The Billion Dollar Benefits of Expanded Green-Skilled Migration

This blog outlines the potential impacts on both earnings and carbon emissions from expanding skilled migration to support the green transition.

The green transition is accelerating. Globally, more than 80 countries have pledged to substantially reduce their greenhouse gas emissions in the coming decades, requiring a ‘green transition’. There are many constraints governments face in meeting these ambitious targets, including insufficient financing, technology access, and political will. But one of the biggest constraints, and very seldom addressed, is a lack of skilled workers. Analysis by the Boston Consulting Group, for example, suggests that in the top ten carbon-emitting economies, at least five million workers will be lacking by 2030.

The International Energy Agency (IEA) has acknowledged that shortages of skilled workers are already translating into project delays and impacting investment decisions. No country currently has enough domestic talent (in areas such as solar panel and heat pump installation) to support the green transition. Current training pipelines are too small and are not being scaled up quickly enough to meet the urgent investment needs required by climate targets.

Skilled migration is one solution for richer countries. Yet given the world as a whole needs an increase in the stock of green-skilled workers, it would do little by itself to support reduced global emissions. This suggests that skilled migration needs to be coupled with greater training opportunities in countries of origin if it is to have the desired impact on both individual earnings and carbon emissions.

Individual earnings

At the start of this year, India and Germany signed a memorandum of understanding, agreeing to increase green-skilled migration. The need is certainly there: the German Solar Association estimates that Germany needs 100,000 new solar panel installers by 2026, while the European Union-level body (SolarPower Europe) estimates 140,000. What economic impact could filling some of these posts with migrant workers have?

Let’s take the midway of the two estimates: 120,000 workers. Now assume that five percent of that demand can be met by skilled Indians, or 6,000 people. An Indian solar technician graduating from the state-run Surayamitra programme can expect to earn around US$2,300 per year in India.^[1] A solar panel installer in Germany with little experience can expect to earn US$33,000 per year, while more qualified installers can earn around US$58,000 per year. Even taking the lower bound, facilitating the migration of skilled Indians would translate into an individual income gain of US$30,700 per year.

Right now, solar panel installers with a job offer and an adequate level of German can access a visa through the new ‘Skilled Immigration Act’, meaning they would have a pathway to permanent residency and citizenship. It’s therefore reasonable to assume that these Indian migrants would have substantial and long-term income gains over the course of their working lives.

Remittances

These gains would also have a transformative effect for their families and communities back home, often spilling out further into their community of origin. The European Migration Network estimates that workers remit an average of 15 percent of their take-home income. Other studies have found much higher numbers; seasonal workers in New Zealand’s Recognised Seasonal Employer scheme remitted an average of 42 percent. If we use a conservative middle ground of 25 percent of net income, this would equate to US$5,750 per person sent back home to India, or US$34.5 million per year overall.

This money could have a transformative effect for individual households and their communities. We know that remittances are also often used to support climate adaptation, making communities more resilient. In some cases (so far relatively rare) remittances can also be used for mitigation (e.g., the replacement of polluting generators with solar panels). They can also be used to support further migration, compounding the benefits; or for debt repayment, medical care, and education, all of which can have enormous positive impacts.

The global stock of workers

The earnings gains reviewed to this point result from using a standard recruitment model. If this was done through a partnership model, the benefits would be even greater. For example, German employers who benefit from skilled Indian labor could be required to provide a percentage of the employee’s earnings (say, one percent, or US$330) to a fund. Multiplied by the number of skilled immigrants, this would ensure the fund’s balance would be approximately US$1.98 million per year.

This fund could be used to support the training of further solar panel installers. Training a solar panel installer in India costs US$194. Using a partnership model could therefore result in over 10,000 additional solar panel installers being trained, many of whom would likely stay in India and meet skills shortages there. Other options could include investing that money in the training of other green-skilled workers, climate adaptation projects, or broader development goals.

Carbon emissions

The London School of Economics’ Grantham Institute has calculated the social cost of carbon, or the estimate of the damage done by each additional tonne of carbon emissions, to be US$200 per tonne.

How does this relate to the impact of a migrant worker? Let’s consider heat pumps; another crucial technology in the green transition, which must be rolled out at a rapid pace to meet emissions reduction targets. According to the IEA, even a poorly installed heat pump will reduce a household’s annual carbon emissions by at least 20 percent. In Germany, where gas boilers emit an average of 34 tonnes of CO2 per year, switching to a heat pump would save 24 tonnes over just the first year of use.

Yet almost all countries have a chronic shortage of heat pump installers. The European Union needs an additional 750,000 heat pump installers by 2030. How would the expanded skilled migration of heat pump installers contribute to a reduction in carbon emissions?

Industry sources suggest it takes around six working days to install one heat pump, so an installer can put in approximately 36 per year. Multiplying that by the social cost of carbon (US$200) and the annual amount of carbon emissions reduced by installing a heat pump (24 tonnes) results in an incredible US$175,000 of global public good. That’s the contribution of just one migrant in just the first year of work.

If we imagine a skilled migration programme that, again, brought in 6,000 heat pump installers, that would be a contribution of over US$1 billion in a year. Again, this is in addition to the gains from training additional heat pump installers who stay in their country of origin and contribute to reductions in carbon emissions there.

Next steps

Without the necessary workers, the green transition will not happen at the urgent pace required. Germany has recognised this. Its pilot green migration programme offers a lesson for other countries to learn from. Similar programmes will be needed elsewhere: the UK, for example, could benefit from a mobility programme focused on heat pump installers.

Managing green skills partnerships requires a detailed understanding of the country of destination’s skill needs and of its training capacities. Migration must be carefully incorporated into just transition plans, supplementing the domestic workforce rather than displacing upskilling opportunities. It must also complement the skill needs of the country of origin. In the case of the Germany-India partnership, India has a surplus of solar panel installers that can contribute to meeting Germany’s needs. In other partnerships, the country of destination is likely to need to support training in the country of origin to avoid harming the green transition there.

As this blog shows, these partnerships can offer huge benefits to everyone. In the coming years, billions more dollars in carbon emissions reductions may be delayed by workforce shortages. We need to start planning partnerships for the next decade, and fast.