Managing
Coal Mine
Closure
Achieving a Just Transition for All
November 2018
Managing
Coal Mine
Closure
Achieving a Just Transition for All
November 2018
This issues paper summarizes lessons-learned from more than two decades of World Bank assistance on
coal mine closure to governments, enterprises, workers and their communities. This in-house experience
was further enhanced by a review of other global experiences to produce a summary of key considerations
for planning and implementing coal mine closure programs. The World Bank continues to provide
assistance on coal mine closure that is underpinned by practical experience, leading-edge skills and
valuable lessons-learned – necessary for a just transition for all.
Table of Contents
Managing Coal Mine Closure: Achieving a Just Transition for All
Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Importance of a Just Transition for All. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Drivers of Change: Their Relationship to Coal Mine Closure . . . . . . . . . . . . . . . . . . . . . . . . 19
Lessons Learned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Pillar 1: Policies and strategy development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Pillar 2: People and communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Pillar 3: Land and environmental remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
End Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
FIGURES
Figure 1: Drivers of changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Figure 2: United Kingdom: coal production and employment 1960–2015. . . . . . . . . . . . . 22
Figure 3: Russian Federation: coal production and employment 1990–2016. . . . . . . . . . 23
Figure 4: United States: coal production and employment 1960–2015. . . . . . . . . . . . . . . . 24
Figure 5: Pillars to managing coal mine closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Figure 6: Stylized process of divesture of labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Figure 7: Stylized summary of active labor market policies . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5
Abbreviations
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
AZM Agentia Zonelor Miniere
CEO Chief Executive Officer
CDN Canadian dollars
CGMC Central Group for Mine Closures
FIDIC International Federation of Consulting Engineers
GBP British pound sterling
GHG greenhouse gas Acknowledgments
ha hectares
HSE health, environmental, and safety Managing Coal Mine Closure: Achieving a Just Transition for All was developed
collaboratively across the World Bank led by the World Bank’s Energy and Ex-
IAC Inter-Agency Commission
tractives Global Practice, collaborating with the Social Protection and Jobs Global
IAP Implementation Assistance Project Practice, and the Climate Change Group. The core team included Michael Stan-
IAS Industrial Adjustment Services ley (Lead Mining Specialist, GEEDR), John Strongman (Consultant, GEEDR),
Rachel Perks (Senior Mining Specialist, GEEX2) and Helen Ba Thanh Nguyen
IEA International Energy Agency
(Program Assistant, GEEDR) from the Energy and Extractives Global Practice,
IGU International Gas Union Wendy Cunningham (Lead Economist, GSP02) and Achim Schmillen (Senior
IMCSC Inter-Ministerial Coal Steering Committee Economist, GSP02) from Social Protection and Jobs Global Practice, and Michael
McCormick (Public Sector Specialist, GCCRA) from Climate Change Group.
IRENA International Renewable Energy Agency
The team would like to thank Gary Stuggins (Consultant, GEEDR), David Fretwell
LCOE levelized-cost-of-energy
(Consultant, GSP02), and Tom Witt (Analyst, GCCRA) for their valuable analyt-
LNG Liquefied Natural Gas ical support. Furthermore, the team appreciates the constructive feedback on
MATS Mercury and Air Toxics Standards draft reports from Sanjay Srivastava (Program Leader, SACBN), Keith McLean
(Lead Governance Specialist, GGO13), Kirsten Hund (Senior Mining Special-
MCSER Mine Closure, Environmental and Socio-economic Regeneration
ist, GEEX1), Hirut M’Cleod (Leadership Development Specialist, GG028), Da-
MCSM Mine Closure and Social Mitigation vid Craig (Consultant, GTFMR), Rohit Khanna (Practice Manager, GEES), Todd
NAD National Agency for Development Johnson (Lead Energy Specialist, GEE09), Reynold Duncan (Lead Energy Spe-
cialist, GEE08), Dejan Ostojic (Lead Energy Specialist, GEE03), Xiaodong Wang
PV photovoltaic
(Senior Energy Specialist, GEE02), Mamadou Barry (Senior Mining Specialist,
SEED Social Enterprise and Economic Diversification GEEX2), Jonathan Coony (GTCID), Leszek Kasek (GMF03), Siet Meijer (GCCFM)
SECAL Sector Adjustment Loan and Catherine Tovey (AFCS1).
SOE state-owned enterprise Lastly, the team is grateful for the guidance from James Close (Director, GCCDR), Ran-
jit Lamech (Director, GEED2), Riccardo Puliti (Senior Director, GEEDR), John Roome
TCF trillion cubic feet
(Senior Director, GCCSD), and Christopher Sheldon (Practice Manager, GEEX2).
6 7
Executive Summary
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
1 Over the last half century, large-scale changes to coal1 industries across Europe,
and more recently in the United States and China, have resulted in as many as 4
million coal workers losing their jobs. Drivers of these changes are found in mine
mechanization, government policies and competition from other fuels in down-
stream energy demand markets. The impact of coal use on air and water pollution
requires that these impacts are mitigated by using less polluting fuels. Shifts away
from coal arise, as the cost of alternative fuels decreases and their availability in-
creases. In different countries this shift has been caused by a variety of factors in-
cluding increased use of nuclear power, increased availability of natural gas and,
more recently, increased use of renewable energy. As commercial concerns impact
coal use, the coal industry turns to the increased use of mechanization to remain
competitive. The overall result has been closure of less efficient mines with consol-
idation around more efficient, lower-cost, mechanized operations. The varying in-
fluences these drivers of change may have on domestic policy responses to energy
transition does not, however, deter from the inevitability of coal mine closure. In all
mine closure case studies, job losses, and the subsequent socioeconomic impacts
borne by families and communities in coal-dependent regions, are significant.
2 At present, economies in Asia, Eastern Europe, and Africa face these same
drivers of change. Large job losses are already taking place in China, with oth-
er large coal producing countries in Asia likely to follow. Lessons drawn from
the experiences of the Russian Federation (Russia), Ukraine, Poland, and Ro-
mania,2 complemented by data on impacts of coal industry adjustment in the
United Kingdom, the Netherlands, the United States, and China, show that job
losses in the coal industry are indeed inevitable as the industry contracts. Those
that bear most of the burden are coal miners, their families, and communities,
particularly the mono-industry communities. However, these changes also im-
pact owners and investors in the coal industry. Each of these stakeholders can
exercise considerable sociopolitical and economic impact on closure processes.
The challenge comes in balancing the diverse needs of all groups.
3 The narrow economic base of many coal mining regions requires careful mitiga-
tion of coal mine closure impacts. Coal mining is often concentrated in regions far
from major population and economic centers where alternative employment pros-
pects may be found. As a result, “mono-industry” coal towns and regions face mul-
tiplying and damaging impacts from mine closure. The loss of mining employment
substantially reduces the flow of income through these local economies—affect-
ing retail, food services, and other dependent sectors, as well as social services. In-
8 9
deed, the loss of a local economy’s dominant economic engine exposes the fragility
of many coal mining regions’ narrow economic base. Unique characteristics of coal Table E.1: Lessons Learned on Managing Coal Mine Closure
mining communities—such as geographic isolation, disparity of wages, and coal
mining identity—pose challenges for recovery efforts. Decades later after a mine has Pillar 1: Policies and strategy development
Emphasizes that coal mine closure requires clear policy direction, large budget outlays, and
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
shut down, many coal-dependent regions continue to lag socially and economically.
significant stakeholder consultations
4 Therefore, mine closure is, in large part, about mitigating impacts on people
and communities. In highlighting the central concern for people and commu- Lesson 1: Managing the social and labor impacts from coal mine closures is best
nities, mine closure approaches which adopt “Just Transition for All” principles
3 achieved when multiple agencies participate in the policy development.
can achieve meaningful outcomes for mine-affected communities. In this report, Lesson 2: Meeting the substantial budget needs for mine closure is a challenge
a “Just Transition for All” for coal mine closure is underpinned by: (i) continuous
4
given the short-term, high costs required.
dialogue and consultation with a wide variety of affected stakeholders to determine
Lesson 3: Genuine stakeholder consultation starting at the planning stage and
scope, scale, and timing of closure; (ii) adequate planning at the outset which is sus-
continuing throughout the closure process can significantly reduce the possibility
tained through dialogue and participatory monitoring during the various stages of of social conflicts.
closure and transition; (iii) provision of temporary income support to workers and
their families that is complementary to other existing social protection programs;
and (iv) deployment of active labor market policies that offer services, programs, Pillar 2: People and communities
and incentives to encourage and enable re-employment among laid-off workers. 5 Underlines the importance of a Just Transition for All to meet the needs of workers, families, and
the wider community
5 Nine lessons learned on managing coal mine closure are proposed. They are
organized around three pillars: 1) Policies and strategy development; 2) People Lesson 4: A systematic process to mitigate social and labor impacts that starts
and communities; and 3) Land and environmental remediation. The lessons are before any labor layoffs occur can result in a more orderly, less stressful, and
presented in Table E.1. ultimately lower cost divestiture process.
6 Given the energy transition, planning and preparing for coal mine closure are Lesson 5: Pre-layoff planning and assistance can prepare workers for impending layoffs.
essential to lessen the shock to coal-dependent communities and facilitate new
Lesson 6: Post-layoff assistance, including temporary income support, can help
employment possibilities for redundant workers. A sustained commitment will
sustain laid-off workers in a way that results in them staying in the labor market.
be required from several stakeholders—governments, international financial in-
Lesson 7: Active labor market policies offer services, programs, and incentives
stitutions, the private sector, and civil society—to ensure this is achieved. For-
that can encourage and enable re-employment among laid-off workers.
ward looking, governments can augment the findings from this report with coun-
try- and region-specific diagnoses of the drivers to reform their respective coal
sectors, address their social protection needs, and mitigate environmental risks.
Pillar 3: Land and environmental remediation
Collaboration is also necessary to implement the support programs for laid-off
Advances the importance of financial planning for environmental remediation and land
workers, their families, and their communities focused on helping them get back reclamation, and summarizes a range of possible financial assurance mechanisms available
into productive employment, with programs and initiatives that facilitate broad-
based economic growth and job creation by the private sector. Strong analysis to Lesson 8: Environmental reclamation is best addressed from the outset of mine planning.
inform decision making, together with mobilization of public and private sector Lesson 9: Financial assurance mechanisms can be an effective tool to guarantee
financing, will be critical. Going even further, considerations regarding regional funding availability.
economic diversification and rejuvenation to foster job creation beyond coal min-
ing are also of importance, but beyond the scope of this report. Calling on all those
with expertise and resources will require leveraging existing, and putting in place
new, platforms, partnerships, and ways of working that can catalyze action at the
10 scales commensurate to the needs of a Just Transition for All. 11
Introduction
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
OBJECTIVES
7 Over the last half century, large-scale changes to coal6 industries across Eu-
rope, and more recently in the United States and China, have resulted in as
many as 4 million coal workers losing their jobs. The main drivers of these
changes are mine mechanization, government policies and competition from
other fuels in downstream energy demand markets. At present, economies in
Asia, Eastern Europe, and Africa face these same drivers of change, with large
job losses already taking place in China, and with other large coal producing
countries in Asia likely to follow. Lessons drawn from the experiences of the
Russian Federation (Russia), Ukraine, Poland, and Romania from 1994 to 2012,7
complemented by data on impacts of coal industry adjustment in the United
Kingdom, the Netherlands, the United States, and China, show that job losses
not only take place as the industry contracts but even if production is increasing.
