Green jobs for green growth

The coming transition to a green economy offers exciting economic opportunities.  But governments, investors and employers will need to make bold decisions to fully capitalize on this potential.

The urgency of the climate challenge facing the world was made clear by the new chair of the Intergovernmental Panel on Climate Change (IPCC), Professor Jim Skea.

In October 2023, he told The Guardian newspaper in the UK:

“The longer you put off action, the greater will be the cumulative CO₂ emissions that have gone into the atmosphere, and therefore the higher the level of the warming.  The situation we are in is urgent, we are in dire circumstances.  But we can also do something about it if we choose to do so.”[1]

Professor Skea’s comments make clear that if the world is to meet the challenge posed by climate change, major transformation and concerted action will be necessary.  To keep global temperatures below dangerous levels, a lot will have to happen – and fast.

The green transition

Switching to renewable energy, developing new carbon capture technologies and transforming our living environments will all form an essential part of the mix.  A report in 2020 from McKinsey found that “achieving net zero would mean a fundamental transformation of the world economy”.  The transition, it said, would require “significant changes” to the systems that produce global emissions: power, industry, mobility, buildings, agriculture, forestry and other land use, and waste.[2]

McKinsey’s modeling of a transition to net zero by 2050 found that by that year, oil and gas production volumes would be 55% and 70% lower respectively than current levels, for example, while coal production for energy use would almost cease.  Meanwhile, steel production would increase by about 10% – and almost all of this would be low-emissions steel, which currently comprises only a quarter of production.

Impact on employment

Trends like this would have major implications for the nature of the global economy.  The report says the transition to net zero would involve an increase in annual capital spending globally of about US$ 3.5 trillion a year on new assets and decarbonizing existing assets.  Naturally, there would also be a significant impact on employment, with forecasts suggesting there could be a net gain of millions more jobs globally as a result of the transition to net zero.  This would reflect the broad changes in the economy, with more jobs in areas like renewable energy, and fewer, for example, in industries relating to fossil fuels.

Underlining both the scale of the required changes and the positive opportunities they bring, at the COP28 climate conference in Dubai last December, the UN Climate Change Executive Secretary Simon Stiell said in his remarks to journalists, “The highest climate ambition means more jobs, stronger economies, stronger economic growth, less pollution, better health.  Much more resilience, protecting people in every country from the climate wolves at our doors.”[3]

Millions more jobs expected

The International Labour Organization – an agency of the United Nations – predicts the transition to a green economy, keeping global warming levels below 2 degrees centigrade, would lead to a net increase in jobs by 2030.  A major report[4] from the ILO forecasts that while the transition would lead to the loss of 6 million jobs, it would also create 24 million – leading to a net increase of 18 million jobs.

The ILO says this will be a result of “the adoption of sustainable practices, including changes in the energy mix, the projected growth in the use of electric vehicles, and increases in energy efficiency in existing and future buildings”.

Overall, the ILO’s analysis suggests that the transition to a green economy will bring with it plenty of opportunities for growth.  Job creation in the renewable energy sector, for example, is expected to be higher by about 11% than in a ‘business as usual scenario’.  The net job increase, the organization says, would be driven by the higher labour demand of renewable energy sources compared to fossil fuels, as well as employment in the wider value chain.  For example, its analysis suggests that in addition to direct employment in green industries, over 2 million jobs would be created in the manufacture of machinery needed to produce electric vehicles and generate electricity from renewables.

The organization’s analysis included 163 industries across 44 countries and five regions.  It found that the green transition would bring with it 6.5 million more jobs in construction, and 2.5 million more in the manufacture of electrical machinery and apparatus.  In percentage terms, the top three industries predicted to have the largest job demand growth all concern the production of electricity: by solar thermal energy (3.0 per cent), geothermal energy (0.4 per cent), and wind (0.4 per cent).

But not everyone would gain from the changes.

As the ILO points out, the expected net job creation “masks an important restructuring of the economy, with employment losses expected in the fossil fuel sectors and related industries, and in regions that are heavily dependent thereon”.

These structural changes to the global economy would have a significantly different impact in different parts of the world, says the ILO.  While there would be a net increase in employment in the Americas, Asia and the Pacific (3,14 and 12 million jobs respectively), the Middle East and Africa could see net job losses, unless action is taken to prepare the workforce for the new economy.

Green skills gap

Overall, the transition to a green economy presents a globally transformative opportunity.  But the world will need to overcome serious challenges in order to seize it.

“The transition to renewable energy potentially gives rise to more job opportunities, but we need to re-train and upskill people and this doesn’t happen automatically,” said Olga Strietska-Ilina, the International Labour Organization’s area lead on skills strategy for future labour markets.

