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Ecological Modernization,Environmental Policyand Employment. CanEnvironmental Protection andEmployment be Reconciled?Axel MarxPublished online: 14 Jul 2010.

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Innovation, Vol. 13, No. 3, 2000

Ecological Modernization, Environmental Policy andEmployment. Can Environmental Protection andEmployment be Reconciled?

AXEL MARX

ABSTRACT The paper examines the relationship between environmental policy and employment. Itargues that environmental policy probably has a positive effect on employment. To support this conclusionthe following arguments will be made: polluting companies, and hence employment in these companies,can be, but is not always, negatively affected by environmental policy; polluting companies do not moveto another country due to environmental policy; the ecosector is an important employment sector; and, thenet balance between job losses and gains due to environmental policy is positive. This conclusion isconditional on certain assumptions concerning the functioning of labour markets, the improvement inenvironmental quality and the normative implications of the debate.

Introduction

Sustainable development has become an overarching policy aim. Many declarations ofgovernments include the term sustainable development; and much is written about howto de� ne the term. We de� ne sustainable development as a process which tries tominimize trade-offs which might occur between essential policy goals, such as economicef� ciency, employment, social justice, and environmental management.1 Stated differ-ently, sustainable development represents a process of reconciliation between economic,social and environmental policy goals.

This de� nition is consistent with the operationalization given to sustainable develop-ment by the theory of ecological modernization. ‘Ecological modernization’ is a discoursewhich recognizes the structural character of the environmental problems, but which,none the less, assumes that existing political, economic and social institutions can solvethe problem (Hajer, 1995, p. 25). To paraphrase Sabatier (1989, pp. 661–662), eco-modernization is a coming together of the ‘clean environment coalition’ with the‘economic feasibility coalition’. The former is a coalition united around a set of proposi-tions concerning the role of industry and the state with regard to environmental protection.These propositions include the conviction that markets are unable to deal with pollutionexternalities, as well as the assumption that the serious health problems created by theseexternalities would be ignored by state and local governments in their attempts to attractand retain industry. The economic feasibility coalition, on the other hand, is characterizedby a belief system that considers markets as the main promoter of economic welfare. Thisbelief system also mistrusts government involvement and regulations, insisting that thebene� ts of human health gains can be traded-off against the costs of making the necessarycapital and technical investments (see also Weale, 1992, pp. 71–72).

ISSN 1351-1610 print/ISSN 1469-8412 online/00/030311-15Ó 2000 Interdisciplinary Centre for Comparative Research in the Social Sciences

DOI: 10.1080/13511610020001793

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312 Axel Marx

The notion of ‘ecological modernization’ is usually used at two distinct levels. On theone hand, it is used as a theoretical concept for analysing the development of centralinstitutions, values and norms in modern societies to solve the fundamental problem ofthe ecological crisis.2 On the other hand, eco-modernization is used as a normativepolitical programme to direct environmental policy, and even for re-directing the wholestate–market relationship.3 In a political sense it thus refers to a policy strategy whichaims to modernize its way out of environmental problems, by means of technologicaldevelopments and institutional change. This modernization assumes that a solution forenvironmental problems can (to a degree) be reconciled with the pursuit of other societalgoals such as social justice, economic ef� ciency and employment. In other words, that thetrade-off between, for instance, environmental improvement and employment is minimalor non-existing or that the creation of employment and care for the environment can bereconciled. It is on this topic that we focus in this article.

In the � rst part of the paper, we present a brief introduction to the topic ofenvironment and employment. Secondly, we will proceed to argue, in � ve distinct steps,that environmental policy and regulation, as a response to environmental problems,probably creates more jobs than it destroys. In a third instance, we will highlight anddiscuss the (policy) implications of three important assumptions which are related to thearguments made before. Finally we will present a brief conclusion.

Environment and employment

Sometimes one can hear in the media the threat that jobs will be lost because ofenvironmental legislation. A much quoted case is Forks (Washington, USA), a loggingtown badly hit by both over-cutting and the spotted owl controversy. In this town youcould buy a bumper sticker that reads: ‘Are You an Environmentalist or Do you Workfor a Living?’ (White, 1996, p. 171).

The major aim of this paper is to analyse the relationship between environmentalpolicy and employment. The main question we want to answer is: does ecologicalmodernization, on balance, imply a loss of jobs? Or, alternatively, will a policy aimed atmodernizing our way out of environmental problems result in job losses?4 It is clear thatan ecologically modernizing environmental policy is only legitimate, on the political level,if it can be reconciled with other major policy goals such as reducing unemployment andincreasing employment.