The mitigation of social conflict and economic distress are of grave concern as
globally the coal industry enters a new era of downsizing.
8 The objective of this report is to share with governments lessons learned re-
garding coal mine closure. Indeed, the full set of coal mine closure issues is
diverse with few positive case studies to date to draw on. The complexity of
technical issues and vested interests along with the myriad of potential risks
which may unfold will require combining time-tested and new approaches, and
applying a broad array of skills. In this issues paper, we have sought to identify
lessons from the past that can guide policy makers for more successful future
mine closures. Nine lessons learned are presented for government consider-
ation, drawn from three sets of literature. First, analysis from coal industry ad-
justment and downsizing experiences in Russia, Ukraine, Poland, and Roma-
nia from 1994 to 20128 where interventions ranged from preparatory diagnostic
and technical studies to planning and financing of eventual closure programs.
Second, observations and insights on impacts from coal industry adjustment
in the United Kingdom, the Netherlands, the United States, and China.9 Third,
evidence-based interventions that have helped to mitigate potential negative
social and labor impacts from mass job losses in other industries.
9 The report consists of three sections. First, the Drivers section discusses the
three key drivers to coal mine closure and provides relevant examples on the
interactions amongst specific drivers and their outcomes on coal closure pro-
grams. Second, the Key Lessons section captures learning from past World Bank
12 13
projects and global evidence from impact evaluations on social protection and 11 The narrow economic base of many coal mining regions requires careful miti-
labor programs outside the coal sector. The third section provides the conclu- gation of coal mine closure impacts. Coal mining is often concentrated in regions
sion of the report and underscores the importance of planning and prepared- far from major population and economic centers where alternative employment
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
ness starting now. prospects may be found. As a result, “mono-industry” coal towns and regions
face multiplying and damaging impacts from mine closure. The loss of mining
THE IMPORTANCE OF A JUST TRANSITION FOR ALL employment substantially reduces the flow of income through these local econo-
mies, affecting retail, food services, and other dependent sectors, as well as social
10 Asia is likely to be most impacted by future coal mine closures, as global coal
services. Indeed, the loss of a local economy’s dominant economic engine exposes
production has pivoted from West to East. Consider that in 1960 the largest coal
the fragility of many coal mining regions’ narrow economic base. Box 1 summa-
producers in western Europe were the United Kingdom, the German Federal Re-
rizes key characteristics of coal mining communities which pose challenges for
public, and France, which collectively produced 394 million tons of coal, equiv-
recovery efforts. Decades later after a mine has shut down, many coal-dependent
alent to 20 percent of global coal production. By 2016 their collective production
regions continue to lag socially and economically. Planning and preparing for coal
had dropped to less than 10 million tons hard coal,10 a decrease by 97 percent over
mine closure are essential to lessen the shock to coal-dependent communities
the past five decades. In the United States, the production decrease has been more
and facilitate new employment possibilities for redundant workers
recent. As shown in Table 1, since 2000, production in the United States declined
by 369 million tons, leading to a drop in its global market share from 21 percent 12 There is a political economy consideration around coal mine closure given the
to 8 percent. In contrast, China more than doubled its production since 2000 and stature of coal miners. Coal workers have had a unique identity and high so-
now accounts for 44 percent of total global coal production. India and Indonesia cial standing in many countries. Much of their work takes place in dangerous
also experienced a major rise, and they now account for 10 percent and 6 percent underground conditions where mistakes can cost lives, and coal miners have
of global production, respectively. In 2016, these three countries made up 60 per- previously expressed themselves strongly in the political economy around mine
cent (about 4.4 billion tons) of total global production. As shown in Table 1, Rus- closure. For example, in the United Kingdom coal workers went on strike for a
sia, South Africa, and Poland are also in the top ten for coal production globally. In year to oppose mine closures, and in Poland workers marched on the Parliament.
fact, these countries (alongside China, Indonesia, India, and Australia) will most
likely be impacted most acutely by future mine closures.
Table 1: World hard coal and lignite production (million tons), 2000–201611
Country Production Production Global Share Production Global Share TEXT BOX 1
Change 2000–16 2000 2000 (%) 2016 2016 (%)
Typical characteristics of coal mining communities that influence the potential for
China 1,833 1,377 30% 3,210 44%
regional recovery
India 372 336 7% 708 10%
Indonesia 380 79 2% 459 6%
Narrow economic base of a coal-dependent region exposes the fragility of the
economy, in terms of job creation potential.
Australia 202 307 7% 509 7%
Russia 97 242 5% 359 5% Geographic isolation of most coal mines means that the loss of the main regional
South Africa 26 224 5% 250 3% employer dramatically reduces overall re-employment potential.
United States -369 972 21% 683 8% Disparity of wages between coal mining and alternative professions is often cited as a
Poland -32 163 3% 131 2% stumbling block to re-employing former coal miners.
Germany -28 205 4% 177 2%
Coal mine identity centers on strength, determination, hard work, and risk. Shedding
Others 135 718 17% 802 12%
this identity can be one of the biggest stumbling blocks to re-employment.
Total 2,636 4,623 100% 7,288 100%
Indirect job losses from subsidiary businesses accentuates the social and labor
Source: Enerdata 2017. Global Annual Statistical Yearbook 2017 available at bit.ly/2Jsynyx
challenge; indirectly affected individuals may be more at risk if not considered as
beneficiaries of temporary income support or active labor market policies.
14 15
Furthermore, coal miners can have a very strong identity with their communi- re-employment among laid-off workers. 17 The Government of Alberta has an-
ty—with successive generations of workers working in the coal mines, which nounced a commitment to end coal fired power generation by 2030, supported
can result in very close-knit communities so that redundant workers may be by a commitment that includes an allocation of Canadian dollars (CDN) 45 mil-
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
reluctant to relocate their families to find work in other locations. lion to support a “just transition” for coal workers and their communities. It
is reported that the phasing out of coal fired power generation has gained the
13 While job losses from coal mining may be small in comparison to the total
support of organized labor.18
labor force, a downsizing can result in a disproportionately high impact lo-
cally. The coal industry numbers are usually small relative to the total popu- 16 There are few if any instances of fully satisfactory economic rejuvenation
lation. By way of example, in the United States, in 2017, direct coal mining jobs outcomes in mono-industry coal mining towns. While economic diversifica-
nationwide stood at 49,650 jobs with an additional 34,170 jobs in coal plant
12
tion and rejuvenation is a topic shared across many industries, as discussed in
operations. Together, these two segments of the coal industry represent only
13
Pillar 2 (below), for coal mine closure the loss of the main regional employer
0.06 percent of the United States’ workforce. Or consider China where less than dramatically reduces overall re-employment potential and exposes the fragil-
3 million workers who are registered as coal miners are less than 0.4 percent of ity of a narrow economic base. The compounding effect is significant and the
the national workforce of 770 million. Yet due to the characteristics described in rejuvenation of local economies in coal-dependent regions is a complex chal-
Box 1, impacts from coal mine closure are significant with disruption of regional lenge and can fail even if good intentions and sufficient funds are deployed. For
and local economies inevitable. instance, the United Kingdom long targeted various forms of regional aid with
the intention to foster job creation at several of its main mining areas, including
14 The potential for economic and social shocks due to coal mine closure un-
through a program of coalfield site reclamation and redevelopment that dis-
derscores the importance of strategic planning. In the coal sector, rarely have
bursed more than British pound sterling (GBP) 600 million between 1996 and
closures been supported by successful social mitigation strategies. In fact, gov-
2007. In addition, British coal mining regions have been supported by the Euro-
ernments have typically struggled to support the people who lost their jobs and
pean Union, both through disbursement of its “standard” structural funds and
their families, and the distressed communities. Distress is particularly acute as
specific programs like the RECHAR program that deployed more than GBP 250
closures also affect industries across the coal value chain, especially in busi-
million over 10 years. Still, decades after the major waves of mine closures in
nesses providing goods and services to the coal economy. Layoffs can have dra-
the United Kingdom, labor market impacts can still be felt—especially where
matic and long-lasting effects on the employment, earnings, and income pros-
difficulties are entrenched, such as South Wales. Therefore, mobility support
pects of directly displaced workers and their families. Research from the United
for workers to relocate out of mono-industry coal mining towns may sometimes
States and other countries shows that many of these workers may have long
represent the better option.19
unemployment spells and that those who find work may suffer earnings reduc-
tions of up to 30 percent over at least 15 to 20 years.14
15 Therefore, coal mine closure is, in large part, about mitigating impacts on
people and communities. In highlighting the central concern for people and
communities, mine closure approaches which adopt “Just Transition for All”15
principles can achieve meaningful outcomes for mine-affected communities. In
this report, a “Just Transition for All”16 for coal mine closure is underpinned by:
(i) continuous dialogue and consultation with a wide variety of affected stake-
holders to determine scope, scale, and timing of closure; (ii) adequate planning
at the outset which is sustained through dialogue and participatory monitoring
during the various stages of closure and transition; (iii) provision of temporary
income support to workers and their families in complementarity to other ex-
isting social protection programs; and (iv) deployment of active labor market
16 policies that offer services, programs, and incentives to encourage and enable 17
Drivers of Change: Their Relationship to
Coal Mine Closure
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
17 Closures create disruptions whose social and labor impacts, if anticipated,
may be more effectively mitigated. In most of the countries reviewed for this
report, closures create rapid disruption of the coal mining sector, catching gov-
ernments, companies, coal workers, and communities unprepared to address
the sudden shock. Based on these cases, it is observed that if a country has a
large population of coal workers, especially in labor-intensive and inefficient
mines, then labor divestitures in the coal industry will suddenly unleash vast
numbers of people onto social protection services, straining and possibly over-
whelming the system. Take for instance Russia, Ukraine, Poland, and Romania
where employment losses were close to 2 million over a decade, declining from
around 2.7 million workers in 1990 to less than 1 million in 2001.20 More recent-
ly, coal industry employment in China has declined by over 2 million workers
from over 5 million coal workers in 2013 to less than 3 million workers in 2018.21
Through a good understanding of the drivers and their impacts, governments
are in a better position to anticipate how closures may unfold. See Figure 1.
