Energy Efficiency, Innovation and Job Creation in California

September 1, 2006
David Roland-Holst

Global climate change poses significant risks to the California economy. Recognizing and responding to these threats, Governor Schwarzenegger signed Executive Order #S-3-05 which called for a 30 percent reduction below business-as-usual of greenhouse gas emissions by 2020 and 80 percent below 1990 levels by 2050.

In September 2006, the California legislature passed and Governor Schwarzenegger signed AB 32 into law, which mandates a first-in-the-nation limit on emissions that cause global warming. In June 2006, the California Air Resources Board (CARB) released a "Draft Scoping Plan" – the policy roadmap to meet the emissions reduction target of 169 Million Metric Tons of Carbon (MMTCO2) equivalent by 2020 to stabilize at 427 MMTCO2 overall. The CARB board will take up final adoption of this plan in December 2008.

During the months leading up to this decision, a financial crisis of global proportions is unfolding. The state, nation and world are caught in serial market failures sparked by the collapse of the housing industry, and there is much speculation about the impact of declining capital gains revenue on the state budget.

Against this backdrop, Energy Efficiency, Innovation, and Job Creation in California analyses the economic impact of CARB’s past and future policies to reduce fossil fuel generated energy demand. California’s achievements in energy efficiency over the last generation are well known, but evidence about their deeper economic implications remains weak. This study examines the economy-wide employment effects of the state’s landmark efficiency policies over the last thirty-five years, and forecasts the economic effects of significantly more aggressive policies proposed to reduce emissions to 1990 levels by 2020.

The report’s findings include:

  • Over the past thirty years, forward looking energy efficiency policies created 1.5 million FTE jobs with a total payroll of over $45 billion, and saved California consumers over $56 billion on energy costs. Sectoral examination of these results indicates that job creation is in less energy intensive services and other categories, further compounding California’s aggregate efficiency improvements and facilitating the economy’s transition to a low carbon future.
  • By taking account of the potential for innovation, the proposed package of policies in the state’s Draft Scoping Plan continues California’s legacy of efficiency-driven job growth, achieving 100 percent of the greenhouse gas emissions reduction targets mandated by AB 32 while increasing the Gross State Product (GSP) by about $76 billion, increasing real household incomes by up to $48 billion and creating as many as 403,000 new efficiency and climate action driven jobs.
  • By revenue, energy is the world’s largest industry, and energy efficiency can become to this sector what IT was to management, biotech to medicine, a way to revolutionize traditional practices and increase real living standards around the world.

    "As the financial world’s uncertainty continues to be the cause of anxiety and fear about the future, this report provides hard evidence that energy efficiency and innovation can pave the way to economic security and growth. Whether or not we take that path depends on policy to encourage it." 

    -- F. Noel Perry, Next 10 Founder

    "At this pivotal moment in history, as global markets teeter on the financial edge, our study reveals the economic power of energy innovation and efficiency, and the promise for California if the state redoubles its efforts as proposed in the Draft Scoping Plan to implement the Global Warming Solutions Act (AB 32)." 

    -- David Roland-Holst, U.C. Professor

    "The economy, energy and the environment are the great social and engineering challenges of our time. This report highlights the importance of smart policy to help accelerate adoption of future clean energy products and technologies and how they can truly make a difference to the future of our planet." 

    -- Mike Splinter, Applied Materials President & CEO