Towards Just Energy Transition: Renewable Energy Transition Dynamics and Sectorial Employment in Ghana

Abstract

Energy transition and the creation of sustainable jobs are major concerns towards achieving Sustainable Development Goals (SDGs) 7 and 13, particularly in emerging petroleum-producing economies such as Ghana. Our study examines Ghana’s sectorial employment vulnerability to the dynamics of energy transition. Employing a dynamic ARDL simulation model, we use quarterly data from 2011 to 2021 from Ghana’s Energy Commission, the Bank of Ghana, and the Public Interest and Accounting Committee. We find that transition scenarios increase industrial sector employment. Also, industrial sector employment changes more favorably under the 5% scenario than under the 1% scenario. Agriculture industry employment is positively impacted by the 1% energy transition scenarios but negatively impacted by the 5% scenarios. Up to the sixth year, both transition scenarios increase employment in the services sector; however, employment opportunities are more affected by the 1% scenario than by the 5% scenario. Therefore, developing a policy architecture that aids Ghana’s transition to renewable energy is essential.

1. Introduction

Energy transition implications and employment creation cannot be overemphasized due to the impact of climate change (CC). One of the biggest market failures threatening the Sustainable Development Goals (SDGs) is the surging occurrence of CC [1]. CC affects every area of our lives, particularly health and agriculture [2,3]. To mitigate CC and achieve SDGs 7 and 13, restrictions on fossil fuel use and a global shift towards renewable energy are encouraged [4,5,6,7]. This might affect emerging crude oil-producing countries such as Ghana. This energy transition is affirmed at the Conference of Party (COP) 28. It is estimated that the renewable energy share will increase to 60% by 2040 [8]. Comparatively, renewables are more environmentally friendly and generate smaller carbon dioxide footprints [4,9,10,11].

Additionally, the price tags of renewable energy are decreasing. Solar PV cost has decreased by almost 80%, whereas the cost of wind turbines has decreased by approximately 30 to 40% [12]. Again, the tremendous increase in air quality that was observed during the COVID-19 pandemic’s early lockdown period has reignited the pledges to transition to renewables [13,14]. Consequently, switching to renewable energy is unavoidable. Given the significance of renewable energy towards sustainable energy, energy policymakers must evaluate the consequences of the energy transition on emerging oil-producing economies such as Ghana. The macroeconomic performance of these emerging oil-producing countries is hampered by a fall in petroleum demand since it impacts their export revenue and government budget [15,16]. These countries anticipate funding a sizable portion of their national budgets with crude oil profits [4,17]. Despite accruing significant income from oil, Ref. [18] assert that many developing oil-producing nations lack the diversified manufacturing infrastructure and technologies needed to advance. The majority of such countries’ non-oil output is imported and their non-oil output is always non-tradeable due to low-skilled labor. Furthermore, Ref. [19] reiterate that public sector employment is supported by oil earnings in these economies, including Ghana.

Vulnerable employment makes up the largest portion of all employment in Ghana, where unemployment continues to rise, and youth unemployment rates are very high [20]. According to [21], the unemployment rate was 8.4% in 2017, which was higher than the continent’s (7.9%) and the global (5.6%) averages. Figure 1 illustrates the rise in the national unemployment rate from 3.1% to 13.4% between 2006 and 2022 [22]. Compared to other age groups, the situation is more dangerous for the youth. The youth unemployment rate increased between 2006 and 2022, rising from an estimated 6.6% in 2006 to 32.8% in 2022. Youth unemployment levels are also over twice as high as the national average, and from 2017 to 2022, they rose by more than 75%. The young population is growing at a rate that is almost three times faster than the general population. Approximately 300,000 youth are thought to enter the labor force each year but only approximately 2.0% get hired [23].

The manufacturing sector, which is primarily linked to employment-intensive growth, is trailing the service and agricultural sector [24]. The unemployed become poorer and more reliant on others, which raises the dependence ratio. Ref. [25] assert that many Ghanaians, especially young people and women, are exposed to economic hardship, migration, and different types of social isolation because of the country’s high unemployment rate and prevalence of informal employment. According to estimates from the [26], there were an additional 400,000 poor people between 2013 and 2017 and currently, more than three million Ghanaians live in extreme poverty. Long periods of unemployment also put the victims at risk of other problems like diminished self-worth, depression, bad health, postponed marriage, and a higher chance of divorce [27]. They conduct deviant activities including commercial sex, burglary, suicide, and turmoil in politics more frequently than those employed. It puts a country’s peace and security in danger. In South Africa, xenophobic attacks and shoplifting could be attributed to frustrated unemployed youth. Hence, any threat to employment must be considered as an emergency and treated with all the seriousness required.

