climate friendly communities final december 2011

8/11/2019 Climate Friendly Communities Final December 2011

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Cl

A Review of What Econ

Preared for:

Tracy Morgenstern, City of Seatt

Author:

Kristen A. Sheeran Ph.., Econo

Fall !"##

mate Friendly Communities:

mists Know About the Potential Busin

le, Office of Sustainability and Environment

ics for E!uity and the Environment "et#or$

1

ss Imacts


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E$ecutive %ummary:

The City of Seattle recently commissioned an analysis of the technical feasibility of a range of

strategies in trans%ortation, building energy, and #aste sectors to achieve net carbon neutrality

by the year &'(' from ma)imum de%loyment of $no#n technologies at reasonable %enetrationrates. The energy*saving strategies that #ere identified %rovide o%%ortunities to reduce

greenhouse gas emissions and redesign urban landsca%es, architecture, and trans%ortation

systems to become more resilient to climate change and higher fossil fuel %rices. They also

introduce %olicies, incentives, and regulations, and re!uire investments that other cities and

regions have not necessarily made. Do these initiatives disadvantage businesses and

households in Seattle, or do they incentivize efficiency and innovation and position the city

more competitively for growth in the future?

This re%ort revie#s the relevant literature in economics to hel% %rovide ans#ers to these

im%ortant !uestions. +e consider ho# the suite of regulations and incentives considered by

Seattle could affect business %rofitability and com%etitiveness. +e also e)%lore the benefits to

Seattle and its businesses of becoming a more climate friendly. The re%ort does not analye the

s%ecific economic im%acts of the emissions reduction strategies under consideration. -ather, it

dra#s im%ortant insights from the literature to establish #hat economists currently $no#

about the li$ely business im%acts of creating climate friendly communities.

Economic research on the %otential economic im%acts of regulatory measures and other

incentives to im%rove environmental outcomes s%ans decades. Em%irical studies and other

analyses have reached three general conclusions

There is no evidence of widespread flight of polluting industries to different regions orcountries to esca%e environmental regulations. /irm relocation decisions have been

driven mostly by the %ursuit of lo#er #age and benefit costs0 the costs of com%lying

#ith environmental regulations are sim%ly not high enough as a %ercentage of total

business costs to motivate relocation.

The em%irical data sho#s that layoffs attributed to environmental regulation are rare,

even in heavily %olluting industries.

At the economy*#ide level, there is no real tradeoff between environmental regulation

and growth. -egulation may slo#ly shift the com%osition of economic activity from%olluting to clean technologies and s%ecific businesses or industries may be

dis%ro%ortionately im%acted. The net effect, ho#ever, should be small as indicated by

historical evidence and trends.

1n Seattle, the s%ecific concern is #hether businesses #ill choose to relocate to nearby suburbs

to avoid the %otential costs of im%lementing a city*#ide carbon neutral strategy. 2usinesses

based in nearby Seattle suburbs #ould dra# from the same regional labor %ool and %ay the


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same average #age rates0 there #ould be no labor savings by moving outside of city limits. 2y

moving to the suburbs, businesses #ould forgo the advantages of locating in an urban center

and the benefits of Seattle3s %lanned energy*saving and efficiency measures. To offset the loss

of these benefits, the costs of im%lementing Seattle3s carbon neutral %lan #ould have to be

very significant. 4et, as national studies have sho#n, the costs of environmental com%liance are

ty%ically not large enough on average to drive relocations.

