California's efforts to save energy create jobs, study finds

By Felicity Barringer
Published: October 20, 2008

OAKLAND, California: California's energy-efficiency policies created nearly 1.5 million jobs from 1977 to 2007, while eliminating fewer than 25,000, according to a study that was to be released Monday.
The study, conducted by David Roland-Holst, an economist at the Center for Energy, Resources and Economic Sustainability at the University of California at Berkeley, found that while the state's policies lowered employee compensation in the electric power industry by an estimated $1.6 billion over that period, it improved compensation in the state by $44.6 billion.
Built into that figure were increases of $1.2 billion in the light industrial sector, $11.2 billion in wholesale and retail trade, $7.3 billion in the financial and insurance sectors and $17.8 billion in the service sector. "Consumers were able to reduce energy spending," the study said. "These savings were diverted to other demand."
"When consumers shift one dollar of demand from electricity to groceries," the report said, they create jobs among retailers, wholesalers, food processors and other businesses.
The study, which examined household spending, comes as state and regional initiatives on climate-change policies have been gathering momentum. Meanwhile, arguments have sharpened over how much it will cost the economy to cut the emission of greenhouse gases like carbon dioxide produced by burning fossil fuels, which are linked to climate change. Roughly half of U.S. electric power is generated by burning coal, the fuel that produces among the highest greenhouse gas emissions.

Some economists focus their studies on the cost of converting the power grid to run on low-carbon technologies, like wind energy, or the cost of developing technologies to separate the carbon dioxide from coal plant emissions and bury it underground. Others focus on the job-creating potential of new energy industries.
The Berkeley study is different in that it focuses as much on historical data as on modeling the future. California's energy-efficiency policies were adopted in 1978, long before the widespread push for greenhouse gas reductions, but the data they provide were highly relevant to the current economic debate.
Roland-Holst said he based his calculations on residential spending on electricity over the past 30 years, factoring in both the decrease in per-capita demand for electricity - now 40 percent below the national average - and the increase in electrical rates in California, which were about 40 percent above the national average in June. Household spending represents more than 70 percent of the gross state product.
Historically, Roland-Holst said, the decrease in per-capita demand for electricity outstripped the increase in rates. Much of the economic growth, the study said, was driven by efficiency standards for large appliances like refrigerators and for residential and commercial buildings.
In an interview, Roland-Holst said, "What I wanted to do to support the forward-looking vision is go back and look at the evidence we have in front of us."
In two months, California is set to adopt broad policies to enforce a new cap on greenhouse gas emissions that was signed into law two years ago. More detailed regulations will then be developed. That process is likely to be contentious, as it divides the overall costs of the new program among competing sectors of the state's economy.