Towards a Comparative Political Economy of the Just Transition in the Carbon Intensive Regions of Europe

Achieving a just carbon transition in carbon–intensive regions can be challenging. Carbon–intensive regions face numerous challenges, mainly related to adaptive capacity, which will determine the final outcome of the process. The process itself is complex and multi–layered: while the regulatory framework in its broadest sense is set at the level of the European Union, the lower levels where it is adapted to the conditions and needs of the regions appear to be particularly important. The paper is an attempt to analyze the adaptive potential of the regions studied, and then to look at how the process of forming an energy transition strategy has looked and to what extent it meets regional and local needs. Therefore, this analysis is an attempt to look at the socio–economic capacity of the selected regions to successfully go through the transition process and make it as equitable as possible. The regions analyzed were carefully selected for their diversity. They represent both countries in the center of the EU (Germany) and the periphery (Greece, Estonia, Poland), both long–standing EU members (Germany, Greece) and relative newcomers (Estonia, Poland), including countries with the baggage of Soviet experience (Estonia) and socialist experience (Poland). The regions selected represent three types of mining regions: hard coal (Silesia), lignite (Rhineland and Western Macedonia), and oil shale (Ida–Virumaa). They also vary in size in terms of population, industrial output, GDP and location. Also, within countries, the importance of the selected regions varies considerably. The selected regions face different types of challenges in transforming the carbon–intensive sector and phasing out coal (or other carbonhydrates). These are related to their location (within countries and the EU), population and economic potential, and the path of economic development over the past decades. Based on the literature, three hypotheses are formulated to better understand the process of just transition in these coal regions:

• Regional capacity (a form of state capacity) and adaptive capacity and the associated bargaining power of regions can significantly moderate the transformation process and is an important factor in determining its fairness. Regions that are small, with poorly diversified economies and without strong lobbies and advocates at the national/European level behind them may be more affected by the transition process because politicians may be less concerned about its fairness and local communities may be less able to assert their rights.
• In the case of regions where the carbon–intensive sector is a major or dominant industry, long–term carbon lock–in may occur. Under the current regulatory framework, this will not stop the decarbonization process itself, although it may slow it down. Short–term benefits for groups associated with the sector (including workers) may lead to deep inequities in the future, as is sometimes already the case.
• Some of the peripheral countries of the EU, especially the post–socialist countries (Poland, Estonia), are very sensitive to the issue of energy security. The strength of the carbon–intensive sector, together with the belief that such security must be ensured at the sovereign level, is an important factor inhibiting the transition process. A major overhaul of the energy system beyond the development of renewables, such as the development of nuclear power, could prove to be a game changer, especially as it will affect the political economy of the sector.

The economies of the regions are very different in terms of location, size, and degree of dependence on the carbon–intensive sector. All of them have grown slower than the national economies in the last decades, although due to the different development dynamics of these  economies, some of the regional economies (Silesia, Ida Virumaa) have grown faster than the EU economy, and the rest have grown slower. Statistical data show that the better the performance and the level of development of the regional economies in relation to the  European economy and the national economies, the fewer development problems they have. Similarly, the more diversified and less dependent on the energy and mining sectors a regional economy is, the better it performs. Thus, the best performing of the regions analyzed is
the Rhineland, followed by Silesia, while Ida–Virumaa and Western Macedonia are clearly weaker.

Qualitative insights into the region’s prospects and determinants of its development path so far, as well as dependencies on it in the future, were provided by interviews with experts and analysis of strategic documents and publications on the situation of the analyzed regions. Interviews conducted with experts in 4 regions identified 3 types of views on the future of these regions. The first is a realistic view, where experts identify risks but see numerous strategies to achieve the goal of equitable transformation. The second is a pessimistic view – in this case, the identification of risks was complemented by concerns about whether and to what extent their materialization could be avoided. This, in turn, led respondents to express concerns about whether the transition would be just and, in that sense, successful. The third view is optimistic. Here, the risks are seen as short–term. Irrespective of the current situation in the regions, some of the interviewees expressed the conviction that, in the long run, the success of the transition is almost guaranteed thanks to the enthusiasm of the population, the goodwill of the authorities, the support of the EU and other factors.

