Editing IPCC:AR6/WGIII/Chapter-17 (section)

==== 17.3.2.3 Stranded Assets, Inequality and Just Transitions ====

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As the momentum towards achieving carbon neutrality grows, the risk of certain assets becoming stranded is on the increase. International policies and the push for low-carbon technologies in the context of climate change are reducing the demand for and value of fossil fuel products. Stranded assets become devalued before the end of their economic life or can no longer be monetised due to changes in policies and regulatory frameworks, technological change, security, or environmental disruption. In short, stranded assets are ‘assets that have suffered from unanticipated or premature write-down, devaluations or conversions to liabilities’ ( [[#Caldecott--2013|Caldecott et al. 2013]] ).

Stranded assets are likely to ‘lose economic value ahead of their anticipated useful life’ ( [[#Bos--2019|Bos and Gupta 2019]] ). They are often described as creative when they become stranded because of innovation, competition or economic growth ( [[#Gupta--2020|Gupta et al. 2020]] ). Divestment refers to ‘the action or process of selling off subsidiary business interests or investments’. This often occurs due to changing social norms and perceptions of climate change.

Indeed, pressure is mounting on fossil fuel industries to remove their capital from heavy carbon industries. As the former Governor of the Bank of England, Mark Carney, remarked, a wholesale reassessment of prospects, especially if it were to occur suddenly, could potentially destabilise markets, sparking a pro-cyclical crystallisation of losses and a persistent tightening of financial conditions. In other words, an abrupt resolution to the tragedy of horizons itself poses a risk to financial stability ( [[#OECD--2015|OECD 2015]] ). The divestment narrative is also based on the view that a shift away from intensive carbon resources will be significant, as the ‘less value will be destroyed, […] the more can be re-invested in low carbon infrastructure’ ( [[#OECD--2015|OECD 2015]] ). Social movements are critical to triggering rapid transformational change and moving away from dangerous levels of climate change ( [[#Mckibben--2012|Mckibben 2012]] ). Although divestment is hailed as a necessary action to decouple fossil fuel from growth and force carbon-intensive industries to go out of business, there is the sense that there is no shortage of investors who are willing to buy shares, so that such resources are not stranded, but simply relocated. Criticism has been levelled at the divestment movement for not having a significant impact on funding fossil fuels and not being sufficiently in tune with other wide-ranging complexities that go beyond the moral dimensions ( [[#Bergman--2018|Bergman 2018]] ). Despite being labelled a ‘moral entrepreneur’, the divestment movement has the potential to disrupt current practices in the fossil fuel industry, shape a ‘disruptive innovation’ and contribute to a strategy for decarbonising economies globally ( [[#Bergman--2018|Bergman 2018]] ). Divestment is contributing to the political situation that is ‘weakening the political and economic stronghold of the fossil fuel industry’ ( [[#Grady-Benson--2016|Grady-Benson and Sarathy 2016]] ).

The risks attached to the stranding of fossil fuel assets have increased with the recent and sustained plunge in oil prices because of the global health pandemic (COVID-19) and the concomitant economic downturn, forcing demand to plummet to unprecedentedly low levels. (Oil prices have recently increased.) Many economies in transition and countries dependent on fossil fuels are going through turbulent times where asset and transition management will be critical ( [[#UNEP/SEI--2020|UNEP/SEI 2020]] ). However, COVID-19 provides a foretaste of what a low-carbon transition could look like, especially if assets become stranded in an effort to respond to the call for action in ‘building back better’ and putting clean energy jobs and the just transition at the heart of the post-COVID-19 recovery ( [[#IEA--2020|IEA 2020]] ; [[#United%20Nations%20General%20Assembly--2021|United Nations General Assembly 2021]] ). COVID-19 provides a useful proxy for issuing two alerts. First, it is a reminder of the urgency of addressing climate change, given that delaying the move away from stranded assets will further worsen climate change. Second, failure to recognise the threat from stranded assets will result in new assets becoming stranded ( [[#Rempel--2021|Rempel and Gupta 2021]] ). Hence, the momentum towards a transformational push is resting on a new opportunity ushered in by COVID-19 to emphasise the urgency for a new departure towards rapid emissions reductions ( [[#Cronin--2021|Cronin et al. 2021]] ).

