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Laurie Johnson’s Blog

New study predicts increased employment, energy security, and household energy savings from the American Power Act

Laurie Johnson

Posted May 20, 2010

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The Peterson Institute (PI) today released the first economic analysis of the American Power Act (APA), introduced last week by Senators Kerry and Lieberman. Consistent with past analyses of climate legislation (and environmental regulation in general) (click here and here and here), they find that passing a comprehensive cap on carbon pollution will give a boost to employment. This is largely due to additional investments in the electricity sector that their model projects are needed to meet emission reduction targets; by 2030, electricity sector investments increase by approximately $22 billion under APA.

This job creation will come when we most need it.

Economists are projecting a slow economic recovery, with employment rates not returning back to normal until 2020. By allowing for unemployment, PI’s model projects on average 203,000 more jobs between 2011 and 2020 as a result of APA (i.e. APA employment levels are on average 144,224,000 over the time period, versus 144,021,000 under business as usual). As the authors are careful to emphasize, they likely underestimate job creation, because their model leaves out many efficiency gains and innovations that will be stimulated from the price on carbon pollution and the complementary incentives and efficiency standards in APA.  This is especially important in the outer years, when the economy returns to normal. Past 2020, when we are closer to operating at full capacity, inflationary pressures offset employment gains in the electric sector. But 2020 is a long way away--it’s hard to imagine there won’t be any cost-reducing innovations by then to counteract this.

And there is more good news. Household energy expenditures could also decline if vehicle fuel efficiency standards are increased past 2016, which many expect will occur. PI simulates such a scenario, finding households saving an estimated $35 per year between 2011 and 2030, in addition to rebates households will receive from the sale of pollution allowances. Increased fuel efficiency will also improve our energy security, lowering oil imports by an estimated 40 percent below today’s levels by 2030.

All around, comprehensive climate and energy legislation is a good investment. Passing APA will provide a boost to our economy and national security, while at the same time reducing dangerous global warming pollution.

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