RDP 2024-09: The ‘Clean Energy Transition’ and the Cost of Job Displacement in Energy-intensive Industries 1. Introduction

Across the OECD, economies are transitioning towards greater carbon- and resource-efficiency to mitigate the impacts of climate change, promote sustainable growth, and ensure long-term economic resilience. At the heart of these processes are energy-intensive industries (whether in terms of supply or demand), which will see profound restructuring to realize the “clean energy transition”. This includes a reduction in the use of fossil fuels for energy production and consumption, while incentivizing the development of cleaner sources of energy (energy supply), as well as the adoption of technologies that enhance energy-efficiency in energy-intensive processes in transport and production (energy distribution and demand).^[1]

The transition towards cleaner energy systems, as part of the broader effort to combat climate change, e.g. the EU's “Fit for 55”, has put in motion significant changes in energy-intensive sectors. While this shift opens up new employment opportunities in renewable and nuclear energy activities (see e.g. Borgonovi et al. (2023_[2])) as well as jobs associated with improved energy efficiency, it increases the risk of job displacement in energy-intensive and predominantly fossil-fuel-based industries, potentially affecting public support for climate policies. Some sectors and firms may be able to change their fuel mix and/or reduce the energy intensity of their production processes by changing the way they operate.^[2] In other cases, such as fossil-fuel extraction, the impacts are likely to arise across firms and sectors, raising the risk of job displacement.

The main objective of this paper is to provide a comprehensive analysis of job displacement in energy-intensive industries (and other industries) using detailed linked employer-employee data for 14 OECD countries.^[3] Displaced workers in energy-intensive industries may face particularly challenges because of the specific characteristics of firms and workers in these sectors and the limited availability of opportunities for moving to a similar jobs due to the decline in energy-intensive employment (Borgonovi et al., 2023_[2]). A secondary objective is to provide additional background to OECD (2024_[1]) on the methodology and the effects of job-displacement across subsectors (energy supply, heavy manufacturing, transport). Energy-intensive industries, as defined in this paper based on energy-intensity, correspond exactly to the set of high-emission sectors as defined in OECD (2024_[1]) based on greenhouse gas intensity.

The remainder of the paper is structured as follows. Section 2 outlines the measurement of energy-intensive industries, presents the national data sources that are be used for the main analysis, and discusses the harmonization process to ensure their comparability across countries. In Section 3, we detail our framework for estimating the costs of job displacement across sectors. Section 4 presents our main results for various energy-intensive industries and the broader economy. Section 5 summarizes policy approaches that can reduce the costs of job displacement in energy-intensive industries and help to build support for the clean energy transition.

Footnotes

Recent OECD work on the labour market effects of the transition towards greater carbon- and resource-efficiency and related labour and social policy responses include OECD (2024_[]; 2023_[]), Keese and Marcolin (2023_[]), Borgonovi et al. (2023_[2]), Causa et al. (2024_[]) and Causa, Nguyen and Soldani (2024_[]; 2024_[]). [1]

Some of this restructuring will take place within a given sector (and even firm), with changes in power generation technologies being an obvious example. [2]

As discussed in more detail below, job displacement in the present paper refers to workers separations from firms engaged in mass layoff events. [3]