Jobs Potential of a Transition to a Circular Economy - presentation by Eleonora Mavroeidi
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Jobs Potential of a Transition to a Circular Economy - presentation by Eleonora Mavroeidi
- 1. JOBS POTENTIAL OF A TRANSITION TO A CIRCULAR ECONOMY Eleonora Mavroeidi Environment and Economy Integration Division OECD Environment Directorate WCEF Side event, 7 December 2020
- 2. This analysis focuses on the shift of labour across sectors following the implementation of Resources Efficient and CE policies. Modelling tool: OECD’s ENV-Linkages general equilibrium model • 25 regions • 56 sectors, including recycling and 8 metal processing sectors • 60 raw materials linked to economic activities Recently published report on the labour impact of circular economy policies 2
- 4. Business as usual projections 4 The global economy will triple by 2060 but global growth slows down Material use is going to double, despite relative decoupling between growth and material use Economic growth will be accompanied with mild employment growth, increases in labour productivity, and expansion of service sectors 1.9% 1.2% 0.3% 0.4% 1.7% 3.9% 1.4% 0.2% 0.4% 3.1% 3.7% 2.7% 1.7% 1.6% 1.9% 3.0% 1.6% 0.8% 0.9% 1.7% GDP GROWTH MATERIAL USE GROWTH EMPLOYMENT GROWTH POPULATION GROWTH LABOUR PRODUCTIVITY GROWTH OECD BRIICS Rest of the World WORLD Source: OECD ENV-Linkages Model Average annual growth rate (2017-2040)
- 5. Structural change shifts activity away from material intensive sectors Percentage changes in 2040 baseline projection relative to 2017 values, OECD. 5 -40% -20% 0% 20% 40% 60% 80% 100% 120% Employment Gross Output Average output growth
- 6. Labour implications of policies to promote Resource Efficiency and Circular Economy transition
- 7. Instrument Description Global Targets (2040) Material tax Tax on primary metals and non- metallic minerals • 10 $/t of iron ores • 50 $/t of aluminium ores • 20 $/t of copper ores • 15 $/t of other metals ores • 5 $/t of non-metallic minerals Subsidy to recycling good Subsidy for recycling input uses 75% subsidy rate on the purchasing price of the recycling commodity Subsidy to secondary metal production Production subsidy to secondary metal production Subsidy on the producer (selling) price of secondary metal - at level that ensures the full package is revenue- neutral (budget balance). 7 Material Fiscal Reform (MFR) scenario • All these fiscal instruments are implemented from 2018 to gradually reach their target in 2040. • Government revenues from the material taxes are used to finance subsidies. • Material taxes are differentiated across countries to take into account existing royalties and taxes on mining sectors.
- 8. MFR is boosting resource efficiency and employment gains seem possible 8 Percentage changes in 2040 compared to baseline – range across aggregate country groups Employment 0 to +0.1% Metal use -17 to -40% GDP 0 to -0.4% Minerals use -4 to -12% … Source: OECD ENV-Linkages Model The policy is efficient relative to its ultimate goal (reducing environmental damages associated to mineral production and use) with very low economic cost and even some employment gains.
- 9. MFR implies small aggregate employment impacts with larger job reallocation • The impact of material tax policies on total employment is very limited • Labour markets dynamic is characterized by shifts of employment across sectors • MFR implies large labour shifts across sectors for limited impacts on GDP • The policy will result in: 10 million jobs creations, and 8 million jobs destructions globally by 2040 9 Changes w.r.t baseline in 2040 as % of total employment. Source: OECD ENV-Linkages Model Net employment growth Job creations Job destructions Total job reallocation OECD 0.05% 0.1% 0.1% 0.2% BRIICS 0.05% 0.3% 0.3% 0.6% Rest of the world 0.01% 0.2% 0.2% 0.4%
- 10. Differences across countries depending on their economic structure MFR scenario (percentage changes w.r.t baseline in 2040) 10 -50% -40% -30% -20% -10% 0% 10% 20% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% Canada Chile Mexico USA OECDEU17 OECDEU4 OtherOECDEurasia AustraliaandNewZealand Japan Korea Brazil OtherLatinAmerica Caspianregion OtherEU OtherEurope Russia MiddleEast NorthAfrica OtherAfrica SouthAfrica China India Indonesia OtherASEAN Othernon-OECDAsia OECD America OECD Europe OECD Pacific Latin America Rest of Europe and Asia Middle East & Africa South and South-East Asia World Employment GDP Material intensity Source: OECD ENV-Linkages Model Employment/GDP MaterialIntensity
- 11. -0.15% -0.10% -0.05% 0.00% 0.05% 0.10% 0.15% 2018 2020 2025 2030 2035 2040 Secondary based metals Recycling Other mining Fossil extraction and transformation Chemicals Utilities Construction Agriculture Fabricated Metal products Machinery and equipment n.e.s. Non-metallic Minerals Primary based metals Power generation Services Transport Equipment Jobs shift towards less material intensive sectors gradually Changes w.r.t baseline as % of total baseline employment, 2018-2040 11 Source: OECD ENV-Linkages Model Services Secondary metals Construction Minerals Primary metals
- 12. • The projected employment effect of the policy action (MFR) is well within the range suggested by the literature. • MFR implies 10 millions of job creations but also 8 millions of job destructions globally in 2040. • Although the net impact on employment is small, some sectors are heavily affected – both in terms of job creations (e.g. secondary materials, recycling, services, utilities) and job destructions (e.g. primary materials, non-metallic materials, construction) Summary of findings 12
