The impact of green recovery interventions on employment is similar but not identical to the effect on economic output. In the short run, virtual net billing and smart meters create the highest positive effects on national employment relative to the reference scenario; for every million euros (M€) invested in either measure, about 14 new jobs are created throughout the economy. In the long-run (2030), the virtual net billing measure still creates the highest economy-wide employment effects. On the contrary, sustainable mobility interventions M8 and M9 create the largest negative effects in terms of employment generation. Their negative employment multipliers are due to their success in shifting mobility from private cars to public transport, which causes household spending for fuel and car purchases as well as for car maintenance to drop considerably; these economic activities (belonging to the trade sector) are labor-intensive so that overall employment falls.

These ‘negative’ effects of energy efficiency measures have to be treated with caution and should not be interpreted as suggesting to avoid energy efficiency investments that improve the economy-wide productivity of energy use. A feature of the IO model is the assumption of fixed technical coefficients: the combinations of inputs are employed in fixed proportions. This assumption implies that there is no substitution among the inputs and no technological progress, which becomes less plausible when the impacts over a longer time horizon are modeled. To the extent that the reduced economic output and employment in sectors such as trade of vehicles and fuels is compensated through re-training of workers and re-orientation of business activities, negative economic impacts of sustainable mobility can be overcome. More broadly, the ability of an economy to transform itself and use the resources saved to grow new sectors, or to divert saved resources to export-oriented activities as a result of increased business competitiveness, will depend on factors like people’s skills, availability of financing and policy decisions – aspects that are insufficiently accounted for by IO models.

It should also be noted that the model does not distinguish between employment categories, so that our approach cannot include the impact on low-skilled and high-skilled workers, which would be important for evaluating the effect of each intervention on long-term growth prospects. Such considerations are important in view of the findings of studies that examined stimulus measures applied after the 2008-2009 economic downturn, which highlight the importance of observing differences in skills in order to properly compare alternative policies (Chen et al., 2020; Strand and Toman, 2010). Moreover, job calculations do not account for the possibility that supply of skills in some sectors may not suffice to meet growing demand. For example, a construction boom due to energy renovations may be limited by a lack of skilled technicians in the country, at a time where a ‘renovation wave’ in buildings is foreseen across the entire Europe. Therefore, before deciding on the extent of implementation of a recovery measure, a skill mismatch analysis would be needed to ensure that human resources are available for realizing this intervention.

It is particularly interesting to observe the results of the counterfactual scenario, which assumes a ‘return-to-normal’ economic stimulus, where all recovery funds are allocated uniformly to households and businesses, and consumption continues as before. As shown in the last row of Table 6 and indicated by a red dot in Figure 2, a business-as-usual economic recovery is clearly not the preferable option; with an economic multiplier of just 0.83, it performs better than only two of all the green measures. It also has a mediocre effect in terms of employment generation, with 6.3 new jobs per M€, whereas four green measures have more than double the job benefits. This clearly indicates that a uniform demand stimulus is far from the most effective strategy for increasing employment in the short term. Such a finding, which has been explored in very few studies so far, is confirmed by Pollitt (2020) for major EU economies (through a macroeconometric model) and by IMF (2020) for the global economy (through a computable general equilibrium model).

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