Green Growth: A U.S. Program for Controlling Climate Change and Expanding Job Opportunities

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Green Growth

A U.S. Program for Controlling Climate Change

and Expanding Job Opportunities

Robert Pollin, Heidi Garrett-Peltier, James Heintz, and Bracken Hendricks September 2014

WWW.AMERICANPROGRESS.O


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Green GrowthA U.S. Program for Controlling Climate Change

and Expanding Job Opportunities

Robert Pollin, Heidi Garrett-Peltier, James Heintz, and Bracken Hendricks

September 2014


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Contents 1 Summary

9 Chapter 1: Introduction

37 Chapter 2: Prospects for energy efficiency

98 Chapter 3: Prospects for clean renewable energy

142 Chapter 4: Oil, coal, natural gas, and nuclear power

174 Chapter 5: Carbon dioxide emissions levels under alternative scenarios

198 Chapter 6: Employment effects of the clean energy investment framewor

236 Chapter 7: Macroeconomic issues with clean energy investments

267 Chapter 8: Advancing a workable clean energy policy agenda

325 Appendices 326 Appendix 1: Public transportation and energy efficiency

334 Appendix 2: Auto fuel-economy standards and energy consumption

337 Appendix 3: Explanation of the EIAs Extended Policies case

343 Appendix 4: Methodology for estimating the employment effects of alternativ

energy industry expenditures

368 Appendix 5: Estimating fiscal impacts of clean energy public policy programs

384 References

396 Index

404 Acknowledgments and About the authors


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Contents List of Tables

16 Table 1.1: Conversion factors in standard energy units 40 Table 2.1: Comparative energy use and emissions levels for the United States

and other advanced economies

41 Table 2.2: Energy consumption in the United States by economic sector

43 Table 2.3: Energy consumption in buildings, 2010 and 2030 Reference case

47 Table 2.4: Main sources of energy-efficiency investments:

Technoeconomic potential Residential - electricity


Technoeconomic potential Residential - natural gas

49 Table 2.6: Main sources of energy-efficiency investments:Technoeconomic potential Commercial - electricity


Technoeconomic potential Commercial - natural gas

54 Table 2.8: Prospects for energy efficiency in buildings: EIA 2030 Reference case

the National Academy of Sciences technoeconomic cases

64 Table 2.9: Sources of energy saving in U.S. pulp and paper industry

65 Table 2.10: Sources of energy saving in U.S. iron and steel industry

67 Table 2.11: Range of estimates of economic potential for energy-efficiency

improvements in industry

68 Table 2.12: Overall costs of energy-efficiency investments in industry

from 2011 through 2030

72 Table 2.13: Energy use by transportation mode

75 Table 2.14: Estimated retail-price increase, gasoline savings, and reductions

in greenhouse gas emissions of advanced vehicles

(relative to baseline-average gasoline vehicles, 2005 models)

79 Table 2.15: Overall costs to reduce transportation-sector energy consumption

from 28 to 20 Q-BTUs in 2030

83 Table 2.16: Summary of efficiency investments needed to reduce

total U.S. energy consumption from EIA 2030 Reference caseof 104.3 Q-BTUs to 70 Q-BTUs in 2030

91 Table 2.17: Estimates of direct rebound effects from two recent survey papers

102 Table 3.1: U.S. renewable energy consumption by categories in 2010


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Contents 104 Table 3.2: EIA Reference case projection of 2030 U.S. renewable energy consum

106 Table 3.3: EIA Reference case projection of 2035 U.S. renewable energy consum 110 Table 3.4: Alternative estimates for renewable energy generation

114 Table 3.5: Greenhouse gas emissions reductions for alternative biofuels

and biomass energy sources

120 Table 3.6: 2035 projections for wind, solar, and geothermal energy supply in E

Low-Cost Renewable Technology case

121 Table 3.7: Summary of clean renewable supply potential from 2030 through 20

124 Table 3.8: Estimated average levelized costs of electr icity

from renewable energy sources

127 Table 3.9: Range for total system levelized costs for electricityfrom renewable energy sources

128 Table 3.10: Average levelized costs of renewables versus fossil fuels and nuclea

130 Table 3.11: Range for total system levelized costs for conventional electricity s

131 Table 3.12: Total levelized costs for clean renewables in 2030 based on

EIA Reference case cost figures

132 Table 3.13: Total levelized costs for renewables in 2030 based on

EIA Low-Cost Renewable Technology case

133 Table 3.14: Total levelized costs for producing 15.4 Q-BTUs of electricity power

a combination of coal, natural gas, and nuclear energy (2010 prices

134 Table 3.15: Comparison of total levelized costs for generating 15.4 Q-BTUs of

electricity through Alternative Renewable and Nonrenewable case

135 Table 3.16: Renewable energy capital expenditures for electr icity generation:

Annual levelized costs and present values

137 Table 3.17: Capital expenditures for estimated clean renewable capacity expan

from 2010 through 2030

146 Table 4.1: Estimated U.S. overall oil demand in 2030

153 Table 4.2: Coal-fired electricity capacity : Alternative projections

154 Table 4.3: Coal-fired electricity consumption: Alternative projections

155 Table 4.4: Natural gas-fired electricity capacity: Alternative projections

156 Table 4.5: Natural gas-fired electr icity consumption: Alternative projections

157 Table 4.6: Nuclear-powered electricity capacity : Alternative projections

158 Table 4.7: Nuclear-powered electricity consumption: Alternative projections


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Contents 161 Table 4.8: Electric ity generation from all nonrenewable energy sources:Alternative projections

166 Table 4.9: Total levelized costs for electricity generation from alternative energy s

177 Table 5.1: CO2emissions levels from alternative fossil fuel energy sources

179 Table 5.2: Weighted averages of U.S. emissions for oil, coal, and natural gas

182 Table 5.3: Summary of investment requirements under 2030 PERI/CAP scenari

187 Table 5.4: Features of Aggressive Reference case for U.S. energy consumption in

188 Table 5.5: Alternative U.S. energy consumption scenarios for 2030

191 Table 5.6: CO2emissions generated by alternative U.S. energy scenarios

194 Table 5.7: 2030 side case 1: 100 percent fuel switch from coal to natural gas of

Aggressive Reference case assumptions

195 Table 5.8: 2030 side case 2: Natural gas partia lly replaces nuclear power under

PERI/CAP case

196 Table 5.9: 2030 side case 3: Natural gas fully replaces nuclear power under

PERI/CAP case

209 Table 6.1: Employment creation through energy-efficiency capital expenditure

buildings and industry

210 Table 6.2: Job creation through buildings and industry efficiency investments

211 Table 6.3: Job creation through renewable energy capital investments

212 Table 6.4: Job creation through renewable energy operationsand maintenance expenditures

213 Table 6.5: Job creation through capital expenditures to produce a net expansio

11.8 Q-BTUs of clean renewable energy

214 Table 6.6: Job creation through operations and maintenance of 15.4 Q-BTUs

of clean renewable energy by 2030 to 2035

215 Table 6.7: Summary of job creation for achieving a 70 Q-BTU economy

with 15.4 Q-BTUs of clean renewable energy by 2030 to 2035

216 Table 6.8: Job creation within nonrenewable energy sectors: New capital

expenditures and operations and maintenance for coal, natural gas,

nuclear power, and oil

218 Table 6.9: Net change in employment through transferring funds from

nonrenewable to clean energy sector spending

226 Table 6.10: Occupations with large growth potential through green investmen


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Contents 228 Table 6.11: Breakdown of job creation by formal educational credential levels

231 Table 6.12: Bioenergy operations and maintenance: Job creation breakdown bformal educational credential levels

232 Table 6.13: Bioenergy operations and maintenance: Occupations

with large growth potential

240 Table 7.1: Comparison of alternative U.S. GDP growth forecasts under baseline

with cap-and-trade legislation

242 Table 7.2: Projected clean energy investments as share of U.S. economy

253 Table 7.3: Expenditure allocation for all ARRA clean energy appropriations

from U.S. Council of Economic Advisers, January 2010

256 Table 7.4: Estimates of direct job creation through ARRA clean energy projects

within the U.S. Department of Energy

258 Table 7.5: Estimate of total job creation on DOE-funded ARRA projects

262 Table 7.6: ARRA clean energy 1705 loan guarantee program: Recipients

of guarantees from 2009 through 2013

273 Table 8.1: A clean energy policy agenda for achieving the U.S. 20-year

CO2emission reduction target

316 Table 8.2: Summary of average annual sources of revenues/net savings

and expenditures from clean energy projects

326 Table A1.1: U.S. energy consumption in 2011 through alternative transportation

332 Table A1.2: Employment creation through investments in public transportatio

332 Table A1.3: Employment creation through doubling public bus transportation

availability in 20 years

334 Table A2.1: Age range for entire U.S. auto fleet in 2001

335 Table A2.2: Calculations for estimating the average fuel economy level for

U.S. light-duty vehicles as of 2030

341 Table A3.1: Alternative U.S. energy consumption scenarios for 2030 including

EIAs extended policies case

342 Table A3.2: CO2emissions generated by alternative U.S. energy scenarios

354 Table A4.1: Composition of energy industries using input-output model

364 Table A4.2: Change in U.S. output multipliers for alternative energy sectors, 1995

365 Table A4.3: Possible impacts on employment from varying rates of GDP growt

labor productivity growth


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Contents 366 Table A4.4: U.S. average annual GDP growth and labor productivity growth ovvarious time periods