Firstly, with green industries set to expand significantly, there is a growing need for people to fill roles within them.  But this isn’t necessarily a straightforward matter.  A report last year from the International Energy Agency (IEA)[5] found the decarbonization of the global energy sector is already well under way, with clean energy employing 50% of total energy workers.  And energy employment is continuing to grow, says the report.

Total energy employment in 2021 was up by 1.3 million from 2019 and was set to increase by a further 6 percentage points in 2022, the IEA said.  Virtually all of the growth in employment was in clean energy, which accounts for an increasing proportion of energy employment as new manufacturing facilities for solar technology and electric vehicles get up and running.

But there are concerns within green energy industries about being able to recruit enough workers with the skills needed for emerging new roles.  As the IEA points out, the energy sector requires a substantial proportion of skilled workers.  Around 45% of energy workers are in high-skilled occupations, compared to a quarter in the economy as a whole.  And the share is even higher for the research and development roles that are set to grow rapidly in the coming years to drive new innovations.

The IEA said that many of the energy firms it interviewed faced a very competitive environment for hiring candidates with the right skills.  This was particularly the case for project managers, technical roles and jobs involving science, technology, engineering and mathematics (STEM).

It isn’t just skills within the energy sector itself that are needed, but also those in adjacent areas that will support the green transition, such as in infrastructure, transport, planning and urban environments.

Another IEA report[6], from October 2023, points out that construction worker shortages are already threatening the pace of clean energy installations in dozens of markets worldwide and that it is also proving difficult to recruit enough people in the trades (such as electricians and plumbers) and manufacturing roles needed to meet decarbonization goals.

Similarly, LinkedIn’s Global Green Skills report[7] in 2023 warned “the increase in demand for green skills is outpacing the increase in supply”.  It found that between 2022 and 2023, the proportion of “green talent” – workers with a green job or listing at least one green skill on their profile – rose by a median of 12.3% across the 48 countries examined.  Meanwhile, the share of job postings on the network requiring at least one green skill rose by 22.4%.  While there are some indications of movement in the right direction, says the report, “we are still dangerously far from the scale of change that’s required”.

Developing talent

What can governments and industries do to meet the challenges of transitioning to a green economy?  Given the skills gaps that have been identified and are already affecting some parts of the transition, supporting workers to develop the necessary skills would be a key element in any successful decarbonization drive.

According to the United Nations Industrial Development Organization (UNIDO)[8], engineering and technical skills are among those that are especially important for green jobs, as well as capacities in science, operation management, and monitoring.  The IEA’s World Energy Employment report[9] argues that higher and further education can play an important part in developing important skillsets like these, saying that strong links between employers and universities or vocational training programmes, as well as research grants for PhDs, internships or apprenticeships, can help to fill talent pipelines.

Employers also pointed to a growing need to revamp teaching curricula of degrees with the highest demand, such as engineering, and would welcome opportunities to work with universities to shape new curricula.

Such initiatives are taking place in many places around the world.

In London, for example, 12 colleges, 11 local authorities and more than 30 employers – including major construction firms – are working together to promote green skills training through the Local London Green Jobs and Skills Partnership.

The initiative includes “green laboratories” at eight college sites which offer training in important areas such as retrofitting and computer aided design.

At COP28 in Dubai, the Ban Ki-moon Centre for Global Citizens launched an online course designed to help young people access green employment opportunities. The “Your Future in Green Jobs” programme, supported by Dubai Cares, empowers youth to “align their passions, interests, and skills with meaningful green careers that address the climate crisis head-on.”[10]

Global firms in other sectors are announcing similar skills-building initiatives, such as EY and Microsoft’s Green Skills Passport[11] – a free 10-hour online program that will allow people aged 16 and over to learn about topics such as sustainability and entrepreneurship.

The Jameel family is also making efforts to improve and modernize global education – whether that’s by backing innovations in teaching and related technology, or through supporting scholarship and mentoring initiatives.

Since 1994, for example, we’ve helped over 200 young people from some 27 countries achieve their potential by studying at the Massachusetts Institute of Technology in the US, through our Jameel-Toyota scholarship program.  Many alumni of this scheme go on to successful careers in business and academia, where they can contribute to building a sustainable future.  In addition, Fotowatio Renewable Ventures (FRV) – part of Abdul Latif Jameel Energy – runs a scholarship program at Spain’s Instituto de Empresa (IE) university. The initiative supports students from locations close to FRV’s sustainable developments to study at IE, covering all training and education costs across a four-year course.

Such initiatives are most effective when governments can put in place the overarching policies to drive and shape the development of the necessary skills, but this is an area where there is still much room for improvement.  In 2015, an EU report[12] stated that a “lack of coordination between skills and environment policies” was preventing the implementation of ambitious green growth strategies, and highlighted how policy institutions can provide a framework that supports green talent and competences throughout education and the labour market.

