Environmental policies come at a cost for workers and regions whose activities depend on carbon-intensive sectors. Pursuing our decarbonization objectives requires a radical reorganization of infrastructure and capital allocation over the next thirty years. Environmental policies enable this shift by increasing the relative production costs of carbon-intensive activities, but these costs will not be borne solely by producers. They will also weigh on their employees and the communities that depend on their work.
While the societal benefits of the green transition are undeniable, they are diffuse, whereas the costs are concentrated and well-identified by those primarily concerned. The impact of environmental policies on the labor market risks serving as the basis for resistance against these policies, similar to the Yellow Vests in France or the BBB movement in the Netherlands. Rodriguez-Pose & Bartalucci (2023) [1] classify European regions according to their vulnerability to transition policies, using criteria such as the carbon intensity of jobs, the importance of fossil fuel extraction, the weight of agriculture, heavy industry and tourism, and the composition of the energy mix. This vulnerability is unevenly distributed across countries and regions, and is also strongly correlated with income. If there is a geographic mismatch between the opportunities created by green transition and where the costs are concentrated, environmental policies risk exacerbating spatial inequalities in Europe, while sowing the seeds of their own opposition.
Addressing and redistributing these costs in the labor market are crucial to enhance the acceptability of environmental policies, and this is the focus of this report. Previous structural transformations of the economy were most often supported by the State, notably after World War II, through the establishment of specific institutions that still exist today, such as public unemployment insurance. However, these have their limitations in the context of a wealthy, deindustrialized and more complex society than during the post-war economic boom.
This report consists of three chapters that successively address the effects of the green transition and climate change on the labor market, how brown jobs differ from others, and finally, available policy options to support workers and regions today.
1. Green transition and the labor market
From a labor market perspective, the green transition is an equation with three unknowns: its cost in terms of growth, the scale of necessary reallocations in the workforce, and the consequences of climate change on working conditions. Most estimates predict that environmental policies will have a negative impact on growth, and this slowdown could, in turn, affect employment. Beyond this, intra-sectoral reallocations between companies based on their energy efficiency, and between brown and green sectors more generally, are taking place in marginal, yet still significant, segments of the labor market where carbon emissions are concentrated: around 6% of jobs account for 70% of emissions in France in 2022. Finally, climate change itself is likely to affect working conditions, mainly through temperature changes that could negatively impact well-being at work and productivity.
Macro-environmental models align in predicting a small net effect of the green transition on employment. Most of these models even foresee a net creation of several hundred thousand jobs in France by 2050. However, these results are the consequence of models that treats the transition either as a Keynesian investment shock or assumes the introduction of a carbon tax that is redistributed in various forms. Furthermore, while these results are reassuring, they don’t adequately account for the possible temporal and geographical disconnect between job creation and destruction: the losers of the transition may not be the first to benefit.
Empirical studies examining the effects of past environmental policies are less positive, highlighting possible job losses. Environmental policies that regulate emissions or put a price on them are most often accompanied by job and income losses for workers in the most polluting sectors. However, green industrial policies, such as renovation subsidies, are also likely to create jobs. These microeconomic estimates are limited, as they generally do not allow for the estimation of the feedback effects of environmental policies. They enable to identify the victims, but not those who will benefit in the short term from the relocation of activity, or in the longer term from climate change mitigation. Nevertheless, they do highlight the cost of green transition for workers in brown sectors.
2. What distinguishes brown jobs from others?
It is often said that jobs in polluting activities are “brown”, but there are several ways of identifying them. Firstly, one can look at jobs that are polluting because of the production process they are part of, but should we then consider that an IT specialist working at Total is more polluting than an IT specialist for an environmental NGO? Alternatively, it might be more interesting to look at the content of the jobs and tasks performed, or at the carbon footprint of the goods produced. In this report, we usually define brown jobs depending on their employers’ emissions, as they are the first to be affected by environmental policies increasing production costs.
Firstly, brown jobs are concentrated in more rural areas than the average, and are not evenly distributed across Europe. The history of the 19th century, the need for many industrial activities to be close to carbon-based energy sources like coal, and the effects of agglomeration contributed to the concentration of polluting activities in certain regions and outside the largest urban areas. The deindustrialization observed since the 1980s does not seem to have changed this relationship.
Brown jobs are better paid than the average and require specific skills. Based on data from European labor force surveys, it is observed that jobs in the most polluting sectors are better paid than the average, when accounting for similar characteristics: around 15% more in France. Moreover, the most comprehensive data show that brown jobs are more technical but are less demanding in terms of other skills that can be valued on the labor market, such as customer relations.
Finally, they are most often occupied by men who are slightly older than the average. There are three men for every woman in brown jobs, workers are on average two years older and more likely not to have a higher education degree than the rest of the workforce.
All these characteristics contribute to making the loss of a brown job more costly than the loss of another job. Their spatial concentration means that the local labor market as a whole is likely to be depressed, making it more difficult to find new employment, particularly at an equivalent wage and if the skills that were valued in the previous job are no longer in demand.
3. Better support the labor market transition
Numerous policies to support workers already exist in developed countries, but they are less effective in addressing job losses linked to green transition. In particular, they do not revitalize local labor markets that are disadvantaged by environmental policies, nor do they help workers in brown jobs regain an equivalent wage level.
To meet the challenge of the green transition, we advocate for the introduction of a wage insurance at European level. A wage insurance complements unemployment insurance by compensating employees who earn a lower wage than they used to when they find a new job. This would allow workers in brown jobs to maintain an equivalent salary and thus incentivize them to remain unemployed for a shorter period, thereby facilitating their reallocation. The net cost of a wage insurance will remain limited if it encourages workers to find a new job more quickly.
To better assist the regions most affected by the transition, we also recommend strengthening local support policies. These policies have an important role to play in mitigating the impact of economic shocks on the labor market when labor mobility is limited. In France, this could involve adapting the ‘France Ruralités Revitalization’ program – which offers tax exemptions in economically weak rural zones – by linking it more explicitly to transition, and increasing investment in infrastructure to allow local labor markets to make the most of environmental transition.
Finally, an efficient support obviously involves training and activation policies that encourage career changes. Priority should be given to training programs with low opportunity costs, either because they are short or because they take place at the workplace, as well as those targeted at younger workers. They should not solely focus on so-called “green” jobs, but rather target all in-demand occupations where employment opportunities exist. Ideally, these programs will steer workers in polluting industries towards non-polluting jobs close to their homes.
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This report focuses on public support for the green transition, but this will be much easier if it coincides with an upgrading of the French labor market. Since the early 2000s, France has gradually lost its comparative advantages in producing high-complexity green goods, partly due to the specialization of a portion of its labor market in lower value-added activities. Therefore, we also need different types of policies to transform the structure of the French economy more deeply to make the most of the green transition. These include policies aimed less at further increasing the quantity of jobs in the economy, but rather at their quality and productivity.
Cyprien Batut & Jonas Kaiser
Image: Umberto Boccioni, Il Mattino, 1909, oil on canvas, 60 × 55cm. Mazzotta Collection.
Notes
[1] Rodríguez-Pose, A., & Bartalucci, F. (2023). The green transition and its potential territorial discontents. Cambridge Journal of Regions, Economy and Society.