The main objective of our study is to analyze the effect of renewable energy transition on employment in different sectors of Ghana. Our study focuses only on Ghana, an emerging oil-producing country in the Gulf of Guinea. Ghana just started the exploration of crude oil in 2011 with a production capacity of 173 to 197 thousand barrels per day. Generally, the discovery of crude oil is always accompanied by a sense of relief and high optimism for developing countries. However, these economies start to encounter some negative shocks within a few years of exploration and production [28]. The jobs that relate to crude oil production that were envisaged and envisioned when it was discovered have not been realized. A workforce with technical know-how in building and maintaining renewable energy systems is required for the transition [29,30]. When Ghana invests in educational and training programs to build a skilled labor force for the renewable energy sector, a new crop of the labor force with a different set of skills will emerge supporting economic growth, innovation, and sustainability of the Ghanaian economy. With their involvement in renewable energy projects, trained people can advance not just economic development but also reduce traditional energy use. Ghana can change its energy environment as a result of this convergence, as well as the creation of a competent workforce that supports sustainable development. Therefore, the generation of renewable energy can be taken into consideration. However, can the transition to renewable energy affect job creation in Ghana?

Some studies [31,32,33] have produced some impressive analyses of economic growth. We contribute to the literature on renewable energy transition dynamics to employment in some important ways. First, SSA countries including Ghana are at a critical stage of their energy transition period. Given that energy transition has become a relevant yet delicate global issue, analyzing the impact of the renewable energy transition on sectoral employment in Ghana serves as an important informative guide for similar countries on the same energy transition trajectory. To the best of our knowledge, an analysis of sectorial employment particularly on vulnerability to energy transitions in Ghana is yet to receive empirical examination. Moreso, the existing literature is oblivious to examining the vulnerability of employment based on the three key sectors of the economy. Our study differs from the present literature by conducting transition scenarios based on the agricultural, manufacturing, and service sectors in Ghana. Researching how Ghana’s energy transition affects employment in the agricultural, manufacturing, and service sectors can help create a successful energy transition plan. We hypothesize that the energy transition has a significant and diverse effect on sectorial employment in Ghana. We employ the dynamic ARDL simulation model. We employ this model to analyze the effect of energy transition on employment creation in Ghana. This model can estimate both point estimates and simulated results.

The rest of the study is structured as follows: Section 2 highlights the theoretical framework and existing studies, Section 3 focuses on the methodology, Section 4 presents the results and discussions, and finally, Section 5 gives the conclusions and policy implications.

2. Renewable Energy and Employment Creation—An Overview

An analytical study conducted by [34] showed how labor market rigidities potentially have the potential to provide a twofold benefit. The effects of increasing renewable energy, however, could be unsatisfactory. The researchers conclude from their analysis that the prospects for employment and welfare modifications are relatively slim and highly dependent on the subsidy rate and financing strategy. According to the analysis, there will be detrimental effects on welfare and employment at all subsidy levels if incentives for renewable energy sources are paid for by labor taxes. On the other hand, employing an electricity tax to pay for these subsidies produces marginal gains for low subsidy rates, but as the subsidy rate exceeds a particular threshold value, these gains quickly turn into sizable losses.

According to a study by [35], a lack of permanent employment opportunities and job security for workers is evident in the renewable energy sector due to the overall incidence of contract-based employment. The study also emphasized how persistent efforts in this sector have the power to lower poverty. The study does point out some difficulties faced by low-income people, such as their limited access to basic training and work prospects as a result of their ignorance of the range of professions available and their prerequisites. The author also reveals that few renewable energy projects include steps to encourage public ownership or support the participation of women in the industry. Furthermore, it is challenging to draw a direct link between employment in renewable energy and a reduction in poverty due to poor data availability.

To evaluate the effect of the local manufacturing of clean energy on employment in the renewable sector, Ref. [31] showed that clean energy output varies significantly among regions. The authors also made use of additional forecasting techniques utilizing data from prior years to determine the sector’s future trajectory. The study’s findings make it possible to spot employment-generating projects in the sector and identify places that are making good progress toward switching to renewable energy. Specifically concentrating on the state of the environment, governance, and employment in renewable energy generation, Ref. [36] undertook a study in China to investigate the factors influencing the development of renewable energy. The findings show a quadratic link between income and renewable energy. The findings, however, did not confirm the idea that the production of renewable energy generates jobs when the lagged unemployment rate was taken into account as a regressor. However, the study discovered that the employed population has a beneficial impact on the growth of renewable energy. The presence of restrictions also had a very favorable impact on renewable energy.

An analysis focused on the potential for employment generation in Chile by renewable energy technology was conducted by [33]. The empirical results showed that, in comparison to coal and natural gas, renewable energy technologies like solar PV, wind, and hydro have a higher potential for creating jobs per unit of energy. In a different study, ref. [37] used disaggregated data from Latin America and Asia and demonstrated a beneficial impact on the rates of unemployment even though there is a good effect on renewables’ consumption. This implies that the benefits of renewable energy consumption on employment depend on energy efficiency and the cost of adopting new renewable energy technology, which varies throughout the study’s locations. Similarly, Refs. [32,38] discovered that clean energy (renewables) hurts unemployment. Ref. [39] discovered that there is a bidirectional causative association between renewable energy and employment in the BRICS (Brazil, Russia, India, and China) and MIST (Mexico, Indonesia, South Korea, and Turkey) nations.

