Design transitions to maximise the creation of decent jobs

Clean energy transitions can significantly improve the livelihoods of people, generating many more jobs than will be lost. However, new jobs will not always be created in the same places, suit the same workers or skillsets, or be of the same quality or remuneration.

Strategic design of clean energy transitions by governments can minimise negative employment disruptions and maximise opportunities for new, good quality jobs across regions by aligning with existing strengths, infrastructure and skillsets, promoting innovation and identifying opportunities in new and emerging areas. Establishing clear and transparent long-term energy transition strategies will help stimulate and de-risk private investment in clean energy sectors to support job creation.

  • As part of Denmark’s decision to phase out oil and gas production in the North Sea by 2050, the government is planning an aid package to ensure local jobs for the existing skillset of oil and gas workers through carbon capture, utilisation and storage (CCUS) and electrification projects.1
  • Japan has recently begun to deploy ammonia as a fuel for existing thermal power plants, which can retain existing workforces while creating jobs in new supply chains.
  • Canada plans to leverage its existing strengths in the oil and gas sector to develop its hydrogen sector, creating up to 350 000 quality, green jobs over the next three decades.

Governments can also explicitly align industrial and climate policies to promote innovation and job creation in growing areas such as energy services, renewables and smart technology. Addressing issues such as economic diversification and development will be particularly important for fossil fuel producing and exporting countries.

  • India’s Make in India industrialisation strategy aims to attract companies to produce solar PV, lithium batteries, solar charging infrastructure and other advanced technologies in India.
  • Envision has been working with the city of Ordos in China’s coal-producing province of Inner Mongolia to repurpose its economy by building renewable and digital technology parks as an alternative to coal production.
  • The European Green Deal is a comprehensive growth strategy, covering all sectors of the economy, designed to maximise the job potential of the green transition.
  • The United States, among others, is promoting the development of CCUS through tax credits as a decarbonisation pathway for its fossil fuel dependent industries to help preserve jobs in these sectors.

It is equally important to ensure that new jobs created by energy transitions are of good quality and uphold the highest labour standards. There are well-developed principles for supporting those affected by employment changes in clean energy transitions, most notably the International Labour Organisation’s (ILO’s) 2015 Guidelines for a Just Transition Towards Environmentally Sustainable Economies and Societies for All, which provide a policy framework and specific recommendations to ensure that energy transition policies are socially inclusive and support decent work.

Charting pathways for net-zero workforces, including quantification of job potentials, can help governments understand future job opportunities and plan for education and skills needs.

  • Recent IEA analysis of job gains and losses under a net zero pathway will help governments understand and prepare for employment shifts brought about by energy transitions. It illustrates that strong investment in clean energy will overall boost GDP growth and create many millions of jobs, although care must be taken regarding the distribution of gains and losses.
  • The UK has set up a Green Jobs Taskforce to gather evidence on skills needed for the transition to net zero.
  • A study of India’s options to move away from coal while preserving employment and economic prospects for its coal-reliant communities highlights the importance of modelling employment and distributional impacts from coal closures.

Case studies

Denmark’s oil and gas phase-out

In December 2020 the Danish government reached an agreement with a broad majority in the Danish Parliament to phase out fossil fuel extraction in the country by 2050, starting with the cancelation of its 8th licensing round as well as all future bid rounds. North Sea production has historically been an important economic driver for Denmark, contributing around EUR 0.8 billion in revenues in 2019. The agreement also commits the government to ensuring a just transition for impacted regions and the approximately 4 000 workers (direct and indirect) currently employed by the oil and gas industry. As part of efforts to support the local area, the government has committed EUR 27 million in support for exploring the potential for carbon capture and storage (CCS) using old oil and gas wells. The plan will also explore opportunities for electrification of existing oil and gas production in the North Sea. The government expects the deal will cut production by around 9-15% and reduce annual government revenues by EUR 12 million. 

Japans fuel ammonia strategy

As part of its pathway to carbon neutrality by 2050, Japan announced that it would deploy ammonia for use in thermal power plants. The Ministry of Trade, Economy and Industry set out a target to co-fire a coal generation unit with ammonia at a rate above 50% and to develop a 100% ammonia-fired gas turbine by 2030. The initiative is part of a JPY 2 trillion (EUR 15.4 billion) fund established by the government to support clean energy innovation projects over the next decade. The government’s research and development institute, NEDO, has announced that it will support power producer JERA’s demonstration research for 20% co-firing of fuel ammonia in coal-fired power plants from FY 2021 to FY 2024. The government in October 2020 launched the fuel ammonia council to recommend pathways for developing domestic supply chains for ammonia. Given the country’s sizable industry and workforce capacity in international upstream, LNG imports and thermal power generation, the fuel ammonia plan has the potential to transition existing workforces and generate new supply chains and economic activity at the same time that it can help transition Japan to a low-carbon economy. 

