Informal Joint Meeting of EU Environment and Labour Ministers General Background document Session Green growth and employment

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1 Informal Joint Meeting of EU Environment and Labour Ministers General Background document Session Green growth and employment Milan, 17July Over the past years most countries in the world have witnessed the emergence of a tremendous economic and financial crisis, which has provoked a rapid and sudden economic downturn and resulted in a permanent loss in the level of potential output. Economies affected by the crisis were not only weakened in their potential growth, but also hit in their social welfare, with millions of job losses in a relatively short period of time. During the crisis the persistent structural economic challenges of the EU did not go away, and the global context for Europe's relative competitiveness changed. Emerging economies and their rising middle class consumption habits provided new market opportunities, but also put strain on supplies of natural resources, which are an essential input for EU industries, leading to strong rises in the prices of material and energy inputs. The crisis, however, pushed for a re-thinking of economic policies so that many recovery plans adopted nationally in many countries worldwide contained measures to enable a long-term and more sustainable economic growth through the inclusion of robust green packages as well as social measures to support employment. In this context the first steps worldwide to enable a transition towards a green, low-carbon, climate resilient and resource-efficient economy took place as well as the first attempts to improve connections among economic, environmental and employment policies. Starting in 2008, UNEP, ILO and OECD have launched several initiatives that have explored interlinkages between green economy and employment, in particular "green jobs", and set the foundation for an integrated approach at policy level, marking milestones in this direction. In the EU, the potential of job creation in the environmental goods and services sectors (EGSS) linked to the production of energy from renewable sources, energy efficiency, waste and water management, air quality, restoring and preserving biodiversity and developing green infrastructure is significant and at least partly resilient to business cycle changes. Increased investment in insulation and energy efficiency is likely to have a positive impact on job creation in the construction sector where more than 4 million workers will need up-skilling 1. Jobs should also be created in the biomass and biofuels sectors 2. There has been considerable job creation in the environmental goods and services sector (EGSS) even during the economic crisis. Environment and energy efficient employment related in the EU increased from 3 to 4.2 million between 2002 and 2011 and by 20% during the recession years ( ) 3. 1 COM, BUILD UP Skills (2013), Preliminary findings from Member States Roadmaps See for ex. EcoRys (2012), The number of jobs dependent on the environment and resource efficiency improvements. 1

2 Going beyond the EGSS to the wider economy, by increasing the efficiency of production processes, adopting innovative solutions to save resources, developing new business models and offering more sustainable products and services, companies can remain competitive, expand their markets and create new jobs, while transforming existing ones. A 30% resource productivity in the EU by 2030 can contribute to creation of more than 2 million jobs and to nearly 1% of GDP growth 4. Internal transformation of jobs will also take place in the context of sectors with a high share of emissions (energy power, transport, agriculture, building which are responsible for respectively 33%, 20%, 12% and 12% of EU greenhouse gas emissions) 5. The transition towards a green, low-carbon, climate resilient and resource-efficient economy would entail a shift away from resource expenditures towards innovative equipment with high added value and recycle/re-use techniques. Such innovation will create global business opportunities that would benefit EU competitiveness and domestic employment. The Europe 2020 Strategy on smart, sustainable and inclusive growth has been a major step in the direction of building a renewed European governance, more concerned with people and the planet. While concrete progress has been made, more efforts are still needed to achieve the Europe 2020 targets in a coordinated way, to attain well-being, equity and sustainability in a growing economy and to better integrate these objectives into the European Semester for economic policy coordination. The Europe 2020 Strategy has set a headline target on environment made of three components, namely the reduction of GHGs emissions of 20% by 2020 compared to 1990 levels, the increase of the share of renewable energy in final energy consumption to 20% and to achieve a 20% increase in energy savings. While the EU is on track to meet its greenhouse gas (GHG) emissions and renewables targets, further efforts are needed to reach the energy efficiency objective. The 2020 targets for GHG emissions, renewable energy source and energy savings have played a key role to drive progress and sustaining employment of more than 4.2 million 6 people in the eco-industries, with continuous growth during the crisis. At the same time, the EU 2020 Strategy also sets a target of 75% of the population aged to be employed by The EU employment rate stood at 68.4% in 2012, compared to 68.5% in 2010 and 70.3% in the peak year of Based on recent trends, it is expected to increase to around 72% in CEDEFOP studies 7 show that achieving both climate and employment Europe 2020 targets at the same time is still possible but requires better integration of climate and energy polices with measures to support employment across the EU, including better addressing skills mismatches, to cope with the transition process. Greening the economy is expected to significantly change skills demand: anticipating and forecasting employers skills needs is key in ensuring a smooth transition towards a green economy and in minimizing imbalances skills and jobs mismatches in labour market, and should be at the core of any economic growth policy. Better forecasting skills needs across sectors and industries will allow the relevant authorities and stakeholders to adapt to change. 4http://ec.europa.eu/environment/circular-economy/pdf/AnalysisEUtarget.pdf 5See Cambridge Econometrics, and al. (2013), Employment effects of selected scenarios from the Energy roadmap 2050, Final report for the EC (DG Energy), 6Eurostat data on the environmental good and services sector. 7 CEDEFOP (2013) Skills for a low carbon Europe. The role of VET in a sustainable energy scenario. Synthesis report. Luxembourg: Publications Office of the European Union

