Prevention better than cure

Effects of coal mining in Estercuel, Spain – CC BY 2.0 – Picture by Jennifer Woodard Maderazo

The financial costs of worker reconversion and regional economic adjustment are often much smaller than the costs of failing to implement a transition.

The cost of supporting an uncompetitive industry is typically extremely high. For example, in the Spanish case, approximately €22 billion  have been spent for government subsidies just to sustain the profitability of mining activities between 1992 and 2014. This money could have been spent earlier on helping workers and regions to manage their transition processes. Even in countries with formerly larger mining employment levels than Spain, the costs of a genuine investment in regional economic transition were typically in the order of €1 to 5 billion  – an order of magnitude lower than the costs of subsidising an industry that is not in transition.

A failure to invest sufficient resources in a just transition leaves high legacy costs for the government. For instance, workers who lose their jobs in a transition process and are not actively aided in finding new employment, can and often will ultimately spend decades of their potential working lives out of the workforce.  The net costs for governments can quickly grow into several hundreds of thousands to millions per worker. Furthermore, the problem can be transmitted to the next generation of workers in the region.

No stakeholders should be allowed to escape their responsibilities. In all of the six case studies, mining companies relied on governments to socialise significant costs of the transition (such as site environmental remediation, mining subsidies to protect profitability for asset holders) or, more occasionally, to facilitate the development of new business models. However, if governments are to do so, then there needs to be an acceptable quid pro quo and an answer to the question:

How will companies ensure a smooth transition for the workers and the region they have used?

The example of the US case study, for instance, illustrates the potential for companies to “cut and run” from their responsibilities to workers and regions – using pension scheme liabilities or unpaid health care protection – under the defense of bankruptcy protection.