Israel 2050: A Strategic Plan for a Thriving Economy in a Sustainable Environment

The Impact on Quality of Life in Israel: Executive Summary

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Background

At the beginning of 2019, Israel launched a major initiative to promote the transition to a thriving low-emissions economy, spearheaded by the Ministry of Environmental Protection, the Israel Democracy Institute, the OECD, and the Ministries of Finance, Transport, Energy, and the Economy. Reducing emissions is vital in order to halt global warming, which is generating a range of threats including: changes in the quantity and distribution of precipitation; a rise in the frequency and intensity of extreme weather events (e.g., flooding, drought, heatwaves, and hurricanes); a drop in the volume of water flowing in streams and rivers in the summer months; and the melting of polar ice caps and the associated rise in sea levels, threatening the very existence oceanic island states, and which may eventually flood major coastal cities around the world.

These processes could have a far-reaching impact on Israel’s national, economic, and social resilience as well as on its security. The Middle East is heating up at a rate that is double the average global rate of warming, and temperatures in the Southern Mediterranean are expected to reach 46 degrees Celsius by 2050. While Israel, unlike other states further south, is not facing an existential threat due to climate change, being unprepared for the consequences of climate damage may lead to significant crises and pose a real strategic threat. Anticipated challenges include:

Strategic and security threats: The melting of polar ice caps and rising sea levels are already opening up new marine trading routes, which may reduce the strategic importance of the Middle East as a trade route. This scenario may undermine incentives for international support for Israel, resulting in instability in the Middle East and harmful to Israel.

Waves of migration reaching Israel's borders: There is potential for large scale migration from areas that undergo desertification and become hotbeds of starvation and violence, due to food insecurity. Waves of migration and refugee camps at Israel’s borders could undermine stability and lead to hostile incidents-- and even wars- in the region.

Threats to food security and increased dependency on resources: Global warming is expected to lead to a rise in the prices of strategic resources such as water and food reserves. Israel’s ability to continue to import food at any price is not assured. The government is thus responsible for maintaining the resilience of Israel's agricultural sector, which involves ensuring sufficient land reserves for agriculture, replacing, replacing protection quotas with direct subsidies to farmers, and continuing to develop the country’s water desalination capabilities.

Rise in Israel's national debt: Due to the expected increases in food and water prices and the need to expend large sums in order to import agricultural produce, Israel can expect an increase in its national debt.

Threats to energy independence: Climate change is expected to increase energy consumption (for heating and cooling). Because Israel is an “energy island,” forced to supply all of its own energy needs with no support from neighboring countries, it is important that the country ensures maximum energy efficiency, maintain energy reserves and develops storage solutions for renewable energy. This will be particularly important toward 2050, when Israel’s gas reserves are expected to be exhausted.

Damage due to economic growth: Climate change is expected to threaten economic growth worldwide, including in Israel. According to estimates by the US National Bureau of Economic Research , the effects of climate change may reduce Israel's GDP by 1.4% by 2050, and by around 4% by 2100.

Reduced Competitiveness: OECD states are already preparing for the threat of climate change by introducing strict new regulations and setting ambitious targets for clean economies. The Israeli business sector will have to adapt to these stricter international standards, so as to remain competitive. Companies failing to comply with new standards on reduced emissions and the use of green and clean energies will not be able to compete for-- and win-- tenders and export deals around the globe.

At the beginning of 2019, the Israeli government launched a comprehensive strategic plan to address these issues, further to the commitments made as part of the Paris Agreement to meet international targets for reductions in greenhouse gas emissions by 2030. This plan, titled “Israel 2050: A Thriving Economy in a Sustainable Environment,” (hereafter: Israel 2050) involves the first implementation in Israel of the "whole government" approach for a strategic national project. According to this approach, government ministries should operate "beyond the confines of their defined mission in order to achieve shared goals and to pool resources, so as to be able to respond to various and wide-ranging issues such as the development of national infrastructures. By definition, these issues are inter-ministerial in scope and require cooperation among government ministries. Israel 2050 calls for an innovative implementation of the whole-government approach, and involving inter-ministerial coordination and cooperation, and inter-sectorial cooperation with the business sector and with civil society organizations. The Israel Democracy Institute has taken on the leadership of this initiative, based on the belief that practical application of the whole-government approach is vital for implementing a strategic plan of this type. The Institute’s leadership has created a neutral safe space for discussion among ministries and across sectors, in a roundtable format.