One encouraging recent initiative addressing this need is the EU’s European Classification of Occupations, Skills and Competences (ESCO) system, published in 2022[13].  Available in 27 languages, ESCO defines skills and areas of knowledge – such as how to carry out energy audits or measure sustainability – which are essential to the green economy.  The aim is to support job mobility by providing a “common language” that can be used to discuss relevant occupations and the skills they require.

Uneven disruption

It’s clear that even in places and sectors where the green transition would drive growth, there remain serious challenges.  And there could be even bigger hurdles for those set to lose out in the immediate future.

McKinsey’s report on the net zero transition, for example, says there could be about nine million fewer direct jobs within the fossil fuel extraction and production sector by 2050.[14]

That would mean a lot of people looking for new employment.

And the impact of changes like this would not fall evenly, but rather would be focused on specific geographic areas where those industries are currently concentrated.  For example, McKinsey says that in 44 US counties, more than 10% of jobs are currently in industries set to decline, such as fossil fuel extraction and refining, fossil fuel-based power, and car manufacturing. Oil and gas extraction accounts for 41% of employment in Upton, Texas, while 31% of work in Clay, Illinois, is in automotive manufacturing.  The report adds that in Germany, Japan, Mexico, and South Korea, automotive production provides a “relatively large share” of employment.

Areas like these are set to face major disruption in the coming years.

At a global level, these kinds of issues are more likely to emerge in the countries the least equipped to manage them.

McKinsey says that the countries facing the highest levels of risk in the net zero transition are those with with relatively lower GDP per capita, including Bangladesh, India, and Kenya.

These tend to have more jobs, capital and GDP in the high-emission sectors that will face most disruption under the transition.  Countries that produce high levels of fossil fuels will also face big challenges.  But overall, wealthier countries tend to face lower risks overall due to their service-based economies.  This situation, McKinsey points out, could lead to growing inequity concerns as the less-developed countries that have contributed least to emissions find themselves paying a bigger price to address climate change.

A ‘just transition’?

Such concerns have led to growing momentum developing behind the concept of a “just transition”.  The ILO, which recently confirmed its strong support for the concept[15], defines this as “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”.  It gives the example of a factory switching from fossil fuels to solar power, which would involve retraining some technicians and making others redundant.  A just transition in this instance, says the ILO, would require careful consultation involving employers and workers in order to find appropriate solutions.  Without such approaches, the organization warns that economic changes could increase social inequality and worker disillusionment, leading to strikes or civil unrest, with damaging effects on businesses and economies.

The ILO also says that while all involved have some responsibility, just transition efforts will typically be led by governments.  One relevant example is the European Union’s €19.2bn Just Transition Fund[16], which supports regions and communities most affected by the green transition.  Projects it can be used for include those that involve reskilling, environmental rehabilitation and research and innovation.  Spain, for example, will receive €869m through the program to support schemes such as an innovation hub for offshore renewable energy in A Coruña and an initiative using microalgae to produce renewable fuels in Cádiz[17].

But despite such efforts, many remain unconvinced about the desirability of a green transition.  A report this year from the US-based think tank RMI points out that despite positive forecasts, “green jobs have a believability problem”[18].  The report argues that simply predicting more jobs is an insufficient metric and that it is “not credible to imply that green jobs can directly substitute for potential or existing fossil-based jobs”.

RMI points out that many green jobs are lower quality than those they are expected to replace, in terms of remuneration, security or safety – and may also require workers to relocate.  In China, for example, the areas suitable for clean energy projects such as solar and wind power facilities are in very different places to the current locations of coal mines.  Across the world, the combined impact of factors like these has the potential to devastate entire communities and economies through effects such as lower wages, outmigration and reduced tax revenues.

In addition, the finance required to support the growth of green industries, particularly in developing countries, is often lacking.  RMI’s report says the scale of investment needed from wealthier countries into the global south is currently “not close to happening”. Rich countries, says the report, are failing to meet a commitment of directing US$ 100 billion a year in climate finance to developing nations by 2025, a promise first made at the 2009 Copenhagen climate summit and re-stated at every COP since, while from 2017 to 2019 G20 governments spent US$ 290 billion a year subsidizing fossil fuels.

Taking a wider view

For such reasons, optimistic claims about the benefits of going green can struggle to be heard in the places where solutions are most needed.  Many African political leaders are said to be skeptical about the numbers of green jobs forecast[19], while the president of the United Mine Workers of America recently argued it was impossible to “point to one ‘just transition’ in this country” over the past 30 years[20].

In this light, RMI argues for a broader framing that considers the issue in a wider context.  Its report argues that as well as climate challenges, the world also faces risks from other socioeconomic megatrends, such as international migration and technological innovation – as well as crises including the COVID pandemic and the Russia-Ukraine conflict.  McKinsey, for instance, says that by 2050, trends such as automation and remote working are likely to have an even bigger impact on employment than the net-zero transition[21].