3 Measures will be also required to protect low skilled workers and women 8 from the risk of social exclusion and in-work poverty, through both enhancing and re-shaping skills and competencies and promoting gender equality in the access to STEM-related fields and occupations. Measures to support job creation are very much needed, as well as measures for securing transition from declining to emerging activities. Restructuring the labour market should be handled in a socially responsible way, in particular to preserve human capital. A pro-active approach by PES Public Employment Services is also needed to provide comprehensive services such as training and general re-skilling initiatives, particular targeting the most vulnerable. Supporting green jobs creation could, in particular, include measures such as shifting taxation from labour to environment, resource and energy use. This could be further enhanced by using carbon pricing to lower labour cost, promoting green public procurement and green entrepreneurship. Furthermore, consideration should be given to investments for the conservation, restoration and enhancement of the natural capital that results in economic revenues, contributing to the creation of new employment opportunities, and sustaining activities that generate jobs such as in the tourism sector. Going towards a circular economy would also create new jobs in the product maintenance, repair, recycling and (re)design sectors. Some Member States have developed tools to monitor the demand for green jobs, but still much needs to be done. A fundamental progress in this direction would be the broadening of the statistical framework on green jobs, building on the work already in place in the context of the European environmental economic accounts. As sustainable development is the guiding principle for development 9 in the European Union, the European Semester and the forthcoming mid-term review of the Europe 2020 Strategy are important opportunities to explore ways and means for pursuing the integration of environment and employment policies; to further mainstream them into economic policy coordination and planning; and to build synergies among environmental and employment targets and flagship initiatives. Several flagship initiatives are relevant in the context of green economy and green jobs: the Agenda for new skills and jobs ; the Youth on the move ; the "Resource-efficient Europe"; An industrial policy for the globalisation era ; Innovation Union. Within this framework, linking the debate on greening the European Semester and the midterm review of the Europe 2020 Strategy with the 2014 Commission initiatives on circular economy, waste policy and targets review, the proposed 2030 framework for energy and climate, sustainable building and green employment, offers a promising avenue to boost growth and jobs in the context of a smart transition towards a green economy in the EU and to advance in the process of identifying broader measures of progress. An integrated approach is needed to exploit the employment potential and address possible challenges of the transition towards a green, low carbon, climate resilient and resource efficient economy; at the same time the establishment of a sound and robust connection between growth, employment and environmental policies is a fundamental step forward in the direction of sustainable and inclusive development. The shift to a green and resource efficient economy is above all an opportunity to increase European global competitiveness, to secure the well-being of future generations, and to 8 OECD (2014). Greener Skills and Jobs. OECD, Paris. 9 Article 11 of the Treaty on the Functioning of the European Union: Environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities, in particular with a view to promoting sustainable development.. 3

4 support sustainable and high quality employment, while contributing to the recovery from the recent economic crisis. Employment and labour markets policies at large need to play a more active role in supporting employment and skills related to the transition to the green and resource efficient economy. The Green Employment Initiative of the European Commission addresses the following issues: Improving integration and coordination of existing European and national level policies and initiatives; Further developing governance structures and methodological tools to facilitate the transition towards a green and resource efficient economy, to better coordinate policies and to ensure consistent monitoring of reform measures; and establishing a closer working relationship and dialogue with social partners on the employment challenges for greening the economy; Further strengthening the existing Commission skills intelligence tools and networks to better anticipate and monitor developments in sectors and occupations linked to green growth, resource efficient and circular economy; Ensuring that EU and Member States funding programs and policies support the job creation in the green economy; Reporting on progress related to green employment as part of the National Reform Programmes (National Job Plans) of Member States and assessing it in the European Semester; Working towards an international playing field in promoting green and inclusive growth; Building on the recommendations of European Resource Efficiency Platform to develop a broad strategy for greening jobs, skills and education. The Informal Ministerial meeting on environment and employment provides an opportunity to explore specific actions that Ministers could jointly take to profit of the interconnections between green growth and employment. There is the need to launch a process that enables the EU to move forward on the implementation of mutually supportive and integrated policy measures in these fields. We need to integrate green employment and green economy policies, mainstream labour and environment into economic policy and planning, and boost growth and jobs. Each of the following Roundtable is intended to be a step forward in the direction described above. 4

