Cars and the Green Transition: Challenges and Opportunities for European Workers

CarsandGreenTransition:ChallengesandOpportunitiesforEuropeanWorkers OyaCelasun,GalenSher,PetiaTopalova,andJingZhouWP/23/116 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate. TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. 2023 JUN ©2023InternationalMonetaryFundWP/23/116 IMFWorkingPaper EuropeanDepartment CarsandGreenTransition:ChallengesandOpportunitiesforEuropeanWorkers PreparedbyOyaCelasun,GalenSher,PetiaTopalova,andJingZhouAuthorizedfordistributionbyOyaCelasun June2023 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. ABSTRACT:Reducingtransportsectoremissionsisanimportantpillarofthegreentransition.However,thetransitiontoelectricvehicles(EV)portendsmajorchangesinvehiclemanufacturingactivity,onwhichmanylivelihoodsinEuropedepend.UsingtheheterogeneityacrossEuropeancountriesinthespeedoftransitiontoEVproductionandvariationinsectoralandregionalexposuretotheautomotivesector,thispaperoffersearlyevidenceofthelabormarketimplicationsoftheEVtransition.Ourresultssuggestthatthetransformationoftheautosectorisalreadyhavinganadverseimpactonemploymentintheaffectedsectorsandregions,whichcanbeexpectedtogrowatleastinthenearterm.Manyoftheaffectedworkerswillbeabletoretireandouranalysissuggeststhatthosewhowillhavetotransitiontonew“greener”jobshaveafairchancetodosowhencomparedtootherworkersinthemanufacturingsector.Furthermore,wefindevidencethatactivelabormarketpolicies,specificallytraining,canhelptoreducetheadjustmentcostsfortheaffectedworkers. RECOMMENDEDCITATION:Celasun,Oya,GalenSher,PetiaTopalova,andJingZhou.2023.“CarsandGreenTransition:ChallengesandOpportunitiesforEuropeanWorkers”IMFWorkingPaper23/116,InternationalMonetaryFund,Washington,DC. JELClassificationNumbers: E24,Q52,Q55 Keywords: Electricvehicle;employment;greentransition;labormarketpolicy Author’sE-MailAddress: OCelasun@imf.org,GSher@imf.org,PTopalova@imf.org,andJZhou@imf.org WORKINGPAPERS CarsandtheGreenTransition:ChallengesandOpportunitiesforEuropeanWorkers PreparedbyOyaCelasun,GalenSher,PetiaTopalova,andJingZhou1 1TheauthorswouldliketothankSabihaMohonaforexcellentresearchassistance.OyaCelasunocelasun@imf.org;GalenShergsher@imf.org;PetiaTopalovaptopalova@imf.org;JingZhoujzhou@imf.org.TheviewsexpressedinthispaperdonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoardorIMFmanagement. Contents I.Introduction3 II.TheTransitiontoEVs5 III.EvidenceonEmploymentEffects10 EvidenceBasedonDifferentSectoralExposurestotheAutomotiveSectorElectrification11 EvidenceBasedonDifferentRegionalExposurestotheAutomotiveSectorElectrification14 IV.TheRoleofPolicies19 V.ReallocationProspectsoftheAdverselyAffectedSectors20 VI.Conclusion22 FIGURES 1.ExportsofElectricVehicles6 2.NewRegistrationsandSalesofElectricVehicles7 3.ElectricVehicleChargingStations8 4.CountriesinEuropewithOfficialTargetsfora100PercentPhaseOutofICEVehicleSales9 5.RRF-FundedSpendingDedicatedtotheAutomotiveSector10 6.EmploymentofAutomotive-Related12 7.NumberofAutomotiveEmployees(FTE)byRegion,201514 8.EmploymentintheAutomotiveSectorinEuropeanRegions,201515 9.ChangeinEmploymentRate,2015–1917 10.ProspectsofSwitchingtoaGreenJob:Germany22 TABLES 1.LaborMarketOutcomesandExposuretoElectrification:SectoralEvidence13 2.LaborMarketOutcomesandExposuretoEVProduction:RegionalEvidence16 3.ScenariosoftheNumbersofEUWorkersaffectedbytheEVTransition16 4.UnemploymentRateandExposuretoEVProduction:TheRoleofWorkers’Education18 5.UnemploymentRateandExposuretoEVProduction:TheRoleofWorkers’Age19 6.LaborMarketOutcomesandExposuretoEVProduction:TheRoleofPolicies20 AnnexI.DataSourcesandVariableConstruction24 References25 I.Introduction Vehiclemanufacturingisundergoingitsmostprofoundtransformationinhistory.Acombinationofrisingdemandforenvironmentallyfriendlyvehiclesandregulatoryrestrictionsonemissionsissteeringtheindustrytoproducezero-emissionvehicles,especiallyvehiclespoweredbyelectricity(EVs).Withtheirpaint,frames,wheels,steeringsystemsandinteriors,EVsmaylooksimilartotraditionalinternalcombustionenginevehicles(ICEVs).However,EVsneedbatteries,morewiring,andsimplerelectricmotors,whileICEVshavemorecomplexenginesandneedstarters,fueltanks,exhaustpipesandgears.Asaresult,theamountoflaborinputandcomponentsrequiredtoproduceanEVcouldbesignificantlylowerfromtherequirementsoftraditionalICEVs—aproductwithoneofthelongestandmostcomplexsupplychains.EVswillalsotransformenergymarkets:EVswillincreasedemandforelectricity,requiringmorepowerplantsandhigher-capacitytransmissionlines,andwillreducedemandforgasolineanddieselrefiningandfillingstations.AsDanielYerginnotes,“Today,theEVhasbecomeanexistentialquestionfortheglobalautomotiveindustry.”1AndtheEUautomotiveindustryandconsumershaverespondedinanastoundingmanneroverthepast5-6yea