Circular Economy and Labor Market Impacts: Modelling Environmental Economics

'Socio-Economic, Environmental and Regional Aspects of a Circular Economy' Modelling the impact of circular economy on the labour market Session No 6. Modelling environmental related economics Dr Dora Fazekas 19. 04. 2018. Pecs, Hungary

Overview Background Cambridge Econometrics and your presenter A quick introduction to E3ME Circular economy impacts on the labour market Objectives Our research questions Our approach Outcomes of the study

Cambridge Econometrics Cambridge Econometrics provides modelling support to the European Commission, international agencies and national governments on issues related to climate and energy policy The principal tool applied is the E3ME macroeconomic model (www.e3me.com) SME with 3 offices: HQ in Cambridge, UK Budapest Brussels Dora Fazekas: Associate Director, Climate-Energy-Circular Economy Team; MD of CE Hungary

First A quick introduction to E3ME Macro-econometric model based on a post-Keynesian framework Optimisation not assumed Demand <= Potential Supply Under the right conditions it is therefore possible for regulation to increase output and employment Scenario analysis Based on the system of National Accounts E3ME has historically been a real-economy model with the strength of sectoral disaggregation and E3 linkages

Objective of the study To understand labour market impacts of circular economy and resource efficiency in Europe for the European Commission (DG Environment) in partnership with Trinomics and ICF Raw materials employment employment Recycling Manufacturing Wase Consumption employment

Our research questions How do changes deriving from EU circular economy policies impact on the economy? How is this reflected by economic sectors, in particular, what effects does this have on the labour force, including changes in sectoral and occupational composition? Who are winners and losers in the labour market? What is the size of the net employment impacts, split by skill group and age? What are direct and indirect labour impacts as well as induced labour impacts? Are there differences between the short-term and medium-term perspectives? What are the underlying drivers of employment, including ecological-driven structural change, technological change and innovation; public green investment, etc.? Under what conditions can the circular economy boost employment in the EU? How can EU policy support this process, including by developing new skills, and how it could mitigate possible negative impacts?

Our approach model input processing model input scenario assumption level of CE activities in sector A, B,..Z mapping to E3ME sectors direct impacts macroeconomic and labour market impacts jobs and skills analysis E3ME running model model output further analysis

1. Sector selection Criterion Description Circular economy sector potential The potential that circular economy activities have in the sector (thus representing the extent to which the sector might be transformed by the circular economy from a business perspective) Whether the sector is a priority in terms of circular economy policy action and/or whether the sector was identified by previous literature on this topic as a priority sector in terms of its potential for the circular economy Importance of the sector to the EU economy in terms of value added generation and employment Circular economy policy importance Economic significance

Five key sectors Food products & beverages (NACE A, C10 & 11) Motor vehicles; (NACE 29); Construction; (NACE F 41&43) Electronics and Electrical equipment; (NACE 26 & 27) Waste collection and treatment (NACE 38 & 39)

2. Circular economy (CE) activities: RESOLVE Activities that can make a product s lifecycle more circular REgenerate Use of renewable energy and materials (biological materials) Share Reduce the need for new goods through sharing/renting and the use of second-hand products Optimise Reduce resource use, improve durability, reduce wasting of materials during production and optimise operation, e.g. through automation Loop Remanufacturing, recycling and recovery of useful materials and components Virtualise Replace physical products with virtual services Exchange Replace materials and processes by others with less impact on resource use and the environment Source: Ellen MacArthur Foundation (2015) Growth within: a circular economy vision for a competitive Europe

3. Circular economy scenarios Translating circular economy activities to modelling inputs to use E3ME Food Construction Waste Electronics Motor Vehicles All Management Baseline Business as usual (continuation of historical trends; legislation adopted by Member States until December 2017) Moderate Moderate uptake of the circular economy (measures in Circular Economy package & moderate sectoral transformation) Ambitious uptake of the circular economy (moderate scenario + extensive sectoral transformation) Ambitious

4. Linking circular economy activities to jobs A relatively detailed treatment of the labour market is an area that distinguishes E3ME from most other macroeconomic models. E3ME includes econometric equation sets for employment (as a headcount), average working hours, wage rates and participation rates Outputs: circular economy impacts on employment for the selected sectors. The next task is to explore the implications for the shape of jobs and the skills required as a consequence.

5. Linking jobs to occupations and skills Qualitative analysis: understanding occupational shifts in employment as a consequence of the circular economy it is then possible to assess how the skills required may evolve both within sectors and between sectors Outputs: a set of quantitative results for the baseline and each scenario covering employment, split by occupation and by basic skill group.

Outcomes of the study (in progress) A set of policies designed to move Europe towards a more circular and resource efficient economy. A set of likely economic and labour market impacts from implementing these policies. A set of remedial (labour market) policies that could mitigate any negative impacts that are found and support the effective growth of a circular and resource efficient economy in line with anticipated future scenarios.

'Socio-Economic, Environmental and Regional Aspects of a Circular Economy' Modelling the impact of circular economy on the labour market Thank you for your attention Dr Dora Fazekas <df@camecon.com> 19. 04. 2018.

Modelling circular economy measures via IO adjustment in E3ME