sou · GWB3105EN · 2009-01-01 00:00:00 — Note: Migration intensity is estimated as the number of migrants in relation to the population in respective age groups. Employment catchment areas are areas considered to be independent or self-supporting as to job and labour availability. Source: Appendix 3 to the Long-Term Survey 2008 (SOU 2007:35). The education capacity and the vacancy ratio were the most important factors in the extent of the migration to and from different employment catchment areas.153 The importance of unemployment levels for migration patterns increased between the periods 1986 to 1990 and 1998 to 2004 while the importance of education capacity and vacancies decreased. High unemployment thus means a high net outward migration from a region. For the period 1990 to 2005, there was a significantly higher probability of migration by both unemployed single men and women only during the years 1990 to 1992. 153 Appendix 3 to the Long-Term Survey 2008 (SOU 2007:35). The Long-Term Survey 2008 Economic Change and Adaptability women, but also for men, unemployed peoples relative probability of migration appears to have decreased during this period. Unemployment thus appears to be more important in explain- ing migration between regions while the relative probability of migration by unemployed people has decreased over time. The explanation may be that groups other than the unemployed, parti- cularly students, are primarily responsible for the migration. As to commuting, there was a significant and rising probability of single unemployed persons commuting to and from employ- ment catchment areas from 1990 to 2004. Unemployed men are about twice as likely as unemployed women to commute. geographic mobility is desirable but may be difficult to achieve. According to Labour Force Surveys, approximately 60 per cent state that they would not migrate in the event of unemploy- ment, even if they could immediately get an equivalent job else- where, if the alternative was to wait a year for a job in their current place of residence.154 Reasons for unwillingness to migrate may range from inadequate financial incentives to the social situation. Changing occupations or employers is the usual way of adapting The individual can adapt to new conditions by changing employer or occupation. Mobility between employers seems to be more important than geographic mobility in the adjustment process. A survey of the percentage of the employed who changed employers from 1972 to 2002 found a relatively high degree of stability when cyclical fluctuations were taken into account (figure 5.8).155 During economic booms, about 10–12 per cent of employees changed employers and during slowdowns about 6–8 per cent did. The majority of those changing employers stayed in the same industry.156 The period of employment with the current employer increased between 1968 and 1991, after which it declined somewhat and by 2000, it was at the same level as in 1980.157 The increase was greater among women than among men. This is probably because the 154Furåker, B. [2004]. There are Surveys for 1991, 1993 and 2001. 155Israelsson, T., Strannefors, T. & , H. [2003]. 156Appendix 7 to the Long-Term Survey 2008 (SOU 2008:21), Swedish Business Develop- ment Agency () [2000] and [2006]. 157le Grand, C., Szulkin, R. & , M. [2001]. Economic Change and Adaptability The Long-Term Survey 2008 women who entered the public sector in the 1970s and 1980s stayed with the same employer. The percentage of those employed longer than 10 years increased throughout the period. There has thus been a polarisation between those with relatively short periods of employment and those with relatively long periods. Figure 5.8 Change of employer related to the number of employees, 1972–2002 Source: , T., Strannefors, T. & , H. [2003]. 5.5.3The policy must take a broad approach to facilitate adjustment The role of the public sector is to support the ability of both individuals and companies to deal with change. It draws up the overall regulatory framework in a great many areas that individuals and companies must take into consideration. On one hand the public sector attempts to steer people away from some behaviour, for example, the Employment Protection Act (LAS) makes it more difficult to dismiss those who have been employed for a long time, generally older employees. On the other hand, the public sector The Long-Term Survey 2008 Economic Change and Adaptability tries to steer people towards certain behaviour, for example, deductions for work-related encourage geographic mobility. Different parts of public sector regulations may have divergent effects. This is due in part to the risk of various kinds of failures in all public regulations. This is often due to the wish to achieve several goals simultaneously. For economic change to succeed, individuals need to be adaptable. Since technological developments and internationali- sation mean that new industries and occupations are exposed to competition, broader groups need to be more adaptable. This should apply regardless of whether or not the pace of change seen in the economy as a whole increases. A well-functioning policy for adjustment must take a broad approach and cover most policy areas. A number of factors affect adaptability, which the public sector can influence:158 unemployment insurance and other transfer systems the level of education and the education system the capacity for entrepreneurship and innovation New business starts are an important part of the ability to adjust to change in the economy. New business starts are an important, but not the only factor in achieving an innovative economy. A strategy for entrepreneurship must include both existing and new enter- prises. Policies for entrepreneurship do not concern support for small and medium-sized companies. Rather they deal with creating a dynamic economy in which small and medium-sized companies play an important part.159 Measures to improve the business climate should be general. A general enterprise policy means that different types of companies are treated similarly, i.e. the framework conditions for entrepre- neurship are in principle to be identical regardless of the type of 158See among others Kongsrud, P.M. & Wanner, I. [2005]. 