CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION .................................................... 14-1

14.2 ASSUMPTIONS ..................................................... 14-1

14.3 METHODOLOGY ................................................... 14-1

14.4 ANALYSIS ......................................................... 14-2

14.5 SUMMARY RESULTS ................................................ 14-4

LIST OF TABLES

Table 14.5.1 Net National Change in Employment ............................... 14-5

LIST OF FIGURES

Figure 14.4.1 Employment Impacts of Increased Investment on More-Efficient

Furnace and Boilers ............................................. 14-3

Figure 14.4.2 Employment Impact of Redirected Residential Spending ................ 14-4

Figure 14.5.1 Employment Impacts of Furnace and Boiler Standards ................. 14-5

 EE-RM/STD-01-350 COMMENT 164

CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS 

TABLE OF CONTENTS 

14.1 INTRODUCTION .............. . . .. ................ . .. ..... .. . ...... . 14-1 

14.2 ASSUMPTIONS ......... . . .. ...... ... .. .. ............. . .. ... ..... . .. 14-1 

14.3 METHODOLOGY ........ ... . .. ... .. .. ...... .......... . ... .. .... . ... 14-1 

14.4 ANALYSIS .. . .. .. .... ... ....... ..... .. . . .... . . ... ..... .. ....... .. . . 14-2 

14.5 SUMMARY RESULTS ........... ..... .. . . ... ...... .. ............... . . 14-4 

LIST OF TABLES 

Table 14.5.1 Net National Change in Employment ...................... . ........ 14-5 

LIST OF FIGURES 

Figure 14.4.1 Employment Impacts of Increased Investment on More-Efficient 

Furnace and Boilers ....... . .. . ........ .. ................ . ....... 14-3 

Figure 14.4.2 Employment Impact of Redirected Residential Spending .. . . ... . .. ...... 14-4 

Figure 14.5.1 Employment Impacts of Furnace and Boiler Standards ...... . . . ........ 14-5 

14-i 
CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

14.1 INTRODUCTION

DOE conducted an employment impact analysis for the SNOPR. DOE's employment

impact analysis is designed to estimate indirect national job creation or elimination resulting

from possible standards, due to reallocation of the associated expenditures for purchasing and

operating residential furnaces and boilers. DOE estimated national impacts on major sectors of

the U.S. economy, using publicly available data and incorporating different energy price

scenarios.

14.2 ASSUMPTIONS

DOE expects furnace and boiler efficiency standards to decrease energy consumption,

and therefore to reduce energy expenditures. The savings in energy expenditures may be spent

on new investment or not at all (i.e., they may remain "saved"). The standards may increase the

purchase price of furnaces and boilers, including the retail price plus sales tax, and increase

installation costs.

Using an input/output econometric model of the U.S. economy, this analysis estimated

the year-to-year effect of these expenditure impacts on net economic output and employment. A

simple model might involve reduced expenditures for energy and reallocation of that money

toward other sectors of the economy. DOE intended this analysis to quantify the indirect

employment impacts of these expenditure changes. It evaluated direct employment impacts at

manufacturers' facilities in the manufacturer impact analysis (see Chapter 12).

14.3 METHODOLOGY

The Pacific Northwest National Laboratory (PNNL) developed a model of the U.S.

economy (IMBUILD II) for DOE that focuses on the 98 sectors of the economy most relevant to

industrial, commercial, and residential building energy use.' IMBUILD was developed as a

special-purpose version of the Impact Analysis for Planning (IMPLAN) national input-output

model to specifically estimate the employment and income effects of energy efficiency

technologies.2 IMPLAN is routinely used by more than 1500 clients at all levels of the

government, in academia, and in the private sector (i^tl^^: iwwe.iiii^lan,c«^^s'rc#erei^cr.ti,iZlEr3l]

Like IMPLAN, IMBUILD II includes structural coefficients to characterize economic flows

among different sectors of the economy and track the inter -industry employment impacts

resulting from efficiency standards. IMBUILD II calculates the total effect of standards on

employment, including job creation or deletion in the manufacturing , commercial, and retail

sectors of the economy.

