3. The twin transition and changing skills needs
For the twin transition to happen, education and training systems must ensure sufficient numbers of specialists equipped with the right skills to develop and implement new technologies and infrastructure. (139) The green transition is expected to have an overall positive effect on employment, but there are considerable differences in expected impacts across sectors, regions, and skill groups. As the green and digital transitions are strongly interlinked and entail an economy-wide transformation, investments in adult learning, upskilling and reskilling will be needed in most sectors to implement green-digital solutions. (140) More specifically, the twin transition will increase the need for the digital skills already in strong demand today. (141) This is likely to exacerbate labour shortages and skill gaps, especially in the short term. Given the priority to meet green and digital objectives and their significant impact on future skills needs, this section provides a separate analysis of how each of the transitions is expected to change skills and affect labour shortages.
3.1. Impact of green transition on labour and skills shortages
Policies under the scope of the European Green Deal are expected to have positive effects on employment. There is a wide range of estimates of the expected employment effects, depending on the underlying assumptions (Box 2.3). According to some forecasts, if supported by the right employment and education policies, (142) net-zero policies could create between 1 million and 2.5 million jobs by 2030 in sectors with enhanced economic activity due to greening, as well as in other sectors indirectly affected (Box 2.2Box 2.2, Box 2.3). (143) The commitment to reach climate neutrality in the EU by 2050 and to shift to cleaner production modes was enshrined for the first time in the European Climate Law adopted in July 2021 (144) and is binding at national level. This commitment is accelerated by the European Green Deal Industrial Plan (145) and the Net Zero Industrial Act, (146) which are expected to significantly boost the demand for workforce in many industries (Box 2.4). Job losses are also projected, particularly in carbon-intensive industries, such as mining, manufacturing of steel and iron, or fuels. (147) Despite this, the transformation towards climate neutrality is predicted to generate net employment gains across all broad economic sectors by 2030, according to the impact assessment of the European Green Deal. (148) Nevertheless, labour shortages could hinder these employment gains.
Almost all occupational categories are expected to benefit from the implementation of the European Green Deal. Cedefop’s European Green Deal scenario forecasts significant additional employment increases for science and engineering associate professionals (3.0%), science and engineering professionals (2.4%), administrative and commercial managers (2.1%), chief executives, senior officials and legislators (1.7%), ICT professionals (1.5%), and business and administration professionals (1.2%). (149) However, those jobs may prove difficult to fill, given that skills in those areas are already scarce and the labour demand for these occupations is expected to grow. Among medium-skilled occupations, the highest impact is expected for refuse workers, building and related trades workers, electrical and electronic trades workers, and drivers, most of which are already experiencing persistent labour shortages. Although scientists, R&D researchers, specialised engineers and associate professionals may face only small changes in their employment share, they are indispensable to the development, design and implementation of green technologies, including the relevant infrastructure. (150)
Box 2.2: Approaches to define green jobs
Scenarios to estimate impacts of the net-zero economy transition show a complex picture of multiple demand and supply channels, influencing employment patterns in different ways and at different intensities. Analysis of the actual employment trends, including labour and skills shortages in key sectors, is not clear-cut, as an established definition of ‘green jobs’ is not yet firmly in place. Generally, two approaches can be taken to define green employment. Firstly, the top-down approach takes a sectoral lens and establishes the greenness of a job based on the importance of the sector’s output in reaching climate targets and other environmental objectives. Secondly, the bottom-up approach denotes greenness in an occupation by measuring the extent of green skills, (1) tasks or knowledge, as well as the technology required in that occupation. Each of these approaches has distinct advantages and disadvantages. The top-down approach is better suited to sectoral analysis, as it denotes the greenness of jobs based on their output. However, it is limited to the initial definition of ‘green’ and can overlook indirect impacts of the transition. The task based-approach can be used for holistic analyses of the job impacts of greening. However, capturing the composition and relevance of tasks in jobs in the varied and dynamic labour market is a complex exercise that comes with caveats on data availability, transferability and durability.
