In its Powering up Britain plan, the UK Government promised greater energy independence, more affordable energy bills, less fossil fuel use and high skilled jobs alongside inflation reduction and economic growth. The headline figure quoted on jobs was ‘480,000 in 2030’. The UK Government has also recently announced that it will review the ‘contracts for difference’ scheme in order to strengthen domestic supply chains for the renewables industry and support ‘thriving green industries and high quality jobs’. The ambitions and focus on jobs will be broadly welcomed. Yet, without parallel discussions and careful planning in relation to labour markets, which are currently, and potentially persistently (in the absence of policy action), constrained in terms of workers and skills, the Government’s ambitions could fall short and risk potentially unanticipated and undesirable outcomes on project delivery and the cost of living and doing business in the UK.
Why do labour markets matter?
As part of Net Zero discussions and planning, there has been a great deal of focus to date on the numbers of jobs that could be supported by different elements of the transition and the types of skills required. Yet the question of whether workers will be available in sufficient numbers to service both net zero needs, whether required skills can be developed, and what this means for the economic opportunities that the transition offers, has received less attention. However, these are issues highlighted as potential barriers to progress by the Office of National Statistics (ONS) and energy industry bodies.
A new project, LAB-CLUSTER, led by the Centre for Energy Policy (CEP) and funded by the Industrial Decarbonisation Research and Innovation Centre (IDRIC) is seeking to bridge this gap and bring crucial new analytical insight and evidence on how persisting labour market supply constraints and other cost pressures (e.g., continuing energy price volatility) may impact decarbonisation project delivery and sectoral/wider economy outcomes. Focussing on the example of industrial carbon capture and storage (CCS), LAB-CLUSTER aims to strengthen understanding of how constrained labour markets can lead to competition between sectors and projects for appropriately skilled labour. This includes focus on the effects of bargaining between employers and workers over real wage rates on labour costs, prices, and the cost-of-living and -doing business in the UK. Crucially, it looks to explore how the outcomes of competition for skilled labour in regions where Net Zero projects are developed can affect local communities, as well as any communities where workers may currently reside.
Labour markets and industrial decarbonisation
LAB-CLUSTER’s focus on labour markets and decarbonising industry clusters builds on previous and existing CEP research on labour market challenges across the net zero space. In the specific context of CCS, it builds on work on various projects, including Scotland’s Net Zero Infrastructure (SNZI) programme (funded by Innovate UK) and CCUS and wage-driven employment displacement across multiple sectors in a supply constrained labour market (funded by UKCCSRC).
For example, CEP research on the SNZI project suggests that a new Scottish CO2 Transport and Storage industry built around the Acorn project, and sequestering up to 6.4 million tonnes of CO2 per annum (60% of which is generated in the Scottish cluster) could ultimately support just under 1,100 full-time jobs across UK supply chains, but with some displacement of employment in other sectors as wage costs are bid up in the UK’s supply constrained labour market. However, if labour supply constraints and wage pressures can be substantially or fully mitigated this figure could potentially more than triple to around 3,900, with limited or no displacement of jobs across other sectors.
Through LAB-CLUSTER, we are building out this evidence base by:
- Understanding how supply constraints and competition in industry, regional and national labour markets may influence the costs of delivering and operating CCUS systems and the industries decarbonising via CCUS, as well as the cost-of-living and -doing business in the UK.
- Exploring what the regional economy impacts associated with the relocation of workers and potential displacement of employment across clusters and industries might be.
- Investigtating how persistently high energy prices may also influence the potential sectoral, regional and economy-wide outcomes associated with the operation of CCUS activity in UK industry clusters.
- Updating economy-wide scenario simulations as national accounting data on the structure of the economy updates, and as CCUS cluster sequencing develops.
Bringing this type of nuanced understanding to policy development and decision-making, particularly around Net Zero and wider economic and workforce planning, will be critical to realistically defining and meeting ambitions in relation to the UK’s future sustainability and prosperity. Particularly against an increasingly competitive global backdrop where other countries and regional blocs, such as the US through its Inflation Reduction Act, are seeking to boost local supply chains and associated job creation.
Get involved
If you would like to find out more about the LAB-CLUSTER project or get involved please contact the Centre for Energy Policy’s stakeholder engagement lead, Hannah Corbett, hannah.corbett@strath.ac.uk.