The stranded assets narrative has focused overwhelmingly on consumption by companies: not much emphasis has been placed on the commercialisation- and investment-related aspects. In addition, other carbon-intensive activities can also run the risk of being stranded, such as cement, petrochemicals, steel and aviation ( [[#Baron--2015|Baron and David 2015]] ). This is why stranded assets are often referred to as having a cascading impact on several other sectors.

Transitions are broad-based and complex, involving governance structures, institutions and climate vulnerabilities, and there is a need to include historical responsibility, resource intensity and capacity differentials, thus relegating the debate across simplistic binary lines of developed versus developing countries ( [[#Carney--2016|Carney 2016]] ). Hence, transition processes will have to respond to several preconditions and structural inequalities related to climate finance, energy poverty, vulnerabilities and the broader macroeconomic implications associated with managing the debt burden, fiscal deficits and uneven terms of development in developing countries. In addition to structural inequalities, the COVID-19 pandemic has severely disrupted energy and food systems, and reduced the speed at which developing countries can procure new low-carbon technologies and decouple economic growth from fossil fuels ( [[#Winkler--2020|Winkler 2020]] ). For instance, global supply-chain transition costs might be lower when compared to in-country supply chains, as became evident when COVID-19 created further disruption to renewable-energy projects ( [[#Cronin--2021|Cronin et al. 2021]] ). Moreover, developing countries can experience difficulties in phasing out old technologies, especially if the latter has a cost disadvantage, has not benefitted from an established track record and its performance is uncertain ( [[#Bos--2019|Bos and Gupta 2019]] ). There is the risk of lock-in effects related to grandfathering when emitters comply with less stringent standards.

Despite their efforts in deploying renewable energies, many developing countries are still contending with problems related to the immaturity of the current technologies and the challenges of battery storage. In short, the transition to low-carbon development must consider the challenges of renewable-energy penetration and existing energy-related vulnerabilities and inequalities. There are power asymmetries between first-comers and latecomers, especially in cases where mature technologies can be located in countries with less stringent laws and standards. Carbon leakage has implications for just transitions, as carbon-intensive industries can move their dirty industries to developing countries as a way of outsourcing the production of carbon ( [[#Bos--2019|Bos and Gupta 2019]] ; [[#UNU-INRA--2020|UNU-INRA 2020]] ). When the challenge of climate mitigation is transferred to developing countries in the form of carbon leakage, the risks of carbon lock-in for developing countries are heightened ( [[#Bos--2019|Bos and Gupta 2019]] ).

Overcoming the carbon lock-in is not simply a matter of the right policies or switching to low-carbon technologies. Indeed, it would mean a radical change in the existing power relations between fossil fuel industries and their governments and social structural behaviour ( [[#Seto--2016|Seto et al. 2016]] ). Some actions to fix the climate change problem can themselves create injustices, thereby challenging sustainable development ( [[#Cronin--2021|Cronin et al. 2021]] ). Not paying sufficient attention to perceptions of injustice related to the rights to development, energy and resource sovereignty can further create resistance to climate action ( [[#Cronin--2021|Cronin et al. 2021]] ).