373 Table A5.1: Federal and state green bank programs: Estimating annual program

over 20 years

375 Table A5.2: Federal loan guarantee program for clean energy investments:

Estimating annual costs for 20-year program

377 Table A5.3: Estimated 20-year public budgetary impacts through policies supp

$200 billion annual U.S. clean energy investment program

381 Table A5.4: Summary of average annual sources of revenues/net savings

and expenditures from clean energy projects


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Contents List of Figures

5 Figure S.1: CO2emissions generated by alternative U.S. energy scenarios 38 Figure 2.1: U.S. energy consumption from 1970 through 2010

51 Figure 2.2: Residential electr icity savings potential for 2030 based on

National Academy of Sciences Technoeconomic cases

52 Figure 2.3: Residential natural gas savings potential for 2030 based on


52 Figure 2.4: Commercial electr icity savings potential for 2030 based on


53 Figure 2.5: Commercial natural gas savings potential for 2030 based on


189 Figure 5.1: Alternative U.S. energy-consumption scenarios for 2030

192 Figure 5.2: CO2emissions generated by alternative U.S. energy scenarios

225 Figure 6.1: Job creation through $1 million in spending: Clean energy investm

versus fossil fuels


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1 Political Economy Research Institute Center for American Progress | Green Growth

Summary


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Summary

Te quesion or policymakers, and all oher ciizens, is no longer wheher humans

are changing our climae. Te quesion now is, how we can sabilize an already-chang-

ing climae in a way ha promoes economic prosperiy? While recenly esablished

domesic policies have made srides oward a lower carbon uure, such measures are

sepping sones. Tey prescribe he iniial pah bu will no lead o he final goal o

achieving he reducions in greenhouse gas emissions necessary o help sabilize

global emperaures. Effecively miigaing climae change requires ideniying

exacly how he Unied Saes will ransorm is energy economy o atain inerna-ional goals o help proec our climae.

Tis repor quanifies he level o invesmen required or he Unied Saes o align

emissions reducions wih inernaional goals in an economically beneficial and

echnically easible manner. Te specific emissions-reducion goal we explore in his

sudy is wha he Inergovernmenal Panel on Climae Change, or IPCC, has proposed

or he world as a whole: reducing greenhouse gas emissions by 40 percen rom 2005

levels by 2035.1o do is par o mee his goal, he Unied Saes mus reduce is

carbon dioxide emissions rom energy-based sources by 40 percen, o 3,200 million

meric ons, or mm, over roughly he nex 20 years. Te proposals in his repor pu

he Unied Saes on his rack o effecively miigae global climae change.

Te repor covers hree areas o analysis. I firs describes he need or a subsanial

new wave o mosly privae invesmen in advanced energy echnology and higher

perorming buildings, as well as significan public and privae invesmen needed o

build dramaically more efficien inrasrucure. Second, i oulines how he Unied

Saes can and mus reduce is use o ossil uels by 40 percen wihin he nex 20

years, as he window o opporuniy o sabilize our changing climae is small and

closing rapidly. Tird, he repor shows ha sabilizing he climae requires boldacions ha we erm he PEI-CAP scenario. In addiion o his analysis, he repor

oulines flexible policy opions ha can be uilized o ake he needed acions.

Noably, he repor finds ha his invesmen agenda will no only proec our

climae bu will also generae 2.7 million ne new jobs.


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Findings

Greater clean energy investment is vital to the nations welfare and economy

Te repor finds ha he invesmen needed o sabilize our climae and improve

our economy amouns o abou $200 billion annually in boh public and privae

resources. Average ne public expendiures would comprise roughly one quarero ha oal, averaging $55 billion per year, which alls wihin he $44 billion o

$60 billion per year range ha he Unied Saes has devoed o clean energy

invesmens in recen years.2I a successul carbon ax or cap were implemened as

par o his plan, i would also yield public revenues averaging $200 billion per year.3

o pu he clean energy invesmen oal in perspecive, consider he ollowing:

Public expendiures would comprise 0.3 percen o curren U.S. GDP and

roughly 1.4 percen o he ederal budge.

oal expendiurespublic and privaeare roughly 1.2 percen o curren U.S.GDP.

A recen Whie House Council o Economic Advisors repor ound ha a

emperaure increase o 3 degrees Celsius above pre-indusrial levels would

increase economic damages by $150 billion, year aer year in perpeuiy. oal expendiures are roughly 40 percen below U.S. oil and gas indusry

invesmens or 2013.

O he $200 billion needed or annual invesmens, $90 billion mus be invesed in

raising efficiency sandards or he operaions o buildings, ransporaion sysems,

and indusrial equipmen. Tese invesmens can reduce overall U.S. energy

consumpion by 30 percen relaive o curren levels. In mos cases, he coss o

hese energy efficiency invesmens can be offse wihin an average o hree years,

ollowed by ne posiive financial gains. Te remaining $110 billion per year would

be invesed in renewable energy ha generaes low o zero emissionsi.e., solar,

wind, geohermal, small-scale hydro, and low-emissions bioenergywhich will

raise overall U.S. producion rom hese energy sources more han ourold.

Addiionally, he U.S. Energy Inormaion Agency, or EIA, esimaes ha he

average cos or producing elecriciy rom mos clean renewable sources

including wind, hydro, geohermal, and clean bioenergywill be a rough cospariy wih mos nonrenewable sources by 2017.4


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Te repor finds hese invesmens will yield he ollowing employmen benefis:

4.2 million overall jobscreaed boh by new invesmens and expanded levels o

operaions and mainenance 2.7 million net increase in jobs,evenaer esimaedconracions in ossil uel

secors Net employment expansion at all levels of pay in the U.S. labor market and a

decrease in he unemploymen rae by abou 1.5 percenage poinse.g., rom

6.5 percen o 5 percen wihin he 2030 U.S. labor marke

We must significantly reduce demand for nonrenewable energy sources,

including natural gas

CO2emissions produced by burning oil, coal, and naural gas o generae energy

accoun or roughly 75 percen o all U.S. and global greenhouse gas emissions.5

educing U.S. CO2emissions by 40 percen wihin 20 years will hereore require

major absolue reducions in U.S. consumpion o oil, coal, and naural gasabou60 percen or coal, 40 percen or oil, and 30 percen or naural gas. Based on careul

review o currenly available echnology and economics, his repor deermines ha

such a ransormed uel mix, while ambiious, is enirely achievable wihou undue

disrupion o he securiy, reliabiliy, or affordabiliy o he domesic energy sysem

and would provide a ne gain o he U.S. economy.

o mee he 20-year emissions-reducion arge, he ollowing energy and eco-

nomic policies are required:

Reductions in fossil fuel consumptionby approximaely 60 percen or coal, 40

percen or oil, and 30 percen or naural gas Reduction of overall U.S. energy consumptionby approximaely 30 percen

relaive o curren levels Raising overall U.S. energy production from low to zero emissions renewables

by more han ourold. Reduction in oil importso absorb mos o he decline in U.S. oil consumpion,

which will bring a sharp decline in he U.S. rade defici and avorable macroeco-

nomic effecs

Transitional support for affected communities and workershardes hi by hereduced U.S. consumpion o coal and naural gas. Te ederal governmen

hereore needs o provide major ransiional suppor or workers and commu-

niies ha are acing rerenchmen in order o promoe economic developmen

and job opporuniy in hese impaced communiies and regions.


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No expansion of nuclear energy supply; despie being an emissions-ree source

o elecriciy, nuclear energy is unlikely o experience major expansion in he

nex wo decades, due o public-saey consideraions and marke concerns. Tis

repor concludes ha nuclear energy s conribuion o he overall U.S. energy

mix will hereore remain roughly consan.

These investments are the best path to achieving economically beneficial

carbon emissions reductions

Te repor examines he hree disinc pahways or he energy uure o he

Unied Saes: a eerence case o uure emissions based on our curren acions;

an Aggressive eerence case o emissions semming rom subsanially more

asserive acions based on he curren poliical and policy ramework; and finally,

he PEI-CAP case, which works backward rom he IPCC goal noed earlier o

ouline a realisic ramework o acions needed o achieve success.

Te PEI-CAP case may ace poliical challenges. I is no wihou cos. However,i is also a necessary and easible way o sabilize he climae. In aggregae i will

provide srong ne benefis o he U.S. economy.

FIGURE S.1

CO2emissions generated by alternative U.S. energy scenarios

Emissions are in millions of metric tons, or mmt

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Coal and high-

emissions biomass

Petroleum and

other liquid fuels

Natural gas

2030 PERI/

CAP case

2030 Aggressive

Reference case

2030 EIA

Reference case

2010 actual

Millionsofmetrictonsofemissions

Totalemissions5,634 mmt




3,200 minimum emissionreduction goal for 2030

Source: See Table 5.6.


