A Fair Net‑Zero Transition

Key findings

• OECD countries are adopting ambitious climate change policies to achieve net-zero greenhouse gas emissions by 2050. This transition will and is already reshaping, labour markets, with some sectors shrinking, others expanding and many occupations evolving. However, while job creation is widespread, losses tend to be concentrated in certain sectors and regions, raising specific concerns.

• High-emission industries, responsible for 80% of emissions, employ just 7% of the workforce on average across OECD countries. While most high-skill emission-intensive jobs share similar skill requirements with occupations in other industries, this is less the case for low-skill jobs who will require more intense retraining. On average, it is 24% more costly to lose a job in a high-emission sector than in other sectors, because workers tend to be older, less educated and tend to have wage premia that are difficult to match in the new jobs they can get access to. Moreover, most of the new jobs brought about the green transition are not in the same local market as the high-emission jobs are lost.

• The “policy-induced” nature of the transition, driven by political decisions and regulations, raises strong expectations for effective management. Therefore, preventive measures to support affected individuals and communities are needed to ensure that the transition is fair, understood and accepted.

• Most OECD countries have mechanisms for managing structural labour market changes, but some instruments may require expansion or modification, particularly to better protect low-skilled workers or tackle the uneven effects of the transition across regions.

• Addressing the labour and social challenges of the net-zero transition will require stress-testing existing policies, including via specific skills assessment and anticipation exercises, to check whether they are fit for purpose along three main objectives: i) helping workers in high-emission industries to make the transition to other jobs, ii) supporting the livelihoods of displaced workers and iii) steering workers and jobseekers towards the expanding sectors of the economy.

• Robust stakeholder engagement is essential for effective transition management. While some OECD countries include unions, employers or other partners in consultations, only a few closely involve social partners in managing the net-zero transition.

OECD countries have embarked on a range of very ambitious targets to swiftly reduce global greenhouse gas (GHG) emissions towards net zero, as well as to confront the escalating impacts of climate‑related disruptions. While there is broad agreement that the net effect on the total quantity of jobs will be modest, the OECD Employment Outlook 2024 (OECD, 2024[1]) shows that major reallocations are expected within and between certain sectors and regions as some jobs disappear, new opportunities arise and many existing professions are transformed and redefined as day-to-day tasks and work methods become greener. For instance, by 2030, employment in EU industries like fossil fuel energy, transport, mining, and energy-intensive manufacturing – which generate 80% of emissions but employ only 7% of the workforce – is projected to decline by 14%. This is 9 percentage points more than under a business-as-usual scenario. Moreover, across OECD countries, workers displaced from high-emission sectors experience a 24% larger drop in annual earnings compared to those from low-emission industries. The benefits of the transition to net-zero are likely to be widespread while the costs will be acute in certain sectors and communities, highlighting the need for targeted support, training, and mobility measures.

Most OECD countries already have a range of instruments for managing structural adjustments and in some countries trade unions and employers’ organisations have a long-standing experience in anticipating structural change. However, some instruments may need to be adapted – e.g. in terms of targeting and resources and new ones may be needed, for example to make low-skilled green jobs more attractive, or to address the strong regional disparities in the effects of the transition. The extent to which expansion or innovation of existing policies, or possibly new instruments, will be required will depend on the country context and the specific design of climate change policies.

This policy brief outlines the set of policies needed to address the labour and social challenges related to the transition to net zero drawing on examples from two OECD policy questionnaires on employment and training policies for the net-zero transition that were distributed at the end of 2023. A more detailed discussion of the policies can be found in the OECD Employment Outlook 2024 (OECD, 2024[1]), in a report on training provision for the green transition (OECD, 2024[2]) and a policy paper on active labour market policies and the role of public employment services (PES) (OECD, 2025[3]).

Stress-testing existing policies

To effectively address the challenges outlined above, it is crucial to start with a rigorous assessment and stress-testing of existing national labour and social policies to ensure that they are fit for purpose, i.e. whether they are reaching the target populations, whether resources are sufficient or whether they need to be expanded in scope or generosity, and whether new instruments are needed. Such stress tests should consider different scenarios and also include specific skills assessment and anticipation exercises (SAAs) to characterise current and future skills needs and the available supply of skills.

