Methodology for Modelling Distributional Impacts of Emissions Budgets on Employment in New Zealand

50 Pages Posted: 5 Oct 2021

See all articles by Lynn Riggs

Lynn Riggs

Motu Economic and Public Policy Research Trust

Livvy Mitchell

Motu Research

Date Written: October 4, 2021

Abstract

Efforts to reduce emissions to counter climate change are expected to have both costs and
benefits, and these effects are likely to be unevenly distributed across the population. Hence, we
developed the Distributional Impacts Microsimulation for Employment (DIM-E) to examine the
potential distributional employment impacts for different mitigation options to reduce
greenhouse gas emissions. DIM-E is comprised of two main components: the first component
estimates industry-level employment effects, and the second simulates the characteristics of
impacted workers and jobs. We based DIM-E on results from a computable general equilibrium
(CGE) model, C-PLAN, and applied them to more detailed employment information in order to
better understand the extent to which industries, jobs and workers are likely to be impacted by
the different pathways. It is possible, however, for DIM-E to be used to analyse any policy
scenario and its baseline using employment indices and similar employment information. In this
paper, we describe DIM-E in the context of the initial case for which it was developed – to
analyse emissions budgets for greenhouse gasses to be set by the New Zealand government for
three time periods (2022-2025, 2026-2030, and 2031-2035). We also provide a sampling of
results from this initial case in order to put the methodology into context. Hence, we show that
DIM-E can be used to examine changes in employment trends due to policy changes as well as
the different types of workers that are most likely to be affected by the reallocation of
employment across industries. We found that the DIM-E results produced for the initial case
were in line with previous research in this area – the overall net industry employment effects
were predicted to be relatively small, though some industries will be more affected than others
especially in the short- and medium-term. Moreover, very few worker groups would be
negatively affected (in terms of the number of jobs) by any of the proposed mitigation options
especially over the long term.

Keywords: Environmental Economics, Climate Change Mitigation, Distributional Impacts of Employment

JEL Classification: J01, Q52, R11

Suggested Citation

Riggs, Lynn and Mitchell, Livvy, Methodology for Modelling Distributional Impacts of Emissions Budgets on Employment in New Zealand (October 4, 2021). Available at SSRN: https://ssrn.com/abstract=3936126 or http://dx.doi.org/10.2139/ssrn.3936126

Lynn Riggs (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Livvy Mitchell

Motu Research ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

HOME PAGE: http://https://www.motu.nz/about-us/people/livvy-mitchell/

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