Energy market innovations
Coal industry
downsizing/
closure and job
loss
Clean energy policies Coal mine mechanisation
Figure 1: Drivers of Change
18 19
18 The first driver of change is mine mechanization. Technical improvements in supply/use with decreased costs and increased availability of alternative fuels,
coal extraction methods and technologies continue to be introduced in response such as renewable energy and gas. From 2014–2015 global energy production
to macroeconomic and business pressures. The effect is a consolidation of opera- grew by 0.3 percent with non-OECD countries energy production growing by
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
tions by shifting production from less efficient and unmechanized mines to more 0.5 percent and OECD countries declining 0.3 percent25 much lower than 2 per-
efficient mechanized operations. The end result is a net loss of jobs. Practically, cent as was typical in the past.
as seen in the United States and Russia over the past four decades, the coal in-
21 Under this third driver, the commercial viability of coal-fired power plants,
dustry first sheds the least efficient operations and then consolidates around the
an important industrial anchor in the coal value chain, is being seriously chal-
remaining technology intensive operations. Mechanization induces coal mines
lenged. Since the early 2000s, the penetration of renewable energy and natural
to shed labor, which helps create greater financial resilience by increasing pro-
gas has continued market loss for coal, principally in the power sector. Natural
ductivity. Even under the International Energy Agency’s (IEA) business-as-usu-
gas prices are decreasing26 and natural gas trade is increasing27 driven by shale
al forecast scenario, which predicts global coal production to remain relatively
22
gas and associated gas from oil production from tight fields. Increased market
constant at current levels to 2040, countries will face strong disruptions on the
penetration of renewables within the power sector has been driven by decreases
regional level as less efficient coal mines close under continued industry consol-
in the Levelized Cost of Electricity (LCOE), as estimated by Lazard, for utility
idation. In the affected regions, this will lead to significant losses in coal sector
scale solar photovoltaic (PV) (73 percent) and onshore wind power (25 percent)28
employment. In this situation, job losses will be significant locally/regionally, but
over the past decade. The shale gas experience in the United States has caused a
may be less visible when viewed across the total labor pool nationally.
large decrease in natural gas prices29, radically reducing the commercial viabili-
19 The second driver of change is clean energy policies. This includes local and ty of coal-fired power.30 In 2011, onshore wind power became cheaper than coal,
regional air pollution prevention programs, low carbon and clean energy de- followed by solar power in 2014. Both wind and solar power are estimated to cost
velopment agendas, and worker and community safety initiatives. In gener- less than half that of coal-fired power plants.
al, progressive government policy interventions in favor of alternative energy
22 Drivers of change impart varying influences on both the pace of closure, and
sources over the last fifty years have included: (i) policies to reduce rampant
the magnitude of the impacts. While the data do not permit analysis that would
air pollution—e.g., Western Europe in the 1960s and today in South and East
disaggregate the decline of employment in the coal sector according to various
Asia and Poland; and (ii) more recently policies and programs that address cli-
drivers, there are some prevalent patterns. Coal mine mechanization has been
mate change, including an energy transition favoring lower carbon/zero car-
a long-standing persistent driver, the product of competitive market pressures
bon energy resources, away from coal. The global movement to reduce green-
from alternative fuels that have taken coal’s market share. This pressure re-
house gas (GHG) emissions has moderated overall energy demand (especially
sults in mechanization to improve operational efficiency and lessen cost, which
coal) and shifted energy use to more flexible energy sources with lower or no
in turn induces mines to shed jobs. While some state enterprises undergoing
carbon emissions.
mechanization retain excess labor to the point of financial strain and then shed
20 The third driver of change is the changing dynamics of the energy sector af- jobs suddenly, generally, when mechanization is the driver job losses happen
fecting coal consumption. This has two aspects. First is a slowing of demand relatively gradually over the decades. In comparison, policy and energy market
largely resulting from energy efficiency improvements. Unlike past decelera- drivers have been more discrete events in time, having more immediate impact
tions of energy demand that were driven by broad economic slowdowns, this when introduced. Moreover, policy and energy market drivers may be linked
decrease has been driven by energy efficiency measures, enabling a decrease should a government introduce a policy driver to address air pollution, which in
in global energy intensity23 by 2.8 percent in 2015 and 2.0 percent in 2016. turn increases the cost of coal use relative to alternatives and thereby alters the
Governments’ energy efficiency policies and regulations have supported this dynamics of energy markets.
transition through standards, building codes, public financing, and tradable
energy certificates. As a result, there has been a strong increase in the uptake
of energy efficiency investments like LED lighting and energy efficient heating
and cooling.24 Alongside demand, the second aspect is a broad shift in energy
20 21
23 The United Kingdom, Russia, and the United States are countries that show 24 In the late 1980s and early 1990s, Russia was driven to adjust its coal sector as
strikingly different production outcomes from the drivers. Coal mining em- part of wider macroeconomic reforms. As the economy contracted, coal demand
ployment has declined substantially in all three countries. But production has declined and the government initially tried to prop up its coal industry with very
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
followed distinctly different pathways, as will be presented in Figures 2, 3, and large subsidies to cover losses, rather than closing mines, undertaking orderly
4. For the United Kingdom, the initial driver of change was clean energy poli- layoffs, and reducing losses. However, the coal subsidies became unmanageable
cies as government sought to abate severe air pollution as smog from coal use and reached over 1 percent of GDP in the early 1990s. From 1990–1998, coal
grew worse in major cities. Government then shifted to cleaner energy imports, production declined by just over 40 percent and employment declined by near-
as competitive pricing and availability of oil imports from the Middle East and ly 60 percent (Figure 3). Russia privatized its coal industry from 1999–2001 as
Africa, and later gas from the North Sea, increased alternative energy supplies. part of an overall large-scale privatization policy. Industry with the lowest cost
Figure 2 shows the subsequent decline in coal production and coal employment mines could stabilize—largely through mechanization—and operate profitably.
from 1960 to 2015. The least-efficient, most labor-intensive mines were closed The overall impact was a substantial recovery in coal production since 2000:
first, and in the 1960s employment fell by 52 percent compared with only a 26 with well over 350 million tons of production in 2016. Even as production in-
percent decline in coal production. In 2016, United Kingdom, coal production creased, the sector continued to shed labor.
declined to just 4 million tons with approximately 1,000 employees. The United
Kingdom is expected to phase out both coal production and coal-fired power
generation over the next decade, and in 2018 began to report 24-hour periods
without coal-fired power being dispatched.
Figure 3: Russian Federation: coal production and employment 1990–2016
Source: Authors’ own compiled from World Bank Reports; Russian Federation, Ministry of Energy; Mineral Survey: Russia,
United States Geological Survey (USGS), various years; and from mining.com – see bibliography for full details)
Figure 2: United Kingdom: coal production and employment 1960–2015
Source: Authors’ own, based on data compiled from Coal Transition in the United Kingdom, Steve Fothergill (Paris:
IDDRI and Climate Strategies, 2017).
22 23
25 The United States has followed a third pathway as it responds to drivers of 26 In each case, the scale of social distress was vastly different. The U.K. minimized
change. The two main drivers of change in past decades (until about 2008) were, social distress at the outset as miners took pensions or transferred to other oper-
first, economic growth, which led to steady growth in power demand for coal, and ating mines. But social conflict increased over time as more mines closed. Labor
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
second, mechanization (including strong growth in surface mining in the western strikes were a defining feature of the period from the early 1970s until the mid-
states), which led to greatly increased productivity and declining employment 1980s. Such social unrest culminated in the year-long national coal strike from
since the 1980s (Figure 4), especially in Appalachia. Clean air mandates have led 1984–85, and widely publicized opposition to coal mine closure created broader
to new emissions standards in the 1990s, which further disadvantaged higher solidarity with organized labor and youth movements, leading to a complex polit-
sulfur eastern coal production as compared with lower sulphur western coal pro- ical economy for successive British governments seeking to implement reforms.
duction. Coal jobs also suffered a steep decline during this period. However, after Russia experienced very severe initial distress as hundreds of thousands of min-
several decades of steady growth coal production and consumption have dropped ers left the industry in the early 1990s with large wage arrears and no severance
sharply from 2006 to 2015 because of competition from shale gas and renewables. packages or income support. Only as the crisis deepened did government design
Coal’s share of power generation decreased from 40 percent to 33 percent, while and implement a sector reform program which included allocating resources for
gas-fired power generation increased from 22 percent to 34 percent, and electric- a social protection response in the form of paying wage arrears and making sev-
ity generated by renewables increased from 8 percent to 15 percent over this peri- erance payments. In the United States social distress steadily built up since the
od. Coal power plants also responded to stronger air pollution emissions controls, 1980s and has only been given strong attention during the past decade. Even so,
including the need to meet the 2011 Mercury and Air Toxics Standards (MATS) for there is considerable poverty in coal producing regions, especially Appalachia.
power plants. While the coal industry shed more jobs during this period, the job
losses were modest compared to the 1980–2000 period.
Figure 4: United States: coal production and employment 1960–2015
Source: Authors’ own compiled from US Energy Information Agency sources and from Coal Transition in the United States,
Irem Kok, (IDDRI and Climate Strategies, 2017) (see bibliography for full details).
24 25
Lessons Learned
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
27 Nine lessons for managing coal mine closure are discussed. Lessons are orga-
nized around three pillars: i) Policies and strategy development; ii) People and
communities; and iii) Land and environmental remediation. Figure 5 summa-
rizes these pillars.
Pillars to Coal Mine Closure
Policies and strategy development
Includes the political, strategic, institutional, regulatory, fiscal/budget planning
– setting in place the conditions, rules, and capacity needs and responsibilities to
implement the coal sector downsizing. It also includes stakeholder engagement
for workers, communities and companies, which is necessary to reduce
opposition to industry downsizing, to the extent possible. Encapsulates the
coal sector and other segments of the energy industry – involving industry
structure, reorganization and restructuring, possible privatization of state mining
companies, consolidation, financial capacities (including pensions), and exit or
bankruptcy; it also addresses energy system infrastructure development.
People and Communities
Incorporates income support instruments and labor market programs to
address the needs of redundant workers; it also pertains to community support
initiatives and new job creation programs (reflecting different levels of resilience
to sector downsizing); and impacts on workers in related and dependent
industries that may use or transport coal and provide goods and services to the
coal mines and miners.
Land and environmental Remediation
Covers physical mine closure and environmental reclamation and rehabilitation
(including the removal of mine equipment), transfer of useful assets to the local
community, securing the stability of remaining dumps and impoundments, water
management and surface stability at closed underground mines, monitoring and
managing any post closure environmental and human health impacts, including
any legacy issues.