5 Informal Joint Meeting of EU Environment and Labour Ministers Background document Roundtable 1 Employment and environmental policies: tools, experiences and barriers Milan, 17July :30-12:45 Level 1 Facilitator Jacqueline McGlade - UNEP I. Introduction With a world unemployment level estimated at around 200 million 10 and an additional 5 million job loss projected for combined with the 2008 financial crisis that wiped out more than 50 million jobs, employment is still a major problem with the youth being especially affected. Indeed, according to ILO, tens of millions of young people newly enter the world s labor every year, but not all of them secure gainful employment. With a forecasted global unemployment rate at around 6,3 % in pitted against the need to create 600 million in the next 10 to 15 years, it becomes vital to unearth new employment opportunities. A transition towards green jobs presents such opportunities and the numbers say it all: the global market for environmental products and services is projected to double from $1,370 billion per year at present to $2,740 billion by Business-asusual is no longer an option. II. Towards more equitable and sustainable green jobs UNEP defines green jobs as work in agriculture, manufacturing, research and development (R&D), administrative, and service activities that contribute substantially to preserving or restoring environmental quality. Specifically, but not exclusively, this include jobs that help to protect ecosystems and biodiversity; reduce energy, materials, and water-consumption through high-efficiency strategies; de-carbonize the economy; and minimize or altogether avoid generations of all forms of waste and pollution. The transition towards more equitable and sustainable green jobs implies some structural changes both at the policy and regulatory levels while understanding new requirements in the job markets (analyzing both the quality and quantity of jobs and training towards acquiring new and more relevant skills), fully involving the private sector (e.g. use of feed-in-tariffs for renewable energy or concessional lending for green SMEs start-up); linking green jobs to opportunities for the post-2015 through sustainable development goals, and introducing innovative tools and instruments. Some of the key issues that need to be considered are macro-economic policies (for example: high carbon prices to deter the electricity sector from using more coal could provide substantial 10 ILO Report Roland Berger Strategy Consultants 5

6 revenues and offset potential inflationary effects of high carbon pricing) ; financing and investment; technological innovation (including smart and 3D technologies); and incentives. Other important aspects include equity, wages and social protection (more than 43% of the global workforce is living below the $2 a day poverty threshold); sustainable production and consumption; the implementation of circular economy; combine strong labor policies and environmental policies supported by adequate legal frameworks. Some of the challenges include the greening of brown sectors and finding alternatives/substitution for jobs lost in the brown sectors that have great multiplier and value-added effects on income and employment; reducing insecurity due to job displacement; and ensure that demands for new job skills are met. III. Policy tools and instruments in support of green jobs and labour market transitions While the role of the private sector is undeniably crucial in terms of creating jobs and generating growth and value-addition throughout the economic food chain, fostering dialogue with all stakeholders will play a key role in ensuring the development and implementation of sound policies for green growth and a labour market adapted for green jobs. Some of the potential policy instruments include: Subsidies: A phasing out of all harmful subsidies towards investments on cleaner, more efficient technologies and modes of transportations; Tax reform: Scaling-up of eco-taxes and using part of the revenues as buffers to alleviate tax burdens on labor while discouraging less-carbon intensives and polluting economic activities. It is important to note that such instrument can also generate some amount of push back if the payments and rewards ratio are not carefully calibrated (e.g. France who has recently repelled the eco-tax); Carbon markets: Fix some of the inherent shortcomings of the carbon trading schemes under the CDM and generate sustainable and predictable revenue streams to be re-invested in green jobs projects; Targets and mandates: Regulatory tools are used in the drive to develop greener technologies, products, and services and thus green employment. This includes land-use policies, building codes, energy-efficiency standards (for appliances, vehicles, etc.), and targets for renewable energy production; Energy alternatives: Adopt innovative policies to overcome barriers to renewable energy development, including feed-in laws and tariffs that secure access to the electrical grid at guaranteed prices; Product take-back: Adopt laws requiring companies to take back products at the end of their useful life for all types of products; Green public procurement: Improve GPP policies in order to further identify common environmental criteria to serve as a template for public purchasers; Eco-labelling: Adopt eco-labels for all consumer products to ensure that consumers have access to information needed for responsible purchasing decisions; Budgeting for R&D: Reduce support for nuclear power and fossil fuels and provide greater funding for renewable energy, eco-innovation, efficiency and smart technologies; 6

