Doing the Recovery Right
Green Investments Lower Energy Costs
If government policy aims to discourage fossil fuel consumption either through a cap-and-trade mandate or a carbon tax--as it must--this will raise the price of oil, coal and natural gas. However, this does not have to bring a fall in living standards. One simple solution, as proposed by California businessman Peter Barnes and my University of Massachusetts colleague James Boyce, is to rebate the government revenues generated by a carbon tax or the auctioning of cap-and-trade permits back to all energy consumers according to a fair set of principles. The most important aim would be at least to help lower-income families to meet the fossil fuel price increases.
Beyond this, the green investment agenda, especially in the area of energy efficiency, should lead to significantly lower energy costs, which will benefit lower-income households. The two basic ways to do this are through improving access to public transportation and increasing the energy efficiency of residential buildings.
Public transportation accounts for an abysmally low share of travel in the United States, even though ridership rose over the past two years, following the oil price spike. As of 2007, automobile travel accounted for 99 percent of transportation spending even for the least well-off 20 percent of households, despite the fact that public transportation is about 60 percent cheaper per mile. The reasons most Americans, including those with less money, do not use public transportation are straightforward: access is bad, off-peak service is limited and transferring is difficult. If the average lower-income household were to increase its public transportation use to just 25 percent of its transportation budget, it would save nearly $500 a year, raising its living standard about 2.4 percent. [For more on the need for public transit investment, see Ben Adler, "Ticket to Ride"]
In terms of residential energy efficiency, for the average individual family residence, a one-time $2,500 investment in retrofitting--caulking air leaks and windows, improving insulation and buying more efficient appliances--can reduce annual energy consumption by 30 percent. This would produce an average saving in home energy costs of about $900 a year. Of course, low-income families are much more likely to be renters than homeowners. The green residential retrofit program must therefore stipulate ways to pass along the savings to tenants through rent reductions.
Two Birds With One Stone?
In undertaking a project as massive as the one I am outlining--to replace our current fossil fuel driven economy with a clean energy economy and to concurrently establish full employment as a central policy aim--we obviously cannot proceed flippantly. If serious critics are explaining why it cannot be done, we need to be confident we can answer them. If a thinker of the stature of Jan Tinbergen says you cannot--at least most of the time--kill two birds with one stone, we need to consider finding another stone or allowing one of the birds to fly away unscathed. Pursuing complementary large-scale investment programs in healthcare and education, which, among other benefits, will spread the expansion of employment opportunities fairly across gender and racial lines, is one critical example where another stone is surely necessary.
But all sides also need to be open to evidence. The central facts here are irrefutable: spending the same amount of money on building a clean energy economy will create three times more jobs within the United States than would spending on our existing fossil fuel infrastructure. The transformation to a clean energy economy can therefore serve as a major long-term engine of job creation. If managed correctly, it can also become a cornerstone of a long-term full employment program in this country, which in turn will be the most effective tool for moving people out of poverty and into productive working lives. In short, the transition to a clean energy economy has the capacity to merge the aims of environmental protection and social justice to a degree that is unprecedented. It is an opportunity that must not be lost.