Future of work

This comprehensive study, which examines labour market dynamics in Italy from 1992 to 2020, reveals stark disparities in how environmental policies affect jobs with different skill levels.  

The Environmental Policy Stringency (EPS) Index is a composite measure developed by the OECD that scores countries on a scale from 0 to 6, where 0 = least stringent environmental policies and 6 = most stringent. The index aggregates 13 different environmental policy instruments across three categories: 

• Market-based policies (taxes and certificates): 

• • CO2 certificates, renewable energy certificates, and taxes on CO2, NOx, SOx, and diesel 

• Non–market-based policies (performance standards): 

• • Emission limit values for NOx, SOx, particulate matter, and sulphur content in diesel 

• Technology support: 

• • Research and development expenditure and adoption support for renewable energy sources (solar and wind) 

Each component is weighted equally to create the composite score. Italy’s EPS score was about 4.0 in 2020, up from 1.3 in 1992. 

Using a novel statistical methodology known as dynamic autoregressive distributed lag (DYARDL), the research demonstrates that a 1% increase in environmental policy stringency reduces demand for low-skilled labour by 0.66% in the long term while boosting demand for high-skilled labour by 0.12%. 

The green energy transition shows even more pronounced effects. A 1% increase in renewable energy adoption decreases demand for low-skilled workers by 0.37% and raises demand for high-skilled workers by 0.85% over the long term—a nearly sevenfold difference in magnitude. These findings highlight the displacement of workers in traditional carbon-intensive sectors. This has particularly affected Italy’s 6.8 million low-skilled workers, who represent approximately 28% of the labour force. 

From 1992 to 2020, Italy’s renewable energy capacity tripled to 26,000 from 8,000 kilotonnes of oil equivalent (KTOE), driven by feed-in tariffs and incentives for solar, wind, and hydropower initiatives. While this transformation advanced climate goals, it generated significant labour market disruption. The EPS Index score increased to 6 (the maximum stringency level) from near 0 over the study period, reflecting Italy’s aggressive pursuit of environmental compliance. 

The structural transformation under the European Green Deal and Italy’s 2025 National Energy and Climate Plan, targeting 39.4% renewable energy by 2030, intensifies these challenges. Southern regions, which already experience concentrated low-skilled unemployment and limited access to training opportunities, are particularly vulnerable. The country’s rapidly aging population–whose working-age demographic is projected to drop by 34% from 2023 to 2060—compounds these constraints in skill availability. Additionally, Italy’s energy import dependency, which reached 74.8% in 2023, exposes the workforce to external price volatility. 

The research also examines green technological innovation and finds that a 1% increase reduces the demand for low-skilled labour by 0.10% while increasing the demand for high-skilled labour by 0.26%. This suggests that technological advancement in green sectors primarily benefits workers who have specialized expertise in environmental engineering, compliance auditing, and renewable infrastructure development. 

Under the EU’s Recovery and Resilience Facility, each Member State developed a National Recovery and Resilience Plan outlining how it would invest EU recovery funds in areas such as education, labour markets, and climate action. Italy’s plan allocates €26.9 billion to education and active labour market policies, with 39% of its €194.4 billion total investment directed toward climate-related objectives.  

The study emphasizes the need for the following critical interventions: 

• modular, short-cycle training programs delivered through technical institutes and mobile training units, prioritizing the workers in construction, manufacturing, and transportation sectors whose jobs are at the highest risk from environmental regulations 

• transition packages, including retraining vouchers and wage protection schemes to cushion short-term employment shocks 

• green apprenticeships and skill-based certifications integrated into formal education, focusing on practical skills in energy installation, auditing, and sustainable waste management 

• geographically targeted investments in sustainable construction hubs and renewable energy projects in provinces with high densities of low-skilled labour 

• the establishment of a National Green Labour Monitoring Unit to track employment trends and coordinate regional training centres 

The study confirms that the economic effects of the green transition persist across short, medium, and long-term time horizons, suggesting structural rather than cyclical changes. Public investment shows positive effects for both skill levels, with a 1% increase raising demand for low-skilled labour by 0.46% and high-skilled labour by 0.55%. This indicates that strategic public spending can partially offset transition-related displacement. 

Without proactive interventions, Italy risks creating a two-tier labour market that could undermine both its climate goals and its social cohesion. The widening gap between skill levels threatens to exacerbate existing regional disparities and could trigger broader socio-economic instability, particularly as traditional industries face accelerated decline.