Strategies for achieving carbon*neutrality in Seattle by &'(' target e)%ansive energy efficiency

im%rovements in trans%ortation and commercial and residential building sectors. Measures

include ne# building design, building retrofits and renovations, and s#itching to district energy

and heat %um%s. These types of energy efficiency measures have been shown to generate

savings for businesses and consumers and to contribute to economic growth and prosperity in

a region. The %otential energy savings from efficiency im%rovements in the building sector are

es%ecially significant. 1n the 5.S., buildings account for roughly 6'7 of all energy use. Energy

efficiency improvements in buildings and appliances offer the greatest potential for negative-

cost abatement opportunities that generate positive economic returns to society at large over

the lifecycle of the projectThe literature, therefore, is largely very su%%ortive of the $inds of

energy efficiency initiatives outlined in Seattle3s carbon neutral strategy. Those initiatives have

the %otential to deliver high benefits at relatively lo# cost and ris$.

As com%ared to other regions, Seattle may e)%erience lo#er energy savings and longer %aybac$

%eriods from its energy efficiency investments. This is because the region already benefits from

a mild climate and abundant hydro%o#er. Energy efficiency im%rovements, ho#ever, offer

Seattle businesses and households o%%ortunities to save on more than 8ust their energy bills. 1n

addition to energy cost savings, energy efficiency investments %rovide benefits in the form of

reduced maintenance costs, greater reliability, avoided future ca%ital costs, lo#er #ater and

chemical #astes, and greater %roduct !uality. Moreover, the potential energy cost savingsfrom space heating and for transportation are significant. Seattle3s %o%ulation is heavily

de%endent on single*occu%ancy vehicles and suffers some of the heaviest traffic %atterns in the

nation. +ith rising fuel costs and the %otential time and cost savings from %ublic

trans%ortation, %edestrian friendly #al$#ays, or bicycling, Seattle3s carbon neutral %lan can

deliver real savings.

Efficiency improvements, in turn, can increase the city!s competitiveness and its ability to

attract industry, capital, and a highly s"illed wor"force Seattle is already home to multi%le

innovation clusters, including clean technology. The literature on regional innovation clusters

finds that businesses benefit from co*location by reducing costs along a su%%ly chain, e)%anding

the labor %ool, and attracting s%ecialists to the region. 9igh tech, green tech, and clean energycom%anies are not li$ely to locate to areas that do not su%%ort the very technologies, %roducts,

and services they %roduce. The realities of climate change and %ea$ oil su%%lies strongly

suggest that the most successful businesses of the future will be able to innovate ways of

e#tracting more energy services from every dollar of energy e#penditure. Seattle3s carbon

neutral strategy #ould su%%ort local demand for clean technologies and create a %olicy

a%%aratus and set of incentives that could attract more of these businesses to the area.


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I&

Introduction

The city of Seattle is u%dating its Climate Action Plan and develo%ing short*term and long*term

strategies for reducing greenhouse gas emissions, #ith the goal of achieving net carbon

neutrality by the year &'('. To su%%ort the Plan u%date, the City commissioned an analysis of

the technical feasibility of a range of strategies in the trans%ortation, building energy, and#aste sectors to evaluate the %otential :9: reductions from ma)imum de%loyment of $no#n

technologies at %lausible %enetration rates.

1n the absence of global and federal leadershi% and regulation on climate change, momentum

behind city and regional initiatives is gro#ing. 1n establishing aggressive goals for emissions

reductions and greater energy efficiency, Seattle 8oins other ma8or cities #orld#ide and across

the 5.S. in recogniing the im%ortant contributions cities can ma$e to climate stabiliation

efforts and the gro#th o%%ortunities inherent to the u%ta$e of climate*friendly technologies.

Emissions mitigation on a city*#ide scale, ho#ever, %oses some uni!ue challenges.

