Climate Change and Employment in the European Union
 
 

Table of Contents

1 Executive Summary

1.1 Overview of Available Studies on Climate Change and Employment in the European Union

2 Introduction

2.1 Climate Change, the Environment and Employment

2.2 Background to the report

2.3 Note on terminology

3 Procedure

4 Case Studies

4.1 The Austrian Toronto Technology Program - The Economic Dynamics of Greenhouse Gas Reduction Targets (Austria)

4.2 Main gain future: New employment opportunities through a sustainable transport system (Germany)

4.3 Elements of a Green Energy Plan which can Create Job Opportunities (Denmark)

4.4 Electricity without Nuclear Power - Boom or Doom for Jobs? (Germany)

4.5 Saving the Climate that’s my Job - Case Study: Netherlands

4.6 Major Energy Savings, Environmental and Employment Benefits by Double-Glazing and Advanced Double-Glazing Technologies (European Union)

4.7 30.000 New Jobs through Implementing the Austrian Biomass Program (Austria)

4.8 Energy for the Future: Renewable Sources of Energy - White Paper for a Community Strategy and Action Plan (Communication from the Commission, COM (97) 599 final) (European Union)

4.9 What are the Costs of a CO₂ Reduction? (Germany)

4.10 Green Tax Reform - Part 6: A Reform package for the UK - 1997-2005 (United Kingdom)

4.11 A Fiscal Reform for Increasing Employment and Mitigating CO₂ Emissions in Europe (Belgium, France, Germany, Italy, Netherlands, UK)
 

5 Analysis

5.1 Introduction

5.2 Quantitative Analysis

5.2 Limitations of the data

6 Conclusions

6.1 Methodological recommendations

6.2 Integration of employment concerns into environmental thinking
 

7 Further Work

 

8 Bibliography

 

9 Index of Terms

 

Annex 1: Further Studies

1 Improving the Environment and Promoting Employment in Denmark

2 Sustainable Development in the Service of Employment (France)

3 Are there Double Dividends in Finland? - The Swedish Green Tax Commission - Simulations for Finland

4 Jobs for the Climate: The Employment Potential of Energy Efficiency Measures in the Housing Sector (Germany)

5 Saving the Climate That’s my Job - Literature Study: Germany (West-Germany)

6 Solar Jobs 2010 (Germany)

7 Direct and Indirect Job Creation from the Standard of Performance for Energy Efficiency Program (United Kingdom)

8 Less Traffic, More Jobs (United Kingdom)

9 New Power, New Jobs - Combined Heat and Power: The Impact on Employment (United Kingdom)

10 Rethinking the Costs Relating to Global Warming: a Survey of the Issues (Belgium, Denmark, France, Ireland, Italy, Portugal, United Kingdom, West-Germany)

11 The Potential for Employment Opportunities from Pursuing Sustainable Development (European Union)
 

Annex 2: Case Studies:

Job Creation in the Climate Change Mitigation Sector

WISE Group (Glasgow, United Kingdom)

Heatwise Ldt. (Glasgow, United Kingdom)

Environmental Improvement Program - EIP (Berlin, Germany)
 

Environmental issues today are more prominent than ever. Climate change is one of the most pressing of these problems and there is a strong need for different players in society to act in the short term. This is even clearer with regard to the Kyoto Protocol agreed in December 1997 and signed by the EU in April 1998. The EU has agreed to reduce its greenhouse gas emissions by 8% between 2008 and 2012, compared to the year 1990. After this reduction target was shared out between the Member States in June 1998, the next move must be the implementation of policies and measures designed to achieve these targets.
 
 

In parallel, perhaps the most prominent political issue of today is unemployment. Within the EU 10.2% of the population, about 18 million people, are currently unemployed. Tackling this problem was first declared a priority at the Amsterdam Summit in June 1997 and has since been confirmed as key several times.
 
 

The European Commission began to bring these two issues together in the Communication "Environment and Employment - Building a Sustainable Europe", adopted directly before the Extraordinary Summit on Employment in Luxembourg in November 1997. However the environment has not yet been integrated into the general political discussion on employment even though it is increasingly recognized that there are significant opportunities for job creation in the environmental sector which have not yet been exploited.
 
 

From a total of 22 studies dealing with climate change and employment, those studies which directly relate CO₂ reductions to job creation have been selected. This report draws together these eleven case studies in an attempt to show the implications of this research for the employment potential of climate protection policies. Each case study has been summarized and translated (where necessary) and the results from this are listed in the matrix attached to this chapter.
 
 

The most obvious conclusion of the review is that climate protection is beneficial for employment compared to the business as usual scenarios. With one exception all of the studies we have been provided with show this in their results. Although some of the studies have been published by groups supporting the development of a proactive climate policy and are therefore likely to contain positive results, it is interesting to note that this kind of research has not been undertaken by the fossil fuel or energy intensive industry who are normally the biggest opponents to climate protection. The only example (1) known which results in an overall negative employment effect has not been published in a full version to-date.
 
 

Comparison between the studies is difficult. Most of them look at individual sectors or at interaction between sectors related to climate change at a national level, and therefore reflect country specific circumstances. Adding to this, there is a great variety of models used with different assumptions implicit in their methodologies. The studies have used different levels of modelling which means that some have only measured direct costs and benefits whereas others have gone into much greater detail.
 
 

Despite these uncertainties it was possible to estimate the employment potential of a CO₂ emissions reduction of 15% until 2010, as compared to 1990 for the European Union, at +1.9 million jobs. The estimate was based on extrapolation from 8 studies with a correlation coefficient of 0.86. Two taxation-only studies were omitted from this analysis because pure revenue recycling as opposed to broader investment packages seemed to generate a bias in favour of job creation, although this omission was essentially a subjective decision. This estimate should be taken more as an indication of a trend than as an exact prediction.
 
 

The review has made it clear that even though climate change mitigation is beneficial for employment this area is far from being fully explored. On the methodological side there is a clear lack of a common approach and definition of terms which needs to be solved in order to make future research more effective. But there is also a need for better interaction between environmental decision makers and economics decision makers who usually influence the employment market most. Only then can the full benefits of CO₂ reduction and employment creation in tandem be realized. Furthermore focusing on the effects of existing programs (e.g. environmental tax schemes) could provide a clearer ‘real life’ picture of job creation priorities and opportunities.
 