Canada hydrogen strategy

Canada sees a sizeable role and competitive advantage in the production, distribution and use of hydrogen given its abundance of feedstocks, skilled workforce and existing position as a leader in intellectual property and export of hydrogen technologies. Hydrogen is expected to form a key plank of Canada’s pathway to meeting its net-zero goals. In December 2020, Canada published the Hydrogen Strategy for Canada, designed to spur investments in hydrogen production and use, and create partnerships that establish Canada as a global supplier of hydrogen. Early actions outlined in the Strategy can be supported by several programmes identified as part of the government’s Strengthened Climate Plan, “A Healthy Environment and a Healthy Economy”, and the 2021 federal budget. This includes a CAD 1.5 billion (EUR 1 billion) Clean Fuels Fund that supports the build-out of new clean fuel production capacity (including hydrogen) and the CAD 8 billion (EUR 5.3 billion) Net-zero Accelerator that supports industrial decarbonisation. If the hydrogen opportunity outlined in the Strategy is fully seized, it is estimated that by 2050 over 350 000 new high-paying jobs could be created nationally as well as revenues in excess of CAD 50 billion (EUR 34 billion), relative to the 832 500 direct and indirect jobs in the energy sector in 2019.

Make in India strategy

The prime minister of India launched the Make in India initiative in 2014 to galvanise investments in India’s manufacturing sector, including through the development of state-of-the-art infrastructure to create industrial corridors and smart cities. The Make in India programme aims to increase the share of manufacturing as a proportion of GDP from 16% to 25% by 2022, and to create 100 million additional jobs in industry. In the clean energy space, through the Make in India initiative, the government is working to attract global companies to produce solar photovoltaics (PV), lithium batteries, solar charging infrastructure and other advanced technologies in India. In particular, the government is strengthening its innovation efforts in a broad range of energy technology areas, including cooling, electric mobility, smart grids and advanced biofuels. Under the Make in India initiative, the focus is on public–private collaboration to tap into the RD&D capabilities of private actors and scale up domestic technology development and deployment, leading to sizeable job creation. The plan is bolstered by the government’s target to achieve 450 GW of installed renewables capacity by 2030. 

Envision Group helps bring cities in China to net zero

Envision Group is one of China’s leading green technology companies, and among the world’s top wind turbine suppliers. More recently, it has supported local governments in China achieve carbon neutrality, in line with China’s national 2060 target. In 2020 Envision Group began discussions with the government of Inner Mongolia to develop a Net Zero Industrial Park in the cities of Ordos and Baotou. Ordos is the world’s largest city-economy powered by coal, and currently produces around 16% of China’s coal. As a result, Ordos is under enormous pressure to transition to clean power sources, while ensuring energy access and power system flexibility. The Net Zero Industrial Park planned by Envision is the first of its kind in China. It will be used to generate green hydrogen that will reduce Ordos’ coal consumption in industry (currently planning 10 x 1,000Nm3/h electrolysers), and lay the foundation for the production of synthetic biomaterials. The Park will also include an 8 GWh/year plant for energy storage and batteries, with phase one of three due to be completed at the end of 2021. A smart grid will co-ordinate the use and distribution of renewable energy. The project aims to further reduce emissions by replacing 330 000 trucks for coal transport with EV trucks. These will cut 30 million tons of GHG emissions per year, and save RMB 30 billion in operation costs. By drawing on 100% locally sourced renewable energy at 5 TWh/year (80% direct supply), the Industrial Park’s operations would be net zero.  

