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The importance of focusing on jobs and fairness in clean energy transitions

The IEA’s landmark Roadmap to Net Zero by 2050 highlights the monumental task of placing the global economy on a path to net-zero emissions by mid-century. The transition to a clean energy system affects every aspect of society, with uneven impacts across sectors, communities, regions and countries.

Employment is a top concern for policy makers. Where will jobs be gained, and where will they be lost? And how will this affect the wider economies and communities these jobs support?

The transition towards net-zero emissions will lead to an overall increase in energy sector jobs. In the pathway set out in the IEA’s Net-Zero Emissions by 2050 (NZE) Scenario, an estimated 14 million new jobs are generated in energy supply by 2030. Over the same period, fossil fuel production could lose 5 million positions, resulting in a net gain of 9 million in this pathway. 

Global employment in energy supply in the NZE Scenario, 2019-2030

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In addition, clean energy industries – such as efficiency, automotive and construction – would require a further 16 million workers. This means a total of more than 30 million jobs could be created in clean energy, efficiency and low-emissions technologies by 2030. These include freshly created jobs, for example due to efficiency upgrades. They also include new roles for existing workers in construction, in the manufacturing of emissions-reducing products like EVs and hyper-efficient appliances, and in innovative technologies such as hydrogen. 

Additional workers in the NZE Scenario by occupation and skill level, 2020-2030

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Additional workers in clean energy and related sectors in the NZE Scenario, by sector and job type, 2020-2030

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However, new jobs will not always be in the same places or sectors where employment is lost (for example, see this World Bank report about coal mines in the US, Europe and China). Job losses would be most pronounced in communities that are heavily dependent on fossil energy production, especially coal. Even where the number of direct energy jobs lost is small, the impact on the local economy can be significant.

With appropriate long-term planning, many dislocated workers can readily find work in related sectors, minimising near-term effects from dislocations.

Many workers in traditional energy industries have experience pertinent to clean energy transitions. For example, some oil and gas workers have skills necessary for offshore wind, carbon capture utilisation and storage (CCUS), and low-carbon gas production and transport. And coal miners have skills needed to mine critical minerals – such as lithium, copper and cobalt – which overall see a seven-fold growth in demand by 2050 in the NZE Scenario. Additionally, environmental restoration of closed mines or wells can help maintain vital jobs within communities for a number of years after closure.

While managing the impacts of labour dislocation is rightly the focus for much energy transition planning, enabling companies to find qualified workers for new positions is also of paramount concern. The energy sector already faces difficulty hiring qualified talent to keep pace with clean energy’s uptick. If solar and wind installations reach four times today’s annual level in 2030, as called for in the NZE Scenario, these labour constraints could impede the world’s ability to accelerate the shift to a low-carbon future.

Perhaps most important, these new jobs could address persistent challenges around workplace safety, equity and inclusion. Employment creation can be targeted in key geographical areas and communities that are impacted by the decline of local industries (even those beyond energy) or that are historically underdeveloped or disadvantaged. Government assistance can be linked to criteria focused on equity and inclusion, and on ensuring the jobs are high quality and well compensated – while still maintaining the competitiveness of clean energy. Making sure the energy world benefits all people can help advance human and economic development goals, especially in emerging and developing economies, and is critical for increasing public acceptance of energy transitions.

With these considerations in mind, IEA Executive Director Fatih Birol convened the Global Commission on People-Centred Clean Energy Transitions 1 earlier this year under the leadership of Prime Minister Mette Frederiksen of Denmark, and chaired by Dan Jørgensen, Minister of Climate, Energy and Utilities of Denmark. Bringing together 30 global leaders in energy, climate and labour, the Global Commission is developing a set of recommendations for how energy policy and planning can best put people at the heart of the transformation of our energy systems.2

A key pillar of this work is understanding and managing shifts in energy employment that are already underway in many regions around the world, bringing into focus lessons that can be shared among policy makers.

First, it’s important to recognise that practices for putting people at the heart of clean energy transitions already exist, most notably in the Guidelines for a Just Transition Towards Environmentally Sustainable Economies and Societies for All published by the International Labour Organisation (ILO) in 2015. The guidelines, which are referenced in the Paris Agreement, make recommendations for governments and social partners covering worker rights, occupational safety and health, social protection, skills development, active labour market policies and social dialogue.

A number of countries have already put some of these tenets into practice, particularly in the coal sector, which is often the first to be impacted by clean energy transitions. Most fossil fuel jobs are geographically concentrated and are significantly intertwined with the local economy. While the energy sector accounts for only 1.2% of global employment, it represent a high percentage of total earnings in many communities. In Saudi Arabia, only 4.8% of the labour force works directly in energy-related industries, but nearly 50% of GDP is derived from fossil fuels.