 
 

1.1 Overview of Available Studies on Climate Change and Employment in the European Union
 
 
 

Measures	Time frame	Total CO2 reduction (Mt) (3)	Investment (in ECU) (4)	Employ-ment	Jobs/Mt CO2	Key assumptions underlying the study	Other benefits (economic and environmental)
Sector: General CO2 Reduction
Austria: The Toronto technology program, Austrian Council on Climate Change
Enhancement of: cogeneration; energy efficiency; transport; renewables	1997-2005	70.2 Mt	prefinancing of 824 million (103 m per year)	12,200 (net)	174	Details on assumptions on economic and energy growth and energy efficiency improvement could not be obtained in time; no introduction of new technologies	additional private investment: over ECU14.4 bn; GDP: +1.2%; national demand: ECU3.46 bn; governmental budgets (net): ECU640.9 mn
Sector: Transport
Germany: Hauptgewinn Zukunft: New jobs through a sustainable transport system, Öko-Institute and Verkehrsclub Deutschland (VCD)
sustainable transport shift through car sharing; use of modern communication technologies; new technologies for passenger cars; increase taxes on transport fuels; speed limits	1999-2010	328 Mt	62.7 million (5.7 m per year)	200,000 (net)	610	Baseline: GDP grows from 3.023-4.232 (1995-2010); transport growth +35% (1992-2010); population (2010): 83.8 million; no relevant introduction of new car technologies	reduction of SO2 and other emissions from transport; reduction of traffic noise; free space of 125km²; reduction of accidents; no effect on GDP
Sector: Energy Industry
Denmark: Elements of a green energy plan which can create job opportunities, Department of Development and Planning, Aalborg University
Enhancement of natural gas, district heating, combined heat and power (CHP), renewables; energy efficiency	1996-2015	81.84 Mt	12.28 bn (662 m per year)	16,000 (net)	195.5	Baseline: standard Western European economic growth assumed, energy consumption stable Model: based on empirical data; no changes in consumer prices;	foreign exchange savings: between ECU79.4-185.3 mn; value of additional value apparatus: ECU 10.6 bn; reduction of SO2 and NOx; reduced nitrate pollution; reduction of flue dust and slag/cinder

 

Measures	Time frame	Total CO2 reduction (Mt)	Investment (in ECU)	Employ-ment	Jobs/Mt CO2	Key assumptions underlying the study	Other benefits (economic and environmental)
Germany: Electricity without nuclear power - boom or doom for jobs?, Progress Institut für Wirtschaftsforschung (PIW), Bremen
Phase-out of nuclear power until 2000; reduction of coal, enhancement of renewables	1995-2010	1000 Mt	210 bn (14 bn per year)	121,000 (net)	121	Baseline: rise in electricity production +36% (2010); no change in policies; CO2 emissions +9% ( to 1993) GP scenario: electricity production -20%; nuclear power plants are shut down when storage is full	no specific effects mentioned
Netherlands: Saving the climate, that’s my job - Case study Netherlands, Centre for Energy Conservation and Environmental Technology
Efficiency improvement of transport, industry, electric equipment, insulation, wind energy	1995-2005	440 Mt	investment 2.5 bn per year	71,000 (net)	161	Baseline: GDP growth 1.5% per year; CO2 and energy growth 1.3% per year; energy prices constant 1990 level; Model: ICARUS database for static input-output model; no change in energy prices, import and export; new technologies as in ICARUS database;	saved energy costs amount to ECU7.71 bn per year; additional money for households: ECU4.03 bn; reduction of SO2 and NOx
Sector: Energy Efficiency (Domestic/Tertiary)
EU-15: Major energy savings, environmental and employment benefits by double-glazing and advanced double-glazing technologies, Karlsruhe Fachinformationszentrum (FIZ) and Comité Permanent des Industries du Verre de la Communauté Economique Européenne (CPIV)
Replacing single-or double-glazed windows through high performance double-glazed windows of 60% of European dwellings	10 years	940 Mt	137 bn(13.4 bn per year)	126,000 (net)	134	Assumptions on prices made on the basis on prices in 1995; payback between 7/8 and 24/36 years; interest rate of 8% for a dwelling with 35m² window area	space heating savings: ECU13 bn/ year; more light and solar gain in houses; improved sound insulation and use of floor space; property related benefits
Sector: Renewables (Electricity and Heat)
Austria: 30.000 new jobs through implementing the Austrian biomass program, Austrian Biomass Association
biomass: higher taxes on fossil fuels; no taxes on renewables; lowering non wage labour costs	1997-2005	20.18 Mt	5-5.7 bn (625-713 m per year)	30,000 (net)	1,487	Model assumes a static situation on the basis of 1995 ? data;	improved air quality; lower dependency on import of fossil fuels; new export chances; governments savings through less unemployed

 
 
 
 

Measures	Time frame	Total CO2 reduction (Mt)	Investment (in ECU)	Employ-ment	Jobs/Mt CO2	Key assumptions underlying the study	Other benefits (economic and environmental)
EU-15: Energy for the Future: Renewable sources of energy - White paper for a community strategy and action plan, Energy for Sustainable Development Ltd
enhancing the share of renewables to electricity production from 6 to 12% of EU primary energy demand	1997-2010	1,749.94 Mt	95 bn(7.3 bn per year)	500,000 (net)	286	SAFIRE model (input-output) used;	avoided fuel costs of ECU21 bn; reduced imports 17.4% (ref. 1994)
Sector: Taxation
Germany: What are the costs of a CO2 reduction?, Institute for Empirical Economic Research, University of Osnabrück
CO2 tax; revenue recycled through lower employer’s social security payment	1996-2005	1,290.12 Mt	overall revenue in 2005: 112 bn (12.4 bn per year)	1.5 million (net)	1,163	Baseline: GDP growth +1.4% per year; private consumption +1.8% per year; energy consumption +5.7% overall; CO2 emissions +2% over 1990; Model: Panta Rhei	GDP rises 1.1% per year; energy consumption decreases 19.3% (overall); better export chances of W-Germany
United Kingdom: Green tax reform, Cambridge Econometrics
industrial energy tax, transport taxes, landfill tax; revenue recycle: lowering employer’s National Insurance Contribution (NIC)	1997-2005	12.665 Mt (in 2005)	overall revenue in 2005: 33.4 bn (4.175bn per year)	717,000 (net)	(56,613)	Baseline: no data available Model: Cambridge E3	reduction of SO2 emissions, waste disposal and landfill; no major effects on GDP, inflation, profits and balance of payments (in relation to model errors)
Same taxes as above; revenue recycle: lowering VAT, business rates and NIC	see above	see above	see above	576,000 (net)	(45,480)	see above	see above

 
 

Measures	Time frame	Total CO2 reduction (Mt)	Investment (in ECU)	Employ-ment		Jobs/Mt CO2	Key assumptions underlying the study	Other benefits (economic and environmental)
Belgium, France, Germany, Italy, Netherlands, UK: A fiscal reform for increasing employment and mitigating CO2 emissions in Europe, Ministry of Economic Affairs, Belgium
50% CO2, 50% energy tax; revenue recycle: employer’s social security contributions	1995-2003 (8 years)	597 Mt	overall revenue: 62.3 bn (7.7875bn per year)		696,900 (net)	1,167	Baseline: assumption on GDP, private consumption, energy consumption and prices (see description);  Model: HERMES	Effect on GDP: +0.15% (overall); energy consumption: -3.5%; private consumption: +0.15%; mean energy prices: +16.3%;

Footnotes
 1 Regionalwirtschaftliche Wirkung von Steuern und Abgaben auf den Verbrauch von Energie - das Beispiel NRW (1996). Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI).