159Hoffman, A. [2007]. Economic Change and Adaptability The Long-Term Survey 2008 Entrepreneurship and production can then take place under the forms that are the most rational and efficient. Different types of enterprise may be appropriate for different types of production. Structural change causes the composition of the optimal enterprise stock to vary over time. The concept of change has no clear-cut definition. It is relevant to study the change both between industries and within industries. The pace of change depends on how this pace is defined. There are many indications that the pace of structural change was higher, but not increasing, during the 1990s and 2000s compared with the 1980s. However, different measures yield entirely different results when the period after 1990 is compared with the 1970s. Change has two components: jobs lost and jobs created. At the same time, the debate often focuses on the jobs lost instead of on the jobs created. The policy for change should not be aimed at preventing jobs from disappearing, but on creating the conditions for new job opportunities and a well-functioning adjustment to them. The negative effects from the low pressure to restructure on productivity growth in the 1980s show that aiming for a lower pace of change is not a good solution. At the same time, it is difficult to try to specify precisely how high the pace of economic change should be, nor is it desirable. interesting is how change is handled at the individual and the enterprise levels. The lower percentage of people having jobs long after the crisis of the 1990s may be interpreted to mean that there have been problems in the way that change has been handled. Given that job turnover is higher in the service sector than in manufacturing, a continued expansion of the service sector may mean a higher general job turnover in the economy. This in turn requires more adaptability in the economy, both at the enterprise and the individual level. A policy to increase adaptability in the economy must take a broad approach and cover several policy areas: the labour market, housing, research, infrastructure, taxes, education, etc. To increase individuals adaptability, there should be both more geographic mobility and more mobility between employers. The Long-Term Survey 2008 Economic Change and Adaptability employers will very likely continue be of greater importance in the years ahead. For change to succeed at the individual level, both incentives and adaptability are called for. For the individual, the work-first principle includes both requirements and opportunities. Given relatively high benefit levels in the income insurance schemes, there must be strict requirements to take available jobs. At the same time, individuals must have the skills needed to perform the available tasks. Chapter 3 discussed inefficiencies in the Swedish education system. To enable everyone to improve their ability to adapt to new situations, more people must complete upper secondary school and the pursuit of university studies need to be more efficient. 6Energy, Climate and Economic Growth A well-functioning energy supply is crucial to long-term economic growth. At the same time, energy consumption often has a nega- tive impact on the environment. Carbon dioxide emissions from burning fossil fuel that add to the greenhouse gas effect are one obvious example. The national and international aim is therefore to limit emissions of carbon dioxide and other gases affecting the climate and indirectly limit the use of fossil fuels. Reducing carbon dioxide emissions using policy instruments aimed at changing the energy supply has repercussions in the economy as it affects energy prices. Since energy is used in so many parts of society, changes in energy prices probably have a greater impact on the for economic growth than changes in the price of any other product. In recent years, international fossil fuel prices have risen, partly as a result of rapid economic growth in some developing countries. Forecasts also indicate that global energy consumption will continue its rapid growth.161 Rising prices on fossil fuels and the threat of global due to greenhouse gas emissions have increased the focus on the energy issue. The need for a secure and environmentally friendly energy supply is increasingly attracting attention. The close connection between energy consumption and economic develop- ment on the one hand and energy consumption and greenhouse gas emissions on the other hand means that climate policy commit- ments will affect the for economic growth. The climate issue has a long-term perspective and thus the design of the policy may be important for economic growth for a long time to come. The Kyoto Protocol created an international framework to manage the climate problem. It emphasised cost efficiency with 161 IEA [2007]. Energy, Climate and Economic Growth The Long-Term Survey 2008 international emissions trading as one key element. At the same time, a large number of goals and policy instruments linked to the climate problem have been introduced at the regional, national and local levels that partly risk counteracting international cost efficiency. This may lead to the implementation of measures with substantially higher costs than are necessary as the estimates in the Long-Term Survey 2008 also illustrate. The estimates also indicate that a well-designed policy may bring about substantial reductions in global emissions at a relatively low cost. 6.1An integrated climate and energy policy The Earths climate has become warmer. The average global temperature has increased by over 0.7 degrees in the last 150 