The shift away from fossil fuels can bring cleaner air, new jobs and major climate benefits. However, a new CMCC study finds that ensuring a just transition also requires giving affected communities a meaningful voice and respecting their identities, histories and ways of life. “The evidence shows that climate and environmental policies can deliver major benefits, but their costs and benefits may not affect everyone in the same way,” says CMCC researcher and lead author of the study Ireri Hernandez Carballo. 

The transition to a low-carbon economy will not affect all people and places equally. Although its overall benefits may outweigh its costs, workers may lose jobs, households may face higher prices and communities dependent on carbon-intensive industries may experience lasting economic and social disruption.

A new study led by CMCC researchers reviews how environmental economics can help make this transformation fairer. Published in the Review of Environmental Economics and Policy, the research assesses existing evidence through four dimensions of justice: how costs and benefits are distributed; how harms are repaired; how decisions are made; and whether communities’ identities and values are respected.

“Economists have studied the distribution of costs and benefits extensively, as well as some forms of compensation. But we need more evidence on broader transition support, fair and meaningful participation, and respect for community identity,” says Hernandez Carballo, who believes that the study helps identify ways in which researchers can help fill those gaps and inform effective climate action.

The transition to a low-carbon economy creates major environmental and climate benefits, including for the most vulnerable individuals. Research also finds that overall, new job creation related to the energy transition can more than offset job losses from fossil fuel jobs. However, new jobs may not appear where old jobs disappear, may not compensate in the same way, and workers may need different skills. For example, members of society such as older workers, women and people with vocational qualifications may face particularly high costs when displaced from carbon-intensive industries.

There are ways of countering these unequal effects, for example policy design can also determine how costs are shared among households. Returning carbon-pricing revenues to citizens can reduce the burden on lower-income groups. By contrast, some evidence suggests that energy-efficiency standards can weigh more heavily on poorer households than carbon taxes with revenue recycling, while subsidies for solar panels or electric vehicles may favour people able to afford the initial investment, findings which highlight the importance of policy design in making sure that the transition is implemented in a just manner.

“The evidence shows that climate and environmental policies can deliver major benefits, but their costs and benefits may not affect everyone in the same way,” continues Hernandez Carballo.

Beyond compensation

Although there is a wide body of knowledge on the financial costs of climate policies and how compensation can address them, there is far less research on procedural justice – whether decision-making is transparent, inclusive and gives affected groups genuine influence – and recognition justice, which concerns respect for communities’ dignity, culture and ways of life.

“Addressing financial inequality alone is not likely to resolve these concerns,” says Hernandez Carballo, who also explains that these dimensions can directly affect whether climate policies are considered legitimate and gain public support if communities feel excluded from decisions or believe their history, knowledge and identity have been overlooked.

“Just transition is a multifaceted and complex topic. Economists do contribute to its understanding, and can do so even more with their research,” says CMCC scientist and co-author Elena Verdolini. “Yet, building bridges with other disciplines is necessary to achieve a well-rounded understanding of how Just Transition can be supported in practice across Europe and beyond.”

The authors identify several priorities for future research. These include understanding which workers, households and regions are most exposed; evaluating which training programmes and local investments work; examining the barriers faced by smaller firms; and studying how political and economic power shapes climate decisions. They also call for greater collaboration with political scientists, sociologists and other researchers to examine how industrial change affects community identity.

For further information:

Hernandez Carballo, I., Verdolini, E., Steckel, J. C., Tavoni, M., and Vona, F. (2026). “The Economics of a Just Transition.” Review of Environmental Economics and Policy, 20(2). https://doi.org/10.1086/742029