Accordingly, many national and sub-national governments have deployed comprehensive transition plans, with substantial government support for revitalising local economies that combines investment and education strategies. Key lessons from these approaches include the importance of long-term engagement, often over decades, and the value of strong social dialogue across national and local governments, businesses, unions and other key stakeholders.

Another key finding is that detailed energy employment data is essential for informed decision-making. Governments facing transitions can take steps now to adopt more in-depth surveying approaches for energy industry employment, such as those employed in the US Energy & Employment Report, which helps governments understand whether subsectors are in decline or in ascension, as well as providing insights on skills gaps, hiring needs and demographics. Many governments or local organisations are already implementing or considering more granular reporting, including the United Kingdom, Canada and Australia. While it requires greater efforts, this data can help governments design better programmes to attract new resources and develop workforces.

The Global Commission on People-Centred Clean Energy Transitions is currently examining the experiences of a wide range of communities from around the world in order to develop actionable recommendations for designing more inclusive transition plans and policies. While the nature of transitions will vary across countries and sectors, the Global Commission is beginning to crystallise broad principles that will inform the IEA’s work and the Commission’s input for COP26.

From the Global Commission’s discussions and the IEA’s exchanges with stakeholders around the world, it’s clear that fostering employment and protecting communities can be a core design element of clean energy transition plans. It aligns policies with countries’ existing strengths and skill sets to maximise opportunities for new, good quality jobs.

Long-term programmes that focus on both workers and communities, usually with significant financial investment, are essential to address negative employment effects. Social dialogue among all stakeholders, including employers, workers, communities, international organisations and governments can facilitate better outcomes.

Finally, there is a need to quantify the potential for new jobs and identify needed skills to help governments understand future employment opportunities and plan for education and training.

To develop these themes, the IEA is organising two important events this week. The first is a public webinar on The Voice of Labour in Our Inclusive Energy Future, which will take place on 7 July at 14:00 (CEST Paris time) and be livestreamed on the IEA website. This high-level webinar will bring together the perspectives of governments and labour unions to share best practices and insights regarding the important role of collective decision-making to ensure that clean energy transitions also deliver job opportunities, decent work, regional redevelopment and social protection.

The second event is a technical workshop on Better Data for More Inclusive Policies to discuss the importance of granular accounting and modelling of energy jobs. The workshop will explore strategies and approaches to integrating disaggregated employment and geographic data in planning energy transitions at the country level.

Lastly, the IEA has responded to governments’ demands for deeper insights into energy employment following the analysis in the Special Report on Sustainable Recovery, and is now expanding its analytical capacity on energy employment, in partnership with Enel Foundation. Our work will help policy makers understand how employment is likely to shift under different clean energy transition scenarios, providing detailed information on regional job dynamics, skills requirements and job quality. This builds on work pioneered by the ILO’s Green Jobs programme.

These efforts represent just the beginning of IEA’s expanding work on the interplay between society and energy transformations. Affordability, economic development, fairness, better jobs and economic prosperity are all critical elements to a successful transition towards net-zero emissions. Ignoring these critical considerations would be as damaging as disregarding obstacles posed by finance, policy effectiveness and consumer acceptability.

Making the transition work for people is vital for consistent, substantive progress in decarbonising global energy systems. It also offers an opportunity for economies to reinvent themselves, improve their labour force and advance human development. Capturing these benefits is possible, indeed essential; and the IEA is committed to working with partners to develop solutions.

As emphasised by the IEA Executive Director, clean energy transitions are, at heart, for people and about people. Acknowledging the challenge of how to mitigate any negative employment impacts is not to divert or delay the transition to a clean energy future, but to ensure we strategically design and deliver it at the pace required in a way that benefits everyone.

References
  1. The Global Commission for People-centred Transitions is convened by Dr. Fatih Birol, the IEA Executive Director, led by Danish Prime Minister Mette Frederiksen of Denmark, chaired by Dan Jørgensen, Minister for Climate, Energy and Utilities, Denmark, co-chaired by Sophie Gladima, Minister for Petroleum and Energy, Senegal, and is comprised of energy and climate ministers and other leading international figures.

  2. The IEA is currently inviting people around the world to take part in a survey to share their input on ways government can make their clean energy policies more inclusive and equitable in order to maximise the benefits for the public. The contributions from the survey will help to inform the work of the Global Commission for People-Centred Clean Energy Transitions. Take the survey here.