Employment opportunities from mitigation policies in The Netherlands.

Jerry van den Berge

March 2010

Introduction

In 2007 Dutch trade unions and environmental NGO’s commissioned a report on green energy policy. This was called Green4sure. It contained a plan to achieve a 50% reduction of CO2 emissions by 2030 and at the same time diminish energy dependency from foreign countries, this way increasing security of energy supply. Several recommendations were made to the Dutch government that made some of them to Dutch energy policy for the period 2009-2012. This paper builds on the Green4sure report and focuses on the employment effects, which are in general positive.

The paper elaborates several policy options and measures and tries to turn employment opportunities from solid mitigation policies to good account. Most of the measures are still in proposal phase and much depends on government policies if these measures will ever be taken or not. Discussions about prioritising mitigation or adaptation continue as well as discussions on investments in roads or railways to combat the huge congestion problems in traffic in the Netherlands. Recession made clear that government funding is not unlimited and investments in one sector can’t be done at the same time in another sector. Choices need to be made. The paper intends to make employment a serious consideration to take into account in climate and environmental policy. On the other hand this paper wants to create awareness among (Dutch) trade unions that mitigation of climate change is not a threat to our jobs, but instead an opportunity to create new (green and decent) employment.

1. Green energy policy

Green4sure is a market-based energy plan in the spirit of our times that ties green targets to realistic policy instruments that have been well thought through in terms of economics.

Our point of departure is the ambitious target of 50% reduction in CO2emissions by the year 2030 compared with a 1990 baseline. Although this target goes beyond that set by the present Dutch government (30% reduction in 2020), because of the 2030 horizon we have taken, there is in fact little discrepancy between the two. We have chosen to extend our vision to the year 2030 because this is long enough for a major turn-around while still ensuring that the proposed changes can be readily envisaged. The Green4sure targets represent the firststep towards the further cuts in carbon emissions needed in the course of the present century. Green4sure has opted for government policies designed to change the behaviour oftrade and industry and individual citizens. These policies impinge on decision makingbehaviour of all kinds and make due allowance for the resistance to change that will inevitably arise. Most of the policies are generic rather than specific. The core policy at the heart of the plan is allocation of carbon budgets to all energy users, similar to the EU Emissions Trading Scheme now in force for industry. This quota system will be supported by efficiency standards for domestic appliances, vehicles and buildings; targets and, later, standards for the use of renewable sources by energy suppliers; and facilitation of sustainable choices. By facilitation is meant: a multitude of new financial and fiscal measures, including road pricing and suitable compensation for low-income groups and

others, but also new investments in utilities and changes to today’s legislation. So

that change can start apace, an interim set of policies is proposed to support measures taken to protect the climate, until such time as the new regime of budgets and efficiency standards has reached maturity. These include so-called Green Funds and research grants to promote innovation, a variety of charges, environmental permits, an interim Electricity Act, tax incentives and differentiation of property transfer tax. (Rooijers et.al., 2007)

Another key choice concerns differentiation between sectors. The Green4sure energy plan fully realises that any majorchanges to energy systems may have a far greater impact on energy-intensive andinternationally operating industries than on energy-extensive businesses whosecompetitiveness is governed far less by energy costs. For this reason Green4sure proposes three different carbon budgets: one for industry, electrical power generation and greenhouse horticulture, a second for the transport sector, and a third for the built environment (households, offices and small businesses). This differentiation ensures that each sector contributes to the cuts according to its capacity to do so and provides scope forspecific flanking policies. The choices made in the proposed policy package make it possible for this to be a domestically led strategy; measures that can be taken at the national level can be implemented immediately. For a number of sectors and instruments, though, a European approach will be essential. Such will be the case for the carbon budgets for industry, greenhouse horticulture and transport, for example, as well as for the proposed standards for appliances, lighting and vehicles and the requirements made of electricity suppliers. The impact of Green4sure will be felt in a variety of ways. In the first place it will

have a major impact on carbon emissions. The ambitious target of a 50% cut in emissions by 2030 proves entirely feasible. Another key impact will be the improved security of supply achieved by less fossil fuels having to be imported from politically sensitive regions. Of course we have assessed the costs and benefits of the plan and how these would pan out for individual sectors and citizens. The costs of Green4sure are certainly higher than in scenarios involving no additional climate policy, but these are offset by a variety of benefits. With time there will be modest growth in employment and there will also be added benefits in terms of new market opportunities and improved local quality of life (less air pollution by particulates and NOx). (Blom et.al.,2007)

