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Low-Carbon Sectors Growing, Encouraging Productive Economies

A new study has found that low-carbon sectors are outpacing their less-productive, higher carbon-intensive sectors and the general economy in terms of growth, while increasing jobs and skill levels.

Dr Baron Doda from the London School of Economics analyzed 34 developed and developing countries for their carbon intensity, defined in terms of the volume of carbon dioxide emitted per unit of output. The new study, which was published 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, found that sectors with low carbon intensity are not only outpacing the general economy in terms of productivity growth, but are also increasing the number of jobs and skill levels.

Conversely, those sectors with high carbon intensity account for a relatively small portion of employment in the economy, and experienced declines in the number of jobs and the skill level of the average worker over the study period of 1995 to 2009.

“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,” Dr Doda said. “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 working-paper study, Tales from the tails: Sector-level carbon intensity distribution, was published on Monday, concluded that technological changes, combined with a drift away from agriculture and manufacturing towards services, have impacted the carbon dioxide emissions of developing countries. Specifically, Dr Doda found that low carbon intensity sectors in developing countries “are among the most dynamic and can provide a cushion for low-skilled workers becoming unemployed in” high carbon intensity sectors.

Of particular interest is the catalysts for such a change over the study period. According to the results of the analysis, “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,” Dr Doda explained. “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.”

“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.”

Dr Doda concluded that meeting emission reduction targets in line with the 2015 Paris Agreement “can be achieved through reductions in economic activity, declines in its carbon intensity, or changes in its structure.” However, for some countries — especially those developing countries — simply reducing economic activity is not only unlikely, but would actually work counter to its development goals. As such, changes to carbon intensity and structure are much more important to meeting emissions reductions targets.

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