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As Figure S.1 shows, his repor ound ha in he Energy Inormaion Agencys

eerence case or U.S. energy consumpion in 2030i.e., wha he EIA regards as

he mos likely U.S. energy-secor condiions in 2030CO2emissions are a 5,733

mm, or roughly 80 percen above he 20-year IPCC emissions-reducion goal.

Te repor hen consrucs a scenario based on he Aggressive eerence casehe ull implemenaion o he bes clean energy policies currenly considered

achievable wihin he near erm wihou a change in he curren poliical and

policy debae. Assuming ha hese iniiaives are all ully and successully imple-

mened, Figure S.1 esimaes ha U.S. CO2emissions will be a 4,441 mm, or 40

percen above he 3,200 mm arge level, under his case.

Finally, under he PEI-CAP case, we work backward rom he IPCC goal o

undersand which echnologies can produce a susainable uel mix wihin climae

limis. We consrain hese choices by he bes available echnical and economic

research o ensure ha his scenario is achievable using exising echnologies underreasonably anicipaed marke condiions. Te clean energy program we develop

hrough which overall annual U.S. energy consumpion alls o 70 quadrillion

BUs wihin 20 years, wih 15 Q-BUs coming rom clean renewable sources and

55 Q-BUs rom nonrenewableswill enable he Unied Saes o achieve he

CO2emissions arge o no more han 3,200 mm wihin 20 years. Tis is a decline

o abou 40 percen relaive o curren emissions levels o abou 5,600 mm.

There are four essential pillars to transforming our energy and

environmental future

Building rom exising policies a he ederal, sae, and municipal levels wihin he

Unied Saes, we highligh our pillars, or policy caegories, o promoe a $200

billion annual shi in invesmen across he U.S. economy. Tese measures will be

mos effecive when used in concer wih each oher.

Market-shaping rulesha level he playing field and build demand or new

echnology wihin energy, real esae, and financial markes. Tese include a

carbon cap or ax, sric enorcemen o he Clean Air Ac, renewable energy

sandards and building codes, vehicle uel-efficiency sandards, and sae and

local regulaion o elecriciy markes.

Direct public spending, including governmen invesmens in energy efficiency

rerofis or publicly owned buildings, major inrasrucure sysems, renewable

energy procuremen projecs, and expanding ederal research and developmen


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suppor or efficiency and renewable energy. Such public invesmen is crucial

or seting he plaorm upon which individual marke decisions are made.

Private investment incentivesha manage risk and improve access o capial or

privae invesors a all levels o he economy and hereby make clean energy

cheaper and more broadly accessible. Tese programs include resrucuringclean energy producion and invesmen ax credis, implemenaion o eed-in

ariffs, financing green banks, and offering governmen loan guaranees.

Regional equity and transitional support for communities and workers, which

includes allocaing ederal governmen clean energy invesmen spending

equiably among all regions o he counry, argeed communiy-adjusmen

assisance, exensive worker-raining programs, and adjusmen-assisance

programs or ossil uel workers. Te naional clean energy invesmen program

can isel provide a criical base or generaing new opporuniies among

workers and communiies ha are presenly dependen on he ossil uelindusries.

Sabilizing climae change requires a ransormaional shi in how we consruc,

finance, and deploy our energy inrasrucure. Tis repor quanifies ha shi by

oulining he challenging bu easible seps ha can help resore a climae balance

and increase overall U.S. employmen in he process.


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Endnotes

1 Intergovernmental Panel on Climate Change, ClimateChange 2007: Mitigation of Climate Change: Chapter13: Policies, instruments, and co-operative arrange-ments (New York: Cambridge University Press, 2007),p. 776, box 13.7, available at http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdf.

2 Bloomberg New Energy Finance and Business Councilfor Sustainable Energy, Sustainable Energy in America2013 Factbook (2013), available at h ttp://www.bcse.org/factbook/pdfs/BCSE_BNEF_Sustainable_Energy_in_America_2013_Factbook.pdf.

3 Including the carbon tax or cap, the full program wouldoperate, on average, in rough fiscal balance over the20-year investment cyclemeaning there would beno net increase in g overnment spending. This wouldbe after assuming that 75 percent of the revenuesgenerated by the carbon tax or cap would be returneddirectly to U.S. taxpayers, while 25 percent wouldsupport clean energy public policies.

4 U.S. Energy Information Administration, Levelized Costof New Generation Resources in the Ann ual EnergyOutlook 2012, June 25, 2012, available at http://www.eia.gov/forecasts/archive/aeo12/electricity_generation.cfm.

5 Ecofys, World GHG Emissions Flow Chart 2010 (2010),available at http://www.ecofys.com/files/files/asn-ecofys-2013-world-ghg-emissions-flow-chart-2010.pdf;U.S. Environmental Protection Agency, Inventory of U.S.Greenhouse Gas Emissions and Sinks: 19902011 (2013),page 78, table 2-3, available athttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdf.
http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdfhttp://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdfhttp://www.eia.gov/forecasts/aeo/electricity_generation.cfmhttp://www.eia.gov/forecasts/aeo/electricity_generation.cfmhttp://www.eia.gov/forecasts/aeo/electricity_generation.cfmhttp://www.ecofys.com/files/files/asn-ecofys-2013-world-ghg-emissions-flow-chart-2010.pdfhttp://www.ecofys.com/files/files/asn-ecofys-2013-world-ghg-emissions-flow-chart-2010.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2013-Main-Text.pdfhttp://www.ecofys.com/files/files/asn-ecofys-2013-world-ghg-emissions-flow-chart-2010.pdfhttp://www.ecofys.com/files/files/asn-ecofys-2013-world-ghg-emissions-flow-chart-2010.pdfhttp://www.eia.gov/forecasts/aeo/electricity_generation.cfmhttp://www.eia.gov/forecasts/aeo/electricity_generation.cfmhttp://www.eia.gov/forecasts/aeo/electricity_generation.cfmhttp://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdfhttp://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdf


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Chapter 1

Introduction


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Introduction

Tis sudy develops a ransormaive clean energy invesmen program over he

nex 20 years ha will enable he Unied Saes o dramaically reduce is overall

level o greenhouse gas emissions and hereby allow he counry o make a air

conribuion o he massive and urgen global projec o conrol climae change.

We show ha his clean energy program is echnologically and financially achievable

and will in ac generae widespread and broadly shared economic benefis. We

recognize ha here are already a wide range o policies in operaion in he Unied

Saes ha are making effecive conribuions oward conrolling climae change.Te advances achieved by hese policies are he resul o concered and successul

effors by large numbers o ciizens and policymakers. Bu we also show ha he

policy ramework in place oday is no close o being adequae or meeing he

challenges beore us.

Te saring poin o our sudy is he firm conclusion by he overwhelming majoriy

o climae scieniss ha greenhouse gas, or GHG, emissions rom economic

aciviy is he undamenal cause o global climae change. Moreover, we know ha

generaing energy rom ossil uel sourcesby burning oil, coal, and naural gas

is by ar he larges single source o GHG emissions. Tis is because burning hese

uels releases carbon dioxide, or CO2, ino he amosphere. Our sudy hereore

examines wha is requiredin erms o raising energy efficiency sandards and

generaing energy rom low- or zero-emissions renewable energy sourcesin order

or he Unied Saes o achieve a major reducion in CO2emissions over he nex

20 years. We also esablish how much he Unied Saes will need o reduce is

reliance on oil, coal, and naural gas as energy sources over his 20-year ime period.

Working rom his undersanding o he necessary changes over he nex 20 years

in he U.S. energy sysem, we are hen able o provide careully developed esimaeso he level o public and privae invesmens ha will be needed o make his new

clean energy economy a realiy. Crucially, we also show ha building a clean energy

economy in he Unied Saes can be a significan new source o job opporuniies

in all regions o he counry and can conribue oward reurning he U.S. economy


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o a healhy long-erm economic growh rajecory. Ta is, we demonsrae in

deail ha he projec o building a clean energy economy in he Unied Saes is

ully compaible wih he equally imporan purpose o expanding economic

opporuniies or working people and businesses hroughou he counry. As

Podesa e al. wroe in 2009, building a clean energy economy in he Unied Saes

is a undamenally affirmaive agenda, raher han a resricive one. Moving beyondpolluion rom ossil uels will involve exciing work, new opporuniies, new

producs, innovaion and sronger communiies.1Tis sudy documens in deph

how his undamenally affirmaive agenda can be successul in he Unied Saes

over he nex 20 years.

