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Green Versus Brown: Comparing the employment impacts of energy efficiency, renewable energy, and fossil fuels using an input-output model

Modeling the Job-Creating Impact of Clean Energy vs Fossil Fuel Investments

In new research published by Economic Modelling, PERI’s Heidi Garrett-Peltier develops a model to compare employment impacts of clean energy versus fossil fuels investment. The author builds an input-output model to create "synthetic" industries to estimate job creation from investment in alternative energy sectors. The research finds that for every $1 million invested, 7.7 clean energy jobs are created as compared to 2.6 fossil fuel jobs. Thus, each $1 million shifted from dirty to clean energy yields a net increase of roughly 5 jobs.  This amounts to a 250 percent increase in U.S employment from clean energy investments relative to the fossil-fuel dominant energy infrastructure.

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Global carbon emissions have reached unsustainable levels, and transforming the energy sector by increasing efficiency and use of renewables is one of the primary strategies to reduce emissions. Policy makers need to understand both the environmental and economic impacts of fiscal and regulatory policies regarding the energy sector. Transitioning to lower-carbon energy will entail a contraction of the fossil fuel sector, along with a loss of jobs. An important question is whether clean energy will create more jobs than will be lost in fossil fuels. This article presents a method of using Input-Output (I-O) tables to create “synthetic” industries – namely clean energy industries that do not currently exist in I-O tables. This approach allows researchers to evaluate public and private spending in clean energy and compare it to the effects of spending on fossil fuels. Here we focus on employment impacts in the short-to-medium term, and leave aside the long-term comparison of operations and maintenance employment. We find that on average, 2.65 full-time-equivalent (FTE) jobs are created from $1 million spending in fossil fuels, while that same amount of spending would create 7.49 or 7.72 FTE jobs in renewables or energy efficiency. Thus each $1 million shifted from brown to green energy will create a net increase of 5 jobs.

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