Energy, Scottish Economy

Measuring the economic successes of low carbon and renewable policies in Scotland

Grant Allan, Department of Economics and Deputy Director Fraser of Allander Institute, University of Strathclyde

It was central to 2010’s “Low carbon economic strategy for Scotland” that there could be economic opportunities in decarbonising the Scottish economy: “jobs in the low carbon sector in Scotland could… rise to 130,000, over 5% of the Scottish workforce”. The slightly later “2020 Routemap for Renewable Energy in Scotland” justified ambitious energy targets – for instance, the equivalent of 100% of Scottish electricity demand to be produced from renewables in Scotland – as “necessary to reindustrialise Scotland through 21st century technologies and seize the opportunities to create tens of thousands of new jobs and secure billions of pounds of investment in our economy”. Five years later, it is an opportune time to reflect on what we can conclude about the economic successes of low carbon and renewable energy policy in Scotland.

So are we on track to secure a jobs revolution?

In this piece we examine three points. First, how useful current measures of employment in low carbon and renewable energy (LCRE) are to the evaluation process. Second, we discuss what the Office for National Statistics (ONS) recent (first) UK-wide survey of LCRE tells us about the economic health of these activities. Our final point is more general, focusing on whether employment is the most useful measure of the economic success of energy policies.

Current measures of employment in LCRE

In a recent paper, we have written about the usefulness of existing LCRE employment measures for Scotland. These were the measures produced by: Scottish Renewables (11,136 employees); BEIS (73,960) and the Scottish Government’s own “energy (including renewables)” measure (63,400 in 2012).

The first key point to note, is that it is not straightforward to identify employment in LCRE activities for one simple reason: there is no commonly agreed definition. But this is just the start. Two further, and interrelated, problems are how to operationalise any agreed definition, and the accuracy of any definitions.

Each of the above measures – for instance – focus (naturally) on different elements of employment in Scotland in LCRE activities: the only two areas we identified as included in all three were those employees involved in the operation and maintenance of renewable energy plants and renewable energy consultancy.

Where it is difficult to identify specific LCRE activities, additional confusion arises over the identification of jobs in the wider “supply-chain”. We return to this below.

Some recent official statistics on LCRE

Earlier this year, the Office for National Statistics published its first survey of economic activity in the low carbon and renewable energy economy. This surveyed firms that were active in any of seventeen LCRE activities, and related to the year 2014[1].

While there are lots of results presented on various measures, we focus on the employment results here: of the (238,500) total full-time equivalent employees identified as LCRE in the UK, 9% (21,500 from a total of 201,000) were in Scotland. By activity, Scotland contributed 16% of UK employment in “low carbon electricity” (6,500 jobs) while 7% (11,500) in the largest UK employment category of “Energy efficient products”.

Later this year, ONS will produce further analysis of the wider economic impacts supported by these activities. These should include, for instance, those jobs supported by LCRE activities – including, for instance, provision of materials and inputs to LCRE activities.

For this to be done correctly, however, it is necessary to identify the specific linkages between each identified LCRE activity and the “non-LCRE” rest of the economy. Using published “multipliers” for existing industrial sector would be incorrect, and may lead to significant “double-counting” i.e. where a firm is included in the definition of LCRE, its activities must be excluded from the supply chain for the LCRE sector.

For instance, a firm (and therefore its employment) might be identified as part of LCRE as it provides inputs to an operational offshore windfarm. That employment will therefore be part of the supply chain and so should be excluded from the “multiplier” measure. Not an easy challenge, but as we saw above, definitions matter.

Is employment the best measure of success?

There is little doubt that energy policy has the opportunity to affect economic activity across Scotland. However, are the current figures helpful in measuring the success of Scotland’s low carbon economic ambitions?

First, while a regularly updated and consistent ONS survey helps us understand trends in the number of jobs in LCRE activities, these are silent on the drivers of this employment. Are such jobs driven by technology exports or domestic projects, for instance? This matters, principally as it helps to understand what might happen to LCRE employment in Scotland over the coming years and the contribution of specific projects and technologies in Scotland and the UK to employment measures. It is also important for understanding if these jobs are ‘new’ or ‘additional’ jobs and are not simply replacing jobs in other areas where low carbon activity is acting to replace more traditional activities.

Other economic measures are also important. For instance, the ONS survey shows that “low carbon electricity” provides 17% of FTE employees, but 27% of turnover – reflecting the low labour intensity of LCE activities. Energy efficient products, by contrast are “fairly labour intensive”. Creating jobs alone is only one dimension of the economic outcomes from energy policy.

Additionally, understanding the nature of LCRE jobs in LCRE is important. For instance, are such jobs more or less skilled than other “non-green” jobs? What kinds of skills are required in the short and medium term, and how can policy help? Further, what is the geographic distribution of these activities?

Finally, in our paper we make the case that Input-Output (IO) accounts would provide a consistent way to measure all economic – including employment – impacts of low carbon and renewable energy activities.

These accounts are a vital part of the economic statistics for Scotland, produced annually by the Scottish Government. By providing a detailed snapshot of economic activity (including employment, but also measures of Gross Value Added (similar to GDP) as well as exports), they give great detail on the economic structure of the Scottish economy.

By linking LCRE definitions to IO accounts – in principle possible given the new survey by ONS – policy could better understand the employment as well as broader economic consequences of activities in LCRE and the extent to which current LCRE activities are contributing to the success of Scotland’s low carbon and renewable energy policies. 

Some Final Thoughts

In conclusion, July’s ONS survey estimated that there were 21,500 jobs in low carbon and renewable energy (LCRE) activities in Scotland in 2014, less than 1% of total employment in Scotland in that year.

Additionally, the lack of a widely agreed definition and a regularly repeated survey using a consistent methodology makes it difficult to track how this measure has evolved over the last five years.

The new ONS survey marks a positive development in this regard. But it only marks the first step.

More jobs will be supported by LCRE activities through the supply chain, and new methods will be required to develop this, avoid issues of double-counting and obtain a full system-wide understanding of these new activities, innovations and technologies. We suggest that linking measures to the IO tables would allow for a more detailed picture of the varying economic contributions of the LCRE sector.

At the same time, it is important that we move beyond employment as being the sole measure of the economic successes of LCRE policy in Scotland. Jobs are important, but developing a more resilient and sustainable economy are also crucial.

In order to have a serious debate about the economic opportunities for Scotland from low carbon and renewable energy activity, and the right policy responses, it is vital to have available robust and reliable measures. These will help inform the most appropriate future policy in this important area

[1] For instance, for offshore wind activity, firms were included if they undertook activity related to “The production of electricity from offshore wind renewable sources and the design, production and installation of infrastructure for this purpose. Including operations and maintenance”.


The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.