One example of the top-down approach is Eurostat’s 2021 estimates on employment in the environmental goods and services sector (EGSS) based on national accounts. According to this metric, the European economy had 4.5 million green jobs in 2019 (3.2 million in 2000), around 2% of total employment. This should be considered a narrow proxy for green jobs, as it excludes other activities making a substantial contribution to climate and environmental objectives.
A number of attempts have been made to analyse green employment based on the task-based approach. Most build on the Green Jobs Framework initially introduced by O*NET in the United States (US), (2) which categorises occupations based on the combination of the top-down and bottom-up approaches. This creates a four-fold division of all occupations:
- New unique occupations introduced due to new nature of activities in the economy;
- Jobs that existed prior to the transition but see a considerable share of their tasks changed as a result of green activities;
- Those whose nature remains unaffected but whose demand increases due to accentuation of green activities in the economy;
- Jobs with no impacts due to the transition (‘non-green’ jobs).
With some limitations, this classification is adaptable to the EU labour market. (3) Using this framework, one study estimates that up to 40% of employment in the EU contributed to green goals in 2016. (4) Further explorations suggest that around 17% of jobs in the OECD countries include a substantial share of green tasks. (5)
Given the high variation between the estimates of different approaches, they should be interpreted with caution.
- 1. List of ‘green skills’ can be found in the European Classification of Occupations, Skills, and Competences (ESCO). These are defined as the skills, competences, abilities and knowledge needed to live in, develop and support a society that reduces the impact of human activity on the environment (Cedefop, 2012).
- 2. More information available on the website of O*NET Resource Center.
- 3. This approach applies a cross-reference between O*NET classification used in the US and ISCO classification used in the EU. One of its main weaknesses is the necessary aggregation, as O*NET is available at 8-digit level and ISCO at 4-digit level. Also, it assumes that EU Member States have broadly the same occupational structure as the US.
- 4. (Bowen and Hancke, 2019).
- 5. (OECD, 2023b).
The majority of EU citizens believe that policies to tackle climate change will create more jobs than they will remove and that those will be better quality jobs, at 57% and 61%, respectively. (151) More than half (55%) of the respondents to the Special Eurobarometer in 2022 reported that being in a job that contributes to the green transition is important to them personally, with 15% stating that they ‘totally agree’. However, only around one-third believe that their current job contributes to that transition. Those proportions vary considerably across Member States, potentially reflecting regional differences in general public awareness of the green transition’s impact and relevance to their lives.
Box 2.3: Macroeconomic modelling of employment impacts of climate scenarios
Macroeconomic simulations of labour market impacts aid policy-making to reach climate goals in the EU. These models take into account the most recently adopted climate and environmental targets and consider different scenarios, with various sets of underlying assumptions on regulation (e.g. different tax systems complementing the reforms, energy price policy mixes), as well as socioeconomic assumptions (perfect labour markets with smooth transitions and no skill shortages, assumptions on population and growth). Accordingly, the estimates vary and should be taken as purely indicative. The models outline future employment development based on different production targets in the relevant sectors and compare the final employment snapshot in a given year (either 2030 or 2050, with an analysis based on new 2040 targets forthcoming) to the baseline scenario without the climate targets. Caveats include little flexibility to incorporate unexpected shocks (such as COVID-19) and the inability to capture possible shifting employment patterns within sectors (e.g. accelerated growth in demand for specific skill-intensive occupations). Nevertheless, macro-modelling tools are crucial to identifying future labour trends and corresponding policy needs.
(Cedefop, 2021a): The green employment and skills transformation - insights from a European Green Deal skills forecast scenario | Up to 2.5 million net jobs (1.2%) could be created to 2030, compared to the business-as-usual scenario |
Joint Research Centre (JRC) (Asikainen et al., 2021): The future of jobs is green | Green transition policies could lead to a net increase in jobs of up to 884 000 (+0.45%) by 2030, compared to the business-as-usual scenario |
(European Commission, 2020f): Impact assessment accompanying the Communication ‘Stepping up Europe’s 2030 climate ambition - investing in a climate-neutral future for the benefit of our people’ | With the right accompanying polices in place, the green transition could create around one million additional quality jobs in the EU by 2030 and two million by 2050.
