A question of development
Summary of AFD's investigations
OCTOBER 2022 N° 59
Employment in a zero net emissions future in Costa Rica: Renewable energy to enable widespread benefits for the country. In pursuit of a "3D" economy (decentralized, digitized and decarbonized), Costa Rica is encouraging transformations to work towards the year 2050 through its National Decarbonization Plan (NDP) and the National Strategic Plan (NSP). Successful implementing these plans would lead to an increase in the number of jobs related to clean energy, sustainable transport, and the efficient use of natural resources. The University of Costa Rica and AFD (Agence Française de Développement) studied the magnitude and the periods in which these changes in employment would be expected.
Authors Jairo Quirós-Tortós, Professor, University of Costa Rica Alejandro Matarrita, Economist, University of Costa Rica María José Sauma, Economist, University of Costa Rica Mónica Rodríguez, Economist, University of Costa Rica Slim Dali, Economist, Agence Française de Développement
I. A multisectoral transformation of the Costa Rican economy The "3D" economy aims to electrify 85% of the public and 95% of the private vehicle fleet by mid-century. By the same year, we plan to have introduced new logistical practices and taken steps towards the electrification of freight transportation. The aim is to have a 100% renewable electricity system by the middle of the century. We also seek to encourage sustainable practices when building and transforming the industrial sector into a low-emission sector. Good practices in waste management would be encouraged to increase reuse and promote the circular economy. Sustainable practices for less carbon-intensive agriculture are to be encouraged. This also includes changes in household consumption habits toward balanced diets, which would have an effect on production chains. In addition, innovative solutions in forestry, forest plantations and forest management would be proposed to increase the country's carbon sinks. Furthermore, we seek a decentralized and inclusive economic development of the country through the sophistication and modernization of economic activities, using and strengthening human capital and other resources of the different regions of Costa Rica. There would be 12 development units made up of hubs, corridors and management areas for or which the company will promote a resilient production matrix and the transition to a "3D" economy, strengthening existing activities and orienting future investments, as well as other drivers towards the main productive sectors.
Graph n.º 1: Impact of the 3D economy on the number of net jobs per five-year period.
Net employment
40
Direct Indirect Induced
43 7
30
28 22
20
10
11 7
0
17
16 2 10
3
4
2021-2025
2026-2030
20
14
8 5
2031-2035
2036-2040
4
5
14
9 7 2041-2045
9
2046-2050
SOURCE: AUTHORS' OWN CREATION
The main public policy messages regarding the effect of the transformations on employment in Costa Rica are presented below. An input-output model was developed based on the Miller and Blair[1] methodology with cantonal information. Future demands under a scenario with and without "3D" economics are obtained from an integrated and regionalized model that studies the link between climate, land use, energy and water (CLEW- Regional-CR)[2]. Both models are linked to study the total number of jobs in each scenario. The number of net jobs is defined as the difference between the scenario with a "3D" economy minus the scenario without "3D" economy.
II. The path to a 3D economy provides multiple benefits The 3D economy would bring socioeconomic benefits for Costa Rica. Implementing the NDP would generate an estimated net economic benefit by 2050 of $41 billion (equivalent to 64% of Costa Rica's GDP in 2019), of which $20 million is associated with the energy sector and $41 billion is associated with the energy and transport sector[3]. Increased use of public transportation would reduce traffic and the number of accidents, and the reduction in emissions would improve people's cardiorespiratory health. The fiscal impact of transportation decarbonization would be much smaller than the financial benefits of carbonization and this can be managed with fiscal adjustments that distribute these benefits (Rodríguez-Zúñiga et al et al. 2021). International evidence indicates that structural changes in production and consumption patterns to achieve zero net emissions in Latin America and the Caribbean by 2030 would result in 15 mil[1] Miller, R. E., & Blair, P. D. (2009). Input-Output Analysis-Foundations and extensions (Second). Cambridge University Press. [2] Quirós-Tortós, J., Rojas, M., Roccard, J., Henriques, C., Alemán, B., Angulo-Paniagua, J., Araya, A., Coto, A., & Rodríguez, M. (2021). "Herramientas integradas de modelado para apoyar políticas de desarrollo sostenible basadas en evidencia en Costa Rica". UNDESA. [3] Details of these socioeconomic evaluations can be found in Groves, D., Syme, J., Molina-Perez, E., Calvo, C., Víctor-Gallardo, L., Godínez-Zamora, G., Quirós-Tortós, J., De León, F., Meza Murillo, A., Saavedra Gómez, V., & Vogt-Schilb, A. (2020). Costs and benefits of decarbonization of Costa Rica's economy-Evaluation of the National Decarbonization Plan under uncertainty. Interamerican Development Bank http://dx.doi.org/10.18235/0002867
lion net jobs for the region (Saget et al. 2020). Furthermore, it is estimated that a dual transition towards clean energy and electric mobility in the region would create more than 35 million net jobs by 2050 (UNEP, 2019). The country could benefit from 135 thousand cumulative net jobs by 2050 by investing in renewable energy, sustainable transport (electrification, public transportation, active mobility) and digitized institutions (Graph 1). The transformative actions would directly impact the country's economic activities with some 24,000 net direct jobs. The linkage of economic activities would have a positive effect on other activities and would generate slightly more than 70,000 net indirect jobs by 2050. Stimulating the 3D economy would create more than 41,000 net induced jobs. Encouraging transformations towards a 3D economy would make Costa Rica more inclusive and beneficial for vulnerable populations. Just over 30% of these jobs would be held by women and approximately 10% by people with disabilities, migrants or indigenous people. Most of these jobs will be in commerce, clean energy production, water distribution and sanitation, education of future professionals, and information and communication activities. Short-term investments are catalysts for jobs that grow as actions are implemented. In the short term (202125), around 11,000 net jobs will be generated linked to activities in the energy, transportation and education sectors. This number would increase by five in the medium term (2026-35) when major transformative investments in the 3D economy would occur. In the long term (2036-50), some 65,000 net jobs would be created following the consolidation of investments and massification of electromobility. Public policies that promote renewable electricity production, water distribution and sanitation, and sustainable activities in the areas of commerce, transportation, information and communication could maximize the benefits for the environment communication could maximize the benefits for the country, as these activities together would generate 83% of total net employment in 2050 (Figure 2). Investing in renewable energy and sanitation systems would generate around 52,000 additional jobs.