Cities have limited sco%e for establishing the broad*based %olicies, such as a carbon ca% or ta),

#hich can raise the %rice of carbon emissions and incentivie broad scale reductions by

businesses and households. A carbon %rice %rovides a direct mar$et signal that carbon

emissions are costly and should be economied, and it levels the %laying field bet#een fossil

fuels and clean energy alternatives. +ithout the benefit of a carbon %rice, cities li$e Seattle can

encourage emissions reductions by increasing the energy efficiency of their infrastructure,

enhancing non*single occu%ant vehicle trans%ortation systems, im%roving #aste management,

and to the e)tent %ossible, generating clean energy locally sourcing clean energy from

su%%liers. Seattle is already a #ell*recognied leader in this regard. The City of Seattle o#ns

Seattle City ;ight, the utility that %rovides the ma8ority of electricity to Seattle residents and

businesses. City ;ight is the first carbon neutral electric utility in the nation. Over


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need to brea$ their de%endence on fossil fuels and antici%ate and %lan for the im%acts of

climate change. /or#ard loo$ing cities and regions that act early and effectively can smooth the

transition and minimie im%acts for businesses and citiens.

Cities that embrace bold climate change initiatives, ho#ever, introduce %olicies, incentives and

regulations and ma$e investments that are not necessarily %resent else#here. Some fear that

these initiatives #ill disadvantage businesses, industries, and households and negatively im%act

income and em%loyment in the region. Others have argued that the benefits of living and

o%erating in a climate friendly community out#eigh any %otential com%etitive disadvantages.

These advantages include energy savings and %roductivity gains, as #ell as the benefits of living

and doing business in urban areas that are innovation clusters. Com%ared to other cities, the

financial and emissions savings from energy efficiency im%rovements in Seattle #ill not run as

dee%, because the city relies on lo# cost rene#able hydroelectric %o#er and e)%eriences a mild

climate. 9o#ever, electricity conservation measures in Seattle increase the availability of

hydroelectric %o#er to dis%lace fossil fuel use else#here. Additionally, cost and emissions

savings should be realied from energy efficiency im%rovements in trans%ortation and naturalgas use.

There is an established literature in economics that critically e)amines the benefits and costs of

carbon regulations and incentives and analyes the %otential im%acts on com%etitiveness,

em%loyment, and income in a region. 1n the sections that follo#, #e revie# the relevant

literature in economics to hel% %rovide ans#ers to the follo#ing !uestions confronting City of

Seattle officials as they u%date the Climate Action Plan

9o# might the suite of regulations and incentives being considered affect business

%rofitability and com%etitiveness=

+hat are the benefits to Seattle and its business community of becoming a climate

friendly community=

This re%ort does not analye the s%ecific economic im%acts of the emissions reductions

strategies under consideration. -ather, the re%ort dra#s im%ortant insights from the literature

to establish #hat economists currently $no# about the li$ely business im%acts of creating

climate friendly communities.

II&

Bac'(round

There is a large and gro#ing literature in economics that com%ares the economic benefits and

costs of carbon reductions to determine the o%timal %olicy res%onse to climate change. This

literature relies on integrated assessment models, large*scale com%uter models #hich estimate

and com%are the aggregate benefits of avoiding climate change and the aggregate costs of

mitigation. The analyses ty%ically estimate national or global mitigation costs as a %ercentage


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loss of economic out%ut %ro8ected from a given level of emissions reduction as com%ared to

business*as*usual. -ecent estimates of the aggregate global costs of achieving atmos%heric

concentrations of carbon dio)ide of >('*6(' %arts %er million, the levels recommended by

climate scientists to minimie the #orst ris$s of climate change, range bet#een ?*>7 of global

out%ut annually @Stern &''0 Ac$erman et. al &''


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that determining ho# bad and ho# li$ely the #orst case scenarios of climate change may really

be.

The conclusion to be dra#n from this literature is that the %otential conse!uences of climate

change #arrant investments in %reventative measures today @Stern &''0 +eitman &''D0

+eitman &''0 Ac$erman et al. &''


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The ta$e home message from these economics studies is as follo#s. Measures that increase

carbon %rices in fossil fuel de%endent economies #ill raise energy costs and the costs of other

goods and services. The im%acts are %otentially regressive, but effective %ublic %olicy tools can

be used to lessen the burdens on households and businesses. Energy conservation, energy

efficiency, and fuel*s#itching to cleaner energies can reduce the vulnerability of households

and businesses to higher carbon %rices and smooth the transition to a lo# carbon or carbonneutral future.