The shrinking carbon budget has raised questions over whether to meet our commitment to 2°C if fossil fuel resources were to be mined or left stranded, as McGlade and Ekins argue: ‘… [a] large portion of the reserve base and an even more significant proportion of the resource base should not be produced if the temperature rise is to remain below 2 degrees C’ ( [[#McGlade--2015|McGlade and Ekins 2015]] ). This logic means that developing countries that rely on fossil fuel extraction will need to replace their hydrocarbon revenues with other income-generating activities. Stranded assets remind most oil-producing governments that fossil fuel assets do not have a durable value and are vulnerable to politico-economic forces and fluctuations. The goal of staying within the 1.5°C temperature goal, in line with the Paris Agreement, is already part of the policy vision and planning of large fossil fuel-consuming economies. For early fossil-fuel producers, however, the reality that their resources may not yield the desired returns is often perceived as bad news, particularly in the context of the increasing depreciation of fossil fuel products.

Stranded assets raise fundamental questions related to issues of equity and just transitions:

• Who decides which resources should be stranded?

'''•''' Who shoulders the burden of the transition and losses incurred from moving away from heavy industries with associated compensation?

• How should the advantages of short-term fossil fuel exploitation be shared based on the principle of distributive justice?

The transition to a low-carbon development is wired in issues of justice and equity: how do you align carbon reductions to meet the needs of humanity? Distributive justice calls for a fairer sharing of the benefits and burdens of the transition process, while procedural justice is essentially about ensuring that the demands of vulnerable groups are not ignored in the pull to the transition. The impacts of climate change and the mitigation burdens are experienced differently by different social actors, with indigenous communities facing multiple threats and being subjected to unequal power dynamics ( [[#Sovacool--2021|Sovacool 2021]] ).

Nonetheless, the production of fossil fuels is central to many economies with numerous development implications related to rents associated with export revenues, energy security and poverty alleviation ( [[#Lazarus--2018|Lazarus and van Asselt 2018]] ). The central question is: who decides which types of carbon should be burnable or non-burnable? Hence, social equality is at the heart of the transition process, but it falls short of a response on how to chart a new road map towards carbon neutrality, especially given that fossil fuel producers and investors tend to belong to large, powerful companies and wield a great deal of influence and power, especially when their entrenched interests are at stake ( [[#Lazarus--2018|Lazarus and van Asselt 2018]] ). The question of whether developing countries should be compensated for foregoing their resources in light of their current development needs has not yielded many results and had only limited success in mobilising international finance, as demonstrated by the case of Yasuni-ITT in Ecuador ( [[#Sovacool--2016|Sovacool and Scarpaci 2016]] ). According to ( [[#Sovacool--2021|Sovacool et al. 2021]] ), affected communities and their views may be discounted and excluded from planning, which can neglect important matters such as rights, recognition and representation ( [[#Sovacool--2021|Sovacool 2021]] ).

Fossil fuel-dependent countries are doubly exposed to the vulnerability related to climate change impacts and are being targeted in the global effort to address the problem ( [[#Peszko--2020|Peszko et al. 2020]] ). Countries that are heavily reliant on oil, coal and gas are also those most at risk from a low-carbon transition that may curtail the activities of their fossil fuel industries and render the value chains and economies associated with the exploitation of fossil fuels unviable ( [[#Peszko--2020|Peszko et al. 2020]] ).

Developing countries in Latin America and Africa that are reliant on revenue streams from fossil fuels may not see these returns converted into much-needed infrastructure and other social and economic amenities that can reduce poverty. However, given the falling prices of renewables, developing countries do not have to face the burden of retrofitting their infrastructure to align with new low-carbon industries, since they can leapfrog technologies and shape a sustainable trajectory that is more resilient and fit for the future.

However, the transition towards a carbon-neutral world is complex and non-linear, and it will likely result in some disruptions, with manifest equality implications, given the scale of the transformation envisaged. There are parallel movements that can be observed. On the one hand, divestment initiatives are underway to move away from carbon-intensive investments. On the other hand, hydrocarbon-rich countries in some parts of the developing world are identifying new opportunities to reduce the fiscal loss associated with the loss of fossil fuel revenues. Indeed, with global investment in energy expected to shrink by 20% in 2021, this has created fiscal challenges for countries that are heavily reliant on fossil fuel products as their main source of revenue.

