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 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 ofIncreased 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 ofFurnace and Boiler Standards

...... . . . ........ 14-5

14-iCHAPTER 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 

### 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 nationaljob creation or elimination resulting from possible standards, due to reallocation ofthe 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 ofthe U.S. economy, this analysis estimated the year-to-year effect ofthese expenditure impacts on net economic output and employment. A simple model might involve reduced expenditures for energy and reallocation ofthat money toward other sectors ofthe economy. DOE intended this analysis to quantify the indirect employment impacts ofthese 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 ofthe u.S. economy (IMBUILD II) for DOE that focuses on the 98 sectors ofthe economy most relevant to industrial, commercial, and residential building energy use. I IMBUILD was developed as a special-purpose version ofthe 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 ofthe government, in academia, and in the private sector 

### ( hrto :llwww .1Lllolill1

.c m J references

.hnn! \ Like IMPLAN, IMBUILD II includes structural coefficients to characterize economic flows among different sectors ofthe 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 ofthe economy .

14-1Efficiency 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. Efficiency standards are represented in IMBUILD II by a combination ofcapital 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 ofinput tables that quantify the size ofthe 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 oflabor intensity and so changes in the level of spending (e.g., the effects of an efficiency standard) in one sector ofthe economy will affect flows in other sectors, which will affect the overall level ofemployment. 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 ofthe 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 offurnace 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 ofthe increased investment on more-efficient furnaces. The increased cost ofthe 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 ofthe economy, the net result is a small loss of employment.

14-2Qa 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. 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 ofredirected 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.

14-330

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 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 offunds to other sectors ofthe 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 ofthese funds by other sectors ofthe 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.

14-425 T

U) U a. .a E o 20

15 -*-TSL I -•-TSL A TSL 2 --TSL B TSL 4 --TSL5

-52015 2020 2025 2030 2035 2040 Year Figure 14.5.1 Employment Impacts of Furnace and Boiler Standards

Table 14.5.1 Net National Chan g e 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

25

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

_ _ _ _____**v" ~** 

---TSL 1
- - ----- ---/;./

-- TSLA / / ' 20

TSL2 , /'**~ 15+---~**  

### r-------- ••

_ ,-**<~ ---------**  <Il (jj'
- .....TSL B ,;;/**.§~ TSL4** 

.... "0 -+ · TSL 5**~** ffi**10 ----** **-=== ~==** **-- ----** **-r L---** **-- ----~** **~~ ~~~** **-~** 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

a e 

# . . e a lOna T bl 1451 N tNt" 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

14-5REFERENCES
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. 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, WA. Report No. PNNL-11884. Prepared for the U.S. Department ofEnergy under Contract DEAC06-76RLO 1830.
2. Minnesota IMPLAN Group Inc. IMPLANProfessional: User's Guide, Analysis Guide, Data Guide. 1997. Stillwater, MN.

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