7 Redirecting international aid schemes: Reorient the priorities of national and multilateral development assistance agencies as well as export credit agencies away from fossil fuels and large-scale hydropower projects toward greener alternatives; Education, training and building capacity for entrepreneurship: Through setting-up apprenticeship schemes IV. Green Jobs opportunities at-a-glance 12 Knowledge industries: For instance, in the US alone businesses providing smart grids products and services grew 140 percent from 1995 to Research and development: Investment and use of smart technologies such as Smart Shape Technology (SST) via mobile devices and wireless chips containing 3D design data and linked to smart hubs gives consumers access to suppliers, local chain manufacturers and help make decision on the use of clean and green products. In Chicago for instance, a shift to SST created 50,000 new manufacturing jobs with each manufacturing job creating an additional 2.3 jobs in the service sector 14 ; Renewable energy: More than 2.3 million jobs in recent years including in the wind, solar PV and solar thermal industries; Energy efficiency in buildings and constructions: Created some 4 million green jobs; Transportation: It offers substantial opportunities to create massive employment with around 1.3 million people working in public transports in the EU and US alone; Basic industries and recycling: Although conflicting statistics exist with regard to employment especially in the recycling industry, estimates for the US alone is around 1 million; and Brazil, China and the US at more than 12 million people while Western Europe employs around 1.3 million people; Agriculture: Presents major opportunities for green jobs being the largest employer in the world at 1.3 billion farmers. Unsustainable farm practices can be corrected switching towards a more sustainable and organic farming which reaped a $100 billion sales profit worldwide. Other very good examples of countries who have been transiting towards organic farming include Kenya and Uganda; Forests: Play a major role in maintaining natural life s-support systems and provide jobs for 40 million people and livelihoods for 60 million others worldwide. A switch towards green jobs in forests provides great opportunities for income and employment multiplier and value-added effects as well as great way to reduce poverty. Questions for discussion: 1. What are the key policy tools and instruments (e.g. tax shift) that could help foster the transition to green growth in the EU? 2. What are the targeted policy responses required to overcome the existing barriers to stimulate both the creation of green jobs and the transition towards green growth? 3. How strengthening the environmental and social priorities in the economic governance of the EU could help in the pursuance of an integrated approach? 12 UNEP/ILO Green Jobs Report Silicon Valley Smart Grid Task Force Report Smartamerica.org/smart-shape-technology 7

8 Informal Joint Meeting of EU Environment and Labour Ministers Background document Roundtable 2 Employment potential and skill needs in a greener economy Milan, 17July :30-12:45 Level 1 Facilitator Peter Poschen, ILO Environment and employment challenges and opportunities 15 Recovery from the global crisis which erupted in 2008 is both fragile and uneven. Unemployment in many EU member states has remained high. Particularly among youth it has reached unprecedented levels with 30 and in some countries 50 per cent of job seekers from years in unemployment. Together with growing income inequalities this is a threat to social cohesion. With low levels of business and consumer confidence, investment and growth remain sluggish. At the same time, climate change and environmental degradation pose significant challenges to economic growth and employment in the medium to long term, and require complex adaptation and mitigation measures. Business-as-usual (BAU) strategies for growth and employment are increasingly self-defeating as they approach and breach planetary boundaries. Research by OECD, the World Bank, the ILO and others has unanimously found that BAU will increasingly undermine productivity and destroy enterprises and jobs. The EU has adopted ambitious climate targets as part of a transition to a greener economy under its Europe 2020 Strategy 16 : (i) to decrease GHG by 20% compared to 1990 levels, (ii) increase the renewable energy production to 20% of all energy production; (iii) 20% increase in energy efficiency. Such policies drive markets worldwide. Worldwide, the six lead markets 17 in the green-tech industry will be worth a combined total of EUR 4,400 billion by 2025, a figure that corresponds to average annual growth of 5.6 per cent between now and then (Roland Berger Consultants for BMU ). The transition to a greener economy will affect the volume as well as the nature and quality of employment. It is also likely to have significant effects on income distribution. These effects occur directly and indirectly as green sectors and their supply chains grow faster while energy and resource intensive sectors stagnate or contract. The transition can also have significant 15 This issues paper provides a summary of salient issues. For a fuller and global discussion see: ILO (2013) Sustainable development, decent work and green jobs, Geneva relconf/documents/meetingdocument/wcms_ pdf Six lead markets are: energy efficiency, sustainable water management, environmentally friendly power generation and storage, sustainable mobility, material efficiency, and waste management and recycling