An answer on the question can, to a large extent, be found in already existing studiesof employment effects of environmental policy.5 At least since the 1970s there has beena steady stream of environmental legislation and regulation in the industrialized coun-tries. Laws on wastewater management, air pollution, noise pollution, waste, naturalresources management, etc. have been issued. Research shows that these have affectedemployment one way or another (see also Doeleman, 1992). On the basis of thisresearch, and our own research in Flanders (Belgium), we would like to make thefollowing arguments:

1. Employment in polluting companies can be negatively affected by environmentalpolicy.

2. Employment in polluting companies is not always negatively affected by environmen-tal policy.

3. There is no strong relocalization effect due to environmental policy.4. The ecosector is a signi� cant labour market.

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Reconciling Environmental Protection and Employment? 313

5. The net balance between job gains and losses due to environmental policy is probablypositive.

Before we further develop these arguments we would like to state that, in general, onecan identify four important areas in which environmental policy in� uences employment.First of all, there are employment effects in private companies due to environmentalregulation. These are the most important effects and the most relevant for the discourseon ecological modernization. Secondly, there are employment effects due to an increasein public expenditure for environmental protection, for example, nature conservation,inspection, research, etc. Thirdly, there can be employment effects due to the implemen-tation of an ecological tax reform, which aims to shift the tax burden from labour ontoenvironmental pollution and the use of natural resources. Fourthly, there are employ-ment effects due to the integration of environmental priorities in other economic sectorssuch as agriculture, energy, tourism, and transport. It is too early to discuss genuineemployment effects of the latter two types, because there is too little empirical evidenceavailable to assess the impact of these possible policy shifts which still largely have tooccur.6 Therefore, in the remainder of this article, we focus on the � rst type of effects,as these are currently the most important ones.

Employment in polluting companies is negatively affected by environmental policy

There are indications that environmental policy negatively affects employment inpolluting companies. However, the empirical evidence is very sparse. Goodstein (1995)analysed for the USA how many people were laid-off and how many companies (withmore than 50 employees) had to close down owing to environmental regulation between1987 and 1990. He used a database which was set up to register the main reasons for� ring people. He concluded that environmental policy was responsible for only 0.1% ofthe layoffs during that period. In addition, only four companies a year closed downbecause of environmental regulation. This meant a loss of 648 jobs out of a total loss of504,112 jobs.

We found similar results for Flanders (Belgium) (see also Marx et al., 1999). We useda survey to measure, inter alia, how many companies (with more than � ve employees) hadto � re people and/or close down a unit because of environmental policy.7 Only onecompany � red people (in total 15 people) and four companies closed down a unit.However, the latter did not result in a direct loss of jobs. Hence, we found that in lessthan 1% of the cases was employment negatively affected by environmental policy.

However, these empirical results are to a certain degree misleading. Many studiesrecognize that negative employment effects occur, but that they are dif� cult to quantify.The main reason is that where negative effects occur, these are often the result of thenon-incidence of job creation as a consequence of environmental policy. In the contextof direct negative effects it is rather the potential loss of jobs and not so much the realloss of jobs which is at stake. As a result, companies which have to invest heavily inpollution control can have a loss of jobs due to environmental policy.

This becomes more clear when one looks at the effect of environmental policy oninvestments in companies. In our research we asked companies to indicate whether theycancelled or delayed investments in production due to environmental policy. Elevencompanies cancelled and 21 companies delayed (for at least one year) investments dueto the high investment costs of environmental pollution control, problems with permits,etc. This cancelling and delaying of investments had an effect on employment. However,it is very dif� cult to quantify this loss of jobs.

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314 Axel Marx

In general, expenditures for pollution control or pollution abatement costs, which area result of environmental regulation, can affect companies, and their employment base,negatively. Oates et al. (1993) found that there is a signi� cant negative relationshipbetween productivity and investment in pollution control. Hence, pollution controlexpenditure is a possible indicator of the burden of environmental regulation oncompanies. The pollution control expenditure as a proportion of total expenditure incompanies is for most OECD countries, for which there are reliable data, between 1 and2% (OECD, 1996a). Jaffe et al. (1995) found that in 1991 the operational expendituresfor pollution abatement for American manufacturing was 0.62% of total expenditure.For companies in the petroleum sector this was 1.8%. On average companies spend 1%of their total expenditure on pollution control and abatement. As a result environmentalregulation does not dramatically increase costs for companies. However, it does increasecosts and in certain cases (highly competitive markets) this can be signi� cant and resultin a negative effect on employment.

Employment in polluting companies is not always negatively affected by environmental policy

Employment in polluting companies is not always negatively affected by environmentalpolicy. Hence, employment does not always decrease in such companies. There are twodistinct aspects connected to this argument.