New business activities and new business models around electromobility would generate almost 30,000 additional jobs by 2050; 27,000 and 3,000 additional jobs, respectively. Approximately 14,000 additional jobs related to information and communication technologies and 16,000 new jobs would be created in transportation activities (public and ecotourism). It is expected that the momentum in these specific sectors and the changes in household consumption patterns will create links between economic activities. Public policy must closely monitor the new linkages and be able to react proactively in the creation of channels and incentives (laws or subsidies for example) to ensure that the new routes are aligned with the aims of the 3D economy and that the benefits are distributed among the population.
III. Decentralization generates regional benefits Promoting decentralization would generate more jobs in the regions and development hubs (Figure 3). The 3D economy would bring benefits to the Central region; it would result in an increase of at least 35 net jobs per 1,000 inhabitants living in the region in 2017. That said, decentralization would increase the number of jobs in the Chorotega region and in the Central Pacific region by 28 and 18 units per thousand inhabitants that lived in the corresponding region in 2017. The Brunca, Huetar Atlántica and Huetar Norte regions would see an increase of between 8 and 9 more jobs per thousand inhabitants that inhabited the corresponding region in 2017. In terms of the development hub, the promotion of renewable energies in Cañas-Tilarán-Upala would generate 131 jobs per 1,000 inhabitants living in the hub in 2017. In the Greater Metropolitan Area, sustainable business activities should be encouraged to create about 92 net jobs per thousand inhabitants living in the hub in 2017. In general, it is found that promoting renewable energies and water and sanitation activities would generate more jobs in all other development hubs compared to a baseline scenario.
Virtually all cantons, 78 out of 81, would benefit from this decentralization. The generation of clean energy should be promoted within the cantons with the potential to do so, as well as trade, transportation, storage, information and telecommunications activities in all cantons to generate more jobs under the 3D economy. In those countries where agriculture is the main source of employment, public policies should be generated to encourage more diverse production.
IV. A beneficial transition Costa Rica would benefit from the transition to the 3D economy with more jobs economy with more jobs, which could be up to five times more than the baseline estimates (Graph 5). The study explored the effect of uncertainty on demands, and relationships between activities, wage ratios and number of jobs per million. The number of plausible new jobs generated in future 3D economy varies between 35,000 and 750,000, distributed proportionally among regions, hubs, and cantons, building inclusiveness and benefitting vulnerable populations.
Graph n.º 2: Cumulative net jobs by 2050 for each economic activity. Electricity, water and sanitation services
Trade and repair of vehicle
Other activities
Transportation and storage
52
Direct Indirect Induced
50
Net employment
Information and communication
40
30
30 23
20 10 0
SOURCE: AUTHORS' OWN CREATION
N.B.: THE "OTHER ACTIVITIES" CATEGORY INCLUDES ALL ECONOMIC ACTIVITIES.
16
14
Graph n.º3: Impact of the 3D economy on the number of net jobs per five-year period.
Central
35
Chorotega
28 18
Central Pacific Brunca
9
Huetar Norte
9
Huetar Atlántica
8
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
Net jobs per thousand inhabitants SOURCE: AUTHORS' OWN CREATION
Graph n.º5: Future net employment by 2050. Direct Indirect Induced
700 600
Net employment
500
400 300 200 100
19 91
10 34 18 64 7 17 87 22
44 93 8 89 52 101 92 68 62 41 48 60 55 33 71 63
98 85 66 15 54 16 32 90
59 30 61 83 80 72 12 26
103 95 69 74 53 27 36 99
0
Future SOURCE: AUTHORS' OWN CREATION
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L. F., QUIRÓS-TORTÓS, J., JARAMILLO, M., &
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To consult our other publications in Spanish: https://www.afd.fr/es/ressources-accueil
y opciones de política para manejarlo. InterSAGET, C., VOGT-SCHILB, A., & LUU, T. (2020). El empleo en un futuro de cero emisiones
netas en América Latina y el Caribe. Banco Interamericano de Desarrollo. http://dx.doi. org/10.18235/0002509
The analyses and conclusions of this paper are the responsibility of the authors: they do not necessarily reflect the opinions of AFD or its collaborating institutions