Given these wider challenges, RMI highlights growing interest in the idea of “regenerative capitalism”, which takes account of human and natural capital, as well as the more conventional financial and manufactured categories.  This could lead to new understandings and new opportunities.  For example, the impact of climate change itself could have an even worse impact on local communities than the loss of fossil-fuel related jobs – by affecting people’s living environments, livelihoods and health.  Acknowledging this could lead to areas developing projects, such as those restoring degraded environments or helping adapt to climate change, which could build more resilient and sustainable communities while also creating new local jobs.

In the US alone, for example, there are more than 5,000 abandoned coal mines, estimated to be responsible for more than US$ 18 billion worth of environmental and health damage in the surrounding areas.  Remediating sites such as these could provide jobs requiring skills similar to those needed to work in the original facilities, while enhancing local environments and paving the way for new projects[22].

Whether or not we follow this new vision for a great transformation of the world economy, it is clear that the required green transition, combined with tackling other global challenges, will call for imaginative solutions and new ways of thinking.  Some of the areas most vulnerable to climate change and other shocks, such as small island nations, are now starting to make the ambitious decisions that the situation requires.

The Maldives, for example, has recently suffered heavily from the impact of the pandemic and rising fuel prices.  The nation is now investing in a range of projects – including restoring natural environments and improving early warning systems, as well as scaling up renewable energy capacity – in order to boost its resilience[23].

The country has declared an ambitious goal of reaching net zero by 2030.  These developments have been made possible by more than US$ 140 million in private financing – which was itself enabled by a risk mitigation framework designed with the World Bank (the bank is also contributing US$ 12.4 million itself).

This is precisely the kind of partnership – combining local initiative, private investment, and forward-thinking policy – that offers a viable model for what is needed on a global scale if the world is to fully capitalize on the opportunities of the green transition.

[1]https://www.theguardian.com/environment/2023/oct/02/slow-route-to-net-zero-will-worsen-global-climate-crisis-ipcc-chief-warns

[2] https://www.mckinsey.com/capabilities/sustainability/our-insights/the-net-zero-transition-what-it-would-cost-what-it-could-bring

[3] https://unfccc.int/news/as-cop28-enters-its-final-stretch-simon-stiell-calls-for-a-highest-ambition-outcome

[4] https://www.ilo.org/weso-greening/documents/WESO_Greening_EN_web2.pdf

[5]https://iea.blob.core.windows.net/assets/a0432c97-14af-4fc7-b3bf-c409fb7e4ab8/WorldEnergyEmployment.pdf

[6]https://iea.blob.core.windows.net/assets/26ca51d0-4a42-4649-a7c0-552d75ddf9b2/WorldEnergyOutlook2023.pdf

[7]https://economicgraph.linkedin.com/content/dam/me/economicgraph/en-u s/global-green-skills-report/green-skills-report-2023.pdf

[8]https://www.unido.org/stories/what-are-green-skills

[9]https://iea.blob.core.windows.net/assets/a0432c97-14af-4fc7-b3bf-c409fb7e4ab8/WorldEnergyEmployment.pdf

[10] https://bankimooncentre.org/news/your-future-in-green-jobs-press-release/

[11] https://www.ey.com/en_gl/news/2023/10/ey-and-microsoft-expand-social-impact-collaboration-and-advance-sustainability-education-worldwide-with-green-skills-passport

[12] https://www.slideshare.net/MarioVerissimo/green-skills-and-innovation-for-inclusive-growth

[13] https://esco.ec.europa.eu/en/news/green-skills-and-knowledge-concepts-labelling-esco-classification

[14] https://www.mckinsey.com/capabilities/sustainability/our-insights/the-net-zero-transition-what-it-would-cost-what-it-could-bring

[15] https://www.ilo.org/global/topics/green-jobs/news/WCMS_886213/lang–en/index.htm

[16] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/finance-and-green-deal/just-transition-mechanism/just-transition-funding-sources_en

[17] https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7868

[18] https://rmi.org/insight/realizing-the-green-jobs-promise

[19] https://www.chathamhouse.org/2022/08/financing-african-just-transition

[20] ^{https://www.weku.org/ohio-valley-resource/2021-04-21/mine-workers-leader-wants-to-save-last-coal-jobs-as-biden-tackles-climate}

[21]  ^{https://www.mckinsey.com/capabilities/sustainability/our-insights/the-net-zero-transition-what-it-would-cost-what-it-could-bring}

[22] ^{https://rmi.org/insight/realizing-the-green-jobs-promise}

[23]^{https://blogs.worldbank.org/endpovertyinsouthasia/small-island-developing-states-path-renewable-energy-and-resilience-story}

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