Simone d'Alessandro, the Eurogreen model of job creation in a post-growth economy

The EUROGREEN Model of Job Creation in a Post-Growth Economy Simone D’Alessandro , Kristofer Dittmer? , Tiziano Distefano and AndrÊ Cieplinski

Department of Economics and Management, University of Pisa, Italy ?

Cogito, Sweden

Bruxelles, September 2018

W ORLD C LOUD What is the most pressing issue economists today should be addressing?

W ORLD C LOUD What is the most pressing issue economists today should be addressing?

M OTIVATION I

Climate change and increasing inequality have emerged as the main challenges facing our societies over the past few decades

M OTIVATION I

Climate change and increasing inequality have emerged as the main challenges facing our societies over the past few decades

I

Their impact is highly visible and well recognized by overall civil societies way beyond the academic circles

M OTIVATION I

Climate change and increasing inequality have emerged as the main challenges facing our societies over the past few decades

I

Their impact is highly visible and well recognized by overall civil societies way beyond the academic circles

I

Concrete threats to contemporary standards of living, peace and democracy (Beddoe et al. 2009; Piketty 2018) =⇒ S USTAINABILITY

M OTIVATION I

Climate change and increasing inequality have emerged as the main challenges facing our societies over the past few decades

I

Their impact is highly visible and well recognized by overall civil societies way beyond the academic circles

I

Concrete threats to contemporary standards of living, peace and democracy (Beddoe et al. 2009; Piketty 2018) =⇒ S USTAINABILITY

I

A wide range of public policies (e.g. basic income – radical decarbonization) have been proposed, questioned and not rarely deemed economically and politically unfeasible

M OTIVATION I

Climate change and increasing inequality have emerged as the main challenges facing our societies over the past few decades

I

Their impact is highly visible and well recognized by overall civil societies way beyond the academic circles

I

Concrete threats to contemporary standards of living, peace and democracy (Beddoe et al. 2009; Piketty 2018) =⇒ S USTAINABILITY

I

A wide range of public policies (e.g. basic income – radical decarbonization) have been proposed, questioned and not rarely deemed economically and politically unfeasible

I

The EUROGREEN model explores the viability, effectiveness and possible synergies between alternative policy options to low-carbon transition and social justice

E COLOGICAL M ACROECONOMICS I

Environmental and social variables in macro-economic models (Victor 2008; Jackson 2016; Røpke 2016; Hardt and O’Neill 2017)

I

The development of ecological macroeconomics draws upon an ongoing convergence between Post-Keynesian and Ecological Economics =⇒ EUROGREEN M ODEL

E COLOGICAL M ACROECONOMICS I

Environmental and social variables in macro-economic models (Victor 2008; Jackson 2016; Røpke 2016; Hardt and O’Neill 2017)

I

The development of ecological macroeconomics draws upon an ongoing convergence between Post-Keynesian and Ecological Economics =⇒ EUROGREEN M ODEL

I

System dynamics offers the flexibility and comprehensiveness necessary to envision I I

trade-offs between income distribution and GHG reduction unexpected policy effects due to the interdependence among different industries and heterogeneous agents

E COLOGICAL M ACROECONOMICS I

Environmental and social variables in macro-economic models (Victor 2008; Jackson 2016; Røpke 2016; Hardt and O’Neill 2017)

I

The development of ecological macroeconomics draws upon an ongoing convergence between Post-Keynesian and Ecological Economics =⇒ EUROGREEN M ODEL

I

System dynamics offers the flexibility and comprehensiveness necessary to envision I I

I

trade-offs between income distribution and GHG reduction unexpected policy effects due to the interdependence among different industries and heterogeneous agents

These dynamic interlinks are often unnoticed on more traditional macroeconomic models without similar feedbacks among socioeconomic and environmental variables

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

M ACRO -V IEW The EUROGREEN model is applied to France (2014-2050)