European Green Deal

The European Green Deal is a comprehensive strategy to reduce the EU’s GHG emissions by at least 55% from 1990 levels by 2030 and achieve climate neutrality by 2050. One of the core pillars of the plan is to lead the third industrial revolution while addressing its socio-economic consequences, creating markets and jobs in clean technologies and products for European industry, and ensuring a just transition for those most directly affected. The European Commission expects that this major shift will have wide-ranging impacts across value chains from sectors such as energy, transport and construction that will result in local, well-paying jobs. In particular, as electrification of the economy using renewable sources of energy becomes more pronounced, employment in these sectors is expected to grow. Moreover, energy efficiency programmes will create local jobs in the construction sector. For instance, the Commission is aiming to renovate 35 million buildings across the EU by 2030 under its Renovation Wave strategy, with an estimated 160 000 additional green jobs created in the construction sector. 

US 45Q tax credit for CCUS

As part of the Bipartisan Budget Act that passed in February 2018, the US Congress extended and significantly increased tax credits for CO2 use and storage under Section 45Q of the Internal Revenue Code. Specifically, the changes: expanded the credit to include all carbon oxides, not only CO2, raised the amount of the tax credits; introduced a start-of-construction deadline (originally 1 January 2024 and subsequently extended to 1 January 2026) and 12-year claim period; removed the original 75 million tonne cap; allowed credits for direct air capture and CO2 utilisation; and allowed owners of capture equipment to claim credits and for that entity to transfer the credit to the entity storing the CO2, introducing more flexibility into ownership structures. In January 2021, the IRS issued final regulations for claiming Section 45Q credits including requirements for demonstrating secure geological storage, credit recapture, and life cycle analysis for CO2 utilisation, as well as clarification on taxpayer eligibility to claim the credit. The moves are intended to boost the business case for carbon capture, utilisation and storage (CCUS) projects and stimulate investments in new projects. The US Treasury estimated the cost of the tax credits to be USD 2.3 billion over 2020-2029. The credits are expected to help power plants and industrial plants decarbonise. The United States is already a leader in carbon capture technology, hosting nearly half of all facilities operating globally. 

ILO’s guidelines for a just transition towards environmentally sustainable economies and societies for all

The International Labour Organisation (ILO) in November 2015 adopted new guidelines to help governments, workers and employers undertake the process of structural change toward greener economies in a way that achieves just outcomes, including decent jobs and social protections. The guidelines are the product of consultation among nominated experts under each of the categories of participants (governments, workers and employers), based on country-level policies, sectoral strategies and best practices from around the globe. The guidelines include implementing employment-centred macroeconomic policies, targeted environment regulations for industries and sectors, social protections for workers, skills development, and social dialogue, among others. The conclusions were adopted by governments, workers and employers of ILO’s 186 member countries. 

UK Green Jobs Taskforce

As part of the UK government’s climate strategy and green recovery efforts from Covid-19, the government in 2020 set up the Green Jobs Task force, comprised of 17 experts from industry, academia, labour unions, and the education and skills sector. The group undertook its study over the period from November 2020 to July 2021. The task force is part of the government’s Ten Point Plan for a Green Industrial Revolution, which is expected to support the creation of up to 250 000 green jobs by 2030. The 15 final recommendations – divided along three themes of the ‘green jobs lifecycle’ – are meant to help meet the government’s ambition for two million green jobs in the UK by 2030 and help establish the workforce pathway to net zero emissions by 2050. The task force’s report notes that one in five jobs in the UK (approximately 6.3 million workers) will require skills that may experience demand growth (10% of UK jobs) or reduction (approximately 10%) as a result of the transition to net zero. The report also includes estimates of job creation potential in various clean energy sectors (such as offshore wind and buildings retrofits) as well as jobs and skills shifts in sectors experiencing significant transformation (such as automotive). 

Just transition case study for India

A case study on a just transition away from coal in India was carried out by the Climate Investment Funds (CIF), in collaboration with The Energy and Resources Institute (TERI) in 2021. For India, the shift away from coal will have wide-ranging economic and social implications, given the relatively young fleet of coal generation and the job losses that would be associated with an end to coal mining. The case study examines not only the transition from coal to renewables, but also the distributional impacts of the shift and social inclusion dimensions through a just transition framework. The report’s recommendations include: pursuing complex system modelling to better determine distributional impacts; develop local platforms to empower marginalised stakeholders; establish partnerships across national and state governments toward just transitions; undertake regional planning to identify priority areas for just transition efforts; develop detailed economic diversification plans; identify and secure budgeting requirements for both clean energy projects and support measures for coal areas; create institutional frameworks that include environmental and social safeguards; and identify institutions to scale up just transitions. 

  1. More detailed descriptions of all case studies can be found on the IEA website.