2 The 15% CO2 reduction target forms part of the greenhouse gas reduction target of 8% agreed in Kyoto. We chose this figure in order to make it comparable to already existing work.

3 Calculation of the CO2 emission reductions for studies where only the percentage figure was given was made on the basis of data available from “1997 - Annual Energy Report” from the Directorate General for Energy (DG XVII)

4 Calculation from the different currencies used in the studies to ECU (where necessary) was made on the basis of the exchange rate of 10 April 1998 (Source Agence Europe)
 
 

The aim of this report is to bring the issues of climate change and employment together and to show that they are not contradictory to each other. Instead it reveals that the climate protection policies that have to be introduced today can have a positive effect on the employment market in the European Union.
 
 

2.1 Climate Change, the Environment and Employment
 
 

In its Second Assessment Report of 1995, the Intergovernmental Panel on Climate Change (IPCC) (5)confirmed the human fingerprint on the atmosphere as well as the dangers of climate change to our planet. Science found the political back-up in December 1997, when the Kyoto Protocol was agreed upon by the negotiating Parties to the UN Framework Convention on Climate Change (UNFCCC). The Protocol set greenhouse gas (GHG) reduction targets for industrialised countries, on average a 5.2% reduction between 2008-2012, for six GHGs. For the European Union a reduction target of 8% has been agreed which the EU confirmed by signing the Kyoto Protocol in April 1998. At the Environment Council in June 1998, the EU furthermore shared up the 8% between the Member States, opening the way for implementing the Protocol.
 
 

In the run-up to Kyoto, the EU played a leading role by pushing for a reduction target of 15% by 2010, which was more ambitious than proposals of other industrialised countries. This target was backed up by detailed research done by the European Commission on policies and measures available to achieve it as well as showing the cost effectiveness of these measures.
 
 

There are many options available to countries to reduce greenhouse gas emissions. In this study we concentrate on options to reduce CO₂ emissions as CO₂ is the main greenhouse gas (GHG), making up 83% of all GHG emissions in the EU. And most of the detailed work has been done on CO₂.
 
 

While climate change is an extremely important environmental issue, unemployment is at the top of the political agenda With 18 million unemployed (10.2%) people in April 1998, unemployment is one of the most urgent problems that the EU faces. At the Amsterdam Summit in Summer 1997 employment was declared to be one of the top issues of the EU, to be integrated into other policy areas. This statement was confirmed both at the EU Extraordinary Summit on Employment in Luxembourg (November 1997) and the Cardiff Summit of the Heads of States in June 1998.
 
 

One of the results of the Luxembourg Summit was that member countries committed themselves to present national plans every year on how governments plan to combat unemployment in their countries. The first set of these was submitted to the European Commission in April 1998. Despite the fact that the Commission published the Communication "Environment and Employment - Building a sustainable Europe" shortly before the Luxembourg Summit, the guidelines for the national plans on combating unemployment made no reference, until today, to environmental aspects.
 
 

This failure to integrate the environmental aspect into social policies reflects the usual approach to these two problems, which is shaped by the out-dated opinion that they are contradictory. However, more and more people recognise today that this is not necessarily the case. In the face of the "jobless growth" that many EU economies are experiencing at the moment - meaning the growth of economic activity without the according increase in employment - it is even more unlikely that old-fashioned concepts will be able to cope with today’s situation. The facts show that new concepts and approaches are needed in order to react to the complex problems of today.

We hope that this report will facilitate a new look at climate change measures and employment, helping to accelerate the implementation of the

climate related policies and measures that will benefit the environment and create jobs.
 
 

2.2 Background to the report
 
 

In this report we explore the idea that measures to protect the environment (in this case climate protection measures) are not damaging to the economy, but are actually creating employment and possibly promoting sustainable economic growth when implemented in a coherent way.

Reasons for Concept

There are several reasons why climate protection is beneficial for employment:

• when looking at the effects of a climate policy it becomes clear that the sectors of the economy that will lose are those with high and/or carbon intensive energy demand, as one of the main goals of a climate policy is to reduce CO₂ from energy consumption. Accordingly, sectors with low energy consumption are likely to be among winner industries, that is industry that will benefit from climate protection. The latter are most often labour intensive sectors whereas the energy and heavy industry generally employs fewer people. Therefore it is probable that the effects will be beneficial for employment.
• when talking about investment in traditional fossil and nuclear electricity production compared to renewable energies it is also important to note that the structure of the former is an important factor determining the employment potential. Fossil fuel and nuclear generation is mostly taking place in centralised power plants which need a high investment in infrastructure. For renewable energy production on the other hand, the balance of investment in infrastructure and employment is much more in favour of labour, as it is more small-scale and decentralised.
• another aspect that is often mentioned, but not fully taken into account yet, is that while policies to protect the climate might appear costly today, if not implemented, the environmental, economic and human costs will be even higher in the future. Already governments are spending millions to restore degraded land, on pollution abatement or on health damages caused by environmental destruction. Such costs will rise as action to combat climate change is further delayed.

• Research today shows clearly that there might even be higher employment benefits in the future than projected at present. As mentioned, most studies only account for the direct and indirect jobs attached to climate measures. Taking the multiplier or re-spending effect into account would amplify the results.
• Another effect is the way in which new technology associated with climate protection measures would influence the competitiveness of countries in the international market. Present evidence suggests that countries with higher environmental standards will win as their production of new technologies is better developed compared to other countries. The most commonly cited example is Denmark where wind turbines are the third most important export good.

When looking at the idea that climate protection is beneficial for employment there are different aspects to be taken into account as they could lead to serious problems preventing the programmes to be successful.
 
 

• The overall positive picture does not mean that there will be no sectoral problems, as in every structural change. As sectors related to energy production are often regionally concentrated, a shift to a cleaner and less energy consuming society will lead to a job displacement in those areas (e.g. the Ruhrgebiet in Germany). On the other hand, sectors that are likely to gain from climate protection measures are often dispersed, like for example the building sector which will gain from the fostering of building insulation. In order to prevent social disruption in areas most heavily affected this has to be kept in mind and appropriate measures need to be undertaken. Governments can take different approaches to lower the burden on industry with a high energy consumption.
• In addition, policies have to be introduced as part of a comprehensive strategy which includes a full set of measures. Taking the ecological tax shift as an example it is very important to look at the tax itself but also at the way the revenue of this tax is recycled. The introduction of an energy or CO₂ tax is probably only beneficial to employment if there is recycling of the revenue into jobs. While the research community has examined different scenarios, the one that seems the most beneficial is a reduction of non-wage labour costs, e.g. employer’s social security contribution. Setting climate protection as a clear target and presenting a coherent, step-by-step policy plan will also send a clear sign to industry and make it possible for them to adapt their activities accordingly, which will lead to a slow structural change towards a sustainable society, as already mentioned above.