14-1

 EE-RM/STD-01-350 COMMENT 164

CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS 

14.1 INTRODUCTION 

DOE conducted an employment impact analysis for the SNOPR. DOE's employment 

impact analysis is designed to estimate indirect national job creation or elimination resulting 

from possible standards, due to reallocation of the associated expenditures for purchasing and 

operating residential furnaces and boilers. DOE estimated national impacts on major sectors of 

the U.S. economy, using publicly available data and incorporating different energy price 

scenanos. 

14.2 ASSUMPTIONS 

DOE expects furnace and boiler efficiency standards to decrease energy consumption, 

and therefore to reduce energy expenditures. The savings in energy expenditures may be spent 

on new investment or not at all (i.e., they may remain "saved"). The standards may increase the 

purchase price of furnaces and boilers, including the retail price plus sales tax, and increase 

installation costs. 

Using an input/output econometric model of the U.S. economy, this analysis estimated 

the year-to-year effect of these expenditure impacts on net economic output and employment. A 

simple model might involve reduced expenditures for energy and reallocation of that money 

toward other sectors of the economy. DOE intended this analysis to quantify the indirect 

employment impacts of these expenditure changes. It evaluated direct employment impacts at 

manufacturers' facilities in the manufacturer impact analysis (see Chapter 12). 

14.3 METHODOLOGY 

The Pacific Northwest National Laboratory (PNNL) developed a model of the u.S. 

economy (IMBUILD II) for DOE that focuses on the 98 sectors of the economy most relevant to 

industrial, commercial, and residential building energy use. I IMBUILD was developed as a 

special-purpose version of the Impact Analysis for Planning (IMPLAN) national input-output 

model to specifically estimate the employment and income effects of energy efficiency 

technologies.2 IMPLAN is routinely used by more than1500 clients at all levels of the 

government, in academia, and in the private sector (hrto:llwww.1Lllolill1.c mJreferences.hnn! \ 

Like IMPLAN, IMBUILD II includes structural coefficients to characterize economic flows 

among different sectors of the economy and track the inter-industry employment impacts 

resulting from efficiency standards. IMBUILD II calculates the total effect of standards on 

employment, including job creation or deletion in the manufacturing, commercial, and retail 

sectors of the economy. 

14-1 
Efficiency standards are represented in IMBUILD II by a combination of capital

investment and energy savings. These capital investments and energy savings divert spending

away from some business sectors and toward others. Accordingly, IMBUILD II measures the

economic effect of a standard as (1) the expansion enjoyed by businesses that receive diverted

funds minus (2) the contraction suffered by businesses that lose diverted funds.

IMBUILD II includes a series of input tables that quantify the size of the capital

investment and energy savings resulting from efficiency standards. These tables also designate

industrial sectors that manufacture efficiency products (and those that lose sales as a result of

efficiency standards, including energy supplying firms and utilities).

In the model, different sectors have different levels of labor intensity and so changes in

the level of spending (e.g., the effects of an efficiency standard) in one sector of the economy

will affect flows in other sectors, which will affect the overall level of employment. For

example, furnace standards may reduce energy expenditures and increase equipment prices in the

residential, commercial, and industrial sectors. The expenditure changes are likely to reduce

commercial and energy sector employment. At the same time, furnace standards may increase

commercial sector investment, and increase employment in other sectors of the economy. DOE

designed the employment impact analysis to estimate the year-to-year net employment effect of

these different expenditure flows.

14.4 ANALYSIS

The results in this section refer to impacts of furnace and boiler standards relative to the

base case. DOE disaggregated the impact on jobs into three component effects. Figure 14.4.1

shows the employment impacts of the increased investment on more-efficient furnaces. The

increased cost of the equipment leads to higher employment in the furnace manufacturing sector

and lower employment in other economic sectors. Because furnace manufacturing is relatively

capital-intensive, compared to other sectors of the economy, the net result is a small loss of

employment.

 EE-RM/STD-01-350 COMMENT 164

Efficiency standards are represented in IMBUILD II by a combination of capital 

investment and energy savings. These capital investments and energy savings divert spending 

away from some business sectors and toward others. Accordingly, IMBUILD II measures the 

economic effect of a standard as (1) the expansion enjoyed by businesses that receive diverted 

funds minus (2) the contraction suffered by businesses that lose diverted funds. 