9 induced effects on employment, however, depending on changes in trade balances and budget effects for enterprises and households from resource prices. A significant number of environmental jobs already exist in the European Union. Ecosystem services for example, are estimated to employ 14.6 million workers directly or indirectly to protect biodiversity and rehabilitate natural resources and manage forests. Entirely new industries have been created in recent years. Renewable energy, for example, employs 1.2 million workers in EU member states. Average annual growth in green employment was 2.7% from From 2.4 million jobs in 2000 it went to 3.4 million in The transition in carbon- and resource intensive sectors is likely to have a moderate impact when compared to that of trade liberalization. An OECD study estimates that only around 1 per cent of the workforce is likely to face job losses and a shift to another economic sector. An area that is particularly attractive is energy and resource efficiency. Gains in energy efficiency translate into employment gains via direct and direct employment in sectors such as construction, transport infrastructure, equipment manufacture and recycling. The induced effects can be much larger as expenditure for domestic and imported energy is reduced through cost-effective measures. They are also cumulative over time. Every percentage point reduction in resource use leads to 100, ,000 new jobs. This could yield million jobs by Through increase energy efficiency, up to 2 million green jobs are being created or retained by Buildings, in particular housing, as well as energy efficient transport have very large potential to generate additional employment and can benefit poor households. A significant additional benefit is increased energy security. This also holds for renewable energy which is rapidly becoming competitive. In central and eastern Europe, the potential is particularly large in energy efficiency in buildings, industry and transport but also in material recycling. EU-wide, waste management and recycling could create between 0.4 and 0.7 million jobs by An important fact to take into account is that the greener economy is dominated by small and medium-sized enterprises which are also the main source of new employment creation economy wide. They do, however, face particular barriers to access these new markets. On balance, most available estimates mostly based on meeting limited climate goals agree that a well-managed transition will lead to a net gain in jobs. Economy wide, these gains are estimated to range from per cent of the total workforce 21. This would make a notable contribution to reducing unemployment. Moreover, several studies suggest that the gains for growth and employment could significantly larger if investment was driven by more ambitious environmental goals. A green growth scenario which increases the GHG emission reduction target to 30 % by 2020 could trigger significant investment. It could cut unemployment in the EU-27 to 13.4 million by 2020 (5.3 per cent), as opposed to 19.4 million (7.6 per cent) under BAU, i.e. almost one third lower 22. Another study 23 finds that stepping up the EU-GHG reduction to 40% in 2030 lead to a net increase of 1.25 million jobs with the right policies in place. 19 See for ex. EcoRys (2012), The number of jobs dependent on the environment and resource efficiency improvements. 20 Di Pietrantino, L Working towards a green economy after Rio+20, Brussels 21 For a summary of available studies see ILO (2014): Sustainable development, decent work and green jobs 22 C.C. Jaeger et al.: A new growth path for Europe: Generating prosperity and jobs in the low-carbon economy, Final report (Potsdam, European Climate Forum, 2011), p EC (2014) Impact assessment, A policy framework for climate and energy in the period from 2020 up to 2030 (see page 88). COM(2014) 15 final}{swd(2014) 16 final}, 9

10 Income effects from increased resource prices due to taxation or scarcity are affecting poorer households more as a much larger proportion of their income is used to purchase energy and related good and services. Heating alone consumes 10 per cent and more of the income of households in the lowest income decile. Social policy can compensate this effect. For instance, renovation of social housing for energy efficiency can cut this expenditure by over half, while creating additional employment in the building sector. Policies matter Markets react to policy signals. In fact, the employment and income effects of policy signals are to a large extent determined by the policy instruments used to drive the shift to a greener economy. It will require a mix of: i) green taxes which reduce market distortions and provide incentives; ii) greater investment in greening; iii) social and labour market which facilitate transitions and improve skills, and iv) social dialogue to ensure a well informed and broad consensus regarding the shift. Eco-taxes or equivalent emission trading schemes, which shift the tax burden from labour to pollution and resource use are particularly effective in generating a double dividend of higher employment and lower environmental impact 24. Energy and resource efficiency, though particularly attractive from an environmental and an employment perspective are trailing behind target. The green growth study cited above concludes that concerted, EU-wide measures are found to be more effective than isolated national actions. Skills for a greener economy Skills play a critical role in seizing the economic and employment potential of a greener economy and for dealing with the challenge of structural adjustment. Skills shortages are a significant bottleneck even in the most advanced countries and sectors in the EU. Changing and emerging occupations in a greener economy will not only affect demand for high-skilled workforce but also medium-level vocational qualifications. Apprenticeship training and other types of hands-on experience are particularly valuable in increasing workers adaptability in changing labour markets 25. A massive change in skills demand will affect those occupations that are already wellestablished on the labour market: the skills composition of the occupational profiles will need to adjust. The construction sector is a good example. At the same time, new occupations mostly emerge alongside the technological change and innovation and require higher levels of education and especially STEM (science, technology, engineering and mathematics) skills. Core employability skills such as leadership skills and readiness to learn remain essential and will continue to underpin occupational mobility. Environmental awareness is itself becoming an important core skill and merits inclusion in education from childhood and continuing through lifelong learning programmes 26. In the carbon-intensive sectors which are likely to undergo structural changes by adopting more eco-friendly approaches to economic production and/or will see job losses, different sets of skills will be required from workers. Earlier ILO research demonstrated that the share of low-skilled workers in carbon-intensive sectors is higher than in low-emitting ones (26% vs 24 See Torres, R. (2008) The social impact of policies to address climate change: a review of the issues. International Labour Review, Geneva 25 ; 26 Ibid 10

