A green transition that leaves no one behind

A fair transition for households and communities

The transition towards a green economy can help to address existing inequalities in our societies. Vulnerable groups and households are more exposed to the impact of environmental degradation, such as climate change and air pollution, and more vulnerable to its consequences. At the same time, greening measures may negatively affect economic activities in certain regions or increase the prices of basic services (e.g. water, energy) with negative implications especially for lower income households. With the right policy packages, the green transition can benefit all and ensure that no one is left behind.

OECD work has looked at the distributional effects of energy taxes as well as the potential distributional consequences related to the phasing out of fossil fuel subsidies. Carbon pricing reforms that cut CO2 emissions may mean higher energy prices, which is a particular threat to poor households as they typically spend a large share of their income on energy bills. OECD analysis reveals that transferring a third of the additional revenues from an energy pricing reform to poor households, by means of an income-tested cash transfer, would be sufficient to increase their ability to pay for their energy needs.

Spatial planning instruments have long been used to organise and alter the distribution of human settlements and economic activity, and balance tensions between economic, social and environmental objectives. The OECD Spatial Planning Instruments and the Environment (SPINE) project investigates the role played by spatial planning and land use policies in managing the trade-offs between environmental, economic and social objectives. The case studies dedicated to Auckland and Santiago use the MOLES model to provide a holistic welfare evaluation of decarbonisation and air pollution mitigation policies, to assess their environmental effectiveness, economic efficiency and their impact on fiscal balance and housing affordability. Ongoing work for the Greening Mobility and Transport project takes stock of the distributional impacts of policies discouraging car use. Among others, the study examines whether road pricing, distance-based charges, the fuel tax and parking fees impose a higher burden on low-income groups, and the degree to which this may be context-specific. The study identifies complementary measures that can increase the inclusiveness and public acceptability of transport policies that are key to the transition to net zero.

Beyond energy, also water policies can have distributional implications if they raise water tariffs. Investment needs and more stringent environmental and health standards can increase the costs of water supply and sanitation services globally. A review of financing needs and capacities in 27 European Member States projects that, while these services remain affordable for the vast majority of the population, fully reflecting additional costs into tariffs would bring average bills at 3-5% or more of households’ budgets for the lowest decile of the population in several OECD countries. This would raise affordability concerns for these groups.

The OECD Environmental Performance Reviews of individual countries also regularly assess public participation in decision making, as well as citizens’ access to information, justice and environmental education. Ease of access to information, education and justice is instrumental to ensure that (environmental) polices are fair.

OECD work also focused on specific demographics that are most vulnerable to the impact of environmental degradation. Youthwise, which is the OECD’s Youth Advisory Board, was established to bring the youth perspectives in OECD work. Youthwise members are contributing to shaping OECD action on the green transition by providing inputs to projects and joining the debate with highlevel government officials. Youthwise members participated to the OECD events at COP26 and COP27, the plenary session of OECD Environmental Ministerial Meeting alongside the Secretary-General and OECD Ministers, and contributed to the OECD’s Horizontal Project on Climate and Economic Resilience.

Gender equality and environmental goals intersect and can be mutually reinforcing but insufficient attention has been paid into breaking the silos. The OECD report on Empowering Women in the Transition towards Green Growth in Greece provides a framework for assessing environmental and climate policies through a gender lens, and gender equality policies through an environmental lens. The OECD report on Supporting women’s empowerment through green policies and finance finds that, even if the interlinkages that shape the gender-environment nexus are starting to be acknowledged, further efforts are needed to foster synergies between gender and environmental goals in policy design, sustainable finance approaches as well as in infrastructure planning and implementation.

Climate change can have complex and far-reaching impacts on migration across regions and countries. The OECD is planning a foresight exercise on migration and environmental change, with particular focus on examining the policy options of anticipated scenarios and the role of diaspora communities to support resilience. In addition, the Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT) provides a toolbox for policy makers to chart just, realistic, and sustainable low-carbon pathways, consistent with development priorities.

Climate change will also have significant implications for countries’ health services, in the form of new and different demands for health care arising from changing patterns of disease or acute events associated with extreme weather. Lower income households are often more vulnerable to such impacts because of lower baseline health condition, ability to invest in adaptation technology, and access to good quality healthcare. The Health Committee is investigating the complex relationships between health and climate change, including through the development and strengthening of indicators to measure both climate change’s impact on health, and the contribution of the health system to climate change.

The report The inequalities-environment nexus Towards a people-centred green transition analyses jointly the consequences of the environmental degradation and of environmental policies on several well-being dimensions. The report concludes that policy packages for an inclusive green transition should aim at: (i) mitigating the possible regressive impact of pricing environmental externalities, (ii) investing in human capital and upgrading skills to facilitate labour reallocation, (iii) addressing systemic inequalities with sectoral and place-based policies, (iv) ensuring efficient and responsive governance.