The &''( Climate Action Plan and the strategies considered in the carbon neutral analysis,

ho#ever, do not include measures li$e a carbon ta) or ca% that #ould directly raise local energy

costs0 rather, energy savings result from measures designed to reduce energy use through

energy efficient design and retrofits. Actions contem%lated include a variety of initiatives and

incentives to reduce vehicle miles traveled, electrify the vehicle fleet, redesign and retrofit

commercial and residential buildings to achieve greater efficiency, s#itch fuels, and increase

recycling and com%osting rates. The carbon neutral analysis assumes that Seattle City ;ight #ill

su%%ly carbon neutral electricity to the city by adding ne# #ind, geothermal, and other

rene#able resources to e)isting hydro%o#er electricity su%%lies. The Plan also assumes that theoverall electricity load #ill not increase0 electricity savings from energy efficiency measures #ill

offset electricity demands from vehicle electrification and s#itching to electric heat %um%s in

buildings @;aarus et al. &'??B.

9o# might this %ac$age of initiatives im%act Seattle businesses= To ans#er this, #e turn to

related literatures in economics that e)%lore ?B the im%acts of regulations on businesses0 &B the

benefits to businesses of energy efficiency im%rovements0 and >B the benefits to businesses and

cities of %roactively %lanning for a carbon constrained future.

111.

Imacts of Re(ulation on Business

The debate over the %otential economic im%acts of regulatory measures to im%rove

environmental outcomes is long standing. The oft*cited concern is that environmental

regulations #ill increase %roduction costs, raising %roduct %rices and decreasing the !uantity of

goods and services demanded. This could %otentially lead to layoffs and rising unem%loyment in

sectors or industries of the economy affected by the regulations. Em%irical evidence, ho#ever,

finds little su%%ort for #ide*scale 8ob losses or relocations arising from strengthening of

environmental %olicies. The economics research on this to%ic e)tends bac$ over the last forty

years, #ith some of the most im%ortant findings %ublished in the late ?


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that there has been little movement by 5.S. firms to other countries to esca%e environmental

regulatory burdens. "or has there been a migration of ne# investment in dirty industries to

develo%ing countries #ith la) regulations, the so*called H%ollution havensG. Over the last fe#

decades of the neoliberal era, both dirty and clean industries have relocated outside of the 5.S.,

but that movement has been driven mostly by the %ursuit of lo#er #age and benefit costs

@es%ecially health costsB, #hich com%rise a much higher %ercentage of their total costs@:oodstein ?


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The third ma8or conclusion is that at the economy*#ide level, there seems to be no real

tradeoff bet#een environmental regulation and gro#th. Environmental regulation leads to a

very slo# shift in the com%osition of s%ending 8obs are gained as #or$ers %roduce, install and

maintain clean*u% e!ui%ment and engage in retrofits, and are lost as firms %ass on those cost

increases to consumers, #ho have to cut bac$ their %urchase of goods and services from thatsector @:oodstein ?


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All businesses consume energy0 energy services are vital to economic activity. Measures that

reduce the costs of energy services, therefore, can contribute to economic gro#th and

%ros%erity in a region. Energy generation and use in the 5.S. is incredibly inefficient. 5.S.

electricity generation, for e)am%le, is only >>7 efficient. This inefficiency is com%ounded by the

inefficiency #ith #hich consumers then use that generated electrical %o#er. According to a

recent analysis by Ayers and Ayers @&'?'B, the overall efficiency of the different $inds of energyused in the 5.S. to %roduce Fuseful #or$3 is only ?>7. This signifies a tremendous amount of

energy #aste as #ell as enormous o%%ortunities for energy savings through investments in

energy efficiency.

