How do we ensure the green transition doesn't penalize the poorest? 

We can't improve what we don't measure. This is especially true of the green transition and its potential socio-economic impacts.

While some metrics exist for assessing green transition efforts and other metrics assess social outcomes, few address the intersection of the two.

Our research has found that only five of 58 indicators with the potential to track the economic equity risks of the green transition are systematically collected and published globally.

Accelerating an Equitable Transition: A Data-Driven Approach, a report produced in collaboration with BCG, finds that although economies across the globe may be committed to an equitable transition, a lack of data and policy toolkits creates a barrier to action.

To better understand the complexity of equity implications in the green transition, the report proposes six country archetypes that highlight the different starting points of countries when it comes to enabling an equitable transition. Countries share structural similarities with others in the archetype and consequently may be able to draw on common strategies in responding to shared challenges.

Here are the six archetypes:

High-income, service-driven economies making significant strides in reducing emission intensity through available green technologies while ensuring economic equity. A skilled workforce and high financial capability are among their strengths while eroding competitiveness, cost-of-living pressures and an aging workforce seem to be potential challenges.

Country example: The UK is responsible for around 1% of global greenhouse gas (GHG) emissions, and its NDC (Nationally Determined Contribution) aims for net zero by 2050, legislated for in the Climate Change Act.

It plans to phase out coal-fired power plants by 2024, increase renewable energy sources and invest in new nuclear power capacity, with a Green Finance Strategy, that commits to creating the potential for over £100 billion in private investments by 2030 to enhance market liquidity.

The government's Green Jobs Taskforce aims to create a skilled workforce, ensuring that workers in high-carbon sectors are supported throughout the transition and women are equally represented in new green jobs.

But challenges to an equitable transition in the UK are emerging, with cost-of-living pressures a growing concern: fuel poverty affects six million households in 2024. Housing prices, already near all-time highs, are even higher for energy-efficient houses.

Upper-middle and high-income economies with significant industrial employment transitioning to innovation-driven economic models. Many countries in this archetype tend to have a significant share of their workforce in legacy industrial sectors that require significant transformation, making reskilling and support for job transitions key imperatives.

Country example: Uruguay is responsible for around 0.1% of the global GHG total and its NDC commits to achieving carbon neutrality by 2050.

Since 2010, the government has been setting targets, such as Decree 354, which have been instrumental in achieving 98% renewable electricity generation. Fossil fuels still account for approximately 45% of the country's total energy supply.

The Green Hydrogen Sectoral Fund has accelerated its second energy transition – to scale up the use of green hydrogen in heavy industry and transportation, which is projected to generate $1.9 billion in annual revenue and create over 30,000 jobs by 2040.

Uruguay is piloting the International Labour Organization’s Just Transition guidelines and, as part of this, working to increase stakeholders’ understanding of strategies to create green jobs economy-wide.

An exporter of beef, in 2021, the government joined the Global Methane Pledge and has committed to reducing the intensity of methane and nitrous oxide emissions per unit of beef production by 35% and 36%, respectively, by 2030. These targets were complemented by the rollout of initiatives to support rural farmers in increasing their capacity for mitigation and agroecological production.

Economies heavily reliant on fossil fuel rents and subsidized energy consumption, resulting in high emission intensity. Countries in this group benefit from a STEM (science, technology, engineering and mathematics)-focused workforce and strong fiscal balances, but restructuring the fiscal system to account for subsidy phase-outs and economic diversification more broadly can prove challenging in the years ahead

Country example: Oman is responsible for around 0.2% of global GHG emissions, while its most recent NDC commits to a 7% reduction in emissions by 2030. The government launched the National Strategy for an Orderly Transition to Net Zero to reach carbon neutrality by 2050.

Oil and gas account for between 70% and 85% of government revenue, but Oman is working on diversifying its economy to reduce this dependency through Vision 2040, which aims for up to 39% of its electricity to come from renewable sources by 2040.

The Oman Hydrogen Center is focused on promoting research and development of green hydrogen technology, which could help the country become the world’s sixth-biggest exporter of hydrogen, according to the International Energy Agency.

Rapidly industrializing upper-middle income economies with growing energy demand, balancing climate mitigation with socio-economic development. Countries in this cluster are well positioned to reap a demographic dividend but addressing income inequality and unlocking finance to stimulate an innovation-driven economy remain potential challenges.

Country example: Malaysia contributes 0.7% of global GHG emissions and its most recent NDC commits to a 45% reduction in emissions by 2030.

