Impact of the American Recovery and Reinvestment Act on the Clean Energy Transformation

A central piece of the American Recovery and Reinvestment Act of 2009 (ARRA) is more than $90 billion in government investment and tax incentives to lay the foundation for the clean energy economy of the future.  These investments and tax incentives include everything from energy efficiency retrofits to modernizing the electrical grid to tax credits for advanced clean energy manufacturing.  These clean energy investments are also providing crucial stimulus to the economy today.  The CEA’s third quarterly report on the impact of the ARRA, released on April 14, found that the Act as a whole raised employment by between 2.2 million and 2.8 million jobs over what it would otherwise have been.  In a new supplement to the report, we focus in detail on the macroeconomic impact of the Act’s clean energy provisions.
      
Table 1 lists the clean energy provisions in the ARRA, grouped into nine functional categories.  Column 1 shows that of the original $787 billion estimated cost of the Act, $90 billion was devoted to clean energy programs.  The last two columns indicate that nearly $40 billion of this total has already been obligated for specific clean energy projects, and more than $9 billion has been outlayed.

042110 CEA Table 1

To estimate the short-run economic impact of the ARRA’s clean energy investments, we use the CEA macroeconomic model described in our third quarterly report.  Table 3 of the supplement shows the results.  We find that the Recovery Act created more than 80,000 clean energy jobs as of the first quarter of 2010, and that the clean energy investments supported an additional 20,000 jobs throughout the economy.  Importantly, these estimates include only employment related to projects that have received actual outlays to date.  In many cases, the additional $20 billion in obligations shown in Table 1 may have already generated economic activity because recipients may begin spending as soon as they are certain funds are available.  Looking over a longer horizon, the ARRA’s clean energy provisions will support about 720,000 job-years through 2012.  (A job-year is the equivalent of one worker employed for one year.)  Thus the Act will be a source of both employment and progress on clean energy for years to come.

CEA 042110 Table 3

Christina Romer is the Chair of the Council of Economic Advisers.

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