9. From Skills to Sustainability: The Potential of Green Jobs and Digital Transition

9.1 The World Energy Employment report: tracking energy employment to ensure good quality jobs in the net zero

Authors:

Enel Foundation

International Energy Agency

The inaugural edition of the World Energy Employment (WEE) report (IEA, 2022) – published in September 2022 by the IEA with the support and analytical contribution of Enel Foundation – is the first comprehensive inventory of the global energy workforce. It provides, with unprecedented granularity, a snapshot of employment across the entire energy value chain. The report aims to be an essential resource for energy and labour policymaking in the coming years, especially for policies related to the just transition of workers out of fossil fuel industries in decline, and cultivating the workforce needed in growing clean energy industries.

The study looks at energy employment across three main segments: fuel supply (coal, oil, gas, and bioenergy), power sector (generation, transmission, and distribution) and end-uses (vehicles manufacturing and energy efficiency for buildings and industry). The report also estimates the distribution of energy workers across different traditional economic activities to give a picture of the full energy value chain ranging from raw materials; software, IT, data, and business services; manufacturing of equipment; construction; operation, repair, maintenance; transport, distribution, and delivery. The study also looks at the skill level of workers (high, medium, and low), based on the ISCO-08 classification used by ILO and on the education level.

In terms of methodology, the WEE uses IEA energy investment and spending data, data on energy production and consumption, power capacity and electricity generation, as well as technology stocks and sales as the basis to estimate global employment. These modelled estimates are calibrated against official labour statistics to ensure accuracy. Finally, estimates are tested with companies within IEA’s Energy Business Council, peer reviewers, academics, industry groups and international organisations (such as the International Monetary Fund and ILO). In addition, interviews were conducted with firms in the energy space to check the modelling results and gather narratives in the industry. The report assesses energy employment in 2019 to avoid the labour impacts caused by the Covid-19 pandemic.

9.1.1 Energy employment trends, 2019-2022

The WEE report shows that over 65 million people were employed in the energy and related sectors in 2019, accounting for almost 2% of formal employment worldwide. As of 2021, the report estimates over half of the energy workforce is employed in clean energy technologies, reflecting the rapid build out of new clean energy infrastructure. Virtually all the growth in the energy workforce since the pandemic has been in clean energy segments. Energy sector employment in 2019 is divided approximately into thirds among fuel supply, the power sector, and energy end-uses.

Energy jobs are greatest in regions that are rapidly expanding their energy infrastructure and use. The total number of employees employed per unit invested or energy unit produced is higher in regions with lower prevailing wages, where more people are employed for the same overall costs. Jobs are also concentrated in energy manufacturing hubs and producer economies (Graph 11). Accordingly, China has the largest number of energy workers, near 20 million (around 2.5% of the total workforce in the country), whereas in the Middle East and Eurasia, the energy workforce makes up a relatively higher share of economy-wide employment, averaging 3.6%. North America has 7.9 million workers in energy, equivalent to 3.4% of total employment; Europe has 7.5 million workers in energy, or 2.4% of total employment).

The energy jobs worldwide cover the entire energy value chain and encompass different economic activities. Those working in the production of raw materials, which includes mining and extractive sectors for fuels and agriculture for the production of bioenergy, total over 8.5 million. In the mining sector in particular, energy workers make up 15% of global employment. Over 21 million energy sector employees work in manufacturing and approximately 15 million are in construction, making up 5-6% of their respective sectors. An estimated 14 million work in utilities and other professional services. Other types of jobs, such as wholesale traders and energy transport, make up the balance (Graph 11).

9.1.2 A focus on power sector

Power generation employs 11.2 million worldwide, of which 6.8 million are in renewables. The power sector has the potential to reshape global energy demand and supply through the electrification of end-uses combined with the ongoing transition towards low-emissions sources of electricity. Power generation employment totalled 11.2 million in 2019, comprised of 3 million in solar PV, 2 million in coal power, and 1.9 million in hydro. Wind power, including onshore and offshore, employed 1.2 million and nuclear power 1 million. Oil and gas employed 1.4 million workers. Employment in other renewables totalled some 710 000 employees (Graph 12). Over 60% of workers are employed in the deployment of capacity additions, while the other almost 40% work in the operations and maintenance (O&M) of existing facilities. Overall, power generation employment includes 2.6 million workers in manufacturing transformers, turbines, compressors, and solar panels, 4.0 million in construction (i.e. building power plants, dams, mounting systems), 3.8 million employed in utilities and in professional roles such as project finance and procurement and 0.8 million in wholesale and trading.

