New report reveals impact on jobs of climate change policies that push up energy prices

April 12, 2010 5:00 PM

Ruth Lea - a leading economist who recently spoke at the TPA's post-Budget briefing - and Jeremy Nicholson - Director of the Energy Intensive Users' Group - have released a new report for Civitas about the impact of climate change policies on industrial employment.   The report makes a number of very important points.

First, climate change policies are having a heavy impact on bills, which is set to rise sharply.  Here are the official projections, which many experts believe to be underestimates:

Berrelectricitypriceeffect 

Adding a third to domestic energy prices - or doubling them as Citigroup Investment Research suggest is likely - will have a huge impact on families.  Coming at the same time as a major fiscal adjustment which will mean big spending cuts or tax rises, higher energy prices will push people into poverty and benefit dependency.

Adding 70 percent to business electricity bills will mean fewer jobs.  Energy costs are a big part of many manufacturing firms' costs and an increase in those costs will make it harder for them to keep up with competitors abroad.   Unfortunately it is often difficult to get tangible examples as investment quietly shifts abroad and it isn't in anyone's interest to make a fuss until it is too late.  There is some fascinating material in this new report though.  First they go over some existing evidence of rises in energy prices costing jobs:

"There is no doubt that high energy prices have already been a factor behind industry closures. In 2003 the energy intensive Britannia Zinc works near Bristol was closed, with a loss of 400 jobs. And in May 2006 the EIUG reported that the UK gas price spike of 2005-06 had contributed to 6,000 jobs lost over the previous 18 months in the glass sector; several paper mills had also been closed. In addition, brick capacity had been cut back and manufacturers of chlorine and ammonia-based fertilizer had reduced production."

A new case study focuses on the chemical industry, which has been successful in Britain in recent years as chart 2.1 in the full report shows.  It uses the INEOS Chlor plant in Runcorn as an example.  The plant is vulnerable to sharp rises in electricity prices.  The management think that it will be uncompetitive if electricity prices are hiked thanks to climate change policies either not in place or not imposing the same burden in other countries.

The plant is a substantial employer in itself but it has a wider economic significance as a supplier of chlorine and caustic soda which are important precursors for a number of other manufacturing processes.  A study of the potential fall-out if the plant closed suggests that within ten years 46,000 jobs in the chemical industry would be threatened directly.  Another 87,000 would be threatened in the wider economy.  That makes a total of 133,000 jobs which the report estimates would be lost in the long-term.

Remember that next time some politician tells you that expensive climate change policies will deliver "green jobs".  As studies in Germany and Spain have found, more jobs are lost in the rest of the economy, which pays for these policies, than are gained in the green industries.

Ruth Lea - a leading economist who recently spoke at the TPA's post-Budget briefing - and Jeremy Nicholson - Director of the Energy Intensive Users' Group - have released a new report for Civitas about the impact of climate change policies on industrial employment.   The report makes a number of very important points.

First, climate change policies are having a heavy impact on bills, which is set to rise sharply.  Here are the official projections, which many experts believe to be underestimates:

Berrelectricitypriceeffect 

Adding a third to domestic energy prices - or doubling them as Citigroup Investment Research suggest is likely - will have a huge impact on families.  Coming at the same time as a major fiscal adjustment which will mean big spending cuts or tax rises, higher energy prices will push people into poverty and benefit dependency.

Adding 70 percent to business electricity bills will mean fewer jobs.  Energy costs are a big part of many manufacturing firms' costs and an increase in those costs will make it harder for them to keep up with competitors abroad.   Unfortunately it is often difficult to get tangible examples as investment quietly shifts abroad and it isn't in anyone's interest to make a fuss until it is too late.  There is some fascinating material in this new report though.  First they go over some existing evidence of rises in energy prices costing jobs:

"There is no doubt that high energy prices have already been a factor behind industry closures. In 2003 the energy intensive Britannia Zinc works near Bristol was closed, with a loss of 400 jobs. And in May 2006 the EIUG reported that the UK gas price spike of 2005-06 had contributed to 6,000 jobs lost over the previous 18 months in the glass sector; several paper mills had also been closed. In addition, brick capacity had been cut back and manufacturers of chlorine and ammonia-based fertilizer had reduced production."

A new case study focuses on the chemical industry, which has been successful in Britain in recent years as chart 2.1 in the full report shows.  It uses the INEOS Chlor plant in Runcorn as an example.  The plant is vulnerable to sharp rises in electricity prices.  The management think that it will be uncompetitive if electricity prices are hiked thanks to climate change policies either not in place or not imposing the same burden in other countries.

The plant is a substantial employer in itself but it has a wider economic significance as a supplier of chlorine and caustic soda which are important precursors for a number of other manufacturing processes.  A study of the potential fall-out if the plant closed suggests that within ten years 46,000 jobs in the chemical industry would be threatened directly.  Another 87,000 would be threatened in the wider economy.  That makes a total of 133,000 jobs which the report estimates would be lost in the long-term.

Remember that next time some politician tells you that expensive climate change policies will deliver "green jobs".  As studies in Germany and Spain have found, more jobs are lost in the rest of the economy, which pays for these policies, than are gained in the green industries.

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