2015: A Year at the Energy-Employment Nexus

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Benjamin Deitchman
January 13, 2015

Green jobs, the Keystone XL Pipeline and fracking are relatively recent terms to enter our political lexicon, but they will appear near the top of policy agendas as Congress and state legislatures reconvene in 2015. The debate over energy policy and the impact of energy resources on our economy and environment remains a point of partisan conflict as American leaders grapple with financial struggles for the middle class, climate change and water resource challenges. States continue to address the tension between the ecological and economic impacts of fracking.

In addition, the debate over Keystone may (or may not) reach a resolution in a new Republican Congress. Jobs through clean energy activities, however, are an opportunity for a broad dialogue. This column will explore policy options that can yield green jobs, particularly at the state and local levels of government. It also serves as a preview of my March presentation at the ASPA Annual Conference.

Analysts have devoted significant attention toward the definition of a “green job” and “green industries.” On behalf of the presidential administration, Vice President Joe Biden defined green jobs as careers that “provide products and services that use renewable energy resources, reduce pollution, and conserve energy and natural resources.” Engineers developing next-generation energy-efficient products, technicians installing solar panels and contractors weatherizing homes are serving their customers and the general public through these energy-saving and emissions-reducing industries. Direct green jobs are often a result of a public subsidy, regulation or another enabling governmental action to promote clean energy. These first-order jobs, however, are not a complete accounting of the employment opportunities from a shift away from fossil fuel resources toward clean energy technologies and conservation.

The idea of generating jobs and economic growth through energy efficiency and renewable energy is counterintuitive. Displacing inexpensive fuels and consuming less, on the surface, appears to be a method to reduce the size of the economy. Replacing capital-intensive industries (such as the electricity sector) with labor-intensive efforts and shifting expenditures toward more productive sectors, however, can improve financial outlooks throughout American society.

My analysis shows that investment in energy efficiency products and services generates more economic growth, more jobs and more labor income than similar expenditures on fossil-fuel based electricity, bioenergy, solar power, wind power and other economic industries. In fact, fossil-fuel based energy yields the lowest levels of employment and labor income, while the renewable energy sectors result in strong job totals but relatively weak labor income due to lower pay in various agricultural and low-skilled manufacturing sectors that generate the relevant employment opportunities. In terms of secondary effects, shifting away from fossil fuels, investing in energy efficiency, and allowing consumers and businesses to spend electric bill savings into the rest of the economy could have positive impacts on the entire gross domestic product.

Every state has its own regional economic structure and electricity portfolio. Wyoming is the largest coal producing state in the nation, while Texas produces the most natural gas. These two states show that even with the importance of fossil energy in their economies, the clean energy sectors are more productive for generating employment per dollar of investment than coal or natural gas. That is not to say that coal and natural gas are not important to these states, but the relative results of investment reveal a complex picture for opportunities for further economic growth. Federal proposals to mitigate greenhouse gas emissions recognize the importance and opportunity of the implementation of relevant policies and deployment of clean energy technologies and practices at the state and local level of government.

Over the past decade, states and localities have emerged as leaders in the expansion of the low-carbon economy as part of the competition of ideas in the laboratories of democracy and, in particular, as part of the competition for economic development opportunities through energy efficiency and renewable energy projects. For example, states have developed a variety of innovative financing tools in recent years. They have worked with utilities on on-bill financing efforts, where customers can pay for clean energy upgrades over time on their regular electricity or natural gas bill. In addition, they have worked with lending institutions to buy down loan rates through loan loss reserves and worked with communities on policy assessed clean energy (PACE) taxation districts. Additional productive financing innovations are under consideration across the country.

A vigorous debate remains over the best approach to energy policy. Attention of policymakers remains on the economic impacts. Although this is merely one dimension of energy and the environment, it is a critical component of policy analysis in this arena. Renewable energy and, in particular, energy efficiency are the cleanest, greenest, and often most economical approaches at the local, state, and national level and scholars and practitioners should continue to explore the multiple benefits of relevant policies in 2015.

Author: Benjamin H. Deitchman, Ph.D. is a visiting assistant professor of public policy in the Saunders College of Business at the Rochester Institute of Technology. You can email him at [email protected] and/or follow him on Twitter: @BHDRIT. He will present this ongoing research as part of the Deil Wright Symposium at the ASPA Conference in March. For further details of this analysis, please see his dissertation or a recent conference paper.