9.1.3 Skills in the energy sector

The energy sector demands more high-skilled workers than other industries, with 45% of the workforce requiring some degree of tertiary education, from university degrees to vocational training certifications. The percentage of low-skilled labour is also lower than in other sectors. Low-skilled workers are more common in Emerging Markets and Developing Economies, as is the prevalence of informal workers (Graph 13).

A granular analysis of the skills required in the energy transition provides a better understanding of how employment in the energy sector will evolve. In many parts of the energy sector there are concrete possibilities to successfully redeploy highly skilled workers from traditional energy sectors to emerging clean energy sectors. This includes workers within engineering, procurement & construction (EPC) firms to build clean energy assets, workers in oil and gas to clean fuel production, HVAC specialists to heat pumps installation and servicing, and car manufacturers to EV production. This can help limit the amount of training required to meet growing demand for skilled labour in clean energy sectors, which grow in all IEA scenarios. This is also confirmed by the surveys conducted within the framework of this study, where three quarters of the clean energy companies surveyed replied that they plan to hire new staff in the next three years (2022-2024), while the remaining ones had already hired substantially in recent years. Companies interviewed that operate both in the renewables and conventional energy sectors mentioned they do not plan to lay off staff in the coming few years.

On the other hand, the interviews also revealed that the growing demand for workers with increasingly specific skills in the energy sector can, however, become a concern for companies as it is not matched by an adequate supply. Many firms interviewed said they faced a very competitive environment for hiring candidates with the requisite skill sets. This was particularly true for skilled workers in construction, where many countries already face strong hiring challenges. This is followed by high-skilled workers in the fields of science, technology, engineering, and mathematics (STEM), followed by project managers and other technical roles. The energy transition, indeed, require a more intensive use of STEM skills with respect to the past and in particular to jobs in traditional energy sectors (Popp, D., et al., 2022). Companies also expressed concern about the high turnover of workers with the most in-demand competences, which has increased throughout the Covid-19 pandemic.

In order to avoid these and other potential bottlenecks due to the fact that specialized workforces are not on tap, it becomes necessary acting along the following directions:

1. Energy transition-ready vocational and educational programmes. Private companies are best placed to train and upskill their workforce based on market and technological developments. Yet, educational programmes promoted and sustained by partnerships between public institutions and private companies can ensure all curricula keep pace with technology and regulatory evolution of the energy markets. It is indeed important for academia to have a greater awareness of the skills required by the clean energy labour market. This will also help address the STEM skills shortage. Indeed, secondary schools can play a key role in the career and university orientation for new graduate students. Universities, on the other hand, can refine their curricula according to the knowledge and skills required for the energy transition.

2. Well-crafted training programmes that build on existing certification schemes. These programmes should be designed taking into account the needs of the local labour markets and delivered in cooperation with players along the entire value chain. Furthermore, targeted training programmes are more effective than broad training programmes, which is why a granular analysis of data on the specific skills required in the clean energy sector is essential.

3. Involvement of the unions. Enabling the co-designing proper collective bargaining arrangements where international labour standards, as well as diversity and inclusion aspects, have been taken into the right consideration. In addition, labour transition plans have been a successful policy measure adopted by most of the companies surveyed.

9.1.4 Energy employment in 2030

Finally, it is worth mentioning that, starting with the 2019 global employment data provided in the WEE report, the World Energy Outlook 2022 (WEO 2022), analyses the employment impacts in two scenarios: the Announced Pledges Scenario (APS) where all announced climate pledges were met on time and in full, and the Net Zero Emissions (NZE) by 2050 Scenario, which is consistent with limiting global surface temperature warming to 1.5 °C by 2050. In the NZE Scenario, total energy investment more than doubles to 2030, driving up the demand for skilled workers across the energy sector. Energy employment expands to almost 90 million in 2030 from around 65 million today (Graph 14). Job growth in the APS is less dramatic, but energy employment still reaches 80 million in 2030. Fossil fuel supply jobs decrease by 7 million by 2030 in the NZE Scenario, with coal supply seeing the sharpest decline as mechanisation and decarbonisation efforts lead to further downsizing of the coal industry, but in both scenarios job growth more than offsets a decline in traditional fossil fuel supply sectors.

