Policymakers have many questions relating to the economic opportunities and costs of climate legislation like the American Power Act, proposed last month by Senators Kerry and Lieberman. What are the concrete economic benefits of a climate bill? Where would new “green” jobs be created? What would the bill mean for the competitiveness of U.S industry? How can domestic legislation contain “emissions leakage,” which could occur if industries relocate to countries with weaker greenhouse gas regulations and as a result, simply shift global emissions instead of reducing them?
Three years ago, WRI and the Peterson Institute for International Economics (PIIE) formed a research partnership to help answer these questions. To continue the discussion, they convened a roundtable of key players – including congressional staffers, administration officials, and representatives of industry, organized labor, think tanks and NGOs – on May 7th.
The takeaways from this event were clear: the United States is falling behind in the clean energy revolution. Workshop participants agreed that the country needs a price on greenhouse gas emissions and that a bill must combine environmental protection with support for vulnerable industries. Without comprehensive climate policy, the country stands to lose green jobs and long-term competitive advantages that would come from increased energy efficiency and a strong domestic market for clean energy technologies. The piece below reflects the discussion at the workshop, much of which centered on what a transition to a low carbon economy would look like.
The Path to Clean Energy, Good Jobs, Economic Growth
Any analysis of the economic impacts of climate and energy legislation must consider the opportunities for job and competitiveness gains for the economy overall. Under a climate bill, job growth would occur primarily in the energy efficiency and renewable energy sectors, but there are additional benefits that would touch almost all Americans. Analysisby the American Council for an Energy-Efficient Economy of the House-passed Waxman-Markey bill found cost savings from economy-wide energy efficiency would lead to an average net energy spending reduction of $354 per household and an increase of nearly 425,000 jobs by 2030.
Renewable energy technologies also have the potential to create good jobs in the U.S., but American industry currently lacks the incentives to invest in these areas. Recent WRI and Peterson Institute working papers found that both the wind and solar industries have grown in recent years in countries where there is predictable, long-term policy support. A Center for American Progress reportalso found that China, Germany and Spain have been able to take the lead in clean energy through a comprehensive policy approach.
While government support is a main driver of renewable energy deployment, “Buy American” provisions for clean energy projects are not always beneficial for domestic job growth. For example, leading wind industry executives have pointed out that requiring all locally manufactured components could lead to slower growth of local clean technology industries and fewer US jobs.
According to recent research by WRI and PIIE, even without local content requirements, the majority of jobs in these industries are created locally and not easily moved overseas. This phenomenon is most prevalent in the wind industry because its infrastructure is difficult to transport, encouraging the creation of regional production hubs. For example, state policies that require electric utilities to develop renewable electricity sources have attracted international turbine manufacturers and other suppliers to locate facilities in Colorado and Pennsylvania to serve the growing U.S. wind market. And while the solar industry has a more globalized value chain, most jobs along this chain are in system design, planning, installation and operations – activities that inherently happen close to the installation site.
The Waxman-Markey bill and pending Senate legislation include several provisions based on what states like Colorado and Pennsylvania have done to attract investment in the clean energy sector. American job growth in this area depends on a thriving clean technology industry. Climate legislation can achieve this by creating local market demand through setting national standards for new buildings and appliances, providing financing for R&D and strengthening the infrastructure necessary for a clean energy revolution. Most importantly, a cap-and-trade system for domestic emissions like that in Waxman-Markey and Kerry-Lieberman will put in place a long-term price signal on the cost of carbon pollution. This will give U.S. industry the incentive to heavily invest in clean energy, realize economies of scale and efficiency gains, and create thousands of new “green” jobs.