Creating 30.000 green jobs in Catalonia: The NEW Tax.

Labour market situation in Catalonia is critical, there is an unemployment rate about 25%, more than 700.000 people are looking for a job, and there is hardly any hope for shifting this situation.

We should look for initiatives in order to turn around this tendency. Green economy and Environmental Tax Reform have responses, but well-aligned policies should be set out immediately in order to enable the potential benefits of the Green Transition. The No-Energy-Wasteful Tax could be one example.

When the present crisis came over, some economical measures and investment programmes were set out, but from the occupational point of view they were not in the right way. They did not underpin neither a sustainable nor a job-rich oriented growth. Then, due to the lack of credit and the market-demanded needs to stop public debt, these policies were forgotten and replaced by strong austerity measures; and this type of measures remain although have been recently harshly questioned by some international organisations such as ILO (Global Employment Trends 2012. Preventing a deeper jobs crisis, 2011) —especially because of its negative employment consequences.

Ignoring these alerts there are a lot of new cuts being under way: Less pubic investment, cuts in education, hard reductions on labour market policies, huge budget reductions in wealth and social services, and constant firings and reductions of salaries in the public sector, amongst others. To tell the truth, public policies not only are hindering economic growth but also they are the unemployment first enemy. The Fiscal consolidation and fight against public debt are the pretext to do this, but nothing is said about the employment consequences: All prospects anticipate high unemployment rates for the next years and there is no signal of green roots.

This critical panorama forces to look for radical solutions and new approaches, but not solutions for the financial enterprises or for fostering the market confidence either: Solutions for urgently creating employment.

Green economy is definitely a big opportunity to walk on to a new path: Creating new competitive advantages, increasing local values, educating consumers demand, fostering the labour intensity of work, avoiding off shoring phenomena, recovering the productive economy, reducing the oil dependence, improving export opportunities…; quite right outcomes with clear employment benefits.

But these potential benefits have nothing to do if the policies that make them possible are not put in place. Amongst all the available tools to do this, the Environmental Tax Reform and environmental taxes can play a crucial role. In other words: If policy makers —even in the current social situation— have been able to considerably increase the cost of the wealth services taxes, court fees, as well as public transport taxes… —amongst others—, they should be able to consider not only new environmental taxes but also an environmental reform of the existing ones, with no social negative impact but rather with interesting outcomes for a job-rich recovery.

Here it is an example of a potential tax with huge social, economic and environmental benefits: The No-Electricity-Wasteful Tax (NEW).

The goal of the NEW tax is avoiding wasteful attitudes related to electrical consumption dedicating all its revenues on managing the implementation of this tax system.

The NEW tax is a progressive tax that wants to guarantee a fair cost for essential consumption of electricity but charging any wasteful uses.

  • NEW tax is aligned with the environmental policy that have showed better results into creating green jobs: the energy efficiency programmes;
  • It affects one field that is still clearly an oligopolistic  sector with a lot of possibilities to improve its efficiency, transparency and distributive justice, as the electric sector in Spain;
  • It implies the most common professional profile amongst the unemployed population: people who used to work for the building sector.

Identifying the essential consumption

The first thing to understand the idea of this tax is to identify what is essential electricity consumption.

Nowadays, in Catalonia —as in Spain— for most households (with less than 10KW of contracted power) the cost of each kWh is fixed. That means that cost of the KWh is not depending neither on how the house is (isolation level, lighting conditions, dimension, variety of energies available, etc.), nor how many people live or which activities they do.

Besides, this electricity is significantly subsidised by the State, which means that de difference between the cost that consumers pay and the real cost that the State pays to the electric market is paid by the taxpayer through the State public budget.

It is clear that at present electricity is an essential good, necessary for quite non-renounceable activities and services, and it should be available for all the population at affordable costs. But it is not fair that the cost of one kWh that a family of four use to do the washing twice a week in a flat is the same as one kWh for lighting a swimming pool and the garden of a well-standing couple in a big house.

The NEW tax will put a fair cost for the essential consumption, but the cost of the electricity would increase progressively as the consumption moved away from the essential uses. Here it should be pointed out that the essential consumption definitions will be also a tool in order to fight against the energy poverty.

Regardless their economic level, the point is that with a NEW tax system implemented, the redundant kWh of the couple should be more expensive than a kWh that could be considered essential.

Carrying on with the example, if a progressive tax system was implemented, the couple wpuld have three choices:

  • They could reduce consumption. If this happened in many cases it would mean that on the one hand the publicly financed part of the electricity would be saved —although it would be also interesting to progressively reduce this mechanism of subsidies—;and on the other hand that as the lower consumption is the lower price of electricity would be —because the market prices of electricity depend on the level of demand—. It implies environmental benefits and economic gains.
  • They could maintain the consumption but without paying too much. It would imply that efficient measures should be implemented at home: Solar-lightings, efficient devices detecting movement, or installing LED lightings, for example. It would mean environmental benefits, economic gains, and employment.
  • They would like to maintain their consumption anyway. It would mean important incomes for the system and important revenues to create employment associate to this system (energy auditors, retrofitting programs, etc…). It would mean economic gains and employment.

As building diagnostics of energy conditions are quite developed, the point would be to establish a standard method to progressively audit and certify the household park in order to determine —on an individual basis— what would be considered as essential consumption. Once this essential consumption is well-defined, progressive tax rates could be established.

Of course this first step needs some initial investment, but —with a duly designed legal support— a implementation system by stages could be engaged (by municipalities or districts , for example); and the revenues of the first phases could finance the system development.


The legal basis

Regulation of the Electric sector is a State competence, and the Electric Sector Law (Law 54/1997, November 27th) states in Article 18 that the Last Resource Fee (LRF)— the fee that would be affected by the NEW tax—should be unique for all the State. But there is also an option (art. 18.5 paragraph) that allows some possibilities to put territorial additional costs to the LRF. Thus, a regional regulation could be developed.

A social-friendly tax with immediate employment benefits

If the NEW tax is well-explained it could be considered a social-friendly tax; because it is fairer, it implies environmental benefits, it has economic gains, and it creates immediate employment: direct, indirect and induced employment.

30.000 jobs is an estimation of the potential net new jobs that would be created in Catalonia as consequence of a massive retrofitting plan with the aim of improving energy efficiency. This figure comes from some previous analysis done at with reference to this issue.

A deeper analysis of this NEW tax would show other interesting benefits, for example it reduces the rebound-effect associated to energy efficiency programs and it gives a price signal to the consumers in order not to waste electricity.

As all the employment outcomes should be taken in advantage, the NEW tax system should be implemented in a wider program that guarantees this goal. For instance, providing the right skills to the potential participants (auditors, communicators, retrofitters, installers…) and defining measures to assure that the new jobs are decent and sustainable. There are several experiences mentioned at that could be taken into account.

This NEW tax has been exposed in order to be applied for households but it could be also designed for business, services and industrial sectors. Probably an option non-related with an essential consumption definition but to an auditing system implementation (with reference to best practices or benchmarking, for example).

Transition to the Green Economy is a clear opportunity to create employment, but the situation of the labour market is so critical that new and urgent policies should be set out as soon as possible, there is no time to waste. Although this NEW tax needs further development it seems to have several potentialities that deserve a deeper study.

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