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Saving Energy Creates Jobs

By Heidi Garrett-Peltier

This article is from the May/June 2009 issue of Dollars & Sense: Real World Economics available at http://www.dollarsandsense.org/archives/2009/0509garrett-peltier.html

This article is from the May/June 2009 issue of Dollars & Sense magazine.

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Improving energy efficiency—using less energy to do the same amount of work—saves money and cuts pollution. But today, the other benefit of investing in energy efficiency may be the best draw: saving energy creates jobs.

Let’s look at energy use in residential and commercial buildings. In the United States, buildings account for 40% of all energy use and are responsible for 38% of U.S. carbon emissions. Homes and other buildings lose energy through wasted heat, air-conditioning, and electricity. Following Jimmy Carter’s suddenly fashionable example, we can turn down the thermostat in the winter and put on a sweater. We can unplug appliances that aren’t used and save “phantom” power.

Beyond these personal changes, though, lie massive opportunities for systematic energy efficiency gains. These include insulating buildings, replacing old windows, and updating appliances and lighting. All of these generate new economic opportunities—read, jobs—in construction, manufacturing, and other sectors.

For instance, retrofitting existing homes, offices, and schools to reduce heating- and cooling-related energy waste (also known as weatherization) creates jobs of many kinds. Recent media attention has spotlighted “green jobs” programs that are hiring construction workers to add insulation, replace windows, and install more efficient heating systems. Perhaps less visible, retrofitting buildings also creates jobs for the engineers who design the new windows and furnaces, the factory workers who build them, and the office workers who make the appointments and handle the bookkeeping.

In fact, retrofitting creates more than twice as many jobs per dollar spent than oil or coal production, according to a detailed study that my colleagues and I at the Political Economy Research Institute conducted in 2008. For each $1 million spent, retrofitting creates about 19 jobs while spending on coal creates nine jobs and oil only six. Retrofitting also creates more jobs per dollar spent than personal consumption on typical items such as food, clothing, and electronics. Personal consumption does better than fossil fuels, but not as well as retrofitting, generating about 15 jobs per $1 million spent.

Why does retrofitting create more jobs? First, retrofitting is more labor-intensive than fossil-fuel production, meaning that more of each dollar spent goes to labor and less to machinery and equipment. Retrofitting also has higher domestic content than either fossil fuels or consumer goods; in other words, more of the supplies used to retrofit buildings are produced in the United States. In fact, about 95% of spending on retrofits stays in the domestic economy, versus only 80% of spending on oil (including refining and other related activities). Since more of its inputs are produced in the United States, retrofitting employs more U.S. workers. And this raises its multiplier effect: when those workers spend their earnings, each retrofitting dollar leads to yet more demand for goods and services.

To be fair, not all energy efficiency improvements will create jobs. When a more energy-efficient appliance or window design is widely adopted, the manufacturing worker who produced a less efficient good yesterday is simply producing a more efficient good today, with no net increase in employment. On the other hand, many retrofitting activities are pure job creators. Insulating attics and caulking leaky windows are activities that necessitate new workers—not just a shift from producing one good to another. With the collapse of the housing bubble and the huge rise in construction industry unemployment, retrofitting is an activity that could put tens of thousands of people back to work.

The Obama administration’s stimulus package contains a wide variety of energy efficiency incentives, from 30% rebates for home insulation and for installing efficient windows, to rebates for builders of energy-efficient new homes and commercial buildings. These provisions will drive energy-saving improvements, accelerating the transition to a low-carbon economy while also creating jobs.

Heidi Garrett-Peltier is a research associate at the Political Economy Research Institute in Amherst, Mass.

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