Tomorrow’s Company Briefing on…
The Case for Green Jobs
March 2009
In the midst of any economic crisis, short-term economic growth and job creation is a key objective for policymakers. But when a global economic crisis coincides with a global environmental crisis, there is a clear opportunity to ensure the resources that are invested and the jobs that are created are in the sectors that will maximise recovery both economically and environmentally.
The inefficiency of tax cuts as a means to boost employment has been acknowledged in various studies (e.g. Zandi, 2009; Shapiro & Slemrod 2008) as only a small proportion of the rebates are spent in the year they are received as recipients choose to invest or pay off debt as opposed to increasing spend. Furthermore, tax cuts will never directly impact on the unemployed and therefore any positive impact on employment can only be a slower, trickle-down effect. Therefore, it is accepted that in an economic stimulus package there should be a greater emphasis on public spending rather than on sweeping tax cuts.
Why Green not Brown?
There has long been a consensus among analysts and policymakers that a relationship between environmental protection, the economy, and jobs exists. However, due to a lack of empirical data, there has been broad debate around whether this correlation is positive or negative. Will an increased investment in environmental protection and cleaner, renewable energy initiatives facilitate economic growth and create jobs and, if so, can this positive effect be quantified?
The greater impact of investing in ‘green’ rather than traditional infrastructure has been demonstrated in a number of recent reports (Pollin et al 2008, Houser et al 2009, Stern et al 2009, etc). As detailed below, it is estimated in the U.S. that an investment in the renewables sector, where there is a high domestic labour requirement, would generate significantly more jobs than the same investment in fossil energy industries, as they are so heavily import-dependent, or in conventional infrastructure projects such as road building.
“Green Recovery”, a joint report by the Center for American Progress and the Political Economy Research Institute , elements of which have been incorporated into the U.S. stimulus demonstrates how an immediate investment in green infrastructure, such as renewable energy, will provide significant returns, both in the short- and long- term. The report shows how a package of green infrastructure investment of $100 billion over a two year period, divided between tax credits, direct government spending, and loan guarantees, would create two million jobs nationwide, which is nearly four times more jobs, and roughly triple the number of “good” jobs (those paying at least $16 an hour), than spending the same amount of money within the oil industry.
A similar study published this year by the Peterson Institute for International Economics and the World Resources Institute also concludes that moving towards a green economy will result in the creation of more jobs. It estimates that for every $1 billion invested by the U.S. government in green strategies, on average 30,100 jobs will be created per year, in comparison to 25,200 jobs if the same was invested in traditional infrastructure (i.e. road investment) and just 7,000 from $1 billion in tax rebates.
The benefit of green rather than brown investment is aligned to the combination of two factors: the first is the potential that, through tax credits, investment of public resources will generate additional private investment which will lead to further employment; the second is the positive impact on the economy of reducing energy costs, as it is estimated that 50 per cent of the annual savings of domestic households on energy bills will be spent in other economic sectors, generating further employment. Furthermore, in contrast to expenditure on tax cuts and traditional infrastructure, the employment benefits from improving energy efficiency will continue to be seen after the money has been spent and are therefore sustainable beyond the current crisis. It has been estimated that the green recovery scenarios modeled in the report would save the U.S. economy $450 million per year for every $1 billion invested.
Global Recommendations
A recent report commissioned by the UNEP entitled “A Global Green New Deal” recommends that globally $750 billion, which is one third of the $2.5 trillion total of national economic stimulus packages worldwide, should be invested in “greening” the global economy. This report advises that, alongside the United States, the European Union and other high income OECD economies should allocate at least 1 per cent of GDP over the next two years on reducing carbon dependency and adopting complementary carbon pricing policies. The paper highlights example nations, such as the China and Republic of Korea, where 2% to 3% of total GDP is to be invested in green strategies.
A paper published in February by the Grantham Research Institute and the Centre for Climate Change Economics and Policy recommends that dedicating 20% of the total economic stimulus package would be sufficient. It was calculated that this would generate an additional $400 billion global investment in green strategies. The report assessed and compared various possible green policy options in regards to the ease implementation and the resultant global impact. From this research it is concluded that an investment in improving energy efficiency measures would be most desirable as, not only would this deliver significant economic stimulus as well as effectively helping to deliver climate change objectives, it is also useful from the point of view of enhancing energy security and reducing fuel poverty. It also highlights several transport initiatives as especially attractive.
Europe and the UK
From a UK perspective in particular, renewables are the only indigenous energy source available. As a result, it is of key significance that, through green investment, we can move towards a low-carbon economy which increases energy independence and security. As part of an EU agreement in 2007, the UK committed to increasing the percentage of total energy from renewable sources to 15 per cent by 2020. Despite this being one of the lowest targets of any country, it is currently predicted that the UK will not make it.
An immediate and large-scale program to expand energy conservation and renewable energy supply in the European Union (EU) could create 1 to 2 million new, full-time jobs . However, the historic lack of investment in relevant sectors means that the UK workforce is wholly unprepared for the job at hand. Without an initial investment in training and education now, the number of people who will be equipped to execute these jobs is enormously limited.
Further reading
A Global Green New Deal
Barbier, E., for the Economics and Trade Branch, Division of Technology, Industry and Economics, UNEP. 2009. available:
http://www.unep.org/greeneconomy/docs/GGND_Final%20Report.pdf
An Outline of the Case for a “Green” Stimulus
Bowen, A., Frankhauser, S., Stern, N. & Zenghelis, D., for Grantham Research Institute on Climate Change and the Environment & Centre for Climate Change Economics and Policy. 2009. available:
http://www.lse.ac.uk/collections/granthamInstitute/publications/An%20outline%20of%20the%20case%20for%20a%20%27green%27%20stimulus.pdf
A Green Global Recovery? Assessing US Economic Stimulus and the Prospects for International Coordination
Houser, T., Mohan, S. & Heilmayr, R., for Peterson Institute for International Economics and The World Resources Institute. 2009. available:
http://www.wri.org/publication/green-global-recovery
Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy
Pollin, R. Garrett-Peltier, H., Heintz, J. & Scharber, H. for Center for American Progress and Political Economy Research Institute. 2008. available:
http://www.americanprogress.org/issues/2008/09/pdf/green_recovery.pdf
The Green Collar Economy, Jones, V., 2008.
UNEP Year Book, 2009. available:
http://www.unep.org/geo/yearbook/yb2009/