Te basics o he program are simple. I enails abou $200 billion o combined

public and privae invesmens in clean energy every year or 20 years. Tis is a

massive amoun o money, bu i is only abou 1.2 percen o curren U.S. GDP.2

Neverheless, i is abou 3 o 4 imes more han he $44 billion o $60 billion per

year ha has been devoed o U.S. clean energy invesmens over he pas ew years.3

Te challenge o ramp up invesmens o $200 billion per year over he nex 20 years

will be ormidable. Invesmens will need o be ocused on wo areas. Te firs is o

dramaically raise energy efficiency sandards in buildings, ransporaion sysems,

and indusrial processes o reduce he overall level o U.S. energy consumpion by

30 percen while sill allowing or he U.S. economy o grow a a healhy rae. Te

second is o expand he U.S. producion o zero-o-low emissions renewable energy

sourcessolar, wind, geohermal, small-scale hydro, and clean bioenergy power

by abou 400 percen relaive o curren levels, or a an average annual rae o abou

7.5 percen per year over he nex 20 years. Tis will enable hese low-emissions

sourceswha we erm clean renewables hroughou his sudyo provide

abou 20 percen o overall U.S. energy supply wihin 20 years.

I is imporan o emphasize ha he invesmen in energy efficiency will also produce

significan savings. Aer invesors make heir upron efficiency invesmens, hey

will be able o operae buildings, cars, rucks, buses, rains, and indusrial machinery

a significanly lower coss. On average, heir upron invesmens will be ully

reurned o hem in energy savings wihin abou hree o five years. Similarly, once

invesmens are made o creae expanded clean renewable energy resources, hecoss o consumers o purchasing energy rom hese sources will be, in mos cases,

a rough pariy or lower han hose o oil, coal, naural gas, and nuclear power.


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A every level o governmen hroughou he Unied Saes, here are already policies

in place aimed a promoing clean energy invesmens and reducing CO2emissions.

Te primary challenge or now is hereore no designing new measures bu

grealy srenghening he policy ramework ha already exiss. Wihin his exising

policy ramework, we develop our agenda wihin our broad caegories: marke-

shaping rules ha promoe invesmens in energy efficiency and renewable energy;direc public spending ha invess in inrasrucure, procuremen, and research

and developmen; privae-invesmen incenives ha manage risk and improve

access o capial; and ransiional supporor communiies and workers acing

rerenchmen. We consider 19 separae policy measures in all, including carbon

caps and axes; ederal research and developmen unding in suppor o advancing

efficiency and clean renewable echnologies; producion and invesmen ax

credis; and a Superund o finance a viable adjusmen-assisance program or

workers employed in he coal, oil, and naural gas secors.

We have developed rough esimaes as o he fiscal impac o all o our policyproposals deliberaely based on high-end cos assumpions or all public policy

programs. More specifically, we find ha i a carbon cap or ax is implemened

along he lines recenly oulined by he U.S. Energy Deparmen,4hen he overall

U.S. clean energy program will be fiscally neuralhere will be no ne impac,

eiher posiive or negaive, on public-secor budges. Tis is rue even i we assume

ha 75 percen o he ax revenues rom a carbon cap or ax are reurned direcly

o U.S. axpayers raher han being reained by he ederal governmen or spend-

ing on clean energy projecs or o suppor any oher governmen aciviy. I,

alernaively, we consider our ull se o policy proposals exclusive o a carbon ax

or cap, he remaining programs ha we discuss would amoun o a ne annual cos

o abou $50 billion, or 0.3 percen o curren U.S. GDP. Ta is, operaing wihou

a carbon cap or ax, we esimae ha abou 75 percen o he ull $200 billion in

annual clean energy invesmens ha are needed would come rom he privae

secor and 25 percen would come rom public spending.

Working rom our overall goal o achieving he 20-year CO2emissions-reducion

arge, we find ha he Unied Saes needs o sharply reduce is reliance on energy

generaed rom burning oil, coal, and naural gas. We conclude ha, by 2030 o 2035,

coal consumpion needs o decline by abou 60 percen relaive o is 2010 level;oil consumpion by abou 40 percen, including rom boh domesic sources and

impors; and naural gas by abou 30 percen. Communiies and workers in many


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pars o he counry will obviously be significanly impaced by his conracion in

U.S. ossil uel producion. Tis is precisely why effecive ransiion-assisance

programs argeed a hese impaced regions, communiies, and individual workers

mus be incorporaed as a cenerpiece o he clean energy policy agenda.

We urher demonsrae ha here are basically no workable alernaives o some-hing akin o our clean energy invesmen pah i he Unied Saes is going o make a

serious conribuion oward meeing he global challenge o conrolling climae

change. Tus, over he nex 20 years, i he Unied Saes were o proceed along an

energy pah ha he U.S. Energy Inormaion Adminisraion considers is mos

likely rajecorywha he EIA erms is eerence case scenarioU.S. emissions

as o 2030 o 2035 will be roughly 80 percen higher han he arge figure or

emissions reducions esablished by he Inergovernmenal Panel on Climae

Change. Moreover, even assuming highly opimisic esimaes as o he impac o he

Obama adminisraions curren policy agenda or reducing emissionswha we

have ermed an Aggressive eerence casehe Unied Saes will sill exceed heIPCCs emissions-reducion arge or 2030 o 2035 by nearly 40 percen.

A criical eaure o such a clean energy invesmen program is ha i can succeed

in dramaically reducing emissions while also expanding employmen opporuniies

in all regions o he counry and a all levels o he U.S. labor marke. Specifically,

we find ha his invesmen program would resul in he creaion o 4.2 million

oal new jobs and a ne expansion o 2.7 million jobs, even aer aking accoun o

he job losses ha will resul rom a conracion in he producion o oil, coal, and

naural gas. We again give careul atenion in our policy discussions o he mos

effecive mehods o ransiion assisance o workers and communiies ha will be

affeced by he decline in U.S. ossil uel producion. As such, our sudy demonsraes

ha he projec o conrolling climae change can be ully compaible wih he goal

o expanding broadly shared economic opporuniy and prosperiy.

Te reason or advancing his highly ambiious clean energy invesmen program

is sraighorward. A presen, an overwhelming majoriy o climae scieniss

conend ha our environmen aces a severeand perhaps even exisenial

hrea i we do no conrol he changing climaic condiions resuling rom he

emissions o greenhouse gases generaed by human aciviy. Te overwhelmingconsensus among climae scieniss is ha achieving hese dramaically reduced

emissions levels in he Unied Saes and equivalenly low levels elsewhere in he

world is needed o sabilize global mean emperaures a around 3.6degrees

Fahrenhei (2 degrees Celsius) above he preindusrial mean global emperaure


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o around 56.7degrees Fahrenhei (13.72degrees Celsius). I he global mean

emperaure can be sabilized a around 60.1degrees Fahrenhei, climae scieniss

hold ha he mos severe hreas o global ecology resuling rom climae change

may sill be prevened.5

As o 2010 oal annual global greenhouse gas emissions amouned o abou45,000 million meric ons o carbon dioxide or is equivalen. Tis includes

33,615 in CO2emissions rom burning oil, coal, and naural gasequaling abou

75 percen o oal greenhouse gas emissions. Te remaining CO2-equivalen

emissions come rom mehane and nirous oxide, as well as smaller amouns rom

hydrofluorocarbons, perfluorocarbons, and sulur hexafluoride. In order o conrol

climae change, he IPCC esimaes ha oal greenhouse emissionsincluding

boh CO2

and CO2equivalen emissionswill need o all by abou 40 percen as

o 2030, o 27,000 mm, and by 80 percen by 2050, o abou 9,000 mm.

As o 2010 he U.S. economy was consuming a oal o abou 98 quadrillion BUs,or Q-BUs, o energy per year rom all energy sourcesincluding oil, naural gas,

coal, and nuclear power, as well as rom all renewable energy sources.6Tis

ranslaed ino abou 5,600 million meric ons o CO2emissions in 2010 rom all

energy sources, given he exising energy mix in he Unied Saes. In addiion, he

Unied Saes emited roughly anoher 1,200 meric ons o CO2rom nonenergy

sources in 2010, including mehane, nirous oxide, and oher less significan

sources o greenhouse gases. Tis amouns o a oal o abou 6,800 million meric

ons o emissions in 2010, or 17 percen o oal global emissions.7A he same

ime, U.S. residens accouned or only abou 4.4 percen o global populaion.8


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Units of Measurement

By its nature, this study necessarily aims to provide an across-the-board analysis of energy

use within the United States economy. We are examining energy consumption for all

purposesthat is, for industry, transportation, and for all activities within buildings. We also

necessarily take account of all energy sources, including oil, coal, natural gas, nuclear power,

and all renewables. We also stress the role of investments in energy efficiency.

Each of these segments of the energy industry operates with its own sets of terms, markets,

and ways of measuring activity and output. For example, electricity consumption is typically

measured and priced in terms of kilowatt hours or megawatt hours, while crude petroleum

is measured and priced as barrels of oil. In retail markets, refined petroleum is priced and

sold as gallons of gasoline.

To keep the study grounded in the realities of each specific market segment, it is important

to keep in mind these standard units of measurement and terms. At the same time, precisely

because this study necessarily considers all segments of the U.S. energy industry as a unified

whole, it is also crucial that we make use of terms and units of measurement that can be

applied equally across all industry segments.

One standard unit of measurement that applies across all industry segments is the British

Thermal Unit, or BTU. BTUs measure the heat content generated by any given energy source.