First, polluting companies have to invest in pollution control and abatement goods andservices. These goods and services need to be operated and monitored. For this, labouris needed. Hence, pollution control creates employment within polluting companies. InFlanders, we estimated that the total number of full-time employed people for pollutioncontrol and abatement in polluting companies was between 0.30 and 0.65% of the totallabour force. In absolute numbers this was between 2750 and 6850.8

In certain cases an internal substitution effect can occur. Pollution abatement andcontrol investments will cancel or delay production investment. As a result, the employ-ment connected to the production investment is replaced (substituted) by employmentconnected to pollution control. However, it must be clear that this internal substitutioneffect does not occur in all companies. Many companies invest in pollution control andin production. As a result, there is not always a crowding-out effect (i.e. substitutingproduction investment with pollution abatement and control investment) related toenvironmental regulation. In fact, on the basis of our research we can conclude that inmost cases there is no crowding-out effect related to environmental regulation.

Secondly, polluting companies may use environmental regulation as a competitivefactor. Here we arrive at the so-called Porter hypothesis. The Porter hypothesis statesthat there is a positive relation between strict environmental regulation and thecompetitiveness of polluting companies. In other words, that there is a win-win situationbetween environmental improvement and company policies. Environmental regulationwill force companies to innovate which will make them stronger and more up-to-date onthe market. This Schumpeterian (see for example Bhatnagar and Cohen, 1997) emphasison innovation (for instance new production processes) is one strategy which can result ina so-called win-win situation or double dividend. Other strategies can include: attemptingto save costs on environmental and natural resources expenditures; re-use naturalresources; invest sooner than is legally required (in order to spread environmental controlexpenditure over more years and hence reduce yearly costs); or obey stricter environ-mental standards which then can be used as a benchmark for national legislation(� rst-mover advantage). All these strategies give certain companies a competitive advan-tage vis-a-vis companies which do not pursue these strategies. In other words, polluting

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Reconciling Environmental Protection and Employment? 315

companies can go ‘beyond compliance’ with reference to environmental protection inorder to improve their market position. This will have a bene� cial effect on employment.

Much recent literature on environmental accounting emphasizes the possible gains oftaking the environment and natural resources into account in strategies of companies.Cost reductions due to clear environmental management can be signi� cant (see forexample Bennett and James, 1998; USEPA, 1998; von Weizsacker et al., 1998). On thebasis of their annual pollution abatement costs and expenditures surveys, the USDepartment of Commerce estimated that the total cost reduction for all industries dueto environmental management was around $1,693 million in 1994.9 However, it has tobe noted that in proportion to the total costs related to environmental protection(investment and operational expenditure of $28,247 million) this is only 6 per cent (USBureau of the Census, 1996).

The effects on employment and a possible con� rmation of the Porter hypothesis canbe found in an interesting study by Golombek and Raknerud (1997). They looked at theimpact of environmental regulation on three manufacturing sectors under strict environ-mental regulations in Norway. These sectors were pulp, paper and paperboard; iron,steel and ferroalloys; and basic industrial chemicals. For each sector they differentiatedbetween highly regulated companies and less-regulated � rms, on the basis of thestrictness of permits which are company-speci� c. They found that for two of these sectors(the � rst two), companies under strict environmental regulations had a higher tendencyto increase employment and a lower tendency to exit (go out of business) than companieswithin the same sector but under weak or no environmental regulation. These resultsindicate that possible double dividends between strict environmental regulation andemployment increase can occur.

However, not all companies can generate win-win strategies. In the literature on thePorter hypothesis and related issues little attention is paid to cases where � rst-moveradvantages, beyond compliance strategies, fail. In the few case studies we conducted, itbecame clear that environmental strategies do exist, but that they were not alwayssuccessful. In the case of one large chemical company, there was a clear environmentalstrategy (beyond compliance). However, the company stopped with this strategy becauseit did not generate obvious advantages.

In this case the strategy pursued by the company was to build up a good reputationor credit with policy-makers by means of a better environmental performance thanwas legally necessary. This, they thought, could be used in later phases as a kind ofmoral device in order to negotiate new (and less strict) environmental permits. Inother words, the strategy was a kind of mechanism where they did more (vis-a-viscompetitors) in the � rst instance, in order to do less later on. This credit-building did notwork in this case. Permits10 became more strict each time and the company was not ableto use its credit in the bargaining process between policy-makers/inspectors and thecompany. As a result, they stopped this strategy and now pollute just as much as theyare legally allowed. They lost the incentive to do more because of a lack of response byregulators.

We do not know how representative this case is, but it is clear that more research intothe structural nature of win-win strategies has to be done. However, it is also clear thatdouble dividend strategies do not always work. In a recent article, Reinhardt (1999)theoretically discussed the conditions under which certain strategies can work. Theseconditions or circumstances are: where the possibility of strategic interaction withcompetitors exists; where opportunities exist to differentiate products or where principal-agent problems11 within the � rm give rise to un-exploited cost savings (a ‘free lunch’) andhence to the possibility of cost reduction within the � rm.