- 13. To maintain public support throughout the transition process towards a circular economy, it is important: - To carefully study the sectoral shifts in the labour market - To acknowledge the positive and negative implications that may arise Policy actions that could help to mitigate some of these side effects: - Implement training policies to help workers reskill or upskill to compete successfully for new jobs (e.g. jobs shift from material intensive sectors to services). - Investments in R&D and digitalization to mitigate the cost of substituting primary materials. Policy messages 13
- 15. • Global assessment (disaggregated to 12 large economies + 13 regions ) • 2060 time horizon • 50+ economic sectors • 60 materials 15 Overview of the articulation of models and assumptions at OECD Environment Dir. Multisectoral model ENV-Linkages Material extraction data Recycling technologies data Structural change assumptions on demand and production Macro model ENV-Growth Capital accumulation Total factor productivity Labour Demographics Economic projections Materials use projections Environmental impacts
- 16. Sectoral Aggregation Agriculture, Fisheries and Forestry Manufacturing Paddy Rice Food Products Wheat and Meslin Textiles Other Grains Wood products Vegetables and Fruits Chemicals Oil Seeds Pulp, Paper and Publishing products Sugar Cane and Sugar Beet Non-metallic Minerals Fibres Plant Fabricated Metal products Other Crops Electronics Cattle and Raw Milk Motor Vehicles Other Animal products Other Transport Equipment Fisheries Other Machinery and Equipment Forestry Recycling Non-manufacturing Industries Iron and Steel - Primary Coal extraction Iron and Steel – Secondary Crude Oil extraction Aluminium – Primary Natural Gas extraction Aluminium – Secondary Other Mining Copper – Primary Petroleum and Coal products Copper – Secondary Gas distribution Other Non-ferrous Metals – Primary Water Collection and Distribution Other Non-Ferrous metals – Secondary Construction Other Manufacturing Electricity Transmission and Distribution Services Electricity Generation (8 technologies) Land Transport Electricity generation: Nuclear Electricity; Hydro (and Geothermal); Solar; Wind; Coal-powered electricity; Gas- powered electricity; Oil-powered electricity; Other (combustible renewable, waste, etc). Air Transport Water Transport Business Services Other Services (incl. Government)
- 17. BASELINE - Job creations in most sectors across Non-OECD economies Percentage changes in 2040 baseline projection relative to 2017 values. 18 -50% 0% 50% 100% 150% 200% 250% Employment Gross Output Average growth Linear (Average growth)
- 18. Within OECD additional employment gains captured in labor intensive sectors - services OECD - Changes w.r.t. baseline in 2040 19 -20% -10% 0% 10% 20% 30% 40% 50% 60% -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 Employment Gross output MillionJobs Outputgrowth Source: OECD ENV-Linkages Model
- 19. Non-OECD benefit from lower material costs Non –OECD - Global variation in 2040 w.r.t. central baseline scenario 20 -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Outputgrowth Millionjobs Employment Gross output
- 20. • Importers of raw materials benefit from lower input prices • However, drop in OECD demand for primary metals, negatively affect certain non-OECD economies (some Asian countries) Partial implementation of MFR yields leakages -0.25% -0.20% -0.15% -0.10% -0.05% 0.00% 0.05% 0.10% Canada Chile Mexico USA OECDEU17 OECDEU4 OtherOECDEurasia AustraliaandNewZealand Japan Korea Brazil OtherLatinAmerica Caspianregion OtherEU OtherEurope Russia MiddleEast NorthAfrica OtherAfrica SouthAfrica China India Indonesia OtherASEAN Othernon-OECDAsia World OECD America OECD Europe OECD Pacific Latin America Rest of Europe and Asia Middle East & Africa South and South-East Asia World Employment Gross output Changes w.r.t. baseline in 2040 Source: OECD ENV-Linkages Model
Editor's Notes
- However, they miss the distributional aspects of a CE transition. Distributional aspects in transitions are key and employment implications of the circular economy transition are an important aspect to ensure a just transition. The transition to CE implies structural changes (e.g. changes in production modes and demand patterns) that in turn would shift labour from material intensive sector to less material intensive sectors. Subsequently, in addition to job creations, RE-CE transition may also affect jobs negatively in certain sectors. (for instance in extraction sectors and materials intensive sectors.) It is thus important to study carefully the labour implications across sectors of a CE transition. This analysis focuses on the implied structural changes and the subsequent shift of labour across
- The first section of the paper describes the underlying trends in the absence of RE-CE policies
- Jobs destructions in industrial sectors and job creations in services sectors across OECD economies
- countries with large extraction sectors (Indonesia, Australia and New Zealand) face a larger number of job destructions compared to job creations economies with manufacturing sectors that are also net importers of primary materials (Korea, Japan, China, USA, OECD EU 4), exhibit net employment gains of magnitude 0.1% compared to baseline in 2040