It is widely accepted that the transition to low-carbon technologies in the energy sector will have positive impacts on the environment through reduced emissions and will thus raise the chance to avoid dangerous climate change by keeping global warming below the threshold of 2°C above pre-industrial levels. However, there is an ongoing debate about the impacts of such a transition on employment.
Growing unemployment in the EU in the context of the economic crises have intensified the debate about the links of energy policy to growth and employment and in particular about how the EU can decarbonise its economy without negatively affecting industry and businesses and thus employment.
A first observation from the assessment of direct jobs related to primary (fossil) fuels and the EU power sector is that the EU energy sector only employs a comparatively small share of the EU’s total employed workforce (less than 1%). This means that decarbonisation of the energy sector is only likely to have a small impact on employment and will certainly not be able to solve the unemployment problem by itself.
The analysis also shows that job losses in primary (fossil) fuel activities are generally compensated by new jobs in electricity generated from renewable energy sources. There may even be an ‘overcompensation’ effect. However, this is largely related to additional electric back-up capacity required to balance increasing amounts of intermittent renewable energy sources. The cost burden stemming from substantially increased employment as a result of significantly higher installed (power generation) capacity because of the intermittency of new renewables will ultimately translate into higher power prices. Unless price hikes are compensated by energy savings (thus limiting the impact on costs) this could make it more attractive for European business and (energy intensive) industry to import more carbon intensive energy from outside or to move production to other parts of the world. Concerns may be pronounced where non-depreciated fossil installations are replaced by low-carbon energy sources, thus accelerating the energy transition but also raising related costs. Technological improvements of renewables are thus of vital importance for the success of the new socio-ecological transition away from fossil fuels. Particular focus should be put on raising capacity factors of key renewable energy technologies through measures including better interconnection of transmission lines, more flexible distribution, demand-side response and management, and storage.
It is therefore urgent that the EU starts addressing the power market design, i.e. the regulation that underlies the functioning of the power market. A first step has already been undertaken with the review of the state aid guidelines (see Genoese and Egenhofer, 2014). But more will be needed such as an increased cooperation between EU member states when it comes to reaching the 2030 target for renewables.
Furthermore, the research results suggest a need for intensified coordination between employment and skill policies. With the level of qualifications in the energy sector going up, there may be a risk of skills shortages. Indeed, as the share of highly qualified workers in the general labour market increases (Cedefop, 2011), the energy sector could be in competition with other sectors for the recruitment of a highly qualified workforce. In particular, shortages of engineers and technicians are common to the renewable energy sector (ILO and EU, 2011). The problem can be traced back upstream, with a lack of qualified trainers for renewable technologies (ibid.). In addition, the trend of an ageing workforce in the power sector carries the risk of not finding appropriately skilled labour market entrants to replace retirees. Several examples of successful upskilling and transferring skills from one sector into another show that these issues can be addressed, however, such schemes need to start early due to long lead-times of some programmes, e.g. qualifying trainers. In addition, they will also need to aim at improving the gender balance in the energy system.
This skills transition may require more public spending in terms of education and (re)training, as well as (temporary) unemployment benefits. The EU budget can address skills shortages through training and technical assistance programmes and support to SMEs, e.g. COSME policy, cohesion policy for SME creation, technical assistance, etc. Technical assistance investment can lead to the leverage of considerable sums for large- scale projects, promoting employment and further skills development. In the area of energy, for example, technical assistance programmes such as the ELENA programme have attracted an amount of investment funds 40 times greater than that of the EU budget assistance. National education and (re)training programmes could be financed by increasing income tax revenues and decreasing social security spending, which may result from additional jobs created in the energy system during the transition away from fossil fuels.
Chosen excerpts by Job Market Monitor. Read the whole story at Options to address labour market issues in the transition to a low-carbon economy in Europe