Key Publications and websites

• Equitable Framework and Finance for Extractive-based Countries in Transition (2022)

• Empowering Women in the Transition towards Green Growth in Greece (2022)

• Decarbonising Urban Mobility with Land Use and Transport Policies - The Case of Auckland, (2022)

• The inequalities-environment nexus: Towards a people-centred green transition, OECD Green Growth Papers (2021)

• Managing the distributional effects of environmental and climate policies: The narrow path for a triple dividend, OECD Environment Working Papers (2021)

• “Air pollution and environmental degradation”, in Health at a Glance 2021: OECD Indicators (2021)

• The Environmental and Welfare Implications of Parking Policies, OECD Environment Working Paper (2019)

• Multi-objective local environmental simulator (MOLES 1.0): Model specification, algorithm design and policy applications, OECD Environment Working Papers (2017)

• www.oecd.org/health/healthy-people-healthy-planet.htm

• www.oecd.org/environment/tools-evaluation/spine-spatial-planning-instruments-and-the-environment.htm

• www.oecd.org/gender/

Contact for more information

Shardul Agrawala

Environment Directorate

E-mail: Shardul.Agrawala@oecd.org

Enrico Botta

Environment Directorate

E-mail: Enrico.Botta@oecd.org

Ioannis Tikoudis

Environment Directorate

E-mail: Ioannis.Tikoudis@oecd.org

Nicolina Lamhauge

Environment Directorate

E-mail: Nicolina.Lamhauge@oecd.org

Dimitra Xynou

Environment Directorate

E-mail : Dimitra.Xynou@oecd.org

Lahra Liberti

Development Centre

Email: Lahra.Liberti@oecd.org

Francesca Colombo

Employment, Labour and Social Affairs Directorate

Email: Francesca.Colombo@oecd.org

Jobs and skills for a just transition

Green policies can trigger job creation in a number of ‘green’ economic sectors, while job destruction could occur in ‘brown’ sectors. In addition, existing jobs are likely to change and require new skills as well as awareness of sustainability issues. An effective transition to a low-carbon, resource- efficient and green economy will only be possible by ensuring that workers are able to adapt to new task and ways of working, transfer from areas of decreasing employment to other industries, and that human capital is maximised to develop new industries.

Active labour market and skills policies are crucial to help manage structural adjustments and minimise skills bottlenecks, including those that may be generated by the green transition. Vocational Education and Training (or VET) can help young people, as well as adults, to develop the technical and transversal skills need to thrive in greener economies and societies – especially when it provides opportunities for work-based learning (e.g. apprenticeships). The inter-agency project “Work-based Learning and the Green Transition” describes how learning at the workplace can offer learners direct access to the innovative practices and technologies brought about by the green transition, while at the same time fostering collaboration and cross-fertilisation between employers and VET institutions that could lead to eco-innovations.

In developing countries, where the majority of jobs are in the agriculture sector, it is crucial that the greening of the agriculture sectors is accompanied by the promotion of local value chain development. Recent study by the OECD Development Centre shows that a transition towards a greener food production system could lead to decent employment creation in both low and high skilled-jobs, particularly for youth, in Africa and Southeast Asia.

Some of the economic activities that are most difficult to make climate neutral are regionally concentrated. Achieving the transition therefore requires a regional perspective. This is shown in the forthcoming report Regional industrial transitions to climate neutrality. Since regions differ in their socio-economic conditions, understanding the regional development implications is also necessary to prepare a just transition. This report describes how these activities are distributed across European regions, related zero-emission-consistent infrastructure needs, and socio-economic conditions of the regions most exposed to these transitions.

Education policies play a role to promote a sustainable growth model by empowering individuals with the knowledge to identify and resolve environmental challenges, and shape attitudes and behaviours. PISA data show varying levels of environmental knowledge and skills, attitudes and actions among 15-year-old students across countries/economies. Students need stronger scientific knowledge and skills in environmental issues than they currently have, especially in countries and economies where student performance in science tends to be lower. Better performers in science have, on average, more pro-environmental attitudes than lower-performing students, and students with pro-environmental attitudes are more likely to take part in actions that benefit the environment. If schools help students find an environmental senseof-purpose, this can mobilise their knowledge and propel them into action. Environmental education initiatives that target school communities as a whole and not just individuals are promising.

Ongoing work will identify changes in skill demand arising from the climate transition with focus on the European Union 2030 targets as stated in the Fit for 55 policy package. It will combine Big Data analysis with projections based on the ENV-Linkages model. The OECD is also supporting countries in carrying out their own assessments and facilitating peer learning. The project Skills for the Green Transition is gathering information on how governments define green jobs and green skills and how they evaluate the skills requirements of the green transition and best prepare the adult learning systems to cope with the changes brought about by greening policies. Research on how this analysis of changing skill needs feeds into employment, education, training and migration policies is also being investigated.

Key Publications

• Towards a greener and more inclusive society in Southeast Asia, OECD Development Centre Studies (forthcoming)

• Are Students Ready to Take on Environmental Challenges?, PISA (2022)

• Teaching for climate action, Teaching in Focus (2022)

• Apprenticeships for greener economies and societies, CedefopOECD (2022)

• Embedding Values and Attitudes in Curriculum: Shaping a Better Future (2021)

• Jobs for Rural Youth: The Role of Local Food Economies, Development Centre Studies (2021)

• The jobs potential of a transition towards a resource efficient and circular economy, OECD Environment Working Papers (2020)

• A review of “Transition Management” strategies: Lessons for advancing the green low-carbon transition”, OECD Green Growth Papers (2019)

• SMEs: Key drivers of green and inclusive growth, OECD Green Growth Papers (2019)

• The distributional aspects of environmental quality and environmental policies: Opportunities for individuals and households, OECD Green Growth Papers (2019)

Contact for more information

Elisa Lanzi

Environment Directorate

E-mail: Elisa.Lanzi@oecd.org

Francesca Borgonovi

Centre for Skills

E-mail: Francesca.Borgonovi@oecd.org

Marieke Vandeweyer

Centre for Skills

E-mail: Marieke.Vandeweyer@oecd.org

Kateryna Obvintseva

Education Directorate

E-mail: Kateryna.Obvintseva@oecd.org