One BTU is roughly equivalent to the energy produced by burning one wooden match. In

discussing and comparing energy generation across alternative energy sources and sectors

of the economy, we therefore need to work within the framework of BTU measurement.

Further, for discussions on general energy use at a large scale, such as for the U.S. economy

as a whole, it is convenient to refer to quadrillion BTUs of energy. Throughout this study, we

use the acronym Q-BTUs as a shorthand for quadrillion BTUs. At the same time, we also refer,

when appropriate, to more industry-specific terms, especially as regards the electricity

sector, where the standard units of measurement are kilowatts or megawatts.

As a reference, Table 1.1 presents conversion factors between Q-BTUs, kilowatt hours of

electricity, barrels of crude oil, and gallons of gasoline.


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TABLE 1.1

Conversion factors in standard energy units

Energy units converted to BTU heat rates

Fuel Units Approximate heat content

Coal1

Production million BTU per short ton 20.192

Consumption million BTU per short ton 19.847 Coke plants million BTU per short ton 26.297

Industrial million BTU per short ton 20.433

Residential and commercial million BTU per short ton 21.188

Electric power sector million BTU per short ton 19.623

Imports million BTU per short ton 24.719

Exports million BTU per short ton 25.698

Coal coke million BTU per short ton 24.800

Crude oil

Production million BTU per barrel 5.800

Imports1 million BTU per barrel 5.989

Petroleum products and other liquids

Consumption1

million BTU per barrel 5.254 Motor gasoline1 million BTU per barrel 5.100

Jet fuel million BTU per barrel 5.670

Distillate fuel oil1 million BTU per barrel 5.771

Diesel fuel1 million BTU per barrel 5.762

Residual fuel oil million BTU per barrel 6.287

Liquefied petroleum gases1 million BTU per barrel 3.557

Kerosene million BTU per barrel 5.670

Petrochemical feedstocks1 million BTU per barrel 5.510

Unfinished oils million BTU per barrel 6.118

Imports1 million BTU per barrel 5.337

Exports1 million BTU per barrel 5.851

Ethanol million BTU per barrel 3.561Biodiesel million BTU per barrel 5.359

Natural gas plant liquids

Production1 million BTU per barrel 3.674

Natural gas1

Production, dry BTU per cubic foot 1,024

Consumption BTU per cubic foot 1,024

End-use sectors BTU per cubic foot 1,025

Electric power sector BTU per cubic foot 1,022

Imports BTU per cubic foot 1,025

Exports BTU per cubic foot 1,009

Electricity consumption BTU per kilowatt hour 3,412

1 Conversion factor varies from year to year. The value shown is for 2010.

Note: BTU=British thermal unit.

Sources: Energy I nformation Administration,Annual Energy Review 2010(U.S. Department of Energy, 2011); Energy Information

Administration,Annual Energy Outlook 2012 (U.S. Department of Energy, 2012).


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BOX 1.1

How much energy does one Q-BTU provide?

Residential energy consumption:One Q-BTU is equal to the total average annual energy

consumption for the residences of 10 million U.S. households. This roughly equals the annual

residential energy consumption for all households in Pennsylvania and Ohio combined.

Automobile travel:One Q-BTU can provide enough energy for 61 million round-trip

automobile trips between New York City and Los Angeles.

Power plants:One Q-BTU is the amount of electricity generated in one year by 408

averaged-sized U.S. power plants. This is about 7 percent of all U.S. power plants. It is

approximately equal to the amount of electricity consumed in one year in Michigan,

Virginia, and Colorado combined.

Coal Supply:One Q-BTU is roughly equal to the energy contained in 40 million tons of coal.

This is the amount of coal that would be loaded onto a freight train that stretches from New

York City to Fairbanks, Alaska.

Numbers of calories:One Q-BTU contains just over 250 trillion calories. This is roughly

equal to the amount of calories contained in 1 trillion McDonalds hamburgers. If each of the

worlds 7.1 billion people ate 140 hamburgersone per day for 20 weeksthis would equal

the amount of calories contained in one Q-BTU.23


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Te specific goal we explore in his sudy is or he Unied Saes o reduce is CO2

emissions rom energy-based sources over roughly he nex 20 yearsha is, as o

he five-year period rom 2030 o 2035by he percenage ha he IPCC has

proposed or he world as a whole. Tis means ha he Unied Saes needs o

reduce is energy-based CO2emissions by abou 40 percen in 20 years. As we

discuss in deail laer in his sudy, his ranslaes ino a specific goal or he UniedSaes o reducing CO2

emissions rom is energy secor o he level o no more

han 3,200 mm annually by he period rom 2030 o 2035.

We do no in his sudy look a he separae se o issues relaing o he conrol o

nonenergy based GHG emissions rom mehane, nirous oxide, or oher green-

house gas sources, hough we o course recognize he criical need or conrolling

hese non-CO2sources o GHG emissions. Mehane is he mos significan

emissions source oher han ossil uels, accouning or abou 9 percen o oal

U.S. emissions.9A he same ime, he larges proporion o mehane emissions

comes rom producing naural gas and coal. Tis means ha a clean energy programha leads o significan reducions in coal and naural gas producion will also

produce major reducions in mehane emissions.10

I is cerainly rue ha oher counries a all sages o developmen also need o

ake dramaic seps over he nex generaion o make heir conribuions oward

conrolling climae change. Te mos obvious case is Chinahe only counry in

he world where oal emissions presenly exceed hose o he Unied Saes. Bu

here is also no doub ha he projec o dramaically reducing emissions in he

Unied Saes requires an exensive and deailed analysis on is own.

Precisely because he challenge o conrolling climae change is global, i is crucial

ha he Unied Saes commi o aking on he challenge in ull wihin is own

borders. I is no adequae or he Unied Saes o mainain excessively high

emissions wihin is domesic economy and compensae or hese high emissions

by helping finance emissions-reducion measures in oher lower-income coun-

ries. U.S. financial suppor o reduce emissions in lower-income counries will o

course be beneficial, and we encourage he expansion o such programs. Bu

measured on a per-capia basis, CO2emissions in he Unied Saes as o 2010

were 60 imes higher han he average or low-income counries as caegorized byhe World Bank and five imes higher han he average or middle-income coun-

ries.11Average U.S. emissions per capia were also hree imes higher han hose

in China in 2010.12As such, he Unied Saes should no underake any carbon-

offse program or low-income counries program as a subsiue or dramaically


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lowering emissions in he Unied Saes isel. For he Unied Saes o do so would

consiue an abdicaion o responsibiliy, especially given his counrys enormous

echnological and financial resources and capaciies.

O course, we also recognize he cenraliy o achieving he IPCCs 2050 goal o an

80-percen reducion in emissions by 2050, boh in he Unied Saes and he reso he world, bu our ocus in his sudy is he nex 20 years. Tere will be almos

no chance or he Unied Saes or he world a large o mee is 2050 emissions-

reducion argesand o hereby conrol climae changei we do no achieve

major advances wihin he nex 20 years.

In his sudy, we have ound ha or he Unied Saes o have a serious chance o

reaching he 2030 o 2035 emissions arge, he single mos imporan order o

business is or here o be dramaic improvemens in energy efficiency hroughou

he U.S. economy. No mater wha addiional acions are aken, i will no be possible

or he U.S. economy o dramaically cu emissions wihou a highly aggressive seo iniiaives o increase energy efficiency. By our esimaes, his enails invesing

abou $90 billion per year in various efficiency measures in order o cu overall

U.S. energy consumpion o 70 Q-BUs by 2030 o 2035 rom is 2010 level o

abou 100 Q-BUs. Tis esimae akes reasonable accoun o any possible rebound

effecswhen consumers increase heir energy-consumpion levels in response o

improved energy efficiency.

Te second crucial projec or he Unied Saes o underake is a major expansion

in he use o clean renewable sources o energy, especially solar, wind, and geohermal

power since hey can produce energy wihou emiting CO2. Tis means invesing

abou $110 billion per year in new invesmens. We esimae ha his level o

invesmen will enable overall clean renewable producion in he Unied Saes o

rise rom is 2010 level o abou 3.5 Q-BUs o 15 Q-BUs by 2030 o 2035.

Overall renewable energy was a abou 8 Q-BUs as o 2010,13bu more han hal

o his oal supply came rom high-emissions bioenergy sources, corn ehanol in

paricular. Anoher one-hird came rom large-scale hydro projecs, in which uure

prospecs or expansion are unavorable. Tis is why he U.S. clean energy inves-

men projec needs o ocus on grealy expanding capaciy in clean renewables

such as solar, wind, and geohermal power, low-emissions bioenergy, and small-scale hydro projecs.


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Wihou major advances in hese wo criical areas o efficiency and clean renewables,

he only oher plausible pah or significanly reducing greenhouse gas emissions

will enail a major increase in our reliance on nuclear power, which is emissions-

ree. However, he meldown o he Fukushima nuclear power plan in Japan in

2011 as a resul o he massive 9.0 icher-scale earhquake and subsequen

sunami provided a dramaic and ragic reminder o he severe public saey risksassociaed wih nuclear power. Tis recen even will likely resul in ongoing

srong public opposiion o any large-scale expansion o U.S. nuclear power plans,

as has been he patern hroughou mos o Europe and Asia. Te combinaion o

such growing public disrus and serious financial risks has brough invesmens in

nuclear power o a sandsill. Tese obsacles o growh are no likely o diminish

in he oreseeable uure, and as such, nuclear energy canno be seen as a reliable

source or supplying an increasing supply o low-emissions energy in he Unied

Saes or elsewhere.