11 18% respectively in the EU-15) 27. Retraining and skills upgrading are therefore essential for productive transformation and lowering social costs of the economic adjustment. Identifying future skill needs and putting in place coherent environmental and skills development strategies are therefore essential for realising the job creation potential from green growth and for granting access to these jobs to all, including women, youth and disadvantaged groups. Without coherence between skills and environmental policies, skills bottlenecks may well impede the successful transition to greener production and consumption. Particularly sectors dominated by small and medium-sized enterprises need support to adapt. At the same time, the ILO research has demonstrated that although most countries have drawn up some environmental policies, few have put in place the skills development strategies needed to implement them 28. Cedefop reports that European countries have, to date, made limited progress in identifying skill needs for a low-carbon economy and integrating this understanding into coherent education and training policies. Examples of national strategies for green skills are limited to a few Member States including France, Austria and the UK 29. Tripartite institutional platforms and public-private partnerships at national and sectoral levels proved to be instrumental in establishing social dialogue and policy coordination between environmental, employment and skills development policies. Bringing trade unions and employers associations into the planning, design and implementation of skills development does a great deal to boost the responsiveness of education and training and can trigger green transformation on a larger scale 30. Questions for discussion: 1. How could EU member states and the Union as a whole achieve greater investment into green economy as driver of job creation? What could an ambitious scenario achieve in your country and EU wide? How could greater ambition get political support? 2. What are the barriers (awareness? perceptions? skills? profitability? incentives? cash flow? etc.) and how can they be overcome? In particular, what needs to be done to ensure SMEs which can create local jobs in large numbers can seize the opportunity of a greener economy? 3. What policies will work best to reap the double-dividend for environment and employment? How can ministers of environment and labour cooperate more effectively to this end? 4. How do your countries anticipate and address skills bottlenecks in the transition to greener economies? 5. What institutional mechanisms do you have in place or envisage do ensure enterprises and workers acquire the skills for a greener economy? 27 publ/documents/publication/wcms_ pdf, p ;

12 Informal Joint Meeting of EU Environment and Labour Ministers Background document Roundtable 3 Towards a green economy; successfully manage the associated labour market transitions Milan, 17July :30-12:45 Level 1 Facilitator: Stefano Scarpetta, OECD As highlighted in the recent EC Communication, Green Employment Initiative: Tapping into the job creation potential of the green economy, a successful transition towards a low-carbon economy will necessarily reshape the labour market, creating new opportunities for workers, but also risks. Labour market and skills policies can make an important contribution to a successful transition by facilitating the structural change required to put green production practices in place. Policies should also seek to maximise the benefits of green growth for workers while assuring that adjustment costs remain acceptable. Failure to meet these challenges can undermine political support for green growth policies. Greening the economy will create additional employment in some sectors, but will also make some jobs obsolete and change the skill requirements of others. One of the main labour market impacts will be to alter the sectoral composition of employment, with green sectors growing rapidly and the more CO2-intensive sectors needing to change their technologies or shed jobs in the transition towards green growth. The international evidence so far available about labour market effects of green growth and related wage developments is mixed. For example, recent simulations carried out by the OECD suggest that the net impact on overall employment is likely to be positive but small in comparison to the total number of jobs. Even the more sizeable impacts on the industry mix of jobs will be small compared to the high underlying rates of labour reallocation generally observed in European countries during recent decades, including due to the impact of deepening globalisation. The main reason for this is that much of the economic restructuring implied by an active green growth policy occurs within the energy sector and that sector employs only a small share of the total workforce. While certain green sectors, such as renewable energy, will grow at a rapid pace, the overall labour market impact will still be small. The overall impacts on employment tend to be more positive if revenues of carbon or green taxes or auctioning are used to lower labour costs paid by employers. As in the case of the ICT revolution, the shift towards greener production practices will lead to changes in skill requirements across the economy. However, unlike the ICT revolution there appear to be few uniquely green skills ; the green skills that new labour market entrants will require can largely be acquired by incremental enrichment of established vocational education and training programmes, combined with some top-up training in the case of experienced workers. However, the strong increase in environmental 12

