Climate change and the costs of transition

Climate change and environmental degradation constitute a major global challenge that has a significant collective impact. To respond to this problem, the European Union presented the Green Deal for Europe. The Pact is a roadmap setting out the main lines of a radical transformation of the European economy, but also an opportunity for a fairer society. This transition to a green economy is not without economic and social costs. The economic and social inequalities that the transition can create must be addressed urgently and in parallel with it so as not to compromise the cohesion of society.

The Green Deal for Europe

Published in 2019, with the aim of respecting commitments made at international level under the Paris Agreement, a Commission Communication (2019) explains the Union's commitment to achieving climate neutrality by 2050. “This new growth strategy aims to transform the EU into a global society just and prosperous, with a modern, resource-efficient and competitive economy, characterized by the absence of net greenhouse gas emissions by 2050 and in which economic growth will be decoupled from “use of resources”. [1]

This strategy therefore encompasses different areas, in particular transport, energy, agriculture, construction and sectors such as steel, cement industry, textiles and chemicals. This highlights the elements that will be prioritized in this EU climate and economic effort for 2030 and 2050.

The EU wants: 

  • A clean, affordable and secure energy supply;
  • Mobilize industry players in favor of a circular and clean economy;
  • Promote development of the construction sector;
  • Accelerate the transition to sustainable and intelligent mobility;
  • Design a fair, healthy and environmentally friendly food system;
  • Preserve and restore ecosystems and biodiversity;  
  • Have an environment free of toxic substances;
  • Promote green finance and investment and ensure a just transition;

The main measures to achieve these objectives are divided into three groups of texts:  

  • European climate law, adopted in June 2021, which sets the objective of climate neutrality, as well as the intermediate target of a reduction of at least 55 % in EU greenhouse gas emissions by 2030, compared at the 1990 level.
  • The European climate pact, which sets up a platform for discussion and exchange with civil society. 
  • The two “Adjustment to Objective 55” packages, a set of proposals aimed at revising and updating European legislation to ensure compliance with the 55% targets in 2030.

The impact of the transition

The most fragile countries and populations will also be the most affected by this climate crisis and its consequences. For example, if we consider natural disasters, whose frequency and dangerousness are constantly evolving, their consequences affect disadvantaged areas more significantly. Indeed, these areas are inevitably less equipped. Likewise, within European countries, the groups most vulnerable to climate change will be the least equipped financially and in terms of social coverage.

Beyond the consequences of climate change, the increase in inequalities is also illustrated in the implementation of the ecological and energy transition. At the national level, it is important that measures towards the transition do not increase the vulnerability of disadvantaged households. At the international level, the importance of moving forward together and in solidarity in the face of this global challenge seems obvious, yet a new challenge is emerging: the more transparent consideration of the externalities of our consumption and in particular green energies and digital technology in the framework of the ecological and energy transition.

Aware of the social impact of measures linked to the climate challenge, the European legislator has created instruments such as the social climate fund (FSC) And the just transition fund (FTJ) to support households, small industry and for regions more dependent on fossil fuels and emission-intensive industry.

It is important today to create instruments allowing these climate objectives to be respected, but also taking into account the importance of the social criterion. Indeed, the Emissions Trading System (ETS) – one of the instruments used by the EU to achieve its objectives regarding the regulation of its greenhouse gas emissions – was born to regulate industrial emissions. energy intensive. However, the system has expanded to also affect the construction and road transport sectors. With these changes, we must prepare for repercussions on the cost of certain processed products. It will therefore be necessary to study the impact on households, in particular by identifying the products concerned that will be found in the baskets of low-income households. The expansion of this system (the ETS) to transport could also have an impact on the lower middle class. We saw this in France, for example, through the “yellow vest” movement, faced with the increase in the cost of oil proposed by the French government. We note the recovery of some of these issues by populist and nationalist parties in search of electorates. These highlight job losses, the lack of planning in the transition to renewable energies, the increase in the cost of fuel.

The transition and the employment sector

Decent work, the eradication of poverty and environmental sustainability are three of the decisive issues of the 21st century. Economic restructuring combined with the increase in the cost of energy (diversification of energy sources and suppliers) will result, on the one hand, in layoffs and business closures. On the other hand, the creation of jobs linked to the greening of businesses and workplaces. Even if the equation between job loss and job creation were positive, the social cost would still be significant.

The European Commission estimates at the macroeconomic level that the transition will have a neutral or slightly positive impact on employment. A major technological transition is expected, which will lead to the loss of many jobs and the creation of new ones at the same time. THE carbon border adjustment mechanism – which aims to avoid the fact that European companies can move their carbon-intensive production abroad, or that EU products are replaced by more carbon-intensive imports – helps to save jobs work. On the other hand, it potentially causes an increase in the prices of imported products and social costs in non-European countries.

In the labor market, precariousness becomes the norm, wages and purchasing capacity are gradually reduced. Mobility between professions is often mission impossible, even for those with higher education. In addition, the situation is aggravated by a non-growing economic environment. The Commission is aware of the need for a simultaneous and integrated approach to macroeconomic, industrial and sectoral, safety and health at work policies, but the social policy is above all the responsibility of the Member States. If, on the one hand, the greening of economies requires subsidizing measures specific to each country, on the other hand, a certain degree of integration is necessary to avoid dumping and ensure the creation of decent jobs in the sectors high value added and in more labor intensive industries. The instruments now proposed in the European Union risk being insufficient. We will therefore have to see the skill of the EU and the Member States to reconcile ecology with social issues through the European Semester (cycle of coordination of economic, budgetary, social and labor policies).


An ecological transition is necessary to respond to climate change. If political initiatives were delayed. A more resilient society would have had more resources to accompany the process and support those who were left behind. Some companies did, and now they are (in some sectors) happy oases in a post-industrial desert. Unfortunately, not all climate policies necessarily result in social and economic justice. Although inactivity is more costly than action, actions must be fair.

The population should not be considered as passive spectators but as agents of change. An integrated approach based on dialogue and a transversal solution at several levels (national, regional, sectoral and company) is urgent. Partial or extreme policies can destroy the long road that European society will have to travel.

Europe and its states play a fundamental role and their leaders must demonstrate the same resilience as the founding fathers. There is no place for hesitation. Action will take place, certainly through subsidiarity and integration, but also above all through dialogue and solidarity.

Mattia Tosato.

[1] Communication from the Commission, The European Green Deal, COM(2019) 640 final


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