Editing IPCC:AR6/WGIII/Chapter-3 (section)

=== 3.6.4 Structural Change, Employment and Distributional Issues Along Mitigation Pathways ===

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Beyond aggregate effects at the economy-wide level, mitigation pathways have heterogeneous economic implications for different sectors and different actors. Climate-related factors are only one driver of the future structure of the economy, of the future of employment, and of future inequality trends, as overarching trends in demographics, technological change (innovation, automation, etc.), education and institutions will be prominent drivers. For instance, [[#Rao--2019b|Rao et al. (2019b)]] and [[#Benveniste--2021|Benveniste et al. (2021)]] have shown that income inequality projections for the 21st century vary significantly, depending on socio-economic assumptions related to demography, education levels, social public spending and migrations. However, the sections below focus on climate-related factors, both climate-mitigation actions themselves and the climate change impacts avoided along mitigation pathways, effects on structural change, including employment, and distributional effects.

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==== 3.6.4.1 Economic Structural Change and Employment in Long-term Mitigation Pathways ====

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Mitigation pathways entail transformation of the energy sector, with structural change away from fossil energy and towards low-carbon energy ( [[#3.3|Section 3.3]] ), as well as broader economic structural change, including industrial restructuring and reductions in carbon-intensive activities in parallel to extensions in low-carbon activities.

Mitigation affects work through multiple channels, which impacts geographies, sectors and skill categories differently ( [[#Fankhaeser--2008|Fankhaeser et al. 2008]] ; [[#Bowen--2018|Bowen et al. 2018]] ; [[#Malerba--2021|Malerba and Wiebe 2021]] ). Aggregate employment impacts of mitigation pathways mainly depend on the aggregate macroeconomic effect of mitigation (Sections 3.6.1 and 3.6.2) and of mitigation policy design and implementation ( [[#Freire-González--2018|Freire-González 2018]] ) ( [[IPCC:Wg3:Chapter:Chapter-4#4.2.6.3|Section 4.2.6.3]] ). Most studies that quantify overall employment implications of mitigation policies are conducted at the national or regional scales ( [[IPCC:Wg3:Chapter:Chapter-4#4.2.6.3|Section 4.2.6.3]] ), or sectoral scales (e.g., see [[IPCC:Wg3:Chapter:Chapter-6|Chapter 6]] for energy sector jobs). The evidence is limited at the multinational or global scale, but studies generally find small differences in aggregate employment in mitigation pathways compared to baselines: the sign of the difference depends on the assumptions and modelling frameworks used and the policy design tested, with some studies or policy design cases leading to small increases in employment ( [[#Chateau--2013|Chateau and Saint-Martin 2013]] ; [[#Pollitt--2015|Pollitt et al. 2015]] ; [[#Barker--2016|Barker et al. 2016]] ; [[#Garcia-Casals--2019|Garcia-Casals et al. 2019]] ; [[#Fujimori--2020a|Fujimori et al. 2020a]] ; [[#Vrontisi--2020|Vrontisi et al. 2020]] ; [[#Malerba--2021|Malerba and Wiebe 2021]] ) and other studies or policy design cases leading to small decreases ( [[#Chateau--2013|Chateau and Saint-Martin 2013]] ; [[#Vandyck--2016|Vandyck et al. 2016]] ). The small variations in aggregate employment hide substantial reallocation of jobs across sectors, with jobs creation in some sectors and jobs destruction in others. Mitigation action through thermal renovation of buildings, installation and maintenance of low-carbon generation, and the expansion of public transit lead to job creation, while jobs are lost in fossil fuel extraction, energy supply and energy-intensive sectors in mitigation pathways ( [[#von%20Stechow--2015|von Stechow et al. 2015]] , 2016; [[#Barker--2016|Barker et al. 2016]] ; [[#Fuso%20Nerini--2018|Fuso Nerini et al. 2018]] ; [[#Perrier--2018|Perrier and Quirion 2018]] ; [[#Pollitt--2018|Pollitt and Mercure 2018]] ; [[#Dominish--2019|Dominish et al. 2019]] ; [[#Garcia-Casals--2019|Garcia-Casals et al. 2019]] ). In the energy sector, job losses in the fossil fuel sector are found to be compensated by gains in wind and solar jobs, leading to a net increase in energy sector jobs in 2050 in a mitigation pathway compatible with stabilisation of the temperature increase below 2°C ( [[#Pai--2021|Pai et al. 2021]] ). Employment effects also differ by geographies, with energy-importing regions benefiting from net job creations but energy-exporting regions experiencing very small gains or suffering from net job destruction ( [[#Barker--2016|Barker et al. 2016]] ; [[#Pollitt--2018|Pollitt and Mercure 2018]] ; [[#Garcia-Casals--2019|Garcia-Casals et al. 2019]] ; [[#Malerba--2021|Malerba and Wiebe 2021]] ). Coal phase-out raises acute issues of just transition for the coal-dependent countries ( [[#Spencer--2018|Spencer et al. 2018]] ; [[#Jakob--2020|Jakob et al. 2020]] ) ( [[IPCC:Wg3:Chapter:Chapter-4#4.5|Section 4.5]] and Box 6.2).

