Environmental Goods and Services Sector: employment and value added

Briefing Last modified 19 Dec 2018
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Environmental Goods and Services Sector: employment and value added

Indicator

EU indicator past trend

 

Selected objective to be met by 2020 

Indicative outlook
of the EU meeting
the selected
objective by 2020

Employment and value added in the environmental goods and services sector (EGSS)

Employment in the EGSS


Green triangle: improving trend

Value
added in the EGSS

Green triangle: improving trend

Promote a larger market share of green technologies in the Union and enhance the competitiveness of the European eco-industry — 7th EAP


Stable or unclear trend

Overall employment and value added increased over the examined period of 2003-2014, although since 2011 growth in the sector’s value added slowed and employment creation stagnated. The 2020 prospects of continued growth and employment creation in the sector are uncertain and dependant on the sector competing with equivalent sectors in China and the USA, and continuing ambitious renewable energy and green growth policies in Europe

For further information on the scoreboard methodology please see Box I.3 in the EEA Environmental indicator report 2017


 The Seventh Environment Action Programme (7th EAP) calls for strengthening the market share of green technologies and enhancing the competitiveness of eco-industries by 2020. Overall, over the 2003–2014 period, the environmental goods and services sector (EGSS) has grown faster than the rest of the EU economy, in terms of both employment and value added. The EGSS value added grew by 54 % and the employment by 41 % between 2003 and 2014. The main driver was growth in the renewable energy sector while an increase in public sector spending on green infrastructure played a role too. Since 2011 EGSS growth in value added slowed and employment creation stagnated as a result of increasing global competition and a reduction in domestic investments in renewable energy. The EGSS will need to retain global competitiveness to achieve the 2020 7th EAP objective. This could be aided by continuing ambitious renewable energy and green growth policies in Europe.

Setting the scene 

The 7th EAP (EU, 2013) calls for strengthening the market share of green technologies in the European Union and enhancing the competitiveness of European eco-industries. This will not only reduce the environmental pressures arising from economic activities but could also have important socio-economic benefits in terms of value added and employment. This briefing presents trends in value added and employment in the EGSS. The 7th EAP reflects the objectives of the Europe 2020 growth strategy towards a sustainable economy (EC, 2010), including growing employment in the green economy (EC, 2012). In the context of globalisation and technological change, the green economy offers potential for growth. Europe as a global leader in the development of environmental goods and services has significant potential for exporting this expertise (EC, 2015a).

Policy targets and progress

The increased awareness of the need to combat environmental pollution and preserve natural resources as well as obligations to comply with the environmental acquis has led to an increase in the supply and demand of environmental goods and services, i.e. products to prevent, measure, control, limit, minimise or correct environmental damage and resource depletion.

The Europe 2020 strategy does not include quantitative targets for increasing employment or for output from the EGSS. Nevertheless, the EGSS’s environmental–economic accounts enable trends in headline macroeconomic indicators for the EGSS, such as value added and employment to be reported, providing information on progress towards a green economy. The EGSS encompasses environmental protection activities — related to preventing, reducing and eliminating pollution and any other degradation of the environment — and resource management activities — which include management of energy resources (renewable energy production and equipment and installations for heat and energy saving).

Figure 1. Employment and value added in the EU environmental goods and services sector (EGSS) compared with the whole economy

 

Note: The GDP and EGSS value added was deflated to 2010 values using the GDP deflator. 

Figure 1 shows that, on average, since 2003, the EGSS has seen faster growth in employment and value added than the total EU economy. The sector’s contribution to gross domestic product (GDP) grew from 1.5 % in 2003 to 2.1 % in 2014, while employment in the EGSS grew from 3.0 million full-time equivalents to 4.2 million over the same period. 

Growth in both environmental protection and resource management activities has been strong but has been particularly high in the resource management area, whose value added grew from EUR 50.7 billion in 2003 to EUR 117.3 billion in 2014 (at 2010 prices), an increase of 133 %. The renewable energy sector was the key driver in the growth of the resource management area — the value added of the renewable energy sector increased by 179 % over the period — while an increase in products for energy and heat savings also played a key role. The increase in value added of the environmental protection activities over the same period was rather moderate - 25% between 2003 and 2014. Although the environmental protection activities still represent the major element of the EGSS (EUR 156.7 billion in 2014 at 2010 prices), the relative contribution of these activities in the EGSS growth has considerably decreased over time.

