Why do green investments create more jobs? Experts explain

This article was originally published on WRI.

The coronavirus pandemic has been the biggest disruption to the global labor force in generations. It’s also exacerbated inequality. Global unemployment was equivalent to 127 million full-time jobs in the second quarter of 2021. The number of people who do have jobs but are living in poverty has increased — undoing five years of progress. While in some countries the number of jobs is returning to pre-pandemic levels, most of the world is still in the throes of an unemployment and underemployment crisis.

Meanwhile, 2021’s heat waves, fires, droughts, hurricanes and floods have brought the impacts of climate change to our doorstep. The latest Intergovernmental Panel on Climate Change report warns of severe future shocks without urgent action.

Thankfully, it’s possible to address both the unemployment and climate crises at once.

Putting climate-friendly and unsustainable investments head-to-head

If you were a policymaker and had $1 million to invest in expanding or strengthening your energy system, would you choose clean energy or fossil fuels? Considering the effects of climate change, investing in clean energy is the obvious decision.

But what if your goal was simply to create as many jobs as possible? Fortunately, the answer is the same.

Dollar-for-dollar, clean energy and other green investments generally create more jobs in the near term than unsustainable investments, according to a new analysis of studies from around the world published by WRI, the International Trade Union Confederation and the New Climate Economy.

For example:

Other green investments are also strong job creators compared to traditional alternatives, including wind energy, electric grid upgrades, industrial efficiency, walking and cycling infrastructure and electric vehicle charging infrastructure.

This analysis is based on our review of a dozen studies that included apples-to-apples comparisons of job creation. For some investment types, such as solar and wind energy, there were data points from many countries, including Brazil, China, Indonesia, Germany, South Africa, South Korea and the United States. But for some other investment types there was only one study each — such as walking infrastructure, cycling infrastructure and ecosystem restoration, where estimates were available from only the United States.

The findings so far are promising, but more research needs to be done, particularly for low-income countries and for nature-based climate solutions.

Activities such as installing solar panels, restoring a degraded ecosystem or retrofitting a building to be more energy efficient are labor intensive and hard to outsource. This means they create local jobs. On the other hand, the fossil fuel industry is highly automated and capital intensive. City projects such as walking and cycling infrastructure require more urban planners, engineers and construction workers per dollar compared to road construction, where a higher share of the investment is spent on materials such as asphalt and stone products.

This analysis shows that green investments are better job creators in the vast majority of cases, but in some instances the employment impact is mixed.

Electric vehicles (EVs) are an example. The transition from traditional gas-powered vehicles to EVs is expected to lead to job gains on the whole. This is because EV owners spend their money on electricity rather than gasoline, and the electric utility sector is more labor intensive than the oil sector. In addition, EV owners spend less on electricity than they would on gas each year and inject those savings back into the overall economy, which is also more labor intensive than the oil sector.

However, despite these overall employment gains, some jobs will be lost. EVs are expected to create slightly fewer jobs in the car manufacturing and maintenance sector because they are made up of fewer and less complex parts than gas-powered vehicles. That’s not to mention the effects of advanced production techniques, digitalization and artificial intelligence, which are poised to cause big reductions in the number of auto manufacturing workers needed for any type of vehicle. For this reason, a just transition to retrain and re-employ traditional auto workers will be essential.

Image courtesy of The Green Jobs Advantage: How Climate-Friendly Investments are Better Job Creators
Notes: Median ratio across studies from around the world. A ratio >1 (colored in green) means that green investments create more jobs than an equivalent amount of unsustainable investments. A ratio <1 (colored in red) means that green investments create fewer jobs than an equivalent amount of unsustainable investments. All estimates are focused on job creation in the near term.

Job creation is important, but it’s only part of the story. We also need to make sure the jobs are high-quality. There are real challenges to overcome, but with the right policies it is possible to improve wages, benefits, inclusivity and job security in green sectors.

In low- and middle-income countries, jobs in green sectors can offer good wages when they are formal. But too often they are part of the informal economy so they have low wages, limited access to job security and few social protections.

For example, in the off-grid renewable energy sector in both India and Nigeria, 60-70 percent of the jobs are informal. This is not a problem unique to renewable energy; in fact, in these two countries, about 90 percent of all jobs across the economy are informal. For green jobs and all jobs alike, it’s essential that governments help formalize the workforce and promote career progression through training, capacity-building and skills certification.

In high-income countries, green jobs can provide avenues to the middle class, including for workers with only a high school diploma.

In the U.S., clean energy workers earn 25 percent more money than the average worker. However, wages for clean energy are still slightly lower than fossil fuel jobs, where wages remain high — in part due to decades of hard-fought union representation and bargaining. New green jobs are less likely to have such benefits and rights already established and workers today have less power to advocate for changes.

We need to avoid a race to the bottom where the falling costs of green technologies are achieved by cutting wages, job security or working conditions. New research finds that the impact of raising labor standards on the cost and pace of the energy transition could be much smaller than we think, in part because workers who are paid more are more productive.

There are a few models of how to promote green job quality that countries can follow.

In 2018 Spain reached a deal to shut down its coal mines and invest $280 million in the affected mining regions, including training for green industries, options for early retirement and jobs in environmental restoration. In Illinois, U.S., labor representatives were heavily involved in the development of a newly passed net-zero emissions climate law; the law includes strong labor standards and environmental justice provisions.

It’s essential to make sure green jobs are accessible to all, especially for groups and communities that have historically been excluded from employment opportunities. Going green can be a benefit for women in the workforce. About 32 percent of renewable energy jobs globally are held by women, higher than the 22 percent share in the oil and gas sector. However, this is still too low.

The construction and manufacturing industries that benefit from energy and transportation investments are also historically male-dominated. Barriers to female participation can be addressed through training and audits to raise awareness, supportive networks and mentorships for women in the field, gender targets and quotas, provision of childcare and policies against sexual harassment and gender-based violence.

There are emerging examples of best practices. For example, South Africa’s Working for Water program has a goal of building a workforce that is 60 percent women, 20 percent youth and 5 percent people with disabilities.

Finally, green jobs are generally safer than jobs in fossil fuels and other unsustainable industries. Coal is more than 500 times more likely to cause deaths from accidents and air pollution compared to solar or wind. And farmers using sustainable techniques are less exposed to pesticides and other chemicals.

Even so, green jobs feature their own hazards, such as solar PV workers dealing with potentially toxic materials or nature-based solutions workers facing extreme heat, so stringent safety measures and safety training are still required.

Climate-friendly investments are a win-win for the environment and economy

Climate-friendly investments should be a core part of coronavirus recovery stimulus packages, as well as longer-term economic strategies. They are absolutely necessary to meet climate goals, and as this analysis shows, are often effective job creators compared with unsustainable alternatives.

It’s essential that the jobs created are good ones. Governments should work with unions and employers to advance policies and practices that ensure fair wages and working conditions, as well as target hiring of excluded social groups as conditions for public investment and procurement.

Most governments don’t seem to have gotten the message yet. In response to COVID-19, countries have funneled a lot of money to green infrastructure, but even more to unsustainable, polluting infrastructure. Not only does this ignore the urgency of the climate crisis, but it means countries are missing a key job creation opportunity for citizens who may need it more than ever.