Energy efficiency is an under*utilied resource in the 5.S. economy and an im%ortant

com%onent of any emissions mitigation strategy. 1nvestments in energy efficiency are ty%ically

lo#*ris$ but yield high returns. McKinsey Com%any @&''7 of %ro8ected

demand and abate ?.? gigatons of greenhouse gases annually using technologies already

demonstrated to be cost*effective @McKinsey Com%any &''


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that a variety of #aste*to*energy and recycled energy systems could ca%ture enough #aste

heat from industrial facilities to offset ?'7 of current 5.S. electricity demand @Ayers and Ayers

&'?'B.

/uture %ro8ections for energy efficient technologies are bright. As energy efficient technologies

achieve greater %enetration, and as behavioral, institutional, and structural obstacles to #idermar$et im%lementation are identified and addressed, the energy efficiency resource should

become %rogressively chea%er @;aitner and Ehrhardt*Martine &''B. Effective %ublic %olicies

can accelerate the rate of im%rovement and ado%tion of these technologies, enabling lo#er

costs and higher %erformance over time @McKinsey &''


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aeros%ace, information technology, clean technology, life sciences, logistics and international

trade, military, and tourism. The clusters theory, #hich dates bac$ to Michael Porter3s seminal

?B. ;ocating close to rivals can increase a businesses3

customer base, reduce costs along the su%%ly chain, and e)%and the labor %ool and attracts%ecialists to the region. Porter, ho#ever, argues that colocation can also increase %roductivity,

innovation, encourage ne# business formation, and su%%ort local start*u%s @Porter ?B. The research also cites the

im%ortance of %ublic %olicy in creating and su%%orting the vitality of regional clusters. The

benefits of colocation stem from %ositive s%ill over benefits, or #hat economists call

e)ternalities. E)ternalities contribute to mar$et failures in the form of underinvestment in

s%ecialied s$ills, scientific $no#ledge, and s%ecialied infrastructure. "o one firm has the

incentive to invest sufficiently in these areas, as the benefits accrue to e)isting com%etitors and

lo#er barriers to entry to ne# com%etitors. Public %olicy can satisfy investment needs in these

areas or %rovide the incentives and structure firms need to ca%ture some the s%ill*over benefits

themselves. Public %olicy can strengthen the %ositive e)ternalities %resent in clusters, thereby

enhancing %roductivity and gro#th as a result @Muro and Kat &'?'0 Porter &''DB.

The clusters literature argues that cluster*based %olicies should be neutral #ith regards to the

ty%e of industry or economic activity0 the role of %olicy is to su%%ort e)isting or emerging

clusters, not %ic$ #inners. 1n %art, this reflects the notion that the evolution of %articularclusters is some#hat organic, resulting from regional attributes that are not easily identifiable.

Seattle, ho#ever, already harbors a cluster of more than 6'' clean technology com%anies.

Seattle3s carbon neutral strategy, to the e)tent that it creates local demand for clean

technologies and creates a %olicy a%%aratus and set of incentives that encourages green

innovation and efficiency, com%lements and su%%orts its clean technology cluster. :reen

technologies #ill emerge in the areas #here there is greatest demand. The 5.S. lags behind

other nations in develo%ing clean energies because it lac$s a national carbon %olicy, unli$e all

other industrialied countries. 9igh tech, green tech, and clean energy com%anies are not li$ely

to locate to states and cities that do not su%%ort the very technologies, %roducts, and services

they %roduce. The realities of climate change and beyond*%ea$ oil su%%lies im%ly that

successful businesses of the future #ill li$ely be those that innovate #ays of e)tracting more

energy services from every dollar of energy e)%enditure. Successful businesses #ill be those

that manage and invest for energy %roductivity, as #ell as labor %roductivity. @Ayers and Ayers

&'?'B.