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316 Axel Marx

No strong relocalization effect

A much-discussed issue in relation to employment effects of environmental policy is thepollution-haven hypothesis. That is, companies will move to (developing) countries withless environmental regulation if environmental regulations become too strict in thecountry where they are resident. In other words, companies will delocate to anothercountry if environmental policy is too strict. This will result in a loss of jobs.

This effect is hard to measure and the literature is not completely conclusive on it.However, there are clear indications that the impact of environmental policy on thedecision to move to another country is very small. Closeness to markets, labouravailability, expansion possibilities, and many other factors are far more important (seeGoodstein, 1995; OECD, 1997a; WTO, 1999). For example, a study on delocalizationfor Belgium showed that there was no evidence that companies moved to anothercountry because of environmental policy (Bernard et al., 1994). This is probablyassociated with two arguments.

First of all, and as already stated above, environmental regulation has only a marginaleffect on the total costs of companies and hence on their competitiveness. It is mostcertainly not the most important factor. Secondly, environmental policy tends to increasewith welfare. This is the so-called Kuznetts-curve argument (i.e. environmental pollutionstabilizes when national income increases, at least for certain pollutants). In other words,companies will over a period of time be confronted with environmental regulation inother countries as well, and will eventually have to invest in pollution control. This willreduce the incentive to move away.

However, Mani and Wheeler (1997) found some evidence to support the pollution-havens hypothesis. They looked at the evolution (1960–1995) of the most pollutingindustrial sectors in the so-called pollution havens (Asia, excluding Japan, and LatinAmerica) and in OECD countries. The hypothesis was that, if the pollution haven theoryis correct, one would observe an increase in the most polluting sectors and in theproduction of the most polluting products in pollution havens. A cross-national analysisshowed some evidence to support this hypothesis. The pollution-intensive output as apercentage of total output has consistently decreased in the OECD countries andincreased in the pollution havens. In addition, the net export of pollution-intensive goodsby pollution havens increases strongly in the same periods when one observes an increasein pollution abatement expenditure in certain OECD countries.

However, these conclusions do not necessarily imply a major relocalization effect, nora big employment effect. First of all, the study also showed that the consumption/production ratios for dirty-sector products in the pollution havens have remained stablethroughout the period they looked at. In other words, much of the pollution-intensivedevelopment is strictly domestic (Mani and Wheeler, 1997). This could indicate that ageneral trend of development needs a certain amount of pollution-intensive sectors(chemical companies, etc.) and that other factors, such as closeness to markets, lowertransaction costs, and expansion to new markets, are more important factors thanenvironmental regulation. Secondly, the study does not really show whether the observeddifferences are really linked with the effective movement of companies from one countryto another. Hence we do not know to what extent these � gures indicate factual changes.As a result, there is no way of estimating possible job losses related to this relocalizationeffect. For example, in Belgium, the recent evolution of employment for pollutingindustries did not show a pattern which would indicate a loss of jobs owing torelocalization. For instance, in the chemical sector, which can be considered one of themost polluting sectors, employment increased by 6.3% while for all manufacturing

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Reconciling Environmental Protection and Employment? 317

sectors the employment decreased by 7% in the period from 1986 to 1996. Similarresults can be found for other polluting sectors. In certain sectors there is a small (lessthan 7%) decrease in employment; in others an increase. Although one has to be carefulto attach conclusions to this evolution it gives an indication that employment in strongpolluting sectors stays relatively stable. Moreover, sectors like chemical production aretraditionally dominated by a few big players. Hence, the effective movement of one ofthe companies would show up in the � gures.

To conclude, there is little evidence supporting the relocalization hypothesis due toenvironmental policy. The literature is inconclusive with this respect: there is someevidence which indicates a possible effect; other research shows little or no effect.Consequently, it is not expected that many jobs will be lost because companies move toanother country as a result of environmental regulation. From a sociological point ofview, this is, in a way, self-evident. First, the strictness of environmental standards arenegotiated by states with companies, and the former are keen to not impose regulationthat is detrimental to the economic sector. It is good to remind ourselves that environ-mental regulations and policy are political and social processes which take into accountthe interest of most stakeholders. Like Majone (1984, p. 15) accurately observed:

far from being an almost mechanical process safely relegated to technicians, thesetting of health, safety and environmental standards in reality a microcosm inwhich con� icting epistemologies, regulatory philosophies, national traditions,social values and professional attitude are faithfully re� ected.

