China is the world’s largest producer and consumer of coal. The surge in energy demand after China joined the World Trade Organization (WTO) in 2001 led to a decade-long “golden era” for the coal industry, (according to data published in the China Economic Information Center). However, the rapid growth of coal consumption soon resulted in serious environmental pollution and a crisis of overcapacity. After 10 years of huge efforts to build out renewable energies and fight air pollution, more than 10,000 small and medium-sized coal mines were closed. Most of these were located in north-east, south-west or central China, so that today more than 80% of coal production is concentrated in four north-western provinces: Shanxi, Shaanxi, Inner Mongolia, and Xinjiang. By the end of 2023, there were still 2.6 million coal workers. Given that China aims to peak carbon emissions by 2030 and achieve carbon neutrality by 2060, achieving a just transition is therefore a tremendous challenge.

In a recent study, we explored the experiences of two coal-mining cities in China—Wuhai in Inner Mongolia, and Tongchuan in Shaanxi Province—to gain insights into the realities of a just transition over the past decade.[1] Although past policies in China’s coal regions were not primarily focused on decarbonisation, they still offer valuable lessons for how China could approach this issue in the future. Our research involved interviewing local stakeholders (including government officials, private companies, coal workers, and residents), along with conducting an extensive analysis to provide a comprehensive view of the economic, energy, and environmental transformations in these cities.

Strengths of China’s Just Transition Framework

The two cities’ experience indicates that “just transition,” a concept that originated in the U.S. in the 1980s, has been a key consideration for the central government in its policy-making and implementation of the coal transition. For example, during the structural reform to reduce the overcapacity issue in the coal-mining and steel industry from 2016 to 2020, the central government allocated RMB 100 billion (approximately USD 14 billion) to provide benefits and compensation to workers whose employment was at risk. Local governments were asked to provide similar kinds of subsidies. These programmes were customised to address workers’ varying needs based on their age, skills, and interests. For example, in Wuhai, people due to reach retirement age within 5 years were paid at least 80% of their salary and enjoyed all their usual benefits until they reached retirement age, and people expected to retire in more than 5 years but within 10 years were paid the minimum wage and enjoyed part of their usual benefits until retirement age. At the other end of the age spectrum, younger people who became unemployed received training and help to find new job opportunities, and businesses were provided with incentives to hire unemployed coal workers. The government also created “public interest” job opportunities that do not require highly specialised skills or qualifications, such street sweepers or gate guards, for those finding it difficult to get a new job. As a result, of the 13,500 coal workers whose jobs were at risk, most were able to keep their livelihoods, avoiding any social instability.

Given that the transition of the industrial structure away from coal is complex and lengthy, the central government should implement region-specific schedules that provide coal-dependent areas with the time needed to develop alternative industries and address unemployment.

China’s approach to just transition extends beyond supporting individual workers. A strong emphasis has been placed on creating policies for diversifying local economies to encourage growth in non-coal sectors and to foster job opportunities. For example, in the 2010s, Wuhai identified the coke-chemical and chlor-alkali industries as new sectors in which it would have a competitive advantage, using the waste products of the coking process as raw materials, the cheap electricity generated from coal, and the abundant reserves of limestone in Wuhai as feedstock. After becoming one of China’s main production bases for these two industries, Wuhai continued to extend and upgrade its chemical industries, thanks to continuous industrial policies over almost fifteen years. As a result, Wuhai’s chemical industry now provides more jobs than traditional coal mining and has made Wuhai an attractive location for new companies and industries to settle.

Challenges in Achieving a Just Transition in China’s Coal Regions

Despite the country’s progress, our case studies of Wuhai and Tongchuan show that transforming the industrial structure to include non-coal industries on a scale that can replace coal is extremely challenging, takes a long time, and requires continuous attention. During the transition, coal cities struggle with selecting new industries, overcoming talent shortages, coping with infrastructure deficiencies, and fierce competition from neighbouring cities, all of which can hinder the development of alternative industries. Attracting companies from new industries and retaining highly educated talent in coal cities remains difficult, despite offering strong incentives.

In addition, in both cities, coal remains the dominant contributor to the economy’s gross domestic product, and the industrial structure still relies heavily on energy-consuming heavy industry. The energy intensity—the energy required to produce one unit of economic output—of both cities therefore dramatically exceeds that of the province and the country. Also, in the face of stricter global standards for carbon emissions, there is little optimism about the international competitiveness of coal chemical products. Furthermore, the highly energy-consuming industries in Tongchuan, such as aluminium and ceramic production, are facing tighter energy and carbon constraints in line with China’s carbon reduction goals.

Policy Recommendations for a Just Transition

Drawing from the experiences of Wuhai and Tongchuan, we propose several key recommendations for policy-makers to ensure a just transition in coal regions as China and countries in similar situations strive to achieve their decarbonisation goals:

• Tailor timelines and approaches: Given that the transition of the industrial structure away from coal is complex and lengthy, the central government should implement region-specific schedules that provide coal-dependent areas with the time needed to develop alternative industries and address unemployment. This tailored approach will allow for flexibility without disrupting the broader decarbonisation timeline.
• Diversify financial support: So far, China has mostly relied on direct financial allocation from the government’s budget to fund just transition policies in coal-mining regions. This will not be enough to meet China’s ambitious carbon-reduction goals. The government should therefore also leverage private capital and offer indirect incentives (such as investment tax incentives, infrastructure development, and loan guarantees) to stimulate the growth of new industries. National and provincial governments should also require coal companies to contribute to transition funds, ensuring that resources are made available for a just transition in the future.
• Encourage comprehensive and strategic intergovernmental collaboration: To help coal cities overcome the challenges they face (such as shortfalls in talent and advanced technologies, and head-to-head competition from neighbouring cities), the central and provincial governments should offer comprehensive strategic coordination and policy support to local governments. Such policies can include better integrating coal cities into regional economic development strategies, coordinating the roles of different coal cities, and providing the technologies and talent to jump-start new industries.
• Provide comprehensive social support: Robust social support programmes are essential for reducing hardship and social disruption in coal regions. These programmes should include retraining initiatives, social safety nets, and community services—not only for coal workers but also for their families and communities.

[1] There is currently no unified framework or definition for just transition. For clarity, in this article and in the study, we refer to “just transition” as it is defined in the Paris Agreement: “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.”

Yingxia Yang is a former researcher with the Environment and Natural Resources Programme at Harvard Kennedy School_’s Belfer Center for Science and International Affairs. Wenjuan Dong is an associate fellow of the Institute of Climate Change and Sustainable Development at Tsinghua University. Jiejie Hui was an Edward Mason Fellow at Harvard Kennedy School.