Climate legislation could boost energy efficiency investments

Cap-and-trade legislation has gotten a lot of bad press lately because of indications that taxes on carbon emissions could hurt U.S. competitiveness. What's lost in the debate, however, is that embedded within cap-and-trade proposals are policies which encourage energy-saving investments, can create millions of jobs, and save U.S. consumers billions of dollars on annual energy bills.

These are among the conclusions of the American Council for an Energy-Efficient Economy (ACEEE) in a recently completed study called Climate Change Policy as an Economic Redevelopment Opportunity: The Role of Productive Investments in Mitigating Greenhouse Gas Emissions. In it, I suggest that aspects of cap-and-trade legislation will spur investments in energy-efficient devices, materials and equipment such as energy-saving home appliances, better-insulated buildings, and more fuel-efficient equipment and vehicles.

All in all, such legislation could lead to increases, not decreases, in the number of jobs in the U.S. economy. Furthermore, it will reduce, not boost, our energy bills, with negligible impact on the size of the economy. The enormous economic benefits of promoting energy-efficiency investments have largely been ignored or grossly underestimated by previous studies. That's because many of them have been produced or funded by opponents of cap-and-trade legislation.

If no federal climate legislation were signed into law, baseline projections suggest that the nation's energy bills would rise 46% by 2030 and would nearly double by 2050. Energy consumption would rise by 8% by 2030 and 28% by 2050 (largely the result of inefficient energy use). Total greenhouse gas emissions would also grow 8% by 2030 and 21% by 2050.

In its new report, I used our state-of-the-art “DEEPER” energy policy model to examine the economic impacts of three cap-and-trade policy scenarios. These scenarios differ with respect to the degree to which they encourage and support energy-efficiency investments.

Scenario one assumes climate legislation as passed by the House of Representatives, which contains basic provisions to spur investments promoting more-efficient energy use. By 2030, this scenario would see the average household reduce its net energy spending by $354. There would also be an increase of nearly 425,000 jobs. By 2050, the increase in jobs would grow to nearly 1.2 million.

Scenario two assumes an improved version of climate legislation containing a variety of enhanced energy-saving provisions. In this case, consumer energy costs would drop 23% by 2030 and 21% by 2050, nearly double the savings from the bill passed by the House. Under this scenario, nearly three-quarters of a million extra jobs would be created by 2030 with more than 2 million additional jobs created by 2050 (or nearly double the number of extra jobs than would be created by the House-passed legislation).

Scenario three assumes an even-further-improved version of climate legislation with energy efficiency improvements that roughly double the energy savings indicated in scenario one. In this case, consumer energy costs would decline 27% by 2030 and 32% by 2050, nearly triple the savings from the House-passed bill. Under these assumptions more than one million additional jobs would be created by 2030 with more than 2.5 million extra jobs created by 2050 (or more than double the additional jobs created by the basic House bill).

These positive outcomes would happen while the country simultaneously met goals for reducing carbon emissions. For each of the three scenarios, greenhouse gas emissions would be roughly halved by 2030 and reduced about 75% by 2050. The DEEPER modeling analysis also found that each of the three climate policy scenarios would have zero or near-zero impact on the size of the economy.

The report demonstrates that climate policies that encourage investments which boost overall energy productivity have a positive net economic impact. In fact, the findings show that the greater the level of investments in energy savings, the greater the economic benefits for Americans. By channeling modest investments into energy-saving buildings, technologies and infrastructure, lawmakers can produce a winning combination for the U.S. economy and the climate.

As the report documents, these investments will let us meet greenhouse gas reduction goals, create more jobs and cut energy costs for American businesses and families while maintaining robust economic growth. Studies that ignore these fundamental financial and economic realities inevitably distort the impacts of climate legislation.

More info

Climate Change Policy as an Economic Redevelopment Opportunity: The Role of Productive Investments in Mitigating Greenhouse Gas Emissions, aceee.org/pubs/e098.htm