Green Industries Can Accelerate a True Jobs-Focused Recovery

If stimulus packages target low-carbon sectors, the global economy will see a faster jobs-based recovery as well as significant movement towards averting the global climate catastrophe.

Expert comment Updated 15 September 2020 Published 23 June 2020 3 minute READ
Demonstrators with placards during a protest in New York City to support the Green New Deal. Photo by Michael Brochstein/SOPA Images/LightRocket via Getty Images.

Demonstrators with placards during a protest in New York City to support the Green New Deal. Photo by Michael Brochstein/SOPA Images/LightRocket via Getty Images.

As of the beginning of May, 33 million Americans had lost their jobs in the preceding seven-week lockdown - equivalent to a 14.7% unemployment rate, and quadrupling the 2019 rate of 3.5%. In China, although officially unemployment is just 5.9%, independent estimates are more than three times greater, at 20.5%, principally due to a lack of accounting for job losses amongst migrant workers.

With India’s unemployment rate standing at 23.5%, three times greater than pre-pandemic levels, and Brazil - the new epicentre of COVID-19 – seeing unemployment double compared to 2019 to 25.6%, it is not just the world’s two largest economies who are suffering. Nobel prize-winning economist Joseph Stiglitz, Lord Nicholas Stern, and Cameron Hepburn recently wrote that 81% of the global workforce has been hit by full or partial lockdown, and the UN estimates 300 million jobs may have been lost.

So in early June, an audible sigh of relief was heard across the Atlantic, as US data indicates a slight decline in unemployment, hopefully meaning Great Depression levels of 24.9% may be avoided. But while all countries are likely to benefit from declines in peak unemployment rates as strict lockdowns are removed, how will job markets perform over the next 12 months?

The clearest forecast has come from the OECD, defining two scenarios for 2020. The optimistic scenario sees unemployment in OECD countries increasing from 5.4% prior to the pandemic to 9.2%. However, if a second wave of infections hits global economic and public health systems, unemployment could more than double to 12.6%.

Disastrous loss of income

But such ruinous statistics are not simply a barometer to weakening economies because beneath the numbers are millions of families dealing with repercussions of a disastrous loss of income. Governments need to be simultaneously stimulating economies and providing families with the incomes they so desperately need.

In the UK, Ed Miliband, the shadow secretary of state for energy and climate change, has helped catalyse pressure on the UK government to pursue a ‘Green Recovery’ by proposing the government pay the wages of young workers in green sectors. This is pertinent given that 600,000 young people could lose their jobs this year because of COVID-19.

And before UK chancellor of the exchequor Rishi Sunak delayed decisions on the recovery package, there were rumours the UK Treasury was preparing to put green jobs front and centre, with new skills programmes to help retrain people in building upgrades, offshore wind farming and tree-planting.

The rationale for a global green recovery in creating new jobs while simultaneously addressing an even bigger systemic risk - namely climate change - appears obvious to many. The paper by Stiglitz, Stern and Hepburn claims renewable energy generates more jobs in the short-run - when jobs are scarce in the middle of a recession - which boosts spending and increases short-run GDP multipliers. The authors offer a value for money comparison in job creation between the extractives and renewables industries saying that ‘every $1m in spending generates 7.5 full-time jobs in renewables infrastructure, 7.7 in energy efficiency, but only 2.7 in fossil fuels’.

The Green New Deal narrative has gained traction across many OECD countries but the counter-arguments have also become more vociferous. Elizabeth Harrington, spokeswoman for the Republican National Committee, wrote that carbon-cutting plans by the Democratic Party were ‘the perfect opportunity to kill millions more jobs’ while long-time Democratic consultant Robert Shrum warned Joe Biden not to talk about the present crisis as though it has a silver lining because it ‘plays into the hands of people who argue that action on climate means the destruction of the economy’.

A central problem for the green recovery argument is that low-carbon industries are new relative to their fossil fuel counterparts and many countries do not explicitly define low-carbon sectors within national employment statistics. This shorter track record has seemingly contributed to the 50 largest economies only targeting 0.2% of the committed $12 trillion recovery packages at low-carbon sectors.

More worryingly, in excess of half a trillion dollars is specifically targeted at high-carbon industries with no requirement they reduce emissions. This is perplexing because fossil fuel assets - and hence jobs within these sectors - are likely to become stranded as climate change impacts are felt the world over. As far back as 2011 the World Bank highlighted US studies showing that, for every one million dollars of spending, solar, wind and energy efficiency create almost three times more jobs than the oil and gas sector.

Renewable energy job creation has already been rising steadily across the globe, from 10.3 million in 2017 to 11 million in 2018. Importantly, the modular nature of renewable projects, the sheer number of households requiring energy efficiency upgrades, and short lead times of both, means green stimulus creates jobs in timeframes unseen in traditional, long lead time infrastructure projects.

It should, therefore, come as no surprise that the International Energy Agency has recommended a sustainable recovery could create or save around 9 million jobs per year, for the next three years. But many countries have not capitalized on the low-carbon jobs opportunity. China still represents 39% of all global renewable energy jobs, and Asia overall has 60% of the global total.

So although low-carbon sectors have shorter track records, the evidence is clear that these sectors are capable of providing cost-effective employment at scale, and can expand rapidly due to shorter infrastructure lead times. Further, renewables are now cheaper than fossil fuels in many parts of the world and electric vehicles are within reach of cost parity with combustion engine vehicles.

If all governments focus on stimulus packages targeting low-carbon sectors, then a true jobs-based recovery can be expedited, as well as demonstrating prudent economics and helping avert an even greater global catastrophe.