Te Unied Saes mus underake one urher major and criical projec, even isomehing similar o he clean energy invesmen program ha we have developed

here advances successully over he nex 20 years: building in resilience and

adapaion ha can effecively proec people, communiies, businesses, and our

physical inrasrucure agains he effecs o climae change. Te impacs o climae

change are already occurring wih increasing requency and orce, including

droughs, floods, and oher severe weaher evens. Climae scieniss have made

clear ha he curren global concenraion o amospheric CO2is already a a level

ha has no been seen on his plane or millennia. Tis means we have already

enered unchared erriory in erms o he sabiliy o he global climae.14

Examining his parallel projec o increasing resilience and adapaion is beyond

he scope o his sudy.15Bu we noe ha many o he invesmens in inrasrucure

and he buil environmen we discuss in he conex o achieving major advances

in energy efficiency and renewables hroughou he economy will also conribue

oward srenghening resilience and adapaion. Tese measures include dramaically

improving he efficiency o he elecriciy ransmission and disribuion grid by

creaing smar grid operaions; expanding smaller-scale, communiy-based

disribued energy generaion sysems as alernaives o cenral-saion power

plans; upgrading building managemen and auomaion echnologies odramaically increase building efficiency; and srenghening boh public and

privae ransporaion neworks.


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Tis sudy is srucured as ollows. We begin in Chaper 2 by exploring he ways

hrough which he U.S. economy can achieve major gains in energy efficiency

ha is, o reduce overall U.S. energy consumpion wihin 20 years by abou 30

percen relaive o 2010 levels, while also enabling he U.S. economy o grow a

healhy raes. Our overall conclusion is ha his will ake abou $1.8 rillion in new

invesmens over roughly 20 years, or abou $90 billion per year over he 20-yearperiod. Bu we also emphasize ha hese efficiency invesmens lead o immediae

and permanen gains in energy savings, which in urn bring financial savings.

For example, wih building efficiency invesmens, we esimae ha he average

payback period or invesmens ranges beween hree and five years.

Te U.S. privae and public secors will boh need o underake major invesmens

in all hree energy-consuming areasbuildings, indusry, and ransporaion.

Tis includes invesmens o raise efficiency sandards or boh exising and new

buildings, which enails improving he hermal shell o buildings and improving

he uncioning o heaing, cooling, venilaion, and lighing sysems, among oherhings. Wihin indusry, i includes invesmens in combined hea-and-power

sysems and a range o secor-specific efficiency enhancing invesmens, especially

in indusries ha operae a high levels o energy inensiy such as pulp and paper,

iron and seel, and chemical manuacuring. Several measures will also be needed

in he ransporaion secor, he single mos imporan o which will be o raise he

uel-efficiency sandard or auomobiles. Te agreemen reached in 2011 beween

he U.S. auo indusry and he Obama adminisraion o raise he average uel-

efficiency sandard or new cars o 54.5 miles per gallon by 2025 will be a corner-

sone or achieving he economys overall efficiency and emissions-reducion goals.

I is imperaive ha his uel-efficiency sandard be implemened in ull over he

nex decade wihou any revisions ha would weaken he agreed-upon sandards.

We conclude Chaper 2 by considering he possibiliy ha advances in efficiency

may no end up yielding reducions in emissions a all. As noed above, his could

resul rom he rebound effec, in which he efficiencies achieved acually encourage

consumers o expand heir energy consumpion. Te economis William Sanley

Jevons firs described his effec in 1865, observing ha he invenion o more

efficien seam engines led o moreno lesscoal consumpion in 19h cenury

Briain.16

Bu we conclude rom reviewing he evidence ha any rebound effecha is likely o emerge as one byproduc o an economy-wide energy efficiency

invesmen projec will no be large enough o significanly reduce he environmenal

benefis o he invesmens. Neverheless, we have acored ino our esimaes a

provision or addiional invesmens ha will be needed o counerac he impac


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o rebound effecs a levels suggesed by he recen research on his quesion. A

he same ime, he mos effecive way o limi any rebound effecs is o combine

efficiency invesmens wih measures ha increase he supply o clean renewable

sources while reducing ossil uel energy consumpion. Ta way, even i energy

consumpion rises somewha due o rebound effecs, a growing proporion o ha

consumpion will be provided by clean energy sources. Te criical iniiaives herewould hereore include policies o accelerae he inegraion o clean renewable

energy sources ino he economy, as well as measures ha would direcly aim o

reduce he use o ossil uels such as a carbon cap or ax.

Chaper 3 ocuses on he projec o grealy expanding he supply o energy in he

Unied Saes coming rom clean renewable sources, including solar, wind,

geohermal, small-scale hydropower, and low- or zero-emissions bioenergy. As

o 2010 as we have discussed above, he Unied Saes was producing abou 3.5

Q-BUs o energy rom hese clean renewable sources. We argue ha his figure

needs o increase roughly our-old, o abou 15 Q-BUs as o 2030 o 2035, i heUnied Saes is going o achieve is emissions-reducion arge. Tis amouns o

an expansion in clean renewable producion o abou 7.5 percen per year over he

nex 20 years. We conclude ha his goal can be achieved hrough annual inves-

mens o expand clean renewable capaciy o abou $110 billion per year or 20

years. In mos cases, he coss o consumers o purchasing clean renewable energy

should reach rough pariy or be less han hose or oil, coal, naural gas, and

nuclear energy by 2017.

In advancing his clean renewable invesmen projec, we mus recognize ha as o

2012 roughly 80 percen o all renewable energy consumed in he Unied Saes

came rom eiher bioenergy or hydro power.17Bu significan problems exis wih

boh o hese currenly dominan renewable sources. Te mos imporan problems

resul rom he producion o corn ehanol, which is also he single mos heavily

uilized source o bioenergy a presen. Under curren mehods o refining corn

ehanol, oal emissions rom consuming corn ehanol can be comparable o

burning peroleum. Moreover, as we discuss in Chaper 3, relying on corn and

oher ood producs as he raw maerial or producing biouels can creae a major

srain on global ood supplies, which has conribued o he recen rising rend in

global ood prices. Tis problem will only become more severe o he exen haood crops are uilized increasingly or producing bioenergy.18


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Wih hydro power, he mos avorable sies in he Unied Saes or building large-

scale dams are already buil ou and operaing a capaciy. Beyond his exising

capaciy, here are likely o be serious environmenal issues resuling rom

consrucing addiional large-scale dams. However, we explore he prospecs or

capuring energy rom he roughly 5,000 sies where small-scale hydroelecric plans

could be developed a low coss, using only exising echnologies. As we will discuss,aking advanage o hese small-scale hydro power opporuniies could increase

hydro-based elecriciy supply in he Unied Saes by as much as 25 percen.

According o he mos recen 2012 EIA daa, wind power accouned or abou

16 percen o all U.S. renewable energy, wih solar and geohermal each a around

2 percen.19Tese hree renewable sources combined hereore provided abou

20 percen o all renewable energy in he Unied Saes, which amouns o abou

1.8 percen o all U.S. energy supply ha year.20We examine in Chaper 3 wha

would be needed o make wind, solar, and geohermal, along wih clean bioenergy

and hydro, a major source o U.S. energy supply. Working wih projecions onelecriciy capial coss or renewables rom he EIA, we esimae ha he oal

direc capial expendiures (no including financing coss) needed o expand clean

renewable capaciy o around 15 Q-BUs will be around $2.1 rillion, or roughly

$107 billion per year or 20 years. We round his esimae up o abou $110 billion

per year. Te major invesmen areas would be clean bioenergy, a around $40

billion per year, as well as hydro, wind, and solar PV, all wihin he range o $17

billion o $23 billion per year.

Sill working wih he EIAs cos esimaes, we show ha he coss or producing

elecriciy rom mos clean renewable sourcesincluding wind, hydro, geoher-

mal, and clean bioenergywill be a rough cos pariy wih mos nonrenewable

sources by 2017. Te EIA does esimae ha naural gas could be supplied more

cheaply in he uure bu only by expanding reliance on hydraulic racuring or

exracing gas rom shale rock ormaions. As we discuss in Chaper 4, his would

enail major environmenal coss and aces ongoing public opposiion.

According o he EIA, solar coss are no likely o be a cos pariy wih nonrenew-

ables by 2017 under average condiions. Bu solar coss are coming down he mos

rapidly o all renewable sources. Moreover, hrough echnical innovaions andexpanded marke opporuniies over he nex one or wo decades, solar promises

o become he cleanes, saes, and mos abundan renewable energy source in he

Unied Saes. Overall, hen, our conclusion rom examining he evidence in

Chaper 3 is ha a large-scale expansion o clean renewable energy is boh criical

or he success o achieving he 20-year emissions-reducion arges and is easible

in erms o he invesmen commimen ha will be required.