Figure 5: Pillars to managing coal mine closure
26 27
PILLAR 1: POLICIES AND STRATEGY DEVELOPMENT benefit from coordination across various decision-making bodies. A high-level
government body is important for decision-making processes and for clarify-
28 Large-scale coal mine closures require clear policy direction supported by a
ing roles and responsibilities across a diverse set of agencies at the national,
long-term Just Transition for All program. Minimizing social distress is key
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
regional, and local levels. Reforms to individual country policies and laws could
to achieving a successful coal mine closure. Success relies on several factors:
include: mine closure procedures and related health, environmental, and safe-
strong government commitment, legal and regulatory review, genuine stake-
ty (HSE) standards; energy use;31 environmental mitigation; land reclamation;
holder engagement, and adequate budgets for necessary social and labor inter-
economic revitalization; and social protection and labor transition programs.
ventions and for coal mine closure and environmental reclamation. The liter-
Two good examples are the Inter-Agency Commission for Socio-Economic
ature review for the countries that received World Bank loans concluded that
Problems of Coal-Producing Regions (IAC) in Russia and the Inter-Ministeri-
the impacts of coal mine closure were more effectively and efficiently addressed
al Coal Steering Committee (IMCSC) in Poland. Each were instrumental in co-
when countries adopted comprehensive reform programs. While each country
ordinating policy decision making and facilitating interministerial cooperation
developed their closure programs at different stages of coal industry decline,
required for reform implementation. Apart from planning, coordination could
lessons across the board demonstrate the utility in comprehensive policy plan-
extend to mobilizing various layers of government interventions during the ac-
ning. By contrast, other major coal producing countries did not have coal in-
tual implementation phase. The literature reviewed suggests that any high-lev-
dustry reform programs. Considerable conflict and miners’ strikes experiences
el body is best then supported by two key agencies: one for coal mine closure and
in these other countries may be attributable, in part, to an ineffective dialogue
one for social protection and labor programs.
with labor groups, for instance in the United Kingdom.
31 Decision making spans different levels of government. As shown in Table 2
Lesson 1: Managing the social and labor impacts from coal mine closures are government assumes several roles and responsibilities within various minis-
best achieved when multiple agencies participate in the policy development. tries and between various levels of government when planning for coal mine
29 Government leadership is indispensable regardless of the coal industry’s op- closure. Beyond policy making, roles include (i) a high-level decision-making
erating model. Coal mine closures come at an enormous cost. How this cost body, (ii) institutional leaders such as ministers, agency heads, and presidents
is distributed will depend on the operating model: whether the coal sector is of state-owned companies; and (iii) managers and professional staff of govern-
state owned and operated or privately owned and operated. State-owned mod- ment ministries and agencies and state-owned companies. Broadly speaking,
els typically present greater difficulties to closure, given liabilities and social commitment starts with the political leadership, and then is adopted and ex-
obligations. Typically, these closures require government policy and budgetary ecuted by the institutional leadership, managers, and professional staff. Coor-
interventions; particularly as even in the absence of explicit guarantees, gov- dination takes place largely at the institutional leadership level, which is where
ernment will most likely bear the costs of physical closure alongside labor tran- budgets are allocated and coordination between different ministries and agen-
sition programs. Private sector closures may benefit from advanced budgetary cies is established, overlaps are resolved, and gaps are filled. There may also be
outlays to bear some of the immediate pre- and post-layoff interventions, such a division of roles between national and subnational agencies, especially given
as paying for statutory severance payments. In the United States, for instance, a need for community-driven approaches to ensure that communities provide
only 21 percent of coal miners belong to a union, with the remaining 79 per- input on key decisions contributing to sound expectations at the local level.
cent working primarily as independent contractors (United States Energy Infor-
mation Administration, 2017). Private sector companies undertaking coal mine
closures may also prepare financially for environmental remediation and land
reclamation. Constant throughout, however, will be the role of government to
set policy direction and provide immediately needed measures when necessary.
30 Coordination of policy development benefits from a high-level decision-mak-
ing body. Regulatory reform affecting coal use and impacts on labor involves
several sector agencies. Therefore, well-managed coal mine closures would
28 29
Phase 1: Policy and Programs Development 32 Setting up a specific mine closure agency can streamline the physical closure
component. Physical mine closure and the subsequent land reclamation in-
High Level Decision Making Body
volves multiple ministries. Yet the control and allocation of restored coal mining
Provides political commitment
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
lands for new uses are likely the responsibility of local authorities. Furthermore,
Initiates and approves program, including budget
coal mines may be state owned. Therefore, depending on the scale of closures
Establishes decision-making processes
and complexity of crosscutting responsibilities, an agency may be best placed to
Enacts any new legislation
manage closure on behalf of several government stakeholders. Such a coal mine
Engages with key stakeholders in the closure process
closure agency would take control of and physically close mines, once produc-
Approves state-owned enterprise (SOE) reforms, including decisions on repurposing ancillary assets
tion has ceased. In the cases of Ukraine, Poland, and Romania, dedicated coal
Institutional Leadership mine closure companies effectively managed the efficient physical closure of
Develops program
mines. Post-closure monitoring and maintenance may also best be undertak-
Establishes new implementing institutions (if needed) en by one or more separate purpose-established institutions or companies; the
Determines budget allocations between ministries and agencies. United Kingdom Coal Authority is a good example in this regard. By contrast,
Oversees drafting of laws Russia did not have a mine closure agency, and eventual physical mine closure
Approves regulations and environmental reclamation were less organized and effective.
Engages with key stakeholders 33 Concurrently, the institution with the biggest stake in the success of the labor
Proposes SOE reform programs divestiture process should lead the planning for the social and labor transition.
As with physical mine closure, social and labor transitions engage multiple minis-
Managers and Professional Staff in Institutions and SOEs
tries. A suite of social and labor transition programs may be required: provision of
Prepares regulations
income support, social service delivery to the most vulnerable (women, children,
Enforces laws and regulations
elderly, etc.), active labor market policies for redundant workers, retraining, and
Acts as key communication channel with stakeholders for program consultations
even broader regional economic revitalization plans. Each type of intervention typ-
ically falls under separate government departments and line ministries. Appoint-
Phase 2: Implementation ing one institution to coordinate the stakeholder engagement and planning process
High Level Decision Making Body can maximize synergies and ensure consistent communication with the public and
stakeholders potentially affected in the coal mining areas. Such an institution would
Reviews implementation on a regular basis
also work alongside nongovernmental organizations and coal mining companies in
Approves any revisions to program and budget
Reports to a high-level decision-making body
their responses. In Romania, for instance, the National Agency for Development
and Implementation of the Programs for Reconstruction of the Mining Regions
Institutional Leadership (NAD)32 was established to oversee and implement the social and labor mitigation
Directs specific implementation streams on physical closure and social protection and labor and local development aspects of the coal sector reform programs.
Engages regularly with stakeholders to assess progress
34 Regulations affecting labor divestiture in the coal sector significantly influ-
Reviews any budgetary and program revisions made by professional staff
ence success. Implementing labor divestiture can be affected by legal and fi-
Managers and Professional Staff in Institutions and SOEs nancial restrictions, such as: national legislation, sector-specific tripartite col-
lective agreements, and enterprise-specific agreements. All three types may
Implements program
need to be addressed in parallel or sequentially. With respect to implementing
Enforces laws, regulations and HSE standards
coal industry reform, it is important to identify key regulations that serve as ob-
Manages physical closure and social and labor work plans
stacles to the labor divestiture process, both in terms of the de jure rules and its
Hosts regular stakeholder consultations to review progress
de facto implementation. There are examples of labor regulations which can be
30 31
Table 2: Phases for managing coal mine closure: government roles and responsibilities
formidable obstacles for labor divestiture, thus impeding reforms to the coal in- jobs was estimated to be in the range of USD 450,000–600,000 per job (Gales
dustry. For example, the complicated priority order for dismissals in the former and Hölsgens, 2017). Additional budget needs included land-related costs, such
Yugoslav Republic of Macedonia became an obstacle for implementing labor as physical closure, environmental remediation, post-closure monitoring, and
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
terminations in other sectors in the 1990s. Policy makers may need to explore maintenance costs. There may also be other very substantial stranded assets
options to change labor divestiture laws and regulations or create additional, such as coal-fired power plants that are no longer economically and financially
more flexible regulations, if they impede reforms to the coal industry. viable which fall into government ownership.
35 Efficient administration of income support programs and active labor market 38 State-owned mining companies often retain labor to the point of crisis, forc-
policies are critical to their success. The availability of, and interactions with, ing government to absorb financial losses rather than close out mines rapid-
existing social safety nets set the conditions for deploying supplemental social ly. This can result in losses steadily building to a point where mines are abruptly
protection and labor programs. At minimum the same amount and type of income closed and the companies unexpectedly lay off large numbers of workers be-
support should be offered to laid-off coal sector workers and workers losing their cause the government will no longer continue providing large subsidies. When
jobs because of mass redundancies in other sectors. In addition to that, delivery this happens, the size of mine closures and social and labor costs will be higher
systems—such as those related to outreach, intake, payments, contracting, mon- and much more compressed in time than if reform had started earlier. Evidence
itoring and evaluation, grievance redress, etc.,—should also be the same as those from past programs in several countries shows that government may also be
for existing income support measures; this will increase operational efficiencies, forced to take over other liabilities of bankrupt private sector companies such as
However, in some cases implementing agencies might in fact be different or dif- pensions and private retirement plans, or physical closure liabilities.
ferent types of income support may be provided in parallel, potentially with dif-
ferent criteria due to the clientele (i.e., average training duration for coal sector Lesson 3: Genuine stakeholder consultation starting at the planning stage
workers may be longer if they need more reskilling than workers in other sectors). and continuing throughout the mine closure process can significantly reduce
the possibility of social conflicts.
Lesson 2: Meeting the substantial budget needs for mine closure is a
39 Avoidance of conflict and social unrest is a critical measure of success in coal
challenge given the short-term, high costs required.
mine closure programs. Stakeholder dialogue and citizen engagement provide
36 Coal mine closure requires enormous budget outlays, often in a relatively short meaningful mechanisms for addressing concerns of the coal industry workers
period of time. The biggest line item is usually the income support packages and other members of coal mining communities at all societal levels. Formal
put in place for coal sector workers (see Pillar 2). Other line items may include engagement mechanisms provide the vehicle by which constituencies can com-
expenses from regulatory reforms (including restructuring of state enterpris- ment and contribute to closure and economic recovery planning. Therefore, it is
es and their liabilities); social service delivery; active labor market programs; indispensable to engage early in the planning process with potentially affected
environmental remediation and land reclamation; and overall monitoring, co- stakeholders. Early in the planning phase, information campaigns can reduce
ordination, and reporting functions for the government institutions involved. misinformation circulating in potentially affected communities. Campaigns
Where there are also social assets owned, budget support may potentially be cover topics such as: (i) the intent to plan social and labor support alongside
needed for the asset transfer from coal companies or state-owned companies coal mine closure; (ii) the stakeholder engagement strategy; and (iii) the gen-
toward local government or other parties. Budget coordination and allocations eral nature of the planned assistance for displaced workers. Correct information
are typically done by the Ministry of Finance or Ministry of Planning. is critical to avoiding social conflict and therefore should be handled by the en-
tities designing and implementing the social and labor programs themselves.