Mitigation action also affects employment through avoided climate change impacts. Mitigation reduces the risks to human health and associated impacts on labour and helps protect workers from the occupational health and safety hazards imposed by climate change ( [[#Kjellstrom--2016|Kjellstrom et al. 2016]] , 2018, 2019; [[#Levi--2018|Levi et al. 2018]] ; [[#Day--2019|Day et al. 2019]] ) (AR6 WGII Chapter 16).

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==== 3.6.4.2 Distributional Implications of Long-term Mitigation Pathways ====

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Mitigation policies can have important distributive effects between and within countries, either reducing or increasing economic inequality and poverty, depending on policy instruments’ design and implementation (see [[#3.6.1|Section 3.6.1]] .2 for an assessment of the distribution of mitigation costs across regions in mitigation pathways; Sections 3.7 and 4.2.2.6, and Box 3.6 for an assessment of the fairness and ambition of NDCs; and [[IPCC:Wg3:Chapter:Chapter-4#4.5|Section 4.5]] for an assessment of national mitigation pathways along the criteria of equity, including Just Transition, as well as [[IPCC:Wg3:Chapter:Chapter-17#17.4.5|Section 17.4.5]] for equity in a Just Transition). For instance, emissions taxation has important distributive effects, both between and within income groups ( [[#Cronin--2018b|Cronin et al. 2018b]] ; [[#Klenert--2018|Klenert et al. 2018]] ; [[#Pizer--2019|Pizer and Sexton 2019]] ; [[#Douenne--2020|Douenne 2020]] ; [[#Steckel--2021|Steckel et al. 2021]] ). These effects are more significant in some sectors, such as transport, and depend on country-specific consumption structures ( [[#Dorband--2019|Dorband et al. 2019]] ; [[#Fullerton--2019|Fullerton and Muehlegger 2019]] ; [[#Ohlendorf--2021|Ohlendorf et al. 2021]] ). However, revenues from emissions taxation can be used to lessen their regressive distributional impacts or even turn the policy into a progressive policy reducing inequality and/or leading to gains for lower-income households ( [[#Cameron--2016|Cameron et al. 2016]] ; [[#Jakob--2016|Jakob and Steckel 2016]] ; [[#Fremstad--2019|Fremstad and Paul 2019]] ; [[#Fujimori--2020b|Fujimori et al. 2020b]] ; [[#Böhringer--2021|Böhringer et al. 2021]] ; [[#Budolfson--2021|Budolfson et al. 2021]] ; [[#Soergel--2021b|Soergel et al. 2021b]] ; [[#Steckel--2021|Steckel et al. 2021]] ). Mitigation policies may affect the poorest through effects on energy and food prices ( [[#Hasegawa--2015|Hasegawa et al. 2015]] ; [[#Fujimori--2019|Fujimori et al. 2019]] ). [[#Markkanen--2019|Markkanen and Anger-Kraavi (2019)]] and [[#Lamb--2020|Lamb et al. (2020)]] synthesize evidence from the existing literature on social co-impacts of climate change mitigation policy and their implications for inequality. They show that most policies can compound or lessen inequalities depending on contextual factors, policy design and policy implementation, but that negative inequality impacts of climate policies can be mitigated (and possibly even prevented), when distributive and procedural justice are taken into consideration in all stages of policymaking, including policy planning, development and implementation, and when focusing on the carbon intensity of lifestyles, sufficiency and equity, well-being and decent living standards for all ( [[IPCC:Wg3:Chapter:Chapter-13#13.6|Section 13.6]] ).

Mitigation pathways also affect economic inequalities between and within countries, and poverty, through the reduction of climate change impacts that fall more heavily on low-income countries, communities and households, and exacerbate poverty (AR6 WGII Chapters 8 and 16). Higher levels of warming are projected to generate higher inequality between countries as well as within them (AR6 WGII Chapter 16). Through avoiding impacts, mitigation thus reduces economic inequalities and poverty ( ''hig'' ''h confidence'' ).

A few studies consider both mitigation policies’ distributional impacts and avoided climate change impacts on inequalities along mitigation pathways. [[#Rezai--2018|Rezai et al. (2018)]] find that unmitigated climate change impacts increase inequality, whereas mitigation has the potential to reverse this effect. Considering uncertainty in socio-economic assumptions, emission pathways, mitigation costs, temperature response, and climate damage, [[#Taconet--2020|Taconet et al. (2020)]] show that the uncertainties associated with socio-economic assumptions and damage estimates are the main drivers of future inequalities between countries and that in most cases mitigation policies reduce future inequalities between countries. [[#Gazzotti--2021|Gazzotti et al. (2021)]] show that inequality persists in 2°C-consistent pathways due to regressivity of residual climate damages. However, the evidence on mitigation pathways’ implications for global inequality and poverty remains limited, and the modelling frameworks used have limited ability to fully represent the different dimensions of inequality and poverty and all the mechanisms by which mitigation affects inequality and poverty ( [[#Rao--2017a|Rao et al. 2017a]] ; [[#Emmerling--2021|Emmerling and Tavoni 2021]] ; [[#Jafino--2021|Jafino et al. 2021]] ).

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