CHAPTER 15. NET NATIONAL EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

15.1 ASSUMPTIONS............................................................................................................... 15­1

15.2 METHODOLOGY ........................................................................................................... 15­1

15.3 RESULTS ......................................................................................................................... 15­2

LIST OF TABLES

Table 15.3.1 Net National Change in Jobs for PTACs by TSL................................................ 15­3

Table 15.3.2 Net National Change in Jobs for PTHPs by TSL ................................................ 15­4

Table 15.3.3 Net National Change in Jobs for Combined PTACs and PTHPs by

TSL .................................................................................................................... 15­4

LIST OF FIGURES

Figure 15.3.1 Net National Change in Jobs for Combined PTACs and PTHPs by

Trial Standard Levels, 2012­2042...................................................................... 15­3

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CHAPTER 15. NET NATIONAL EMPLOYMENT IMPACT ANALYSIS

Employment impact is one of the factors that the U.S. Department of Energy (DOE)

considers in selecting a standard for packaged terminal air conditioners (PTACs) and packaged

terminal heat pumps (PTHPs). Employment impacts include direct and indirect impacts. Direct

employment impacts are any changes in the number of employees for PTAC and PTHP

manufacturers, their suppliers, and related service firms. Indirect impacts are those changes of

employment in the larger economy that occur due to the shift in expenditures and capital

investment that is caused by the purchase and operation of more efficient PTAC and PTHP

equipment. The manufacturer impact analysis in this rulemaking addresses only the employment

impacts on manufacturers of PTACs and PTHPs, i.e., the direct employment impacts (See

Chapter 13 of the TSD); this section describes other, primarily indirect, employment impacts.

15.1 ASSUMPTIONS

If promulgated, DOE expects PTAC and PTHPs’ amended energy conservation standards

to decrease the national energy consumption, and therefore, reduce energy expenditures. The

savings in energy expenditures may be used on new investment or not at all (i.e., they may

remain “saved”). The amended energy conservation standards may increase the purchase price

(i.e., equipment price plus sales tax) and installation costs of PTACs and PTHPs.

Using an econometric model of the U.S. economy, this analysis estimated the year­toyear effect of these expenditure impacts on net economic output and employment. DOE

intended this analysis to quantify the indirect employment impacts of reduced expenditures for

energy and reallocation of that money toward other sectors of the economy.

15.2 METHODOLOGY

DOE defines the net national employment impacts resulting from proposed amended

energy conservation standards for PTACs and PTHPs as the net national change in jobs in the

general economy. The key factors affecting the outcome of net change in jobs are: (1) increased

spending on the purchase and installation of PTAC and PTHP equipment meeting the amended

standards, (2) reduced customer spending on electricity, (3) reduced spending on new investment

or capacity by energy companies, and (4) the associated indirect effects of the above.

DOE based its analysis on the Impact of Sector Energy Technologies (ImSET) model

developed by Pacific Northwest National Laboratory for DOE’s Office of Energy Efficiency and

1 Renewable Energy. ImSET is a personal­computer­based, economic­analysis model that

estimates the effects of standards on major sectors of the U.S. economy related to buildings and

the net impact of standards on jobs. ImSET’s input/output structure is based on the 1997

Benchmark U.S. table aggregated to 188 sectors to estimate the employment and income effects

2 of building energy technologies. In comparison with simple economic multiplier approaches,

ImSET allows for more complete and automated analysis of the economic impacts of energyefficiency investments in buildings.

In an input/output model, the level of employment in an economy is determined by the

relationship of different sectors of the economy and the spending flows among them. Different

sectors have different levels of labor intensity and changes in the level of spending (e.g., due to

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the effects of an amended energy conservation standard) in one sector of the economy will affect

spending in other sectors, which in turn will affect the overall level of employment.

ImSET uses a 188­sector model to predict the economic effects of residential and

commercial buildings technologies. ImSET collects estimates of initial investments, energy

savings, and economic activity associated with spending the savings resulting from amended

standards (e.g., changes in final demand in personal consumption, business investment and

spending, and government spending). It provides overall estimates of the change in national

output for each input­output sector. Then, the model applies estimates of employment and wage

income per dollar of economic output for each sector and calculates impacts on national

employment and wage income.

ImSET calculates the total effect of standards on employment, including job creation or

deletion in the manufacturing sector. As described above, DOE analyzed the direct employment

impacts, i.e., those that would occur at the manufacturing plants of PTAC and PTHP equipment,

in the manufacturer impact analysis (Chapter 13).

