Job losses and political acceptability of climate policies : why the ‘job-killing’ argument is so persistent and how to overturn it

Political acceptability is an essential issue in choosing appropriate climate policies. Sociologists and behavioural scientists recognize the importance of selecting environmental policies that have broad political support, while economists tend to compare different instruments first on the basis of their efficiency, and then by assessing their distributional impacts and thus their political acceptability. This paper examines case-study and empirical evidence that the job losses ascribed (correctly or incorrectly) to climate policies have substantial impacts on the willingness of affected workers to support these policies. In aggregate, the costs of these losses are significantly smaller than the benefits, both in terms of health and, probably, of labour market outcomes, but the losses are concentrated in specific areas, sectors and social groups that have been hit hard by the great recession and international competition. Localized contextual effects, such as peer group pressure, and politico-economic factors, such as weakened unions and tightened government budgets, amplify the strength and the persistence of the ‘job-killing’ argument. Compensating for the effects of climate policies on ‘left-behind’ workers appears to be the key priority to increase the political acceptability of such policies, but the design of compensatory policies poses serious challenges. Key policy insights Public perception of, and support for, climate policies is substantially reduced in the presence of large negative shocks, especially job losses. Climate policies can be perceived as negative for employment, especially in areas where polluting industries represent a large share of employment and in occupations and sectors already damaged by globalization and automation. Policymakers should distinguish between small and large distributional effects of climate policies, and find the appropriate combination of revenue recycling schemes, industrial and retraining policies as well as compensation packages to increase the support for such policies.