2014 was a banner year for two reasons. The economy finally began to truly recover from the great depression, adding more than 200,000 jobs every month, with November job growth spiking to 428,000 jobs. Unemployment is at its lowest point since 2007 and measurements of growth from GDP to consumer confidence are all up. 2014 was also the hottest year on record, since records started being kept in 1891. As indicators of economic growth skyrocket, so do levels of atmospheric carbon dioxide, and global temperatures. Climate change is getting worse, and there is very little being done about it.
There is, however, a simple way to fight climate change and create jobs at the same time. Energy efficiency is an often overlooked way to save consumers money while cutting down on energy usage. The most obvious issue is: when people think about ways to fight climate change, their thoughts turn to solar panels, wind farms and hybrid cars, rather than insulation, calk and LED’s. As unsexy as energy efficiency improvements are, they have many hidden appeals. According to the New York Times, almost any general contractor worth his salt can perform basic energy retrofits. Such projects take between three and seven years to pay off, and can produce energy savings of 30%-40%. Installing solar panels, on the other hand, is a complicated and expensive process that requires an experienced professional. In New Hampshire, such a solar array takes between fifteen and twenty years to pay off. Solar panels, wind turbines and others can take up room and obstruct views, while energy efficient windows and duct sealant are next to invisible.
As a job creator, too, energy efficiency takes the prize. A billion dollars invested in a new coal fired power plant creates 860 jobs, while that same billion invested in solar creates 1,900 and wind, 3,300. But a billion dollars invested in large building retrofits creates 7,000 jobs, and invested in home retrofits, 8,000 jobs. In the U.S., the Empire State building is the poster child of large building energy retrofits. In 2010-11 in underwent a full building retrofit that did simple things like changing ducts and air conditioning and heating. The retrofit is estimated to save the building's owners $4.4 million in energy costs annually, cutting the building’s energy consumption by at least 38% and created 252 jobs to boot.
All of this begs the question: why hasn’t Washington done anything? The answer is twofold. When it comes to creating energy jobs, politicians have a tendency to focus on big projects, like wind farms and pipelines, rather than smaller, grassroots solutions like programmable thermostats and insulated doors. Also, the few major energy efficiency initiatives of the last few years have gone nowhere. In 2011, the president proposed $15 billion for energy efficiency as part of his American Jobs act. It died in committee. A bipartisan bill by Sens. Jeanne Shaheen (D-N.H.) and Rob Portman (R-OH) got 55 votes in the senate, but failed in a motion for closure because 19 senators were absent.
So how to solve this? In his recent budget proposal President Obama proposed a mandatory one time 14% tax on corporate profits stashed overseas. The proposal would raise $268 billion, which he proposed investing in infrastructure. The proposal has almost no chance in the Republican controlled Congress. Last year, the outgoing Republican chair of the house committee on Ways and Means, Dave Camp, proposed a far more modest tax of 8.75%. Such a proposal would raise $148 billion. This is probably the largest such tax that could get through Congress. Congress should invest $52 billion of that in a loan guarantee fund, to guarantee $520 billion in loans to homeowners and business owners for large scale energy efficiency retrofits. It is important to note that since energy efficiency loans have a predictable rate of payback, the actual cost of the program is likely to be lower. McKinsey and Company estimates that such an investment would save at least $1.2 trillion over the next ten years. If the loans were split between homeowners and building owners, such an investment would create 3.9 million jobs, and do so in a short time frame. That is 100 times more than would be created by the Keystone XL pipeline. Such a number is more than was created by the stimulus package in 2009, despite the stimulus being seventeen times larger. After the investment pays itself off, in a little more than four years, the savings would continue, giving the American economy a much needed stimulus for many years to come. Unlike a tax rebate, a boost in food stamps, a drop in gas prices or any other short term mode of stimulus, the $120 billion of household savings would continue year after year. Best of all, such an investment would reduce annual non transportation energy usage in the U.S. by 23%. That’s the equivalent of taking the entire American fleet of passenger vehicles and light trucks off the road, and would lead to the abatement of 1.1 gigatons of carbon dioxide emissions every year, or 20% of overall U.S. emissions. Making such an investment now would show U.S. leadership in the fight against climate change, ahead of the December climate talks in Paris.
In summary, the United States has an unparalleled opportunity to fight climate change, while providing a strong base on which its economy can grow in the years to come.