The Welfare Costs of Job Loss and Decarbonization– Evidence from Germany's Coal Phase Out

Luke Haywood, Markus Janser and Nicolas Koch ()
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Nicolas Koch: Mercator Research Institute on Global Commons and Climate Change (MCC)

No 14464, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Decarbonizing economies is an enormous task. Public debate often focuses on the job loss of workers in fossil industries. Why is job loss costly? Who is most affected? Can delaying transition reduce welfare costs? What other policy instruments may be available? We present a simple job search framework that calculates life-time welfare costs of job loss. We apply the model to the archetypical fossil industry - coal mining. Based on the universe of German coal employment biographies, we estimate the model and decompose welfare costs. We find that unemployment is a small factor: Higher wages and job security in coal drive welfare costs. We distinguish welfare costs by age, education and business cycle. High-educated workers aged 31-49 face highest losses. Based on a detailed demographic projection, we estimate that advancing coal exit from 2038 to 2030 increases unmitigated welfare costs by one third. Labor market policy promoting career switches rather than retirement can alleviate these welfare costs: A wage insurance scheme is estimated to reduce welfare losses by 80-99% at reasonable costs.

Keywords: coal exit; just transition; structural change; job loss (search for similar items in EconPapers)
JEL-codes: J64 L16 Q54 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2021-06
New Economics Papers: this item is included in nep-dge, nep-env and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Journal of the Association of Environmental and Resource Economists, 2024, 11 (3), 577–611

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Journal Article: The Welfare Costs of Job Loss and Decarbonization: Evidence from Germany’s Coal Phaseout (2024)
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