From the aforementioned, it can be seen that some studies have focused on nations with advanced petroleum production while ignoring emerging petroleum economies, like Ghana. Consequently, a more accurate assessment of the impact of the global switch from “dirty” to clean energy on the sectoral employment vulnerability of the Ghanaian economy is timely. According to recent estimates, Ghana’s development is dependent on oil exports. This suggests that petroleum is important to Ghana’s development. Therefore, researching how the energy transition would affect Ghana’s employment vulnerability can help create a successful energy transition plan.

3. Methodology and Data Sources

3.1. Model Specification

The ARDL model is adopted for this study. The generalized ARDL ($p,q$) model is specified as the following:

$$Y_t={\gamma }_{0i}+{\sum }_{i=1}^p{\delta }_i{Y}_{t-i}+{\sum }_{i=0}^q{\beta }_i^{\prime }{X}_{t-i}+{\epsilon }_t$$

(1)

where $p$ is associated with the lag values of the dependent variables while the lag values of the independent variables take the value $q$; $Y_t^{\prime }$ is a vector; the variable ${\left(X_t^{\prime }\right)}^{\prime }$ is allowed to be purely I(0) or I(1); $\beta \mathrm{a}\mathrm{n}\mathrm{d}\delta$ are parameters to be estimated; $\gamma$ is the constant term; $i$ = 1, …, k; $p$ and $q$ are optimal lag orders of explained and explanatory variables; and ${\epsilon }_{it}$ is a vector of the error terms.

3.2. Model Simulation Using the Dynamic ARDL Simulation

We employ the dynamic simulation model of the Autoregressive Distributed Lag (ARDL) model, which combines cointegration variables within a VAR (Vector Autoregressive) time series framework. We employ this model to analyze the effect of energy transition on employment creation in Ghana. This model can estimate both point estimates and simulated results. The model is built on the [40,41] strategy. Applying dynamic ARDL simulations has gained recognition, especially in analyses of energy, health, and environmental economics. The model algorithm is useful for examining cointegration and short- and long-term equilibrium linkages, taking into account both levels and differences [41]. The addition of a visualization interface in the dynamic ARDL simulations, under the assumption that all other variables remain unchanged (ceteris Paribas) [42], allows for the examination of hypothetical adjustments to the desired variable. A dynamic ARDL simulation model adheres to simple yet precise rules. However, the cointegration analysis can only possibly include an endogenous parameter with an I(0) integration order.

When assessments of these variables are made discretely over time, the model can determine the effect of energy transition on employment. In AR models, the most effective approach to observe the long-term effects of exogenous variables is to simulate predicted values and confidence intervals for specific scenarios across a designated number of time intervals. This method functions within the confines of a single equation model. The estimated influence on employment can appear either instantly or gradually over time, unlike the OLS, which only takes into account the present value of energy transition [43]. Some studies [42,44] adopted dynamic ARDL simulation approaches in capturing socioeconomic shocks. This analysis offers policy-based particular inputs to take recent energy transition dynamics’ potential shocks into account. The study makes employment projections for the next 15 years. The empirical model is stated as the following:

$$\begin{array}{c}{Q}_{it}=a_0+a_1{Q}_t+a_2{REC}_t+a_3{GDP}_t+a_4{fossil}_t+a_5{educ}_t+a_6{pop}_t+{\lambda }_1{Q}_{t-i}+\\ {\lambda }_2{REC}_{t-1}+{\lambda }_3{pop}_{t-i}+{\lambda }_4{GDP}_{t-1}+{\lambda }_5{educ}_{t-1}+{\lambda }_5{fossil}_{t-1}+e_t\end{array}$$

(2)

where $Q\mathrm{r}\mathrm{e}\mathrm{p}\mathrm{r}\mathrm{e}\mathrm{s}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{s}\mathrm{a}\mathrm{l}\mathrm{l}$ the dependent variables (employment for agriculture, industry, and services sectors) of the ARDL simulation analyses. Details on the measurement and definitions of the variables are presented in the descriptive statistics and data analysis section of our study. Some of the variables are taken in their percentages while others are taken in their raw forms. We take the natural logarithm of the variables that are in their raw forms to eradicate outliers.

The stationary tests are presented in Appendix A. It indicates that all the variables, except renewable combustible waste, are stationary at the first difference. Renewable combustible waste is stationary at all levels. The calculated F-statistics for employment in the agriculture sector is 22.016, which is greater than the upper bound critical value of 5.61. The calculated F-statistics for the services sector is 21.416 and for the industry is 21.148. All are significant at the 1% level, suggesting no long-run relationship (details are provided in Appendix B).

3.3. Data

This study employs quarterly time series data on Ghana for the period 2011 to 2021. Ghana started the production of crude oil in 2011. Any global decrease in demand for petroleum poses a strategic threat to the economic and financial variability of Ghana and it affects the revenue from exports and the budget of the government which hampers the macroeconomic performance. Data from the Energy Commission (EC), the Bank of Ghana (BoG), the Ministry of Employment and Labour Relations (MELR), and the Public Interest and Accounting Committee (PIAC) are used for the analyses. These authorities provide macroeconomic and energy data every year. We used quarterly data to undertake a more timely assessment of different sectors of the economy as well as an effective evaluation of key economic variables captured in the study. Moreover, reliance on quarterly data stems from the seasonality of core variables involved in the study. The variables used for the study include rates of employment in all the three main sectors of the economy of Ghana—the agriculture, industry, and services sectors— total consumption of renewable energy (REC), inflation, represented by the Consumer Price Index (CPI), education (EDUC), the population of Ghana (POP), consumption of fossil fuels (FOSSILl_cons), and GDP per unit of energy use (GDP_energyuse).

