Job losses and political acceptability of climate policies: why the ‘job-killing’ argument is so persistent and how to overturn it

ABSTRACT

Political acceptability is an essential issue in choosing appropriate climate policies. Sociologists and behavioural scientists recognize the importance of selecting environmental policies that have broad political support, while economists tend to compare different instruments first on the basis of their efficiency, and then by assessing their distributional impacts and thus their political acceptability. This paper examines case-study and empirical evidence that the job losses ascribed (correctly or incorrectly) to climate policies have substantial impacts on the willingness of affected workers to support these policies. In aggregate, the costs of these losses are significantly smaller than the benefits, both in terms of health and, probably, of labour market outcomes, but the losses are concentrated in specific areas, sectors and social groups that have been hit hard by the great recession and international competition. Localized contextual effects, such as peer group pressure, and politico-economic factors, such as weakened unions and tightened government budgets, amplify the strength and the persistence of the ‘job-killing’ argument. Compensating for the effects of climate policies on ‘left-behind’ workers appears to be the key priority to increase the political acceptability of such policies, but the design of compensatory policies poses serious challenges.

Key policy insights

• Public perception of, and support for, climate policies is substantially reduced in the presence of large negative shocks, especially job losses.

• Climate policies can be perceived as negative for employment, especially in areas where polluting industries represent a large share of employment and in occupations and sectors already damaged by globalization and automation.

• Policymakers should distinguish between small and large distributional effects of climate policies, and find the appropriate combination of revenue recycling schemes, industrial and retraining policies as well as compensation packages to increase the support for such policies.

KEYWORDS:

• Climate policies
• employment impacts
• distributional impacts
• collective action problems
• amplification mechanisms
• political acceptability

Acknowledgements

I thank David Popp for useful comments, and Marinella Davide and Will McDowall for useful suggestions.

Disclosure statement

No potential conflict of interest was reported by the author.

Data Availability Statement

The data that supports the findings of this study are publicly available in the following URL: Figure 1: Growth and Productivity Accounts, http://www.euklems.net/ The final datasets are also available from the corresponding author.

ORCID

Francesco Vona http://orcid.org/0000-0002-2112-5537

Notes

1 BRICS: Brazil, Russia, India, China and South Africa.

2 The effect of automation and of the diffusion of information and communication technologies in the workplace are clearly far larger than those of climate policies, as these technologies have potential applications in all sectors. In turn, climate policies directly affect production processes in a set of sectors that represent a significantly smaller share of total employment (basically manufacturing and energy) in nowadays developed economies.

3 This finding is consistent with that of the literature on the so-called pollution haven hypothesis, pointing to a modest effect of asymmetric environmental policies on foreign direct investment and industrial relocation (Dechezleprêtre & Sato, 2017).

4 Similar evidence is available for emerging eastern European economies (Politico, 2016) and Australia (Mathys & de Melo, 2011). In their congresses, both the International Transport workers’ Federation (ITF) and the International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM) explicitly stated that climate policies should be implemented in such a way to protect jobs through a process of just transition (Rosemberg, 2010). Other interesting cases studies of distributional impacts and their political consequences are in Sovacool, Linnér, and Goodsite (2015).

5 Automation is less problematic as an amplifier of the “job killing” argument because it is not policy-driven. Technological choices of companies are not subject to regulation in the same way as the choice to export or to shift dirtier segments of production abroad.

6 The lack of industrial diversification is also a well-known determinant of the so-called natural resource curse associated with the exploitation of exhaustible resources (Van der Ploeg, 2011).

7 While the International Labour Organization plays a key role in promoting sustainable growth, we saw in Section 3 that weakened national unions rarely have the bargaining power to actively negotiate greener investment strategies with multinational and local firms.

8 Trade policies are nested in a more comprehensive and binding legal framework than climate policies.

9 Public sector investments and long-term planning promoting industry diversification and learning represent two related factors that ensured a successful transition in the Ruhr region (e.g., Taylor, 2015; Thimm, 2010).

10 Caldecott et al. (2017) report that 30–40% Polish coal miners were unemployed or out of the labour force two years after displacement

Additional information

Funding

This work was supported by Horizon 2020 Framework Programme, project INNOPATHS [grant number 730403].