered in the 1990s and early 2000s, complemented by case studies on coal mine closure in the USA, United Kingdom, Netherlands, and China. 9 lessons were drawn, organized around three pillars: (i) governance systems; (ii) people and communities; and (iii) land and environmental reclamation. The lessons pointed to the need for sustained stakeholder engagement, advance planning, and adequate budgets to mitigate immediate economic shocks in coal-dependent regions. Crowd sourcing finance, strategy development and repurposing of assets are further required to ensure that over time these mono-industry regions recover and flourish.

The Managing Coal Mine Closure, Achieving a Just Transition (World Bank, 2018) report (and the new business it has generated) positions the World Bank at the cutting edge of global discussions on energy transition, and key actions to meet global climate targets. It is the first research piece of its kind to succinctly distill lessons learned on past coal sector adjustment exercises and offer governments practical ways to begin the difficult process of planning and prioritization. Already the report's findings have generated in-country engagement through Trust Fund (TF) in Greece, Poland, Ukraine, Bosnia-Herzegovina, and South Africa; Reimbursable Advisory Services (RAS) in Bulgaria and Romania (upcoming) and Investment Project Financing (IPF) projects in China and Serbia. In each instance World Bank teams (constituting Energy and Extractives, Jobs and Social Protection, and Environment GPs) are now applying a Coal Sector Transition framework to help country clients develop comprehensive road maps on coal closure and a Just Transition.

The report positioned the World Bank to receive considerable funding from the Powering Past Coal Alliance (PPCA) to implement global and country engagements on the subject matter. The World Bank's convening power has been evidenced by the multiple stakeholders—such as the EC, the European Bank for Reconstruction and Development, the Energy Community Secretariat—who have participated in dialogues and roundtables in 2019 and 2020 hosted by the World Bank on the subject.

The team's commitment to excellence and deep professional expertise in the area has been recognized not only by country clients but equally by donor partners, such as the EC, the Clean Energy Ministerial, the Government of Canada, and the Intergovernmental Forum on Mining and Metals. It is a strong case whereby in less than two years since the report's release in at COP 26 in December 2018 the World Bank has generated new business and new global partnerships on such an important cross-cutting topic.

The work underscores the careful balance to be sought between respect for people and the planet. A guiding principle of the report, and the spirit with which the team approaches its dialogue with clients and partners, is that coal mine closure requires honest dialogue and partnership with those who will be most impacted by coal sector adjustment. Hence the focus of the report on a Just Transition, one that places people squarely at the heart of the energy transition.

The coal transition work exemplifies many principles of cross World Bank collaboration. The Extractives team “speaks the language” of the coal mining sector which gives great credibility to the engagement. A multidisciplinary team with Environment and Social Protection is formed within the World Bank to deliver a unified approach and result that covers all the mining, governance, land, environmental and socio-economic issues facing the clients.

Bank Group Contribution
The IBRD delivered 11 coal mine closure investment loans in the 1990s and early 2000s in Russia, Ukraine, Poland and Romania for 2.7 billion USD. The Managing Coal Mine Closure report was prepared using the Energy and Extractives Global Engagement budget for US$250,000 / year for two years. The Energy Sector Management Assistance Program (ESMAP) is supporting the Global Platform for Just Transition with an initial focus on the Europe and Central Asia (ECA) region with US$725,000 and a mutually reinforcing Extractives Group Programmatic Support (EGPS) grant of US$950,000 on the preparation of key knowledge. The World Bank extractives coal regions in transition team received EC funding of Euro 500,000 to develop the first Just Transition Road Map for Western Macedonia Greece. The EC provided Euro 1.5 million for a similar approach in three regions in Poland. Country level engagements in China (US$180,000), Serbia (US$130,000), Romania (US$100,000) are funded by Country Engagement Budget.

In implementing the various policy priorities of the Green New Deal, more specifically the Just Transition Mechanism, the World Bank is considered a leading partner to the EC; and in a variety of activities: from policy notes and frameworks to in-country technical assistance. For instance, on the context of Greece and our Advisory Services and Analytics (ASA) financed by the EC (€500,000), we held joint missions and briefings in 2019 and 2020. The World Bank extractives coal regions in transition team is in the process of signing an administrative agreement of €1.7million with the EC for an EC-funded technical assistance in three Polish coal regions. In the context of our work in Western Balkans and Ukraine, the EC has brought financing to jointly agreed activities alongside smaller contributions by governments, such as in the case of Ukraine-Poland study tour, where Polish government will be financing actual expenses for the Polish participants.

In addition, the Energy and Extractives GP obtained ESMAP financing to launch a Global Platform for Just Transition in Coal Mining Regions and commenced direct support to clients including European Union funds and lending.

At a global level, the Clean Energy Ministerial, the Government of Canada, the Government of the United Kingdom, and the Intergovernmental Forum on Mining and Metals have been the main partners for support and implementation.

Moving Forward
The Just Transition work is now being actively rolled out in client countries in 2020. The work is demand driven. The initial focus was ECA where the political will for reform was greatest. China has requested support for the coal dependent Shanxi Province as part of its “energy revolution” initiative, Longer-term the most significant climate impact of the work is expected to be in East Asia and South Asia. The World Bank can provide support at whatever stage the client is in this process to help them most effectively prepare for this inevitable transition.

Our recently completed ASA (June 2020) entitled “Preparing for a Managed Transition of Coal-dependent Regions in Western Macedonia, Greece” applied our assessment framework on coal sector transition to the real situation of lignite mining in Western Macedonia. It provided to the government, academia, industry and civil society a rich understanding of the social, environmental and economic challenges associated with a transition away from coal. More importantly it developed and applied new, innovative tools—such as Land Use and Repurposing Application (LURA)—alongside cutting-edge knowledge –such as jobs diagnostics and perception surveys on transition to inform planning for a just transition of the country’s main lignite mining area. With this road map, the Ministry of Environment and Energy, and the Governor’s office of Western Macedonia are well-positioned to develop, the required Territorial Just Transition Plans (TJTPs) and the eventual operational program totaling US$300 million in grants and an additional US$700 million in investment lending; all of which is to be funded by the EC’s Just Transition Mechanism.