The Covid-19 pandemic led to hundreds of thousands of job losses in the global energy sector following months of restrictions that hindered people from getting to work and led to the bankruptcy of many oil and gas firms around the world. However, as the IEA and several governments push for a green energy transition, this could be the tip of the iceberg when it comes to job losses. If that is the case, then the industry desperately needs clear policies to be put in place to ensure job creation and training for the millions that stand to lose their professions.
Following the COP26 summit at the beginning of November, attended by some of the most important world leaders and environmental actors, it was widely agreed that the world must undergo an energy transition, moving away from fossil fuels to renewable alternatives. But shifting from the world’s principal energy sources also means abandoning huge infrastructures and cutting millions of jobs, unless a plan is established to repurpose energy structures and transition workers.
An estimated 400,000 jobs were cut across the energy sector in 2020, with half of those in the U.S. alone. Some of the most stable supermajors were forced to cut jobs, with Exxon reducing its workforce by 15%, around 14,000 employees, not to mention the smaller firms that were forced into bankruptcy. Now, with the energy transition, the oil sector is expected to contract further, around 20 percent over the next decade and by 95 percent between 2031 and 2050.
But as coal plants in the U.S. and Europe are already shutting down at an increasing rate, it is clear that the job losses of the last year are not over yet. Coal plants are closing ahead of schedule, as major economies pledge to cut carbon at a faster rate than originally planned, starting with the dirtiest fossil fuel. The U.K. government is now planning to completely end coal production by 2024, a year earlier than originally planned. And coal plants across the U.S. are undergoing the same transition, with a coal plant outside Nucla, Colorado closing three years earlier than planned.
While this is good news for the environment, as carbon emissions are being lowered, it could spell disaster for many communities that continue to rely on jobs in the energy sector. As well as job losses, several towns and cities situated near fossil fuel production sites can expect a huge loss in revenues unless something is done to support local economies during the green transition.
In the case of Nucla, unemployment in the small town doubled overnight. And this could be the case for several other towns, with over two dozen coal plants expected to close across the U.S. over the next decade. However, some point out the huge potential for these locations to build upon existing energy infrastructure so it doesn’t go to waste, putting railroads and transmission lines to use as well as supporting the local job market.
The U.S., in particular, has extensive experience in dealing with job cuts due to the overreliance on specific industries, such as steel and timber, but perhaps none so big as fossil fuels. There are around 160,000 jobs across the U.S. oil and gas extraction sector, and 50,000 jobs in coal, according to the Bureau of Labor Statistics, but this is just the tip of the iceberg considering the multitude of indirectly related jobs. For every one job cut in power plants or mining, it is estimated that another four indirect jobs are lost.
Initiatives such as the Colorado Just Transition Action Plan, established in 2020 to support workers in the transition away from the state’s coal production, could help communities to become less reliant on boom-bust cycles. Other states across the U.S. are drafting similar strategies to ensure that they are not left behind as fossil fuel production dries up. But this will require significant funding and policy support from the federal level considering how many jobs are at risk.
Not to forget, many of those employed in the energy sector are the backbone of American industry, whose political support should not be overlooked going into future elections. If left behind, the government could lose a significant voter population from fossil fuel-reliant towns and cities across the country.
In addition, many of the workers employed in oil and gas are reluctant to transition to jobs in renewables, which would require more training and may offer lower-paid positions, adding an obstacle to the energy-related unemployment mitigation policy.
But, optimistically, we’re already seeing an increase in the number of jobs in green energy, with renewable energy jobs reaching 12 million globally according to ILO data. This is an increase from 11.5 million in 2019. The majority of these jobs are in China, holding around a 39 percent share, followed by Brazil, India, the United States, and countries within the European Union.
As a clean energy transition is finally underway, after years of stalling, the environment is not the only concern that world leaders must face. With millions of fossil fuel-related jobs at risk at the global level, governments must start implementing clear transition strategies to ensure there are training programs and new job opportunities in place for this huge population that will otherwise end up unemployed.
By Felicity Bradstock for Oilprice.com
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