Executive summary

Southeast Asia is committed to promote environmentally sustainable economic growth. This has been demonstrated by the adoption and endorsement of an array of regional declarations and blueprints by the Association of Southeast Asian Nations (ASEAN). Since the mid-2010s, ASEAN countries have been mapping out green growth strategies. All ten member states have green growth objectives in their national development plans as of 2023. Despite these commitments, the region is not on track to achieve the sustainable development goals and is showing slow progress, even regression on environment-related goals. Environmental degradation due to the increased frequency of extreme weather events, exacerbated by deforestation and overfishing, continues unabated, threatening the working conditions and livelihoods of millions of Southeast Asians.

The region’s typical geographic features as insular and coastal countries make it prone to climate change-related disasters and extreme weather events. Over 100 million workers have jobs that are directly or closely linked to the environment, making them vulnerable to climate change impacts. “Environmentally linked” jobs represent about 37% of total employment in the region. While most of them are in agriculture, up to 5% are jobs in sectors with strong indirect links to natural resources, such as waste management or manufacturing of wood products. Workers in environmentally linked jobs are likely to earn 20% less than the national average and to be in informal employment. In Southeast Asia, the informal economy employs an important share (70%) of the labour force, but jobs with direct links to the environment have an even higher propensity (93%) to be in the informal economy. Informal status typically implies that workers have no social protection and must cope with the consequences of environmental shocks on their own.

Further analysis was carried out for Indonesia and Viet Nam to understand the vulnerabilities of workers in relation to natural disasters. Provinces prone to a high frequency of floods and droughts were overlapped with job characteristics found in these areas. In Indonesia, over half of its labour force (51%) is vulnerable to income loss due to natural disasters. In Viet Nam, this concerns 21% of the workforce. The two countries have similar levels of informality and shares of workers in environmentally-linked jobs. The reason for Indonesia’s higher share of vulnerable workers is the concentration of its population in Java, where natural disasters are prevalent, while in Viet Nam, natural disasters concern mostly the sparsely populated North Central Coast region.

While Southeast Asia’s remarkable economic growth has relied heavily on natural resources, the region must adopt new, more sustainable development pathways as it grapples with environmental challenges. The transition towards greener growth will necessarily create shifts in the labour market: some sectors will create jobs, others will lose jobs or simply disappear. The negative impact will likely be felt more strongly among those already at a disadvantage in the labour market. Understanding the effects of climate change and green growth on jobs and people is a crucial step for promoting inclusive green growth in Southeast Asia. The study does this by looking at the effects a global energy transition on Indonesia’s labour market.

A scenario where the world adopts sustainable energy production and use to reduce global greenhouse gas (GHG) emissions in accordance with the Paris Agreement is used to analyse the possible effects on labour in Indonesia. The simulation shows that the energy transition would result in a total net employment gain of 1 089 000 in Indonesia, or 0.86% more than the business-as-usual scenario. Employment gains are expected to benefit a wide range of sectors, from electricity and gas and construction to metal mining sectors. New employment opportunities would be created for low to highly educated profiles. The electricity and gas (particularly photovoltaic), trade and construction sectors capture the largest employment gains. Mining and manufacturing of fossil fuel are the only sectors expected to lose about 31 000 jobs. Public sector-oriented activities, such as social work, health, education and public administration remain virtually unaffected.

Even though job gains far outweigh job losses, what remains a concern is the geographic concentration of job losses in Kalimantan, the Indonesian region specialised in fossil fuel extraction. The profiles of workers who would be negatively affected by an energy transition are mostly men, wage employed in the formal economy, with higher earnings than the national average and good education levels. Still, a non-negligible 44% of them are in the informal economy, without social protection. In the absence of adequate strategies for job reallocation and territorial economic diversification, the energy transition will have economic costs but also consequences on the social cohesion of the country.

Another sector that requires particular attention in Southeast Asia in terms of its contribution to GHG emissions and environmental degradation is agriculture. Agriculture contributed on average about 11% of GDP in ASEAN countries in 2020 and remains an important source of livelihoods for about 96 million workers. However, Southeast Asia’s thriving agri-food industry is destroying the ecosystem and biodiversity on which it relies. The increased need for arable land for livestock and higher-value crops has led to the massive conversion of primary forests for agriculture. The sector is also the second biggest contributor to global GHG emission after energy. The need for a transition towards more sustainable agricultural practices is urgent from both a biodiversity conservation and climate change mitigation perspective. Considering the size of the agricultural labour force, the effects of a transition in agriculture on employment will be substantial.

The study analyses the potential effects on employment and income of a conversion from conventional to organic rice farming in Indonesia, the Philippines, Thailand, and the region as a whole. Using Input-Output modelling, the simulation shows that an expansion of organic rice farmland to 5% of total rice farmland results in an overall increase in employment and income. The scenario creates 5.4 times more direct jobs than an equivalent land size expansion of conventional rice farmland. When looking at both direct and induced effects on the rice sector, the scenario creates 21 times more jobs. This is explained by the fact that organic farming tends to be more labour intensive, but also by the induced effects from increased income and demand for rice. Notably, in that scenario, the income of rice farmers increases by about USD 8 more per month. This is assuming that price premiums from organic products also benefit farm gate value. The sector likely to experience the most negative impact is “Chemicals and chemical products”, due to the decrease in demand of fertilisers and chemical inputs.

There are several policy implications for a greener and more inclusive society in Southeast Asia. First, countries in Southeast Asia must reduce the vulnerability of the current 100 million workers who depend on the environment for their livelihoods. Social protection schemes such as universal healthcare, unemployment insurance and cash transfer schemes are needed. Public social expenditure in the region as a share of GDP ranged from 3% to 8% in 2019, well below the OECD average of 20%. Second, when embarking on a transition towards greener pathways, whether in energy or agriculture, a careful assessment of the distributional effects on labour and a detailed understanding of the profiles of affected individuals will be necessary, and compensation measures anticipated. Equity is crucial in ensuring political acceptability of a reform. Third, the most vulnerable geographic areas need plans for local development and economic diversification. Finally, reskilling and upskilling must be anticipated in losing and winning sectors alike. The agriculture sector will notably need policy support as it currently absorbs the majority of vulnerable and informal workers. Both adaptation and mitigation measures in the form of skills training, technology transfers and new market opportunities will be necessary, as well as income support during the initial transition phase towards a more sustainable agricultural practice.