The power sector leads the way in the NZE Scenario in terms of job growth to 2030, with around 9 million additional jobs in power generation complemented by 4 million new jobs in power grids and electricity storage. Employment opportunities related to solar PV and wind power increase by around 10% each year to keep pace with steady growth in capacity additions, while power grids maintain 4% annual employment growth thanks to rising electrification rates and new investment in grid upgrades and expansion. Employment also increases substantially in vehicle manufacturing and in businesses concerned with improving the efficiency of equipment, industry, and buildings.

9.1.5 Chapter References

IEA, 2022, World Energy Employment, https://iea.blob.core.windows.net/assets/a0432c97-14af-4fc7-b3bf-c409fb7e4ab8/WorldEnergyEmployment.pdf.

IEA, 2022, World Energy Outlook 2022, https://iea.blob.core.windows.net/assets/830fe099-5530-48f2-a7c1-11f35d510983/WorldEnergyOutlook2022.pdf.

Popp, D., Vona, F., Gregoire-Zawilski, M., & Marin, G. (2022). The Next Wave of Energy Innovation: Which Technologies? Which Skills?. NBER Working Paper No. 30343.

9.2 Enhancing the Digital and Green Transitions: National Observatories and Targeted Reskilling for Policy Action

Authors:

Dr. Laura Cavalli, FEEM

Edward Cruickshank

In the journey towards a sustainable future, policymakers are confronted with the intertwined challenges of the digital and green transitions. This chapter explores two critical components that illuminate the way forward: the task-based approach for understanding the skills landscape of green jobs and the establishment of National Observatories for the Digital Transition.

The first part illustrates the significance of a task-based methodology in comprehending the skill requirements of green occupations, highlighting the need for a nuanced definition and the identification of essential skill sets. By understanding the distinctive characteristics of green jobs, policymakers can devise targeted retraining and reskilling policies that empower communities facing the disruptive impacts of transitioning to low-carbon industries.

The second part, on the other hand, highlights the pivotal role of National Observatories in driving the digital transition. These observatories serve as powerful tools for analyzing the multifaceted dynamics of digitization, identifying areas of improvement, and fostering inclusive and sustainable digital transformations. By exploring the following sub-sections, policymakers can glean insights into how task-based insights and national observatories can synergistically propel the digital and green transitions, forging pathways to a more sustainable and prosperous future.

9.2.1 Risks and opportunities of the Green Economy’s jobs: a task-based approach

The transition towards a low-carbon economy raises questions around the potential effect on the demand for different types of skills in labour market, beyond the energy sector alone. Yet, accurately understanding and measuring what characterises green jobs vis-a-vis traditional jobs remains a challenge. The definition of a green job can vary depending on the industry and the context. For example, a job in renewable energy production is clearly related to environmental objectives and can be identified relatively easily in existing schema, while a data analyst for a transportation company that is trying to figure out where the largest source of emissions that they produce comes from may only be indirectly related. Therefore, although the ILO has its own definition (ILO, 2016), a working definition of green jobs that captures all these nuances and that is applicable across all sectors still lacks.

Following the task-based approach proposed by Autor et al. (2003), VONA et al (2018) propose a methodology to identify skills prominent in green occupations. By using O*NET data, they have been able to: first, distinguish jobs having a significant share of green specific tasks over total tasks; and second, specify the sets of general skills also associated with these jobs. The aim was to evaluate the similarity of labour skills across occupations, in order to understand whether there are any skills differences for employees who are more prone to displacement due to environmental regulations.

The main conclusion of the authors is that the task-based approach provides the most reliable and accurate estimate of the real size of green employment. Moreover, they found that the difference in skill sets between green jobs and brown jobs among the same occupation groups is generally small, although there are exceptions for specific sectors: for example, in the construction and extraction sector green engineering skills are becoming increasingly important; however, these sectors include also workers in the oil and mining industries, and these differences are of relevance for climate policy. In addition, the study suggests that the two most characterising sets of skills of green jobs with respect to traditional jobs are: engineering skills for design and production of technology, and managerial skills for setting up and monitoring environmental organisational practices.

However, in a recent application of the methodology which aimed to characterise trends of low-carbon jobs in the US, the authors found that the cost of reallocating workers in communities that were historically reliant on fossil-fuel industries will be higher: in fact, limited overlap between locations where low-carbon job creation is happening and where job destruction is more likely to be concentrated is detected (Saussay et al. 2022). Therefore, in order to support a successful and just transition, distressed communities will require specific retraining and reskilling policies that are tailored to their location.

The methodology presented here, easy to be replicated and flexible, could be used as a toolkit for policymakers to design targeted retraining and reskilling policies within green deal packages.