years and is currently rising at close to 0.2 degrees every decade. The concent- ration of greenhouse gases in the atmosphere has meanwhile increased by more than 50 per cent. There is overwhelming agreement that the rise in mean temperature is directly linked to the increased concent- rations of greenhouse gases, above all carbon dioxide, which result from burning fossil fuels.162 In addition to a warmer climate, the consequences of the intensified greenhouse gas effect are expected to include an increase in sea levels, shrinking , more extreme weather events, greater risk of flooding, reduced food production and access to fresh drinking water in some areas, and losses in biological diversity. The cost of doing nothing about the growing emissions has been estimated to amount to between 5 and 20 per cent of global GDP. 163 These costs are not evenly distributed throughout the world. Instead they are expected to have a greater impact on the poorest countries.164 162IPCC [2007a]. The United Nations Intergovernmental Panel on Climate Change (IPCC) was established in 1988 with the task of thoroughly investigating human interference with the global climate systems. Since its first report in 1990, the Panel has continued to provide information corroborating and reinforcing the image that global is mostly caused by greenhouse gas emissions. 163Stern, N. [2007]. 164The direct effects of climate change on the Swedish economy are expected to be twofold with equally large items generally on both the income and cost side until 2100. The costs are first of all associated with an increased risk of serious flooding affecting and infrastructure, coast erosion and damages linked to landslides and avalanches. The income side includes more hydroelectric power potential and longer growing seasons (SOU 2007:60). The Long-Term Survey 2008 Energy, Climate and Economic Growth 6.1.1The international framework is now in place An important step in limiting climate change was taken in 1992 when the UN Framework Convention on Climate Change was signed in . The Convention established a number of overall principles for international climate work, but it did not contain any quantitative or time-limited measures for the signa- tories. At the meeting in Kyoto in 1997, the Kyoto Protocol specified the size of the reduction in greenhouse gases to be implemented by a number of industrial countries during the first commitment period, 2008–2012. The target for the Protocols first commitment period is an average reduction of industrial countries total emissions of carbon dioxide and five other greenhouse gases by at least 5.2 per cent from the 1990 level.165 The agreement also defines how the credits for the absorption of greenhouse gases in and other vegetation (sinks) can be counted for the period. The Kyoto Protocol came into force in 2005 and thus became binding on the parties that had ratified it.166 Total commitments under the Kyoto Protocol have been divided between the parties in the form of emissions quotas. The parties can in various ways trade these quotas by using the flexible mechanisms; see fact box 6.1. The Kyoto Protocols commitments do not, in principle, say how large individual parties greenhouse gas emissions may be. Instead, they express how large a reduction in global emissions each signatory must contribute to. The Kyoto Protocol can therefore be likened to an international emissions trading scheme in which the target established is for total emissions.167 The EU 15 together is a party to the Kyoto Protocol and has been given an annual emissions quota for 2008–2012 equivalent to 92 per cent of 1990 levels. Based on this commitment, the burden- sharing agreed in the EU means that has got an annual quota equivalent to 104 per cent of 1990 levels.168 Work is currently under way in the UN Climate Convention to achieve a climate agreement to take over when the first commitment period within the Kyoto Protocol framework expires. The , which is one of these countries, has, however, chosen not to carry out the agreement. 166UN [1998]. 167See, for example, , B. [2007]. 168European Commission [2002]. Energy, Climate and Economic Growth The Long-Term Survey 2008 Fact Box 6.1 The Kyoto Protocols three flexible mechanisms The Kyoto Protocol specifies a ceiling for participating industrial countries total emissions. These emission allowances have been divided between the parties via the allocation of emissions quotas, the Assigned Amounts. To meet these commitments in a cost-effective , flexible mechanisms have been created by which the parties to the Protocol can transfer emissions allowances among themselves. The mechanisms provide a geographic flexibility as to where the emissions reductions may be implemented without this trade affecting total emissions. International emissions trading (IET) International emissions trading makes it possible for parties with emissions quotas to buy and sell these among themselves. The mechanism for joint implementation (JI) Joint Implementation makes it possible for one country with quantitative commitments on emissions limitations to acquire emission reduction units (ERU) by investing in projects reducing emissions in another country with similar commitments. Joint implementation in practice entails a redistribution of emissions allowances between two countries with emission limitation commitments. The Clean Development Mechanism (CDM) The Clean Development Mechanism makes it possible for countries with quantitative commit- ments limiting emissions to invest in emissions reducing projects in other countries that do not have such commitments and get credit for part of the estimated emissions reductions, Certified Emissions Reductions (CER). This provides incentives to reduce emissions even in countries without any emissions targets. 