4. Results and Discussions

4.1. Descriptive Statistics and Data Analysis

Table 1. Descriptive statistics of variables of the study.

Variable	Source	Obs	Mean	Std. Dev.	Min	Max
Agriculture employment	MELR	44	46.415	9.462	29.750	55.120
Services Employment	MELR	44	37.922	7.049	30.840	49.210
Industry employment	MELR	44	15.666	2.621	13.870	21.050
REC	Energy Commission	44	52.892	8.724	41.480	69.320
EDUC	WDI	44	8.065	6.161	0.786	20.142
FOSSILcons	Energy Commission	44	14.322	13.665	0.048	40.422
GDPenergyuse	BoG	44	12.340	1.894	8.400	16.781
CPI	BoG	44	262.11	157.540	112.010	1401.100
POP	BoG	44	26.14 × 107	5,947,878	18.78 × 107	30.18 × 107

displays descriptive statistics from our investigation. Unless otherwise noted, all values have been scaled to three decimal places. According to Table 1, the average fossil fuel use, expressed as a percentage of all energy consumption made up of fossil fuels, is 14.32%, with the smallest and maximum values being 0.04% and 40.42%, respectively, and a standard deviation of almost 14%. This suggests a mean deviation of more than 10%. This implies that the maximum emission in Ghana was 40.42%. It has been noted that there is a significant gap between the minimum and maximum ranges. GDP per unit of energy use (GDP_energyuse) averages 12.34 kg with a standard deviation of 1.894 kg. GDP_energyus ranges from 8.400 kg to 14.07 kg. This suggests that Ghana’s GDP_energyus may remain at around 12 kg on average. With a standard deviation of almost six million and a mean of 26 million, the population of Ghana ranges from 19 million to 30 million at its lowest and highest points, respectively. This suggests that Ghana’s population has fluctuated between 19 and 30 million, with an average of 26 million.

Total agriculture employment (agriculture employment) (measured as the percentage of total employment in agriculture) has a mean of 46.41%, approximately 46%. Accordingly, 46% of Ghana’s working population is employed in agriculture on average. There is a dispersion from the mean of less than 10%, as indicated by the standard deviation of 9.462%. The employment rate in agriculture ranges from a low of 29.75% to a maximum of 55.12%. The employment rate in the services sector (services employment) ranges from a minimum of 30.84% to a maximum of 49.21%, with a standard deviation of 7.04% and a mean of 37.92%. This indicates that more than 30% of the workforce has always been employed in the services industry. In Ghana, there were no appreciable changes in the proportion of total employment that was in the service sector in 2019 compared to 2018. It stayed at around 49.21%. However, with 49.21%, 2019 still marks a high point for the share in Ghana. With a mean of 15.66% and a standard deviation of 2.62%, the percentage of Ghana’s population that works in the industrial sector (industry employment) ranges from 13.87% to 21.05%. Accordingly, the biggest percentage of the working population, or 21.050% in the time under consideration, was employed in the industrial sector. Therefore, it is not unexpected that Ghana’s industrial sector contributes the least to the country’s GDP.

Additionally, the percentage of people who enroll in tertiary education following secondary school, which is used to quantify education, ranges from 0.78% minimum to 20.14% highest, with a mean of 8.06% and a standard deviation of 6.16%. Thus, from about 1.0% in 2001 to more than 20% in 2021, tertiary education in Ghana has expanded. One of the key factors contributing to Ghana’s rising level of education is the government’s dedication to it. Over the years, the government has made considerable investments in education, which have increased access to education. The GoG boosted the amount they spent on education from 2.40% of GDP in 2000 to 6.20% of GDP in 2017, according to the [45]. The government is now able to offer free elementary and secondary education, which has contributed to a surge in primary school enrollment. This investment includes energy training in public universities in Ghana and outside Ghana. These pieces of training include renewable energy training. The development of the educational infrastructure is another factor in Ghana’s rise in educational standards. The government has spent money renovating and constructing new schools. As a result, there are more schools and classrooms, which makes it simpler for kids to access education. The government has also made investments in programs for teacher training, which has increased the number of certified teachers in the nation. As a result, school enrollment has increased and the quality of education in Ghana has improved.

With a maximum value of 69.32%, a minimum value of 41.48%, a standard deviation of 8.72%, and a mean of 52.89%, renewable energy consumption (REC) has a range of values. This is mostly due to the usage of renewable hydroelectricity, which dominates Ghana’s consumption of renewable energy. This is attributed to Ghana’s abundance of natural resources. Hydropower is one of the many renewable energy options available in Ghana. Only a small portion of the nation’s hydropower potential, which is believed to be around 2000 MW, is now being used. Ghana’s abundant natural resources have made it possible for the country to generate a significant amount of renewables.