IMBUILD II includes a series of input tables that quantify the size of the capital 

investment and energy savings resulting from efficiency standards. These tables also designate 

industrial sectors that manufacture efficiency products (and those that lose sales as a result of 

efficiency standards, including energy supplying firms and utilities). 

In the model, different sectors have different levels of labor intensity and so changes in 

the level of spending (e.g., the effects of an efficiency standard) in one sector of the economy 

will affect flows in other sectors, which will affect the overall level of employment. For 

example, furnace standards may reduce energy expenditures and increase equipment prices in the 

residential, commercial, and industrial sectors. The expenditure changes are likely to reduce 

commercial and energy sector employment. At the same time, furnace standards may increase 

commercial sector investment, and increase employment in other sectors of the economy. DOE 

designed the employment impact analysis to estimate the year-to-year net employment effect of 

these different expenditure flows. 

14.4 ANALYSIS 

The results in this section refer to impacts of furnace and boiler standards relative to the 

base case. DOE disaggregated the impact onjobs into three component effects. Figure 14.4.1 

shows the employment impacts of the increased investment on more-efficient furnaces. The 

increased cost of the equipment leads to higher employment in the furnace manufacturing sector 

and lower employment in other economic sectors. Because furnace manufacturing is relatively 

capital-intensive, compared to other sectors of the economy, the net result is a small loss of 

employment. 

14-2 
Qa c - - I_-I-L1-

-1

+-TSL I

-TSL A

TSL 2

TSL B

-=P-TSL 4

-+-TSL 5

-3-F

-4

2015 2020 2025 2030 2035 2040

Year

Figure 14.4.1 Employment Impacts of Increased Investment on More-Efficient

Furnaces and Boilers

Figure 14.4.2 shows the employment impact of redirected residential spending made

possible by appliance energy savings. In this case, the employment impact is positive,

increasing employment in the sectors that supply households with consumption inputs.

 EE-RM/STD-01-350 COMMENT 164

2 

(.)~ 

m CI) 

0...0 E .Q, =--TSL 1 _ ""C 

a5 ffi -2 E CI) 

>,:::J 

o 0 -..r::. 0..-

E~ 

UJ 

-3 

--_._ .... _---_. --- -

TSLA 

TSL2 

TSLB 

--TSL4 

-+-TSL 5 

e------

-4+-----~-----~-----~----~-----~ 

2015 2020 2025 2030 2035 2040 

Year 

Figure 14.4.1 Employment Impacts of Increased Investment on More-Efficient 

Furnaces and Boilers 

Figure 14.4.2 shows the employment impact of redirected residential spending made 

possible by appliance energy savings. In this case, the employment impact is positive, 

increasing employment in the sectors that supply households with consumption inputs. 

14-3 
30

25

TSL 1

--TSL A

--TSL B

-- TSL 4

-+-TSL 5

TSL 2

Year

Figure 14.4.2 Employment Impact of Redirected Residential Spending

The change in employment resulting from decreased utility investment and the

redirection of funds to other sectors of the economy is negligible. When consumers use less

energy resources, energy utilities experience relative reductions in demand which leads to

reductions in utility sector investment and employment. The effect on utility employment is

small because the utility sector is capital intensive, and the employment per dollar utility revenue

is relatively low. Use of these funds by other sectors of the economy tends to more than offset

the utility employment impacts, with no significant effect on overall employment.

14.5 SUMMARY RESULTS

Figure 14.5.1 shows the estimated net national employment impacts of each trial standard

level. These trial standard levels are discussed in greater detail in Chapter 10. The figure shows,

for any given year, the change in the number of jobs in the economy relative to the number of

jobs if there were no change in standards (and thus no resulting change in spending and cash

flow patterns throughout the economy). Table 14.5.1 shows the net national employment impact

in specific years.