Despite the prominence in the public debate, there is no universally accepted definition of green jobs and only ten OECD countries out of the 35 countries that responded to the OECD Policy questionnaire on the net-zero transition have attempted to define what a green job is. In most cases, such exercise had essentially a statistical purpose, i.e. gauge the size of the jobs likely to be positively affected by the transition (e.g. in Austria, Italy or Switzerland). In other cases, the definition reflects broad policy objectives: in Canada, for instance, the definition of a “sustainable job” follows the one proposed by the International Conference of Labour Statisticians to include “any job that is compatible with Canada’s path to a net-zero emissions and climate resilient future” but also that reflects the concept of a “decent job”. Finally, in few cases, the definition is used for operational purposes, such as guiding the work of the PES or targeting hiring incentives: in Slovenia, for instance, employers could receive a subsidy when hiring an unemployed person for a “green job”, defined on the basis of the firm’s activity but also its status (e.g. social enterprise).

About one‑third of the OECD countries that have responded to the questionnaire have undertaken some form of assessment of the labour market implications of the net zero transition, although few have looked closely at the readiness and adequacy of existing policies and programmes. The Australian clean energy workforce assessment completed in late 2023, for instance, represents a comprehensive exercise to inform public policies under different transition scenarios. The aim was to identify the jobs and industries needed to achieve net zero by 2050, the risks and opportunities for workers in high-emission industries and how the benefits of the transition can be shared fairly across regions and workers. Another example is Canada’s Sustainable Jobs Plan released in 2023, which aimed at creating “well-paying, high-quality jobs and grow a strong, inclusive net-zero and resilient economy”. The plan was the backbone of the Sustainable Jobs Act of June 2024 which established a dedicated secretariat to ensure effective collaboration and policy coherence across federal entities and ensure a regular engagement with trade unions, employers’ associations as well as indigenous organisations.

As part of these stress tests, consultations with key stakeholders, starting with the social partners, will provide essential input for the design of the transition and the measures needed to support workers and their families. Germany’s “Coal Commission” (Commission on Growth, Structural Change and Employment) established in 2018, provides an interesting example of engagement with the key stakeholders to draw up a transition roadmap for a complete phase‑out of coal production completely by 2038. However, at the moment, only a quarter of the assessments in OECD countries involved business/employers’ organisations and trade unions in the development of such an assessment.

In terms of skills assessment and anticipation (SAA), in particular, economy-wide assessments of existing and emerging skills needs are common, but SAAs do not yet appear to be widely used in policy planning for the net-zero transition. In Norway, the Committee for Skills Needs published in 2023 an SAA which estimates the effect of the net-zero transition on the number of jobs and their skill requirements in Norway, highlighting the need to update education and training systems to respond to the changing skill needs. In Australia, the Clean Energy Generation study – an SAA conducted by Jobs and Skills Australia in 2023 – concluded that there is a need to update national occupational standards of jobs related to the green energy transition in order to accurately capture the new skill needs.

Helping workers in high-emission sectors to make the transition to other jobs

For a smooth career transition from a declining sector to a growing one, workers need to be equipped with the right skills. Many high-skilled emission-intensive and green-driven jobs are very similar in their skill requirements, meaning that high-skilled workers can, with relatively little retraining, transition from emission-intensive to climate‑friendly industries. However, this is not the case for low-skilled workers who will require more reskilling to transition out of emission-intensive occupations to green jobs.

OECD countries, as well as the private sector, appear to be well aware of the importance of reskilling, and several initiatives are being taken to offer targeted training as well as financial support and career guidance for adults at risk of job loss to work in growing green sectors. Yet, training among workers in emission-intensive occupations is significantly less frequent than for workers in other occupations. Moreover, information on how the transition is affecting the demand for skills which is key to empowering individuals to take an active role in redirecting their careers is rarely communicated in an accessible way.

To incentivise training, eight out of the 26 OECD countries that responded to the questionnaire on training in the net-zero transition report having programmes that include subsidies or tax deductions to employers that offer green training to employees. In other countries, financial incentives are offered directly to workers. In North-East Estonia (Ida-Viru County) for example, the PES provides for a special allowance for workers who have been dismissed from the oil shale industry and who are ready to take up a new job in another sector within a short period of time. 19 countries report offering funding for training providers to create new training programmes or apprenticeships (or update curricula of existing ones to include skills and competences for green jobs).

Training alone will not be enough. Other timely and targeted measures for workers at risk of redundancy or who have been given notice of dismissal as well as measures to deal with collective dismissals are key to limiting the incidence and consequences of job displacement and fasten the transition process to new jobs. While this is a lesson that applies more generally, the largely policy-driven nature of the net-zero transition makes it somewhat easier for policy makers to anticipate which sectors, regions and workers are more at risk. Therefore, this increases the responsibility to provide meaningful outplacement services, early interventions by the PES, social plans and transition initiatives. Some OECD countries already have such early intervention programmes but there is considerable scope to extend their use.