2.3 Note on terminology
 
 

Most of the terms and expressions used in this report are commonly known. There are however some expressions which deserve an explicit clarification because it is important to be clear about their definition in order to understand the review and the analysis attached to it.

Gross and net employment

In terms of the employment effects there is a distinction between different effects. There is on the one hand the "gross" employment. In this report it has been used with the definition that it calculates the employment created in each of the different sectors of economy. On the other hand there is the "net" employment which is the overall figure calculating all the gross effects occurring in the sectors affected by the study. On a large-scale the net employment calculates all gross effects including direct, indirect and multiplier effects of the national economy.
 
 

Direct, indirect and multiplier effect

Furthermore there are different types of employment effects. First of all there are "direct" employment effects which are the jobs created or lost in industries directly affected by climate measures. "Indirect" employment effects refer to industries such as supplier industries. Most of the studies up to now have only calculated these two effects as they are easiest to model. On a third level there is the "multiplier" or "respending" effect which today is very hard to model in quantitative terms, and therefore isn't reflected in the studies with a common definition. The multiplier effect refers to the fact that by reducing unemployment more money is circulated in the economy. Part of this is the reduced unemployment costs of governments or the additional money available to people that have been unemployed before. This additional money creates a higher activity and therefore has its effects on the whole of the economy and employment.
 
 

We hope that you may find this work useful and would welcome your comments and especially any additional information on studies not mentioned in this collection. Please send these to:
 
 

Climate Network Europe

44 Rue du Taciturne

1000 Brussels

Belgium

Tel (32 2) 231 0180

Fax (32 2) 230 5713

Email canron@gn.apc.org
 
 

Footnotes
5    The IPCC is an international group of over 2000 government appointed scientists.

6  Communication “Climate Change - The EU Approach for Kyoto” (COM(97)481 final), October 1997

7 EUROSTAT Press Release of 16th June 1998
 
 

The report is based on a literature study Climate Network Europe (CNE) has been doing since September 1997. For this report we assessed those studies that contained the appropriate sets of data for comparative analysis. The areas we put emphasis on was data on CO₂ reduction, level of investment and employment created. This led to the selection of 11 suitable studies. The next step was to summarize the key details of the studies, which usually included further investigative work in order to collate more background details. We have focused on the following areas:

• Models used for the studies: we have tried to identify the names, where available, outlines of the procedure and the assumptions involved in the modelling. This was done through literature review and where necessary by consultation with the authors. We have not evaluated the models, but have limited ourselves to descriptive outlines. We are also not listing an exhaustive set of all assumptions involved in the models. Instead we have tried to concentrate on a limited number of key assumptions.
• The intention behind each study and the measures involved in the programs.
• Environmental and economic benefits (apart from CO₂ reduction, investment and employment) in order to get a broader overview of the package as a whole.

We have also undertaken a quantitative assessment of the CO₂ and jobs data. We have omitted quantitative analysis of the direct investment data because of a evident lack of transparency and comparability between the studies on this figure, which is discussed more thoroughly in the Analysis.

For each project the annual savings in CO2 for each year of the project (relative to business as usual) were added together to give a figure for the total ‘CO2 reduction’ over the lifetime of the project. This was necessary because using a reduction figure for a single year of a project takes no account of the possibility that CO2 savings may change from year to year during a project.

For example, a 10 year project which reduces C02 by 100T per annum every year relative to "business as usual" saves 1000T in total, whereas a project which saves no C02 in the first 5 years and 150T per annum in the last five years only saves 750T in total. It is therefore important to consider the reductions over the whole project lifetime, rather than just the final year, or indeed years for which data is available.

For some projects we do not have data on annual CO2 savings for each year of the project lifetime. For years where data was not available we have extrapolated linearly between the years for which we do have data. For example, with a 10 year programme where case study data indicates reductions of 100 tonnes/annum in year ten we assume reductions of 10 tonnes/annum in year 1, 20 in year two and so on.

‘Jobs created’ data was taken as net jobs created by the project given in the individual studies. There are some major issues concerned with the relevance of this data which are considered more fully in the Analysis (Section 5). A correlation was calculated between the jobs created and the CO2 reduction and a linear regression used to generate a best-fit line relating jobs created to tons of CO2. We then used this regression to estimate the number of jobs that might be associated with the EU reaching the target of a 15% reduction in annual CO2 emissions (relative to 1990) in the year 2010. In order to do this we calculated the total reductions in CO2 achieved between 1990 and 2010, on the assumption that the Community reduced emissions in a linear fashion between 1990 and 2010. According to the Commission Communication ‘The EU Approach for Kyoto’ reaching the 15% target in 2010 means a reduction in emissions of 800 million tonnes/annum CO2 relative to 1990. We therefore assumed that emissions abated in 1990 are 0 tonnes, in 1991 40 million tonnes, in 1992 80 million tonnes, and so on, until the target of 800 million tonnes below 1990 levels is reached in 2010.

Total jobs created was then generated by extrapolating the best-fit line from the case study correlation to the cumulative reduction in CO2 over the years 1990-2010 (which was 8400 million tonnes).
 
 

List of Case Studies

4.1 The Austrian Toronto Technology Program - The Economic Dynamics of Greenhouse Gas Reduction Targets (Austria)

4.2 Main gain future: New employment opportunities through a sustainable transport system (Germany)

4.3 Elements of a Green Energy Plan which can Create Job Opportunities (Denmark)

4.4 Electricity without Nuclear Power - Boom or Doom for Jobs? (Germany)

4.5 Saving the Climate that’s my Job - Case Study: Netherlands

4.6 Major Energy Savings, Environmental and Employment Benefits by Double-Glazing and Advanced Double-Glazing Technologies (European Union)

4.7 30.000 New Jobs through Implementing the Austrian Biomass Program (Austria)

4.8 Energy for the Future: Renewable Sources of Energy - White Paper for a Community Strategy and Action Plan (Communication from the Commission, COM (97) 599 final) (European Union)

4.9 What are the Costs of a CO₂ Reduction? (Germany)

4.10 Green Tax Reform - Part 6: A Reform package for the UK - 1997-2005 (United Kingdom)

4.11 A Fiscal Reform for Increasing Employment and Mitigating CO₂ Emissions in Europe (Belgium, France, Germany, Italy, Netherlands, UK)
 
 
 

4.1 The Austrian Toronto Technology Program - The Economic Dynamics of Greenhouse Gas Reduction Targets (Austria)

(Das österreichische Toronto-Technologie-programm - Die wirtschaftliche Dynamik von Treibhausgas-Reduktionszielen) 1997

Published and carried out by the Austrian Council on Climate Change

Intention

• Reduction of CO₂ emissions

Macroeconomic computer model developed for the Austrian economy.
 
 

The concept of the model starts with defining the amount of the 5 factors determining the final economic demand (among others private and public consumption, export). Investment is desegregated into five categories and modelled for each category. In a second step the sum of the final demand is fed into a sector model through which then the effect on demand for certain goods is calculated.

