With Heidi Garrett-Peltier
Imagine: The year 2034, late October.
America is no longer dependent on coal and foreign oil. Consumption of these fossil fuels is down by 60 and 40 percent, respectively. Natural gas consumption is down by 30 percent. Fall is in the air as the U.S. is nearing the end of a perfectly unremarkable hurricane season.
Meanwhile, the economy is nearing full-employment as job opportunities have been created that put people back to work who were looking for jobs or who had given up hope of finding any.
Coincidence? Or the result of a sustained and major investment in clean energy?
Polls show that Americans are increasingly accepting the reality of climate change, but they aren’t ready to do something about it yet. That’s partly because many Americans have not yet accepted how serious the consequences of climate change could be. But it’s also because we fall for the old myth that what’s good for the environment is bad for the economy. When it comes to addressing climate change, that couldn’t be farther from the truth.
Enter a new report from the Center for American Progress and the University of Massachusetts Political Economy Research Institute. Four years in the making, this in-depth study quantifies the level of investment in the U.S. that would be needed to meet carbon emission reduction targets through a combination of energy efficiency measures and investment in clean energy. And the program it proposes would generate 2.7 million net new jobs.
A few words about that number: 2.7 million jobs. That’s almost the number of officially unemployed workers (those who are actively looking for work) in the economy today (3.0 million). It’s larger than the number of workers who are “marginally attached” – those who were looking for work previously but no longer count as unemployed because they’ve given up the search. In other words, adding 2.7 million new jobs would significantly transform an economy that’s been hobbling out of the recession. So, what’s the price tag for this rosy future?
The study estimates that reducing carbon emissions to the target levels, and creating 2.7 million jobs in the process, would require an investment of $200 billion a year, for twenty years. Without doubt, that’s a lot of money, especially compared to the $44 to $60 billion in clean energy investments in recent years.
But it’s doable. An investment of $200 billion represents 1.5 percent of current GDP. The fiscal impact of the clean energy program could be neutral – or even positive. For instance, the authors show that a carbon cap or tax could generate enough revenue to fund the initiative – and still funnel 75% of its proceeds back to taxpayers. With a carbon cap or tax, the entire $200 billion set of investments would have no negative effect on our country’s bottom line. None. No new accumulating debt. And still 2.7 million net new jobs.
But a cap or tax on carbon, as the authors note, is politically doubtful, good policy though it may be. So they estimate what the fiscal impact would be without it. In this case, in which there are no revenues from a carbon cap or tax, the clean energy program would require about $55 billion in government expenditures. But this would leverage, through financial incentives and regulatory mechanisms, an additional $150 billion of private investments so that the government’s share is only 25% of overall investments in creating a clean energy economy.
This sort of public-private partnership is not a new idea. Michael Likosky of the Century Foundation has been writing for years about the huge potential to fund American infrastructure–such as that needed to move to sustainable energy sources—through an infrastructure bank relying jointly on public and private funds.
To put the public component of such an investment in context, $55 billion is just slightly more than the government pays to a single Pentagon contractor, Lockheed Martin, in a single year ($44 billion in 2013). The U.S. spent, on average, $120 billion per year over the last 12 years fighting in Iraq and Afghanistan, with little to show for it. Even before the situation with ISIS escalated, President Obama requested $60 billion in war funds for 2015, when we would officially be drawing down troops in Afghanistan. Compared to these dubious investments, the payoffs from investing in slowing climate change are clear – including the national security payoff of reducing U.S. dependence on Middle East oil.
The CAP/ PERI study emphasizes that it’s not too late: Climate scientists say there is still time to stabilize the earth’s temperature. And it’s not too late for our economy, either: By capitalizing on our ingenuity and work ethic and leveraging private investment as we’ve always done, we can also demonstrate that the U.S. is still an economic superpower. Climate change is a problem we can afford to fix.
Heidi Garrett-Peltier is Assistant Research Professor at the Political Economy Research Institute and an author of the study.