37 Some case studies illustrate the magnitude of costs. Government budgets can
Above all, care should be taken not to advertise services that cannot be deliv-
run into the billions of United States dollars (USD) —with social and labor sup-
ered, as this will add to, and not reduce, social tensions. A diverse stakeholder
port costs being as much as three to four times physical mine closure costs. The
group should be expected across: industry workers and their unions, managers
Miners Social Packages, seen as very successful in Poland, cost over USD 2 billion
of state-owned coal companies, nonprofit groups already providing services in
for about 80,000 workers. Total costs in the Netherlands were nearly USD 6 bil-
local coal mining areas, government agencies, churches, and other civil orga-
lion (in 1980 terms) and the cost of facilitating the creation of 17,100 new lasting
32 33
nizing groups. In Central Appalachia, a regional planning approach has helped base of mono-industry regions is difficult and costly. When mining areas are
to channel efforts more coherently around future development priorities. already entrenched in intergenerational poverty, the challenge of economic re-
vitalization is all the more difficult.
40 Russia, Poland, and Romania illustrated successful stakeholder engagement
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
processes during their coal sector reform programs. In Russia, the government 42 Mitigating potential social and labor impacts from labor loss is best achieved
engaged extensively with the trade unions and with the Association of Min- when the needs and preferences of different groups of workers are understood.
ing Cities to explain the need for coal industry downsizing. In Poland, forceful Some coal sector workers are close to retirement; some are in the middle of their
miners’ protests accompanied the launch of the coal reform program. The gov- working lives; and others are younger workers not yet entrenched in the coal in-
ernment responded by establishing extensive dialogue channels with the trade dustry. Those close to retirement might prefer to leave the workforce with retire-
unions. This led eventually to the acceptance by the unions of the necessity of ment packages and other social protection measures. The middle-age workers—
reform programs, and helped facilitate their effective and successful implemen- who often have debts, immovable assets, and family commitments with deep
tation. The stakeholder engagement led to the design and delivery of adequate roots in their community—are often unwilling to consider relocation to places
income support measures known as “Miners Social Packages” which smoothed where more work opportunities may be available, even when mobility incentives
the transition for mine workers and communities. In Romania, engagement are offered. The younger workers are generally more ready and willing to be re-
with mine workers and community representatives not only contributed to the skilled and take alternative employment—even if the wages are lower than in the
acceptance of mine closures but also contributed greatly to the design of social coal mining industry and if it means relocating. Differences also need to be rec-
and labor support measures for workers, their families, and communities. In ad- ognized not only for workers employed in coal mines but also for those who lose
dition, community involvement through a “community capacity building” ac- their jobs in the other industries in the coal ecosystem—coal users, coal transport
tivity included discussions on the repurposing of infrastructure and other assets systems, goods and service suppliers, and coal industry social assets.
which guided realistic expectations. These discussions had the added value of
providing some limited direct employment opportunities as part of the mine’s Lesson 4: A systematic process to mitigate social and labor impacts that
decommissioning. By contrast, Ukraine and the United Kingdom lacked signif- starts before any labor layoffs occur can result in a more orderly, less
icant stakeholder engagement. In the case of Ukraine, reforms were blocked. In stressful, and ultimately lower cost divestiture process.
the case of the United Kingdom, reforms were achieved but there were protract- 43 A three-stage approach (Figure 6) comprising pre-layoff planning, pre-lay-
ed conflicts with unions and mine workers over a two-decade period. off assistance, and post-layoff assistance provides governments with a so-
cial response framework for large-scale labor divestiture. The first step in the
PILLAR 2: PEOPLE AND COMMUNITIES process of pre-layoff planning is to identify who will lose their jobs. Very often
41 A Just Transition for All seeks to meet the needs of people, their families, and divestiture comprises the total closure of a coal mine or other plant, but there
the community. The coal industry ecosystem is vast and includes not only coal are also instances of partial closures. In the case of partial closure, the organi-
mines but also (i) coal users, such as power plants, industrial companies, dis- zation and utilization of labor must be defined to reach desired efficiency. Next,
trict heating systems, and in less common cases, transport companies and res- an analysis of the skills and competencies of the existing personnel must be
idential users; (ii) transport systems carrying coal from mines to users (mostly performed and, whenever possible, personnel meeting the new requirements
railways); (iii) suppliers of goods and services to the coal mines; and (iv) in some should be selected from the existing staff. To note is the possibility to retrain
cases social assets that provided auxiliary social services that were owned and some existing staff, and in some cases, new staff or managers with experience
operated by coal mines. Therefore, coal mine closures can result in substantial from more productive and competitive mines may even need to be hired. Any
job loss in both the coal sector (mines and plants) and related industries. Fur- surplus personnel need to be divested. Pre-layoff planning should also look be-
thermore, economic spillovers from coal mine closure extend to declining retail yond the coal mines to be closed and include an analysis of possible indirect job
expenditures and employment in the service industry. Oftentimes, decades lat- losses, which could have a wider geographic range. If coal mines operate social
er coal-dependent communities still lag socially and economically far behind assets and infrastructure, pre-layoff planning should also address how these
other areas of the country. The main reason being that rebuilding the economic assets and auxiliary social services will be sustained.
34 35
Lesson 5: Pre-layoff planning and assistance can prepare workers for
impending layoffs.
46 Affected workers need to be given sufficient periods of notice and be informed
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
about lay-offs. This will help smooth the adjustment for affected coal workers,
especially for large-scale layoffs where demand for services will be high. It is
critical that workers are clearly informed of the options and services they may
be provided upon being laid off well before the actual layoff occurs. The period
between the decision to divest and the time workers are to be displaced is one of
the most difficult for those affected. To ease tensions and anxieties, early, honest,
and comprehensive information for affected workers as well as trade union rep-
resentatives and other stakeholders is critical. In Poland, considerable pre-layoff
planning and preparation took place with the trade unions. Generous retirement
and other income support was put in place before the mines were closed. Most
importantly, the government avoided making any promises it could not keep.
47 Start delivering social service programs before beginning layoffs. Typical ser-
Figure 6: Stylized process of divesture of labor vices started before workers lose their jobs, would include: (i) establishing el-
igibility for, and assessing interest in, temporary income support, active labor
44 Women may be potentially more impacted by closure programs. By way of illus-
market programs, or retirement options (which might include early pension
tration, impacts for women include not only direct job loss but also increased bur-
eligibility); (ii) profiling and worker skill audits to provide each worker with a
den of domestic responsibilities. When men lose their employment, intra-house-
clear understanding of their skills development and assistance needs; and (iii)
hold tensions and possibly gender-based violence may increase. Gender relations,
providing initial jobs counseling and placement services. Box 2 describes a Ca-
family, and community life may be disrupted through out-migration. For these
nadian pre-layoff assistance service initiative, which effectively helped prevent
reasons, engaging early on with not only men but also separately with women is
displaced workers from falling into long-term unemployment. Providing these
critical to understand and respond to the range of potential impacts closure may
services should involve collaboration between workers, business, and local and
induce. Due to diminished revenues, social services may be precariously under-
regional public officials. The delivery of services works best on-site where the
funded, with families and affected community members turning to other social
layoffs will occur. However, off-site local services may also be needed to re-
structures for help. For example, women’s nonprofit organizations in Silesia
spond to indirect job losses. Rapid deployment is critical.
played a significant role in supporting individuals, families, and communities to
respond to the Polish coal sector downsizing and layoffs by providing help, coun- Lesson 6: Post-lay off assistance, including temporary income support, can
seling, and shelter for those in need and by addressing domestic violence, alcohol, help sustain laid-off workers in a way that promotes continued participation
and substance abuse issues, which increased due to the layoffs. in the labor market.
45 Gendered design in coal mine closure programs is important from the outset. 48 Different instruments can be applied depending on the circumstance. The
Women and men often have different jobs in the mining sector. For example, in Po- precise design of income support instruments will significantly affect the cov-
land’s coal reform program the majority of surface workers were women who were erage and adequacy of financial support, and workers’ incentive to actively look
initially excluded from receiving the Miners Social Package which was only avail- for jobs. Four main instruments for temporary income support include: (i) sev-
able to underground mine workers and coal washing plant workers, all of whom erance or other forms of termination payments; (ii) unemployment insurance;
were men. Eligibility criteria were adjusted to include surface workers, thus bring- (iii) social assistance payments; and (iv) early retirement incentives.
ing women into the labor divestiture process. The Polish experience also showed
49 Termination payments can provide both quick-disbursing and longer-last-
that women were more willing to consider other job options while many of the male
36 ing income support for newly laid-off workers. Termination payments can ei- 37
mine workers would not consider lower paying jobs in other sectors.
Text Box 2 scale jobs losses that lead to a longer-term unemployment period typical of labor
Canada’s Industrial Adjustment Services displacement in the coal sector, some countries have used such systems to deliv-
Canada’s Industrial Adjustment Services (IAS)—originally founded in 1963—and its er additional support in times of crisis. For example, in the United States an ex-
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
successor organizations and initiatives consist of small units composed of specially tended benefits feature is triggered in times of high unemployment. Canada ties
trained staff who, on request, provide assistance to firms and communities facing large- levels and durations of unemployment benefits to regional unemployment rates.
scale labor redundancies. For instance, in the case of Canada’s province of New Bruns- It should also be considered that while unemployment insurance systems can in
wick, activities supported by its Department of Post-Secondary Education, Training and principle offer extended income support to displaced workers, very long benefit
Labor have recently included the setting up of a temporary service offering employees periods can create job search disincentives. There is evidence that extended un-
facing job loss with early retirement option information, labor market information, em- employment benefit durations can account for a substantial share of the increase
ployment program information, and employment action planning. Also supported by in long-term unemployment in the United States during the Great Recession of
the New Brunswick’s Department of Post-Secondary Education, Training and Labor are 2007 to 2009 (Farber and Valletta, 2015). Starting an unemployment insurance
human resource management for workers not affected by a layoff and for companies or system in the context of rapid transition is also not a viable option since the in-
sectors facing change or expansion. Evidence indicates that IAS support can be effec- surance fund needs to accumulate contributions before it can pay out benefits.
tive and cost-effective in terms of shortening periods of unemployment. Critical success 51 Social assistance payments can act as a social safety net for those who do not
factors are that the IAS focuses limited resources on the most vulnerable workers to en- qualify for, or have exhausted, regular unemployment benefits. In contrast to
sure that public funds are used in the most efficient way, and that all local stakeholders unemployment insurance benefits, social assistance payments are usually not
are involved and work together to solve practical labor problems. IAS also demonstrates funded through contributions by employers or employees but out of general gov-
to the worst-affected workers that both the community and government care about the ernment revenue and available not to specific groups of (laid-off) workers but to
problems of adjustment. the population at large, subject to specific eligibility requirements. Social assis-
Source: Authors based on Government of New Brunswick (2015) and Fretwell (2017) tance payments are also usually means-tested, household-based, and at a lower
level than unemployment benefits. The World Bank has supported many coun-
tries in the design, piloting, and scale-up of social assistance systems (including
as part of the coal industry reform and restructuring programs) and more recent-
ly supported a growing number of “adaptive” social assistance programs specifi-
ther take the form of regular severance payments that firms fund and pay out
cally meant to be scaled up in response to economic or other shocks.
upon separation, or countries can set up special funds to dispense payments to
laid-off workers in the affected industry or region. These special funds can be 52 Early retirement programs are sometimes used to incentivize older coal indus-
financed in various ways, although inevitably there will be considerable govern- try workers to exit the sector. Early retirement programs have political value: they
ment contributions. Under both regular severance plans and special adjustment help limit labor disputes and reduce damage to morale. They are also a solution for
funds, benefits are usually disbursed either on a one-time basis or periodically some older laid-off workers who realistically have little chance to find re-employ-
through an annuity-type arrangement. There are advantages and disadvantag- ment. At the same time, they put a high fiscal burden on the pension system and, if
es with each disbursement arrangement. On the one hand, annuity payments not well targeted, may deprive the economy of productive human capital. Given the
ensure that job losers will have continuous support. On the other hand, receipt potentially high cost of early retirement programs, it may be preferable to offer so-
of the full payment at the beginning of unemployment may allow for more pro- cial assistance payments to laid-off workers until they reach the regular retirement
ductive use by recipients or for migrating to a place with better job prospects. age, augmented by bonus payments for those who delay retirement.
