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'Green' stimulus funds create jobs and boost economy
January 4, 2012, Wednesday
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IN response to the financial and economic crisis of the last four years a number of countries, both industrialized and developing ones, launched fiscal stimulus packages.
Altogether these were estimated at US$3.1 trillion of committed spending in 2009. At least 15 percent of this spending - more than US$445 billion - was allocated to sectors and activities such as infrastructure, in particular, railways, electric grids, high-speed broadband networks, water and waste, energy efficiency, renewable energies and low-carbon vehicles that build on and enhance the earth's natural capital or reduce ecological scarcities and environmental risks.
These sectors, in addition to other innovative and energy-efficient goods and services, can therefore broadly be considered green.
There is indication that green stimulus spending triggered a significant expansion of economic activity in targeted green sectors.
The Chinese State Grid Corp has announced that 2009 was its highest-ever investment in grid development, in part due to an increase in railway infrastructure.
In the United Sates a record high of 9.9 GW of wind installations was added in 2009. The US Department of Energy indicates that the stimulus in the renewable sector will leverage US$43 billion of private capital in 2012. Spending by the US Department of Energy has been matched by an estimated US$27 billion of private capital, totalling about US$65 billion in projects (about equivalent to 0.5 percent of total GDP).
Infrastructure
Public-private partnerships were made possible through government grants, as well as soft and facilitated loans. As a direct result of the American Recovery and Reinvestment Plan, the State of Massachusetts in 2009 awarded funding solely for projects that move towards the development of zero net energy buildings.
Infrastructure, in particular, rail infrastructure, has received the biggest boost from green stimulus packages. Investment in rail and water infrastructure, grid expansion and improved building efficiency has been particularly high, totaling 85 per cent of the allocation of green stimulus packages or US$379 billion. For example, almost half of China's US$218 billion green stimulus package has been allocated to railway infrastructure. About US$23 billion (15 percent of the total) has been channeled to the construction of water infrastructure that benefited 14.6 million people.
Infrastructure investment is one of the main means of restarting growth and creating jobs, the reason why a significant part of fiscal spending went to construction, transport and energy-related infrastructure. Part of this includes green infrastructure such as works for flood control, irrigation schemes, insulation of buildings and changing transport from road to rail.
Sustainability
Nonetheless, there have been concerns about the sustainability of jobs created through stimulus packages. According to certain studies, just one in 10 of the newly created green jobs became a permanent job.
It must be noted that very little analytical work has been devoted to this issue in the literature. Therefore, the results emanating from the few studies available should be interpreted with caution.
More generally, the rising level of informality in the global economy constitutes a major challenge to all job growth, including green job growth.
Spain, for example, experienced one of the highest increases in unemployment among young adults after the global financial crisis.
Despite efforts to revive the economy, unemployment rates have stagnated. As a result, Spain's informal economy has grown, lowering wages and government revenue.
The effort to advance decent work and pro-poor sustainable development as a single and integrated strategy is critical to building green jobs across the developing world. One way to reduce the risks associated with green jobs would be to increase social safety nets in various countries. There is empirical evidence today that targeted government spending can start a transition to a low-carbon economy.
The Green Economy Report (UN Environment Program 2011) found that investing 2 percent of global GDP per year in 10 economic sectors between 2010 and 2050 can kick-start a transition towards a low-carbon, resource-efficient economy.
Adapted from the report: Working towards a balanced and inclusive green economy: A UN system-wide perspective.
Altogether these were estimated at US$3.1 trillion of committed spending in 2009. At least 15 percent of this spending - more than US$445 billion - was allocated to sectors and activities such as infrastructure, in particular, railways, electric grids, high-speed broadband networks, water and waste, energy efficiency, renewable energies and low-carbon vehicles that build on and enhance the earth's natural capital or reduce ecological scarcities and environmental risks.
These sectors, in addition to other innovative and energy-efficient goods and services, can therefore broadly be considered green.
There is indication that green stimulus spending triggered a significant expansion of economic activity in targeted green sectors.
The Chinese State Grid Corp has announced that 2009 was its highest-ever investment in grid development, in part due to an increase in railway infrastructure.
In the United Sates a record high of 9.9 GW of wind installations was added in 2009. The US Department of Energy indicates that the stimulus in the renewable sector will leverage US$43 billion of private capital in 2012. Spending by the US Department of Energy has been matched by an estimated US$27 billion of private capital, totalling about US$65 billion in projects (about equivalent to 0.5 percent of total GDP).
Infrastructure
Public-private partnerships were made possible through government grants, as well as soft and facilitated loans. As a direct result of the American Recovery and Reinvestment Plan, the State of Massachusetts in 2009 awarded funding solely for projects that move towards the development of zero net energy buildings.
Infrastructure, in particular, rail infrastructure, has received the biggest boost from green stimulus packages. Investment in rail and water infrastructure, grid expansion and improved building efficiency has been particularly high, totaling 85 per cent of the allocation of green stimulus packages or US$379 billion. For example, almost half of China's US$218 billion green stimulus package has been allocated to railway infrastructure. About US$23 billion (15 percent of the total) has been channeled to the construction of water infrastructure that benefited 14.6 million people.
Infrastructure investment is one of the main means of restarting growth and creating jobs, the reason why a significant part of fiscal spending went to construction, transport and energy-related infrastructure. Part of this includes green infrastructure such as works for flood control, irrigation schemes, insulation of buildings and changing transport from road to rail.
Sustainability
Nonetheless, there have been concerns about the sustainability of jobs created through stimulus packages. According to certain studies, just one in 10 of the newly created green jobs became a permanent job.
It must be noted that very little analytical work has been devoted to this issue in the literature. Therefore, the results emanating from the few studies available should be interpreted with caution.
More generally, the rising level of informality in the global economy constitutes a major challenge to all job growth, including green job growth.
Spain, for example, experienced one of the highest increases in unemployment among young adults after the global financial crisis.
Despite efforts to revive the economy, unemployment rates have stagnated. As a result, Spain's informal economy has grown, lowering wages and government revenue.
The effort to advance decent work and pro-poor sustainable development as a single and integrated strategy is critical to building green jobs across the developing world. One way to reduce the risks associated with green jobs would be to increase social safety nets in various countries. There is empirical evidence today that targeted government spending can start a transition to a low-carbon economy.
The Green Economy Report (UN Environment Program 2011) found that investing 2 percent of global GDP per year in 10 economic sectors between 2010 and 2050 can kick-start a transition towards a low-carbon, resource-efficient economy.
Adapted from the report: Working towards a balanced and inclusive green economy: A UN system-wide perspective.
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