Methodology and Calculations for Clean Energy Cost Estimates in Proposed U.S. THRIVE Agenda and Related Policy Proposals

This report presents details on the underlying methodology and calculations for the March 2021 estimates that Chakraborty, Wicks-Lim and Pollin derived on employment creation through the THRIVE Agenda investment program in energy efficiency and clean renewable energy.^[1]  The material in this report supplements the methodological discussions in the March 2021 report.  Specifically, this report presents estimates as to the level of investment spending required  for the U.S. economy to reduce CO₂ emissions by 50 percent as of 2030 relative to the economy’s 1990 emissions level.  In the framework presented here, the economy’s emissions reductions are achieved through reducing the consumption of all fossil fuel energy sources as well as that of high-emissions bioenergy. The framework assumes that consumption from these energy sources falls by the following amounts relative to their 2019 levels: oil and natural gas by 40 percent; high-emissions bioenergy by 70 percent; and coal by 90 percent.
 
The framework also assumes that the U.S. economy grows at an average rate of 2.5 percent per year between 2019 – 2030.  Within this growing economy, the major reduction in the demand for fossil fuel and high-emissions bioenergy are compensated for through the expansion of alternative energy sources. This framework assumes that the reduction in fossil fuel energy is compensated for through investments to both 1) dramatically increase energy efficiency and 2) equally dramatically expand the supply of clean renewable energy sources. This report provides two alternative estimates of this necessary level of clean energy investments. These alternative estimates are based on lower-cost and higher-cost assumptions respectively for producing a given amount of energy efficiency savings or a given increase in clean renewable energy supply.  The study then presents these alternative cost estimates in terms of both overall budget figures over 2021 – 2030, and also as average annual spending amounts over the 10-year period. Through providing this range of results based on alternative assumptions on investment costs and public investment shares of overall costs, we can observe, among other things, how the THRIVE Agenda established the budget figures for the various components of its overall program. 

[1].  https://www.peri.umass.edu/component/k2/item/1397-employment-impacts-of-proposed-u-s-economic-stimulus-programs