Employment and other macroeconomic benefits of an innovation-led climate strategy for the United States

Climate protection policy and its analysis are pursued in the context of other societal goals, among them the maintenance of economic growth and high employment. Too often, however, analysis of energy and climate policy does not realistically reflect technological conditions and the dynamics of technological change. This tendency unnecessarily associates the decline in energy consumption or carbon emissions with the decline in national economic output or income. But there is ample prima facie evidence to the contrary. Just as in the 19th century when the perceived need to reduce labor inputs as part of the production process spurred labor-saving technological progress, now the need to reduce energy (and pollution) costs could spur innovation and diffusion of efficient and clean energy technologies. This, in turn, can increase overall growth in economic productivity. Energy technology analysts have identified many such existing and near-term commercial technologies, as well as innovations that can be foreseen beyond the immediate technological horizon, which would become widely used if policies were developed to overcome market and institutional barriers. This paper presents a macroeconomic analysis for a set of policies that would induce the adoption of more efficient and low-carbon technologies, and finds that overall employment and economic output could be increased by small amounts while significantly reducing carbon emissions. Published by Elsevier Science Ltd.