For instance, outplacement services assist a departing employee to find a new job or transition to a new career. In Poland, the Upper Silesian Agency for Entrepreneurship and Development, for instance, supports the development of the region’s economy and stimulates entrepreneurship, particularly among SMEs, by providing services such as training, business consultancy, and auditing services, as well as financial support through preferential loans while financial support for jobseekers who want to start a business is offered by the Upper Silesian Fund S.A. Another interesting example are the German “transfer companies” (Transfergesellschaften) which can be established as part of a social plan during mass layoffs. Employees are transferred to an independent business unit, usually managed by an external specialist and this arrangement involves a tripartite contract between the former employer, the transfer company and the employee, who has terminated his existing employment status. During the time that the employees are employed by the transfer company (maximum 12 months), they receive a special short-time allowance funded by the PES and are engaged in various qualification and training measures, which will help them find a new job. Several private transfer companies specialise in facilitating the transition of workers from downsizing carbon-intensive industries to green ones. Mostly their activities involve professional training, career counselling, skills assessments and job placement services tailored to the green economy sector.

In 11 OECD countries, job retention schemes can be used to accompany the restructuring of companies in the context of the transition to net-zero and to prevent job losses. However, to limit the risk of delaying the transition by postponing the reallocation of labour to growing companies and sectors, job retention schemes must be strictly conditioned on a reorientation of business activities and training for workers. In Spain, for example, under the recently introduced RED (Reducción de Empleo por Despidos) mechanism for employment flexibility and stabilisation, employers can request a temporary reduction in working hours not only due to cyclical factors, but also due to structural changes, such as the transition to net-zero, that require workers to undergo retraining and career transition processes. Workers covered by RED are compensated and must undergo a retraining process provided by the employer.

Supporting the livelihoods of displaced workers

Even with effective training and an early intervention system, some workers will not immediately find another suitable job opportunity. Arguably the most important and most common tool to support the income of displaced workers is unemployment insurance (UI) and the wider social safety net to provide income support.

In many OECD countries, severance pay also plays a significant role, providing compensation to partially offset the sudden loss of income. However, it may be more beneficial to operate longer notice periods rather than higher severance payments as this can facilitate the pre‑displacement intervention by employment services and, thus, the transition to another job (as discussed above). In addition, in some countries, early retirement schemes have historically been used to facilitate economic restructuring. In recent decades, however, they have often been reserved for workers in physically demanding and hazardous occupations (e.g. coal miners in Germany) some of which overlap with those in high-emission industries. Early retirement schemes can be expensive and dampen the incentives for early adjustment and occupational re‑orientation which are needed in times of rapid population ageing and labour shortages. Their use should be limited to workers close to retirement, while other re‑employment options should be considered for the other workers.

An instrument that is currently relatively uncommon, but which may become of interest to help speed up the transition to new jobs when workers are offered lower wages than before displacement, is wage insurance schemes that cover the differences between pre‑displacement and re‑employment wages. So far, such schemes have been used only in few countries, mainly as part of trade adjustment mechanisms (among the 35 countries which have answered to the OECD Policy Questionnaire, only seven report having some form of wage insurance while the United States in 2022 discontinued its Trade Adjustment Assistance which was available for workers that lost their job due to increased international trade). They appear to be an efficient tool to support displaced workers in the net-zero transition, particularly for low-skill workers, who tend to be paid less in green jobs than in other jobs for which they would qualify. Wage insurance schemes may even free up resources for more targeted interventions to support displaced workers. However, they also raise equity concerns, as these workers previously held jobs in well protected sectors that extracted high rents with correspondingly high firm wage premia and pose the risk of lock-in effects in low-productivity and/or low-paying jobs. However, evidence from the United States suggests that the benefits of a well-targeted, time‑limited programme outweigh the costs.

Finally, to address, at least in part, the risks that the shift to net-zero emissions may imply a reduction in wages and benefits for the workers directly involved, the United States Inflation Reduction Act, a federal law aimed at promoting clean energy (among other objectives), includes specific provisions to favour companies that pay wages in line with those set in collective agreements.

