A Cleaner, Greener World Requires More Than Regulations

Countries around the globe are grappling with the challenges of designing, introducing, and enforcing policies to minimize the extent of climate change and to prepare for those damages that are inevitable. Most people, I think, would agree a cleaner, greener world is ideal, but concerns emerge about the costs inflicted by the sustainable revolution. More regulation and higher taxes can mean higher costs for businesses, either directly through the payment of taxes or indirectly through increased compliance costs (measurement equipment, time/labor dedicated to new practices or file keeping, etc.). Additionally, if regulations spell higher costs for consumers, a drop in the quantity demanded might be expected. If gas gets more expensive, people buy less gas; if heating costs go up, people cut back on heating; if manufactured goods get more expensive, people buy fewer things; and so on.[1] Long story short, climate change and policies that seek to mitigate its impact will have a significant impact on the economy overall. Certain industries will disappear entirely, while others are created, and those that do neither will have to adapt their production processes to more efficient, sustainable standards. This will affect the labor market and the rate of labor income in complicated ways – jobs in dying industries will continue vanishing while jobs in newer industries will sprout up. And everybody will have to face up to the consequences (warmer temperatures, increased storm frequency, etc.) of climate change.

There are industries, such as coal, which must become obsolete as green, renewable sources of energy become the norm. In addition, countless other industries will see their costs of production change, their pool of available resources change, the market into which they are selling change, and so on. Climate change will have direct impacts on things like health and wellbeing of workers, crop yields, trade routes, and more. Also, the indirect effects of climate change could be tremendous. Expendable incomes will be vulnerable, as households spend more on air-conditioning or storm preparation; migrations will continue at an elevated rate; and the cost of intermediate goods and production processes will reshape the marketplace. As the world adapts to the changing climate, it is necessary to evaluate what that adaptation might look like for the typical worker. What happens as one industry or another becomes obsolete? What happens to jobs if production costs skyrocket in certain industries? What happens to employment as the market for produced goods levels off or drops?

On September 21, the New School for Social Research hosted two guest speakers for Climate Change: The Challenges to Labor, the Fall installment at the Schwartz Center for Economic Policy Analysis’ (SCEPA’s) continuing Climate Change Project. Reiner Hoffman, Chairman of the German Trade Union Confederation DGB, and Satya Tripathi, the Assistant Secretary General and Head of the United Nations Environment New York Office, each gave a short presentation relating the challenges of climate change to their impacts on the labor market. The two speakers represent quite different backgrounds and offer expertise in different areas of the climate change and labor market crossroads. Hoffman draws on experience from Germany, an environmentally progressive industrial powerhouse, while Tripathi’s expertise rest in the dynamics of developing economies. Following the presentations, the guests fielded questions from journalists and audience members. A recording of the event can be viewed at the SCEPA website.

Reiner Hoffman’s talk centered around the “just transition” principles guiding German labor’s approach to climate change. The “just transition” to a more sustainable economy with a greener workplace is comprised of seven tenets. Policy should:

1. Be anchored in the objectives laid out in the Paris Agreement,
2. Be actively shaped by governments, businesses, and trade unions,
3. Be supported by high levels of sustainable investment,
4. Create decent work and maintain jobs,
5. Strengthen participation, such that no one is left behind,
6. Ensure qualification and lifelong education for workers, and
7. Maintain fair cost allocation.

He first talked about the opportunities present in Germany that might allow for a transition to a more sustainable economy in such a manner that jobs, and the dignity of employees are respected. These opportunities revolve around decreasing dependency on fossil fuels, highlighting environmental and climate protection, strengthening regional economic cycles, innovating and sustaining job growth, and generating better living conditions and prosperity. While Germany is a relatively small emitter of CO2 on the global scale, emissions per capita rank among the highest in the world. There is much room for improvement on this front, and, as Hoffman posited, “there is no alternative.”

The successes in transitioning towards sustainability offer hope but, in the end, represent some middle point on a long, complicated process. The focus thus far has been on transitioning energy to renewable sources, and, in fact, the last functioning coal mine in Germany is scheduled to close on the 21^st of December. Jobs in traditional energies have dropped dramatically in the last 20 years, and this was done without dismissal. The corresponding growth in renewable energies has taken off in recent years, but with an interesting twist. Since most of the renewable energy companies are relatively young, and the industry as a whole is itself fairly young, there are much lower rates of union participation in these industries. Subsequently wages tend to be significantly lower than in traditional energies, and there tend to be more workplace safety concerns.

This underscores the dynamic at the heart of the “just transition” mantra. The move towards sustainability is a step in the right direction, but the rights and well-being of workers should be accounted for when structuring the nuts and bolts of the specific policies and mechanisms that will be used to steer the transition.

Tripathi presented what the transition to sustainable economies looks like (or might look like) in developing economies. Where Germany is highly industrialized, the focus is on shifting more sustainable production of energy (renewables have been growing as a share of overall energy over the last 15 years). For developing economies, Tripathi highlighted the outsized role that the agricultural sector will play. There are roughly one billion agriculture jobs worldwide, a quite significant (and often overlooked) aspect in the discussion about transitioning towards sustainability. For economies more heavily dependent on agriculture, the focus becomes how to raise the factor of productivity of available land in a manner consistent with sustainability objectives; arable land area is not growing, but population definitely is.

Tripathi then makes the case that climate change policy and solutions should not rest entirely in the hands of governments. He estimates the private share of global GDP is around 70 percent, while that of government is about 30 percent. To focus solely on governmental solutions to climate change and sustainability is to ignore large potential avenues for change. Paraphrasing Tripathi’s main point here: if you are not talking to the ‘bad companies’ (about mitigating climate damages, sustainability goals, and so on) you are irrelevant. To demonize the business sector and focus solely on governmental solutions creates an unnecessary division within societies. At a time when all economic actors need to be working together towards shared goals of sustainable economic growth that ensures a rich and thriving environment, looking only to governments for solutions creates an us-vs-them dichotomy. Top-down regulations often lack the local knowledge and practical insights afforded those working on-site. This local business knowledge might prove quite helpful for developing implementable sustainable practices.

Transitioning to greener, more sustainable processes is of the utmost importance. But in developing the actual policies that guide this transition, it is necessary to consider how jobs and wages might be affected in the near term. There is a comment that Tripathi made during his presentation that I believe sums up the angle that both speakers are working towards to address this concern: “lives and livelihoods must be at the center of solutions.” As newer, cleaner technologies are developed, as financing and funding of large-scale projects are imagined, and as taxation policies are argued over in capitals across the globe, policymakers and advocates must accommodate the dignity of vulnerable people and vulnerable industries in their plans.

Michael Flaherty is a PhD student in Economics at the New School for Social Research. His recent research has focused on the financing of climate change policies and mitigation efforts. He works as an economic consultant in New York City.