Green policies in California created 1.5 million jobs

A detailed new economic analysis Energy Efficiency, Innovation, and Job Creation in Californiafinds:

Over the past thirty-five years, innovative energy efficiency policies created 1.5 million additional fulltime jobs with a total payroll of over $45 billion. Looking forward, the report finds that if California improves energy efficiency by just 1 percent per year, proposed state climate policies will increase the Gross State Product (GSP) by approximately $76 billion, increase real household incomes by up to $48 billion and create as many as 403,000 new jobs.

Imagine how many jobs the entire country could create if we improved energy efficiency by just 1% per year. The answer is many millions (see “What would a Green Recovery do for your state?” and “Mayors report: 4.2 million new green jobs possible“).

U.S. vs. California energy consumption, 1960-2001

Total electricity use, per capita, 1960-2001

And making the country as a whole more efficient would be a considerably easier task than making California more efficient, given that for decades the state has been the leader in tapping the energy efficiency resource and that Californians already use 40% less electricity per person than the rest of America (see “Efficiency, Part 4: How California does it so consistently and cost-effectively“).

Energy efficiency must be the cornerstone of any clean energy climate policy, since efficiency is the only unlimited source of carbon-free energy that generates economic savings. Here are the study’s key historical findings:

  • Without taking the aggressive steps to reduce energy dependence and increase energy productivity over three decades ago, California would be more vulnerable to the current economic crisis — with greater dependence on volatile fuel prices, lower consumer savings and, as a result, reduced spending. Thanks to energy efficiency, California reduced its energy import dependence and directed a greater percentage of its consumption to in-state, employment-intensive goods and services, whose supply chains largely reside within the state, creating a strong “multiplier” effect of job creation.
  • Over the past thirty-five years, forward looking energy efficiency policies created 1.5 million FTE jobs with a total payroll of over $45 billion, and saved California consumers over $56 billion on energy costs.
  • The same efficiency measures resulted in slower (but still positive) growth in energy supply chains, including oil, gas, and electric power. For every new job foregone in these sectors, however, more than 50 new jobs have been created across the state’s diverse economy.

The report corroborates the state’s recent findings that policies proposed by the California Air Resources Board (CARB) to meet the emissions reductions mandated by the Global Warming Solutions Act (AB 32) can be achieved with “net economic benefits” (see The savings from cutting California’s carbon “outweigh the costs”).

The UC report goes further, however, by assessing the economic impact of innovation, revealing even greater economic benefits than the state’s official modelling because the latter assumes technology characteristics remain static (2008-2020).

Findings include:

  • By taking account of the potential for innovation, the proposed package of policies in the state’s Draft Scoping Plan continues California’s legacy of efficiency-driven job growth, achieving 100 percent of the greenhouse gas emissions reduction targets mandated by AB 32 while increasing the Gross State Product (GSP) by about $76 billion, increasing real household incomes by up to $48 billion and creating as many as 403,000 new efficiency and climate action driven jobs.
  • The economic benefits of energy efficiency innovation have a compounding effect. The first 1.4 percent of annual efficiency gain produced about 181,000 additional jobs, while an additional one percent yielded 222,000 more. It is reasonable to assume that incremental efficiency gains will be more costly, but they have more intensive economic growth benefits.
  • Clearly establishing a price for carbon emissions provides economic stimulus for efficiency innovation. To accelerate that innovation, revenues raised from the cap and trade system can be at least partly invested in R&D and adoption incentives for these technologies. \
  • By revenue, energy is the world’s largest industry, and energy efficiency can become to this sector what Information Technology (IT) was to management, biotechnology to medicine, a way to revolutionize traditional practices and increase real living standards around the world.
  • California can sustain its enormous economic potential and establish global leadership in the world’s most promising new technology categories, energy efficiency, just as it did so successfully in IT and biotechnology. This will secure the Golden state’s transition to a low carbon future and establish competitive leadership in another breakout technology industry.

If only the United States had bipartisan political leadership that recognized global leadership in energy efficiency and clean tech was the key to our economic future, our energy independence, and our environmental survivability.

The NYT story on the study is here.

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3 Responses to Green policies in California created 1.5 million jobs

  1. Larry Coleman says:

    This story – the economic upside of combating GW – is the most important idea that needs to be understood by the public and politicians…because people currently think just the opposite, which creates a high barrier against doing anything. It could be enormously useful, Joe, to have the facts and ideas in this post (and others) condensed into a document suitable for presenting to senators and representatives, and in op-ed pieces and talks. You are uniquely qualified to prepare such a document, which should include data in easy-to-read graphical form, and I – for one – would use it with politicians, op-eds and talks. This is a powerful story that needs to be widely understood if serious steps to combat GW are to be successful.

  2. Kevin says:

    Not sure I understand the real lesson from this report. California’s unemployment rate is significantly higher than the U.S. average — is that because of their energy policies? Perhaps California could succeed in employing more people if the state had fewer restrictions on energy?

    When we say energy policies created an additional 1.5 million jobs, that’s ignoring the jobs that would have been created in absence of those policies, isn’t it? What’s the real alternative outcome? Are we to believe that if California had never instituted its energy policies, the unemployment rate today would be 16% instead of a “mere” 7.7%? Does that sound likely?

    In reality I’m guessing the job market would pretty much have expanded to absorb all but about 7% of the labor force at any time anyway, no matter how the state tweaked energy policies.

  3. John Mashey says:

    For future reference, I recommend Dow Jones Alternative Energy Innovations 2008, going on right now in Redwood Shores, CA. They do these yearly ajnd they have lots of interesting speakers.

    Among other good speakers, today we had:

    Jim Davis, President of Chevron Energy Solutions, a branch of Chevron that does energy efficiency and sustainable energy supplies, and whose business is worth looking at. Of course, Chevron is based in California, which is, after all, an oil state.

    Michael Peavey, President of the Cailfornia PUC.

    Smart folks. They said the same things as in Joe’s post.