Energy­efficiency technology primarily affects the U.S. economy along three spending

pathways. First, general investment funds are diverted to sectors that manufacture, install, and

maintain energy­efficient technologies. The increased cost of technology leads to higher

employment in the air­conditioner manufacturing sector including PTACs and PTHPs and lower

employment in other economic sectors. Second, commercial firm spending is redirected from

utilities toward firms that supply commercial production inputs. Third, electric utility sector

investment funds are released for use in other sectors of the economy. When customers use less

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

utility sector investment and employment.

15.3 RESULTS

The results show the total effects of amended energy conservation standards on

employment for the selected years. The analysis was based on the assumption that PTAC and

PTHP equipment will phaseout the current refrigerant R­22 in 2010 and use a substitute

refrigerant R­410A before the effective date of this rulemaking.

Figure 15.3.1 illustrates the estimated net national employment impacts of the seven

different trial standard levels (TSLs) for all the PTAC and PTHP equipment. A detailed

discussion of the TSLs can be found in Chapter 9 of the TSD). The figure shows, for a given

year over the period of analysis (2012­2042), the change in the number of jobs in the economy

relative to the number of jobs if there were no change in standards and hence, no resulting

change in spending and cash flow patterns throughout the economy.

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­50

0

50

100

150

200

250

300

350

400

2012201720222027203220372042

Jobs

TSL7

TSL6

TSL5

TSL4

TSL3

TSL2

TSL1

Figure 15.3.1 Net National Change in Jobs for Combined PTACs and PTHPs by Trial

Standard Levels, 2012­2042

Similarly, Table 15.3.1, Table 15.3.2 and Table 15.3.3 show the net national employment

impacts of the amended PTAC and PTHP energy conservation standards by trial standard level

and specified years for the entire PTAC and PTHP markets, respectively.

Table 15.3.1 Net National Change in Jobs for PTACs by TSL

Trial Standard Net National Change in Jobs (Number of Jobs)

Level 2012 2022 2032 2042

1 0 7 10 11

2 0 7 10 11

3 0 14 22 24

4 0 7 10 11

5 0 25 39 44

6 ­1 41 63 69

7 ­2 88 133 147

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1

2

3

4

5

6

7

Table 15.3.2 Net National Change in Jobs for PTHPs by TSL

Trial Standard Net National Change in Jobs (Number of Jobs)

Level 2012 2022 2032 2042

0 12 18 20

0 24 37 40

0 24 37 40

0 36 55 62

0 36 55 62

­1 48 73 82

­2 116 175 195

Table 15.3.3 Net National Change in Jobs for Combined PTACs and PTHPs by TSL

Trial Standard Net National Change in Jobs (Number of Jobs)

Level 2012 2022 2032 2042

1 0 19 28 31

2 0 31 47 51

3 0 38 59 64

4 0 43 65 73

5 0 61 94 106

6 ­2 89 136 151

7 ­4 204 308 342

As shown in the Figure 15.3.1, Table 15.3.1 and Table 15.3.2, the proposed PTAC and

PTHP standards have virtually no initial impact on jobs and have a small positive impact on jobs

in later years. This is explained by the fact that the required initial investment in the standardcompliant equipment costs a few jobs because the investment is capital­intensive relative to other

spending in the economy that would be displaced to pay for the investment. However, in the long

term, the benefit to the economy of the energy savings from the installed equipment more than

makes up for the initial investment and the net effect on employment is positive. The long term

positive and increasing impact occurs because the energy savings in future years are obtained

from both current and previous efficiency investments reflected in the installed stock of efficient

equipment, while investment costs for the equipment occur only once.

In conclusion, DOE estimates that net indirect employment impacts from a proposed

PTAC and PTHP standards are positive, as shown in Table 15.3.3.

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REFERENCES

1. Pacific Northwest National Laboratory, ImSET: Impact of Sector Energy Technologies. 2005.

Richland, WA. Prepared for the U.S. Department of Energy under Contract DE­AC05­

76RLO1830.

2. Lawson, Ann M., Kurt S. Bersani, Mahnaz Fahim­Nader, and Jiemin Guo. 2002.

“Benchmark Input­Output Accounts of the U. S. Economy, 1997,” Survey of Current

Business, December, pp. 19­117.

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