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A Green Global Recovery? Assessing U.S. Economic Stimulus and Prospects for International Coordination

by Robert Heilmayr, Trevor Houser and Shashank Mohan - February 2009

Well-tailored “green” components of a recovery effort can create jobs and stimulate the economy while achieving significant energy cost savings for businesses, consumers and the government.

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Key Findings

In light of this analysis, we argue that:

  • Well-tailored, green components of a recovery effort can create jobs and stimulate the economy while achieving significant energy-cost savings for businesses, consumers, and the government. On average, for every billion dollars invested our green recovery scenarios create 30,100 jobs and save the economy $450 million per year in energy costs. These future savings can serve as a sort of “efficiency pay-go” for government outlays today.

  • A green stimulus is no replacement for comprehensive climate and energy policy. Even the most aggressive short-term spending will have only a modest impact on US greenhouse gas (GHG) emissions and dependence on foreign sources of energy. On average, our green policy scenarios reduce annual CO2 emissions by 592,600 tons for every billion dollars spent. Scaling this investment and focusing funding on programs with the highest return could increase this amount, but would still fall far short of the billions of tons of reductions necessary to stabilize the climate.

  • Although green recovery efforts alone will not achieve broader climate and energy objectives, they can reduce the cost of comprehensive climate and energy policy. The most successful programs will be those that can be implemented quickly and can complement, rather than seek to replace, future energy and climate-specific legislation.

  • Internationally, the response to the current economic crisis provides an opportunity to lay the foundation for, and build confidence in, a multilateral approach to the climate crisis at the UN-led negotiations in Copenhagen later this year. When G-20 leaders meet in London in April, they should seek to coordinate green components of national stimulus programs and take stock of how these efforts impact long-term emission-reduction goals.

Executive Summary

As the 111th Congress begins and a new president takes office, the economic crisis dominates the US policy agenda. The financial system remains in a tenuous state despite massive bank recapitalization, and the economy, more than a year into the current recession, shows no signs of recovery. Given the scale of the challenge Washington faces and the amount of money required to combat it, there will likely be little room for other legislative priorities. As a result, policymakers are hoping to direct government spending over the next two years in a way that not only generates short-term economic growth and employment but also addresses long-term policy goals sidelined by the current crisis.

Energy and environmental objectives are chief among these goals, as evidenced by the considerable attention given to the notion of a green economic recovery by policymakers and the press. This Policy Brief provides a framework for evaluating ways to meet energy and climate-policy goals as part of an economic recovery effort, assesses a range of policy options currently under consideration, and discusses the prospects for coordinating US actions with those of other major economies for broader effect.

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