Energy transition

According to the Dutch Energy Transition Board (ETB), the main paths along which a transition to a sustainable energy supply shouldtake place are:

1. Improving efficiency – limiting the primary need for energy by both reducingdemand, and converting energy losses.

2. Using more renewable energy – going through the learning curve, and changingover (step-by-step) from fossil-based to renewable energy sources.

During the transition period, renewable energy sources in the energy system aregiven priority over other energy sources. This situation is legally regulated in 2009.The complementary use of fossil fuels can be phased out further. Over the new fewdecades, fossil fuels will still form the largest part of the energy supply. However, toallow transition to succeed, the complementary use of fossil fuels must meet twocriteria:

3. Flexibility. The energy system must meet fluctuating demand, and must be ableto capture the variable supply from renewable energy sources.

4. Clean fossil fuels. Due to the urgency of the climate problem, additionalmeasures will be required to limit the CO2 emissions released through the use offossil fuels.

These four elements form an interlinking cluster. The first, and most logical option,is to save energy. However, current energy systems also need to be flexible in orderto incorporate an increasing use of renewable energy, the production of which isstill variable. Expanding the basic capacity with new coal-fired power plantsreduces this flexibility and makes it harder to incorporate renewable energy. Thereare several ways to increase flexibility, but the ETB suggests that coal gasificationforms the best option. This is a well-known and cost-effective technology thatallows coal and biomass to be used for various purposes. A so-called ‘gas hub’allows the coal to be coupled to the strong Dutch natural-gas infrastructure. Thisoption also provides new economic opportunities. Above all, the capture of CO2viagasification technology is relatively simple. If coal is used via gasification, thisincreases the flexibility of the energy system, which means that more renewableenergy can be used in the national power network.The transition strategy views 2020 as its initial target, but this is no more than anintermediary step. The ETB expects a further growth in renewable energy usageover the longer term. Applications such as solar and offshore wind energy can forma substantial part of the Dutch energy supply in the long term. (ETB, 2008)

2. Employment

Current employment figures for The Netherlands are: 430,000 unemployed in January 2010; which is equivalent to 5.6% of working population. For men the unemployment rate is 5.4%, for women it is 5.8%. In January 2009 the figures were 320,000 unemployed (3.9%, men 3.4% and women 4.5%). Rising unemployment is directly related to the crisis. Especially in technical jobs unemployment has risen in the past year. Most affected by the crisis are low and medium skilled jobs. This explains the higher rise in men’s unemployment compared to a lesser rise in women’s unemployment. Before the crisis unemployment was at an all-time low of 3.2%. (CBS, 2010)

Unemployment of low and medium technical skilled (male dominated) jobs rose from 51,000 to 72,000, an increase of 42%(!) in one year between January 2009 and January 2010, whereas in care (mostly female workers) unemployment rose with only 3% (CBS, 2010). Instead of forcing people into another completely different sector, these opportunities should be taken to employ people in new technical green jobs. This requires investments in green development and thus clear political choices. In 2009 government took a measure to create a possibility for industries that were severely hit by the crisis, to employ staff for 50% and use the unemployment fund for 50%.This is a kind way to help the industry to survive and does prevent lay-offs, but at the same time maintains current unsustainable forms of production and consumption and retains innovation and transition of the industry to a greener industry.

