No. 2023-28 - Employment dynamics in a rapid decarbonization of the power sector

Abstract:

Transitioning to a net-zero emissions power system will create and destroy jobs in different occupations, creating skill mismatches and labor mobility frictions. We analyze the employment dynamics of a fast transition scenario for the US electricity sector that reaches 95% decarbonization by 2035, using an input-output model coupled to an occupational mobility network. We find three distinct labor market phases during the transition: ‘scale-up’, ‘scale-down’, and a long-term steady state. During the scale-up phase, from 2023–2034, for every job lost in a given industry, twelve new jobs are created elsewhere. But only a few occupations experience a consistent increase in demand throughout the transition. We predict that skill mismatches will create labor frictions during the transition, especially in the scale-down phase. Without proper planning, rapidly growing industries will struggle to find skilled labor in the scale-up phase, and displaced workers will have difficulty finding jobs during the scale-down phase.