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Blog Post October 8, 2021

US climate investments are required to secure green economy and jobs

By Jeff Goldstein

The White House and Congress are assessing which climate change policies to invest in and the world is preparing for the UN Climate Change Conference. During this time, it is important to consider how green fiscal policies impact workers and jobs. There could be short-term challenges as the US economy and some of its workers undergo a green transition. However, evidence shows that well-designed policies can have a positive economic impact and lead to green jobs. For the US economy to sustainably function and continue creating jobs in the long-term, investments that help manage climate change and prevent further damage to the environment are essential economic policies.  

The Biden administration’s Build Back Better (BBB) agenda involves many such climate components that attempt to make economic activity more climate-friendly. President Biden has also emphasized how climate investments will help address climate change in the future and create jobs. Congressional Democrats are currently putting together a tax and budget reconciliation bill, which may include the following proposals: clean energy and electric vehicle tax credits, a new clean electricity payment program, investments in climate-efficient agriculture and forestry, consumer equipment rebates, retooling of industrial plants, the creation of a Civilian Climate Corps, environmental justice measures, and more.

These investments may benefit the environment and workers, but major economic transitions are still hard. Moving towards a more sustainable economy that creates green jobs is particularly difficult because policymakers have taken too long to meaningfully begin the process. If a true green economic transition begins, facilities will close or be repurposed, certain types of equipment will lose value, and some workers will switch occupations and locations. At the same time, large investments will be required to build a greener capital stock.

Another concern expressed by some labor groups is that climate-related construction and installation jobs, for example, are only temporary and lower wage, while higher-skilled manufacturing jobs remain offshore. However, the BBB and reconciliation bill proposals could put the economy on a more sustainable path and spur near-term job creation as the economy undergoes a green transition. 

To achieve a successful green economic transition, the proposals aim to deploy existing technologies at a significantly larger scale than ever before. They also support building new infrastructure, as well as developing emerging technologies and industries with commercial appeal. The Economic Policy Institute recently found that this combination of climate investments would support more than 763,000 jobs annually, with manufacturing, technological research and development, and renewable energy generations driving growth.

For example, the solar energy industry has had steady job growth in recent years and now employs over 230,000 people. Even though most solar panels are imported, the industry is set to employ 400,000 people by 2030. If these proposals are implemented, the solar panel industry could employ up to 900,000 workers by 2035 due to the increased scale of solar installations and solar farm management. New technologies, such as the green production of cement, steel, plastics, and others, also hold promise. For example, in the nascent offshore wind industry it is estimated that development, construction, and operating activities will support roughly 80,000 jobs per year from 2025 to 2035, and 16,000 jobs per year thereafter.

Recent precedent also provides a helpful example of the positive impact green fiscal policies can have on the economy and job market, as well as indicating how to think about their design. At the Brookings Papers on Economic Activity conference in September 2021, a group of economists and policy experts presented a paper examining the impact of the $62 billion in green investments from the 2009 American Recovery and Reinvestment Act. The authors found that by 2017 the initiatives created 640,000 jobs per year, approximately 10 jobs for every $1 million invested. The dramatic job production illustrates how climate investments could effectively “reshape” the economy.

Their research on the resulting employment patterns also provides insight into policy design decisions. The authors concluded that job creation was notably stronger in areas where the workforce already had a high level of education and applicable green engineering and manual labor skills, highlighting the need for new job training. According to the authors, “any green spending plan intending to create green jobs should include funds for job training to ensure a smooth transition into green jobs for displaced workers in fossil fuel and energy intensive sectors.” The BBB agenda includes training and retraining efforts. It also includes measures such as plugging orphan oil and gas wells and cleaning abandoned coal mines to help communities facing difficult clean energy transitions.

Beyond the immediate opportunities and challenges of transitioning to a green economy, investing in climate preservation is clearly necessary for a prosperous US economy in the future. Climate change is already impacting the US economy in significant and costly ways. 1 in 3 Americans experienced a climate-related weather disaster in the summer of 2021. While debate ensues around spending $1.5 to $3.5 trillion total over 10 years in the reconciliation bill, it is estimated that the health costs of climate change alone will be more than $8 trillion over the next 10 years. The costs of inaction will only rise the longer the United States waits to act, and it must be joined by other international leaders. Global experiences similarly suggest transitioning to a low-carbon economy is far cheaper than the costs of climate change inaction.

The White House and Congressional Democrat climate plans contain promising green job measures to help the economy transition in the short-term, but every climate policy may not feature perfectly designed job support elements. Issues could emerge around rapidly deploying existing technologies and commercially developing new ones. Policymakers must be ready with other economic support measures as needed. Despite possible uncertainties, large and carefully designed climate investments must be made now. They are desperately needed. The planet and jobs of tomorrow depend on it.

Jeff Goldstein is a contributor to the Atlantic Council’s GeoEconomics Center. During the Obama administration he served as the Deputy Chief of Staff and Special Assistant to the Chairman of the White House Council of Economic Advisers. He also worked at the Peterson Institute for International Economics. Views and opinions expressed are strictly his own.

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