The idea that %ublic %olicy can %lay a %ositive role in su%%orting innovation and gro#th runs

counter to the belief of many that the free mar$et @not governmentB is ideally suited to


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identifying %rofit*ma$ing o%%ortunities. 2ut only if #e believe that all %rofitable o%%ortunities

have been discovered, that there are no dollar bills lying unclaimed on busy side#al$s, can #e

assume that smart regulation cannot contribute to the develo%ment of ne# businesses and

investment o%%ortunities. Economists have long recognied that there are many barriers to

innovation that %revent managers from identifying, and ca%italiing on, ne# money ma$ing or

money saving o%%ortunities. There are, in fact, dollar bills lying on cro#ded side#al$s and%ublic %olicy can hel% steer businesses to their location.

This is the basic logic behind the Porter 9y%othesis, first articulated in a %a%er by Porter and

van der ;inde in ?


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strictest controls on carbon emissions in the 5.S. 1nitial o%%osition to A2 >& and recent

attem%ts to re%eal it #ere led by concerns over its economic im%acts, es%ecially for small

businesses. A &''< re%ort by the 2rattle :rou% @+eiss and Sarro &''& #ould be small, since most small businesses #ould not

be directly regulated. The im%acts #ould be more indirect, in the form of higher energy and

other in%ut costs. They note that the vast ma8ority of small businesses in California are notenergy*intensive0 the average small business in California s%ends less than ?.(7 of revenues on

energy*related costs. A study of the em%loyment im%acts of A2 >& @abin and 2uffa &''B constructing a LsmartG electrical grid and @6B investing in #ind %o#er, solar, and second

generation biofuels. The study estimated that total 8obs created #ould be ?.< million. 9ad the

same amount of money been given to households to finance general consum%tion, only ?.D

million 8obs #ould have been created @Pollin et al. &''B. "umerous other studies find that

investing in the environment, energy efficiency, and rene#able energy #ill generate more 8obs

than investing in e)tractive industries and fossil fuels @:oodstein ?


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regions that act early and effectively and can smooth this transition and minimie im%acts for

businesses and citiens. /or decades, 5.S. cities benefitted from relatively stable electricity

%rices and abundant fossil fuel su%%lies. +ithout a %lan in %lace to bridge the transition from

fossil fuels, economies #ill suffer the %ressures of rising energy demands from %o%ulation

gro#th, fossil fuel shortages, environmental degradation, and climate change. Ayres and Ayres

@&'?'B argue that the cities that achieve greater energy efficiency #ill be better able to#ithstand such shoc$s. Energy efficiency, therefore, is a $ey com%onent of a resilience strategy.

/or e)am%le, by u%grading buildings to ero net energy or ero emissions standards, #e

transform the ris$s of blac$outs, traffic congestion0 automobile e)haust @Ayers and Ayers &'?'B.

+hile the %rimary %ur%ose of much of the urban redesign described in Seattle3s Climate Action

%lan is to reduce emissions and energy use, these measures %rovide simultaneous o%%ortunities

to %re%are for climate change im%acts. ;ong term savings from energy efficiency and

conservation #ill free u% resources for investment in ada%tation to climate change @Ayers and

Ayers &'?'B.

Urbanization

2usinesses that left Seattle to avoid the %otentially higher costs associated #ith the City3s

carbon neutral ob8ectives #ould lose certain advantages that could not be readily found in the

suburbs or even other cities. Seattle offers the most im%ortant benefits of high density urban

centers that %roduce for local and global mar$ets efficient trans%ortation infrastructure0 a

#ell*educated #or$force0 innovation clusters0 and %orts that offer ready access to global

mar$ets.

Seattle3s carbon neutral vision reflects many of the emerging %riorities of urban %lanning

com%act, develo%ment #ith convenient access to many destinations, shorter commuting

distances bet#een home and #or$0 and %ublic trans%ortation oriented. +hile the %rimary

%ur%ose of much of the urban form described by Seattle3s carbon neutral %lan is to reduceemissions and energy use, these measures yield other benefits as #ell.

