You are here

Stimulus Policies Can Serve Economic and Environmental Goals

A new Policy Brief provides policymakers with a timely framework for maximizing economic, energy and climate-policy objectives.

As they respond to the worst economic crisis the United States has faced in half a century, policymakers seek to direct government spending in ways that not only generate short-term growth and employment but also address long-term policy goals sidelined by the current crisis.

Chief among these are energy and environmental objectives, as evidenced by the considerable attention paid to “green” economic recovery by policymakers and the press.

The Policy Brief, co-authored by the World Resources Institute and the Peterson Institute for International Economics, assesses 11 “green” policy options under consideration by Congress for their economic and environmental impact against a backdrop of pending climate legislation.

Download a two-page fact sheet derived from the report here.

Watch a CNN interview with Robert Heilmayr here:

Economic Benefits

The authors found:

  • Well-tailored green components of a recovery effort can create jobs and stimulate the economy while achieving significant energy cost savings for businesses, consumers, and the government.

  • Recovery policies currently under consideration have the potential to reduce demand for fossil fuels. The resulting drop in cost and consumption of energy has the potential to save Americans an average of $450 million per year for every $1 billion invested, serving as an “efficiency pay-go” for current fiscal spending.

  • By returning money to households through lower energy bills, green components of a recovery package combine the employment benefi ts of tax cuts with the construction and manufacturing jobs created through infrastructure investment. On average, green recovery programs create 30,000 jobs for every $1 billion in government spending.

The matrix below illustrates how the 11 policy options measure up in terms of speed of deployment and potential for job creation.

<p>A Green Recovery Matrix. (Click image to enlarge.)</p>

A Green Recovery Matrix. (Click image to enlarge.)

It also shows how more environmentally friendly policy options can produce added value compared with road investment – an example of traditional infrastructure spending. Road building is matched by several of our “green” options in terms of speed of deployment and job creation, but produces a negative effect on energy costs, energy security, and climate change abatement.

Environmental Benefits

While the primary goal of the recovery package is to encourage economic growth, a “green” recovery can lay the foundation for achieving climate change and energy goals. Nevertheless, even the most aggressive short-term “green” spending will have only a modest direct impact on carbon dioxide emissions.

The recovery package alone would fall far short of the billions of tons of reductions necessary to stabilize the climate – and on a price per ton basis, would be more costly than the comprehensive climate change policies under consideration by Congress.

It is nonetheless critically important that all recovery efforts be designed to complement, rather than replace climate change and energy policies down the road. In order to maximize the effectiveness of such future climate and energy programs, while reducing their costs, an economic recovery package should focus on:

  • Inefficient responses to price signals: Our report identifies several profitable or low-cost opportunities to reduce energy demand and carbon dioxide emissions from consumers that do not effectively respond to a price on carbon. For example, energy efficiency retrofits can reduce emissions from buildings that are not likely to be responsive to a future cap and trade’s price signal alone.

  • Technology hurdles: Uncertainty about the availability of critical low-carbon energy technology creates anxiety about the future cost of climate change policy. This is particularly true in the transport sector, where high barriers to technological change in transportation make weaning the country off foreign sources of energy expensive. Policies adopted today, such as next generation battery R&D can help accelerate technology development and cut the cost of reducing emissions and oil imports down the road.

  • Infrastructure bottlenecks: The deployment of low-carbon technology and the facilitation of less oil-dependent lifestyles also depend on enabling infrastructure. Whether via electricity transmission, carbon dioxide pipelines, or mass transit, the federal government will play a role in building and regulating the infrastructure that facilitates future energy and climate goals. Many of those investments can begin today.

Stay Connected