FORTUNE AND NEW ENERGY

The Economic Benefits of Investing in Clean Energy; How the Economic Stimulus Program and New Legislation Can Boost U.S. Economic Growth and Employment
Robert Pollin, James Heintz and Heidi Garrett-Peltier, June 18, 2009 (Center for American Progress)

SUMMARY
The Economic Benefits of Investing in Clean Energy describes the opportunities the U.S. can take advantage of and the rewards the country can reap as it makes the urgently necessary transition to a New Energy economy.

3 interrelated goals define the transition to the New Energy economy mapped out in the legislation: (1) The maximum increase of efficient energy use, (2) reducing the costs of the New Energies as much as it is possible, and (3) establishing a limit on the use of, ultimately by putting a disincentivizing price on, fossil fuels to eliminate as much as possible the burning of oil, coal, and natural gas.

Achieving these goals will cut greenhouse gas emissions (GhGs), fulfilling the U.S. responsibility in the fight against global climate change. It will also benefit the economy, through employment opportunities, growth and higher incomes.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

To describe the potential of the New Energy economy concretely, the paper - from the Center for American Progress and the Department of Economics and Political Economy Research Institute (PERI) at the University of Massahusetts, Amherst - evaluates the likely impacts of provisions in 2 Obama administration New Energy initiatives, the American Recovery and Reinvestment Act of 2009 (ARRA), passed by Congress in February, and the proposed American Clean Energy and Security Act of 2009 (ACESA), written by Representative Henry Waxman (D-Calif), Chair of the House Energy and Commerce Committee, and Representative Edward Markey (D-Mass), Chair of the House Energy Subcommittee, passed by the House of Representatives in June and now being considered by the Senate.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

Between provisions in the ARRA and the ACESA, the New Energy economy is likely to generate ~$150 billion yearly in New Energy investments over the coming decade. Most of it will come from the private sector. It will likely generate ~1.7 million new jobs, an expansion that is likely to be sustained by continuing investment in New Energy and expanded as investment increases.

The NET job gains, after taking into consideration losses in jobs associated with the transition from Old Energy to New Energy, would in and of themselves reduce national unemployment roles by 1 full percent.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

Regarding potential economic harm in the ACESA’s capping of GhGs, the CAP economic models without exception forecast, at worst, a small negative impact on U.S. economic growth over the long-term. And the economic models do not factor in the growth stimulus likely to follow the implementation of the ACESA’s cap&trade system, such as more New Energy jobs, a reduced international trade deficit, technological advances that will make New Energy and utility rates cheaper and the improved health and reduced health care costs that follow cleaner air and water.

There is one other benefit, perhaps the biggest benefit, that the spending from ARRA and ACESA will provide: The avoidance of the costs of adapting to global climate change.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

COMMENTARY
Wisely acknowledging the problematic nature of economic forecasting, the CAP study details its cautious and rigorous economic-modeling methodology.

The forecast’s key estimate is that a ~$150 billion per year investment in a New Energy economy would create ~2.5 million new jobs but cost (worst case scenario) ~800,000 Old Energy jobs. In other words, investment in New Energy is expected to create about 3 times the jobs that the same investment in Old Energy would create.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

Some of the significant investment provided by ARRA includes (1) $24.4 billion in federal spending on Energy Efficiency, (2) $23 billion in federal investment in fuel efficient transportation, and (3) $25.3 billion in federal investments in the New Energies. The money in ARRA is expected to be flowing to the New Energy and Energy Efficiency industries by 2010 but will also continue generating economic activity through the 2011-to-2014 period and beyond.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

3 categories of ACESA initiatives are expected to be enacted by any version of the bill that survives the legislative process: (1) Policies to boost the use of New Energy such as a national Renewable Electricity Standard (RES) requiring regulated utilities to obtain a designated portion of their power from New Energy sources by a specific year, (2) a solid cap on all U.S. GhG generation through mid-century and a means, such as a trading system or a tax, that holds emissions spewers to their caps, and (3) federal spending and funding mechanisms, such as investment tac credits, production tax credits, loan guarantees and grants, that support businesses, communities and individuals in getting to a New Energy economy.

ARRA, written as an economic stimulus program, directs government spending and financial incentives to promote private investment. It is relatively easy to forecast the impacts of such spending. ACESA will generate New Energy and Energy Efficiency expansion through policies and regulations, most importantly by requiring New Energy and by pricing the emissions from Old Energy. The greater difficulty in predicting the impact of such policies and regulations is incorporated into CAP’s methodologies and assumptions.

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

QUOTES
- From the conclusion to the CAP analysis: “The United States needs to promote an aggressive policy agenda now to defeat global warming. This fact is now widely if not universally recognized. The overarching challenge before us is therefore to determine a policy path that is effective in building a clean-energy economy as rapidly as possible and in promoting widespread employment opportunities and broadly shared well-being. The current severe recession has only intensified the need to pursue such a unified program that can both promote job creation and build a clean energy economy.”

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

- From the conclusion to the CAP analysis: “The specific features of ARRA and ACESA complement each other. In this paper we have demonstrated how the two measures work in combination to advance clean-energy investments and the transition to a clean-energy economy. Specifically, we examined the effect these two measures are likely to have on job creation and economic growth. We conclude that these two measures operating effectively as a complementary set of policy initiatives, in conjunction with related initiatives both at the state and local government level and especially by private investors, could produce over the next decade about $150 billion a year in clean-energy investments that also expand job opportunities. The net expansion in employment through this combination of initiatives could be about 1.7 million jobs.”

It will be necessary to CLICK TO ENLARGE the not easily readable but quite valuable CAP charts and tables.

- From the conclusion to the CAP analysis: “This expansion of job opportunities would occur strictly as a result of the shift in spending of a given $150 billion in favor of clean energy and away from fossil fuels. It will not be necessary for U.S. GDP to grow more quickly in order for these positive job effects to emerge through a clean-energy investment agenda. Our overall conclusions are therefore that the clean-energy components of ARRA and ACESA will have significant economic benefits aside from the contributions they will make to reducing carbon emissions and combating global warming. The most important and most clearly established economic benefit is that clean-energy investments will be a substantial source of new employment opportunities throughout the United States.”