Second, there is a big difference between formal and de facto implementation ofenvironmental rules, and this provides companies with considerable leeway. A thirdreason is that environmental requirements are not excessive in comparison with otherstates. It is clear that if a state would effectively enforce very strict and strongenvironmental rules, the delocalization effect could become much more important.

The ecosector is a signi�cant labour market

The largest employment effects of environmental policy can be observed in the ecosector.The ecosector is the economic sector which produces goods and services for theimprovement of the environment. In the words of the OECD and EUROSTAT, theecosector consists of companies which produce goods and services to measure, prevent,limit or correct environmental damage to water, air and soil, as well as problems relatedto waste, noise and ecosystems. In other words, the ecosector consists of companies whichproduce and trade goods and services which are related to air pollution control;wastewater management; solid waste management; remediation and clean-up of soil andgroundwater; noise and vibration abatement; recycling; process-integrated technologiesand products; and the monitoring, analysis and assessment of the different kinds ofenvironmental pollution (OECD, 1996c).

The rise of the ecosector coincides with the rise of environmental regulation. Manyenvironmental laws have a direct impact on the development of the ecosector. Atpresent, for instance, one can observe the rise in demand for products and servicesconcerning soil remediation. This is a consequence of the fact that many countries tooklegislative steps in this � eld (for example Flanders and The Netherlands). In other words,the ecosector is a policy-driven economic sector (see Medhurst, 1998, pp. 56–57).

Table 1 indicates the estimations of the direct, indirect and total employment effectsin the ecosector in the European Union for 1994. The European Commission (1997b)estimates that more than 1 million people are employed in the ecosector. The OECD

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318 Axel Marx

Table 1. Employment � gures for the ecosector in the EU

Employment

Country Direct Indirect Total

Austria* 41,500 10,900 52,300Belgium 15,500 10,600 26,100Denmark 15,900 6,400 22,300Finland* 13,600 7,600 21,200France* 200,900 121,800 322,600Germany* 316,500 131,400 447,800Greece 5,100 2,900 8,000Ireland 8,700 3,800 12,500Italy 100,600 65,000 165,600Luxembourg 1,600 100 1,800Netherlands* 88,700 18,600 107,400Portugal 17,100 7,700 24,800Spain 37,600 15,300 52,800Sweden 40,700 32,000 72,600United Kingdom* 140,300 22,100 195,500Total 1,044,300 489,200 1,533,400

Note: countries marked with * have reliable data. The data forother countries should be seen as an indication. The data for thesecountries are not always reliable.Source: compiled from European Commission (1997a).

(1996b) estimated the industry’s market to be of the order of US$250 billion world-wide,calculated an average growth of 5% per year and predicted a growth rate for the comingyears of between 3 and 5.5% (OECD, 1996b). Hence, the ecosector is an importanteconomic sector. The estimates concerning the relative contribution to the total work-force lie at around 1% (OECD, 1996b; OECD, 1997b; European Commission, 1997a;Marx et al., 1999). This means that one person employed in a hundred works in theecosector.

On the basis of the above � gures, we estimated that in Flanders the ecosector employsbetween 11,000 and 14,000 full-time equivalent persons. As the ecosector does notcomprise a distinct statistical category in employment � gures, there is no way to establishits growth rate over the last several years. The sole statistical category, which includessolely ecosector companies, is the one dealing with wastewater and certain aspects ofmunicipal and industrial waste management. In this sector employment increased by73% between 1986 and 1996 (from 3579 to 6221). This signi� cant growth is indicativeof the employment-forcing potential of environmental policies.

Besides being good for employment, the ecosector is of quintessential importance forenvironmental policy and environmental protection. Most environmental improvementscome from the development of abatement and prevention technologies. The ecosector isone of the most important developers of new technologies. Consequently, it is animportant institution in the development of better technologies for environmentalprotection and clean-up.

The net balance is probably positive

The previous sections discussed the most important effects that occur when environmen-tal policy in� uences employment. To reiterate, environmental regulation mainly affects

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Reconciling Environmental Protection and Employment? 319

two types of companies, namely, polluting companies, such as those in the chemicalindustry and the petroleum industry, and ecosector companies, i.e. � rms which producegoods and services to combat and prevent environmental pollution and natural resourcesuse. In each type of company different employment effects occur: on the one hand, inpolluting companies environmental regulation can lead to a decrease or an increase inemployment or to the decision to move away; in the ecosector, on the other hand, wecan observe a positive relationship between environmental regulation and employment.In order to establish the overall employment effect of environmental regulation it isnecessary to assess the net balance of these different employment effects. On the basisof the evidence discussed above one could argue that the net employment effect ofenvironmental policy is positive. However, as already stated, there is a problem withcomparing positive and negative effects, because the latter are far more dif� cult toquantify. A possible loss of demand due to increased environmental costs, or thesubstitution of production investments by pollution abatement and control investments,will in� uence employment. These changes in� uence potential jobs rather than real jobs,thus are more dif� cult to quantify.