4.2. Employment and Consumption of Renewable Energy in Ghana

Figure 2 shows the trends of employment in all three main sectors of the economy of Ghana. The sectors and how they co-move with the consumption of renewable energy are depicted. It is shown that employment in the agriculture sector continued to be the highest from 2001 until 2014 and in the same period, employment in the industry sector is the lowest. Employment in the industrial sector continues to be the lowest for the entire period from 2001 to 2019. This is not surprising that agriculture has been contributing the largest share of GDP in Ghana. The economy of Ghana has been mostly based on agriculture. It is noteworthy that the agriculture sector has received massive support from all successive governments. Currently, there is Planting for Food and Jobs and Planting for Export, which may increase employment in the agriculture sector. However, the industry sector has been facing many challenges including power outages.

The statistics indicate that in 2001, more than 55 per cent were active in the agriculture sector while about 31 per cent were active in the services sector and about 14 per cent were active in the industry sector. These trends remained almost the same from 2002 up to 2014, and the distribution of employment in the services sector has been the highest since then. This is because the economy of Ghana has undergone significant changes in recent years, with a shift towards services-based industries. This shift is a result of government policies aimed at diversifying the economy and promoting growth in sectors such as finance, telecommunications, and tourism. Also, Ghana’s agriculture sector is largely made up of small-scale farmers who often lack access to modern farming technologies and infrastructure, making it difficult to compete with larger, more mechanized farms in other countries. As a result, many Ghanaians have turned to the services sector for employment opportunities.

It is observed that when the consumption of renewables is high, there is a decline in employment in the agriculture sector. Employment in the industry sector has been appreciating with declines in the consumption of renewables, especially from 2013 to date. This might be due to the discovery of crude oil in Ghana. Despite this appreciation, employment in the industrial sector continues to be the lowest and lags behind employment in the other sectors. The industry sector in Ghana has struggled to compete with other countries in the region due to high energy costs, a lack of skilled labor, and limited access to financing. This has resulted in a relatively small industry sector, with fewer employment opportunities compared to the services sector.

4.3. Effect of Transition on Employment in the Industry Sector

Table 2. Energy transition and industry employment.

Employment in Industry	Coef.	Std. Err.
Linindustry	0.949 ***	0.029
REC	0.114 ***	0.035
GDPenergyuse	−0.003	0.089
FOSSILcons	0.002	0.009
EDUC	0.390 **	0.193
POP	−0.007	0.031
CPI	−0.034 ***	0.001
LagREC	0.089	0.497
lagGDPenergyuse	0.089	0.091
lagFOSSILcons	0.0004	0.009
LagEDUC	0.213	0.493
LagPOP	0.004	0.030
LagCPI	−0.021 ***	0.009
_cons	−0.744	2.216
r-square	0.984
Adjusted r-square	0.982

Note: *** = 1%, ** = 5% representing 1% and 5% significance levels.

displays how the energy transition has affected employment in Ghana’s industrial sector. It suggests that energy transition positively affects industrial sector employment. Energy transition results in a 0.11% rise in employment and it is significant at 1% (p-value = 0.002). This is hardly surprising considering that the majority of Ghana’s manufacturing sector relies nearly exclusively on electricity supplied to the national grid. The result is supported by other studies such as [46,47] suggesting that renewables serve as a viable means of generating jobs in the industrial sectors of developed countries. Ref. [48] mentions that crude oil accounts for 52% of the energy used in the regular industrial sector. As long as industries in Ghana are using renewable energy, then the country will gradually be gearing towards zero carbon emissions as a global goal. There will be a demand for trained professionals in the renewable energy sector as Ghana moves toward clean energy. For example, engineers, technicians, and installers of renewables will be included. This might generate new employment possibilities and lessen the nation’s reliance on conventional energy sources, both of which could have a favorable effect on employment in the industry sector. Furthermore, large investments are needed in renewable energy projects, which may boost the economy and create jobs in connected sectors.

The industry sector includes activities of manufacturing, transportation, and construction that stand to gain from the rising need for infrastructure supporting renewable energy sources. Once more, switching to clean energy can result in increased energy efficiency in the commercial sector. Energy-efficient technologies and procedures can assist industries in lowering their energy costs and consumption, which can improve their competitiveness and profitability and possibly result in the creation of jobs. The switch to clean energy can lessen the air pollution caused by conventional energy sources and enhance worker health and happiness, both of which have a favorable impact on job opportunities in the industrial sector.

Employment in the industry sector is significantly impacted by some of the exogenous variables. For instance, a 1.0% increase in fossil fuel usage leads to more jobs in the industrial sector. Employment in the industry sector rises by 0.39% as education levels rise and this increase is significant at 5% (p-value = 0.045). This is consistent with the study of [49] indicating that an individual with a technical education has a greater chance of being employed in the industrial sector since it requires specialized skills before any job engagement. Employment in the industrial sector is positively and significantly impacted by the employment gap. That is, employment in the industry sector increased from the previous quarter to the current quarter. This is primarily because one industry will result in the establishment and growth of numerous other businesses. Education lag has a favorable effect on employment in industry sectors. While inflation and the lag of inflation hurt industrial employment, the lag of GDP per energy use, fossil fuel use, the shift to renewable energy, and population have no discernible effects on industry employment.