Other disruptions are linked to redundant contracts and postponed or cancelled explorations, as many oil companies are diversifying their production in the wake of the pandemic and are cutting back on planned hydrocarbon investments (Denton et al. 2021). These failed concessions and disruptions have implications for the just transition, especially in developing countries without the financial ability to pull out of fossil fuels and to diversify with the same urgency as the industrialised nations ( [[#Peszko--2020|Peszko et al. 2020]] ). For instance, in South Africa, which is seeking to divest away from coal and decarbonise its energy sector, if the transition is not properly managed, this could lead to a loss in revenue of R1.8 trillion (USD125 billion), thus compromising the government’s ability to support social spending ( [[#Huxham--2019|Huxham et al. 2019]] ). Emerging oil producers like Uganda are having to postpone the start of production. Eni and Total, two of the largest international oil and gas majors in Africa, have already signalled they are making 25% cuts to their investment in exploration and production projects in 2020, representing a EUR4 billion reduction in foreign direct investment for Total and a USD2 billion reduction for Eni ( [[#Le%20Bec--2020|Le Bec 2020]] ).

A poorly managed transition will reproduce inequalities, thus contradicting the very essence of a just, sustainable, inclusive transition. Revenues from oil and gas have been ploughed into social safety nets and are supporting free senior high-school education in countries such as Ghana, thus enabling the realisation of SDG 4 (quality education) ( [[#UNU-INRA--2020|UNU-INRA 2020]] ). The move from fossil fuels towards a low-carbon economy has economic implications for lower-income countries that are dependent on hydrocarbon resources, are endowed with significant untapped oil and gas reserves, and may not have the transitional tools to move towards low-carbon technologies or economies ( [[#Peszko--2020|Peszko et al. 2020]] ).

The energy transition landscape is changing rapidly, and we are witnessing multiple transitions. This creates room to manage the transition in ways that will prioritise the need for workers in vulnerable sectors (land, energy) to secure their jobs and to maintain a secure and healthy lifestyle, especially as the risks multiply for those who are exposed to heavy industrial jobs and all the associated outcomes. The shift to carbon neutrality is being driven by convergent factors related to energy security and the benefits of climate mitigation, including the health impacts of air pollution and consumer demand ( [[#Svobodova--2020|Svobodova et al. 2020]] ).

Climate change is high on the global agenda, as is energy’s role in decarbonising the economy, giving rise to a number of equality issues. ( [[#Oswald--2020|Oswald et al. 2020]] ) have shown that economic inequality translates into inequality in energy consumption, as well as emissions. This is largely because people with different levels of purchasing power make use of different goods and services, which are sustained by different energy quantities and carriers ( [[#Oswald--2020|Oswald et al. 2020]] ; [[#Poblete-Cazenave--2021|Poblete-Cazenave et al. 2021]] ).

A study by ( [[#Bai--2020|Bai et al. 2020]] ) shows that an increase in income inequality in China hinders the carbon abatement effect of innovations in renewable-energy technologies '','' possibly even leading to an increase in carbon emissions, while a decrease in inequality of incomes is conducive to giving play to the role of this carbon abatement effect, thereby indicating that there is an important correlation between the goals of ‘sustainable social development’ and ‘sustainable ecological development’.

India is home to one sixth of world’s population but accounts for only 6.8% of global energy use and consumes only 5.25% of electricity produced globally. During the period 1990–1991 to 2014–2015, overall energy intensity in India declined from 0.007 Mtoe per billion INR of GDP to 0.004 Mtoe per billion INR of GDP, an annual average decline of 2%. The industrial sector is making the highest contribution CO 2 mitigation by reducing its energy intensity ( [[#Roy--2021|Roy et al. 2021]] ).

