Chapter 10. Credit crisis and climate crisis: the one doesn't resolve the other

References [ CPB | General | Scientific ]     Summary

Authors

Paul Koutstaal & Joëlle Noailly
Contact: Paul Koutstaal

In this chapter

The contraction of the economy will lead to a reduction in CO₂ emissions. Is the credit crisis a blessing in disguise for climate policy?

The crisis has a negative impact on 'green' enterprises such as Econcern.

Can a 'Green New Deal' save us from the credit crisis?

Employees for the new green jobs have to be recruited from other sectors. Instead of creating new jobs, existing jobs are ultimately only shifted around.

What does the crisis mean for the negotiations on international climate agreements scheduled for late 2009?

References

CPB

CPB/PBL, 2009, Effecten van de kredietcrisis op klimaat- en energiebeleid, Den Haag.

Initial research into the consequences of the credit crunch and the need for a joint 'green' stimulus policy by the Netherlands Environmental Assessment Agency and the Netherlands Bureau for Economic Policy Analysis (CPB).

General

PBL, 2009, Invloed van de recessie op halen Kyoto-doel en 2011-S&Z-doel, Bilthoven.

The Kyoto Protocol's objectives for greenhouse emissions are likely to be met regardless of the recession. Because of the recession, it is expected that the government will not need to use their emission rights to achieve these goals. Nor will companies that form part of the European emissions trading system be required to buy as many carbon credits.

BMU (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit), 2006, Erneuerbare Energien: Arbeitsplatzeffekte, Wirkungen des Ausbaus erneuerbarer Energien auf den deutschen Arbeitsmarkt, Berlin.

In Germany, manufacturers receive compensation for supplying the grid with renewable energy. This has meant a significant growth in the share of sustainable energy; well over 9% of the country's electricity was generated in a renewable manner in 2004. This created jobs, but whether this will continue in the long term will depend on the existence of a foreign market for sustainable energy products from Germany.

Alex S. Bowen, Sam Fankhauser, Nicholas Stern and Dimitri Zenghelis, 2009, An outline of the case for a 'green' stimulus, Policy Brief, Grantham Research Institute on Climate Change and the Environment and Centre for Climate Change Economics and Policy.

A call from parties including Nicholas Stern (the main author of a pioneering study on Climate Change Economics) for CO₂ pricing and for a 'green' stimulus package, given factors such as the urgency of climate policy.

World Watch Institute, 2008, Green Jobs: Towards Decent work in a Sustainable, Low-Carbon World, UNEP/ILO/IOE/ITUC, Nairobi.

The report estimated that the number of green jobs worldwide came to well over 2.3 million in 2006. The transition to a green economy should create countless new jobs, according to the report.

Trevor Houser, 2009, Structuring a Green Recovery: Evaluating Policy Options for an Economic Stimulus Package, Testimony before the Select Committee on Energy Independence and Global Warming,, Washington.

The testimony summarises the costs and employment effects of a variety of 'green' stimulus measures.

Peter Voigt and Pietro Moncada-Paternò-Castello, 2009, The global economic and financial downturn: What does it imply for firms’ R&D strategies? European Commission, Joint Research Centrum, IPTS Working Paper 12.

A summary of the economic literature and results of surveys among European entrepreneurs on the issue of R&D investment during the financial crisis.

Lord Sainsbury of Turville, 2007, The race to the top: A review of the government’s science and innovation policies. London: HM Treasury.

Chart 2.1 shows the development of private R&D as a percentage of the GDP of various countries since the recession of 1990-1991.

IEA, 2009, The impact of the financial and economic crisis on global energy investment, IEA Background Paper for the G8 Energy Ministers’ Meeting, 24-25 May.

Forecasts by the EIA: worldwide investment in energy will decline in 2009.

A.T. Kearney, 2009, Green Winners: The performance of sustainability-focused companies during the financial crisis, Research Report.

The share prices of companies committed to sustainability have been hit less hard by the crisis than other businesses have.

Scientific

Ulrike Lehr, Joachim Nitsch, Marlene Kratzat, Christian Lutz and Dietmar Edler, 2008, Renewable energy and employment in Germany, Energy Policy 36, pp 108-117.

An English paper on the BMU study mentioned previously.

Samuel Fankhauser, Friedel Sehlleier and Nicholas Stern, 2008, Climate change, innovation and jobs, Climate Policy 8, pp 421-429.

The effect of climate policy on employment is difficult to estimate. In the medium term, it could mean a loss of jobs - especially if companies relocate activities to other countries. In the long-term, innovation and technological development could once again lead to greater economic growth, and subsequently more jobs.

HSBC Global Research, 2009, A Climate for Recovery, The colour of stimulus goes green.

HSBC bank gives an overview of the economic stimulus packages of 20 countries. The report shows that 15 percent of the total sum of about USD 2.8 trillion have an effect on CO₂ emission.

Summary

Besides the financial crisis, governments are also faced with another important challenge: the issue of climate change. Will the financial crisis help or hurt the climate? And can climate policy, in the form of a "Green New Deal", help us out of the current economic crisis? This chapter concludes that the financial crisis will not help to solve the climate crisis. As companies reduce their activities, the economic slowdown will lead to a reduction in CO₂ emissions. Yet, the effects on emissions will remain temporary and limited to sectors that do not fall under the Emission Trading System. Investment in clean energy will fall, as cheap oil makes it less attractive for firms to invest in energy-saving or renewable energy. Also, the high level of uncertainty and volatility of future energy and CO₂ prices makes it difficult for firms to invest in research and development for clean technologies.

But if the crisis does not help the climate, can a 'Green New Deal' help to solve the current financial crisis? In many countries, green stimulus packages have been launched in the hope of creating millions of 'green jobs'. In fact, jobs in green sectors are likely to come at the cost of jobs in other sectors. Jobs will be moved from one sector to the other, rather than created. There is no 'free lunch' and climate policy comes at the cost of economic growth - although we gain in terms of slowing down climate change. Action on climate change remains urgent and the current focus on the financial crisis should not delay such efforts. The financial crisis makes the upcoming negotiations on climate change in Copenhagen in December 2009 even more difficult. Needless to say, the climate would be better off without the financial crisis.

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