13 -i CHAPTER 13. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

13.1 INTRODUCTION ......................................................................................................... 13-1

13.2 ASSUMPTIONS ............................................................................................................ 13-1

13.3 METHODOLOGY ........................................................................................................ 13-1

13.4 RESULTS ...................................................................................................................... 13-2

LIST OF TABLES

Table 13.4.1 Clothes Dryer Net National Change in Employment (Thousand jobs) ............. 13-6

Table 13.4.2 Room Air Conditioner Net National Change in Employment (Thousand jobs) .................................................................................................................... 13-7

LIST OF FIGURES

Figure 13.4.1 Clothes Dryer Employment Impact of Increased Equipment Cost .................... 13-3 Figure 13.4.2 Room Air Conditioner Employment Impact of Increased Equipment Cost ...... 13-3 Figure 13.4.3 Clothes Dryer Employment Impact of Operating Cost Savings ........................ 13-4 Figu re 13.4.4 Room Air Conditioner Employment Impact of Operating Cost Savings .......... 13-4 Figure 13.4.5 Clothes Dryer Net National Change in Employment ........................................ 13-5 Figure 13.4.6 Room Air Conditioner Net National Change in Employment ........................... 13-613 -1 CHAPTER 13. EMPLOYMENT IMPACT ANALYSIS

13.1 INTRODUCTION

DOE conducted an employment impact analysis for the NOPR and Final Rule . 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 clothes dryers and room air conditioners.

13.2 ASSUMPTIONS

DOE expects energy conservation 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 appliances , including the retail price plus sales tax, and increase installation

costs.

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

- to -year effect of these expenditure impacts on net economic output and employment. DOE intends this analysis to quantify the indirect employment impacts of these expenditure changes. It evaluated direct employment impacts at manufacturers’ fa cilities in the manufacturer impact analysis (see c hapter 12 ).

13.3 METHODOLOGY

The Department based its analysis on an input/output model of the U.S. economy that estimates the effects of standards on major sectors of the economy related to buildings and the net impact of standards on jobs. The Pacific Northwest National Laboratory developed the
model, ImSE T 3. 1.1 1 ( Im pact of S ector E nergy T echnologies) as a successor to ImB uild 2 , a special -purpose version of the IMPLAN 3 national input/output model. Im SET estimates the employment and income effects of building energy technologies. In comparison with simple economic multiplier approaches, Im SET allows for more complete and automated analysis of the economic impacts of energy

- efficiency 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 so changes in the level of spending (e.g., due to the effects of an efficiency standard) in one sector of the economy will affect flows in other sectors, which affects the overall level of employment.

ImSET uses a 187-sector model of the national economy 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 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 input-output sector. The model applies estimates of employment and13 -2 wage income per dollar of economic output for each sector and calculates impacts on national employment and wage income.

Energy -efficiency technology primarily affects the U.S. economy along three spending pathways. First, general investment funds are diverted to sectors that manufacture, install, and maintain energy

- efficient appliances. The increased cost of appliances leads to higher employment in the appliance manufacturing sectors and lower employment in other economic sectors. Second, commercial firm and residentia l spending are redirected from utilities toward firms that supply production inputs. Third, electric utility sector investment funds are released for use in other sectors of the economy. When consumers use less energy, electric utilities experience relativ e reductions in demand which leads to reductions in utility sector investment and employment.

13.4 RESULTS

The results in this section refer to impacts of residential clothes dryer and room air

conditioner standards relative to the base case for each appliance. DOE dis aggregated the impact of standards on employment into three component effects : increased capital investment costs, decreased energy costs, and changes in operations and maintenance costs. These component effects and a summary impact are presented for residential clothes dryers and room air

conditioners. No significant change in non- energy operations and maintenance cost is anticipated for room air conditioners or residential clothes dryers.