Even if these negative employment effects are (much) bigger than measured in thedifferent studies, it could still be argued that the net employment effect is positive,because on balance the ecosector is more labour intensive than the polluting sectors.Hence, even if we were to assume that a complete crowding-out effect would occur,namely that all investments in pollution control and abatement would replace productioninvestments and affect production-related employment negatively, the net balance wouldstill be positive.12 This is because polluting companies and the ecosector companiesare structurally linked to each other. Consequently, the investment made bypolluting companies goes largely to ecosector companies. Polluting companies buygoods and services from ecosector companies. As a result, the difference in employmentis a function of how much employment is supported by investment in each typeof company. This, in turn, means that the net employment effect is a function of thelabour intensity of the two companies. The labour intensity is the number of jobssupported by a given amount of turnover or added value. The net employment effect ofenvironmental policy in this analysis will be positive because, on balance, ecosectorcompanies are far more labour intensive than the most polluting companies. Table 2clearly shows this.

We calculated the labour intensity � gures for the ecosector on the basis of Europeanand American sources (Repetto, 1995; OECD, 1996b; European Commission, 1997a).The labour intensity � gures for polluting companies were calculated on the basis of thelabour-force statistics of the Belgian Department of Employment, and turnover statisticsof the National Bank of Belgium. The � gures indicate how many jobs are supported bya given amount of turnover (in this case BFr1 million).13

Three important assumptions and their implications for policy

We argued that there is probably no trade-off between environmental policy andemployment. However, this conclusion rests on a few assumptions. In the last section ofthis paper we want to focus on these assumptions and their possible implications.

Assumptions on labour markets

The argument made concerning a positive net balance of employment effects is, to adegree, based on the assumption of a perfectly operating labour market. We assume that

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320 Axel Marx

Table 2. Labour intensity differentialsbetween ecosector and polluting companies.

Non-ferrous Metals 0.03Iron and Steel 0.04Misc. Petroleum, Coal Products 0.07Industrial Chemicals 0.08Non-metallic mineral products 0.11Rubber 0.12Paper 0.13Ecosector Repetto 0.2Ecosector EBJ 0.22Leather Industry 0.24Ecosecor EU6 (total) 0.26Ecosector OECD 0.29

if jobs are lost in a polluting company, due to environmental policy, they are automati-cally compensated for by a gain of jobs in another (ecosector) company. However, in thereal world, these two effects do not necessarily compensate each other. This is a resultof the fact that the jobs which are created and the jobs which are lost are not the same.Hence the labour characteristics needed for one job are not the same for the other. Inother words, the labour markets of the two sectors are not necessarily compatible. Herethe relevance of so-called bottlenecks in the labour market of the ecosector areimportant. Bottlenecks on the labour market refer to the situation that labour isdemanded on the market, but that the demand cannot be met by supply for severalreasons (for example quali� cation differentials).

There are clear indications that ecosector companies have to deal with bottlenecks onthe labour market in Flanders (Belgium) (see Marx, 1999). More generally, with anestimated 70,000 jobs open in the Flemish economy, bottlenecks in the labour market arebecoming an important issue. As a result, one of the crucial factors of production—labour—is possibly slowing the growth of the ecosector. This constraint on expansion hasobviously repercussions for labour markets, but also for environmental policy.

It can be argued that technological development and progress is very important forenvironmental protection. The ecosector is in relation to the development of newenvironmental technologies an important actor or institution. If the ecosector is not ableto expand its abilities because of bottlenecks in the labour market, the development oftechnological innovation will be constrained. Hence the choice of available technologiesto control pollution will be limited. This in turn will have an effect on the possibilitiesand choices of environmental policy to control pollution.

Policy initiatives in this area are important. A transformation from one labour marketto another is in� uenced by many different factors, such as the economic context in whichenvironmental measures are implemented, the availability of quali� ed labour, the natureof environmental policy strategies pursued and the type of policy instruments which areused (command and control, taxes, voluntary instruments, etc.; see OECD, 1997a).These factors can be in� uenced by labour market policies and/or environmental policies.Environmental policy can use different types of instruments or different timetables; it canin� uence the technological requirements and development; and it can invest in researchand development. Labour market policies, particularly those that relate to training, havea direct impact on the supply side of the labour market and hence on the availability oflabour in the ecosector.

Finally, this assumption makes clear that certain (ecosector export-orientated) countries

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Reconciling Environmental Protection and Employment? 321

can have a disproportionate positive net balance, while other countries can have anegative net balance effect due to environmental policy.

