Returns to green tasks in Europe: evidence from online job vacancies

As the green transition reshapes labour markets, a key question is whether there are sufficient wage incentives for workers to acquire the skills that decarbonisation of the economy demands. This paper studies the ‘green wage premium’: the pay differential between green and comparable jobs. It examines the underlying drivers of this wage premium to isolate the actual wage value of performing green tasks in the workplace. It also provides the first comprehensive description of green employment across Europe.

Drawing on a large dataset of online job vacancies in the EU from 2018 to 2023, the authors use large language models to develop a novel way of identifying green jobs at the vacancy level in 12 EU countries. The data includes salaries, skill requirements and employer companies, enabling the authors to compare green job vacancies with similar vacancies within the same occupation, company, country, year and region, eliminating other factors that could explain the wage premium.

The authors find an overall green wage premium of 5.5%, in line with previous estimates. However, three components contribute to this overall figure. First, wage setting by companies accounts for around half: when firm salaries are controlled for, the premium falls to around 3%. Second, the higher level of general skills that green jobs tend to require explains a further tenth of the premium. Once these have been accounted for, the wage reward for performing green tasks in the workplace falls to around 2%: smaller than recent estimates of the wage premium for AI skills or for working in finance. This suggests the market incentive for acquiring green skills is much weaker than for other in-demand competencies and labour markets alone are unlikely to drive the reallocation of skills the green transition needs.

Key points for decision-makers

• The wage reward for performing green tasks is smaller than previously thought: by controlling for firm salaries, skill complexity and the characteristics of jobs, this paper isolates a wage reward for performing green tasks of around 2%. Crucially, this estimate covers a period of ambitious policy support under the European Green Deal, meaning that even with a strong policy tailwind, the wage incentive for workers to acquire green skills remains weak.
• Decision-makers should not assume that labour markets will organically attract workers into green roles: active interventions to support workers’ skill development are likely to be needed.
• Green employment in Europe is growing and outpaces the US: the share of green jobs in Europe rose from 2.6% to 3.6% between 2018 and 2023, consistently above comparable US estimates. This is consistent with Europe’s more sustained climate policy commitment. The share of green jobs is highest among low-skilled occupations, challenging the assumption that the green transition, like digitalisation, will not favour manual workers. However, the fastest growth is among high-skilled occupations, suggesting that demand for green expertise is increasing in more highly skilled roles. Across regions and sectors, green employment remains unevenly distributed, concentrated in Northern Europe and in sectors that have benefited most from European Green Deal support.
• Broad competencies may complement green-specific training: green vacancies are significantly more likely to require broad technical, cognitive, IT and managerial skills than comparable vacancies. This suggests it is beneficial to invest in broad skill formation, particularly in technical and managerial competencies, alongside more targeted green training. Workers equipped with strong general skills are likely to be better positioned to move into green roles as they arise, helping to reduce the ‘adjustment friction’ – the time, retraining and effort it takes workers to shift from one type of job to another – that a modest wage premium alone cannot overcome.
• Ethical or purpose-driven job characteristics do not meaningfully affect the premium: despite the view that green jobs might offer workers an ethical or purpose-driven reward that they accept in lieu of pay, when the authors controlled for these characteristics, the estimated green wage premium barely changed.