Assumptions:

• details on the assumptions on economic and energy growth and efficiency improvements could not be obtained in time
• the factor of multiplication for investment is 1.5 (short-term) and 2 (middle-term)
• no introduction of new technologies, but enhancement of existing technologies

The program aims at reaching the Toronto target; this means a 25% reduction of CO₂ emissions until 2005 (compared to 1988).

Measures proposed are:

• Cogeneration will be used three times as much as in the baseline scenario
• Renovation of buildings including installing improved insulation will lead to a halving of energy consumption
• Re-design of transportation through implementation of road pricing and the 5 liter car
• Promotion of renewable energies: solar, biomass, wind and photovoltaic energy

Effects on employment

net job creation in 2005: 12,200 or 5% of unemployed
 
 

Other benefits

• additional private investment triggered off: over S200 billion through economic activity
• effect on gross domestic product (GDP): 1.2% or S24.5 billion increase in 2005
• effect on national demand (Inlands-nachfrage): S48.2 b. increase in 2005
• effect on governmental budgets (in 2005):

additional spending: -S0.62 billion

(reduced spending)

Prof. S. Schleicher, Austrian Council on Climate Change, c/o University of Graz, Universitätstr. 15/F4, 8010 Graz, Austria, Tel +43 316 380 3440, Fax +43 316 380 3440, Email sts@wsr.ac.at
 
 
 
 
 
 

4.2 Main gain future: New employment opportunities through a sustainable transport system (Germany)

Published by Öko-Institut and Verkehrsclub Deutschland (VCD)

Carried out by the Öko-Institut
 

Intention

• Reduction of environmental impacts through a sustainable transport system

MOBIMOD, a model developed by the Öko-Institut.

Employment effects are calculated with a static input-output model based on 58 sectors.

This model considers the direct employment effects as well as the indirect employment effects, which are induced by the demand of products that are necessary for the production of products and services for the final demand. Changes in labor productivity are not calculated within the model but in an additional approach.

Assumptions:

for TREND and MOVE scenario:

• population in 2010: 83.8 million (increase of 2 million from 1995)
• moderate economic growth (GDP): rises from 3.035 billion DM (1995) to 4.289 billion DM (2010) at constant prices of the year 1991
• working time per person ("Lebensarbeitszeit") even less than today
• price differentials between diesel and gasoline remains at the same level

• transport growth (1992-2010): +35%
• CO₂ emissions from transport rise from 140 Mt (1995) to 160 Mt (2010)
• no relevant introduction of new car technologies

• measures are introduced only in Germany; therefore no effect on sales in other countries

TREND Scenario (baseline) assumes a continuation of current transport policies. Among them are the following:

• continued construction of roads (urban and rural)
• planned installations in the rail sector are being completed
• no major increase in costs for passenger cars utilization
• Air transport increases as no counter measures are taken

The overall amount of journeys undertaken and "activities" are not changed in comparison to the TREND scenario. The overall amount of passenger kilometres is reduced at a range of 4.2% in 2010 as compared to the TREND scenario.
 
 

The usage of transport modes changes as below (in comparison to the TREND scenario):

• Passenger car usage decreases at 10%
• Air transport remains it at the same level
• Rail transport increases at 150%
• Public transport increases at 30%
• Cycling increases at 30%
• Walking increases at 22%

• introduction of speed limits for highways (100km/h), motorways (80km/h) and inner-city (30km/h)
• increase of the gasoline tax
• introduction of a kerosene tax
• expansion of interregional public transport supply
• urban planning schemes that try to improve conditions for public transport, bicycles and pedestrians
• promotion of car sharing

• reduction of gasoline consumption of new cars to the average of 3 litres per 100 km until 2010 (this is not a measure but a result)
• car sharing potential of 2.45 million persons realized until the year 2010

Additional revenues from taxes amount to DM 25.062 million per year. From these there has to be deducted the amount of expenditure for public transport and for investments into new infrastructure due to the intermodal shift. These are at the range of DM 11.212 million per year. The remaining DM 13.851 million are redistributed to private households and therefore compensate them for the additional tax burden. Due to reduced imports (especially cars, gas etc.) the domestic economy experiences an increase in demand of DM 6.808 million per year.
 
 

CO₂ emissions will be reduced at a rate of 31% below the TREND scenario, or 24% below current emission levels. In figures this is a reduction of 50 Mt below the TREND scenario and a 30 Mt reduction below the 1995 level.
 
 

Effect on Employment
 
 

Net average employment (1990-2010):
 

new employment created	337,000
employment lost	-130,000
net employment effect	207,000

 

Sectoral employment effects:
 

Sector	Employment
car production	-74,000
construction	35,000
wholesale and retail	-22,000
services of railways	122,000
services of other transport	99,000
insurance (excluding social security)	-20,000
other services (hotel, restaurant, science, consulting,  architecture etc.)	48,000
other sectors (negative)	-14,000
other sectors (positive)	33,000

 

Other benefits

• introduction of new car technologies
• significant reduction of SO₂ and other emissions from transport that are dangerous to human health
• reduction of traffic noise below the noise level that is dangerous to health
• a space of 125 km² will be freed from parking cars
• reduced need for imports due to a shift transport modes

Anke Herold, Öko-Institut, Binzengrün 34a, 79114 Freiburg, Germany, Tel +49 761 45295-28, Fax +49 761 475437, Email herold@freiburg.oeko.de
 
 
 

4.3 Elements of a Green Energy Plan which can Create Job Opportunities (Denmark)

March 1996

Published by General Workers Union in Denmark (SiD)

Carried out by the Department of Development and Planning, Aalborg University
 

Intention

• Creating employment through environmental measures

The effect on employment and import has been calculated for each technology on the basis of data gathered for the research project "The Employment Effects of Danish Energy Policies".

Assumptions:

• economic growth is assumed to be on a normal European standard rate (like in the "Energy 2000 - follow-up")
• energy consumption is assumed to be stable (from the 1980s)
• two calculations made: one for constant and one for rising fuel prices (doesn’t influence employment effects, but foreign exchange)
• consumer prices remain at the same level (total energy costs for household and industry). This means that in the scenario of rising fuel prices the government has to spend more public money in order to keep energy prices at the same level.
• level of investment remain on the same level over the whole time period
• plan assumes that the necessary qualifications are already there among the present unemployed (250,000-300,000 people)

The study is designed for Denmark to reach a CO₂ reduction of 20% by 2005 and 34% by 2015 compared to 1988 levels.

Measures proposed are:

• Conversion from electrical heating to natural gas or district heating at a level of approximately 60 000 houses or 4 PJ per year.
• Improvement of insulation and low-temperature district heating, so that the net heating requirement falls from 64 GJ p.a. to 57.6 GJ p.a. as an average for all housing
• Utilization of natural gas in district heating instead of individual domestic heating. New pipelines should be installed when the system needs to be exchanged anyway.
• Disperse use of biomass (wood and straw) in decentralized gasification plants which are located in connection with decentralized gas fired cogeneration plants. They should produce 20 PJ p.a.
• Construction of biogas plants producing 25 TJ p.a. by 2015 by using organic industrial waste and manure of farm animals.
• Achieving overall 3000 MW through wind energy generation.
• Solar energy development program constructing 165 000 installations of solar energy capture systems in the year 2015.