Between 1999 and 2007 the number of jobs related to environmental services has increased with about 25% to a total of 109,000 full time jobs (1.5% of total employment). Increase in number of jobs was high in sectors: waste (management and recycling), energy savings techniques and appliances, renewable energy systems (solar panels, etc), environmental services. This number of jobs could rise much more if the Dutch government would make clear choices which sectors will be promoted (by subsidies, fiscal advantages, standards in legislation, easier procedures, etc.) because it would give more certainty for investors. (CBS, 2009)

Shift from fossil fuel use to energy savings creates employment.

If implemented, Green4sure will give rise to plenty of changes in society. One ofthe first obvious signs of change will be the emergence of all kinds of newproducts and services that help reduce (fossil) energy consumption. A secondchange will be that energy consumers, large and small, will see the costs ofpollution passed on in energy bills. This will give private citizens and trade andindustry a solid incentive to really change their behaviour, leading to a sharp andrapid decline in emissions. Use of fossil fuel will decrease and more investment will be done in energy savings. This will at its turn have consequences for employment, A lower use of fossil fuel will lead to a decrease in jobs in fossil based energy production and supply. On the other side investments in energy savings and renewables will create new employment. Over all the effect will be positive because investments in renewable energy are more labour intensive. Effects from specific measures are given in the next chapter.

It is eminently feasible to halve the Netherlands’ carbon emissions at acceptablecost. In doing so, employment will also ultimately rise (40,000 extra jobs by 2030)and there will be a major decrease in the amount of fossil fuels imported (-20%).The share of renewables in our energy supply will grow to 16%, while energyefficiency will improve by 2.1% a year on average. (Blom and Wienhoven, 2007)

The use of renewable energy is a labour-intensive sector. Other employment potential offers large-scale application of wind energy and biomass. Gasification technologies for coal and/or biomass,and the development of a gas hub, all offer excellent potential for newcommercial companies in the Netherlands. As a prominent ‘gas country’,the Netherlands offers opportunities for innovative forms of gasdifferentiation. (ETB, 2008)

Direct employment effects

Four direct effectson employment can be distinguished:

  • Change in employment because of less electricity production as consequence of a lower electricity demand
  • Changes in employment trough a shift from fossil fuel to renewables
  • Changes in employment/ jobs because of aiming at higher energy efficiency of products
  • Changes in employment because of an increase in technological (research and) development and possibly export opportunities of technologies. (SEOR, 2006)

Indirectemployment effects

Because also the price of energy will change it is likely that effects on employment occur in other sectors. Four different (indirect) effects can be distinguished:

  • Competition: effects of scale. Another energy price influences employment because it will affect competitiveness of Dutch companies and competitiveness of Dutch economy as a whole in relation to foreign companies or other countries.
  • Competition: structure of sectors. Because of another energy price, also competitiveness among Dutch companies can change. This could lead to a shift in sectors leading in turn to an increase in jobs in one sector and a simultaneous decrease in jobs in another sector. For example: a higher energy price will negatively effect energy intensive sectors and possibly decrease production and jobs, while at the same time a higher energy price will encourage production of low energy appliances.
  • Purchasing power and spending. If energy use becomes more expensive, less money will be available for other goods or services for consumers. This means other spending patterns will arise in not-energy related sectors. If energy prices increase because of renewables, budget effects are negative. (Pfaffenberger, et al., 2006). If on the contrary energy prices for fossil fuel increase, budget effects are positive.
  • Price relations inputs. Energy prices influence the price relations between other input factors like labour and capital. A high energy price stimulates employment and innovation if substitution is possible. This effect can be estimated. It is important to distinguish effects for different sectors when there is more or less substitution between energy and labour. (SEOR, 2006)

Employment effects from Green4sure

Looking at the energy and energy related sectors the Green4sure scenario will cause a loss of maximally 1000 jobs because of a lower energy demand and a lower production of fossil fuel energy. On 7 million jobs in The Netherlands this is a loss of 0.01% of employment. A higher share of renewables (wind and biomass) in energy supply can create up to nearly 4000 new jobs.