Figure 3 shows several renewable energy transition scenarios’ effects on employment in Ghana’s industrial sector. It has been found that transition scenarios with business as usual had a greater overall beneficial impact on industry employment than transition scenarios involving a 5.0% growth in employment.

However, employment in the industrial sector is expected to decrease under the business-as-usual scenario whereas employment is expected to increase under the quick scenario. This suggests that a faster transition to renewable energy will result in more jobs in the industry sector. This is because the need for additional renewable energy activities is rising as a result of the increasing advocacy for energy transition. For instance, if the demand for fossil fuels declines, jobs in that industry may be lost, and as the demand for renewable energy sources rises, new jobs may be generated in that area. The overall effects of employment are somewhat influenced by the speed and scope of the shift, as well as the accessibility of retraining programs and assistance for impacted people. Renewable energy usage might lower energy costs for businesses, which may improve their competitiveness and profitability as asserted by [50,51]. Renewable energy sources may also guarantee an ongoing energy supply and easy access to it. This can result in more employment opportunities in these sectors. Once more, the shift to renewable energy technology may result in the establishment of new sectors and new job possibilities. For instance, the growth of the manufacturing, installation, and maintenance sectors for solar panels could lead to the creation of new jobs in Ghana. In Ghana, the installation of solar panel jobs has become attractive for many youths who have shown interest in TVET jobs. The economic theory of creative destruction, which contends that the birth of new industries can result in job creation, is consistent with this intuition.

According to [50], renewable energy in northern Ghana may lead to the development of brand-new business prospects. Additionally, shifts in consumer behavior could result from renewable energy usage and increase industrial sector employment. For instance, if consumers start to care more about the environment and want products made using renewable energy, this could raise demand for goods made by businesses that have incorporated these technologies, creating more job possibilities in the area. By promoting the use of renewable energy technology, society may see gains in its overall health and quality of life, which would boost output and stimulate the economy. For instance, using cleaner cooking methods could lessen indoor air pollution, improving household health outcomes. Increasing economic activity may indirectly lead to job potential for the industry sector.

4.4. Effect of Transition on Employment in the Agriculture Sector

From

Table 3. Energy transition and agriculture employment.

Employment in Agriculture	Coef.	Std. Err.
Lagric	0.923 ***	0.029
REC	−0.741 ***	0.075
GDPenergyuse	−0.390 **	0.193
FOSSILcons	0.016	0.020
EDUC	0.490	0.674
POP	−0.007	0.068
CPI	0.391 **	0.193
LagREC	0.061	1.076
lagGDPenergyuse	0.167	0.202
lagFOSSILcons	0.013	0.020
LagEDUC	0.004 **	0.002
LagPOP	0.005	0.067
LagCPI	0.012	0.050
_cons	8.735	5.334
r-square	0.993
Adjusted r-square	0.992

Note: *** = 1%, ** = 5% representing 1%, 5% significance levels.

, employment in agriculture is only positively impacted by the lag in agricultural employment. A rise in renewable energy usage reduces employment in the agricultural industry by 0.74%, and the difference is significant at 1% (p-value = 0.000). This implies that when the agricultural sector adopts renewables as their main form of energy, there is going to be a cascading effect on the sector’s level of employment. A similar outcome was discovered by studies [52,53] in countries like Pakistan and China where the agricultural sector has been revolutionized to use farm mechanization tools as a way to reduce employment in agriculture. Similarly, Ref. [48] explains that fossil fuels provide 96.7% of the energy used in the agricultural sector. The utilization of agricultural land for major hydro projects is another reasonable explanation. Solar cell installations also take place on flat agricultural terrain. Once more, the supply chain for renewable energy will move jobs out of the agricultural sector and into other economic sectors as it moves from production to consumption. Employment in agriculture is significantly negatively impacted by GDP per unit of energy used. This may be because economic expansion causes the agrarian economy to give way to the service and manufacturing sectors.

However, employment in the agriculture sector is negatively impacted by inflation, but exports of fossil fuels and education have little effect. Employment in agriculture was unaffected by the consumption of renewable energy, GDP per energy use, fossil fuel use, or population in the previous quarter. The education gap does, however, significantly benefit employment in the agricultural industry. This may be mostly because individuals who have previously graduated have not been able to find employment in the formal sector and may turn to the agriculture sector in search of positions requiring their qualifications.

Figure 4 shows possible renewable energy transition scenarios for employment in Ghana’s agricultural industry. In contrast to the business-as-usual scenarios, it has been found that 5% of energy transition scenarios negatively affect employment in the agriculture industry. This suggests that scenarios for the switch to renewable energy at a 5% rate will severely hamper efforts to create jobs in the agricultural industry. This may be because the agriculture industry typically relies on inexpensive energy sources to gain from economies of scale. This empirical finding is consistent with [54] that energy transition will dampen efforts to expand existing job opportunities in the agricultural sector. The agricultural industry might raise its demands when resources are less expensive to improve output. For instance, diesel and gasoline are used to power the machines used by farmers and farm-based organizations for mechanized irrigation. These items are considerably less expensive than solar power facilities in Ghana. This is because the informal sector accounts for 85.8% of employment and is dominated by agriculture.

