Economies are becoming more productive as low-carbon sectors grow, new analysis finds

Business sectors that have low levels of carbon dioxide emissions per output are outpacing the general economy in terms of productivity growth, while increasing the number of jobs and skill levels, according to the results of a major study of 39 countries published today (10 October 2016) by the Grantham Research Institute on Climate Change and the Environment and ESRC Centre for Climate Change Economics and Policy at the London School of Economics and Political Science.

The analysis by Dr Baran Doda of 34 sectors in both rich and developing countries found that those with high carbon intensities, defined in terms of the volume of carbon dioxide emitted per unit of output, account for a relatively small share of employment in the economy, and experienced declines both in the number of jobs and the skill level of the average worker over the study period between 1995 and 2009.

By contrast, sectors with low carbon intensities have increased the number of jobs and skill levels, and have had higher rates of productivity growth than in the overall economy.

Dr Doda said: “The Paris Agreement on climate change means that sectors of the economy that have high carbon intensities will need to lower their emissions or shrink in size. But the evidence is that economic sectors with low carbon intensities are more dynamic and growing, particularly in developing countries, and so have the potential to make up for the impacts on high-carbon-intensity sectors.”

The study concludes that technological changes, and the progressive drift away from agriculture and manufacturing towards services, have had particularly strong impacts on the carbon dioxide emissions of developing countries.

Dr Doda said: “Climate change policies are unlikely to have been the prime reason for the trends identified in this study in all but a few northern European countries. This is good news in the sense that climate change policies need only to help rather than reverse the profound economic changes that are occurring.”

He added: “In Finland and Sweden, economic activity has shifted towards business sectors that have low carbon intensities, and at the same time the carbon intensities of sectors have declined more quickly than in other rich countries since they introduced explicit carbon prices. And over the period of this study, both countries have recorded robust economic growth.”

The study is described in a working paper that is due to be submitted for publication in an academic journal. The countries covered by the study are: Australia, Austria, Belgium, Bulgaria, Brazil, Canada, China, Cyprus, Czech Republic, Germany, Denmark, Spain, Estonia, Finland, France, Greece, Hungary, Indonesia, India, Ireland, Italy, Japan, Lithuania, Latvia, Mexico, Malta, Netherlands, Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia, South Korea, Sweden, Turkey, Taiwan, United Kingdom, and the United States.

For more information about this media release, or to obtain a copy of the working paper on ‘Tales from tails: Sector-level carbon intensity distribution’, please contact Bob Ward r.e.ward@lse.ac.uk

NOTES FOR EDITORS

1. The Grantham Research Institute on Climate Change and the Environment (http://www.lse.ac.uk/grantham) was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment (http://www.granthamfoundation.org/).

2. The ESRC Centre for Climate Change Economics and Policy (http://www.cccep.ac.uk/) is hosted by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council (http://www.esrc.ac.uk/).

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