R EFERENCE S CENARIO Contemporary social welfare system and current trends in the main macroeconomic and environmental variables Average yearly growth rates by decade Indicator Real GDP growth Real per capita GDP growth Deficit/GDP GHG reduction Unemployment Unemployment low-skill Unemployment middle-skill Unemployment high-skill Labour productivity Energy efficiency

14 − 19 1.20 0.76 2.79 0.05 9.25 16.15 9.39 5.55 0.20 1.11

20 − 29 1.06 0.72 3.80 −1.75 7.89 12.52 8.37 5.07 0.75 1.83

30 − 39 0.98 0.76 2.75 −1.86 8.38 12.00 11.22 3.19 1.25 2.69

40 − 50 0.99 0.83 1.21 −2.69 10.50 13.45 15.46 3.04 1.64 3.57

F EEDBACK L OOPS IN THE EUROGREEN M ODEL

P OLICY I MPACTS : N EW P RODUCTIVE R EVOLUTION

P OLICY I MPACTS : J OB G UARANTEE

A LTERNATIVE S CENARIOS : G REEN G ROWTH AND P OLICIES FOR S OCIAL E QUITY 1. Green Growth (GG) Based on the pillars of automation, energy efficiency, RES, electrification and change in the energy mix.

A LTERNATIVE S CENARIOS : G REEN G ROWTH AND P OLICIES FOR S OCIAL E QUITY 1. Green Growth (GG) Based on the pillars of automation, energy efficiency, RES, electrification and change in the energy mix.

2. Policies for Social Equity (PSE) Based on similar environmental policies, this scenario adds a few radical social and distributive policies:

A LTERNATIVE S CENARIOS : G REEN G ROWTH AND P OLICIES FOR S OCIAL E QUITY 1. Green Growth (GG) Based on the pillars of automation, energy efficiency, RES, electrification and change in the energy mix.

2. Policies for Social Equity (PSE) Based on similar environmental policies, this scenario adds a few radical social and distributive policies: I

Job Guarantee: Public sector hires workers at an hourly wage of 10.7 e up to a maximum of hiring of 300,000 workers/year distributed between the three skills

A LTERNATIVE S CENARIOS : G REEN G ROWTH AND P OLICIES FOR S OCIAL E QUITY 1. Green Growth (GG) Based on the pillars of automation, energy efficiency, RES, electrification and change in the energy mix.

2. Policies for Social Equity (PSE) Based on similar environmental policies, this scenario adds a few radical social and distributive policies: I

Job Guarantee: Public sector hires workers at an hourly wage of 10.7 e up to a maximum of hiring of 300,000 workers/year distributed between the three skills

I

Working Time Reduction: weekly working hours reduced from 35 to 30

A LTERNATIVE S CENARIOS : G REEN G ROWTH AND P OLICIES FOR S OCIAL E QUITY 1. Green Growth (GG) Based on the pillars of automation, energy efficiency, RES, electrification and change in the energy mix.

2. Policies for Social Equity (PSE) Based on similar environmental policies, this scenario adds a few radical social and distributive policies: I

Job Guarantee: Public sector hires workers at an hourly wage of 10.7 e up to a maximum of hiring of 300,000 workers/year distributed between the three skills

I

Working Time Reduction: weekly working hours reduced from 35 to 30

I

Carbon Tax and Carbon Border Adjustment: increase of both even beyond 2030

A LTERNATIVE S CENARIOS : D E -G ROWTH

3. Degrowth (DG) It adds to the PSE I

a decrease in the marginal propensities to consume by 2% per year

I

a slight decrease in the exogenous component of exports of 0.5% per year

I

an increase in wealth taxes (up to 2%)

A LTERNATIVE S CENARIOS : D E -G ROWTH

3. Degrowth (DG) It adds to the PSE I

a decrease in the marginal propensities to consume by 2% per year

I

a slight decrease in the exogenous component of exports of 0.5% per year

I

an increase in wealth taxes (up to 2%)

The reduction in consumption is not a policy, but rather an assumption: citizens, aware of the already highly visible challenges posed by climate change, voluntarily reduces their material needs.

