Lamia Kamal-Chaoui
Director of the OECD Centre for Entrepreneurship, SMEs, Regions and Cities
COP28 marked a historic moment in transitioning away from fossil fuels. As countries aim to reduce CO2 emissions, policymakers must proactively support industrial regions to adapt before it’s too late.
As highlighted in the OECD Job Creation and Local Economic Development 2023 report, polluting industries are highly concentrated in poorer regions. In Europe, the proportion of employment in polluting jobs can be three times higher in the most exposed regions than in those least exposed. In these places, GDP per capita and wages are up to 38% lower than national averages.
New tech investment to save jobs
Polluting jobs keep unemployment low in those regions and tend to pay much better than other available jobs. In Zeeland, Netherlands, workers in the chemical sector earn more than double the region’s average wage.
In some cases, those jobs can be saved through investments in new technologies. These include deploying hydrogen and renewable energy sources as well as carbon capture, utilisation and storage (CCUS). Our recent report for the Hamburg Chamber of Commerce, Reaching Climate Neutrality for the Hamburg Economy by 2040, highlights many examples of how governments can work with regions and industries to adopt those technologies. In Lulea, Sweden, for example, the Swedish venture Hybrit has produced the first fossil-free steel.
Countries must learn lessons from past approaches to industrial transitions.
Green jobs concentration and skills gap
Yet there are still many challenges in implementing these technologies, and globally, carbon dioxide removal (CDR) will offset less than 20% of emissions. Moreover, it is not safe to rely on new jobs emerging from the green transition to replace polluting jobs in vulnerable regions.
First, because these jobs are instead gravitating to successful cities and capital regions. In 19 out of 25 OECD countries, the capital region has the highest share of green jobs, with more than a third of jobs already involving green tasks in Paris, London, Stockholm, Helsinki and Vilnius. Even where governments do direct green investments towards lagging regions, engineers, lawyers and consultancy firms tend to work remotely on these projects from big cities, and construction workers are present in the areas for only a short time and quickly move on.
Second, there is a yawning skills gap that prevents workers from transitioning from polluting to green industries. Countries must create clear plans for these regions to prevent increasing inequalities and growing resistance to the green transition.
Learn and adapt to grow sustainably
Immediate action is required, following the principles outlined in our recent report, A Territorial Approach to Climate Action and Resilience. Countries must learn lessons from past approaches to industrial transitions, such as the US Trade Adjustment Assistance (TAA), which sought to support US workers displaced as a result of global trade.
The EU’s Just Transition Fund (JTF) is an important step in the right direction — an attempt to support Europe’s regions most exposed to the green transition. However, countries need to learn from each other, and the past, to ensure that no region is left behind.