EU employment in environmental protection and resource management activities was estimated at 4.2 million full time equivalent employees in 2014 (Figure 2). Employment trends were mainly driven by the growing importance of activities that manage energy resources, in particular the production of energy from renewable sources, the production of wind and solar power stations, and equipment and installations for heat and energy saving (Eurostat, 2017).

Figure 2. Employment by activity in the EU environmental goods and services sector

 

Note: The ‘electricity, water and waste’ category includes: electricity, gas, steam and air conditioning supply; water supply; sewerage, waste management and remediation activities. 

The expansion of the EGSS, which continued at a similar pace even in the years immediately after the 2008 economic downturn, partially resulted from innovation and Europe’s competitiveness in the global market, but was also supported by public spending on environmental protection and renewable energy (Görlach et al., 2014; AIRS_PO2.13, 2017). Some of the most successful government interventions have been investment support schemes, which have provided investors with a high degree of investment certainty. Especially in difficult economic times, governments can play a significant role in supporting private investment in the EGSS by guaranteeing the certainty needed by investors (Görlach et al., 2014).

Despite the successes of the sector, recent trends are not so positive, with employment creation stagnating and growth in value added having slowed in the sector since 2011. This may be explained by increasing competition from the United States and China (Görlach et al., 2014). This can also be explained by a decrease in domestic investments in renewable energy as a result of ongoing uncertainty on the future of support mechanisms and lower investment capacity in some EU Member States (Frankfurt School-UNEP Centre/BNEF, 2016) as well as because of a slow down by some Member States that have already met or are about to meet their 2020 renewable energy targets (AIRS_PO2.6, 2017). In 2014, EU investment in renewable energy sources was 51 % of the value (in current prices) of its 2011 investment, albeit the investment levels increased slightly (by 6 %) from 2013 to 2014 (Frankfurt School-UNEP Centre/BNEF, 2017) (AIRS_PO2.6, 2017). Another reason for the decrease in the value of the EU investment in renewables is the decline in recent years of the production costs of generating energy from renewable sources which brought down the investment costs (AIRS_PO2.6, 2017). 

Overall, the future prospects for growth of the EGSS remain uncertain and are strongly dependent on continuing ambitious renewable energy and green growth policies in Europe and how these impact on competition with the United States and China.

The overall increase in employment and value added in the EGSS sector is a positive development. However, a greener economy is not inclusive and socially sustainable by default, and the transition phase is likely to entail some challenges, particularly within certain sectors and certain types of jobs. Consequently, a comprehensive approach is needed that ensures that green jobs are also decent jobs that contribute to social inclusion (ILO, 2008).

Outlook beyond 2020 

An expanding EGSS is a key factor in achieving low-carbon growth decoupled from resource use, as envisaged in the 7th EAP. Policies on energy efficiency and renewable energy (EC, 2015b) and waste recycling (EC, 2015c) cover a period beyond 2020, suggesting that there could be long-term growth in the EGSS. Further expansion of the EGSS could be assisted through ambitious renewable energy and green growth policies at the EU and national levels but also via more direct assistance such as investment support schemes that provide investors with a high degree of investment certainty.

About the indicator 

This briefing uses data from the EGSS account, which is a module of the European environmental–economic accounts. Environmental accounts analyse the interaction between the economy and the environment by organising environmental information in a way that is consistent with national accounts. The EGSS is defined as that part of a country’s economy that is engaged in producing goods and services that are used in environmental protection activities and resource management either domestically or abroad. The income created by the EGSS is expressed in terms of gross value added (at 2010 prices), which is the difference between output and intermediate consumption. Employment in the EGSS is expressed in terms of full-time equivalent jobs.

The data are broken down by industry (e.g. services, construction, etc.); environmental protection class (e.g. wastewater management, waste management, protection of biodiversity and landscapes); and resource management class (e.g. water management, energy resource management). Being still at an initial stage of its development at the EU level, the EGSS does not cover a number of resource management economic activities, e.g. the management of forest resources, the management of wild flora and fauna and research and development on resource management, as well as economic activities that focus on the use of natural resources, e.g. the use and extraction of minerals and hunting.