14-4

 EE-RM/STD-01-350 COMMENT 164

30 

~- --~~-- ~ ---

----~~~~~ 

5+-------.~ --- ~~~---------------------

o 

2015 2020 

., r • 

2025 

...... lit • • Ii . ~ . 2030 2035 

Year 

• • 

Figure 14.4.2 Employment Impact of Redirected Residential Spending 

2040 

The change in employment resulting from decreased utility investment and the 

redirection of funds to other sectors of the economy is negligible. When consumers use less 

energy resources, energy utilities experience relative reductions in demand which leads to 

reductions in utility sector investment and employment. The effect on utility employment is 

small because the utility sector is capital intensive, and the employment per dollar utility revenue 

is relatively low. Use of these funds by other sectors of the economy tends to more than offset 

the utility employment impacts, with no significant effect on overall employment. 

14.5 SUMMARY RESULTS 

Figure 14.5.1 shows the estimated net national employment impacts of each trial standard 

level. These trial standard levels are discussed in greater detail in Chapter 10. The figure shows, 

for any given year, the change in the number of jobs in the economy relative to the number of 

jobs ifthere were no change in standards (and thus no resulting change in spending and cash 

flow patterns throughout the economy). Table 14.5.1 shows the net national employment impact 

in specific years. 

14-4 
25 T

U)

U

a. .a

E o

20

15

-*-TSL I

-•-TSL A

TSL 2

--TSL B

TSL 4

--TSL5

-5

2015 2020 2025 2030 2035 2040

Year

Figure 14.5.1 Employment Impacts of Furnace and Boiler Standards

Table 14.5.1 Net National Change in Employment

Trial Standard Level 2015

(thousands)

2020

(thousands)

2030

(thousands)

2038

(thousands)

TSL1 -0.02 0.13 0.45 0.71

TSLA -0.02 0.19 0.63 0.92

TSL2 -0.10 0.39 1.57 2.40

TSLB -0.64 1.71 7.46 10.97

TSL4 -0.67 1.85 8.15 12.15

TSL5 -2.52 2.15 14.21 26.91

 EE-RM/STD-01-350 COMMENT 164

25 

......-,,",1-

/ 

________ v" ~ ---TSL 1 -- --------/;./ 

--TSLA / / ' 

20 

TSL2 ,/' ~ <Il (jj' 15+---~ - ..... TSL B r--------,;;/ •• _,- <~---------

.§~ TSL4 

.... "0 -+·TSL 5 

~ ffi 10 -----===~==-- -----rL---------~~~~~~-~ E rJJ »::l .Q2 

a. .... E~ 

w +------------- ~-=~~ --------------- --

-5 +- r -----,-----------,----------,---------------,-----------, 

2015 2020 2025 2030 2035 2040 

Year 

Figure 14.5.1 Employment Impacts of Furnace and Boiler Standards 

T a e bl 1451 . . N e a tNt" lOna I Ch an~e III m >Ioymen . E I t 

Trial Standard Level 2015 2020 2030 2038 

(thousands) (thousands) (thousands) (thousands) 

TSLI -0.02 0.13 0.45 0.71 

TSLA -0.02 0.19 0.63 0.92 

TSL2 -0.10 0.39 1.57 2.40 

TSLB -0.64 1.71 7.46 10.97 

TSL4 -0.67 1.85 8.15 12.15 

TSL5 -2.52 2.15 14.21 26.91 

14-5 
REFERENCES

Scott, M. J., D. J. Hostick, and D. B. Belzer. ImBuild: Impact of Building Energy

Efficiency Programs. April, 1998. Pacific Northwest National Laboratory. Richland, WA.

Report No. PNNL-11884. Prepared for the U.S. Department of Energy under Contract DEAC06-76RLO 1830.

2. Minnesota IMPLAN Group Inc. IMPLANProfessional: User's Guide, Analysis Guide, Data

Guide. 1997. Stillwater, MN.

 EE-RM/STD-01-350 COMMENT 164

REFERENCES 

1. Scott, M. J., D. J. Hostick, and D. B. Belzer. ImBuild: Impact of Building Energy 

Efficiency Programs. April, 1998. Pacific Northwest National Laboratory. Richland, W A. 

Report No. PNNL-11884. Prepared for the U.S. Department of Energy under Contract DEAC06-76RLO 1830. 

2. Minnesota IMP LAN Group Inc. IMPLANProfessional: User's Guide, Analysis Guide, Data 

Guide. 1997. Stillwater, MN. 

14-6