Assumptions on environmental improvement

A second assumption has to do with environmental improvement itself. The empiricalresults so far assume that the rate of environmental improvement is suf� cient toecologically modernize society. In other words, the hidden assumption is that we cansolve environmental problems at the current rate and probably create more jobs at thesame time. Yet this is in fact a major issue of scienti� c debate. The evidence onenvironmental improvement is not conclusive. On the contrary.14

However, if more environmental improvement is needed more quickly, which impliesan increase in pollution abatement and control expenditure, than employment will bedifferently affected. The nature of the effects will be the same but their magnitude andtheir proportional distribution will be different. First of all, the incentives for certaincompanies to move away will become bigger. Hence, negative employment effectsrelated with relocalization will be much more signi� cant. Secondly, the negativeemployment effects in polluting companies will increase, because higher pollutionabatement costs will result in a higher internal substitution effect (i.e. crowding-out) andprobably higher layoffs, closure of units, etc. Thirdly, the ecosector might not be ableto follow demand (labour-market shortages, technology bottlenecks) and hence haveproblems compensating possible negative effects.

This brings us to a second point related to this assumption: that there is, probably, apositive net effect of environmental policy on employment does not mean that environ-mental measures should be used or evaluated from this point of view alone.Environmental policy targets the improvement of the environment and has to do this asef� ciently and effectively as possible. This will have an effect on economic developmentand employment. It is important to know whether this impact is positive or negative andhow certain impacts can be maximized or minimized. However, this should have noeffect on the aims and ambitions of environmental policy.

Assumptions on normative implications of the debate

In this article we used on many occasions the terms positive and negative employmenteffects. However, we used them as a quantitative indication of job increases or jobdecreases and not necessarily as a normative appreciation of the arguments made. Herewe arrive at the third assumption. In the literature it is assumed that the creation ofemployment through environmental protection is a good thing. Indeed, in manyinstances, it is a good thing. However, we should not forget that many environmentaljobs are very dirty and sometimes unhealthy jobs, which are done by low-skilled people.Hence it could be argued that, in the sense of physical labour, one societal group(low-skilled workers) contributes proportionally more to the clean-up of pollution than tothe creation of it.

The issue of social justice in relation to environmental regulation and pollution is alegitimate concern. In Europe, in general, very little attention is paid to this topic. Onlyrecently, Mol (1995)15 and Dobson (1998)16 argued that this should get far moreattention. This is indeed the case both in relation to labour as well as to other sociallyunjust consequences of environmental policy (for instance, environmental taxes,LULUs,17 etc.) or their lack (distribution of health problems, environmental risks).

This issue is also related to the � rst assumption concerning a perfect working labour

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322 Axel Marx

market. In future we are likely to be confronted not solely with the question of whetherenvironmental policy creates or destroys jobs, but whether we will � nd enough people ‘todo the dirty work’.

Conclusion

Does ecological modernization, on balance, imply a loss of jobs? Probably not. On thebasis of empirical evidence it could be argued that environmental policy probably createsmore jobs than it obliterates. Hence, one could argue as Repetto did that

The real issue is not the environment vs. jobs. The issue is what we want oureconomy to produce. If we want it to produce a clean environment along withother goods and services, the industries that contribute to a clean environmentwill have a higher output and employment, those that do damage to theenvironment will have less. While jobs in particular industries may rise or fall,total employment will not be systematically affected (Repetto, 1995, p. 22).

Although, the � rst aspect of his statement is true (‘the real issue is what we want our economyto produce’), the second is not necessarily true. It has also been argued in this paper thata positive net employment effect of environmental policy occurs under certain conditions,which build on certain assumptions. As a result, ecological modernization can occur, butdoes not necessarily imply that in every instance environmental improvement can bereconciled with economic ef� ciency or the creation of employment. Under certainassumptions this can be the case. However, it is not clear whether these assumptionsconstitute suf� cient conditions to modernize our way out of environmental problems.

References

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Notes

1. We would like to emphasize that this is only a working de� nition for this paper which makesabstraction of certain conceptual problems arising with almost every de� nition of sustainabledevelopment. For a good analysis of conceptual issues involved in sustainable development wewould like to refer to Dobson (1998).

2. See Spaargaren and Mol (1992) and Mol (1996).3. See Janicke (1989), Weale (1992) and Hajer (1995).4. This paper is based on a literature review and a research project conducted for the Flemish

Department of the Environment on environmental policy and employment. Flanders is thelargest of the three regions of Belgium. For this research more than 1200 companies weresurveyed and a few case studies in chemical companies and car-construction companies werecompleted. In this paper, we are not going to focus too much on the methodology of analysingemployment effects of environmental policy, but more on the results. For the development ofa conceptual model for analysing environmental-policy-induced employment effects see Marx(1999), Marx et al. (1999) and also Morgenstern et al. (1998).

