Clean Energy Transition: how will it affect employment?

With the Federal Government’s commitment to reduce greenhouse gas emissions by 43 per cent below 2005 levels by 2030 and reach net-zero emissions by 2050, there is increasing interest in how the energy transition will affect employment, as some sectors face significant job losses and others continue their strong growth.

It is important to understand the labour market changes brought by the energy transition for two reasons. Firstly, there is a clear efficiency argument. Industry and governments need a detailed understanding of where jobs will grow and decline to secure continued, sustainable growth during a significant industrial restructure.

Secondly, we must also consider the equity side. Total employment changes are expected to be small, yet this obscures the potentially large changes in specific sectors and regions, with some bearing a disproportionate burden. If we understand the potential distribution of impacts, governments can initiate targeted retraining ahead of time to support workers in the transition to the new economy, as occurred with the end of car manufacturing in Australia.

The four key dimensions of future employment changes include: the total changes; changes by sector; the geographic distribution; and the pattern over time. Each of these convey a key insight into the future of work through the energy transition.

Total employment impacts are small

When researchers have modelled emissions reduction relative to a business-as-usual base case, most forecasts predict only a small effect on total employment from the energy transition (Figure 1).

Figure 1: Total change in employment by 2030 across multiple estimates.

In recent years there have been greater-than-expected decreases in the costs of renewables and storage. This has led some research groups to raise the level of expected growth in renewables jobs, such as the recent estimate by the Climate Council of 28,000 additional renewables jobs by 2030.

Employment effects are likely to be highly concentrated 

Despite small overall effects, changes from emissions reduction policies may be highly concentrated in certain sectors. Large decreases in fossil-fuel energy employment, and even larger increases in renewable-energy employment have been forecast, with the MONASH-Green model predicting at least a quadrupling in solar, biomass, hydro and wind electricity generation from 2015 to 2030 relative to the baseline (Figure 2).

Figure 2: predicted changes across sectors due to an emissions trading scheme.

While technology has progressed since this forecast, and it only represents one policy path, its high level of detail across sectors is a valuable signal of potential shifts over time. 

Although the increase in renewables employment appears ambitious, it is consistent with the near tripling of employment in renewables between 2015 and 2021.

Diverse regional impacts

The impact of the energy transition will not only be diverse across sectors, but it will also have different impacts across regions. In 2013, researchers simulated the regional effects of an emissions trading scheme (ETS) and estimated that it could result in eight per cent lower employment in the Hunter Valley in NSW; 10.6 per cent lower employment in Mackay in Queensland; 2.7 per cent lower employment in Gippsland in Victoria and 13.1 per cent higher employment in Southern Tasmania. While an ETS will no longer be the key lever for the future energy transition, any wide-scale industrial shift is likely to produce similarly diverse changes across regions.

To secure a sustainable, smooth energy transition, government must consider these impacts, especially since these regions will all have specific support needs over the transition – policies that work in Mackay are unlikely to be as effective in Southern Tasmania.

Trend of changes over time

Growth in renewables employment is likely to be uneven over time, as projects require high levels of temporary construction workers and much lower levels of ongoing employment in maintenance (Figure 3).

Figure 3: Forecast labour demand by job type under a Step-Change scenario.

This strengthens the need to forecast future labour needs accurately, to reduce risks of project delays from skill shortages and create job security for workers in a potentially volatile sector.

We should act now for the energy transition to succeed, but the uncertainty surrounding its impact on jobs, businesses and communities makes this difficult. Australian organisations such as the Institute for Sustainable Futures at University of Technology Sydney, the Climate Council, Infrastructure Australia and the industry-led research centre RACE for 2030 have already done much work to support our understanding of that future, but much more needs to be done.

Given the size of the challenge, the Federal Government must lead the way by bringing all stakeholders together to provide clear data and comprehensive modelling of our potential futures to inform the transition ahead.