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In 2022, for the first time, investment in renewable energy, electric mobility, energy storage, and clean technologies such as low- and zero-emission hydrogen and carbon capture, use, and storage exceeded $1 trillion and matched investment in the petroleum sector.[1] While this is a welcome inflection point, three to four times as much investment is needed annually to contain global warming to between 2 and 1.5°C above preindustrial levels.[2] This expected growth in clean investment also highlights the importance of skilled labor supply in the energy transition—either as a great enabler or a significant bottleneck.
In Colombia, where the unemployment rate is above 10 percent,[3] the labor outlook for the clean energy sector is encouraging, particularly in renewables and electric mobility. The nearly 4.5 gigawatts of solar and onshore wind power that was awarded between 2019 and 2021, which should continue to come online over the next 5 years, plus the national roadmaps for green hydrogen and offshore wind could generate up to 120,000 well-paid jobs annually during this decade.[4] The strong growth of electric vehicle (EV) sales and the potential to have EV manufacturing plants in the country could further increase the number of green jobs. This is welcome news for the economy, if policy makers can help the workforce shift to clean industries critical for the energy transition.
Renewable Power
Clean energy already employs more than half of the 65 million people working in the global energy industry.[5] Studies have also found that renewable energy is more labor-intensive, employing more people for each unit of electricity generated compared to fossil fuel technologies.[6] Labor intensity notwithstanding, unless the decline in fossil-fuel employment is matched with new green job opportunities, tensions are likely to arise in jurisdictions where relatively high-paid fossil fuel jobs are concentrated.
In Colombia, like in the United States,[7] the geography of clean energy sources aligns with areas where jobs in fossil fuel sectors are plentiful, highlighting the need for national and local policy makers to develop policies and programs to help workers navigate the transition. For example, the provinces of La Guajira and Cesar, in Colombia’s northern Caribbean region, account for more than 90 percent of thermal coal exported by the country.[8] While 30 to 40 percent of each province’s gross domestic product comes from coal mining today,[9] the region also offers the greatest wind and solar resource potential in the country. In fact, two solar projects and six of the largest wind projects awarded contracts in Colombia’s 2019 and 2021 auctions are located in these two provinces.[10] As a result, La Guajira and Cesar are receiving billions of dollars in clean investment, with large-scale renewable power generation projects already in operation and more to come online in the next five years. With the right policies in place, this geographical opportunity—areas with carbon-intensive jobs offering green new jobs—could be a significant asset for intrasector and intraregional labor reallocation.
Wind farm in Guajira, Colombia. Photograph by Fabio A. Aristizabal/Shutterstock.
In the US, however, there are already fears that a shortage of qualified clean energy labor could slow down the country’s ambitious energy transition plans. With the unemployment rate at a record low of 3.6 percent, companies may find it challenging to fill the nearly 540,000 jobs that will be created annually as a result of the implementation of the Inflation Reduction Act over the next 10 years.[11] For example, EV battery manufacturer SK Innovation Co. Ltd., solar photovoltaic installer SunPower, and offshore wind developer Orsted have reported labor shortages in the states of Georgia, Massachusetts, and New York.[12] Drawing lessons from the US experience, Colombia can focus on anticipating labor needs in renewable energy and clean technologies ahead of time to ensure that worker training programs are well targeted and appropriately funded.
Electric Mobility
EV manufacturing appears to be at least as labor-intensive as manufacturing internal combustion engine vehicles (ICEVs),[13] but EVs have fewer parts, use less fluids, and experience reduced brake wear due to regenerative braking. Therefore, they are likely to require less maintenance and fewer checkups relative to ICEVs, possibly reducing employment in the parts and service sector. This potential loss of jobs could be partially or totally offset by additional employment in manufacturing batteries and charging stations, although regional disparities may persist.
Various laws and regulations, including the Electric Mobility Law in 2019, have positioned Colombia as a regional leader in EV sales, overtaking traditional leaders in sustainable mobility, such as Chile and Costa Rica, in the past four years.[14] There are now also discussions to set up the first South American EV manufacturing plant in Colombia.[15] The growing demand for EVs in Colombia and the region, coupled with a global push for more aggressive mitigation policies in the transportation sector, are likely to create new job opportunities for EV manufacturing in the country.
Training and Labor Reconversion Programs
A report by the International Labour Organization (ILO)[16] based on 32 national studies is optimistic about net job creation under two decarbonization scenarios across these three variables:
Creation of new jobs in construction and manufacturing of renewable energy machinery and copper mining;
Re-skilling and reallocation of workers with existing skills into clean energy and low-carbon technology sectors; and
A relatively low number of net job losses in areas like petroleum extraction and refining, and fossil-fuel-based energy sectors.
The study recommends skills certification and recognition programs, including across national borders, to effectively reallocate workers, while acknowledging that “perfect reallocation” is unlikely. It notes that governments may also need to implement “social protection policies to complement reskilling measures.“
Concluding Policy Thoughts
In Colombia, a policy package combining government-funded and well-targeted training programs with fiscal support for low-income households is likely to improve the productivity of low-wage workers, helping them migrate to jobs in low-carbon sectors. Such a package could include a gradual increase in the carbon tax, allocating some of that additional revenue toward training programs targeting low-wage workers in fossil fuel industries to boost their productivity and help them transition to lower-emissions jobs, along with an earned income tax credit.[17] The latter would help offset any consumption shock from higher energy prices as a result of the increase in the carbon tax. If the income tax credit is administratively difficult to implement, however, it could be replaced by a cash transfer to low-income households using existing channels such as the Ingreso Solidario social program designed during the COVID-19 pandemic. The training combined with the income tax credit or the cash transfer is likely to increase after-tax income for low-wage workers, providing income support, reducing inequality, and incentivizing labor supply.[18]
To realize the significant employment opportunity from green jobs in Colombia and elsewhere, it is critical that governments design and implement labor policies and programs to effectively upskill, reskill, and retool the workforce. It is also important that policy makers understand which regions will be hit hardest by job losses in fossil fuel industries to ensure that workers in those industries experience a just transition to cleaner energy sectors.
[17] An earned income tax credit provides workers with a credit equal to a percentage of their earnings up to a maximum ceiling. Both the credit rate and the maximum credit vary according to the design characteristics. The aim is to subsidize low-income workers.
[18] For a more elaborate discussion on how these types of policies could work on advanced and emerging economies, see John Bluedorn and Niels-Jakob Hansen et al., “A Greener Labor Market: Employment, Policies, and Economic Transformation,” World Economic Outlook, International Monetary Fund, April 2022, https://www.imf.org/-/media/Files/Publications/WEO/2022/April/English/ch3.ashx.
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