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In Chaper 4, we examine he uure prospecs or nonrenewable energy sources,

including oil, coal, naural gas, and nuclear power. From our discussions in

Chapers 2 and 3, we reached wo basic conclusions: he Unied Saes is capable

o achieving a 30-percen improvemen in energy efficiency, bringing oal energy

consumpion down o roughly 70 Q-BUs by 2030 o 2035; and abou 15

Q-BUs could be economically supplied by clean renewable sources. I ollowsrom hese wo conclusions ha he U.S. economy will sill require anoher 55

Q-BUs o oal energy supply by 2030 o 2035. By necessiy, his supply will

come rom nonrenewable sources. Te cenral issue we examine in Chaper 4 is

how he Unied Saes can, as o 2030 o 2035, consume as much as 55 Q-BUs o

nonrenewable energy resources while sill bringing energy-based CO2emissions

down o he 20-year arge level o no more han 3,200 mm.

In pursuing his quesion, he firs issue we consider is, wha will be he likely level

o overall demand or peroleum in 20 years as he primary liquid uel source? We

esimae ha overall U.S. oil consumpion will be around 21 Q-BUs in oal by2030 o 2035, wih 13 Q-BUs used in ransporaionpowering auomobiles,

rucks, airplanes, and waer vesselsand 8 Q-BUs consumed as perochemical

eedsocks and or oher indusrial uses. Our esimae or ransporaion-based oil

consumpion is less han hal he level projeced by he EIA in is 2030 eerence

case. Tis difference reflecs boh our conclusion ha he auo uel-efficiency

sandard o 54.5 mpg as o 2025 will generae a major reducion in overall oil

consumpion wihin 20 years and ha he producion o clean biouels as a

subsiue liquid uel or peroleum can reach abou 6 Q-BUs wihin 20 years.

Working wih his esimae ha by 2030 o 2035, he maximum pracical reducions

in peroleum use will sill resul in annual oil consumpion o abou 21 Q-BUs,

his means ha abou 34 Q-BUs will need o be supplied by some combinaion

o coal, naural gas, and nuclear power.21Chaper 4 hereore also ocuses on he

criical issues a play wih respec o generaing elecriciy hrough alernaive

combinaions o coal, nuclear power, or naural gas supply.

In considering uure prospecs or coal, we incorporae he analysis o Deusche

Bank Climae Change advisors 2011 sudy in which Deusche Bank analyss

projeced ha U.S. coal consumpion will all o abou 9 Q-BUs by 2030. Tiswould represen a decline o nearly 60 percen relaive o he 2010 coal-consumpion

level o 20.8 Q-BUs. Te Deusche Bank sudy concluded ha his sharp decline

in U.S. coal consumpion would resul because he Environmenal Proecion

Agency would begin o sricly enorce he Clean Air Ac as i applied o he high

levels o carbon polluion resuling rom he combusion o coal. Te EPA has he


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auhoriy o proceed wih such measures even wihou Congress passing any new

climae legislaion. In ac, his 2011 Deusche Bank analysis is ully consisen

wih he saed aims o Presiden Obamas June 2013 Climae Acion Plan, which

gives major prominence o he policy o reducing carbon polluion rom U.S.

uiliy plans by uilizing is regulaory auhoriy under he Clean Air Ac.

Te Deusche Bank sudy also provides a useul analysis o prospecs or he nuclear

secor hrough 2030. Te auhors conclude ha nuclear power will supply a oal

o abou 8 Q-BUs o energy in he Unied Saes as o 2030. Tis figure is modesly

below he acual 2010 level o U.S. nuclear energy consumpion o 8.4 Q-BUs.

As he Deusche Bank analyss recognize and we discuss urher, nuclear power

does provide he major benefi among nonrenewables o being an emissions-ree

source o elecriciy. A he same ime, public-saey consideraions and he expenses

associaed wih nuclear energy are also criical. A significan new wave o nuclear

power plan consrucion is hereore unlikely, given he combinaion o public

opposiion and very large high-risk financial requiremens or such invesmens.Te mos likely scenario or nuclear energy moving orward is raher in line wih

he conclusion o he Deusche Bank sudyha is conribuion o he overall

U.S. energy mix will remain roughly consan a around 8 Q-BUs.

Given hese major consrains acing boh coal and nuclear power, we hereore

anicipae ha naural gas will become he residual nonrenewable energy source in

he Unied Saes by 2030 o 2035, or boh elecriciy generaion and oher less

significan uses in buildings and indusry. Ye wih requiremens or oil in 2030 o

2035 reaching abou 21 Q-BUs, and wih coal and nuclear power conribuing a

oal o abou 17 Q-BUs o produce elecriciy, his adds o a oal o abou 38

Q-BUs. We have also esimaed ha clean renewables will supply abou 15 Q-BUs

o overall U.S. energy supply as o 2030 o 2035. I overall U.S. energy consumpion,

including clean renewables, is held o abou 70 Q-BUs, his hen leaves abou 17

Q-BUs in oal ha can be supplied by naural gas.

U.S. naural gas consumpion a 17 Q-BUs by 2030 o 2035 would represen

an absolue decline o 31 percen relaive o he 2010 level o 24.7 Q-BUs. We

recognize ha naural gas developmen is currenly experiencing a significan

expansion in producion and a decline in prices ied o rapid increases in drillingusing hydraulic racuring echnology. Despie hese curren indusry rends, here

is simply no scenario hrough which naural gas consumpion in he Unied Saes

can increase significanly relaive o curren levels i we are going o achieve our

emissions-reducion arge, as we examine in deail in Chaper 5. aher, any

significan expansion in naural gas producion will almos cerainly conribue o

he Unied Saes ailing o reach is emissions-reducion arge.


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Chaper 5 explores wha CO2emissions levels would resul hrough hree

alernaive U.S. energy scenarios hrough 2030 o 2035. One scenario is wha he

EIA isel sees as he mos likely energy-secor scenario hrough 2030. Our second

scenario is based on developing a range o highly opimisic assessmens o he

impac on CO2emissions levels o he Obama adminisraions curren major

iniiaives around climae change. Our hird scenario is based on our own analysesin Chapers 2 hrough 4 as o he prospecs or successully advancing a major clean

energy invesmen projec in he Unied Saes over he nex 20 years. We reach a

major conclusion hrough his exercise o comparing he hree alernaive scenarios.

I is ha he clean energy invesmen projec ha we develop in Chapers 2 hrough

4 is he only pah hrough which he Unied Saes can even come close o achieving

is 2030 o 2035 CO2emissions-reducion arge o 3,200 mm.

We begin he Chaper 5 discussion by reviewing daa on he levels o CO2emissions

generaed hrough burning oil, coal, and naural gas o produce energy. Tese are

he underlying figures hrough which we calculae overall emissions levels generaedby any given energy scenario. As we show, on average, emissions are 96 mm per

Q-BU or coal, 63 mm per Q-BU or oil, and 52 mm per Q-BU or naural

gas. Ta is, oil generaes 34 percen less CO2han coal, and naural gas generaes

46 percen less han coal. Naural gas also generaes 17 percen less CO2han oil

per Q-BU o energy.

Working rom hese average emissions figures, we hen ocus on he prospecs

or reaching he 2030 o 2035 CO2

emissions level o no more han 3,200 mm

hrough our hree alernaive scenarios or uure U.S. energy consumpion. More

specifically, he firs scenario we consider is he EIAs eerence case, as developed

in heir 2012 Annual Energy Oulook. Te EIAs eerence case incorporaes

wha he EIA considers o be all o he mos likely rajecories hrough 2030 or

U.S. energy producion and consumpion, as well as he U.S. economy overall.

Te second scenario we consider is wha we call he PEI/CAP case. Tis case builds

rom he conclusions we have developed in Chapers 2 hrough 4 on prospecs or

energy efficiency, renewables, and nonrenewables hrough an ambiious bu

easible clean energy invesmen projec. Specifically his PEI/CAP case is he

ramework hrough which we anicipae ha overall U.S. energy consumpion isable o decline o 70 Q-BUs, wih clean renewables providing abou 15 Q-BUs

o he oal U.S. energy supply.


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For our hird scenario, we presen wha we erm an Aggressive eerence case. We

developed his scenario as a means o evaluaing wheher he ull se o he Obama

adminisraions curren iniiaives around climae change are likely o be sufficien

or achieving he emissions arge o 3,200 mm, even assuming ha hese iniiaives

are ully and successully implemened. Tus, he Aggressive eerence case assumes

ha he implemenaion o he 54.5 mpg auomobile uel-efficiency sandard or2025 will have subsanially greaer impac on improving energy efficiency han

wha he EIA esimaes in is eerence case. Our Aggressive eerence case also

assumes ha he adminisraions June 2013 Climae Change Acion Plan will

succeed in sharply reducing uiliy-secor power plan emissions hrough he ull and

aggressive enorcemen o carbon-polluion sandards under he Clean Air Ac. Tis

scenario also akes ull accoun o he U.S. miliarys program o rely on renewable

energy o supply 25 percen o is energy needs by 2025 and more generally assumes

ha domesic clean renewable supply increases hree-old relaive o 2010 levels.