9.2.2 Proposal for the creation of national observatories for the digital transition

In 2021, The European House - Ambrosetti, in collaboration with Fondazione IBM and Fondazione Eni Enrico Mattei, launched the Observatory on the Digital Transformation of Italy, a centre aimed at analysing both the structural and context-specific dynamics of digitization in Italy.

The need for an Observatory on digital transition in Italy finds two major justifications: on the one hand, Italy lags behind in the digitization of citizens, public administration and businesses (especially SMEs) as indicated by the country’s low ranking on the DESI index (18th out of 27 EU countries in the DESI Index and last among the large economies of Europe); this delay is mainly due to structural deficiencies regarding digital skills, connectivity and data sharing. On the other hand, the digital transformation of production activities represents a unique opportunity for the country to boost its productivity and thus the growth and competitiveness of the country, which have all been stagnant for the last two decades.

However, the underlying goals of the Observatory are more far-reaching, and their rationale extends outside national boundaries. Indeed, the real novelty of the Observatory is the attempt to explore those aspects that are not fully captured by traditional digital indicators and to draw future scenarios and identify the best strategies in order to support and accelerate the ongoing transition according to ethical, inclusive and sustainable principles. Moreover, there are at least two other reasons that puts the digital transition at centre of the political agenda of every European country: the twin transition (i.e. the interconnected nature of the green and digital transitions) and the strong investments towards the digital mission of European National Recovery Resilience Plans (NRRPs).

The twin transition is at the core of the European Union strategy to guarantee sustainable growth, ensure innovation and mitigate the impact of climate change and environmental degradation. If the implicit potential of the interconnected nature of these two transitions were properly exploited, it would help to reduce Europe’s carbon footprint and meet emissions targets, which are key priorities for the EU, by transitioning to renewable energy and reducing energy consumption through digital technologies. Indeed, the digital transition can enable the green transition by providing the necessary tools and technologies, such as smart grids, energy management systems, and digital platforms for tracking and reporting emissions. The digital transition also enables to improve energy efficiency and increase the integration of renewable energy sources into the grid. At the same time, the Twin transition can also drive economic growth and create jobs in the EU: the shift towards a green economy can generate new business opportunities and jobs in areas such as renewable energy, energy efficiency, and sustainable transportation; similarly, the digital transition can drive innovation and create jobs in areas such as software development, data analytics, and e-commerce.

The EU recognizes that the digital transition is a key driver of economic growth and competitiveness and its commitment to “a Europe fit for the digital age” is also demonstrated by the heavy investments towards digitization. In fact, 21% of all the funds of the NextGenerationEU (NGEU) must be channelled towards digital related actions. By investing in digital technologies such as 5G networks, artificial intelligence, and the Internet of Things, the EU aims to support the development of new business models and increase the productivity of existing industries. On top of this, investments in digitization would be one way to address the economic and social challenges brought by the COVID-19 pandemic. For example, the NGEU aims to support the digitization of small and medium-sized enterprises (SMEs) and the acceleration of the shift to e-commerce, which can help businesses adapt to the new economic reality, as well as the roll-out of high-speed internet in rural and remote areas, which can help bridge the digital divide and improve access to education, healthcare, and other services. Finally, the EU also sees the digital transition as an opportunity to enhance the EU’s strategic autonomy in the field of technology and reduce its dependence on third countries.

The creation of National Digitization Observatories can become a useful tool to serve and direct policy makers in addressing the ethical, inclusiveness and sustainability challenges of the digital transition through the analysis of national Key Performance Indicators and the creation of strategies to direct policy action. This would imply the establishment of roundtables with expert groups and the launching of nationwide surveys to delve deeper into the digitalization-related changes taking place in organizations, the strategies adopted and the related impacts, including industry-specific approaches. Greater European collaboration and standardization in data collection activities related to digitization in areas where there is less data availability may also be promoted.

9.2.3 Chapter references

Autor, D. H., Levy, F., & Murnane, R. J. (2003). The skill content of recent technological change: An empirical exploration. The Quarterly journal of economics, 118(4), 1279-1333.

ILO, 2016, What is a green job? , https://www.ilo.org/global/topics/green-jobs/news/WCMS_220248/lang--en/index.htm

Saussay, A., Sato, M., Vona, F., & O’Kane, L. (2022). Who’s fit for the low-carbon transition? Emerging skills and wage gaps in job and data.

Vona, F., Marin, G., Consoli, D., & Popp, D. (2018). Environmental regulation and green skills: an empirical exploration. Journal of the Association of Environmental and Resource Economists, 5(4), 713-753.