sectoral economic costs and benefits of ghg mitigation - IPCC

Seth Dunn and Michael Renner
Policymakers will need to be attentive to the transition costs of climate mitigation measures. The
British experience provides some indication of the danger of social disruption. In the mid-1980s,
the British government restructured the coal industry, closing large numbers of mines and
slashing coal subsidies - though motivated more by the intent to break the power of labor unions
than by the desire to avert climate change. While this policy did reduce carbon emissions, it also
caused high unemployment and unleashed an array of associated social ills in coal mining
regions, not least because the bitterly disputed policy was forced through in a short stretch of
time.
If individuals and communities have reasonable hope that the transition to a sustainable economy
does not translate into social pain for them, they will be far less likely to oppose change. Creating
opportunities for affected workers to learn new skills and providing assistance in their shift to
new careers will be key. This may entail financial support to help pay tuition for vocational and
other training programs, transition income support, and career counseling and placement
services. The more that the economy moves from resource extraction and mass production to
services and a “knowledge” economy, in which skill requirements change frequently, the more
do training and retraining become an issue for the economy as a whole.
Important as they are, educational and skill-building programs by themselves are an inadequate
response to the transition challenge. Measures to spur job creation and build a sustainable
economic base are equally important. Because the transition challenge is especially pronounced
in areas where fossil fuel extraction plays a disproportionate economic role, governments will
need to design programs to assist regions with unsustainable and declining industries. This means
helping to diversify and broaden the economic base and to build infrastructures that can support
such a shift.
An exciting example of this approach - locating “sunrise” industries in regions affected by the
decline of “sunset” industries - can be found in one of the world’s most famous coal mining
regions. In September 1999, the British government announced a strategy to make the
northeastern region of England a center for renewable energy jobs and projects, including solar
photovoltaics, wind turbines, and cogeneration. (The region includes the city of Newcastle-
Upon-Tyne, home to the world’s first commercial electricity generating station and subsequently
the phrase “taking coals to Newcastle.”) The region, whose coal use continues to drop and which
is now a net coal importer, already produces one quarter of Britain’s cogenerated energy. The
plan includes a target of creating 3,500 new jobs, cutting energy consumption by 16 percent, and
reducing carbon emissions by 14 percent by the year 2010.
In addition to “taking renewables to Newcastle,” some governments and businesses are creating
“solar valleys” much as they once developed coal-, oil-, or gas-extracting regions. Claiming the
German region of Helmond-Gelsenkirchen could become a European “Solar Valley,” Shell
Renewables opened in November 1999 a fully-automated solar cell production plant - the
continent’s largest - in Gelsenkirchen. At full capacity, the plant is expected to produce 25
megawatts of cells, enough to power up to 7,000 European households and save 20,000 tons of
carbon dioxide annually; create 45 direct jobs and more than 200 jobs in manufacturing,
marketing, and the supply chain; and meet demand both in Europe and in rural electrification
markets in South Africa, India, and Sri Lanka.
Governments can also adopt measures that reward job creation by companies, and particularly
well-paying jobs. Favorable tax treatment for job creation would be part of a broader recalibration
of fiscal tools to shift the emphasis from labor productivity to resource productivity -
from promoting resource extraction to supporting new employment.
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