A stitch in time for the ongoing green transition is what we need

Source: The post is based on the article “A stitch in time for the ongoing green transition is what we need” published in Live Mint on 9^th May 2023.

Syllabus: GS 3 – Growth & Development, Environment

Relevance: problems with the energy transition

News: Countries are now looking to give up fossil fuel and adopt green energy. This transition carries consequences such as disruptions in labor markets and communities.

What are the concerns with energy transition for labour markets?

It is argued that job losses in the fossil fuel sector due to an energy transition would be compensated by job creation in green energy, through reallocation of capital and labour. However, there are many concerns present with the transition.

The concerns such as – a) the amount of time needed for labour markets to return to the employment rate before the transition, and b) heterogeneity of the labour force employed in old and new energy sectors, are often ignored.

Following are some of the studies that prove the challenges of transitions

Tariff liberalization in the 1980s in Brazil led to the supply of products from other countries. It affected the domestic industries producing the same products at higher cost. The long-term impacts were prolonged wage depression, a decline in formal employment, and a rise in informal jobs.

Workers in Brazil also experienced the costs of switching sectors because the specific experience of previous sector was not fully transferable. These costs were found higher for female, less educated and older workers.

A similar thing happened in the US, when it conferred permanent normal trade relations (PNTR) status on China in 2000. PNTR status reduced tariff-related uncertainties for Chinese exports to the US.

This trade relations with China affected manufacturing employment in the US. Many displaced workers could neither find new jobs in other sectors nor migrate elsewhere.

This disruption in the labour market in the US also had social outcomes such as there were rise in deaths caused due to drug overdose, suicide and liver diseases.

The US also encountered two shocks in the coal sector: one in 1980, when oil prices collapsed, causing a large fall in coal consumption, and another in the 2010s, when natural gas and renewable energy progressively displaced coal in generating power.

Studies show that a contraction in coal mining led to a decline in regional employment and wage rates.

The above examples demonstrate the consequence of green transition policies on the labour market. A full-fledged green transition would induce even bigger shocks, springing from rapidly evolving technology, geopolitics, markets and societies

Must Read: Energy Transition: Challenges and Solutions – Explained

What can be the way ahead for India?

India’s long-term goal of net zero by 2070 is being met through a pragmatically paced shift to renewables. Therefore, India needs to prioritize economic growth and sustain the adoption of environment-conscious lifestyles.

This will help build capabilities to deal with the structural changes associated with a green transition, along with ensuring the availability of finance, technology, raw material, human capital, etc.

Moreover, building a strong social security system and focusing on human capital development, such as labour skilling that eases inter-sector migration, would also help address the labour-market consequences of a green transition in India.