A decrease in the demand for agricultural products could also adversely impact agricultural sector employment. Large tracts of land are frequently needed for the production of renewable energy, which might be shifted from agricultural use to renewable energy. The creation of renewable energy projects necessitates the usage of substantial land areas. Farmers and energy corporations now face competition for land. As a result of this conversion, there is less area that can be used for agriculture, which lowers the number of agricultural products produced. In turn, this lowers the need for labor in the agricultural industry, which results in job losses. Additionally, the shift in employment prospects as the use of renewable energy increases may be able to open up new job opportunities in the sector. There may be a movement in job possibilities away from agriculture as a result of these opportunities, though, as they may call for different skills and credentials than those needed in the agriculture sector.

Another explanation might be related to shifting labor markets, where the move to renewable energy sources may result in adjustments to pay, job security, and working conditions, as suggested by the job search theory. Work in agriculture could become less desirable as a result of these developments compared to work in the renewable energy industry. Additionally, the use of highly automated technology—which requires fewer persons to operate and maintain than traditional agriculture—is frequently used to replace labor in renewable energy projects. This might result in less demand for labor in the agricultural industry, which would mean job losses. Rural locations frequently host renewable energy projects, which may cause a migration of workers from these areas—where agriculture employment predominates—to metropolitan centers. As a result, the number of workers available in the agriculture industry may decline.

The adoption of renewable technologies may result in consumer behavior changes that could adversely impact employment in the agricultural industry. Renewable energy projects in Ghana, particularly in rural areas, may attract job seekers from agricultural communities to work in the energy sector. Migration to urban areas can result in labor shortages in the agricultural sector and affect crop production. Additionally, there are bright spots from the renewable energy sector offering higher wages and better working conditions than the agricultural sector, which has ultimately led to competition for skilled labor. Skilled agricultural workers have been attracted to the renewable energy sector, potentially leaving the agricultural sector with a shortage of experienced labor. This supports the findings of similar studies [55,56], which discovered that several factors, including land-use competition, labor substitution, geographic distribution, and economic displacement, adversely affect the employment of the agriculture sector mediated by the energy transition. Similarly, Ghana’s infancy stage of adopting renewable energies in its agricultural sector results in higher costs and farmers are tempted to pass on these higher production costs to consumers through increased prices for their agricultural products. For example, if farmers use renewable energy for irrigation or post-harvest processing and face higher costs, those costs could be reflected in the prices of fruits, vegetables, or other agricultural products.

4.5. Effect of Transition on Employment in the Service Sector

From

Table 4. Energy transition and services sector employment.

Employment in the Service Sector	Coef.	Std. Err.
Lagservice	0.937 ***	0.031
REC	0.362 ***	0.047
GDPenergyuse	0.377 ***	0.121
FOSSILcons	0.018	0.013
EDUC	0.114 ***	0.035
POP	0.010	0.043
CPI	−0.166 *	0.098
LagREC	0.490	0.674
lagGDPenergyuse	−0.269 **	0.128
lagFOSSILcons	0.014	0.012
LagPOP	−0.007	0.043
LagCPI	−0.473	2.148
LagEDUC	0.140 ***	0.045
_cons	0.582	3.022
N	83
r-square	0.995
Adjusted r-square	0.994

Note: *** = 1%, ** = 5%, * = 10% representing 1%, 5% and 10% significance levels.

, except for inflation, all factors increase service sector employment. Ghana’s employment in the service industry has benefited from the switch to renewable energy. Employment in the services industry will increase by 0.36% and it is significant at 1.0% (p-value = 0.000). This suggests that a rise in renewable energy will result in service sector job creation. This implies that more employment in the service industry will lead to more employment in the sector moving forward. Theoretically, employment is expected to increase in some sectors that favor renewable energy adoption. The case for Ghana has not been different plausibly because energy transition necessitates improvements in energy distribution and grid management. This creates opportunities in the service industry for professionals in grid operations, grid modernization, and energy storage solutions. This is in line with [57] that through the adoption of renewable energy, the tourism sector, one of the leading service industries, witnessed a surge in employment. Also, Ref. [48] shows that 92% of the energy used in the transportation sector of the services industry comes from crude oil. While the lag of GDP per unit of energy use has a major negative impact on the industry, the lag of education has a significant beneficial influence on employment in the services sector. However, services sector employment is not significantly impacted by delays in the percentage of the renewable energy transition, fossil fuel use, or population growth.

It is noted that employment in the services industry is influenced by inflation. This is conceivable because inflation can raise the cost of delivering services by forcing firms to pay higher employee wages, invest in more expensive equipment and supplies, or increase their rent and utility costs. Consumer prices may increase as a result, and service demand can decline. As a result of increased living expenses and potential wage gaps, inflation can also lower consumers’ purchasing power. Because fewer people have extra money to spend, the demand for services may decline as a result. Additionally, interest rates can be impacted by inflation, which may have repercussions for the services industry. Also, employment in the service sector rises by 0.114% as education levels rise and this increase is significant at 1% (p-value = 0.001). This is consistent with the study of [49] indicating that an individual with a technical education has a greater chance of being employed. Generally, about 90% of workers in Ghana have some level of educational attainment.

