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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. ï This analysis focuses on the shift of labour
across sectors following the implementation of
Resources Efficient and CE policies.
ïModelling tool: OECDâs ENV-Linkages
general equilibrium model
âą 25 regions
âą 56 sectors, including recycling and 8 metal
processing sectors
âą 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
âą 10 $/t of iron ores
âą 50 $/t of aluminium ores
âą 20 $/t of copper ores
âą 15 $/t of other metals ores
âą 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
âą All these fiscal instruments are implemented from 2018 to gradually reach
their target in 2040.
âą Government revenues from the material taxes are used to finance subsidies.
âą 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
â 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%
âŠ
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
âą The impact of material tax policies on total employment is very limited
âą Labour markets dynamic is characterized by shifts of employment across
sectors
âą MFR implies large labour shifts across sectors for limited impacts on GDP
âą 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. âą The projected employment effect of the policy action
(MFR) is well within the range suggested by the
literature.
âą MFR implies 10 millions of job creations but also 8
millions of job destructions globally in 2040.
âą Although the net impact on employment is small,
some sectors are heavily affected â 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. âą Global assessment (disaggregated to 12 large economies + 13 regions )
âą 2060 time horizon
âą 50+ economic sectors
âą 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 â Secondary
Crude Oil extraction Aluminium â Primary
Natural Gas extraction Aluminium â Secondary
Other Mining Copper â Primary
Petroleum and Coal products Copper â Secondary
Gas distribution Other Non-ferrous Metals â Primary
Water Collection and Distribution Other Non-Ferrous metals â 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)
19. Non-OECD benefit from lower material costs
Non âOECD - 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. âą Importers of raw materials benefit from lower input prices
âą 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
Notas do Editor
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