& Com%act, densely

%o%ulated cities #ith mi)ed*use develo%ments are ty%ically more resource*efficient than other

settlement %atterns #ith com%arable levels of economic out%ut @5"EP &'??B. 9igh density

urban design ca%tures efficiency gains and technological innovation through the colocation of

economic activities @5"EP &'??0 Porter &''>B. Moreover, it reduces resource and energy

consum%tion by s%reading the costs of urban infrastructure @e.g. streets, rail#ays, #ater, and

se#age systemsB over a greater %o%ulation. A recent study com%ared the costs savings

bet#een smart gro#th region and car*de%endent develo%ments and estimated the direct cost

savings %er household to range bet#een (''' to D(,''' @5"EP &'??B.

The reduction in %avement as cities shift from %ersonal vehicles to %ublic trans%ortation may

o%en u% s%ace for %ersonal use, as #ell as %ublic %ar$s, bi$e and %edestrian %ath#ays, etc

@Ayers and Ayers &'?'0 Kahn &'?'B. Studies have also sho#n that traffic reduction and safer

2For an excellent summary, consult the United Nations Energy Program (UNEP) report: Cities: Investing in Energy

and Resource and Efficiency. Available at:

http://www.unep.org/greeneconomy/Portals/88/documents/ger/GER_12_Cities.pdf


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%ath#ays for bicyclists and %edestrians contribute to a higher !uality of life #ithin communities

@5"EP &'??B. 1t has also been sho#n that the e)tension of %ublic trans%ortation systems can

reduce socioeconomic ine!uality by im%roving access to %ublic resources for disadvantaged

communities @5"EP &'??B. -educing energy use and vehicle trans%ortation #ill %roduce

localied health benefits from cleaner air and safer streets. Therefore, cities li$e Seattle that

e)ecute ambitious climate action %lans can e)%ect a range of non*climate change benefits.

)I&

Conclusion

This re%ort revie#ed the economics literature to establish #hat economists currently $no#

about the li$ely business im%acts of creating climate friendly communities. Though it does not

identify or analye the s%ecific economic im%acts of Seattle3s carbon neutral strategy, the

re%ort finds solid evidence from the literature to su%%ort the ambitious emissions reduction

efforts Seattle has cham%ioned.

There is large and gro#ing su%%ort by economists for ambitious and immediate emissions

reductions as %recautionary investments to avoid future climate change damages. Seattle3s

emissions reductions #ill have minimal im%act on atmos%heric carbon dio)ide levels and

tem%eratures, but they #ill yield a range of economic benefits for Seattle and hel% establish

Seattle as a global leader in climate change solutions. The research demonstrates that cities

that embrace energy efficiency, conservation, and urban redesign and begin the transition from

fossil fuels #ill be more resilient to future climate change im%acts and the instability of rising oil

%rices %ost %ea$*oil.

The non*climate change related benefits of investing in clean technologies and urban redesign

are many, including energy cost savings, safer and healthier communities, and higher !uality of

life more broadly. The research demonstrates the enormous %otential of the energy efficiencyresource and the %otential dynamism and gro#th unleashed by the creation of clean

technology clusters. Moreover, the research is clear that the strength and diversity of

innovation is de%endent on carefully crafted %ublic %olicy. 2y su%%orting green innovation and

creating local demand for clean technologies, Seattle3s carbon neutral strategy can su%%ort its

emerging clean energy cluster as an engine for gro#th and %ros%erity in the region.

/inally, the research %rovides little evidence that Seattle3s carbon neutral %lan #ill create an

environment hostile to businesses and %rofits. Contrary to some %erce%tions, the economics

literature on the im%acts of environmental and health regulations on firm %erformance finds

evidence that smart %ublic %olicy can incentivie efficiency and innovation, im%roving firmcom%etitiveness over time. +hile s%ecific im%acts on firms or sectors may vary, at the

aggregate level, the research finds little evidence of #ide*scale flight by businesses or ne#

investment to avoid com%liance #ith environmental regulations. The evidence finds that

investing in green technology and infrastructure #ill create 8obs on average, not lose them.

