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Kapstein Executive Summary, Green Jobs In Texas

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  • 1. GREEN JOBS IN TEXAS A Report for the Meeting of the Walmart Green Jobs Council Austin, TX. 7 October 2009 Prepared by Ethan B. Kapstein McCombs School of Business and LBJ School of Public Affairs The University of Texas at Austin
  • 2. 2 GREEN JOBS IN TEXAS A Report for the Wal-Mart Green Jobs Council Austin, TX Executive Summary Despite growing interest in the public and private sectors, and among citizens at large, in the “green economy” and “green jobs” there is no commonly accepted methodology for measuring its share of the economy or for estimating the number of green jobs that have actually been or could be created. In this report we compare a number of recent studies that have examined green jobs in the United States (and around the world) and show the significant differences in job estimates. We then turn to consider Texas, and in particular its position of leadership in the energy sector. We demonstrate that even if applying an overly narrow definition of green jobs (those directly involved in supplying renewable and clean energy) dramatic workforce increases should be expected. This leads to a number of policy recommendations, arguing that Texas cannot be complacent in promoting the state’s green economy, and that it should strive to become a global leader in this space, and not just a national leader, given evidence that the United States may be lagging behind in this sector. Introduction Recent years have seen growing interest around the world in the role that sustainable practices, renewable energy and conservation can play in fueling the economy. Concerns with climate change, the volatile prices of fossil fuels, and energy dependence on politically unstable regions of the world have all contributed to this interest. In the United States, Texas is widely viewed by the players in this sector, including public
  • 3. 3 agencies, private firms, and non-governmental organizations (NGOs), as a national leader. Texas was among the first states to mandate a Renewables Portfolio Standard (RPS) that requires electric utility operators to generate 5,880 megawatts (MW) of electricity by 2015 and 10,000 MW by 2025. In particular, Governor Rick Perry has proclaimed Texas to be “the nation’s leader in wind energy” (SECO 2009). According to the Texas Workforce Commission cited by the State Energy Conservation Office (SECO), most green jobs in the state’s economy are: “…concentrated in the energy efficiency sector with expected growth in both the renewable and sustainable energy areas…” As such, the state has invested in workforce training programs and education in this area. For example, $6 million of the state’s ARRA funds are being allocated for the Energy Sector Training Centers which is a partnership between SECO and the Texas Workforce Commission. According to SECO, the funding will be “used to purchase equipment needed to train workers in the fields of energy efficiency, transportation efficiency and renewable energy technologies.” In addition to its focus on the energy sector, the state has developed policies surrounding sustainable buildings. It adopted the Energy and Water Conservation Design Standard in August 2007 that requires the state energy conservation office to “establish and publish mandatory energy and water conservation design standards for each new state building or major renovation project, including a new building or major renovation project of a state-supported institution of higher education.” (Texas Government Code Section 447.004, Design Standards)
  • 4. 4 The state has developed water efficiency standards for new buildings and for the purchase of new or used equipment by the state. The Texas State Conservation Office’s goal of these standards is to “balance water, wastewater, energy and related costs to achieve the lowest lifecycle cost when purchasing new equipment or making modifications to existing equipments.” (www.seco.cpa.state.tx.us/waterconservation.pdf) Local municipalities have focused on sustainable buildings and construction including increased energy efficiency, water conservation and waste reduction. City governments in Austin, Frisco, Dallas, Houston, and San Antonio have either passed resolutions or ordinances for future city projects to follow sustainable guidelines. (Blueprint for Sustainability, Texas Commission on Environmental Quality, http://www.tceq.state.tx.us/comm_exec/forms_pubs/pubs/pd/020/07- 03/blueprintforsustainability.html) Because of these developments, economic agents along with policy-makers have begun to examine the potential for creating “green jobs,” a task that has become all-the- more important in light of the “Great Recession” that began in 2008. The Administration of Barack Obama has launched a number of policy initiatives, with the hope that these policies will generate green jobs. On the campaign trail, candidate Obama pledged to create 5 million green jobs, and upon election he appointed a “green jobs czar”.
