Just Transition away from Coal: A Priori Evidence from Turkey

Talk by Sinem Ayhan (IOS) as part of the Research Seminar Series of the IOS Economics Department.

Amid growing global efforts to reduce fossil fuel emissions and mitigate climate change, many coal-reliant nations are setting coal phase-out targets. While a swift transition away from coal is essential for achieving climate goals, it also presents significant welfare challenges, particularly concerning employment and income losses in the coal sector. Understanding the extent of these economic impacts on individuals directly affected by the transition is critical to designing policy measures that support a "just transition" and ensuring social and political feasibility. This paper contributes to this discussion by presenting evidence on the costs of job displacement in Turkey, a leading coal producer ranked among the world’s top 20 and the third-largest builder of new coal-fired power plants, after China and India. Utilizing employer-employee data from administrative records, we estimate earnings losses from job displacement using a difference-in-differences approach with fixed effects and propensity score matching. Our findings reveal an immediate drop in real monthly wages of up to 44% and daily wages by approximately 13% following displacement. While income losses diminish after the first year, they rarely recover to pre-displacement levels.