13 patenting observed in some countries such as Germany, also suggests the importance of preparing the workforce for a period of rapid eco-innovation, including by raising science, technology, engineering and mathematics (STEM) skills. The transition towards green growth will not only create new opportunities for workers, it could also create challenges but evidence shows that this transition can be managed by reskilling. Employment in areas with a high concentration of either traditional energy-intensive and high-carbon industries or by poor economic diversification risk being hit during the transition process and development of integrated strategies for economic revitalisation of such areas is therefore an important element of the transition process. Although relatively few workers appear to be at-risk, some of the workers in these industries will need targeted assistance, such as retraining to be able to work with cleaner technologies, or help finding new jobs in growing green sectors. These measures will be particularly important in several European countries where coal mining or heavily polluting heavy industry are still major sources of employment. The greening of the European economy is already generating significant numbers of new jobs in key sectors, such as renewable energy and energy-efficient construction, and will continue to do so in coming decades. There has also been acceleration in the development and application of new environmental technologies, which is creating new occupational specialties such as designers and operators of smart electrical grids, and opening up new export markets. For example, green technology innovation hubs have developed in the Copenhagen area and in several other EU countries, which are opening up new export markets and generating employment. Overall the transition to greener growth is likely to involve distributional effects. While well-designed green growth policies can result in a higher level of well-being when all costs and benefits are considered, including the future beneficial effects of improved environmental quality, the associated adjustment costs will be largely borne by specific segments of the economy and their workers. This raises distributional concerns suggesting that appropriate supporting measures may be required to compensate those directly affected. One important challenge, particularly in light of today s labour market condition in Europe, will be to ensure that short-term problems associated with labour market transitions do not turn into long-term disadvantages. Key policy tools to help successfully manage the transition include: Reducing insecurity due to job displacement. The transition will reinforce the need for achieving a workable model that combines a high degree of labour mobility with appropriate support for job losers. It will be especially important to provide effective employment support to displaced workers, even if this means higher spending on active labour market policies and in-work support in the short-term. This support can take the form of adequate income replacement benefits combined with effective activation measures for benefit recipients. Some workers will need targeted assistance, such as retraining to work with cleaner technologies or help finding new jobs in growing green sectors. Reconciling efficient flows of workers from declining to growing firms with income and employment security will be a crucial precondition to defuse political opposition to green growth policies. Fostering eco-innovation through education and training. Developing stronger basic skills in core fields, including mathematics and science, will be essential for compulsory schooling. At the same time, the general case for strengthening tertiary 13

14 education in such a way to train quality graduates who can contribute directly or indirectly to innovation in their workplace and harness research excellence and links to industry is made even stronger in the light of green growth. Redistributive policies. The priority must be to ensure that the tax and benefit system is made more supportive of employment. Putting into place a comprehensive green strategy will provide a unique opportunity to improve the effectiveness of tax and benefit systems. The available evidence across the OECD area demonstrates how the additional revenue from carbon pricing can be used to reduce the tax wedge on labour incomes, so as to promote job creation. However, a careful analysis of the tax/benefit system in a given country will be required to assess whether current distortions from labour taxation are severe enough that this would be the most valuable use of new tax revenues, as well as an assessment of how best to target reductions in labour taxation. Green-specific labour market and skill policies, especially to help meet new job skill needs. An OECD questionnaire sent to labour and employment ministries reveals that about 60% of the responding countries have implemented at least one labour market measure targeted on green growth, with training being the most common type of measure. However, most of these measures are of small scale and were only recently introduced. The limited experience with implementing these policies suggests that they confront two particularly difficult challenges; detecting how green growth is changing labour demand and jobs skill requirements, and co-ordinating labour market and skill policies with environmental policy. This suggests that the role for greenspecific measures is likely to emerge only incrementally, as the environmental policy framework needed to support green growth develops and experience with managing the labour market dimension of the transition to green growth accumulates. To successfully manage the transition towards green growth, governments must also look at ways to build an effective social dialogue, which will have a key role to play in developing green growth policies and smoothly adapting labour markets to this emerging reality. The transition to green growth will be complex and the effort required to get it through will only be sustained if policy goals and strategies are developed through dialogue with all stakeholders. Social partners deep knowledge of issues such as job skill requirements and best practices for implementing new technologies in the workplace will be invaluable in anticipating and managing the labour market dimension of the transition to green growth. Going forward, the potential for dialogue and for sharing experiences are also of utmost importance to help address potentially adverse distributional impacts of green growth policies, including for low-income households. To support this dialogue, the OECD is planning to undertake analysis assessing not only the effects of green growth policies on workers in different occupations and skills, but also on households in different parts of the income distribution. In particular, low-income households are likely to be particularly exposed to changes in energy prices associated with carbon taxes and this would require compensating mechanisms to avoid having the transition to a greener economy being accompanied by further income inequality. Questions for discussion: How best can green growth policies support job creation and facilitate the required reallocation of labour across sectors and locations? 14

15 What are the key labour market and distributional challenges associated with the transition to green growth? What is the perception of European Ministers about the costs associated with the greening of the economy and about their sharing between employers, employees and the government? How can governments improve their capacity to anticipate and manage the labour market transformations required to make an inclusive transition towards green growth? Which combination of policy instruments will foster green growth, while cushioning the negative effects on employment and income distribution? How important, in the view of European Ministers, is the co-ordination of different Ministries in the design and implementation of comprehensive policies to promote green growth? How do Ministers view the role of social partners and civil society in the process? 15

