The large-scale social and economic shifts caused by the clean energy transition should be managed with care, write Magnus Tyreman and Hauke Engel. A broad training effort would enable Europe to create a labour force that will thrive during the pursuit of the net-zero emissions target, they argue.
Magnus Tyreman is a managing partner at McKinsey Europe. Hauke Engel is a partner at McKinsey Europe.
Reducing Europe’s net carbon emissions to zero by 2050, as the EU Green Deal calls for, will almost certainly require a continent-wide effort. The scope of that effort has prompted questions about who would benefit and who would not.
New research by McKinsey suggests that Europe can achieve climate neutrality at no net cost to society. One good outcome would be a reduction in the average cost of living low- and middle-income households. What’s more, by effectively managing its energy transition, Europe could see a net gain of nearly 5 million jobs.
That uptick in employment would result from big shifts in the makeup of Europe’s workforce. Our projections indicate that some 6 million jobs will be displaced by 2050. Retirements would account for some of these, which will mitigate the impact on long-term employment.
Over the same period, the net-zero transition could result in the creation of some 11 million jobs: enough to employ the workers who would be displaced, plus 5 million more.
These large-scale shifts should be managed with care. The pivotal mechanism for supporting workers will be training—reskilling people to perform new jobs, and preparing the next generation of workers for the jobs required by a low-carbon economy.
A broad training effort would enable Europe to create a labour force that will thrive during the pursuit of the net-zero emissions target.
Knowing where to target reskilling programs will be crucial. Job losses will be most pronounced in particular sectors, such as oil and gas. Vulnerable jobs are concentrated in certain areas, so significant impacts on regional employment will warrant attention.
And the transition would have knock-on effects on still more workers, such as those at companies which supply directly-affected businesses, and those at companies which enjoy the patronage of employees from directly-affected businesses.
Not all displaced workers would require retraining, but many stand to benefit from it. That is because the new jobs in Europe’s low-carbon economy would generally be in higher-skilled occupations such as installing solar panels or developing hydrogen fuel-cell technology.
To take one example from our projections for 2050, the power sector would see a net increase of 1.5 million jobs, including nearly 700,000 jobs in solar and 450,000 in wind. Direct employment in the sector would go up by more than 66%.
The buildings sector, too, would undergo a big expansion of its workforce, owing to widespread demand for energy-efficiency improvements. To reach net-zero emissions would require improving the insulation in 55% of the EU’s building stock.
Retrofitting would have to be even more extensive in some areas. In the EU’s coldest region, the Nordics, 80% of all homes would need more insulation. Other upgrades to homes across Europe, such as the replacement of gas-powered furnaces with “green” heating and cooking systems, would further lower their energy consumption.
Activities such as these could create a net total of 1.1 million jobs in the building sector, according to our estimates—a gain of almost 9%.
Not every new job will be a permanent, long-term position. Once all the homes in a country have been weatherised, then large numbers of insulation installers won’t be needed any longer. But the overall effect of the transition will be a lasting increase in employment, simply because so much work must be done.
Reaching net-zero emissions requires Europe to greatly boost its renewable-generation capacity over the next 30 years. Since that infrastructure must be replaced every 20 years or so, healthy demand for factory workers and installers is assured.
The opportunity for governments is to ensure that workers have the skills they need to meet this demand, and thereby sustain a swift transition to net-zero emissions. We estimate that up to 18 million workers in the European Union will need reskilling of one form or another.
Some will need extensive training to perform entirely new jobs. Others will have small skills deficits, because some of their existing skills would also apply to new jobs.
Governments and companies could identify skills needs for many new occupations, identify skills overlaps with existing sectors, and devise training programs that help workers make easier employment transitions.
Every job displacement can cause worry and hardship for the worker it affects—and it must be acknowledged that Europe’s low-carbon transition will put some jobs at risk. But the transition will also create many more jobs, including higher-skilled positions in a range of sectors.
To meet this demand, workers will need reskilling or upskilling. Fortunately, employers and governments have time to develop training programs that will build a capable workforce for the zero-carbon economy. By examining the workforce shifts that could unfold and expanding access to training, Europe can help secure prosperity for all members of society.