Without the right policies, potential losses could reach up to 494 000 jobs (-0.26% at aggregate level by 2030, and up to 1.7 million jobs (-1.4%) in market services, in the worst-case scenario) |
Employment and Social Developments in Europe (ESDE) 2019 (European Commission, 2019b): Towards a greener future: employment and social impacts of climate change policies (based on the impact assessment for the Climate Target Plan) | Create 1.2 million jobs by 2030 and up to between 1.5 million and 2 million jobs by 2050 |
Skills needed for the green transition include technical job-specific skills and more transversal skills. (152) Technical skills are required to adapt or implement standards, processes, services, products and technologies to protect ecosystems and biodiversity, to advance the production and roll-out of net-zero technologies, and to reduce energy, materials and water consumption. They should be viewed as complementary to transversal skills such as the knowledge, abilities, values and attitudes needed to live, work and act in resource-efficient and sustainable economies and societies. Moving towards a more sustainable EU economy relies heavily on technological advancements and innovation, linked to digitalisation, automation, connectivity, artificial intelligence (AI) and blockchain, making digital skills extremely important to the green transition. While new employment opportunities stemming from climate policies are projected across all skill types until 2030, (153) ‒ mitigating the protracted decline in middle-skilled jobs (154) ‒ recent literature shows that green employment creation has been more prevalent among higher-skilled professions. (155)
Box 2.4: Investment needs for additional skilled workers related to net-zero technologies
Delivering on the European Green Deal and reaching the targets of the Fit for 55 package and the RePowerEU plan requires significant acceleration of the clean energy transition in the EU. To scale up manufacturing of clean technologies (wind, solar, batteries, heat pumps, electrolysers), the European Commission has proposed the Net ZeroIndustry Act (NZIA). (1) This will increase the need for investment in physical infrastructure, as well as additional skilled workers.
Up to 2030, the investment needs for retraining, reskilling and upskilling in manufacturing of strategic net-zero technologies are estimated at EUR 1.7 billion under the status quo (maintaining 2022 market shares of EU manufacturing of net-zero technologies), EUR 3.1 billion under the NZIA policy proposal (increasing the shares to the indicative technology-specific objectives set in the NZIA), and EUR 4.1 billion under the NZIA+ scenario (100% of demand satisfied by EU manufacturing) (Table 1). This corresponds to 198 000 additional jobs under the status quo, 350 000 under the NZIA policy proposal and 468 000 under the NZIA+ scenario. These numbers also depend on factors such as the specific technologies used, the pace of adoption and innovation, the scale of investment, and policy frameworks.
Table 1: Additional jobs in manufacturing and related investment needs until 2030
Scenario |
Status quo |
NZIA policy proposal |
NZIA+ scenario | |||
---|---|---|---|---|---|---|
Technology |
Additional jobs (thousand) |
Investment (EUR million) |
Additional jobs (thousand) |
Investment (EUR million) |
Additional jobs (thousand) |
Investment (EUR million) |
Wind |
31 |
270 |
31 |
270 |
40 |
353 |
Solar photovoltaics |
<1 |
3 |
25 |
223 |
66 |
578 |
Heat pump |
28 |
243 |
28 |
243 |
60 |
529 |
Battery cell |
139 |
1 214 |
261 |
2 284 |
294 |
2 578 |
Electrolysers |
0 |
0 |
5 |
41 |
7 |
59 |
Total |
198 |
1 730 |
350 |
3 062 |
468 |
4 097 |
Source: (European Commission, 2023g).
Additional skilled workers will also be needed for the increased installation and deployment of these key technologies. For wind and solar photovoltaics alone, this could lead to about 100 000 additional jobs by 2030 under all three scenarios (the installation of both domestically produced and imported net-zero technologies will take place in the EU). The job creation is mainly expected in construction and services (Table 2). (2) The associated investment in skills could amount to EUR 885 million.
Table 2: Additional jobs in deployment of wind and solar photovoltaics, and related investment needs to 2030
Additional jobs (thousand) | Investment (EUR million) | ||||
Construction | Services | Transport | Total | ||
Wind | 32 | 31 | 5 | 68 | 593 |
Solar photovoltaics | 23 | 10 | - | 33 | 291 |
Total | 54 | 41 | 5 | 101 | 885 |
Note: JRC calculations, based on deployment capacity expansion in (European Commission, 2023g), current deployment levels from Clean Energy Technology Observatory reports for wind and solar photovoltaics ((Chatzipanagi et al., 2022), (Telsnig et al., 2022)), Global Energy and Climate Outlook 2021 macroeconomic baseline, and training expenses from ESDE 2020 (European Commission, 2020d).