According to CRA (2002) investments in energy efficiency will cause three to four times more new jobs compared to investments in increased capacity in energy production. EC (2005) estimates that an improvement of energy efficiency of 1% per year will lead to 200,000 new jobs EU wide in construction and installation. An improvement in energy efficiency of 2.1% per year following the Green4sure scenario will lead to 18,000 new jobs (fte)[1]in The Netherlands by 2030.

Growth in employment through renewables in energy supply (Green4sure)

Table 1

Year / 2000 / 2010 / 2020 / 2030
Increased capacity on landwind (MW) / 0 / 2000 / 3000 / 4000
Increased capacity offshore wind(MW) / 0 / 700 / 3500 / 9000
Increased capacity biomass (MW) / 0 / 560 / 1430 / 1800
Extra jobs per MW on land wind / 0.19 / 0.18 / 0.16 / 0.14
Extra jobs per MW offshore wind / 019 / 0.18 / 0.16 / 0.14
Extra jobs per MW biomass / 1.43 / 1.30 / 1.17 / 1.06
Extra jobs on land wind / 0 / 360 / 480 / 560
Extra jobs offshore wind / 0 / 126 / 560 / 1260
Extra jobs biomass / 0 / 728 / 1673 / 1908
Total extra jobs / 0 / 1214 / 2713 / 3728

Table1 presents an estimate of possible direct employment effect from the Green4sure scenario. Renewable energy can create around 3700 new jobs. Substitution compensates this number partly. The increase in employment can be bigger if more manufacturing, research and development is done in The Netherlands.(Blom and Wienhoven, 2007)

Overview of total employment effects from Green4sure

Table 2

Effect / Min. / Max.
Direct / Lower electricity demand / - 750 / - 1000
Increased efficiency / + 5400 / + 18000
Renewables / + 3500 / + 4000
Export / + / ++
Indirect / Scale / - / --
Sector shift / + / +
Spending / + / +
Price ralations inputs / -/+ / -/++

Table 2 presents an estimate of total employment effects from Green4sure. Indirect effects are difficult to quantify. On balance there will be some 40,000 new jobs as a total employment effect.Employment in the construction and home improvement sector will have grown, while that in energyintensiveindustries will have fallen. Positive effects are expected for export of new technology, shifts from energy intensive to labour intensive industries and a changed spending pattern that gives rise to new green (clean tech) industries. (Blom and Wienhoven, 2007)

Research from TU Delft shows that total employment effects from offshore wind energy can be a net increase in jobs of 1500 fte for The Netherlands if 6000 MW capacity is installed by 2030. Another 3000 fte net jobswill be created abroad because most of the manufacturing is done in other countries. (Mutze et.al., 2007)

Research from Greenpeace shows that the growing contribution of renewables is expected to provide between 15.000 to 21.000 jobs in the field of electricity generation from renewable sources in the mid to long term. This includes both direct effects related to electricity generation and the production of investment goods, as well as indirect effects covering the upstream production chain. New jobs will be in PV, Wind and biomass rising from 15.000 by 2020 to 21.000 by 2030 especially from more biomass use as a source for electricity, then declining to 16.000 by 2050 because of less jobs in wind power generation. (Greenpeace 2006)

4. International developments and comparisons

Clean energy technology is already a large and growing market today. With total sales of EUR 630 billion in 2007, it is bigger than the global pharmaceutical industry. The clean energy technology market consists of two segments. Energy efficiency sales in 2007 totalled EUR 540 billion, renewable energy added EUR 90 billion. By 2020, clean energy technology will be one of the world’s main industries. In a business-as-usual scenario, the energy efficiency and renewable energy segments will grow by 2.5% and 9% per year to EUR 790 billion and 275 billion respectively in 2020. This is not surprising.

Between 2000 and 2008, worldwide annual growth averaged 24% for wind energy (from 4 to 27 GW annual installed capacity), 53% for solar (0.3 to 5.6 GW annual installed capacity), 31% for biodiesel (2 to 11 Mton output) and 29% for energy-saving light bulbs (from 528 million to 2.4 billion units sold) (van der Berg & van der Slot 2009)