Building back better: Construction essential for EU green transition

The Fit for 55 climate policy package beefed up previously agreed targets for renewable energy share and energy efficiency, and set Europe on a path towards low carbon production processes – a journey that mandates a wide-spread restructuring of our energy system.

Europe is the ‘old continent’: much of its building stock predates current ambitious energy efficiency requirements. Today, for example, the act of heating and cooling houses generates over a third (36%) of our total emissions. The conversion of our energy systems will require huge investment and will result in a very material – and labour-intensive – transformation of our built environment.
 

Green growth in construction

Eurofound’s research on how the Fit for 55 climate package will impact European labour markets by 2030 determined that these policies will have a positive impact on employment growth, if only very modestly so; some 204,000 net new jobs will be created by 2030 (compared to a business-as-usual projection).

According to this research, the sector that is driving most of the net employment gains from the Fit for 55 package is construction. Buildings are the single largest source of energy consumption in the EU, responsible for around 40% of energy consumption and 36% of the energy-related greenhouse gas emissions. 1 Close to 40% of additional investment expenditure foreseen is directed into this one sector, and around two thirds of that goes into renovation of the existing housing stock.

2 At aggregate EU level, while most growth in employment is foreseen in services (a continuation of the long-standing employment shift to the services sector), construction is set to contribute disproportionately to overall employment growth; with an estimated 8% of total employment in 2030, it will lay claim to over a fifth of foreseen employment increases. This growth is concentrated in particular in low-mid and mid-paying jobs, which are typical in the sector. It results in flattening what would otherwise be a more polarised pattern of employment growth.

The employment shifts that are more specifically attributable to the Fit for 55 package are much more modest in size but are even more heavily skewed towards construction sector gains (around 300,000 by 2030).
 

Lack of labour

So construction is at the heart of much of the energy transition: in building renewable power plants and related infrastructure, and in retrofitting the third or more of our housing stock that is over a half-century old, predating energy efficiency regulations and remaining largely energy-inefficient. 3

Labour will be required to improve insulation of existing housing stock; to convert heating and cooling systems based on gas or oil to more efficient systems based on heat-pump or photovoltaic technologies running on electricity; and to install electric charging infrastructure, develop new power generation capacity and extend electricity grid capacity.

But this scenario raises serious questions given employment trends. Construction is a sector that has never recovered from the Global Financial Crisis (2007–2008). There are 2.4 million fewer construction jobs in the EU in 2023 compared to 2008. With the sole exceptions of Hungary and Romania, the construction share of employment has declined in every EU Member State, with the declines sharpest in those countries with preceding booms.

At the same time, it is a sector experiencing widespread labour shortages.  4 The reasons for these shortages are clearly not lack of demand; they relate instead to workforce ageing and non-renewal. The sector has been slow to recover post-COVID-19 and the lifting of pandemic restrictions has coincided with many former construction workers now employed in other sectors offering better working conditions. 5
 

Skills essential for transition

There may also be mismatches in the sense that there are insufficient trades workers with the specific skills to respond to the needs generated by the green transition, including plumbers, heating engineers and heat-pump installers. The European Centre for the Development of Vocational Training (Cedefop) estimates that by 2030 the sector would need to provide training for an additional 3 to 4 million workers to meet the targets set by the net zero transition. 6 This will be challenging given the high share of employment in small and micro enterprises in the sector.

But on the positive side, the skillsets of gas heating engineers and an air-to-water heat pump engineer, for example, are significantly overlapping. It may take as little as a week of additional training for the former to acquire the necessary knowledge of the heat pump equipment itself and its system design requirements.  7 Incentives – many supported by EU funding – are increasingly available to fund both retraining and reskilling on the worker side, as well as renewable heating source installation on the consumer side. And soon there will be little alternative. Domestic heating by gas or oil will be subject to limitations and eventual phase-out based on EU directives (the Energy Performance of Buildings Directive and the Energy Efficiency Directive).

So we have the targets, we have the incentives. All we need now is enough skilled construction workers to do the job.

Image © Michal/Adobe Stock

Footnotes

• 1

  European Commission (undated), Energy performance of buildings directive, web page, accessed 20 November 2023.

• 2

  Fragkiadakis, D., Fragkiadakis, K., Vrontisi, Z. and Paroussos, L. (2022), Provision of detailed employment forecasts by occupation and sector for the EU based on policies consistent with achieving the EU’s carbon neutrality goal, final report.

• 3

  European Commission (2023), EU Building Stock Observatory: monitoring the energy performance of buildings across Europe, web page, accessed 20 November 2023.

• 4

  Fondazione Giacomo Brodolini Srl SB, European Labour Authority and EURES (2023), Report on labour shortages and surpluses 2022, Publications Office of the European Union, Luxembourg.

• 5

  Eurofound (2023b), EU lack of labour won't be solved by skills alone: Improving job quality is key, Publications Office of the European Union, Luxembourg.

• 6

  Cedefop (2021), The green employment and skills transformation, Publications Office of the European Union, Luxembourg.

• 7

  NESTA (2022), Helping mid-career gas boiler engineers to retrain in heat pumps, web page, accessed 20 November 2023.