While different assumptions generate different estimates, it is clear that energy transition will require a significant increase in the number of skilled workers in a range of sectors. Persistent labour shortages in the EU at both professional and technician levels can lead to delays in the design, implementation and the deployment of the net-zero technologies.
Across the EU, over one-third of respondents believe that they do not have the necessary skills to support the green transition. According to the Special Eurobarometer, 38% of respondents do not feel equipped for the coming transition. This points to the need for reskilling and upskilling, which might further contribute to labour shortages, especially as several projected future labour shortages are concentrated in higher-skilled occupations (Chart 2.4). On a positive note, the majority of respondents (54%) agree that their current skills allow them to contribute to the green transition (14% ‘totally agree’), with strong heterogeneity across countries. (156)
There are significant differences in employment patterns across sectors crucial to climate neutrality. Sectors considered key to the green transition are energy-intensive industries and sectors undergoing transformation due to greening of economic activities. (157) Employment in those sectors showed a slow growth trend in previous years, with the exception of some energy-intensive industries, where a slight decline is noted since 2018. (158) With the exception of manufacturing of motor vehicles and basic metals, energy-intensive industries are projected to face moderate labour shortages in the future, with their employment share ranging from 0.3% (Ireland) to 8.1% (Czechia) in 2021 (Table A.4). The largest share of EU workers in transformation sectors can be found in manufacturing (16.1%) and construction (6.7%), which are also projected to face moderate-to-average overall shortages by 2035. (159) Transportation and storage, and water supply, sewerage, waste management and remediation activities which constitute 6.1% of the total EU workforce are considered key sectors in the context of the circular economy and the green transition, and have the highest projected future shortages.
Chart 2.3
Sectors in green transformation are male-dominated and employ a high proportion of highly educated workers
Employment shares by gender (first panel) and by education level (second panel) in energy-intensive industries and sectors in green transformation, 2021, EU-27
Note: ED0-2 - Less than primary, primary and lower secondary education (levels 0-2); ED3_4 - Upper secondary and post-secondary non-tertiary education (levels 3 and 4); ED5-8 - Tertiary education (levels 5-8); UNK – Unknown.
Source: DG EMPL calculations, based on Eurostat datasets lfsa_egan2 and lfsa_egan22d.
Sectors that are key to the green transition, including energy-intensive industries, are typically male-dominated, albeit to varying extents. In the EU, mining is the sector with the smallest share of women, at just 9.1% (80 600 women, compared to 484 900 men) (Chart 2.3). In water supply and waste management – which has one of the largest positive projected employment impacts due to the green transition – women constitute 21.5% of the workforce. In transport and electricity industries, their shares amount to 22.2% and 27.7%, respectively. The gender employment gap is the smallest in manufacturing (30.2% are women) and in the energy-intensive subsectors (25.1% are women). Nevertheless, the gap remains considerably above the EU industry average, where women constitute 46.3% of the workforce. This creates a two-fold gender implication in the projected sectoral employment change. Firstly, while job losses due to the transition to a net-zero economy will leave deeper scars in sectors primarily occupied by men (mining), employment gains are expected in sectors where men are more represented (construction and waste management). Secondly, as projected job creation in sectors already important to the structure of the economy is greater than anticipated losses, employment gains will benefit men over women (assuming the current gender employment structure remains unchanged). Recent evidence aligns with this hypothesis, finding that almost two-thirds of green-task jobs across Organisation for Economic Co-operation and Development (OECD) regions are held by men. (160) Gender segregation in sectors key to the green transition might therefore exacerbate labour shortages, as it may be more difficult to fill newly created positions, given the already high participation rates of men in those sectors (see section 5.). This underlines the need for policies enabling women to benefit from the opportunities arising from the green transition (see section 3.).