The successful cities of the future #ill be those that %ro*actively %lan and invest in energy

%roductivity, clean energy, and green infrastructure and design. These are the cities that #ill be


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%oised to gain a com%etitive advantage in the technologies #hich #ill be highly demanded in

the future. These cities can minimie the future im%acts to the %ublic and businesses from

climate change and higher energy %rices. Seattle, therefore, should benefit from becoming a

climate friendly, carbon neutral community.


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References

Ac$erman, /ran$ @&''B. LThe 5nbearable ;ightness of -egulatory CostsG. Fordham Urban Law

Journal.>>@6B

Ac$erman, /. and -. Massey @&''&B. Prospering with Preaution! "lobal #evelopment and$nvironment %nsitute! Tufts Universit&. Available at

htt%JJase.tufts.eduJgdaeJ%olicyresearchJPrecautionA9TAug'&.%df

Ac$erman, /ran$, Ste%hen eCanio, Eban :oodstein, -ichard 9o#arth, -ichard 9o#arth,

Catherine "orman, Eliabeth A. Stanton, and Kristen Sheeran @&''


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Energy 1nnovations @?


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Neutral ,etor and ,trateg& Anal&sis.Pre%ared for the City of Seattle Office of Sustainability and

Environment.

;aitner, Iohn A. and Karen Ehrhardt*Martine @&''B. The ,ize of the U.,. $nerg& $ffiien&

3ar8et* "enerating a 3ore Complete Piture. +ashington, .C. American Council for an

Energy*Efficient Economy.

;aitner, Iohn A. LS$i%G and anessa McKinney @&''B. Positive 2eturns* ,tate $nerg& $ffiien&

Anal&ses Can %nform U.,. $nerg& Poli& Assessments. +ashington, .C. American Council for an

Energy*Efficient Economy.

;ung, -obert 2ruce, Aimee McKane, -obert ;each, onald Marsh @&''(B. LAncillary 2enefits

and Production 2enefits in the Evaluation of 1ndustrial Energy Efficiency Measures.G

Proeedings of the 4))( ,ummer ,tud& on $nerg& $ffiien& in %ndustr&. +ashington, .C.

American Council for an Energy*Efficient Economy.

McKinsey Co. @&''DB. 2eduing U.,. "reenhouse "as $missions* 1ow 3uh at 0hat Cost9TheConference 2oard and McKinsey Com%any.

McKinsey Co. @&''>&*>6&.

Morgenstern, -ichard .0 +illiam A. Pier0 and Ihih*Shyang Shih @&''&B. LIobs versus the

Environment an 1ndustry*;evel Pers%ective.GJournal of $nvironmental $onomis and

3anagement6>@>B 6?&*6>.

Muro, Mar$ and 2ruce Kat @&'?'B. The New Cluster 3ovement* 1ow 2egional %nnovation

Clusters Can Foster the Ne:t $onom&.+ashington C 2roo$ings 1nstitute.

Pollin, -obert, 9eidi :arrett*Peltier, Iames 9eint, and 9elen Scharber @&''B. "reen 2eover&*

A Program to Create "ood Jobs and ,tart +uilding a Low/Carbon $onom&. +ashington, C

Center for American Progress and Political Economy -esearch 1nstitute.

Pollin, -obert, Iames 9eint, and 9eidi :arrett*Peltier @&''B. LThe Economic Performance of -egionsG 2egional ,tudies>D@B (6


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Porter, Michael E. @&''DB. LClusters and Economic Policy Aligning Public Policy #ith the "e#

Economics of Com%etition,G +hite Pa%er @1nstitute for Strategy and Com%etitiveness, 9arvard

2usiness School.

Porter, Michael E. and Claas van der ;inde @?

climate friendly communities final december 2011

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