While President-elect Obama's $775bln economic stimulus plan should be applauded for including many important provisions for green jobs over the next three years, his messaging on why green jobs are a critical component to our economic recovery seems to be getting lost along the way.

In basic terms, economic stimulus packages are about two things, jobs and payback.

Jobs

With the economy losing 2.6million jobs over the past year and around 21 million American workers jobless or underemployed, jobs, jobs, and more jobs are desperately needed to help put money back in peoples' pockets and get the economy moving again. 

Economic stimulus packages are designed to help retain and create good paying jobs by creating pockets of demand in the economy. These jobs can be created to deliver short-term stimulus; like investing in "shovel ready" infrastructure projects, or to deliver long-term stimulus; like investment in current and emerging industries.

While long-term job growth is certainly preferred to short-term job growth, if President-elect Obama is serious about retaining and creating 3-4 million jobs over the next three years, he will need to focus his efforts on both, with emphasis on jobs that will pay well enough to increase overall demand in the economy.

Payback

President-elect Obama plans to invest $775bln of our taxpayer dollars in a stimulus package designed to help re-power the economy. Given the enormous sums involved, it is critical that this money is spent well and that these investments pay back in order to avoid adding to the debt burden of future generations.

The economic stimulus packages that were implemented during Japan's "lost decade" offer an important case in point on how throwing money at the problem is not enough. The Japanese government spent nearly $1trln on fiscal stimulus packages to help revive their economy in the 1990's and now have little to show for these efforts other than a mountain of debt and bridges that go nowhere.  

This is not to say that we shouldn't be putting people to work building and repairing bridges, but when we build these bridges we need to keep in mind how they will pay back to society and whether or not they take us to a place we actually want to go.  

Green Economic Stimulus Delivers 

Green economic stimulus responds to both of the challenges outlined above of creating jobs and providing payback, and does it in a way that is hard to compete with.

First let us look at the jobs picture. Global output is falling at an alarming rate, making top line growth opportunities hard to come by. As a result, if we are going to help industry avoid further lay-offs, something needs to be done to improve bottom-line costs to help them better weather the current economic storm.

One obvious area we can have a meaningful impact on our bottom line costs as a nation is in the energy arena, where our energy productivity ranks amongst the lowest in the developed world. America's energy productivity, as measured in GDP terms per Quads of Btu of energy, currently generates $112 of GDP per Quad of Btu which is less than half that of the world leader Japan, which generates $229 of GDP per QBTU.

Indeed it will be no small task to engineer, design, manufacture, site, install, and service this more productive energy economy that needs to be built to dramatically improve our energy productivity as a nation. In fact, it will require the employment of millions of Americans in the following areas:

• 1) Jobs in improving the energy efficiency of homes and offices. This means jobs for electricians, plumbers, construction workers, and engineers.
• 2) Jobs in finding and developing alternative sources of energy.
• 3) Jobs in building cleaner cars.
• 4) Jobs in improving our crumbling infrastructure.
• 5) Jobs in education and worker re-training.
• 6) Jobs in transitioning our major polluting industries into low carbon providers of energy services. This means building out of carbon, capture and storage at coal plants and improving the efficiency rates of domestic oil production through enhanced oil recovery, both huge jobs spinners in their own right.

Now let us look at the payback. The following is just a short list of the ways green jobs can payback the American taxpayer:

• 1) Green jobs payback by improving our economic position in the world by developing whole new industries to help re-power the US economy over the long term. This would include creating new export opportunities to help improve our balance of trade position.
• 2) Green jobs payback by improving our national security position by cutting the amount of foreign oil that needs to be imported to run the economy. By increasing corporate average fuel economy (CAFÉ) standards to 40mpg by 2020, the American consumer can save $176bln in fuels costs alone.
• 3) Green jobs payback by increasing our energy productivity, driving down our overall energy costs and making our manufacturing sector more competitive. Investments in combined heat and power alone can save us nearly $1trln in net reduced energy costs through 2030.
• 4) Green jobs payback by enhancing our climate security by cutting our greenhouse gas emissions to the benefit of current and future generations.
• 5) Green jobs payback by encouraging massive investments in education and technology, keeping America at the cutting edge of innovative solutions.
• 6) Green jobs reduce the amount of the other fossil fuel pollutants in the air, including particle matter, smog, mercury and acid rain, reducing health care costs from many respiratory disorders.

In sum, using some of President-elect Obama's economic stimulus package to invest in a new energy economy makes good economic sense for the American taxpayer from both a jobs and payback perspective. And while some tax breaks are useful in stimulating additional demand, it should be remembered that other tax breaks are not that productive. Additional tax breaks given to Exxon Mobil are a case in point. Given that the company has been spending the bulk of its profits to buy back its own stock over the past 5 years, the amount of job growth and payback attached to providing them with additional benefits is probably fairly small.   

Lastly, green stimulus should also be seen in the context of passing climate legislation. Passing climate legislation as part of a cap, invest now and recover strategy, would add further momentum to the President-elects goal of employing millions of Americans by using future carbon revenues today as transition assistance to bringing about a more productive and efficient long-term growth model for the US economy.