Figures 13.4.1-13.4.2 s ummarize the employment impacts of the increased investment and spending on higher

- efficiency equipment. Clothes dryer manufacturing is relatively more capital intensive compared to other sectors of the economy, on average, so the net result is a loss of employment. The air conditioning, refrigeration and forced air heating manufacturing sector, which includes room air conditioners, is somewhat less capital intensive than other sectors of the economy, so the net result is a small increase in employment.13 -3 Figure 13.4.1 Clothes Dryer Employment Impact of Increased Equipment Cost

Figure 13.4.2 Room Air Conditioner Employment Impact of Increased Equipment Cost - 9 - 8 - 7 - 6 - 5 - 4 - 3 - 2 - 1 0

2014 2019 2024 2029 2034 2039Incremental Jobs (1000)

Year TSL 1

TSL 2

TSL 3

TSL 4

TSL 5

TSL 6

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

2014 2019 2024 2029 2034 2039Incremental Jobs (1000)

Year TSL 1

TSL 2

TSL 3

TSL 4

TSL 5

TSL 613 -4 Figure s 13.4.3-13.4.4 show the employment impact of redirected spending made possible by appliance operating cost saving s. In this case, the employment impact is strongly positive.

Figure 13.4.3 Clothes Dryer Employment Impact of Operating Cost Savings

Figure 13.4.4 Room Air Conditioner Employment Impact of Operating Cost Savings 0 2 4 6 8 10 12 14 16 18

2014 2019 2024 2029 2034 2039Incremental Jobs (1000)

Year TSL 1

TSL 2

TSL 3

TSL 4

TSL 5

TSL 6

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

2014 2019 2024 2029 2034 2039Incremental Jobs (1000)

Year TSL 1

TSL 2

TSL 3

TSL 4

TSL 5

TSL 613 -5 Figures 13.4.5-13.4.6 show the estimated net national employment impacts of the clothes dryer and room air conditioner product trial standard levels. For any given year, these figures show the net change in the number of jobs in the economy relative to if there were no change in standards (and thus no resulting change in spending and cash flow patterns throughout the economy). These figures show the combined effects of equipment cost, operations and maintenance cost, and energy use changes due to standards.

Figure 13.4.5 Clothes Dryer Net National Change in Employment - 8 - 6 - 4 - 2 0 2 4 6 8 10

2014 2019 2024 2029 2034 2039Incremental Jobs (1000)

Year TSL 1

TSL 2

TSL 3

TSL 4

TSL 5

TSL 613 -6 Figure 13.4.6 Room Air Conditioner Net National Change in Employment

Tables 13.4.1-13.4.2 show the net national employment impact in specific years for each product , as well as the average annual employment impact over the 2014 -2043 time period. For clothes dryers, t he in itial decrease in net employment is caused by the dominance of capital costs in early years, while the impacts of operating cost savings from reduced energy use build up slowly over time, resulting in a net positive impact on employment in later years.

Table 13.4.1 Clothes Dryer Net National Change in Employment (Thousand jobs)

Trial Standard

Level 2014 2020 2030 2043 Average

2014

- 2043

1 0.00 0.00 0.01 0.01 0.01

2 0.00 0.00 0.01 0.01 0.01

3

- 0.14 0.41 1.18 1.82 0.99

4

- 0.19 0.36 1.13 1.75 0.93

5

- 3.50

- 1.37 1.71 4.25 0.95

6

- 7.89

- 3.16 3.69 9.30 1.99 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

2014 2019 2024 2029 2034 2039Incremental Jobs (1000)

Year TSL 1

TSL 2

TSL 3

TSL 4

TSL 5

TSL 613 -7 Table 13.4.2 Room Air Conditioner Net National Change in Employment (Thousand jobs)

Trial Standard

Level 2014 2020 2030 2043 Average

2014

- 2043

1 0.23 0.90 1.11 0.74 0.90

2 0.22 0.88 1.09 0.73 0.88

3 0.25 0.97 1.11 0.74 0.92

4 0.37 1.34 1.59 1.16 1.32

5 0.61 2.04 2.51 1.94 2.11

6 1.38 3.22 3.84 3.07 3.3113 -8 REFERENCES

1. Roop, J. M., M. J. Scott, and R. W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies , 2009 . Pacific Northwest National Laboratory. Richland, WA. Report No.

PNNL - 18412. Also, Scott, M.J. Note on Impact of Sector Energy Technologies (ImSET)

Model Version 3.1 , July, 2010 Pacific Northwest National Laboratory.

2. Scott, M. J., D. J. Hostick, and D. B. Belzer, ImB uild: 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

DE

- AC06 -76RLO 1830.

3. Minnesota IMPLAN Group Inc., IM PLAN Professional: User's Guide, Analysis Guide,

Data Guide , 1997. Stillwater, MN.