Figure 5 illustrates energy transition scenarios and Ghana’s services sector employment. The graph demonstrates that up to the next six years, employment in the services industry will increase under both renewable energy transition scenarios. The employment situation in the services industry is more affected by the scenario of business as usual than by the scenario of fast change. This suggests that energy transition scenarios will increase jobs in the services sector. This may be because many technicians are needed throughout the entire value chain of renewable energy, from production to distribution. In the same way, Ref. [58] made similar observations on the urban expansion of ecosystem services. Major investments in new energy facilities including solar panels, wind turbines, and energy storage devices are necessary to make the switch to renewable energy. These investments may influence the economy. The trade of renewables, maintenance of the facilities, and the entire supply chain of renewable energy involve both importers and exporters. The economy of scope is thus created.

These investing efforts, nevertheless, may have slowed down or even peaked after the sixth year. It makes sense that renewable energy projects would demand a sizable capital investment and may drain financial resources away from the services sector, thereby lowering the amount of cash available for investment in the sector and reducing employment possibilities. This might be because the service sector in Ghana is predominantly SMEs. SMEs in the services industry may be left behind in renewable energy, according to [59], since they lack access to financing and technical know-how. According to [60], if the services industry is not sufficiently supported, the switch to renewable energy could result in employment losses. The fact that renewable energy plants are frequently situated in rural locations, where the services sector may be less developed, may potentially be the cause. This could lead to a shift in labor from the services sector to the renewable energy industry, which would reduce the number of job openings in the services sector. Ghana has historically relied on conventional biomass for its energy needs. A decrease in demand for such biomass would be bad for the services industry. For instance, charcoal production and sales are a significant source of income for many people in Ghana, particularly those working in the services industry. Additionally, Ghana has a lengthy history of producing its electricity using fossil fuels. The transition to renewable energy sources may result in less need for labor in the fossil fuel industry, which could have an indirect effect on the services sector. This supports the findings by [61] that energy transition may lead to fewer job prospects in the industry that produces and sells charcoal.

5. Conclusions and Policy Implications

Our study aimed to examine how employment in Ghana would be influenced by the energy transition as reflected by the percentage of renewable energy use. Along with a study of the empirical data and research techniques, the unemployment situation in Ghana was given. For the analysis, quarterly time series data on three sectors’ employment and the proportion of renewable energy output were employed. The dynamic ARDL simulation model and quantitative studies were both employed to calculate the implications of the shift to renewable energy on employment vulnerability. Unit root tests were run ahead of ARDL estimates. Concerning the point estimate, our study finds that renewable energy transitions have significant positive impacts on employment in the industry and services sectors. The renewable energy transition has a significant negative impact on agriculture sector employment. Our study finds that 1% transition scenarios have a higher overall positive impact on industry employment than the 5% transition scenario in industrial sector employment. However, the 1% scenario has a decreasing impact on employment in the industry sector while the rapid scenario has an increasing impact on employment in the industry sector. The 5% transition scenarios harm employment in the agriculture sector while the 1% scenarios have a positive impact on agriculture sector employment. Both scenarios of renewable energy transition have a positive impact on employment in the services sector up to the next six years. The 1% scenario has a greater impact on employment in the services sector while the 5% scenario has a lower impact on employment in the services sector. The analysis demonstrates that the 1% creates employment in manufacturing as compared to the 5.0% transition scenario, highlighting the necessity for diversity in this industry. Both transitional scenarios increase opportunities for employment in the service sector. This presents the need for funding infrastructure for renewable energy sources.

To minimize the loss of agricultural jobs, we recommend that the Ghanaian government and the Ministry of Energy make deliberate policies to minimize the exodus of farmers from the agricultural sector to other sectors. Moreover, the Ministry of Food and Agriculture should implement targeted subsidy mechanisms for agricultural farmers and producers to help offset any increased production costs associated with renewable energy adoption. This can help maintain affordable prices for agricultural goods while encouraging sustainable energy practices. The Ministry of Science and Technology should also provide seed funds for investment in rural infrastructures that support rural renewable energy projects in Ghana. This will curb the migration of able-bodied youth from rural areas to urban centers, hence preventing labor losses from the agricultural sector. The government through the Ministry of Youth and Employment should intensify training on renewable energy projects and jobs to equip less skilled manpower to be employable in the Ghanaian industrial sector as well as the service sector. A well-managed transition, targeted interventions to protect livelihoods, a variety of economic methods, and inclusive policies that place priority on the equitable distribution of gains across sectors and communities are all stressed in the paper’s conclusion.

One limitation of our study is that we could not consider the impact of technological advancement. Online learning platforms, virtual simulations, and advanced training tools contribute to building a qualified workforce capable of driving the renewable energy transition. Additionally, we could not analyze the renewable energy transition considering the current labor market complexities and rigidities. Future studies could use panel data from other SSA countries to shed more light on the renewable energy employment dynamics in similar SSA countries.