A green wage premium?

In response to climate change, many governments have adopted ambitious targets to significantly reduce carbon emissions over the coming decades. For instance, EU member states have committed to cutting emissions by 55% by 2030 (relative to 1990 levels), with the goal of achieving net zero emissions by 2055.

However, concerns have been raised about how these targets might affect workers and labour markets. As economies shift away from high-emission (or ‘brown’) industries — which often provide relatively high wages — there is a risk of job losses or reduced earnings for affected workers. At the same time, the growth of the green economy, including sectors such as renewable energy, presents new employment opportunities. Whether these green jobs can offset the negative impacts of decarbonisation depends in part on how well they pay — in other words, whether a ‘green wage premium’ exists, and how substantial it is.

This study contributes to the growing body of research on how the transition to a low-carbon, resource-efficient and socially inclusive economy — often referred to as the green transition — affects workers and income distribution. Using detailed administrative data from Norway, the authors estimate the wage premiums associated with green jobs, while accounting for the fact that workers are not randomly distributed across firms.

Key points for decision-makers

• Green jobs offer a wage premium: On average, workers in green firms earn 6.6% more than comparable workers in other sectors. This premium is both statistically significant and economically meaningful.
• Brown jobs still pay more: High-emission firms offer an average wage premium of just over 14%, which is more than double the green wage premium. This suggests that while green jobs can help cushion income losses from the decline of brown industries, they may not fully compensate for them.
• Wage premiums are consistent across groups: The green wage premium remains positive across different definitions of green and brown firms, and across various education levels, genders and occupations.
• Greater benefits for non-college workers and low-skilled occupations: The green wage premium is larger for workers without a college degree and those in low-skilled roles — a pattern not observed for the brown wage premium, or across genders.
• Potential for a more equitable transition: The relatively higher wage gains for non-college workers in green jobs suggest that expanding these opportunities could help reduce inequality and support a fairer green transition.