The absolute number of workers with tertiary education is rising in sectors relevant to the green transition. In 2021, within these sectors, the largest proportion of highly educated workers were employed in the electricity industry (45.4%), which saw the largest increase since 2015 (5.1 pp, compared to an industry average of 4.7 pp) (Chart 2.3). The proportion of workers with higher education also grew in other transformation sectors, but did not exceed EU average growth. This trend was reversed for the groups of workers with the highest educational attainment at elementary as well as secondary level, with workers with secondary education comprising the largest group in all transformation industries, notably transportation (59.4%) and construction (56.5%).
Despite the increasing demand for higher and vocational skills, industries that are key to the green transition report below-average worker participation in education and training. (161) Around 60% of employers in these sectors (e.g. manufacturing and construction) indicate that lack of the right skills is a barrier to climate-related business investment. (162) According to public authorities, obstacles to investment in climate change include the lack of environmental and climate assessment skills, together with digital skills, engineering and other technical skills, and regulatory understanding. (163) Although training provision tends to be better in large and medium companies, they identified skills gaps as a barrier to climate investment more often than small and medium-sized enterprises. This may indicate a positive relationship between firm size and integration of climate-related measures in investment planning. Investment in staff training in the construction and manufacturing sectors has not returned to pre-COVID-19 rates and has even begun to decline. (164) These developments could exacerbate labour shortages, particularly in the construction, manufacturing, and transportation and storage sectors, which are projected to experience high labour market imbalances in the future (imbalances indicator above 2, Table A.5).
Some sectors relevant for the green transition have been particularly badly hit by population ageing. Water supply and waste management has the highest proportion of older workers (165) in the EU (40.7% in 2021), followed by the electricity sector (36.1%). Since 2015, the share of older workers has increased by 5.5 pp in water supply and waste management, and by 5.0 pp in energy-intensive industries, compared to an all-industry average of 3.4 pp. This growth in older workers is not matched by similar growth in young workers, who typically account for less than 8% of employment in each of these industries. Among the green transition-relevant sectors, replacement needs are projected to be most pressing in construction, transportation and storage, and water supply, sewerage, waste management and remediation activities (future shortage indicator of 3, Table A.5).
While data on green labour shortages are limited, available metrics hint at growing labour shortages in sectors crucial to the green transition. Between 2015 and 2021, the rate of vacant posts doubled in these sectors. (166) The average vacancy rate increased from 1.1% in 2015 (1.3% all-industry average) to almost 2.2% in 2021 (2.1% all-industry average), (167) indicating a slightly greater shortage of workers in these key sectors. Transformation sectors all showed a stable increasing trend in vacancies from 2015 to 2021, with a decline in 2020 that can be partly attributed to the economic shocks due to COVID-19. Looking at industry-specific trends of vacancy rates, broken down by five key sectors, the strongest increase is evident in construction, which grew from 1.6% in 2015 to 3.6% in 2021, reflecting increasing construction and renovation of buildings to support the 2030 climate goals (Chart 2.4). Overall, the total proportion of vacant posts has also grown in electricity, manufacturing, and transportation. By contrast, the vacancies in traditional energy-intensive industries such as mining and quarrying (0.7% in 2021) have grown only incrementally since 2015 (by 0.5%) and are well below the EU all-industry average (2.1%). With the exception of mining and quarrying, all of those industries contain subsectors with persistent labour shortages (see section 2.1.). Other data also suggest significant shortages in some energy-intensive industries in the Member States, such as manufacturing of minerals or chemicals. (168) In 2021-2022, occupations with green skills facing persistent labour shortages were identified in construction (bricklayers, carpenters and jointers; plumbers and pipe fitters), manufacturing (metal working machine tool setters and operators) and transportation (heavy truck and lorry drivers) (see Table A.1). (169)
Chart 2.4
Labour shortages are growing in green transition sectors and decreasing in polluting activities
Job vacancy rate in transformation sectors (NACE 1-digit), 2012-2022, EU-27
Note: Data missing for sector E - Water supply; sewerage, waste management and remediation activities.
Source: DG EMPL calculations, based on Eurostat dataset jvs_a_rate_r2.
Notes
- 139. (Muench et al., 2022).
