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How shifting investment towards low-carbon sectors impacts employment: three determinants under scrutiny

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  • Quentin Perrier

    (CIRED)

  • Philippe Quirion

    (CIRED, CNRS)

Abstract

The threat of climate change requires investment to be rapidly shifted from fossil fuels towards low-carbon sectors, and this shift generates heated debates about its impact on employment. Although many employment studies exist, the economic mechanisms at play remain unclear. Using stylized CGE and IO models, we identify and discuss three channels of job creation resulting from an investment shift: positive employment impacts arising from targeting sectors with a high labour share in value added, low wages and low import rates. Results are robust across both models, except for the last, which only occurs in IO. We then undertake a numerical analysis of two policies: solar panel installation and weatherproofing. These investments both yield a positive effect on employment, a result which is robust across models, due to a high labour share and low wages in these sectors. The results are roughly similar in IO and CGE for solar; for weatherproofing, the results are higher in IO because of low import rates, by a factor ranging from 1.19 to 1.87. Our conclusions challenge the idea that renewable energies boost employment by reducing imports, but they also suggest that an employment double dividend might exist when encouraging low-carbon labour-intensive sectors.

Suggested Citation

  • Quentin Perrier & Philippe Quirion, 2018. "How shifting investment towards low-carbon sectors impacts employment: three determinants under scrutiny," Working Papers 2018.13, FAERE - French Association of Environmental and Resource Economists.
  • Handle: RePEc:fae:wpaper:2018.13
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    More about this item

    Keywords

    Renewable energies; Investment; Employment; CGE; Input-Output;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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