Economic and Employment Impact Assessment of Green Investment: Environmental Goods and Services Sector (EGSS) in Japan

Discussion Paper
Economic and Employment Impact Assessment of Green Investment: Environmental Goods and Services Sector (EGSS) in Japan

The Rio+20 United Nations Conference on Sustainable Development has identified green economy as one of the important tools for achieving sustainable development, which can provide a significant opportunity to the shift to a new global economic paradigm. Mobilising investments at the economy-wide level towards green sectors and to the greening of brown sectors is vital for the transition towards a green economy.

In Japan, green economy was defined by the Japanese Government (in 2011) as “an economic system which promotes sustainable growth while improving human welfare through pursuing economic growth and conserving the environment at the same time, as well as utilizing natural resources and ecosystem services properly”. Technological innovation and the role of environmental industry as new engine for economic growth have been stressed as priority areas for green economy. The Environmental Goods and Services Sector (GESS) is thus a key element for addressing such priorities. Assessing the economic and employment impacts of EGSS can be considered as an effective way of measuring the progress on “greening” the economy.

The EGSS framework developed by the Eurostat (2009) and embedded in the System of Environmental-Economic Accounting (SEEA) Central Framework (UNEP, 2014) provides descriptions and specifications of activities to be counted as environmental activities. It can be used for estimating the “share of green economic activities” and thus demonstrating the benefits in terms of revenue, value-added, employment and exports. The EGSS framework is being used in many EU countries and several developing countries. In Japan, statistics on EGSS, the environmental industry, started from 2000 based on the OECD definition and methodology on three broad categories of environmental goods and services industry, i.e. pollution management, cleaner technologies and production and resource management (OECD, 1999). However, in 2012 Japan revised the classification on environmental industry to reflect recent trend in combating climate change and special characteristics of solid waste management, in particular the 3Rs (reduce, reuse and recycling).

The purpose of this paper is to assess the trend of environmental industry development in Japan and the direct and indirect impacts on economy and employment by using detailed Japanese statistics on environmental industry and Japan’s input-output tables.

Results indicated the economic and employment benefits of the investment in environmental industries which originally aim at reducing GHG emissions, enhancing energy security and industrial competitiveness. Among 80 sectors in 2012, the construction sector benefited the most from the investment in environmental industry in terms of sectoral outputs, while investing in environmental goods from automobile sector contributed the most to economy-wide benefits.