- 140. For example, see (Cedefop, 2021a), (Cedefop, 2022c), (Cedefop, 2022f), (Cedefop, 2023a).
- 141. Technological advancement, including in sectors that are key to the green transition, increase the requirements for digital skills across the economy. For example, ICT and advanced electronic machinery are increasingly used to perform tasks in the building sector, including in the development of smart buildings, while improvements in fisheries and forestry sectors are increasing the demand for technological skills (Asikainen et al., 2021).
- 142. Policies increasing labour market and skills matching and labour market participation will play a key role in realising employment gains. For example, estimations in (European Commission, 2020f) show that using carbon revenue to reduce labour taxation for lower-skilled workers could increase employment by 0.45% in 2030 by stimulating low-skilled labour supply.
- 143. (Cedefop, 2021a); (Asikainen et al., 2021).
- 144. More information available here.
- 145. (European Commission, 2023b).
- 146. (European Commission, 2023h).
- 147. For example, up to 286 000 workers in the energy sector were predicted to experience job loss due to subdued economic activity in their sectors (Cedefop, 2021a).
- 148. (European Commission, 2020f)
- 149. (Cedefop, 2021a).
- 150. (Cedefop, 2022a).
- 151. Special Eurobarometer on fairness perceptions of the green transition (European Commission, 2022i).
- 152. (Inter-Agency Working Group on Work-based Learning: Cedefop, European Commission, European Training Foundation, ILO, OECD, UNESCO, 2022).
- 153. (European Commission, 2019b), (Asikainen et al., 2021).
- 154. (European Commission, 2022c), (Asikainen et al., 2021).
- 155. (OECD, 2023b), (Saussay et al., 2022), (Vona, 2019).
- 156. There is a strong positive association between the share of respondents agreeing that their current skills allow them to contribute to the green transition and country’s GDP per capita (correlation coefficient of 88.5%).
- 157. Based on the greenhouse gas (GHG) emissions levels of their production or products, sectors considered energy intensive are: mining and quarrying (B05-09); manufacturing of other non-metallic minerals (C23); manufacturing of basic metals (C24); manufacturing of chemicals (C25); and manufacturing of motor vehicles, trailers and semi-trailers (C29). Sectors in transformation that are directly affected by increased greening are: electricity; water supply and waste management; manufacturing; construction; and transportation and storage. They cannot be qualified as either fully low carbon or high carbon, but are key in driving the implementation of net-zero on the ground, and/or are expected to face the largest employment impacts due to continued decarbonisation of the economy.
- 158. DG EMPL calculations, based on Eurostat dataset lfsa_egan22d.
- 159. With potentially high future shortages in some subsectors.
- 160. According to (OECD, 2023b), 72% of green task jobs are held by men. This does not capture all ongoing employment impacts of the green transition, however, as it only focuses on jobs with green tasks and in selected sectors as defined by O*NET. Jobs outside these sectors, where the nature of tasks was unaffected but whose demand has increased due to greening of economic activity, are not covered in the analysis.
- 161. EU-LFS, participation of employees in education and training (last 4 weeks), by NACE 2-digit level, 2021.
- 162. European Investment Survey database: Tracking investment needs and constraints across Europe, available here. Data are based on survey wave ‘EIBIS 2020’, topic ‘Climate change and energy efficiency’, indicator ‘Factors impacting investment in activities to tackle the impacts of weather events and emissions reduction: availability of staff with the right skills to identify and implement investments related to climate change’.
- 163. (European Investment Bank, 2023).
- 164. (Pouliakas and Wruuck, 2022).
- 165. In this section, older workers are defined as the working cohort aged 50-74, based on EU-LFS data.
- 166. The indicator vacancy rate measures the proportion of empty vacancies in the total number of vacancies. Although imperfect, it is one of the few metrics to give an indication of the extent of labour of shortages faced in all sectors in the EU.
- 167. Indicative figure, based on available data for 17 Member States.
- 168. (European Commission, 2022g).
- 169. Based on (ELA, 2023). Skills and knowledge requirements are based on the ESCO taxonomy on skills for the green transition (436 occupations at ISCO 4-digit level). Examples are identified based on their ESCO ‘greenness’ score and relevant sectors.