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The Shift to the Green Economy Leads to Big and Small Transitions


The global shift to net zero will require major structural changes in economies, as well as extensive change in daily lives. The scale of the transition is unprecedented: from the rush to source critical raw materials to the reconfiguration of global supply chains; from the rise of green skills in the workforce to the development of environmentally sustainable housing markets.

The EBRD Transition Report 2023-24: Transitions big and small, published today, offers revealing insights into the way macro-level trends leading to carbon neutrality impact the types of job sought, household management and, ultimately, the perceived level of happiness in the regions where the Bank operates.

EBRD Chief Economist Beata Javorcik said: “The change and upheaval that stems from these trends will affect people’s lives for the foreseeable future. Policymakers will need to establish a deep understanding of those effects in order to plan future stages of the green transition, as individual attitudes will both shape and be shaped by that transition process. […]

“The success of the green transition will depend on winning their hearts and minds as we continue our journey towards a cleaner future. If there is one thing we have learned from 30 years of transition in the EBRD regions, it is that reforms will not last unless they have broad-based support.”

Big transitions

Climate change, technological development and geopolitical tensions are all reshaping global supply chains in significant ways.

The production of green and digital technologies requires reliable access to critical raw materials. Several EBRD economies, including the Czech RepublicMoroccoTajikistan and Türkiye, are major producers or home to relatively large reserves of raw materials used for solar power and the fuel cell sector. However, establishing new mines and refining facilities will require considerable time and investment.

Meanwhile, geopolitical tensions and the fragmentation of global trade are transforming value chains in a way that offers a potential opportunity to increase exports from economies in the EBRD regions.

Small transitions

Happiness

Using rich data recently collected by the EBRD and the World Bank through the fourth Life in Transition Survey, the Transition Report reveals that average life satisfaction in the Bank’s regions has risen further since 2016. 

People in Central Asia are the happiest, followed by notably increased scores in south-eastern Europe and eastern Europe and the Caucasus.

Overall, the upward trend probably reflects rising incomes, a shift towards more pleasant and higher-skilled jobs and improvements in health.

Jobs

In the labour market, the green economy is increasing demand for workers with green skills (who are paid an extra 4 per cent, on average). However, the ability to move from brown to green jobs remains sluggish across the EBRD regions, partly because of the slow pace of green innovation.

Green policies affect different labour-market segments in different ways, potentially upending local job markets. For example, the loss of existing jobs in the most polluting manufacturing sectors is likely to be concentrated in specific regions. Also, lower-skilled workers tend to be more sceptical about the need for environmental policies.

Housing

Post-war housing blocks are still prevalent across many of the EBRD regions. Levels of home ownership remain high, but there is limited new construction and little social housing. 

Housing also has a substantial environmental footprint. Even though households consume less energy in emerging Europe, Central Asia and North Africa, residential emissions are on a par with advanced European comparators, partly reflecting a continued reliance on coal. However, there is scope for significant emission reductions through home improvements in insulation and metering.

Structural reforms

The annual publication also analyses progress on economic development and structural reforms, looking at whether economies are competitive, well governed, green, inclusive, resilient and integrated.

Over the last year, scores in the areas of inclusion and integration have increased substantially, while those for governance have declined. Across all areas, improvements have been concentrated mainly in central Europe, the Baltic states and south-eastern Europe, with declines observed in the southern and eastern Mediterranean, and eastern Europe and the Caucasus.

Source : ABRD