  • 5. 5 Defining Green Jobs But what are “green jobs”? According to the United Nations, green jobs are defined as “work in agriculture, industry, services and administration that contributes to preserving or restoring the quality of the environment” (UNEP 2008). For its part, the Pew Charitable Trusts defines them as jobs that contribute to “increasing energy efficiency, reducing greenhouse gas emissions, waste and pollution, and conserving water and other natural resources” (Pew 2009). These broad definitions suggest that it may prove challenging to measure green job creation with any precision and the reports that have tried to do this suggest some of the empirical difficulties at hand. Still, in this report we will propose one methodology that may prove useful in guiding future discussions, a methodology that does not seem to be in use at the present time. To give a sense of the empirical difficulties, we begin by comparing some green job numbers that have been presented in recent reports. In its paper Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World, the United Nations Environmental Program (UNEP) estimates that the United States currently has 400,000 green jobs, divided among the various sectors that make up the renewables energy economy (see Table 1). As Table 1 shows, the vast majority of these jobs are in “biomass” or the agricultural sector. It is interesting to note that the United States lags behind several other countries in green job employment.
  • 6. 6 Renewable Employment Top Nations Employment US Source (world) for Jobs Employment Wind 300,000 Germany 82,100 36,800 Solar (PV + 794,000 China 655,000 17,600 Thermal) Biomass 1,174,000 Brazil 500,000 312,200 Hydropower 39,000 EU 20,000 19,000 (partial est) Geothermal 25,200 Germany 4,200 21,000 TOTAL 2,332,000 406,600 Source: UNEP 2008. Table 1: Green Jobs in the World, 2006 Very different numbers appear in the recently released report of the Pew Charitable Trusts (2009), The Clean Energy Economy: Repowering Jobs, Businesses and Investment Across America. Using what it calls a “conservative” methodology of counting businesses that are involved with the “production and services” side of the green economy (as opposed to the users of renewable energy), it comes up with some 770,385 jobs in the United States in 2007, or 0.5 percent of all jobs in the nation (note the UNEP data is for 2006; still, it is doubtful that a one-year difference accounts for almost a doubling of jobs!).
  • 7. 7 But even this methodology of “counting businesses” generates big differences in numbers, as the case of Texas reveals quite strikingly. Thus, the Pew Trusts finds that some 4,802 businesses in Texas are involved in the production and services side of the green economy. For its part, however, the firm of Angelou Economics (2009), which seems to adopt a similar approach to the one used by Pew, counted only “800 separate companies building wind turbine components, designing green buildings, installing solar panels, (and) researching ocean power.” Thus, the difference between the Angelou estimate of 800 firms and the Pew estimate of 4800 firms is six times, which represents a considerable discrepancy. These differences again suggest the importance of establishing a widely-accepted data collection and estimation strategy that provides analysts with reliable information about the green economy, since it is only on this basis that sensible business and public policy decisions can be made. What about the future of green jobs in Texas? In thinking about this question, we apply a methodology that is different from the one of counting businesses and the jobs therein. We begin instead by thinking about the growth of renewable energy use in the state of Texas, and the employment intensity of the renewables sector, according to data from the U.S. Energy Information Administration (EIA) and from the Angelou Economics study, cited earlier. These reports suggest that some 165,000 Texans were employed in the renewables sector of the economy in 2009. As we can see from Table 2, nearly 70,000 of these jobs were in wind energy, which has been the focus of renewable energy development within the state. We then apply two different future scenarios to the growth of renewable energy use in Texas and the implications for job creation. In scenario 1, we assume that renewables achieve 5 percent of overall electricity use in the
