Can emerging markets balance climate goals and jobs? IEEFA says it's time for co-investment push

New Delhi: What happens to coal workers when the last mine shuts down? How will small rural livelihoods survive the shift to clean energy? A new report by the Institute for Energy Economics and Financial Analysis (
IEEFA
) warns that as emerging economies transition away from fossil fuels, millions of workers and communities face the risk of being left behind—unless targeted co-financing models and
just transition
strategies are adopted.
According to the report, ensuring vulnerable workers and communities are not excluded during the
energy transition
is one of the biggest challenges for
emerging markets
and developing economies (EMDEs). At the same time, the shift opens up new job opportunities and avenues for economic growth if planned with social equity in mind.
'Combining climate action with social equity can facilitate the energy transition in emerging markets and developing economies (EMDEs) without disrupting sectors that rely solely on fossil fuels,' said Shantanu Srivastava, IEEFA's research lead, sustainable finance and climate risk.
'A Just Transition aims to manage this change fairly by protecting affected workers and communities, creating opportunities for economic growth and ensuring the benefits of the transition are shared widely,' Srivastava said.
While fossil fuel industries face the risk of stranded assets, large companies often have the resources and access to capital to adapt. The report noted that the greater risk for governments lies in the potential economic disruption to entire communities dependent on fossil operations.
The report proposes a 'co-investment' approach to support asset closures and community resilience. This includes combining investments in
renewable energy
with Just Transition activities such as labour reskilling, social support, and micro-enterprise development. These programmes often require concessional or grant-based finance.
'Just Transition activities encompass a mix of hard energy transition assets, such as renewable energy, climate smart agriculture, and climate-resilient infrastructure, and 'softer' Just Transition aspects like responsible coal asset closures, stakeholder capacity building, labour reskilling, support for micro, small and medium enterprises (MSMEs), and community resilience,' said Soni Tiwari, energy finance analyst at IEEFA.
The report draws on case studies from India, the Philippines, Ethiopia and South Africa to illustrate how targeted planning and coordinated intervention can enable a socially inclusive energy transition.
In the Philippines, the Accelerating Coal Transition (ACT) investment plan demonstrates how securing early-stage grant commitments for Just Transition support helped mobilise concessional and commercial capital for fossil fuel asset closure and repurposing.
South Africa's Just Energy Transition Investment Plan (JET-IP) highlights the importance of institutional coordination, governance frameworks, and dedicated platforms that link funders with project developers.
In India, a targeted programme for MSMEs enabled coordination among domestic, multilateral, and philanthropic investors to drive clean energy adoption. Another programme, Zero-Budget Natural Farming (ZBNF), focused on capacity-building to create self-sustaining, low-carbon agricultural models for vulnerable communities.
In Ethiopia, a rural water programme financed by the United Nations Green Climate Fund (GCF) demonstrated the role of grant-based funding in fragile contexts and the importance of empowering local institutions.
'With fiscal pressures mounting and fossil fuel revenues expected to decline, EMDE governments should look beyond their own budgets to a diverse set of capital providers, including multilateral development agencies, private investors, development banks and philanthropies,' Tiwari said.
'The financing challenge is not only about scale, but also about targeting suitable forms of capital for the right activities based on their risk-return profiles and developmental impact,' Srivastava added.
The report concludes that by strengthening monitoring systems, aligning national schemes and fostering partnerships, EMDEs can mobilise funding more effectively and advance a just and inclusive transition to clean energy.

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