R ESULTS : GDP G ROWTH R ATE

0.025

0.015

0.005

-0.005

-0.015 2014 Baseline Green Growth

2018

2022

2026

2030

2034 2038 2042 Policies for Social Equity Degrowth

2046

2050

R ESULTS : GHG E MISSIONS R EDUCTION (1990=100)

90 80 70 60 50 40 30 20 10 2014 2018 Baseline Green Growth

2022

2026

2030

2034 2038 2042 Policies for Social Equity Degrowth

2046

2050

R ESULTS : U NEMPLOYMENT R ATES

0.15

0.12

0.09

0.06

0.03

0 2014 Baseline Green Growth

2018

2022

2026

2030

2034 2038 2042 Policies for Social Equity Degrowth

2046

2050

R ESULTS : U NEMPLOYMENT R ATES BY S KILL Baseline

Green Growth

4M

4M

3M

3M

2M

2M

1M

1M

0

0 2014

2020

2026

Low Middle

2032 2038 YEAR High

2044

2050

2014

2020

2026

Low Middle

Policies for Social Equity

2032 2038 YEAR High

2044

2050

Degrowth

4M

4M

3M

3M

2M

2M

1M

1M

0

0 2014

Low Middle

2020

2026

2032 2038 YEAR High

2044

2050

2014 Low Middle

2020

2026

2032 2038 YEAR High

2044

2050

R ESULTS : G INI C OEFFICIENT (%)

40

35

30

25

20

15 2014 Baseline Green Growth

2018

2022

2026

2030

2034 2038 Policies for Social Equity Degrowth

2042

2046

R ESULTS : G OVERNMENT D EFICIT- TO -GDP R ATIO

0.08

0.065

0.05

0.035

0.02

0.005

-0.01 2014 Baseline Green Growth

2018

2022

2026

2030

2034 2038 2042 Policies for Social Equity Degrowth

2046

2050

D ISCUSSION The struggle against inequalities and climate change is the headline

D ISCUSSION The struggle against inequalities and climate change is the headline I

Up to now these issues have been dealt with individually and minor changes are required to the business as usual =⇒ TECHNICAL PROGRESS AS PANACEA

D ISCUSSION The struggle against inequalities and climate change is the headline I

Up to now these issues have been dealt with individually and minor changes are required to the business as usual =⇒ TECHNICAL PROGRESS AS PANACEA

I

Required changes are instead major and solutions can be found only looking at the complex relationships between social, economic and environmental dimensions

D ISCUSSION The struggle against inequalities and climate change is the headline I

Up to now these issues have been dealt with individually and minor changes are required to the business as usual =⇒ TECHNICAL PROGRESS AS PANACEA

I

Required changes are instead major and solutions can be found only looking at the complex relationships between social, economic and environmental dimensions

I

EUROGREEN shows that there are strong complementarities between social and environmental policies

D ISCUSSION The struggle against inequalities and climate change is the headline I

Up to now these issues have been dealt with individually and minor changes are required to the business as usual =⇒ TECHNICAL PROGRESS AS PANACEA

I

Required changes are instead major and solutions can be found only looking at the complex relationships between social, economic and environmental dimensions

I

EUROGREEN shows that there are strong complementarities between social and environmental policies

I

The post-growth society entails a change in the productive structure and in the distribution of economic rewards

References

Beddoe, R. et al. (2009). “Overcoming systemic roadblocks to sustainability”. In: PNAS 106, pp. 2483–2489.

Hardt, L. and D. O’Neill (2017). “Ecological macroeconomic models: Assessing current developments”. In: Ecological economics 134, pp. 198–211.

Jackson, T. (2016). Prosperity without growth: foundations for the economy of tomorrow. Routledge.

Piketty, T. (2018). “Brahmin Left vs Merchant Right: Rising Inequality and the Changing Structure of Political Conflict”. In: WID world Working Paper 2018/7.

Røpke, I. (2016). “Complementary system perspectives in ecological macroeconomics”. In: Ecological Economics 121, pp. 237–245.

Victor, P.A. (2008). Managing without growth: slower by design, not disaster.

Edward Elgar.