Effects on employment
 

Sector	Employment effect by 2005
Conversion from electrical heating	400
Additional insulation	2,700
Change to natural gas district heating	1,800
More decentral cogeneration plants	1,500
Biogas and straw gasification plants	1,200
Wind generators	800
Fewer central power generating stations	-600
Power saving	2,600
Operation and maintenance	3,100
Fuels	-500
Total employment effect	13,000

 

Until the year 2015 employment rises steadily to approximately 16,000 jobs (additional to the baseline).
 
 

Other benefits

• foreign exchange savings (in 2015): DKK 0.6 billion (constant fuel prices)

• value of the additional value apparatus is (in prices of 1996): app. DKK 80 billion in 2015
• reduction of SO₂ and NOx emissions
• reduction of nitrate pollution from agriculture
• reduction of the need to deposit flue dust and slag/cinder

General Workers Union in Denmark (SiD), Kampmannsgade 4, P.O. Box 392, DK-1790 Copenhagen, Denmark, Tel +45 33 14 21 40, Fax +45 33 97 24 60
 
 
 
 

4.4 Electricity without Nuclear Power - Boom or Doom for Jobs? (Germany)

October 1994

Published by Greenpeace Germany

Carried out by the Progress Institut für Wirtschaftsforschung (PIW) in Bremen, Germany
 
 

Intention

• Phase-out of nuclear power until 2000

One basis for this study is the study "What does nuclear phase-out cost" by the Öko-Institute for Greenpeace in 1994. The calculations for costs attached to the nuclear phase-out are taken from this study.
 
 

The calculation of the employment effects is done by using an input-output table. The table is based on economic structures as of 1990 and this stays on a constant level. It differentiates 17 sectors. The multiplier effect is calculated with a factor of 1.9 for job gains (this means that for each DM100 that an employee earns more the economy experiences a further increase of income at a rate of DM90).
 
 

Job losses are also taken into account including job losses (indirect and respending) at a factor of over 2 (this means that for each direct job lost another job is lost in the economy).
 
 

Assumptions:
 
 

• electricity production:

trend scenario (2010): 716 TWh (+36%)

GP scenario (2010): 422 TWh (-20%)

• each nuclear power plant is taken from the grid when its own fuel storage capacity is full; the share of renewable energies increases at a rate of 333%; of combined heat and power (CHP) output is 203% above 1993 levels; sharp decline in the use of hard coal

The study refers to the scenario of a nuclear phase-out until the year 2000 and a restructuring of the energy industry in order to achieve a more sustainable energy supply. Apart from the nuclear industry the sectors included in the scenario are:
 
 

• a decrease in coal production: hard coal by -50% and brown coal (lignite) by around -80% (until 2010, as compared to 1992)
• a promotion of renewable energies (up to 333% by 2010, as compared to 1992)
• investment in reducing overall energy consumption (by -20% until 2010, as compared to 1992)

The overall investment required for the Greenpeace scenario is in the order of 416 billion DM over the time period of 1992-2010. This is 38.1 billion below the investment required for the trend scenario. This difference increases even more if the costs of a nuclear disaster are taken into account.

Overall the trend scenario emits 6,800Mt of CO₂ until the year 2010 whereas the totalCO₂ emissions in the GP scenario amount to only 5,800Mt until 2010.
 
 

Effect on Employment

The calculations below are the employment changes from the trend scenario and take into account direct, indirect and multiplier effects. This means that sectoral employment development can be very different from the overall figure given below, e.g. job losses in the coal industry can be much higher. But as there are also job losses projected for the trend scenario the figures below only represent additional job losses caused by the measures undertaken in the Greenpeace scenario.
 
 

Measures/effects	Employment
direct and indirect employment effect resulting from a production impulse through restructuring the power station network	15,000
purchasing power impulses resulting from restructuring power station network	17,000
increased private household demand for consumer goods through savings in electricity consumption	79,000
investment-induced effects on account of savings in electricity consumption by industries and businesses and self-financed measures to encourage restructuring	59,000
Taking nuclear power plants out of operation	-6,000
Reduction of energy from brown coal	-10,000
Reduction of energy from hard coal	-33,000
Net employment effect	121,000

Other benefits

• no specific effects mentioned

Contact address:

Greenpeace Germany, Große Elbstr. 39, 22767 Hamburg, Germany Tel +49 40 30618-222, Fax 49 40 306 18-211, Email mail@greenpeace.de
 
 
 
 
 
 

4.5 Saving the Climate that’s my Job - Case Study: Netherlands

March 1995

Carried out by the Centre for Energy Conservation and Environmental Technology, Marc D. Davidson and Gerrit de Wit
 
 

Intention

• Reducing CO₂ emissions

Input/output model using the ICARUS database for the calculation of the energy saving potentials for different economic sectors and the attached CO₂ reductions. The employment effects are calculated on the basis of the table from the "Statistics Netherlands" for the Dutch economy in 1991.

Assumptions:

Baseline scenario:

• GDP growth in baseline scenario: 1.5% per year until 2005
• CO₂ emissions grow by 1.3% per year from 1994-2005
• Energy growth is assumed to be 1.3% per year, according to CO₂ emissions
• energy prices are assumed to be constant on the 1990 level
• base scenario assumes no energy efficiency improvement; this means that the employment is modelled also for measures that would have taken place under a continuation of current policies

• using a static input output approach with the ICARUS database
• measures are only to improve fossil energy efficiency; measures take place in the most cost effective way
• energy prices same as in baseline
• no relative change in export and import; no changes in relative prices
• no capital destruction assumed
• money respent through lower energy bill is distributed equally over the economy

• assumptions on new technologies have been based on the ICARUS database which includes 900 measures. The database includes new technologies which were regarded as realistically being under investigation for an introduction to the market

The study wants to achieve the Toronto target (a 20% CO₂ reduction until 2005, compared to 1990). This implies a reduction of 80 Mt of CO₂ compared to the baseline scenario. The study focuses solely on energy efficiency improvement. The rate of improvement lies at 4% per year between 1994-2005.

Specific measures introduced are:

• more efficient cars and other transportation
• more efficient electric household equipment
• cogeneration in basic metal industry and for district heating
• more efficient lighting
• production increase in agriculture
• building insulation
• wind energy

Effects on employment
 
 

Potential employment effects in 2005:
 
 
 

	direct	indirect	total
investment in energy efficiency measures	17,000	21,000	38,000
lower turnover of energy sector	-17,000	-27,000	-44,000
respending saved money	40,000	38,000	77,000
Total	39,000	32,000	71,000

This employment rate is also expected to be stabilized on this level after 2005.
 