Renewable energy accounts for only 4% of the country's energy mix, with the main source being natural gas (45%), followed by oil (27%) and coal (24%). It has committed to achieving 70% renewable-energy capacity by 2050.

The government released its National Energy Policy in 2022, which emphasizes low-carbon development and highlights the transition of the energy sector as crucial for socioeconomic progress.

Malaysia’s National Energy Transition Roadmap (NETR) for example, has an overall emphasis on justice and inclusivity. It acknowledges the distributional inequalities that an energy transition can reinforce and intends to direct government policy accordingly. For example, earlier in 2024, the government introduced targeted subsidies aimed at helping lower-income groups cope with cost pressures; subsidies were decreased for the top 1% of heavy electricity users and held constant for the other 99%. Investments stimulated under the NETR are expected to create approximately 310,000 green growth job opportunities by 2050.

Low-income countries with large youth populations and low emissions per capita, that still need to invest in sustainable long-term growth, such as Kenya.

Country example: Kenya is responsible for around 0.2% of global emissions, while its most recent NDC commits to a 32% reduction in emissions by 2030.

More than 90% of its electricity was generated from renewable sources in 2021, but energy access remains a challenge with around a third of the rural population lacking access to electricity and around one-half of the population lacking access to clean cooking fuels.

Its plans to leverage domestic and imported coal to expand power generation reflect the trade-off faced by developing economies between climate goals and development objectives.

The country is particularly vulnerable to climate-change impacts, which adversely affect key economic sectors including agriculture and tourism. Its latest NDC acknowledges the disproportionate impacts on vulnerable groups and aims to strengthen the access women, youth and other vulnerable groups have to climate finance and credit lines.

Highly industrialized and technologically advanced countries leading in the development of green technologies and business models. While well positioned in terms of labour, finance and technology, these countries are among the largest carbon emitters globally and need to manage the transition of large, ageing workforces, into cleaner industries to ensure continued prosperity.

Country example: South Korea is responsible for around 1.6% of the world’s GHG emissions making it the 12th largest emitter globally. Its most recent NDC aims for net-zero GHG emissions by 2050, as mandated by its Carbon Neutrality Act.

South Korea has set an intermediate target of reducing emissions by 40% from 2018 levels by 2030. This involves phasing out coal-fired power generation by 2030, expanding renewable energy sources and increasing deployment of zero-emission vehicles.

The government recognizes the impact this could have on workers and regions and has measures in place to support those adversely affected. The Carbon Neutrality Act itself stipulates support for micro-enterprises, unemployment and reemployment support and established the Korea Climate Action Fund to ensure funding accompanies these institutional commitments.

Nuclear power accounts for approximately 26% of the country’s total energy mix, with coal at 36%, natural gas at 30% and renewables at 8%. In 2021, the government announced the Green New Deal, focusing on providing financing for renewable energy and green infrastructure and fostering green industries.

For each of these countries, the report presents a country-specific data dashboard. The metrics are identified by assessing the possible socio-economic impacts of commonly implemented decarbonization policies across sectors (for example, the impact of phasing out fossil fuels on electricity prices and accessibility). Out of 58 indicators with the potential to track exposure to economic equity risks of the green transition across sectors, only five are systematically collected. The report therefore relies on proxy metrics to identify country-level areas of focus where data on “aspirational metrics” is unavailable.

"The goal is to provide a useful first step for the selected countries, which can be complemented with additional data gathered and through consultations with key stakeholders in the country," the report explains.

As these archetypes and country examples illustrate, there's no one-size-fits-all approach to the green transition. and, in recent years, the scale of trade-offs has come to light, where the costs and benefits of climate policies are unevenly distributed.

For example, efforts to move away from fossil fuels by decommissioning infrastructure and reducing subsidies have raised concerned regarding the impacts on employment and the cost of living.

From Latin America to parts of Asia, emerging economies are experiencing the need to decarbonize and the need for growth as competing priorities.

The same is true for businesses. The report shows findings from the Executive Opinion Survey – a barometer of global business leaders' perceptions on key economic-equity risks associated with the journey to carbon neutrality.

Inadequate access to financing was consistently cited as the economic-equity risk most likely to impact companies' participation in climate action across all sectors.

But "when risks associated with access to capital are accounted for, a wider set of social-equity concerns prove to be top of mind for businesses, including access to technology and know-how as well as consumers’ accessibility of goods and services".

Unless the socio-economic implications of climate mitigation actions are better understood, there is likely to be pushback to climate action itself, risking the global community’s ability to keep 1.5 degrees in sight.

Learn more about the Equitable Transition Initiative.