In the case of Poland and Romania, World Bank–funded coal sector adjustment 53 Future coal mine closure programs can learn from China’s experience with heavy
programs supported severance programs to coal workers. industries readjustment and privatization during the late 1990s and early 2000s.
50 If an unemployment insurance system exists, this provides a second line of This experience illustrates well the deployment of the different temporary income
support for laid-off workers. While on their own, unemployment insurance sys- support instruments, and both success and certain limitations. In the case of China,
38 tems are often not well suited to provide income support in response to large- many workers were offered early retirement and left the labor force. Those of work- 39
ing age were offered temporary income support and re-employment services to find
new employment. And those who were unable to find new jobs were provided “three Lesson 7: Active labor market policies offer services, programs, and incentives
guarantees” of extended temporary income support, unemployment insurance, and that can encourage and enable re-employment among laid-off workers.
social assistance in the form of the urban “Dibao” program. While complete mitiga-
54 Active labor market policies have varying trade-offs. Policies usually include
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
tion of the impacts of industries readjustment and privatization proved impossible,
one or a combination of the following three types: (i) employment services such
the country achieved some successes, and the episode served as an important cata-
as labor exchanges, vocational counseling and mobility assistance; (ii) educa-
lyst for the creation of a modern social protection system. See Box 3.
tion and training like institutional training or on-the job training; and (iii) small
business support services. There are certain trade-offs with respect to their typ-
ical costs per beneficiary and expected impacts, as illustrated in Figure 7.
Figure 7 – Stylized summary of active labor market policies
Text Box 3 Active labor market policy Typical costs per beneficiary Mean impact on probability of employment
China’s “three guarantee lines” for unemployed workers
Short term Medium term Longer term
Many Chinese workers were affected by labor redundancies in the late 1990s. Employ- Employment services $15–$30
ment guarantees for employees of state-owned enterprises were removed, and the en- Labor exchanges (for labor exchanges)
Vocational counseling
terprises laid off tens of millions of workers. According to official figures, about 28.2
Mobility assistance
million workers or more than 15 percent of the urban labor force were laid off between
1998 and 2003. Empirical analyses of China’s mass labor redundancies during this pe- Active labor market policy Typical costs per beneficiary Mean impact on probability of employment
riod document that for redundant workers, rates of labor force withdrawal were high, Short term Medium term Longer term
formal sector re-employment rates low, and earnings losses substantial.
Education and training $250–$1,000
To mitigate the effects of labor redundancies affecting tens of millions of workers, the gov- Institutional training (for institutional training)
On-the-job training $700–$2,000
ernment of China introduced an early retirement program for workers within five years of
Comprehensive programs (for comprehensive programs)
the retirement age. It first piloted and then scaled up the “Xiagang” re-employment pro-
gram. The Xiagang program involved significant provisioning of public funds. It further re- Active labor market policy Typical costs per Mean impact on probability of employment
beneficiary
quired state-owned enterprises to provide temporary income support and re-employment Short term Medium term Longer term
services for up to three years to workers who had been made redundant. Laid-off workers Small business support and $500–$3,000
could receive temporary income support for up to three years through the Xiagang program. subsidized employment (for business support)
Those who still lacked a job after three years could claim unemployment insurance benefits Small business support $300–2,400
Wage subsidies (for subsidized employment) (for community employment programs)
for a maximum of two years. In addition, families with laid-off workers could apply for in-
Community empoyment
come support from the urban “Dibao” social assistance program if they met the applicable programs
eligibility criteria. Together, these programs were called the “three guarantee lines” to pro-
Notes:
vide basic income support for unemployed workers and their families.
denotes an impact on a program beneficiary’s probability of employment of less than
Research finds that the “three guarantee lines” including the Xiagang program achieved
0.05 standard deviations
somewhat mixed success in terms of coverage, adequacy, and leakage of temporary in-
come support and labor market impacts from its active labor market policies. Notwith- denotes an impact of 0.05 to 0.1 standard deviations
standing these challenges, the “three guarantee lines” served as an important catalyst denotes an impact of at least 0.1 standard deviations, all according to the meta-
for the creation of a modern social protection system in China. analysis by Card, Kluve and Weber (2015).
Source: Authors based on Schmillen (2017).
40 Source: Authors based on Betcherman et al. (2007) Card, Kluve, and Weber (2015), and Fretwell (2017). 41
55 Employment services most effectively address situations when displaced
workers have skills for which there is labor demand, but assistance is needed
to access this demand. Employment services generally come in three forms: (i)
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
labor exchange services to support for job search; (ii) vocational counseling; and
(iii) mobility assistance. Employment services might, for instance, involve the
referral of electricians employed by the coal mine to employers outside of the Text Box 4
coal sector looking to hire electricians. Vocational counseling can be effective Constraints to labor mobility
as a self-standing service—e.g., assessing whether coal miners have aptitude
Low labor mobility limits people’s ability to use their productive capacity to access jobs by
and interest in specific occupations in other sectors—or as a screening device to
moving to thriving regions. Of course, many issues may prevent individuals from moving
control access to education and training programs.
to improve their job opportunities, including the monetary cost of moving. A program in
56 Mobility assistance can be particularly crucial when local labor markets are Bangladesh provided minimal mobility payments to seasonal workers who successfully
stagnant or dominated by a coal mine or plant in the process of being shut migrated to locations with jobs during the off-season. Some populations may face other
down. There are substantial difficulties in rejuvenating coal mining economies or additional constraints, for example lack of information about job opportunities, lack of
by finding new “engines of economic activity” to replace coal mining as the relatives and friends in areas of potential migration, the desire not to lose support net-
economic mainstay. Therefore, labor mobility and migration are often the most works in one’s current area, or difficulties facing spouses and children in moving. At the
effective ways forward for workers in “mono-industry” remote coal mining re- same time, policies can play a role limiting labor mobility, either by increasing migration
gions and communities with little connectivity to the rest of the economy where costs or by failing to tackle the market failures that drive low labor mobility.
jobs may be available. In such instances, mobility assistance in cash or in kind
Market failures that reduce labor mobility include high living costs in urban areas, un-
can facilitate coal sector workers to move to regions with better employment
derdeveloped credit markets, and the lack of affordable (social) housing. In addition,
opportunities. Mobility assistance is most effective when combined with com-
cumbersome population registration requirements in some countries (especially for-
plementary interventions to address constraints preventing people from taking
merly centrally planned economies) deter people from moving from lagging regions to
advantage of economic opportunities in high productivity regions, such as re-
leading ones. A survey in Ukraine shows that the population registration system is a key
imbursement of transportation costs, moving and housing subsidies, informa-
barrier to internal mobility. In Kazakhstan, newcomers are required to submit a docu-
tion about jobs in receiving locations, or counseling sessions. See Box 4.
ment proving that he/she has housing of no less than 15 square meters (sqm) for one
57 Education and training programs help displaced workers to succeed in the la- person, as well as a rental agreement.
bor market through re-skilling or retraining. In the case of coal mine closure,
The inadequate provision of education outside of urban centers can also be a barrier to
education and training programs might, for instance, involve the retraining of
mobility. Those who grow up outside of urban centers often receive lower quality edu-
operating engineers employed by the coal mine to operate and repair different
cation, which then constrains them in terms of meeting job market expectations. Edu-
but related types of equipment used outside of the coal sector. Three general cat-
cational attainment also tends to be lower outside of urban centers, and those with less
egories of education and training programs can be distinguished. First, institu-
education are often less willing to move to find jobs than those with more education.
tional training by private and/or public agencies. Second, on-the-job training by
the private sector. Third, comprehensive training programs that combine insti- This suggests that at least for some populations mobility assistance may need to go be-
tutional and on-the-job training. As a general principle, their design should be yond “passive” support in the form of cash but include more “active” support, such as
driven by demand rather than supply, and foster competition and efficiency in transportation, moving and housing subsidies, or counseling sessions.
program delivery. For example, in West Virginia, Social Enterprise and Economic Source: Authors based on Bryan et al. (2014) and World Bank (forthcoming).
Diversification (SEED) Partners are community-based, grassroots organizations
committed to building social enterprises, and then employ former coal workers
who enroll in a 33-6-3 model.33 Workers are offered a two-and-a-half-year con-
tract consisting of 33 hours/week of paid work, accompanied by 6 credit hours of
42 43
higher education, and 3 hours of personal development mentorship. At the end of land occupied by mining facilities, including any usable infrastructure, will al-
their contract, workers have gained invaluable work experience, earned an Asso- low for future use by communities. Indeed, restored land and infrastructure can
ciate’s Degree, and gained clarity on life goals through mentoring. become an economic asset for communities in future regeneration initiatives.