6.1.2Many regional and national targets and policy instruments In addition to the international framework provided by the UN Climate Convention, there are a large number of targets specified that aim at limiting greenhouse gas emissions at the national and regional level. The EU has established a target of reducing EU greenhouse gas emissions by at least 20 per cent by 2020 compared with the 1990 level. The EU is to achieve this climate target regardless of how global climate negotiations unfold. The Long-Term Survey 2008 Energy, Climate and Economic Growth industrialised countries (and some advanced developing countries) make comparable commitments, the EU goal will instead be to reduce greenhouse gas emissions by 30 per cent by 2020.169 In addition to this climate target, the EU has also established targets for energy consumption. The EU has stipulated that the percentage of renewable energy is to be at least 20 per cent of final energy consumption by 2020 and that energy is to be used at least 20 per cent more efficiently. Furthermore, renewable energy in the transport sector is to come to a minimum of 10 per cent in all Member States by 2020, given that certain criteria have been met. In 2002 established its own national target for green- house gas emissions.170 Under this target, average annual emissions for 2008-2012 are not to exceed 96 per cent of the 1990 level. The possibilities of increasing emissions (relative to 1990), which resulted from the negotiations within the EU, will thus not be used. The target is formulated so that it is the actual emissions in that are to decrease, and therefore the use of flexible mechanisms cannot be included. Work is currently progressing to draw up a new Swedish climate target with 2020 in view. There is not, however, any target for 2030, which is the outer year for the scenarios in the Long-Term Survey 2008.171 In addition to the climate policy objectives, also has energy policy objectives. The long- and short-term energy policy objectives are to secure a reliable supply of electricity and other forms of energy at internationally competitive prices. In 2003 an electricity certificate system was introduced with the aim of raising the amount of renewable electricity to a specified level by 2010. The system was later extended to 2030 and given a more ambitious aim.172 In addition, there are targets for the expansion of wind power and the percentage of biofuels in relation to the amount of gasoline and diesel used. In many instances meeting energy policy objectives may push carbon dioxide emissions in the right direction, so that climate targets are achieved and vice versa. But in some instances the 169European Council [2007]. 170Government 2001/02:55. 171However, proposed that one aim should be a reduction in greenhouse gas emissions for of at least 75-90 per cent by 2050 compared with the 1990 level (SOU 2008:24). 172The target is to increase the amount of renewable energy by by 2010 compared with the 2002 level, and by by 2016. See Government Bills 2001/02:143 and 2005/06:154. Energy, Climate and Economic Growth The Long-Term Survey 2008 reverse may hold true. Measures such as the expansion of nuclear power and the capture and storage of carbon dioxide can help achieve the climate target, but do not help achieve energy policy targets. 6.2Economic growth has increased more than energy consumption and carbon dioxide emissions The relationship between economic growth and energy consump- tion has been much discussed and analysed since the energy crises of the 1970s and 1980s. recently, the discussion has once more come to the forefront in connection with the design of climate policy measures. The target for reduced energy consump- tion is usually justified by the need to curtail carbon dioxide emissions. If emissions and energy consumption are closely linked, these targets coincide, as is the case when the energy supply is based on fossil fuels. If in contrast, the energy supply comes, for example, from renewable fuels, the difference between these targets is greater. The connection between energy use and carbon dioxide emissions should therefore be carefully considered in connection with the formulation of an economically effective climate policy. 6.2.1The composition of energy consumption is of crucial importance to carbon dioxide emissions As with the consumption of most goods and services, energy consumption usually grows when the economy grows. At the same time, consumption is affected by the technological developments and the structural change that are constantly taking place in the economy (see chapters 4 and 5). Technological developments and structural change are in turn dependent on the cost of energy consumption, i.e. the price of energy raw materials, energy taxes, etc. The growth in carbon dioxide emissions is closely linked to energy consumption, but it also depends on the composition of that consumption since different energy have different carbon contents. The Long-Term Survey 2008 Energy, Climate and Economic Growth Energy consumption has increased but energy intensity has decreased In recent decades, global energy consumption has grown at a clearly lower rate than economic growth. Between 1970 and 2006, global energy consumption increased by almost 120 per cent, an annual average growth rate of 2.2 per cent (figure 6.1). The increase has been almost continuous except in connection with the oil price shocks of 1973 and 1979, which led to reduced consumption for a few years. Since 1970 Swedish energy consumption has grown considerably more slowly than global consumption has and a more slowly than consumption in the countries as a whole. Figure 6.1 Primary energy consumption, 1970–2006 and world total include only oil, coal, gas, nuclear power and hydroelectric power. Source: Budget [2007] and the [2007]. During the same period, global real GDP growth exceeded 200 per cent. , average global energy intensity (energy consumption per unit of GDP) has declined by close to 1 per cent a year (figure 6.2). Energy, Climate and Economic Growth The Long-Term Survey 2008