Household carbon emissions are mainly affected by incomes and other key demographic factors. Understanding the contribution of these factors can inform climate responsibilities and potential demand-side climate-mitigation strategies. A study by ( [[#Feng--2021|Feng et al. 2021]] ) on inequalities in household carbon the in USA shows that the per-capita carbon footprint (CF) of the highest income group (&gt;USD200,000 yr –1 ) with 32.3 tonnes is about 2.6 times the per-capita CF of the lowest income group (&lt;USD15,000 yr –1 ) with 12.3 tonnes. Most contributors of high carbon footprints across income groups in the US are heating, cooling and private transport, which reflects US settlement structures and lifestyles, heavily reliant as they are on cars and living in large houses.

Studies by ( [[#Jaccard--2021|Jaccard et al. 2021]] ) on energy in Europe shown a top-to-bottom decile ratio (90:10) of 7.2 for expenditure, 3.1 for net energy and 2.6 for carbon. Given such inequalities, these two targets can only be met through the use of carbon capture and storage (CCS), large efficiency improvements and an extremely low minimum final energy use of 28 GJ per adult equivalent. Assuming a more realistic minimum energy use of about 55 GJ per adult equivalent and no CCS deployment, the 1.5°C target can only be achieved at near full equality. The authors conclude that achieving both stated goals is an immense and widely underestimated challenge, the successful management of which requires far greater room for manoeuvre in monetary and fiscal terms than is reflected in the current European political discourse.

The ‘Just Transition’ concept has evolved over the years ( [[#Sweeney--2018|Sweeney and Treat 2018]] ) and is still undergoing further evolution. It emphasises the key principles of respect and dignity for vulnerable groups, the creation of decent jobs, social protection, employment rights, fairness in energy access and use, and social dialogue and democratic consultation with relevant stakeholders, whilst coping with the effects of asset-stranding or the transition to green and clean economies. The concept has come under increased scrutiny, with its protagonists emphasising the need to focus on the equality of the transition, not simply on its speed ( [[#Forsyth--2014|Forsyth 2014]] ). The emphasis on justice is also gaining in momentum, with a growing recognition that the sustainability transition is about justice in the transition and not simply about economics ( [[#Newell--2013|Newell and Mulvaney 2013]] ; Swilling, M. Annecke 2010; [[#Williams--2020|Williams and Doyon 2020]] ). Scholars are increasingly of the view that a transition involving low-carbon development should not replace old forms of injustice with new ones ( [[#Setyowati--2021|Setyowati 2021]] ).

The economic implications of the transition will be felt by developing countries with high degrees of dependence on hydrocarbon products as a revenue stream, as they are exposed to reduced fiscal incomes, given the low demand for oil and low oil prices, and the associated economic fallout of the pandemic. This link with stranded assets is important, but it may be overlooked, as countries whose assets are becoming stranded may not have the relevant resources, knowledge, autonomy or agency to design a fresh orientation or decide on the transition. In addition, some developing countries are dependent not only on fossil fuel revenues, but also on foreign exchange earnings from exports. This dependence comes into sharp focus when one considers that 30% of the Malaysian government’s revenues are linked to petroleum products, and that Mozambique, by exploiting its newly discovered natural-gas reserves, can earn seven times the country’s current GDP over a period of 25 years ( [[#Cronin--2021|Cronin et al. 2021]] ). Thus, any attempt to accelerate the transition to low-carbon development must take into account foreign exchange, domestic revenue and employment generation, which are precisely what ensure the attractiveness of fossil fuel industries ( [[#Addison--2018|Addison and Roe 2018]] ).

Energy use and its deployment are sovereign matters. State responsibilities over the control and use of natural resources concern both current and future generations ( [[#Carney--2016|Carney 2016]] ). Climate change impacts will disable the food, water and energy systems of the most vulnerable. Therefore, the resources required to enable a just transition are predicated on good leadership and governance institutions that will support quality and justice-based transitions. Beyond energy systems, changes to land systems can benefit from sustainable land management in ways that will reduce the pressure on land for food and at the same time support carbon storage. With land coming under increased pressure, land and forest management are critical for carbon sequestration, as well as other ecosystem benefits. Extractive processes have impacts on land, and often there are few if any redistributive benefits for communities in regions where extraction takes place. In addition, extraction of strategic minerals such as cobalt, copper and lithium have been linked to violence, human rights abuses and conflict ( [[#Cronin--2021|Cronin et al. 2021]] ).