 

Other benefits

• Avoided energy costs account for NLG 17.21 billions; they are used to compensate investment and operation and maintenance costs
• households will have NLG 9 billion more to spend; this will be equally distributed on all sectors of consumption
• SO₂ and NOx gases are reduced at roughly the same reduction percentage than CO₂ in 2005

Contact address:
Marc Davidson, Centre for Energy Conservation and Environmental Technology, Oude Delft 180, 2611 HH Delft, The Netherlands, Tel +31 15 215 0150, Fax +31 15 215 0151, Email ce@antenna.nl
 
 
 
 
 
 

4.6 Major Energy Savings, Environmental and Employment Benefits by Double-Glazing and Advanced Double-Glazing Technologies (European Union)

December 1995
Published by DG XVII (Energy) of the European Commission.
Carried out by the Fachinformationszentrum Karlsruhe (FIZ) and the Comité Permanent des Industries du Verre de la Communauté Economique Européenne (CPIV).
 

Intention

• Calculating the amount of energy saved

The model uses a standardized computer model allowing a precise evaluation of energy consumption. It is based on data collected by the glass industries in the EU countries.
 
 

For the economic analysis it makes different calculation steps. First of all it calculates four types of dwellings:

1. single-family house (101m²), constructed ‘49-57
2. single-family house (158m²), constructed ‘69-78
3. apartment house (1 457m²), constructed ‘49-57
4. apartment house (3 020m²), constructed ‘69-78

For the employment effects the study only calculates the direct employment effects for installation and assumes that it takes 4 man days to replace the windows in a typical dwelling. Employment effects calculated are based on the assumption that the working force of the insulating industry is needed for current rates of installation and therefore new capacities are created.
 
 

Assumptions:

• Heating in dwellings consumes 20% of primary energy in the EU (1995) and emits 570 Mt of CO₂ per year.
• All background assumptions related to investment have been made on the basis of prices of 1995 (e.g. energy prices, wages). Therefore no specific economic growth assumed
• Insulation of 60% of European dwellings with advanced double glazed windows until 2010
• Payback periods assumed:

            -for warmer countries: 24 and 36 years

• Interest rates assumed are 8% for a dwelling with 35m² window area
• Energy sources: gas and oil
• Technologies used are high performance double-glazing technologies (already available)

The study only calculates the benefits through energy savings and doesn’t take account of other benefits. Energy savings are calculated for the energy saving potentials per m² window and the fuel which the results are calculated for is oil.

Overall investments required amounts to 137 billion ECUs (1995). Savings in unemployment payment in these 8 countries would amount to around 11 billion ECU.

CO₂ reductions are in the order of 94 million tons per year, representing 3.2% of total CO₂ emissions of the EU.
 

Effect on Employment
 

Country	Direct employment created over 10 years
Belgium	3,380
France	22,375
Germany (West)	13,330
Italy	34,650
Netherlands	2,915
Spain	17,780
United Kingdom	16,670
Total	111,100
For EU-15	126,000

Other benefits

• space heating energy savings could amount to 1 billion GJ per year, the value of this is ECU 13 billion per year
• larger windows can be installed, which provide more light and more solar gain
• sound insulation is improved
• floor space in houses can be better used, as windows are better insulated
• Property related benefits such as fewer complaints, reduced maintenance etc.

Contact address:
Groupement Européenne des Producteurs de Verre Plat, 89 Avenue Louise, 1050 Brussels, Belgium, Tel +32 2 538.4377, Fax +32 2 537.8469
 
 
 
 
 
 
 
 

4.7 30.000 New Jobs through Implementing the Austrian Biomass Program (Austria)

(30.000 neue Arbeitsplätze - Das Österreichische Biomasseprogramm) July 1997
Published and carried out by the Austrian Biomass Association

Intention

• CO₂ reduction and creating employment

not specified

Assumptions:

• Model assumes a static situation: therefore no economic and energy growth

The study calculates measures for the following emission reduction target:

• The program would contribute by 30% (or 4.5 Mt CO₂) to the reaching of the Toronto target (reducing CO₂ emissions at 25% by 2005, compared to 1988 levels).
• The total investment required would be 78 billion Schilling for 62 PJ of biomass. This means public expenditure will amount to 2 billion Schilling per year.
• The revenue from taxes will amount to 12-14 billion Schilling

1. Energy taxes:

• on fossil fuels: increasing the existing taxes by:

• on transport fuels:

• on renewables:

• for industries that are dependent on export there should be no further taxation

Usage of energy tax incomes: measures for social equity/balance payments for families with low incomes and families with several children; lowering labour costs (non-wage-costs); enhancing use of renewables and energy efficiency

2. Supporting projects by 30-80% that enhance renewable energies with public financial support
3. Companies who produce energy from biomass should be provided with economically feasible conditions
4. No more pipelines for natural gas in regions where heating can be provided by wood ovens
5. Public support for renewable energies through public statements and green public spending

Effects on employment
 

Measures	Employment in 2005
Jobs created in production and supply of biomass	18,000
Jobs created in small enterprises and industry (through primary and secondary effects)	12,000
Jobs created through new chances for export of newly developed technologies	3,000
Jobs lost in the traditional sectors of energy production (coal, gas etc.)	-3,000
Net job creation	30,000

Other benefits
 
 

• better air quality
• lower dependency on import of fossil fuels and therefore on the international market
• better chances on the international market for new biomass technologies: if 50,000 wood heating boilers were exported per year, this would mean an gain of 5-8 billion Schilling
• government savings through less payment to unemployed (in the range of several billion Schilling)

Austrian Biomass Association, Franz Josefs-Kai 13, 1010 Vienna, Austria, Tel +43 1 533 0797, Fax +43 1 533 0790, Email forum@netway.at
 
 
 
 
 
 
 
 

4.8 Energy for the Future: Renewable Sources of Energy - White Paper for a Community Strategy and Action Plan (Communication from the Commission, COM (97) 599 final) (European Union)

November 1997

Published by the European Commission
 

Intention

• Enhancing the share of renewables in the EU; proving the economic competitiveness of this

SAFIRE market penetration model which is an input-output model. Induced effects (e.g. respending of labour) are not taken into account by the model.

Results taken from The European Renewable Energy Study (TERES II) study, carried out by Energy for Sustainable Development Ldt. (ESD) for the ALTENER program.

Measures

The share of renewable energy contribution to the primary energy demand shall be doubled, from 6 to 12% until 2010. This can reduce European CO₂ emissions by 250 million tons per year by 2010.

This requires a total capital investment of 95 billion ECU from 1997-2010. The saving in fuel costs is expected to be 3 billion ECU/year and an overall saving of 21 billion ECUs.