Strategic documents shaping the current and future process of green transformation were also analyzed, as well as reports and studies evaluating the process itself. The main finding is that regions differ in their readiness for the process of structural change, and that so far the process itself has been determined more, or at least equally, by a region’s accumulated resources (social, demographic, technological) and location than by the programming/planning of the transition. Strategies can reduce the risk of carbon lock–in and mitigate the social costs of the transition, but the economic potential of a region in transition is largely determined by these factors external to the strategies. Therefore, the situation of relatively centrally located regions (Rhineland, Silesia) can be expected to be better than that of peripheral regions on the far periphery of the EU (Ida–Virumaa, Western Macedonia). In addition, important resources in the transformation process are demographic resources and related labor and human capital resources (where once again the Rhenish Lignite Area, as well as Silesia due to the size of  the population, stand out positively), as well as the baggage of experience accumulated during past structural transformations (which characterizes Silesia and to a lesser extent Ida–Virumaa, in the other regions attempts at such changes began much later). The conclusions of the analysis are as follows:

• The adaptability of regions with a relatively high regional capacity (founded on demographic potential, economic performance, quality of government, tax incomes and location) to new conditions is, at least at the moment and in the short term, higher than that of regions  with lower regional capacity. Moreover, the adaptive capacity of regions will play a more important role in the transition process than the strategies currently being developed and adopted. Even best strategies without
• A higher risk of carbon lock–in is evident in regions dominated by the mining and energy complex. While in regions such as the Rhineland or Silesia, the risk of carbon lock–in is relatively low due to the lower power of the coal lobby, this risk is clearly present in smaller  regions. The dependence of the regional economy and labor market on the mining and energy sector also contributes to this. Green transition strategies formulated in peripheral regions sometimes respond poorly to the challenge of such risk. They sometimes focus on  preserving or even strengthening the economic structure of the region: maintaining the population and labor resources, as well as the high–income industrial sector instead of identifying new directions of regional development. It is actually unrealistic approach under the new post–transition conditions.
• Concerns of post–socialist countries about the stability of the energy system, may lead to a slow-down of the coal phase–out process due to the desire to maintain energy sovereignty at the national rather than the EU level. This process needs further study. However, it seems  that investment in new technologies, including the development of modern and safe nuclear energy, will allay most of these fears.

Thus, one can briefly describe the capacity for successful transformation of four regions from a socio–economic point of view:

• Rhineland: The capacity of the region is high due to its proximity to a large agglomeration, its central location and stable demographics, as well as its highly diversified economy and well–developed regional scientific and R&D complex. Development strategies take into account these characteristics of the region’s economy. In addition, the experience of other German regions can help to avoid risks and dangers in the process of just transition.
• Silesia: The region experienced a long period of more or less successful attempts to transform its economy after 1989. Now it is a relatively modern region with a diversified economy, but it lags behind the fastest developing Polish regions. Silesia’s industrial power is still  great, but it is highly exposed to the risk of crisis during the green transformation. This is especially true for heavy industry, automotive, energy – traditionally key to the region industry. This risk is poorly identified and the region is (probably) poorly prepared for it.
• Western Macedonia: The region is very peripheral, both within Greece and EU. The reduction of the mining and energy sectors (which is declared for 2028) will take a heavy toll on the already poor condition of the region. The peripheral location and the very poor  development of other sectors of the economy will be a major challenge in the transition process.
• Ida–Virumaa: The region is located on the deep periphery not only of Estonia but also of the entire EU. The unavoidable tensions between Russia and the EU in the short and medium term will lead to the loss of perhaps the only advantage resulting from the location. The  future of the industry and the urban communities in the region is uncertain. But the optimism of opinion leaders can infect local communities and provide the energy for a successful structural transformation, even if the final result of the change will be far from what the bureaucrats planned.