Transformation towards a low carbon /carbon-free?/ economy

ETUI conference

Brussels

29-30 March 2011

Béla Galgóczi

bgalgoczi@etui.org

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Conflicting objectives in the post-crisis period

Short term, mid term and long term objectives in conflict:

Short term: minimising social and human cost during crisis, preserve human resources for the post-crisis times (stimulus packages, employment policies)

Midterm: revise growth model; de-leveraging; debt consolidation; try to restore economic equilibrium (in national and international terms)

Long term: above all face the challenge of climate change,

the Great Transformation of the next decades will be the

transition to low carbon economy

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Features of the conflict

It is not just the time horizon, but the dimensions of sustainability that are in conflict with each other

One thing is in common: a new growth model is needed

In the basic scenario, you can pursue `economic efficiency` to the detriment of social and environmental aspects

- This is what happened in the last decades: balance between capital and labour was shifted as the share of labour within the accumulated wealth (GDP) has shrunk in all major economies;

- Environmental resources were seen as external factors that are free and unlimited (irreversible climatic processes were launched with a catastrophy scenario…)

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The transition to low-carbon economy – promises, declarations but not much progress in decoupling

Although the targets of climate change mitigation policies are based on a broad consensus now, these will only then be effective, if appropriate economic tools transmit the objectives to the economic actors – these are however largely missing now

The Cancun challenge: Even if the 2C limit of future temperature increase had been confirmed as objective

It is clear that on basis of current policy scenario the world is heading for a 3.5 C temperature increase by 2100 (IEA, 2010)

Keeping the 2C target requires a four times higher rate of decarbonisation (reduction of CO2 emitted per unit GDP).

Still not taken into account if BRIC would revise the role of nuclear energy after the Fukushima shock

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Track record in brief

The next graphs show that Europe has taken commitments with the EU2020 Strategy, but past performance is not convincing

Global ghg emissions keep on growing

Ghg emission reductions in Europe were more due to crises then to systematic implementation of climate policy – no signs of decoupling economic growth from emissions

Huge gap in Europe in term of resource productivity (Luxembourg-Bulgaria: 1:30)

Renewable energy use in EU: extremely diverse picture – controversial role of nuclear energy; question marks about the role of biomass

No paradigm change yet

Source: Schepelmann (2010)6

Lack of progress: Co2 emissions from fossil fuels between 1990 and 2008 on global level: + 41%

EU Greenhouse gas emissions in % of emissions in the base year 1990

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

EU15

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targeted reductionby 2020

Data source: EEA dataservice

Resource productivity 2008 – Value added generated (EUR) by one ton of resource input

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BG RO EE LV PL CZ LT SI SK TR HU PT CY IE FI ES GR NO DK AT BE IT DE SE FR MT UK NL CH LU

Data source: Eurostat

Share of renewable energy in gross final energy consumption (2006: fact; 2020: target)

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MT LU UK CY NL BE IE HU IT SK CZ DE GR PL EU27

ES BG FR LT SI EE DK RO PT AT FI LV SE

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Data source: Eurostat

Source: Eurostat

Energy intensity (kgoe energy use for 1000 EUR GDP)

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DK IE UK AT IT DE SE LU FR EU27

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The crucial role of economic instruments

The applied economic policy instruments (and their timely schedule) for reaching climate change targets in Europe – cap and trade policy like the ETS, carbon tax, direct state involvement through targeted subsidies and redistribution policies – are crucial for the implementation

BUT these are not fully functioning yet – this creates uncertainty – effective carbon price in future is crucial

The impacts will be transmitted via:

changing cost structures of economic activities, changing trade and investment patterns,

changing demand by consumers and investment

The major social impacts will appear on employment and inequality – as different employee/income groups will be effected differently

The bulk of the adaptation is still to come

Once we have a comprehensive climate policy in Europe that is indeed being implemented, its effects will be also harsher than what we see now.

Still we have a number of open questions:

What happens to energy intensive industries in Europe:

- Downscaling energy intensive activities or to improve energy efficiency of maintained activities (we need to make sure the second option will apply)

- Address carbon leakage

- Future of automobile industry in Europe (it is not just about cleaner cars; what will be the future role of individual transport within modes of transport)

- Clarification is needed

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Green transition

It will be a restructuring process that is directly induced and shaped by explicit policy targets

In case of previous restructuring waves, policy decisions (e.g. liberalisation of trade and markets, deregulation) played a more indirect role and no explicit policy targets were involved.

This is why `anticipation` of change attached to this new restructuring wave can be more straightforward and explicit, and accompanying measures to tackle its `side effects` (above all related to employment effects) can even be planned and integrated into the policy framework right at the outset.

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The challenge of the transition to a low-carbon economy on industrial jobs in Europe

Implementing climate targets will genuinely transform industrial jobs, in quantitative and qualitative terms:

There is a broad consensus in the literature that although climate policies would have no major aggregate impact on the number of jobs,

a massive redistribution of jobs is to be expected:● - New jobs are being created, ● - Existing jobs will be transformed (`greened` jobs in

existing industries)● - Jobs will also disappear

With huge differences by region, branch and LM segment!

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The challenge of the transition to a low-carbon economy on industrial jobs in Europe

Take account of the expected effects of economic policy instruments that are needed in reaching climate change targets in Europe (ETS, carbon tax, subsidies) on industrial employment

Current forecasts for green job creation are `painted rosa` (based on objectives) while job losses are (under)estimated on current policy trend (that fall far too short from targets)

A realistic mapping of real employment and social effects needed

on basis which

Targeted labour market policy instruments to facilitate transition to a low carbon economy at the least possible social cost should be set up

A socially responsible and just transition to a low carbon economy is a vital interest for trade unions but posing also huge challenges for all actors managing this process including workers representatives.

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Strengthen existing structures of social dialogue to meet the challenge

We have seen positive examples in the past:

managing restructuring on enterprise level especially in countries with strong workers participation patterns (Pacts for Employment at a number of German enterprises)

During the crisis employer/employee co-operation (with help of publicly funded short-time work schemes) have contributed to saving a large number of workplaces.

The Green Transformation is the most comprehensive restructuring process we have ever faced and this will remain with us in the following decades

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Crucial role of social dialogue institutions

The tools and the structures are there (not in all countries and especially not in all economic sectors) and we saw good practices of managing change

The one-sided current policy focus is unfortunately providing a very unfavourable framework

It will be a test for Europe, but also for enterprises how the structural change towards a low carbon economy will be managed – how the necessary labour market transitions will be handled, what regional and industry policy measures will be applied and how social partners will be involved