However, in the race to achieve carbon neutrality by 2050, some of the other priorities of the transition, like climate change adaptation and its inherent vulnerabilities, might become muted, given the urgency to mitigate at all costs. Consequently, the transition imperative reduces the scope for local priority-setting and ignores the additional risks faced by countries with the least capacity to adapt. Equally, the ‘just transition’ is often seen through the prism of job losses and the attendant retooling and reskilling imperatives necessary to re-dynamise local businesses, especially those that may fail as a result of mine closures. It is equally important to consider current disparities in knowledge and capacity which could maintain the existing inequalities in the global regional distribution of costs and benefits. One striking example is the manufacturing of PV in India when compared to manufacturing PV in China. In China, manufacturing costs are lower than in India, as are import tariffs ( [[#Behuria--2020|Behuria 2020]] ). Similarly, a solar industry might have greater development prospects in one region than another given existing regional disparities in human capital, infrastructure, finance and technological development ( [[#Cronin--2021|Cronin et al. 2021]] ).

Low-carbon transitions and equality implications will depend on local contexts, regional priorities, the points of departure of different countries in the transition and the speed at which they will want to travel. Hence, timing and scope are important elements that are associated more with a quality transition than a race to the bottom. To date, the debate has had some obvious blind spots, not least considerations of power, politics and political economy (Denton et al. 2021). Certainly, the transition will create winners and losers, as well as stakeholders that can frame their economic interests so as to determine the orientation, pace, timing and scope of the transition.

The determination of a just transition is complex and not simply dependent on the allocation of perceived risks or solutions, but rather on how risks and solutions are defined ( [[#Forsyth--2014|Forsyth 2014]] ). Acting urgently to achieve environmental solutions or meet transition imperatives has certain risks given the need to go beyond commonplace definitions of the just transition by emphasising the distributive or procedural aspects. The framing of policies to align with fast and low-cost mitigation without paying sufficient attention to social and economic resilience creates its own potential risks and can enhance social vulnerability rather than address it. The need to distribute climate change solutions must not delegitimise appropriate economic growth strategies, nor indeed create the additional risks of policy imposition. Perceptions of justice with regard to environmental problems and solutions matter equally. Hence, the types of transition pathway that are chosen may have equality implications. Mitigation at all costs, if done ‘cheaply and crudely’, can create additional problems for social justice and inclusive development ( [[#Forsyth--2014|Forsyth 2014]] ).

The assumption that the benefits of mitigation are enough to offset trade-offs with other policy objectives can be questioned. If one accepts the argument that not all adaptation addresses vulnerability concerns ( [[#Kjellén--2006|Kjellén 2006]] ), and that some adaptation strategies can heighten vulnerabilities if there are flaws in their design and implementation, then the same logic applies, namely that not all mitigation is necessarily beneficial. Hence the emphasis on the transition resulting from mitigation should be placed not only on speed or cost-effectiveness, but also on the legitimacy of the actions, and whether the transition is well designed or not. In short, justice is not always a shorthand for acting ethically, but rather a point of reasoning on what is considered legitimate. Planning for the transition often discounts human rights and social inclusivity that can occur as the result of a rapid transition. The emphasis should be placed on the management of the transition rather than the speed – for instance, if in the rush to build new hydropower energy sources implies that populations are displaced, then this constitutes a human rights violation ( [[#Castro--2016|Castro et al. 2016]] ; [[#Piggot--2019|Piggot et al. 2019]] ).

