Energy efficiency creates jobs and delivers economic stimulus

Performance in energy is job-intensive. Even before the current crisis, more than 3.3 million workers held jobs in the energy efficiency sector in the United States and Europe alone, with the majority working by small and medium-sized companies. Via well-designed economic recovery programmes, investment will take advantage of energy efficiency’s ability to sustain existing jobs, generate new ones and improve economic growth in key labor-intensive industries such as construction and manufacturing. Moreover, by enhancing productivity, improving energy affordability and decreasing energy bills, reducing dependency on energy imports, reducing greenhouse gas emissions and freeing up funds for investment in other areas of the economy, energy efficiency provides a variety of longer-term benefits.

Technology replacement through policymaking

Via technology replacement initiatives for vehicles, freezers or other devices, governments also offer incentives directly to customers or through producers or retailers to substitute existing, obsolete goods with new , more effective versions. This can include investments for vehicles, refrigerators or other appliances and electronic devices in so-called ‘cash for clunkers’ programmes. Motor replacement, heat recovery or heat pump programs in the manufacturing industry may produce substantial job creation results while achieving significant environmental benefits as well. Of course, the cumulative environmental effects of early technology replacement must be taken into account: employment can be generated in the recycling market with focused initiatives in the circular economy.

Replacement initiatives in the style of ‘Cash for clunkers’ can help provide successful economic stimulus and can sustain employment in the supply chains of manufacturing , transport and retail. These systems should be specifically crafted to provide connections to well-established requirements and labels for energy efficiency and to promote the purchase of high-efficiency goods in order to ensure that they achieve energy efficiency improvements. One of the key points of such schemes is the degree to which incentives stimulate new business activity, give rise to economic activity, or promote transactions that are likely to occur anyway. The benefits produced can be maximised by careful programme design.

For example, in the automobile industry in the United States, the 2009 initiative of USD 2.85 billion ‘cash for clunkers’ offered rebates where 700,000 outdated cars were towed and replaced with new ones. The program was able to increase the ratio of energy-efficient purchases by offering greater rebates for more efficient cars.4 The program successfully advanced sales of 400,000 vehicles in the coming months.5 In response to the global financial downturn, similar schemes were implemented in many other countries.

In the appliance manufacturing industry, replacement schemes may also improve jobs while encouraging the uptake of more productive products. A ‘cash for clunkers’ initiative gradually replacing over 1 million obsolete refrigerators was launched by Colombia. The policy provided a substantial cut in VAT for a new refrigerator which included the recycling of old refrigerators in an environmentally friendly way. The new refrigerators use 25 percent less energy than the old units, resulting in slightly lower consumer energy bills and lower demand for low-income household subsidies. In other nations, similar initiatives have been introduced, such as an emphasis on upgrading inefficient televisions and encouraging a variety of replacements for household appliances.

Finally, technology replacement projects will facilitate the development and implementation of new technologies such as heat pumps, digital management systems for houses, and electric vehicles. Economic stimulus and efficiency improvements may also be guided by fleet modernisation initiatives that concentrate on buses , trains, vans or taxis.

Infrastructure projects

A high number of jobs that exploit both public procurement and local value chains can be created by large-scale infrastructure projects. These initiatives include investments in energy storage infrastructure, such as smart grids and charging for electric vehicles, as well as next-generation digital connectivity for a much more efficient , resilient and future-proof energy system. Infrastructure initiatives may also include improvements in public transport infrastructure, the development of bike lanes and pedestrian zones, and the large-scale implementation of street lighting improvements with electrical contractors in order to help support construction employment at the local level. Multiple infrastructure facilities can also be supplied by smart street-lighting improvements, as street light poles can also act as charging stations for electric vehicles and provide 5G telecommunications infrastructure. These investment projects promote renewable energy transformations while increasing the well-being of urban residents by allowing the adoption of sustainable mobility options.

Policy approaches

These stimulus activities may expand on pre-existing approaches and accelerate or exploit new, more radical approaches to the achievement of existing policy goals. The push for increased activity and stimulus, in either case, provides opportunities to align policy and regulatory structures and to remove realistic investment obstacles that can impede activity. It is also important to consider where it is best to target public funds and where, if the conditions are correct, private capital might be available. For instance, financial investment in infrastructure such as smart grids can be promoted by the right policy signals. On the other side, in the short term, without sufficient public financial assistance, homeowners are unlikely to be able to use their resources or take on new debt for home renovations.

The use of pre-existing solutions and requirements will optimize impact speed while protecting customers. Similarly , it is possible to leverage existing distribution processes and market structures. For example, if utilities already have the ability to update buildings for energy efficiency, they could be encouraged to rapidly scale up those activities. Likewise, municipalities can be an important conduit for providing housing services or improvements to street lighting and installing roller shutters for commercial streets.