Efficiency Boost


How conservation stimulates the local economy.

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How conservation stimulates the local economy

Energy conservation efforts are still the Rodney Dangerfield of energy policy: They don’t get no respect.

The media spotlight and big public and private funding efforts are directed toward established big energy production industries, like fracking shale oil in the Midwest and glitzy new technologies like solar and wind. But it turns out that conservation is one of the most powerful approaches to meeting our energy needs.

{pullquote}Being a leader in conservation technologies can be an economic development effort in its own right.    {/pullquote}

We’ve heard how energy conservation can protect limited resources and reduce costs. But often overlooked is the role of conservation as a way to stimulate a local economy in pretty much any community, anywhere.

Sure, the energy industry can produce a localized boom near the oil fields in North Dakota, in the windier parts of the Columbia Basin, or if someone happens to choose to build a gas terminal in your backyard. But how do most of us see any economic development from the energy sector?

Here are the economics: The average household spends $2,000 a year for energy to heat, cool, light and power appliances in their homes, and nearly $3,000 a year for gasoline to power their cars. For most communities, these household energy purchases are a big net drain from the local economy.

Because most communities don’t produce their own energy — whether it’s gasoline to run vehicles, oil and gas to heat homes, or coal, solar and wind to generate electricity — they are buying it from somewhere else. This produces what economists call “leakage” from the local economy: spending power from local households that goes outside the community and isn’t available to be spent on locally produced goods and services. The more “leakage,” the less robust Main Street businesses will be.

That’s where conservation comes in. Strategies to promote energy efficiency — like weatherization, greater use of public transit, more compact development and expanded biking facilities — are a double benefit to local economies. First, the money spent to “buy” conservation is generally spent locally, employing local workers and providing revenue to local businesses.

But there’s more: Conservation investments save local consumers and businesses money on their fuel and electricity bills, which means that, over time, they have more to spend. Weatherization programs often produce the biggest benefits in small towns and rural areas, because of the local spending equation.

Although seldom quantified, the community economic benefits from energy conservation are substantial. For example, we carefully studied the differences in transportation patterns and related purchases (and energy consumption) in U.S. metropolitan areas.

It turns out the average Portland resident drives about 20% less than the typical urban resident in the U.S., about 20 miles per day compared to about 24 miles per day. (Lower driving is a result of more compact development, better transit, good biking facilities and less job sprawl, among other reasons) We estimate that less driving in Portland saves the region’s residents $1 billion per year compared to the typical American, both in savings in gasoline and in the costs of owning and maintaining vehicles. This is real money that households can spend.

There’s one more thing to consider: being a leader in conservation technologies can be an economic development effort in its own right. As local companies pioneer new techniques and capabilities here in Oregon, they can export that knowledge to other places.

Already a number of Oregon firms working in planning, cycling and transportation have used their homegrown expertise to become part of the traded sector of the economy: companies like Alta Planning + Design (cycling), Fregonese Associates (planning), Jarrett Walker + Associates (transit) and NelsonNygaard (transportation planning).

So what’s the barrier to doing more? That’s where the Rodney Dangerfield problem comes in. While supply-side approaches to providing energy have large, well-established markets and institutions (multinational oil companies, regulated public utilities, national distribution systems), conservation remains small scale and local.

Also, there’s a huge subsidy built into our current energy system. We don’t charge people to use the common atmosphere as a dump for carbon. If carbon polluters had to pay the roughly $50 per ton for the damage their emissions do to the environment, the economic incentive to invest in conservation would be much more powerful.

Needless to say, conservation has clear and strong environmental benefits as well. Not burning coal, oil and gas has the effect of reducing carbon emissions. If fossil fuel users had to pay for the privilege of disposing of their carbon in the common atmosphere — as opposed to being allowed to use it as an unlimited and free dumping ground for their waste — the economics of conservation would be even stronger.

If we’re serious about keeping money in our communities, some form of carbon pricing — whether cap and trade or a carbon tax — is one of the best tools we can use to tilt the playing field in favor of more localized economic development. Big- ticket supply-side projects like gas terminals generate big impacts in a small area. But from a statewide perspective, investing in energy conservation produces much more broadly shared economic benefits.

Plus, we’ll all breathe a little easier.

  • Joe Cortright is a principal economist for Impresa, a Portland consulting firm.

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