Fit for 55 policy package to boost green transition: An interesting reading on a stress-test of the impact of an emblematic, and quite needed, EU policy on employment.

An insightful research report on the Impact on EU Employment deriving from the policies required to achieve the green transition by 2030, was recently released by the European Foundation for the Improvement of Living and Working Conditions (Eurofound).[1]

It is well known that one of the core strategic objectives of the EU is to ensure that Europe becomes the first climate-neutral continent, with net zero greenhouse gas emissions by 2050. To achieve this objective, EU policymakers adopted the Fit for 55 policy package in 2021, which contained more ambitious intermediate decarbonization objectives aimed at reaching a 55% emission reduction target by 2030. In the Eurofound report, projections from a global macroeconomic model of how this complex policy package may affect the sectoral and occupational structure of employment in the EU by 2030, and the impacts across different regions and countries, are being provided. A core finding is that the employment impacts of Fit for 55 are likely to be marginally positive at EU aggregate level but will vary across countries, regions and sectors based on their reliance on carbon-intensive industries on the one hand and their readiness to take advantage of greening opportunities on the other.

Carbon neutrality is an ambitious objective that requires large investments sustained over time. It will require dramatic changes in the way we source and use energy. The impacts of the policies required to achieve the green transition will vary considerably among sectors and will affect countries’ income and employment levels and the composition of employment, creating employment in some sectors and destroying it in others.

In the EU’s aim to become carbon-neutral by 2050, 2030 is a critical staging post. In 2021, EU policymakers adopted more ambitious intermediate decarbonization objectives than before, and updated policies accordingly. The principal objective of the Fit for 55 policy package is to achieve a 55% reduction in greenhouse gas emissions compared with 1990 levels by 2030 (the prior target was a 40% reduction). This is a complex package of proposals that operates on many fronts; it extends the scope of the EU Emissions Trading System, revises upward targets for renewable energy use and energy efficiency, puts in place a carbon border adjustment mechanism and tightens emissions standards for cars and vehicles. The package is also an evolving set of policy commitments. For example, in 2023 the Council of the European Union and the European Parliament have agreed provisionally to further strengthen the contribution of renewables to overall energy consumption by 2030 (to 42.5% from 40 indicated in 2021, up from 32% in 2018). Anticipating the impact of developing EU climate policy on the composition of employment in EU labour markets provides essential data to policymakers tasked with ensuring that the green transition is a just transition.

If we were to summarize some key findings of the report, these could be summed up as follows:

  • Most projections of the impact of decarbonization policies on employment at an EU level show very modest net gains, rarely much more than 0.5% compared with the baseline.
  • A net 204,000 jobs are projected to be created in the EU Member Statesas a result of the Fit for 55 package, in addition to the baseline employment growth of 6.7 million net new jobs between 2019 and 2030.
  • The employment effects vary across regions and countries based on their reliance on carbon-intensive industries on the one hand and their capacity to take advantage of greening opportunities on the other.
  • Negative employment effects are more likely in some central and eastern European countries (for example, Poland and Romania) and regions with relatively high shares of workers still working in extractive industries; while positive employment effects are projected in southern European countries (in particular, Spain and Italy) and regions with natural endowments (wind and sun), developed energy efficiency infrastructure and capacity to manufacture renewable energy equipment.
  • With regard to jobs in both energy efficiency improvements and renewable energy capacity development, the sector likely to benefit most in terms of employment is construction. There will also be increased employment in market services as relative prices favour a shift in the structure of the economy towards ‘cleaner’ sectors, reinforcing the employment shift to the services sector.
  • While employment overall is projected to improve towards 2030, the small boost to employment forecast for Fit for 55 tends to occur in medium-low and medium wage jobs that do not require tertiary qualifications.

Even though overall employment projections for 2030 arising from Fit for 55 are mildly positive, the absolute employment impacts of Fit for 55 policies are higher in the regions negatively affected – for example, in Polish and Romanian regions with a relatively high share of employment in mining and extractive sectors – while positive employment impacts are more dispersed across regions. This supports the rationale for region-focused funding of supportive measures, such as the territorial just transition plans.

Projected employment impacts are sensitive to the details of policy implementation. Potentially greater gains in both output and employment may arise in a context of dedicated climate-related fiscal policies where carbon revenues are recycled in order to reduce labour taxes. Such revenues may be also boosted by the retraining necessary to facilitate employment reallocation to less carbon-intensive sectors and occupations.

The source of finance for the large capital investment required by the green transition is also an important determinant of whether Fit for 55 policies will be employment-positive or -negative in practice. When funds are available without the need to crowd out existing investment plans, the macroeconomic implications are positive. However, when the financing of greening investments is not loan-based, both output and employment are projected to decline, albeit marginally.

Policies aimed at lowering greenhouse gas emissions will have differential impacts on employment by sector and by occupation, increasing the demand for some jobs and decreasing it for others.The report concludes with the policy pointer that we have to work hand in hand with education, training and employment policies in order to prepare workers with the required skills and competencies to contribute to the collective decarbonization effort. It is at this exact point that it remains to be decided what the contribution of the practitioners providing up/re-skilling services to NEETs shall be at this direction.

[1] Eurofound (2023), Fit for 55 climate package: Impact on EU employment by 2030, Publications Office of the European Union, Luxembourg.

Yiorgos Alexopoulos (AUA) and Eleni Bletsa (ANKA)


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