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2.2 Job Creation from Green Growth Strategies
BOX 2.2
Job Creation from Green Growth Strategies
A recent survey of more than 200 officials from central banks, finance ministries, and other economic experts identified five policy objectives with high potential for both economic outcomes (such as job creation) and climate impacts: clean physical infrastructure, building-efficiency retrofits, investment in education and training, natural capital investment, and clean research and development (Hepburn et al. 2020). These are promising areas for projects seen as able to create more jobs, deliver higher short-term returns, and bring greater long-term savings than traditional fiscal stimuli can create.
The view that green policies have greater potential than traditional stimuli to create jobs is based on experience (as in the examples described below) as well as anticipation of a changing business environment due to the global commitments of major economic players to a greener orientation of global value chains (GVCs). Theoretical contributions also highlight the greater potential of green sectors for job creation—as, for example, in renewable energy projects that have delivered three times more jobs per dollar than comparable ones in the fossil fuel sector (Garrett-Peltier 2017).
Comprehensive studies of the cleanenergy and other green sectors in the United States provide clear evidence that these sectors have an advantage in terms of not only the quantity of jobs created but also the quality of those jobs. The number of jobs in the clean-energy sector has been growing faster than in the fossil fuel industry while also paying more across all pay levels, with an average wage premium of around 25 percent (BW Research 2020). The 1990 Clean Air Act Amendments and their environmental policies led to strong employment growth in the United States (Walker 2011).
A more recent success story is that of the American Recovery and Reinvestment Act (ARRA), implemented in the United States in response to the 2008–09 Global Financial Crisis. It included large investments in green sectors such as waste treatment, public transportation, and energy, and it has led to substantial employment gains, at least in the longer term (Popp et al. 2020). Although the short-term employment gains were muted, long-run effects were positive and have been especially pronounced in areas with a higher endowment of preexisting green skills. The delayed materialization of employment gains implies that the full benefits of such programs may be visible with a lag—an important point for policy makers to consider.
Furthermore, green policies and investment in sustainable sectors have created jobs at an impressive rate around the world. In China, the introduction of an emission-trading scheme in seven pilot regions has been a driver for employment while also distinctly reducing carbon emissions, yielding a double employmentdividend effect (Yang, Jiang, and Pan 2020; Yu and Li 2021). In Navarre, Spain, early adoption of renewable energy technology
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BOX 2.2
and support for the sector have transformed the region’s energy profile and enormously increased sectoral employment rates (Faulin et al. 2006). And in India, access to frequent public transportation services has also increased nonagricultural employment substantially, with women especially profiting from such developments (Lei, Desai, and Vanneman 2019).
Moving toward a circular economy (an economic system restores its resources, as opposed to a linear “throwaway” system, as further discussed in chapter 4) also shows great potential for a double dividend in the sense of reducing the adverse effects of inadequate waste treatment while simultaneously creating jobs. It is estimated that repair—an integral part of a circular-economy approach— creates over 200 times as many jobs as traditional disposal methods, which lead to high plastic leakage to marine spaces and uncontrolled waste burning (RibeiroBroomhead and Tangri 2021). Although the options for repairing goods made out of plastic are often limited, it is estimated that recycling creates 50 times more jobs than open dumps, landfills, and similar disposal methods, while remanufacturing goods creates almost 30 times as many jobs (Ribeiro-Broomhead and Tangri 2021).
In the European Union (EU), the number of jobs linked to the circular economy grew by 5 percent between 2012 and 2018, reaching around 4 million. Applying the principles of this concept to the whole EU could increase aggregate output by an estimated 0.5 percent by 2030, creating around 700,000 additional jobs (EC 2020). And in Indonesia, the government’s move toward a circular economy as a green response to the COVID-19 pandemic is expected to have substantial positive effects. Compared with a business-as-usual scenario, it is estimated that the adoption of circular-economy opportunities could raise aggregate output by an additional US$42–US$45 billion (around 0.4 percent of Indonesian gross domestic product [GDP]) in 2030 while creating 4.4 million new jobs between 2021 and 2030 (Bappenas and UNDP 2021).
In sectors that negatively affect the environment—those following the traditional brown development path—green projects often bring higher economic returns than traditional projects. However, it is also important to acknowledge that such a transition would also lead to job reductions in displaced sectors. This includes the oil and gas sector (which traditionally has been a major source of value added and employment in oil-exporting countries of the Middle East and North Africa) as well as related downstream industries such as the petrochemical sector, which were used as a way of diversifying the economy in these countries (as briefly discussed in chapter 4, box 4.4).
Putting in place social compensation schemes for displaced workers during transition periods is hence important to cushion these adverse effects. Similarly, supporting the transition of workers out of these sectors into more sustainable ones through retraining programs, relocation assistance, and active promotion of new industries would facilitate a just transformation toward a greener growth model.
The blue natural assets of the Middle East and North Africa are of particular importance for a GRID path. “Blueing” the skies would have the largest effect of any environmental factor on improving public health. Moreover, blueing the skies is synonymous with reducing GHG emissions and mitigating climate change because virtually everything that reduces the emission of air pollutants also reduces the emission of climate pollutants.
Blueing the seas is also of major importance because the blue economy is a significant sector in many of the region’s economies. Tourism alone, which is crucially built on the quality of the marine natural capital of the Middle East and North Africa, accounts for upward of 15 percent of GDP in some of these economies. Moreover, tourism is the main focus for diversification away from the fossil-fuel revenue dependence of many countries in the region. Marine plastics and coastal erosion are critical threats to the tourism sector as well as to other sectors such as fisheries— a particularly critical sector in terms of inclusion given its importance to low-income households as a source of employment and income.
A failure to embark on a GRID path could leave the region’s economies, especially the oil exporters, at risk of ending up with stranded assets. Carbon assets have been a source of prosperity in recent decades for about half the economies in the Middle East and North Africa. However, with a broadening of climate policies globally and the emergence of promising new technologies to make the decoupling of energy production from the use of fossil fuels competitive, the value of these assets is expected to diminish over time (Lange, Wodon, and Carey 2018).
More than 60 countries worldwide, including major players such as China, the European Union (EU), and the US have already pledged to achieve zero net emissions as well as decarbonization of value chains, with more to follow. Although global decarbonization efforts will not be in full force immediately, the global trend toward reduced fossil fuel use will happen gradually, and it is important for the region’s economies to concomitantly start their energy transition so as not to end up with stranded assets and uncompetitive national economies.
Box 2.3 provides some details on the carbon wealth of the region’s economies and how overreliance on their fossil fuel resources could soon become a pitfall. Hence, to reduce environmental pressures and