Effects on Employment

• net employment: 500,000 jobs in 2010
• through an expected increase in technology export, additional job creation: 350,000 jobs in 2010

• avoided fuel costs amount to an overall of ECU 21 billion in 13 years
• import reductions of 17.4% as compared to 1994

Ian McChesney, ESD, Overmoor Farm, Nestom, Corsham, Wiltshire SN13 9TZ, United Kingdom, Tel +44 1225 812102, Fax +44 1225 812103, Email esd@esd.co.uk
 
 
 
 
 
 
 
 

4.9 What are the Costs of a CO₂ Reduction? (Germany)

(Was kosted eine Reduktion der CO₂-Emissionen?) February 1997

Carried out by the Institute for Empirical Economic Research, University of Osnabrück
 
 

Intention

• CO₂ reduction

Model used is PANTA RHEI, a bottom-up and environmental economic model. The model distinguishes 29 fuels, divides the economy into 58 production sectors and uses around 250 variables for each sector. This leads to about 30,000 calculations happening in the modeling process.
 
 

Assumptions:

Baseline:

-GDP rises at an average rate of 1.4% year

-energy consumption rises 5.7% over 1990 levels (until 2005)

-CO₂ emissions rise 2% over 1990 (by 2010)

-Private consumption rises 1.8% per year

Tax scenario:

-Tax of 10 DM/tCO₂ in 1996; rises to 420 DM/tCO₂ in 2005

Companies shift their burden entirely on their prices

additional imports of electricity are prohibited
 
 

Measures

The study is designed to reach a CO₂ reduction of 25% by the year 2005, compared to 1990 levels.

• Implementation of a CO₂ tax from 1996 on. It starts with 10 DM/t CO₂ and rises continually up to 420 DM/t CO₂ in the year 2005. Every producer or importer of fossil fuels has to pay the tax for fuel burning.
• The tax revenue is totally used for a reduction of employers' social security payment.
• Additional import of electricity is prohibited.

Effects on employment
 

Overall GDP is reduced by 2.8% (in 2005 as compared to the business-as-usual scenario). Nevertheless it will still be increasing by about 1.1% per year.

Net job creation: 1.5 million (+5.8%)

Working hours per sector (from selected sectors of economy):
 

Sector	in million	in percentage
mineral oil processing industry	-6.1	-36.5
coal mining industry	-34.6	-23.4
iron processing industry	-27.8	-15.7
chemical industry	-60.5	-6.9
food production	+114.2	+10.0
construction sector	+342.3	+20.2
conversion construction sector	+243.1	+21.7

 

Other benefits

• Energy consumption decreases at a rate of 19.3% until 2005
• export position of W-Germany is improved
• GDP rises at 1.1% per year
• private consumption: -0.3% in 2005 (overall)

Prof. Dr. Bernd Meyer, University of Osnabrück, Rolandstr. 8, 49069 Osnabrück, Germany, Tel +49 541 969-2767, Email meyer@oec.uni-osnabrueck.de
 
 
 
 
 
 

4.10 Green Tax Reform - Part 6: A Reform package for the UK - 1997-2005 (United Kingdom)

1997

Published by the Institute for Public Policy Research - IPPR

Carried out by Cambridge Econometrics
 
 

Intention

• Measuring the effects on economy of a green tax reform

The Cambridge Multisectoral Dynamic E3 model, a large-scale integrated model of the UK economy and its regions. It includes interactions of energy, environment and economy. Among these the energy submodel enables the analysis of the impact of an energy tax on the fuel composition of the economy.
The structure of the model is comparatively simple containing about 26 equations for energy and economy variables. It calculates variables for 49 industries, 38 investment sectors, 10 fuels, 10 types of air emissions and 12 regions.

Measures
 
 

The study models a package of taxes combined with two scenarios to preserve the fiscal neutrality:

• a commercial and industrial energy tax starting with $1 per barrel of oil equivalent in 1997 and increasing it $1 per year up to $9 per barrel in 2005.
• an increased landfill tax of £2 per ton per year from £7 per ton in1997 to £25 per ton in 2005. Also the lower rate for inert wastes is risen by £2 per ton per year from £2 to £18 in 2005.
• Rising road fuel duty from 1997 on, by 8% per year (real increase).
• Introducing a quarrying tax of £1 per ton by 1997, rising £1 per year to £9 per ton in 2005.
• Raising an office parking tax of £1 per place per week in 1997, rising to £8 until 2005.
• Removal of tax preferences for company owned cars.

Scenarios to recycle the revenue:

a) the economist's package:

• all the revenue is used to lower employers' National Insurance Contribution (NIC): 1.3% in 1997 and up to 6.9% in 2005

• the standard rate of VAT is cut by 0.2 percentage points in 1997 and the reduction is going up to 1.7% in 2005
• part of the revenue is used to reduce business tax rates by 3 percentage points
• rest of the revenue is used to cut down employers' NIC: 1% by 1997 and up to 4.5% in 2005

Effects on employment
 
 

a) Economist's package:
 
 

Net employment effect:
 
 
 

Year	Employment
2000	252,000
2005	717,000 (or 2.56% from the baseline)

 

The unemployment rate falls by 300,000 because not all of the newly employed people have been registered as unemployed.
 
 

b) Politician's package:
 
 

Net employment effects:
 
 
 

Year	Employment
2000	206,000
2005	576,000 (or a 2.06% from the baseline)

Gross employment effects in 2005:
 
 
 

Sector	Employment
Agriculture	8,600
Manufacturing	112,200
Utilities	6,700
Construction	40,600
Distribution, hotels	68,000
Transport and communication	17,700
Other market services	119,600
Non-market services	203,000
Total	576,000

 

Type of employment:
 
 
 

Type	Employment
Full-time	325,700
Part-time	177,000
Self-employed	73,300

 

Other benefits

• reduction of SO₂ emissions by 6% until 2005
• reduction of waste disposal by 16% in 2005
• landfill reduction of 18% by 2005
• effect on GDP: +0.31% (2000) and -0.03% (2005) negligible in relation to potential model error
• no major effects on inflation, profits and balance of payment (all in relation to model errors)

Chris Hewett, Institute for Public Policy Research, 30-32 Southampton Street, London WC2E 7RA, Tel +44 171 470 6100, Fax +44 171 470 6111, Email ippr@easynet.co.uk
 
 
 
 
 
 
 
 

4.11 A Fiscal Reform for Increasing Employment and Mitigating CO₂ Emissions in Europe (Belgium, France, Germany, Italy, Netherlands, UK)

1995

Carried out by Francis Bossier and Thierry Bréchet, Federal Planning Office, Ministry of Economic Affairs, Belgium
 
 

Intention

• Modeling the effect of a CO₂/energy tax on economy, especially employment
• Reducing CO₂ emissions and promoting employment

The HERMES model was used which distinguishes energy, capital, labour and other intermediate inputs as production factors, for eight different production sectors.
 
 

Assumptions:

• Baseline simulations (increase per year in percentage):

B=Belgium, F=France, G=Germany, I=Italy, N=Netherlands, UK=United Kingdom
 
 

Measures
 

Implementation of a combined CO₂/energy tax:

• 50% carbon, 50% energy tax
• starting with US$3 per barrel oil, then gradually lifted to US$10 per barrel oil during a period of 8 years