  • 8. 8 Texas economy by 2012; in scenario 2 we assume a doubling of wind energy’s current contribution. Under Scenario 1, there is an employment increase of 137,000 jobs; in Scenario 2 we estimate an increase on 75,000 jobs, with 66,000 additional jobs in wind and 9,000 more jobs in supporting industries. Summary 2007 2009 Total mln MWh in Texas (from EIA) 405.49 421.69 Renewable mln MWh 11.93 12.41 Wind mln MWh 9.01 9.37 Wind as % of renewables 75% 75% Estimated jobs in Renewables (in k) 158 165 Estimated jobs in wind (in k) 66 68 Scenario 1: Renewables 5% of electricity mix in 2012 Job increase renewables total (in k) 137 Scenario 2: Wind energy doubles between 2007-2012 Job increase wind (in k) 66 Job increase renewables total (in k) 75 Table 2: Estimating Job Creation in Renewable Energy in Texas Source: Author’s Estimates. Texas has developed policies for energy efficiency, weatherization, and water efficiency, yet there is still not sufficient information for data-driven economic modeling. This lack of data may be an area that the state may want to further develop to assist in the future planning and development of these other green industry sectors. Barriers to Green Jobs Growth There are a variety of factors that could serve as catalysts or hindrances to the growth of green jobs in Texas. Several key concerns and questions are apparent: First, to what extent does Texas’ history of prominence in the hydrocarbon sector, and its emerging wind energy leadership, affect development in other sustainable energy realms, and vice-versa, how will alternative energy development affect existing areas
  • 9. 9 Second, has Texas adequately provided the investment, incentives and policies needed to encourage innovation and development in green industry sectors other than renewable energy, including areas such as manufacturing, construction, and energy and water efficiency? Third, will entrepreneurs perceive the economic benefits necessary to justify taking the risks associated with emergent green energy technologies, particularly when faced with near-term competition from cheaper (but less environmentally friendly) energy sources? And fourth, if such opportunities are aggressively pursued, are training and educational programs sufficient to meet the demand for Texas workers in green industry jobs? Does the necessary infrastructure exist to provide the development of a trained workforce? Conclusions: Implications for Public Policy Texas has been recognized by the renewable energy community as a leader in both public policy and business development, and clearly these two are closely linked. Yet other states are also scrambling for green energy dollars, and so complacency and inaction would be ill-advised. If Texas wants to remain a leader not only in energy but further develop other green industry sectors, there are a number of policy steps it must take: First, Texas must give careful consideration to the costs and benefits of various incentive schemes to promote the green economy, taking into account the negative externalities associated with reliance on fossil fuels;
  • 10. 10 Second, Texas must ensure that its workforce is prepared to seize the opportunities made available by the greening of every sector of the economy; Third, Texas should be a world-leader in sustainability research and development, including with respect to “green” economics and data collection and analysis; Fourth, Texas must provide a welcoming environment for entrepreneurs and venture capitalists (which require, inter alia, ensuring top-quality schools, cultural amenities, and recreational opportunities for the families); Finally, Texas needs to do a better job of advertising itself as a global player in the green space, and not simply as a national leader, since the United States may not provide the most competitive benchmark for a green economy.
  • 11. 11 References Angelou Economics. 2009. Growing the New Energy Economy in Texas: Renewable Energy Industry and Workforce Development Assessment (January). Pew Charitable Trusts. 2009. The Clean Energy Economy: Repowering Jobs, Businesses and Investments Across America (September). State of Texas. State Energy Conservation Office. United Nations Environmental Program. 2008. Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World. United States. Energy Information Administration. 2009. Texas Renewable Electricity Profile (2007 data release).
  • 12. 12 Ethan B. Kapstein is Dennis O’Connor Regent’s Professor at the McCombs School of Business, and Tom Slick Professor of International Policy at the LBJ School of Public Affairs, both at The University of Texas at Austin. He has conducted economic impact studies for many multinational firms around the world, and has presented his work at the World Economic Forum in Davos and other global venues. Willem Ruster is a consultant with Triple Value Strategy Consulting in The Hague, and has worked with Professor Kapstein on several consulting projects.

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