The plan presents a vision and concrete goals for reducing greenhouse gas emissions, which will be translated into a detailed government resolution and a climate law, drafts of which will be presented at the United Nations Framework Convention on Climate Change. Successful implementation of the plan is likely to result in a significant reduction of Israel's exposure to the harm inflicted by climate change and to associated strategic threats.

In order for the plan to be implemented successfully, the government will also need to take into account its socioeconomic implications. It is important to prevent a situation in which the transition to a clean economy will harm vulnerable populations (due, for example, to increased taxation on fuel or to rising housing prices caused by environmentally friendly construction standards). Turning a blind eye to the potential harm to these populations, created by the e shift to a green economy might generate social unrest, protests, and opposition. This, in turn, could threaten the government’s stability and the country’s economic resilience, as the weakest strata of society suffer, and inequality grows.

In an attempt to map the potential social consequences of Israel 2050 for the benefit of government decision-makers, the Israel Democracy Institute prepared a comprehensive report that provides a “dashboard” of the plan’s expected impact on citizens’ quality of life in various areas. The report presents a set of alerts to guide the government and civil society’s work towards reducing the plan’s negative impact and maximize its benefits as a whole. The report assesses the Israel 2050 plan using the wellbeing indicators set by the government to measure quality of life, and thus constitutes a first-of-its-kind implementation of government resolutions 2494 and 4631 , evaluating the implications of the plan in terms of these indicators and in accordance with OECD guidelines. The report presents the anticipated effects of the plan in terms of these indicators and in accordance with the OECD guidelines.

The report represents the anticipated effects of the plan (e.g., improves/no effect/worsens) on each of the life areas for which Israel has defined wellbeing indicators, as compared with the trends which we anticipate if the plan were not implemented. In addition, the report details a set of policy proposals for ensuring maximum realization of the plan’s potential for positive impact on the relevant wellbeing indicators, with the aim of achieving optimal improvement in the quality of life of the Israeli public.

Analysis of the Israel 2050 Plan’s Impact on Quality of Life

A positive impact is expected on the quality of employment and satisfaction from work, including a higher rate of growth in waste management and related market areas. However, for the plan to be successfully implemented, it will need to be made financially advantageous for companies. It involves the imposition of taxes or strict regulation on industry without any accompanying support, this could lead – in the short term – to reduced profitability, competition and growth, along with negative consequences for employment. In the long term, the plan will bear fruit by improving competitiveness and supporting growth and employment. The government must explore effective ways of encouraging industry to make the transition to clean technologies, using international experience in this field, and must make advance preparations by providing professional training to meet the needs of the newly developing areas.

There is potential for a positive impact on housing and infrastructure. At the same time, there are, concerns as to an increased burden on those living in rented accommodations, should the plan lead to a rise in rental prices. This might marginalize vulnerable populations, who would not be able to afford the higher rents in new, environmentally- friendly, high-rise buildings, and would thus have to settle for living in lower quality housing in which energy and water costs will be higher. The government must ensure that vulnerable populations are also able to benefit from environmentally friendly construction, and that every city is planned in accordance with the rules of the circular economy in a way that supports access to a collaborative economy, which mainly benefits vulnerable populations.

In the short term, an increase is expected in housing costs and in both direct and indirect housing payments, but in the mid and long term--there is an opportunity for a steady and continual decline in expenditures on energy and water. Israel’s government must examine ways of mitigating this burden in the short term, particularly among vulnerable populations who will struggle to cope with higher costs during the transition period. The plan should also be used to improve the connection and accessibility to basic infrastructures of those populations that have not yet been connected (for example, the Bedouins in geographically distant areas.