We hen calculae he emissions levels generaed by hese hree alernaive scenarios.Wha emerges clearly is ha he PEI/CAP case is he only one ha is capable o

achieving he 2030 o 2035 CO2emissions level o no more han 3,200 mm. Te

EIA isel recognizes ha under is 2030 eerence case, overall CO2emissions

would be 5,733 mmully 80 percen above he arge level o 3,200 mm. Under

he Aggressive eerence case, we esimae he overall level o CO2emissions o

be 4,441 mm, sill 40 percen above he arge. Bu overall CO2emissions do all

below 3,200 mm, o 3,051 mm, under he PEI/CAP case. Tese findings

clearly underscore he scale o he challenge or he Unied Saes o make is air

conribuion oward conrolling global climae change over he nex 20 years.

Chaper 5 concludes by considering hree addiional side cases. Te firs side case

explores he prospec ha we can achieve a sufficien reducion in CO2emissions

primarily hrough a major projec o uel swiching rom coal o naural gas or

producing elecriciy, given ha emissions per Q-BU rom naural gas are nearly

hal hose generaed by coal combusion. Te widely discussed idea ha naural

gas can serve effecively as an inermediae erm bridge uel as par o he longer-

erm projec o building a low-emissions economy sems rom his ac. In his firs

side case, we hereore modiy he assumpions o he Aggressive eerence case,

by allowing ha coal consumpion alls o zero and he difference is covered enirelyby expanding naural gas consumpion. Ta is, we creae he mos avorable possible

scenario on behal o a coal-o-naural-gas uel-swiching approach o emissions

reducion. Despie his implausibly avorable scenario, energy-based CO2emissions

remain 26 percen above he 3,200 mm arge emissions level in his side case.


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In he second and hird side cases, we modiy he PEI/CAP case, by assuming

ha nuclear energy alls firs o 5 Q-BUs, hen o zero. In boh cases, again, he

difference is covered enirely by expanding naural gas consumpion. We explore

hese cases in consideraion o public-saey concerns abou nuclear energy, even

while recognizing ha nuclear power is a zero-emissions energy source. We find

ha wihin he ramework o he PEI/CAP case, we can sill mee he 3,200mm CO2emissions arge when nuclear power is mainained a 5 Q-BUs raher

han 8 Q-BUs. Bu when we subsiue naural gas or nuclear power enirely

wihin he PEI/CAP case, we canno lower overall CO2emissions sufficienly o

ge below he 3,200 mm hreshold, even while we hold he overall level o U.S.

energy consumpion a 70 Q-BUs.

In Chaper 6, we esimae he gains in employmen ha would resul rom making

he roughly $200 billion in annual clean energy invesmens ha are needed or

meeing he 2030 o 2035 greenhouse gas emissions-reducion arge$90 billion

per year in efficiency invesmens and $110 billion per year in clean renewables.We also consider he employmen losses ha would resul rom he corresponding

rerenchmens in he nonrenewable energy secors.

We begin Chaper 6 by describing our mehodology or esimaing he employmen

effecs o alernaive energy-invesmen scenarios. In paricular, his includes our

use o U.S. business survey daa and he U.S. inpu-oupu model as our basic

esimaing ools. Tis is he ramework we use or esimaing how many U.S. jobs

will be creaed hrough $200 billion in annual invesmens in energy efficiency

and clean renewables over a 20-year period. We also calculae he gains in employ-

men ha would resul rom he expanded level o spending on operaions and

mainenance or hese clean energy projecs.

A he same ime, o measure he neemploymen effecs o clean energy inves-

mens, we also need o esimae he reducions in employmen in he nonrenewable

secorsoil, naural gas, coal, and nuclear powerha would resul when

producion conracs in hese secors. As we have seen, wihin an overall scenario

o operaing he U.S. economy a 70 Q-BUs o oal energy consumpion, we

esimae ha demand or all nonrenewable energy sources will be abou 55 Q-BUs.

Holding nonrenewable energy producion a his level represens a conracion o34 percen relaive o he EIAs 2030 eerence case in which all nonrenewables

combined would accoun or 83.4 Q-BUs o oal U.S. energy consumpion. Tis

conracion in nonrenewable energy producion will, o course, mean job losses in

hese nonrenewable secors.


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Neverheless, we show in Chaper 6 ha he ne employmen effecs o concurrenly

expanding invesmens in energy efficiency and clean renewables in he range o

$200 billion per year while conracing producion in he nonrenewable secors

will be o significanly expand job opporuniies in he Unied Saes economy

over he nex 20 years. Tere are wo basic reasons or his oucome. Te firs is

ha clean energy invesmens require more employmen per uni o aciviyi.e.,hey are more labor inensive han he average spending o mainain our exising

nonrenewable secors. Te second is ha clean energy invesmens enail a higher

proporion o spending wihin he domesic U.S. economyhey have a higher

level o domesic conenhan spending wihin he nonrenewable secors a

roughly heir curren proporions.

In addiion, here are large differences in he employmen impacs o operaions

and mainenance, or O&M, aciviies wihin he renewable versus he nonrenew-

able secors. For he mos par, O&M wihin he clean renewable secors generae

roughly he same level o employmen as hose or nonrenewables. Bu here isone imporan excepion, which is he clean biouels/biomass secor. Tis secor

requires significanly higher levels o employmen han O&M or boh nonrenew-

ables and oher renewable secors.

Wihin his overall ramework, we hen esimae ha he annual level o employmen

ha will resul hrough advancing he PEI/CAP clean energy invesmen scenario

is 4.2 million jobs. Tis includes jobs creaed boh by new invesmens, as well as

expanded levels o operaions and mainenance in he clean energy secors. We also

find ha oal ne employmenaer aking accoun o job losses in he nonre-

newable secors ied o rerenchmen in hese secorsis sill a 2.7 million jobs.

We close Chaper 6 by considering he likely impac on he U.S. labor marke in 2030

rom expanding overall employmen by abou 2.7 million jobs. One gauge o his

impac is ha all else equal, i would bring a reducion in unemploymen o abou

1.5 percenage poins. Tus, i he economy were oherwise operaing a a 6.5 percen

unemploymen rae, operaing under a clean energy ramework as we have described

would insead mean ha he unemploymen rae would be abou 5 percen. We also

provide a profile o he ypes o jobs ha will be creaed under he clean energy

agenda. As we show, building and operaing he clean energy economy in he UniedSaes will produce large increases in job opporuniies a all levels o credenials

and pay. In shor, he clean energy invesmen agenda creaes more jobs, beter jobs,

and a broader disribuion o opporuniy across wages and skill levels.


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Chaper 7 examines he macroeconomic effecs o a clean energy invesmen

projec in addiion o he employmen effecs reviewed in Chaper 6. We begin

his chaper by reviewing a range o recen macroeconomic orecasing models

ha have atemped o esimae he effecs o cap-and-rade legislaion on U.S.

GDP growh. Te primary purpose o cap-and-rade policies is o lower emissions

hrough resricing producion o ossil uel energy. Bu limiing he supply oossil uel energy will hen also raise he marke price o hese energy sources.

Wih ossil uel-based energy supply hus resriced and prices increasing as a

resul, we would expec ha, all else equal, he impac o any such measure would

be o lower GDP growh, a leas moderaely. Neverheless, all o he large-scale

macroeconomic orecasing models ha we review in Chaper 7including

models produced by srong opponens o cap and radefind ha cap and rade

will have a negligible impac on GDP growh. O course, cap-and-rade policies

per se are no he ocus o our sudy (hough, in Chaper 8, as discussed below, we

do consider cap and rade among a range o policy measures or achieving he

emissions-reducion arge). Sill, hese orecasing resuls provide a useulramework or considering how a clean energy invesmen program could affec

various specific componens o overall GDP.

Te macroeconomic impacs ha we hen examinespecifically wih regard o

he broader clean energy invesmen projec oulined in he PEI/CAP energy

scenarioinclude privae invesmen, labor produciviy, energy prices, he U.S.

rade balance, and finally, how a decline in emissions could affec overall economic

aciviy by reducing severe weaher evens. In mos cases, consisen wih he resuls

o he various economeric orecasing models, we argue ha he impac o clean

energy invesmens on hese oher macro impacs should be modes. Bu here are

also some aspecs o he clean energy invesmen agenda ha should yield posiive

effecs on GDPor example, a reducion in he srucural rade defici and a

decline in severe weaher evens should boh generae posiive benefis or overall

economic growh.

o urher inorm all such discussions on he macro effecs o a clean energy

invesmen agenda, we can now also learn rom he experience o he 2009 simulus

package, he American ecovery and einvesmen Ac, or AR. Te overall

wo-year $800 billion program commited roughly $90 billion o various sors oclean energy invesmen projecs. Tere is a widespread viewvocally advanced,

or example, by ma

Green Growth: A U.S. Program for Controlling Climate Change and Expanding Job Opportunities

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