5. We should make clear from the beginning that many different types of employment effects canbe identi� ed. There are direct, indirect and induced effects; positive and negative effects;short-term and long-term effects; etc. In this paper we mainly discuss direct positive andnegative effects. In other words we mainly, although not exclusively, look at direct increasesor decreases in employment. There can be an indirect increase or decrease in employmentbecause providers of goods and services get an increase or decrease in demand for their goodsand services. Induced effects refer to so-called income multiplicators and a relative change inincome structure. A positive or negative income effect due to an increase or decrease of directemployment effects can also result in a decline or rise of employment. We are not going tofocus our attention on these indirect and induced effects because research indicates that directeffects give a good indication of the direction of indirect and induced effects. (For more ondifferent effects see Jacobs, 1994; OECD, 1997a; Marx et al., 1999).

6. There are already simulations made on the basis of econometric models. However, it is notclear how reliable these models are and their data input. Moreover, these models do not lookat existing effects but project possible effects into the future (2010–2020). These are interestingexcercises, but not relevant in the context of this paper.

7. The survey covered 1000 ‘polluting’ companies, and was exhaustive for the population ofcompanies employing 500 or more employees. See also n. 4 above.

8. There is a big variation in estimations because we had to propose several hypothesesconcerning the non-response to our survey. We also wanted to emphasize that these arefull-time equivalent jobs, which are split into many thousands of environmental tasks whichonly take a few hours a week.

9. For example, a manufacturer installs a closed-loop recovery system in the production processso as to prevent the dumping of the chemicals in the water system. Since the closed-looprecovery system recaptures and reuses the chemicals in the production process, it reducesexpenses for chemicals. The value of the recovered chemicals can be seen as cost reduction.

10. In Flanders permits are made company-speci� c with a law establishing minimum standards.11. Principal–agent problems arise when the interests of a manager (reduced working hours, less

stressful work) (the ‘agent’) are not exactly the same as those of the � rm’s shareholders (the‘principal’); for example, cost control and reduction, and when the shareholders cannot fullycontrol the manager’s behaviour (Reinhardt, 1999, p. 19). In this case, cost reductions, forexample in the � eld of environmental management, can occur.

12 It has to be noted that empirical results hardly ever indicate that complete crowding-outoccurs.

13. The labour intensity � gures for the ecosector were calculated on the basis of European andAmerican sources (Repetto, 1995; OECD, 1996b; European Commission, 1997a). The

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Reconciling Environmental Protection and Employment? 325

labour intensity � gures for polluting companies were calculated on the basis of the labour-force statistics of the Belgian Department of Employment, and turnover statistics of theNational Bank of Belgium. These � gures indicate how many jobs are supported by a givenamount of turnover (in this case Bfr. 1 million ( 6 25.000 Eur)).

14. We would like to emphasize that we are well aware that the issue of de� ning environmentalproblems is itself a social construct with no de� nite benchmarks on whether environmentalproblems are ‘solved’ or not. Yearley (1996), among others, argued that the process of de� ningenvironmental problems constitutes an important moment in the ‘creation’ of environmentalproblems. This is not to say that there are no obvious cases where environmental improve-ment can proceed and probably must proceed much quicker than it is presently.

15. ‘This touches upon the � nal topic, the relation between environmental reform and socialjustice. As the ecological modernisation theory is primarily a theory of environment-inducedinstitutional transformation, it has little attention for aspects of democracy or inequality inconnection with environmental reform. These relations deserve our attention. Let there be nomisunderstanding about the importance of grasping these interdependencies between ecolog-ical restructuring and social justice. Radical ecological reform that is not based on thefundamental principles of social justice should not only be criticised on moral grounds. Itwould endanger the very process of ecological restructuring sooner rather than later. In thatsense, the unconditional prevalence of ecological rationality over other rationalities, asproposed forcefully by some environmental sociologists […], will rebound on itself, delayingrather than accelerating the process of ecological restructuring of modern society’ (Mol, 1995,p. 401).

16. ‘The � rst is that to a large extent the question of whether distributive justice is functional forenvironmental sustainability can only be answered empirically. Before we can draw any � rmconclusions, we need a raft of studies designed to explore this relationship under a numberof different conditions, ranging from pastoral farmers in Sudan, through the urban poor inBrasilia and New York, to stockbrokers in south-east England—and all points in between andbeyond. The most notable thing about such studies is that they do not exist, or at least notin the numbers we require. So to this extent, and in advance of the range of corroborativeevidence required, it would be a mistake to assume that social justice is fundamentallyfunctional for environmental sustainability’ (Dobson, 1998, p. 8).

17. Locally Unwanted Land Uses.

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