European environmental accounts are established by Regulation (EU) No 691/2011 on European environmental economic accounts. From 2017, reporting of data on the EGSS will be mandatory and standardised. Current data are a combination of Eurostat estimates with some Member State data reported through voluntary surveys. There are some comparability issues at country level in terms of coverage, time series availability and the use of different classifications. For more information please see Eurostat, 2016a, 2016b, 2016c and 2017.


Footnotes and References

EC, 2010, Communication from the Commission ‘Europe 2020, A strategy for smart, sustainable and inclusive growth’ (COM(2010) 2020 final).

EC, 2012, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘Towards a job-rich recovery’ (COM(2012)173 final).

EC, 2015a, ‘The Environmental Goods Agreement (EGA): Liberalising trade in environmental goods and services’, European Commission press release, 8 September 2015 (http://trade.ec.europa.eu/doclib/press/index.cfm?id=1116) accessed 25 April 2017.

EC, 2015b, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank ‘A framework strategy for a resilient energy union with a forward-looking climate change policy’ (COM(2015) 080 final).

EC, 2015c, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘Closing the loop — An EU action plan for the circular economy’ (COM(2015) 614/2).

EU, 2013, Decision No 1386/2013/EU of the European Parliament and of the Council of 20 November 2013 on a General Union Environment Action Programme to 2020 ‘Living well, within the limits of our planet’, Annex A, paragraph 43 (OJ L 354, 28.12.2013, p. 171–200).

Eurostat, 2016a, 'Production, value added, employment and exports in the environmental goods and services sector — Eurostat metadata' (http://ec.europa.eu/eurostat/cache/metadata/en/env_egs_esms.htm) accessed 21 June 2017.

Eurostat, 2016b, ‘Environmental goods and services sector accounts Handbook 2016 edition’, Eurostat Unit E2 (http://ec.europa.eu/eurostat/documents/3859598/7700432/KS-GQ-16-008-EN-N.pdf/f4965221-2ef0-4926-b3de-28eb4a5faf47) accessed 3 October 2017.

Eurostat, 2016c, ‘Environmental goods and services sector accounts Practical guide 2016 edition’, Eurostat Unit E2 (http://ec.europa.eu/eurostat/documents/3859598/7741794/KS-GQ-16-011-EN-N.pdf/3196a7bc-c269-40ab-b48a-73465e3edd89) accessed 3 October 2017.

Eurostat, 2017, ‘Statistics explained — Environmental economy – employment and growth’  (http://ec.europa.eu/eurostat/statistics-explained/pdfscache/41606.pdf) accessed 4 October 2017.

Görlach, B., Porsch, L., Marcellino, D. and Pearson, A., 2014, How crisis-resistant and competitive are Europe’s eco-industries, Ecologic Institute, Berlin (http://docplayer.net/9826167-How-crisis-resistant-and-competitive-are-europe-s-eco-industries.html) accessed 25 April 2017. 

ILO, 2008, Green jobs: Towards decent work in a sustainable, low-carbon world, UNEP/ILO/IOE/ITUC (http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication/wcms_098504.pdf ) accessed 19 May 2017.

Frankfurt School of Finance and Management, UNEP Collaborating Centre and Bloomberg New Energy Finance, Frankfurt, 2016. Global trends in renewable energy investment 2016 (http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2016) accessed 19 May 2017. 

Frankfurt School of Finance and Management, UNEP Collaborating Centre and Bloomberg New Energy Finance, Frankfurt , 2017. Global trends in renewable energy investment 2017 (http://fs-unep-centre.org/sites/default/files/publications/globaltrendsinrenewableenergyinvestment2017.pdf) accessed 19 May 2017. 

 

AIRS briefings

AIRS_PO2.13, 2017, Environmental protection expenditure, European Environment Agency

AIRS_PO2.6, 2017, Renewable energy sources, European Environment Agency


Environmental indicator report 2017 – In support to the monitoring of the 7th Environment Action Programme, EEA report No21/2017, European Environment Agency

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