Review of the Green Economy, Green Growth and Green Jobs Paradigm and Relevance to NE Asia

Michael I. Westphal Lead Climate Change Specialist Asian Development Bank

What is a Green Economy

One that results in improved human wellbeing and social equity, while significantly reducing environmental risks and ecological scarcities (UNEP 2010). A green economy is low carbon, resource efficient, and socially inclusive. Includes both adaptation/climate resilience and mitigation. New Sustainable Development?

What is a Green Economy

Brundtland Commission (1987): development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The Green Economy Paradigm: more emphasis on Natural Capital and modifying GDP to account for pollution, resource depletion, declining ecosystem services, and the distributional consequences of natural capital loss to the poor (better quantity measures of growth -Adjusted National Income; quality measures too CO2/energy intensity, PPM etc).

Green Growth
Green growth is economic growth driven by low-carbon, eco-friendly industries. (World Bank Greening Chinas Growth 2011). Emphasis more on mitigation

What is a Green Job?

Definitional issues Positions in agriculture, manufacturing, construction, installation, and maintenance, as well as scientific and technical, administrative, and service-related activities, that contribute substantially to preserving or restoring environmental quality. (UNEP 2007) But often more narrowly meant no/low carbon jobs RE and EE Direct jobs (manufacturing even if plant uses fossil fuels, installation) and indirect jobs (office workers, truck drivers) (e.g. Bezdek 2007)

What is a Green Job?

What is novel in manufacturing? How much of a product is innovative technology? When does an autoworker become a green autoworker?
EU Passenger Car Manufacturing Workforce Share of vehicles emitting 120 grams of CO2 per kilometer (percent) Share of vehicles achieving 40 miles per gallon or more (percent) Jobs in Manufacturing Green Vehicles UNEP (2007) 2,000,000 7.5 n.a. 150,000 Japan 952,000 6.3 n.a. 62,000 Korea 247,000 4.3 n.a. 10,000 US 1,045,000 n.a. 1.2 13,000

RE Jobs
Industry Estimated Jobs Worldwide Biofuels Wind >1,500,000 ~630,000 Brazil 730,000 for sugarcane and ethanol production China 150,000 / Germany 100,000 / United States 85,000 /Spain 40,000 / Italy 28,000 / Denmark 24,000 / Brazil 14,000 / India 10,000 Solar Hot Water Solar PV ~300,000 ~350,000 China 250,000 / Spain 7,000 China 120,000 / Germany 120,000 / Japan 26,000 / United States 17,000 / Spain 14,000 Biomass Hydropower Geothermal Biogas Solar Thermal Total Estimated ~15,000 > 3,500, 000 Germany 120,000 / United States 66,000 / Spain 5,000 Europe 20,000 / United States 8,000 / Spain 7,000 Germany 13,000 / United States 9,000 Germany 20,000 Spain 1,000 / United States 1,000 Examples

REN21 (2010)

Impressive Growth
Employment in Renewable Energy in Germany
400000 350000 300000 Public research 250000 200000 150000 100000 50000 0 2006 2007 2008 2009 2010 Biomass Geothermal Hydropower Solar Thermal Photovoltaics Wind

56% increase since 2006!

(Ministry of the Environment, Nature Conservation and Nuclear Safety)

Compares reasonably well with Fossil Fuels

Fossil Fuel vs. Renewable Employment in the US
800000

700000

600000

500000

Oil and Gas Extraction and Associated Petroleum Refining

400000 Coal Mining 300000 Renewables (Direct and Indirect)

200000

100000

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

(US BLS and Bezdek 2007)

*But not always true that fossil fuel employment is decreasing

RE/EE More Labor Intensive

Technology Biomass Geothermal Solar PV Solar Thermal Wind Carbon Capture & Storage Nuclear Coal Natural Gas Energy Efficiency Total Job-Years Per GW 0.22 0.25 0.91 0.27 0.17 0.18 0.15 0.11 0.11 0.38

(Kammen et al. 2009)

But The Number of Jobs is the Wrong Metric

Jobs in one sector may be offset by losses in another sector -> cascading effects But even net jobs not correct Changes in Real Income should be focus Concerned about mitigation impact of policy -> $/ tonne CO2

Green Growth and Green Technology

Implied that one main aspect of green growth is new green technology (and export-led growth) Manufacturing is not Innovation Designed by Apple in California Assembled in China Much of RE technology is just manufacturing.

Green Technology and Comparative Advantage

Porter Hypothesis Argument for government regulations for climate change right now Forced adaptation government regulation makes firms more efficient, spurs technology innovation, increases productivity and export competitiveness Weak empirical evidence (Green Growth Leaders 2011)

First Mover Advantage in Technology?

Lots of counter examples Betamax and VHS First PC was Altair Netscape and Explorer Excite (?) and Google search engines iPhone/Droids not first smartphones

First Mover Advantage in Technology?

First mover advantage supported:
Where technology evolves linearly and predictably. When there are scarce resources (can control supply) or strong network externalities (value of customer using product with others) (e.g. computers and software) Very strong learning effects When very strong technological firms could capture early adopters - tech-savvy customers and lock them in (e.g. mobile phone networks)

Second mover advantage supported:

When there exists uncertainty drives up cost of development for pioneers. Avoid investments in inefficient technologies (e.g. uncertainty in platforms -> LCD screens). But technological experience important. (Eggers, NYU)

Factors that Lead to the Development of New Technologies

Hard to anticipate the next green technology Hard to quantum leap to new areas -> countries tend to develop fields where there are technical linkages (product space) (Hausman / Dani Rodrik) Agglomeration important for technological innovation but effective clusters difficult to orchestrate (Bresnahan and Silicon Valley)

Myriad of Factors for Technological Innovation

Inputs
R&D, local research infrastructure, education of work force, technical skills of workforce, quality of ICT infrastructure, broadband penetration

Environment
Political Environment, Market Opportunities, policies towards free enterprise and competition, policies toward foreign investment, foreign trade and exchange controls, taxes, financing, the labor market, infrastructure

Innovative just a by-product of good policies? Country right scale? (post-Westphalian world). Firms innovate not nations.

Prospects for NE Asia

China has low-cost manufacturing advantage right now

*3 /10 top manufacturers in 2009 (23% of market); 4/10 in 2010 (30.5% of market) (REN21 2010)

*5 /15 top manufacturers in 2009 (23% of market); 7/15 in 2010 (29% of market) (REN21 2010)

Prospects for NE Asia

Japan and Korea will likely do well not because of green technology per se, but its innovation advantages in general
Spillover effects from autos and electronics Rank highly on the various metrics of innovation

Mongolia?

Innovation Index
Rank Japan Switzerland Finland Germany US Taiwan Sweden Israel Netherlands Denmark Korea (The Economist Intelligence Unit 2009) Projected Index (2009 2013) 10 9.7 9.53 9.49 9.44 9.44 9.42 9.20 9.16 9.06 9.05

Innovation in China
China making progress to be more innovative

Conclusions
Green Economy absolutely necessary mitigation and adaptation/resilience Jobs is a misleading metric Green growth (i.e. RE and EE technology) is significantly manufacturing, not innovation But metrics that lead to innovation strong in NE Asia (i.e. Japan, Korea)