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
Take for instance the Appalachian Wildlife Center, a conservation education and
58 Small business support services can be offered to help laid-off workers to
research facility located on 19 miles of reclaimed mine land in the tri-state areas
start businesses that respond to local demand for goods or services. While
of southeastern Kentucky, northeastern Tennessee, and southwestern Virginia.
small business services can be effective for a certain segment of the labor force,
It serves as an elk restoration and viewing center, creating jobs in a former min-
they can also be relatively more expensive than other active labor market ser-
ing area through tourism and conservation.
vices. Furthermore, they often attract a relatively limited number of displaced
workers (only a minority of laid-off coal sector workers might be interested in
Lesson 8: Environmental reclamation is best addressed from the outset of
starting their own business and at the same time be in the possession of the
mine planning.
relevant aptitude and skills). The most common small business support services
include: (i) technical assistance for start-ups; (ii) micro credits and grants; and 60 Mine closure and land reclamation requirements should be imbedded in the
(iii) small business incubators that provide small firms with an entrepreneurial overall mine planning and permitting process from the outset. An overview of
environment, professional networking and mentorship opportunities, and fi- the regulatory procedures and requirements for mine closure and related finan-
nancial and other resources all in one place. In Romania, the Social Development cial assurance is provided in the April 2016 Report Comparative Study of Finan-
Fund was established to provide a microcredit program to support new business cial Mechanisms for Environmental and Social Sustainability of Mine Sites after
development. It was administered by local nongovernmental organizations. This Closure in Kazakhstan prepared under the World Bank’s Kazakhstan Joint Eco-
program was pursued alongside more traditional re-skilling programs being nomic Research Program. For many coal mines this is a challenge, having been
offered by the national employment agency. Notably, these programs will not in production for decades, and mine closure plans and reclamation processes
be successful in locations where there is no demand for goods or services, which may be outdated or nonexistent. Where there is adequate lead time for plan-
may be the case in a mono-industry town when the mine closes and there is no ning mine closure, an updated environmental impact assessment is warranted.
income base to purchase goods or services provided by new small businesses. It should include considerations on water and air resource protection, land use,
water use, disturbance to the natural environment, discharge of waste and pol-
PILLAR 3: LAND AND ENVIRONMENTAL REMEDIATION lutants, and protection of natural habitats. In Romania, the design of the phys-
ical mine closure of each mine was prepared by mining technical institutes. The
59 Comprehensive mine closure projects seek to repurpose lands and ensure ad-
Romania MCSER loan supported the training of 650 technical staff in the Inter-
equate physical mine closure. In effect, mine closure addresses both environ-
national Federation of Consulting Engineers (FIDIC) contracts and standards,
mental and infrastructure risks. According to the World Coal Association, envi-
thereby creating a cadre of professionals fully capable of carrying forward mine
ronmental reclamation should: (i) prevent negative impacts to soil, water, and
closure activities in the country.
air resources in and near mined areas; (ii) restore the quality of soils to their
pre-mining level; and (iii) maintain or improve landscape and functional qual- 61 Successful physical closure requires modern mine closure regulations and pro-
ity. An often-cited example of a best practice is the Coal-Mac Mining’s Phoenix cedures, and competent institutions. These are necessary both for the initial phys-
#2 in West Virginia. Backfill elevations were established to mimic the natural ical closure and reclamation as well as for long-term monitoring and managing of
terrain, avoiding soil compaction and enhancing prospects for future use. Soil any potentially harmful legacy issues (such as protection of water quality in the
quality was improved to enable reforestation, planting two types of trees that surrounding area of a closed mine). The mine closure procedures should include
would support wildlife, soil stability, and commercially valuable crop trees. measures to restore the land occupied by mining facilities to a condition suitable for
Mine closure also requires securing the workings, waste dumps, and impound- future use. The procedural rules should ensure: (i) the safety of people during the
ments, and removing any post-closure mine site safety risks. This is particular- closure or conservation process; (ii) protection of civil works and infrastructures
ly important to protect workers in underground mines that continue to oper-
ate near to closed underground mines that contain water. Lastly, restoration of
44 45
from hazardous events such as landslides, floods, and subsidence of soil; (iii) com- that temporary or early closure takes place. Penalties should be enforced against
pliance with environmental requirements, including development of an Environ- companies for noncompliance, and charges against responsible officers and di-
ment Impact Assessment for closure and conservation stages; and (iv) compliance rectors of companies should also be considered to increase compliance with en-
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
with industrial safety requirements. In Romania, the government enacted 98 legal vironmental laws and mine closure requirements.
codicils specific to mining activities and mine closure, three laws, two emergency
64 Ukraine, Poland, and Romania demonstrated good practice on physical mine
government ordinances, and two government ordinances. A mine closure manual
closure. Interventions included ensuring that modern mine closure regulations
based on modern international practice was issued by ministerial order (2001) and
and procedures were in place, adequate funding was available, and the necessary
then formed the legal basis for the closure of all state-owned mines in Romania.
capabilities were in place. For instance, as part of its mining industry reform strat-
The manual was later updated with additional annexes on the closure of private
egy the government of Romania prepared a time-bound program for the physical
mines and annexes for consultation when social mitigation and consultation re-
closure and environmental remediation of 174 mines where mining had stopped,
quirements were incorporated in the legislative framework for mine closures.
and Romania established the Central Group for Mine Closures (CGMC) which suc-
62 Mine closure companies may deliver more efficient closures and draw labor cessfully carried out the closure and environmental remediation of 31 mines. The
and other resources from the closed coal mines. Poland employed two mine clo- closures included non-coal (metallic ore) as well as coal and lignite mines. Some
sure companies, SRK and BSRK, to carry out the physical work of closing 16 of 400 hectares (ha) of land were reclaimed and made available for new business and
the countries coal mines between 1997 and 2002. SRK’s and BSRK’s responsibil- other activities in the mining communities; 9 preparation plants were rehabili-
ities covered all aspects of closure, remediation, and reclamation. The physical tated, including several situated in the center of mining towns, thereby creating
mine closure and environmental reclamation were comprehensive and includ- a healthy and safe environment for their inhabitants; and 8 tailing dams were re-
ed a very broad range of activities: filling roadways and closing galleries with fly claimed, significantly reducing the potential risk of dam failure with potentially
ashes mixed with mine water; recovering some potentially reusable underground catastrophic environmental and social impacts. Quarterly audits were undertaken
equipment; undertaking ventilation and methane monitoring for safety purpos- of the closure works which served as a tool for monitoring and evaluation and re-
es; continuous dewatering, necessary to prevent water hazards to the neighbor- sulted in the timely identification of potential issues.
ing operating mines; control of saline water discharges to protect the local wa-
ter systems; demolishing and clearing surface structures, buildings, plants, and Lesson 9: Financial assurance mechanisms can be an effective tool to
equipment, and where necessary, stabilization of any work dumps; filling shafts guarantee funding availability.
with different materials and capping them off with a cement cap; demolishing 65 Insufficient funding is the biggest barrier to physical mine closure and land
existing buildings that could not be reused; dismantling surface structures and reclamation taking place in a satisfactory manner. From the outset, a mine
equipment; stabilizing waste dumps; liquidating tailings ponds; and reclaiming closure plan needs to be accompanied by a financial assurance mechanism. The
land either for industrial use which required clean up and ground leveling or for mechanism would secure the costs that the government would incur if it had
recreational use which required cultivation. Wismut uranium mining company to implement a previously approved closure plan, in the event of default by the
also provided a good example of best practices in which a corporate entity was mine owner. The amount of financial assurance should be based on a site-specific
established in 1991 to restore and clean up the former mining and milling areas.34 calculation to implement the closure plan as approved using a fair market value
63 The trend over the last 20 years has been to implement or strengthen the le- estimate of closure costs. The methods and final estimate are typically subject
gal requirements for mine closure planning. An initial closure plan should be to government review and approval. The estimated closure costs could be signif-
prepared as part of the feasibility work for a new mining operation and approved icant, with immediate placement of a portion of the obligation providing some
before a mining license is issued. The initial plan may be somewhat conceptual guarantee to the government, while limiting the burden on the company.
since mining has not yet started, but even so it should include an estimate of 66 There are a range of possible financial assurance mechanisms. Cash and cash
the full cost of closure. The closure plan and cost estimate should then be up- equivalents are the most secure forms of financial assurance, but they can have
dated on a regular basis thereafter. It is important to ensure the updated closure a significant impact on the finances of a mining company. Other mechanisms,
plans reflect the mining that takes place, and a plan should be ready in the event which are widely used, include bank guarantees and letters of credit. Corporate
46 47
guarantees are strongly advised against. Ideally, the mine closure plan should be
fully funded at the start of mining and progressively increased over time in line
Conclusion
with the revised costs estimates when the Mine Closure Plan is updated. However,
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
this may not be practical, and instead the financial assurance may be progres- 68 Lessons from past coal mine closure programs and the broader literature of-
sively built up over time with funds paid in pro-rata and/or credit increased over fer insights for future coal sector interventions. Over the last half century,
a limited period. For example, in Chile, the initial portion is 20 percent of the obli- large-scale changes to coal industries across Europe and, more recently in the
gation. Annual increases in the financial assurance should be defined based on the United States and China, have resulted in significant job losses with consider-
current mine life, but the time required to put the total funding in place probably able impacts to workers and communities across the coal value chain. The driv-
should not exceed 15 years or half of the remaining mine life, whichever is less. ers behind these sector adjustments persist today, making future closures likely
67 Many countries are now turning to financial assurances to provide security across Asia and Europe, and to a lesser extent Central Asia and Africa. The social
should a mining operator be unable to meet its closure obligations due to in- risk posed by rapid coal mine closures, compounded by the variations in coal
solvency and abandons the mine. Financial assurance has the added benefit of mine ownership, points to the important leadership role required of govern-
improving closure plans and cost estimates. This can result in shifting the costs ments to plan and prepare for this eventuality. Lessons point to the necessity
of unexpected or premature mine closures away from the government to the for early stage planning, consistent dialogue with stakeholders, and methodical
mine owner. Any cash or cash-equivalent payments and costs for financial as- sequencing of the provision of income support and active labor market policies.
surance should be deductible for income tax purposes in the period that they Financing and technology solutions are promising avenues for environmental
are made. There are many financial instruments available to fund for financial remediation and land reclamation, which are often overlooked areas. In fact, a
assurance obligations with the most common summarized in Box 5. window of opportunity exists to improve on past closure experiences and record
new best practices for industry and society at large.
69 Efforts toward a Just Transition for All reside at the heart of future coal mine
closures. As discussed over the course of this report, a successful mine closure
program is one that minimizes social conflict by mitigating impacts on affected
workers and communities. This is not an easy task. Whereas the immediate im-
Text Box 5 pacts of income loss and unemployment can at least to some extent be mitigat-
Most common financial instruments ed through the multiple instruments discussed in Pillar 2, important questions
remain regarding the desirability and feasibility of the long-term revitalization
(i) Full payment in cash or cash equivalents (certified cheques, bank drafts, term
of affected mono-industry towns. Mobility support for unemployed workers
deposits, government issued bonds);
and their families to move to areas with strong economies and new job pros-
(ii) A bank guarantee; pects may be the most effective way forward for those in communities having
(iii) An irrevocable standby letter of credit; low connectivity to strong economic regions. Disappointingly, few studies have
been undertaken to assess outcomes of efforts to reorient coal mining regions
(iv) Contributions into an approved trust (with further details on the use and governance
from decades ago. Evidently, a profound research gap exists to which future ef-
rules set out in local laws and varying by local customs and requirements);
forts can certainly contribute.