Ambitious climate goals can increase the urgency of mitigation and accelerate the speed at which carbon neutrality is achieved. However, if the transition is done with speed, then this will leave diversification efforts stymied, particularly in developing countries that are highly dependent on fossil fuel revenue streams ( [[#UNEP/SEI--2020|UNEP/SEI 2020]] ). Transition decisions and policies may also have far-reaching gendered implications, as the closure of mines is often linked to several ancillary business impacts where men are laid off and women may have to take on multiple jobs to compensate for the reduction in the household‘s income ( [[#Piggot--2019|Piggot et al. 2019]] ; [[#UNU-INRA--2020|UNU-INRA 2020]] ).

A just transition holds out the prospects for alternative high-quality jobs, public-health improvements and an opportunity to focus on well-being and prosperity, with spillover benefits to urban areas and economic systems. Nonetheless, countries that transition from fossil fuels experience different challenges, different levels of dependence and have different capacities to transition. There will be countries with lower capacity and higher dependence, and vice versa ( [[#UNEP/SEI--2020|UNEP/SEI 2020]] ).

Deciding on matters of justice is essential to the transition, and there are several inherent questions to consider when thinking through the allocation of costs and benefits, as is the case with distributive justice. How matters are defined and who defines matters such as the timing of phasing out, prioritising which energy sources need to be phased out and who might be affected are all political economy questions ( [[#Piggot--2019|Piggot et al. 2019]] ).

Similarly, when considering issues of procedural justice, there are matters related to interests, participation and power dynamics that are essential to the process, but that might also subvert the process, depending on whose rights, whose participation and whose power are being put in jeopardy ( [[#Forsyth--2014|Forsyth 2014]] ; [[#Piggot--2019|Piggot et al. 2019]] ). Hence, both distribution and procedure matter, as do inter-generational and intra-generational equity in planning transitions. Six critical variables can shape or inhibit the transition process. These are dependence, timing, capacity, agency, scope and inclusion (Denton et al. 2021).

'''Dependence,''' or the extent to which a country may depend on revenue streams from fossil fuels, will determine its ability to manage the transition from fossil fuels. Countries who rely on the proceeds from hydrocarbon resources as economic rents to support fiscal income and spending on public service-related needs such as education, health and infrastructure, export earnings and foreign exchange reserves will have greater difficulties in foregoing their fossil fuel resources.

'''Timing:''' the transition pathway has to be aligned with a timetable which is anchored in national development priorities. For example, South Africa’s Integrated Resource Planning indicates that the transition away from coal, if not aligned with national development priorities, will reproduce new forms of inequality. In addition, if the transition is imposed and its timing is not organic, then this might also produce social inequalities.

'''Capacity:''' transitions need to reflect spaces and planning. If knowledge about the transition pathway is not adequately mastered or in place, this can disable the process or steer it in the wrong direction. Capacity also relates to several attributes, including technical, governance, institutional, technologies, and economic resources to manage the transition. Poorer countries will have difficulties in managing all these resources, as well as absorbing the costs associated with the transition ( [[#UNEP/SEI--2020|UNEP/SEI 2020]] ).

'''Agency:''' transitions are inherently about the sovereign right to determine one’s orientation towards low-carbon development. However, given the urgency to stick to the Paris Agreement and the new conditionalities related to post-COVID stimulus packages, the absence of agency to deal with the transition might jeopardise its flow, orientation and pace ( [[#Newell--2013|Newell and Mulvaney 2013]] ).

'''Scope:''' the extent to which the transition is rolled out and its potential impacts. If transition policies are ambitious in making commensurate diversification investments, this may enable job creation, but it may also affect employees who are insufficiently prepared to undertake new jobs and skills.

'''Inclusion:''' who is considered in the transition process and how their interests and risks are assessed are important aspects of transition pathways. Stakeholders with strong vested interests may resist the transition, especially as it moves towards diversification activities and policies.

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