Carbon pricing and the labour market

This chapter analyses carbon pricing’s impact on environmental and economic outcomes, focusing on labour markets. Research suggests a generally modest influence on overall employment, with potential job losses in certain sectors balanced by gains in others because the transition to a low-carbon economy will foster innovation and new industries. Carbon pricing indirectly affects the labour market, influencing skill and occupation demand. Various factors - such as pricing design, economic characteristics and complementary policies - influence its effects on employment. Reskilling and retraining programmes can help workers adapt to evolving job requirements during this transition. Policymakers commonly use strategies like revenue reallocation, targeted assistance and supportive policies to ensure a fair and inclusive transition. The implementation of carbon pricing could also influence global competitiveness and potentially exacerbate challenges in labour market adjustments. Therefore coordination and cooperation with international partners are crucial in order to implement climate policies that will prove effective from an economic, environmental and social point view.