(v) A surety bond or insurance policy to fund the closure costs in the event the
70 Large-scale action and learning partnerships can support future best practice.
proponent does not;
A sustained commitment will be required from several stakeholders—govern-
(vi) Assignment of income flows (fixed rent instrument; Ore Sale Contract Cession; ments, international financial institutions, the private sector, and civil society—
Pledge on Export Returns; and to ensure this is achieved. Forward looking, governments can augment the find-
(vii) A corporate guarantee. ings from this report with country- and region-specific diagnoses of the drivers
to the reform of their respective coal sectors, their social protection needs, and
48 Source: Meredith Sassoon 2009, Financial Surety World Bank. 49
environmental risks. Collaboration is also necessary to implement the support
programs for laid-off workers, their families, and their communities focused on
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Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
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Managing Coal Mine Closure: Achieving a Just Transition for All
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End Notes
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
1 Coal is used here as a proxy to cover hard coal (including anthracite) and lignite (including brown coal).
2 The World Bank made eleven loans from 1996–2004, to support coal mine closures, as follows:
(i) Russian Federation Coal Sector Adjustment Loan (SECAL I); (ii) Russian Federation Coal Sector
Restructuring Implementation Assistance Project (IAP); (iii) Russian Federation Coal Sector Ad-
justment Loan (SECAL II); (iv) Ukraine Coal Pilot Project Loan; (v) Ukraine Coal Sector Adjustment
Loan (SECAL); (vi) Poland Hard Coal Sector Adjustment Loan (SECAL I); (vii) Poland Hard Coal
Sector Adjustment Loan (SECAL II); (viii) Poland Hard Coal Social Mitigation Loan; (ix) Poland
Hard Coal Mine Closure Loan; (x) Romania Mine Closure and Social Mitigation (MCSM) Loan; and
(xi) Romania Mine Closure, Environmental and Socio-economic Regeneration (MCESR) Loan. See
Bibliography for a list of documents.
3 The Just Transition for All concept builds on the International Trade Union Confederation’s (ITUC)
concept of a “Just Transition.” The ITUC’s definition is ‘A just transition brings together workers,
communities, employers, and government in social dialogue to drive the concrete plans, policies, and in-
vestments needed for a fast and fair transformation. It focuses on jobs, livelihoods, and ensuring that no
one is left behind as we race to reduce emissions, protect the climate, and advance social and economic
justice’. The “Just Transition for All” complements this concept by also envisioning the reform
of labor and social policy and institutions to ease the disruption faced by a wide range of people
directly and indirectly affected by the transition toward clean energy, as well as to support them
in their post-transition jobs and lives.
4 Global dialogues on meeting the Paris Climate Agreement’s targets have started to address the
“Just Transition” for coal sector workers within the context of phasing down coal consumption
and transforming energy systems. Institutions and organizations that advocate for reduced coal
use have also turned their attention to facilitating a Just Transition from coal with initiatives that
aim to facilitate workforce transitions, development of employment opportunities, and quality
jobs in relation to the implementation of climate change mitigation policies.
5 The Just Transition for All concept builds on the International Trade Union Confederation’s (ITUC)
concept of a “Just Transition.” The ITUC’s definition is ‘A just transition brings together workers,
communities, employers, and government in social dialogue to drive the concrete plans, policies, and in-
vestments needed for a fast and fair transformation. It focuses on jobs, livelihoods, and ensuring that no
one is left behind as we race to reduce emissions, protect the climate, and advance social and economic
justice’. The “Just Transition for All” complements this concept by also envisioning the reform
of labor and social policy and institutions to ease the disruption faced by a wide range of people
directly and indirectly affected by the transition toward clean energy, as well as to support them
in their post-transition jobs and lives.
6 Coal is used here as a proxy to cover hard coal and lignite.
7 The eleven loans made by World Bank were as follows: (i) Russian Federation Coal Sector Adjust-
ment Loan (SECAL I); (ii) Russian Federation Coal Sector Restructuring Implementation Assis-
tance Project (IAP); (iii) Russian Federation Coal Sector Adjustment Loan (SECAL II); (iv) Ukraine
Coal Pilot Project Loan; (v) Ukraine Coal Sector Adjustment Loan (SECAL); (vi) Poland Hard Coal
Sector Adjustment Loan (SECAL I); (vii) Poland Hard Coal Sector Adjustment Loan (SECAL II);
(viii) Poland Hard Coal Social Mitigation Loan; (ix) Poland Hard Coal Mine Closure Loan; (x) Ro-
mania Mine Closure and Social Mitigation (MCSM) Loan; and (xi) Romania Mine Closure, Envi-
56 57
ronmental and Socio-economic Regeneration (MCESR) Loan. tainable Development (IISD), Manitoba, Canada. May 2018.
8 The World Bank made eleven loans for coal sector adjustment as follows: (i) Russian Federation 19 Interview with Brandon Dennison, CEO of Coalfield Development Corporation, 25th April 2018
Coal Sector Adjustment Loan (SECAL I); (ii) Russian Federation Coal Sector Restructuring Imple- noted that out-migration depends on social networks in destination areas, which can be very im-
Managing Coal Mine Closure: Achieving a Just Transition for All
Managing Coal Mine Closure: Achieving a Just Transition for All
mentation Assistance Project (IAP); (iii) Russian Federation Coal Sector Adjustment Loan (SECAL portant for providing a basis of security for the move to another location.
II); (iv) Ukraine Coal Pilot Project Loan; (v) Ukraine Coal Sector Adjustment Loan (SECAL); (vi)
20 These figures do not include job losses in the subsidiary businesses linked to the coal industry.
Poland Hard Coal Sector Adjustment Loan (SECAL I); (vii) Poland Hard Coal Sector Adjustment
Loan (SECAL II); (viii) Poland Hard Coal Social Mitigation Loan; (ix) Poland Hard Coal Mine Clo- 21 Exact figures for coal mining employment in China varies by source. The Annual Mining Report
sure Loan; (x) Romania Mine Closure and Social Mitigation (MCSM) Loan; and (xi) Romania Mine 2018 submitted by China to the Asia-Pacific Economic (APEC) 12th Mining Task Force Meeting,
Closure, Environmental and Socio-economic Regeneration (MCESR) Loan. Port Moresby, Papua New Guinea 21-22 August 2018, reported 2.5328 million employees in energy
minerals in 2017.w
9 The case studies presented in this report are taken largely from a companion draft EEX report
“Coal Sector Adjustment: Case Studies of Coal Mine Closure in Different Regions of the World,” 22 The New Policies scenario is IEA’s central scenario that is based on policies that are in place and
World Bank, forthcoming. announced.
10 Germany remains a major producer of lignite and brown coal. 23 Energy intensity is the ratio of primary energy supply to gross domestic product. Thus, a decrease
in energy intensity implies that the economy is more energy efficient.
11 For this paper, “coal” includes anthracite and “lignite” includes brown coal. Unless otherwise
noted, all units, including for the United States, are in metric tons, with one metric ton equal to 24 Heat pumps and air conditioning units are roughly twice as efficient compared to those available 15
1,000 kg and to 2,204.6 pounds. years ago. Coupled with improved insulated buildings, energy efficiency has improved considerably.
12 See: https://www.bls.gov/oes/current/naics4_212100.htm (Accessed 27th April 2018). These 25 Source: “World Energy Balances (2017 Edition),” the International Energy Agency (IEA).
numbers include all facets of a coal mine company: executives, management, underground and 26 International Gas Union (IGU) estimates that global gas prices, at $3.35 per million British Ther-
surface miners, engineers, health and safety, etc. mal Units (MMBTU) were the lowest ever recorded in their surveys that started in 2005.
13 See: https://www.bls.gov/oes/current/oes518013.htm (Accessed 27th April 2018). 27 The IGU states that Liquefied Natural Gas (LNG) trade has reached record levels for the last three
14 Indeed, laid-off mining workers likely earn higher wages with more benefits as compared to al- years in a row.
ternative low-skilled jobs. This is likely due to several factors. First, miners are paid a “compen- 28 Lazard 2017 LCOE Report available at https://www.lazard.com/perspective/levelized-cost-of-en-
sating wage differential,” namely higher pay in order to compensate for the dangerous and phys- ergy-2017.
ically strenuous labor required in coal mining. Second, years of strong unions will boost mining
29 Shale gas production in the United States increased rapidly from 2 trillion cubic feet (TCF) in 2007
wages more than in less organized low-skilled industries. Third, laid-off mining workers may
to 17 TCF in 2016.
enjoy wage increases due to tenure, while the offered wage for a new worker in an alternative
industry will not recognize tenure in the mining sector. Fourth, and more relevant for developed 30 Coal-fired power in the United States was responsible for about half of all electricity production
economies, is the scarcity of demand for low-skilled workers, which pushes down offered wages before shale gas became available. In 2017 gas-fired power plants edged out coal-fired produc-
in jobs that former miners may be suitable for. tion for the first time.
15 Consider for instance the International Trade Union Confederation’s concept of a “Just Transi- 31 Careful planning is needed to maintain reliable energy supply at low cost, without which support
tion,”—‘A just transition brings together workers, communities, employers, and government in social for the transition would be jeopardized. The United Kingdom undertook detailed planning during
dialogue to drive the concrete plans, policies, and investments needed for a fast and fair transformation. the 1980s to facilitate a transition to support increased use of low-cost natural gas from the North
It focuses on jobs, livelihoods, and ensuring that no one is left behind as we race to reduce emissions, Sea. This process included both the physical aspects of energy supply as well as the policies to
protect the climate, and advance social and economic justice’. support unbundling and privatization. Germany introduced policies in 2004 to support increased
use of wind and solar power, using feed-in tariffs to help address environmental externalities
16 Global dialogues on meeting the Paris Climate Agreement’s targets have started to address the
initially, followed by auctions once the cost of renewable energy options had decreased. Lastly,
“Just Transition” for coal sector workers within the context of phasing down coal consumption
the states of California and South Australia found that rapid deployment of solar and wind created
and transforming energy systems. Institutions and organizations that advocate for reduced coal
problems for system reliability and introduced a market for energy storage that successfully ad-
use have also turned their attention to facilitating a Just Transition from coal with initiatives that
dressed this issue.
aim to facilitate workforce transitions, and develop employment opportunities and quality jobs in
relation to the implementation of climate change mitigation policies. 32 Later renamed “Agentia Zonelor Miniere”—(AZM).
17 This report recognizes that coal mine closure intersects with the broader issue of economic diver- 33 For more information on Coalfield Development Corporation see: http://coalfield-development.
sification and rejuvenation—a diverse research area beyond the narrower scope of this report on org/ (Accessed 27th April, 2018).
short-to-medium issues on closure.
34 For more information see: http://www.wismut.de/en/ (Accessed 10th June, 2018).
58 18 Vriens, Lauren. 2018. “The End of Coal: Alberta’s coal phase-out.” International Institute for Sus- 59
Managing Coal Mine Closure
Achieving a Just Transition for All
64