A positive impact can be expected on Israelis’ material standard of living and overall satisfaction with their financial situation, particularly in terms of improving the relative situation of populations in the periphery. In the long term, the plan has potential for a positive impact on the standard of living of homeowners, in contrast to the expected negative impact on those in rented accommodations.

In the short term, all elements of the plan are expected to increase the public debt-to-GDP ratio per person, due to the need for large-scale investment in upgrading national infrastructures, buildings, and cities. It is therefore reasonable to assume that in the short and medium term there will be an increase in public taxation in order to fund the necessary investment. However, in the long term, this trend is expected to reverse, and there will be a decline in the public debt-to-GDP ratio, thanks to the impact of these massive investments on improving competitiveness and accelerating growth.

There is potential for improving the level of satisfaction with the various education systems. This is due to improved accessibility to education systems, and to the increased probability that even people born to parents without an academic education will gain an academic education.

Implementation of the plan is expected to increase general public satisfaction and to improve Israelis' trust in the efficiency of state institutions, as well as enhancing the areas of leisure, culture, and community life However, the government bears responsibility for ensuring that environmental standards do not become the sole property of the wealthy, but rather--are accessible to all social groups, , including those in economically disadvantaged communities and those perceived seen as vulnerable populations.

There is a great expectation of improving personal safety and reducing the number of serious casualties from road accidents.

An improvement in public attitudes toward government institutions and a strengthening of civic engagement can also be expected. It is important to ensure, from the earliest planning phases, that the locations chosen for new green energy production facilities (e.g., solar farms, wind turbine farms, or natural gas exploration rigs) do not cause extensive damage to open and green spaces. Damage of this kind undermines public trust in state institutions and in their functioning.

The plan can be expected to bring wide-scale improvement to all the health and environment indicators that are measured in the report on wellbeing indicators.

Impact of Israel 2050 Plan on Wellbeing Indicators in Israel

Policy Recommendations

1. Preparations should be made and concrete plans drawn up for coping with the consequences of climate change on Israel’s economic resilience and security.

2. Options should be explored for preserving and developing Israel’s agricultural sector.

3. Inter-ministerial coordination is needed in several areas:

o Coordination between the four different plans, from the very earliest planning stages;

o Coordination with the Israel Innovation Authority and the Israel Investment Authority;

o Coordination with the planning of industrial areas and regional clusters.

4. Suitable preparations need to be made for training the personnel necessary for implementing all these plans.

5. A comprehensive educational program on sustainability should be implemented. The younger generation is expected to lead change processes that will last for approximately three decades.

6. Coordination is required with other government plans. Steps should be taken to ensure that Resolution 922, on government action to promote economic development in minority populations from 2016 to 2020, will be adapted to and coordinated with this plan in order to prevent a waste of resources and to ensure that these populations benefit from the plan's vision.

7. Coordination with local authorities. Steps should be taken to ensure that the strategic plans of local authorities are coordinated, in order to support the successful implementation of this plan, and that tools enabling government supervision are put in place.

8. Balanced management of the tax burden. Before making decisions on taxation, assessments should be made regarding which populations are expected to bear the brunt of the plan and options examined for limiting this impact: specifically, options for reducing the burden on the public caused by the transition to environmentally friendly construction and for reducing the burden on industry, which will need to make huge investments and to change production processes. The state should ensure that these transition costs do not inflict sever damage to industry profitability, which could lead to worker offs and factory closures.

9. The effects of the plan on housing and rental prices should be carefully managed. The state should ensure that transitional costs do not result in a rise in housing costs and do not harm vulnerable or non-home owning populations.

10. An organized system should be put in place for monitoring and evaluating results, making it possible to measure progress toward quantitative targets and examine the impact on wellbeing indicators.

11. Short term versus long term: The potential harm to citizens’ quality of life during the transition period (short term) must be taken into account and steps taken to mitigate this negative impact.