Could Trade Treaties Trump Green Jobs? Upper and Lower Bounds on Clean-Energy Employment Under Varying Trade Policies

Lincoln, Nebraska by American Public Power Association. Photo via Unsplash

A common argument for renewable energy is that it leads to job creation in the country or region where it is located. Yet this clean-energy boost to local employment could be at risk under World Trade Organization (WTO) rulings that prohibit favoritism for local producers. In a working paper for the Working Group on Trade, Investment and Climate Policy, Frank Ackerman and Brandon Taylor use the IMPLAN model to explore the potential effects of trade policy on green jobs by re-analyzing two “deep decarbonization” studies for the U.S. economy under three assumptions about imports.

Based on the average of the two studies, under current import levels, 80 percent reduction in emissions by 2050 could create an average of 1.0 million jobs per year, from now through 2050. (These are average numbers of jobs over a span of more than 30 years, not job-years). This should create a powerful argument for decarbonization, even though some specific jobs with high “legacy” wage rates will be lost. The issue of compensation for those who lose such jobs, such as coal miners and selected others, is an important topic that is beyond the scope of this article.

Recent WTO rulings, however, have struck down many national and subnational policies to promote renewable energy. After several successful U.S. challenges to other countries’ domestic protection of clean energy, India’s recent action against the U.S. suggests that the same could happen to anyone. An increase in U.S. energy sector imports could, according to our calculations, eliminate much or all of the net employment gains from clean energy, although the lower bound calculation is a logical limit, not a plausible policy result. WTO actions that roll back protections for domestic renewable industries could undercut the coalitions necessary to adopt clean energy. Moreover, such WTO actions ignore the positive global externality of emission reduction that results from national renewables promotion. In the other direction, more protectionist U.S. policies toward renewable energy could create more jobs, with an upper bound of 1.5 million per year, or 0.5 million above current conditions. This, too, is a logical limit rather than a policy option; attempts to pursue it in practice would run risks of retaliation from trading partners, another important problem that is beyond the scope of this article. Moreover, aggressive action to increase domestic content could raise prices and thereby slow adoption of renewable energy, a possibility we have not incorporated in our calculations.

Although the winds from Washington are currently blowing against renewable energy in general, the principal policy recommendation from this analysis is that it is important to preserve the current levels of domestic production in renewable energy and other energy inputs. Maintaining this level of domestic production means that clean energy could create a million net new jobs per year, no small accomplishment in itself, and a significant contribution to the politics of emission reduction.

Read the Working Paper