Steering towards the expanding sectors of the economy

In addition to out-of-work and in-work income support measures, active labour market policies (ALMPs) play a key role in assisting displaced workers, as well as those at risk of displacement and job loss, in the job search process and steering them towards opportunities in expanding segments of the economy. In particular, job search assistance has been shown to be effective in increasing the likelihood of re‑employment, while also leading to more stable jobs in re‑employment and it is often used to steer vulnerable job seekers towards green and in-demand jobs (e.g. in Colombia, the Slovak Republic and Spain, among others). For example, Spain supports vulnerable unemployed that are affected by the net-zero transition with dedicated job search assistance, alongside training programmes, that specifically aim for employment in green jobs (European Commission, 2023[4]).

To efficiently support displaced workers, PES must not only be adequately staffed, but the staff must be adequately skilled, for instance to have a detailed sense of declining and emerging industries. Continuous upskilling through the exchange of best practices, online modules, and extensive training can equip PES staff to adequately guide job seekers during the net-zero transition and to recommend the most relevant training and retraining opportunities that maximise job seekers’ chances of finding good quality jobs. In France, for example, local stakeholders (employers, training organisations, public employment service) have drawn up regional roadmaps summarising skills’ needs, which the PES can then draw on to create recruitment pools of jobseekers with the skills needed in expanding sectors.

Beyond upskilling and reskilling programmes and career guidance for jobseekers, some countries use employment incentives targeting green jobs to support mobility across occupations and sectors. The Australian New Energy Apprentice Support Payment, for example, is designed to encourage apprentices to choose clean energy careers and reduce drop-out by providing direct financial support to apprentices starting their apprenticeship in a clean energy occupation. However, other PES indicate that a clear definition of what constitutes a “green job” and a better knowledge of the shrinking/expanding sectors would further help PES to improve their strategies and provide appropriate services.

In some cases, however, the areas most affected by the downsizing of emission-intensive industries, may have a limited capacity to provide sufficient quality jobs in the short term. In those cases, complementary geographical mobility policies might be needed. Yet, according to the answers to the OECD policy questionnaire on the net-zero transition, only seven out of the 35 countries which have provided a response, have programmes to support relocating workers’ housing needs, and they are not specifically linked to the transition to net zero. More generally, to ensure that the net zero transition does not exacerbate regional disparities, place‑based policies may be needed to promote economic development in the regions most vulnerable to the net zero transition. These policies can take the form of green subsidies and investments targeted at the most vulnerable areas, or general compensatory measures without a specific focus on green activities. The US Inflation Reduction Act, for instance, directly targets areas at risk, while funds and mechanisms in the EU have a more limited focus on green activities.

Concluding remarks

The transition to net-zero comes at a time when OECD labour markets are experiencing other transitions such as technological advances, especially in the area of generative artificial intelligence, the reorganisation of global value chains and rapid demographic ageing. However, the net-zero transition is unique in that it is largely policy-driven, so that governments are perceived as being able to arbitrarily reduce its speed in the light of short-term costs. Policy makers should therefore place measures to address the social impact of the transition at the core of the net-zero strategies. A coherent set of labour market policies to prevent mass redundancies, accompany workers and steer them towards the growing sectors of the economy is key to help workers navigate within and across affected sectors and regions.

Financing the measures highlighted in this policy brief will be a challenge, especially given the other concurrent spending needs (demography, defence, etc.). Environment-related taxes can not only contribute to meeting climate targets, but also generate substantial revenue during the net-zero transition. However, their political acceptability depends heavily on their perceived effectiveness and progressivity. As highlighted in the OECD Employment Outlook 2024, channelling part of these revenues back to affected households, in particular to low-income and rural households, without weakening their incentive to reduce emission, would allow governments substantial scope for cushioning losses and shaping distributional outcomes.

References

[4] European Commission (2023), Fair Transition Towards Climate Neutrality: Thematic Review 2023 Synthesis, Publications Office of the European Union, https://data.europa.eu/doi/10.2767/408856.

[3] OECD (2025), The pivotal role of active labour market policies and public employment services in the green transition, OECD Publishing, Paris, forthcoming.

[1] OECD (2024), OECD Employment Outlook 2024: The Net-Zero Transition and the Labour Market, OECD Publishing, Paris, https://doi.org/10.1787/ac8b3538-en.

[2] OECD (2024), Training Supply for the Green and AI Transitions: Equipping Workers with the Right Skills, Getting Skills Right, OECD Publishing, Paris, https://doi.org/10.1787/7600d16d-en.

Contact

Stefano SCARPETTA (✉ [e-mail])

Andrea GARNERO (✉ [e-mail])

Alexandre GEORGIEFF (✉ [e-mail])