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BPEA Article

The employment impact of a green fiscal push

Evidence from the American Recovery and Reinvestment Act

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Editor's Note:

The paper summarized here is part of the fall 2021 edition of the Brookings Papers on Economic Activity, the leading conference series and journal in economics for timely, cutting-edge research about real-world policy issues. Research findings are presented in a clear and accessible style to maximize their impact on economic understanding and policymaking. The editors are Brookings Nonresident Senior Fellow and Northwestern University Professor of Economics Janice Eberly and Brookings Nonresident Senior Fellow and Harvard University Professor of Economics James StockSee the fall 2021 BPEA event page to watch paper presentations and read summaries of all the papers from this edition. Submit a proposal to present at a future BPEA conference here.

The green investments in Senate-passed, bipartisan infrastructure legislation could, over several years, help manual laborers whose jobs are at risk as the world transitions away from fossil fuels, suggests a paper discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 9.

David Popp

Caroline Rapking Faculty Scholar in Public Administration and Policy - Maxwell School of Citizenship and Public Affairs, Syracuse University

Giovanni Marin

Associate Professor of Applied Economics - University of Urbino Carlo Bo (Italy)

Ziqiao Chen

PhD candidate - Center for Policy Research, Syracuse University

The authors—David Popp and Ziqiao Chen of Syracuse University, Francesco Vona of OFCE Sciences-Po, and Giovanni Marin of the University of Urbino Carlo Bo—derived implications for the bipartisan legislation, still pending in the House, after examining the long-term impact of the $62 billion in green investments in the Obama administration’s 2009 American Recovery and Reinvestment Act.

By 2017, the green investments in the 2009 act—in addition to benefiting the environment—had created 640,000 jobs per year (mostly in manual labor work), or slightly more than 10 jobs for every $1 million invested, they find in The employment impact of a green fiscal push: Evidence from the American Recovery and Reinvestment Act.

The authors found that job creation was much stronger, and could be estimated with more confidence, in areas where the workforce already had a high level of green skills. In the 25 percent of commuting zones with the strongest skill distribution, green job creation was twice the creation in the average commuting area. Areas with high levels of green-job skills tended to be the wealthiest, they note, “thus, using green stimuli as part of a green energy transition may exacerbate regional inequities.”

That underscores the importance of training for the new jobs. “Any green spending plan intending to create green jobs should include funds for job training to ensure a smooth transition into green jobs for displaced workers in fossil fuel and energy intensive sectors,” the authors write.

This year’s bipartisan legislation, based on the Biden administration’s larger American Jobs Plan, includes funds for green investments such as electric vehicle charging stations, modernizing the electricity grid, and improving climate resilience. But it also provides money for plugging orphan oil and gas wells and cleaning abandoned coals mines, which should benefit communities hurt economically by the transition to clean energy.

Any green spending plan intending to create green jobs should include funds for job training to ensure a smooth transition into green jobs for displaced workers in fossil fuel and energy intensive sectors.

“Communities and groups that have been in danger of losing jobs have been very vocal opponents of the green energy transition,” Popp said in an interview with The Brookings Institution. “This policy has acknowledged that these losses are real and tried to do something about that. That’s really important.”

The paper also noted that job creation from green investments in the 2009 act was slower, compared with other investments in the act. Most jobs were created from 2013 to 2017, suggesting, the authors write, that green investments are “more effective for reshaping an economy than for restarting an economy” and, thus, would not have been effective way to address economic disruptions early in the COVID-19 pandemic.


Citation

Popp, David, Francesco Vona, Giovanni Marin, and Ziqiao Chen. 2021. “The employment impact of a green fiscal push: Evidence from the American Recovery and Reinvestment Act.” BPEA Conference Draft, Fall.

Conflict of Interest Disclosure

This project was supported in part through the Smart Prosperity Institute Research Network and its Greening Growth Partnership, which is supported by a Social Sciences and Humanities Research Council of Canada Partnership Grant (no. 895-2017-1018), as well as by Environment and Climate Change Canada’s Economics and Environmental Policy Research Network (EEPRN). Other than the aforementioned, the authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. They are currently not an officer, director, or board member of any organization with an interest in this article.

Acknowledgments:

David Skidmore authored the summary language for this paper.

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