16 Informal Joint Meeting of EU Environment and Labour Ministers Background document Roundtable 4 Monitoring the green jobs in the integrated European policy (European Semester/Annual Growth Survey Milan, 17July :30-12:45 Level 1 Facilitator: Linda Laura Sabbadini ISTAT The promotion of green jobs and the full exploitation of its potential in terms of economic, social and environmental progress are one of the main elements of a transition towards green economy. In this context, the need to set up an adequate system for the monitoring of green employment has been advocated for. Indeed, in terms of labour market policies and considering the potentials for enlargement of employment opportunities in the medium and long term due to the greening of the economy, monitoring of green jobs has a crucial role to play. Measuring progress on greening is an important step to sustainable development. Reducing pollution (including greenhouse gases) and a more resource efficient economy is a challenge but also an opportunity for labour market and skills development. Adequate statistical measures provide a key contribution to employment opportunities, to create new jobs, to bridge skill gaps and labour mismatches, to anticipate human capital needs while enhancing natural capital. An integrated approach is the key to be considered. An accurate, methodologically grounded and shared monitoring of green jobs could also help Member States in assessing the effectiveness of their environmental and labour policies, and strengthen the tools developed at European level to track progress and monitor the Employment Guidelines under Europe However, the objective of monitoring green jobs in the European economic policy requires the definition of a more detailed and more integrated conceptual and methodological framework, compared to the one available today. In fact, various national and international initiatives to measure green jobs are in progress, but, at the moment, they represent just starting points towards a more defined and structured approach aiming to an internationally shared and methodologically standardized classification system. Such a framework should aim to provide an overall view of green jobs based on a clear identification of the green component of three main dimensions: industries, production processes, occupations, as recommended by International Labour Organization (ILO, 2012, Proposals for the statistical definition and measurement of green jobs, Discussion paper prepared for informal consultation, November 2012). Reasons behind this suggestion are here explained. 16

17 Green industries, also called eco-industries or environmental industry, comprises those production activities of a national economy that generate environmental products, i.e. goods and services produced for the purpose of environmental protection and resource management. For green industries, the state of knowledge at European level is more advanced, as the recently approved Regulation (EU) No 538/2014 sets up the legal base for the regular production of statistics on the Environmental Goods and Services Sector (EGSS) and includes employment in the EGSS as one of the aggregates to be reported. This Regulation is a major step forward in the direction of establishing a sound and reliable monitoring system of green jobs in the EU. First provisional Eurostat estimates indicate considerable job creation in the environmental goods and services sector (EGSS): EGSS employment in the EU-28 increased from 2.9 to 4.2 million full-time equivalents between 2000 and The work on production processes is less advanced. The challenge with (green) production processes, is to identify shares of green processes within various kinds of enterprises not necessary included as green industries in EGSS data collection. This requires collection of data referred to job-related characteristics such as specific tasks and duties undertaken in the jobs, types of processes or technologies used. In this context, in line with ILO recommendations, one of the most comprehensive approaches has been adopted by the US Bureau of Labour Statistics, which collects data on the basis of the following definitions of defines green jobs as either: - jobs in businesses that produce goods or provide services that benefit the environment or conserve natural resources (outputs) ; - jobs in which workers duties involve making their establishment s production processes more environmentally friendly or use fewer natural resources (processes), by adopting green technologies and practices which lessen the environmental impact of their establishment (e.g. using/generating electricity, heat, or fuel from renewable sources; improving energy efficiency within the establishment; reducing the creation of waste materials by reusing, recycling, or composting). In the framework of the environmental protection expenditure accounts as governed by Regulation 691/2011 on European environmental economic accounts (as amended by Regulation (EU) No 538/2014) data on the output of such ancillary environmental protection activities of corporations will be collected. Data on the employment related to these ancillary activities will be collected on a voluntary basis in the framework of EGSS. As regards occupations, substantial work still needs to be done. Occupations are the set of tasks which define a job. A more complete definition of green jobs requires the matching of data on green industries/processes with those on occupation itself. The Occupational Information Network (O*NET), a program developed under the sponsorship of the US Department of Labor/Employment and Training Administration, carried on an interesting experience, recognized by ILO as the main reference in green occupations analysis. O*NET identifies three main green occupations categories according to the impact of green economy activities and technologies: existing occupations increased in terms of labour demand; existing occupations significantly changed in terms of work and worker requirements; new occupations. Such a classification, opportunely matched to the classification of occupations used in statistics around the world (ISCO, International Standard Classification of Occupation), allows the production of estimates on green employment, promoting an integration between data on labour demand and data from the supply side with the objective to highlight green economy activities. In this complex framework, the following questions will be submitted to the attention of Ministers of Labour and Ministers of Environment: 31Eurostat (2014): Environmental goods and services sector, in Statistics Explained 17