In Massachusetts, energy efficiency isn’t just a good idea – it’s the law. It also may turn out to be sound economic policy.
The commonwealth enacted groundbreaking laws in 2008 to promote clean energy innovation, including the Green Communities Act, the Green Jobs Act and the Global Warming Solutions Act. The Green Communities Act (GCA) encourages investment in energy saving devices, and expanded electricity generation without fossil fuels. The Green Jobs Act fosters employment in the clean energy sector. The Global Warming Solutions Act addresses greenhouse gas emissions (such as carbon dioxide, methane and hydrofluorocarbons), requiring a 10 to 25 percent statewide reduction from 1990 emissions levels by 2020, and an 80 percent reduction by 2050. Environmentalists rejoiced at the passage of these laws. Many business owners were less enthusiastic.
The GCA is the centerpiece of Massachusetts energy policy. It requires utilities to invest in renewable energy sources such as wind, solar and hydroelectric. It supports “net metering programs,” where consumers install renewable energy devices like solar panels, and then sell surplus energy to utility companies. The Board of Building Regulations and Standards must integrate energy saving measures into the state building code. Utilities must enter into long-term contracts with renewable energy sources such as Cape Wind and increase their percentage output from those sources. GCA programs financially support “green communities,” which promote energy conservation and renewable energy. The GCA mandates that eventually 15 percent of electricity comes from newer renewable power facilities. These policies are designed to lower fossil fuel consumption and greenhouse gas emissions. The increasing numbers of wind turbines and solar arrays dotting the Massachusetts landscape are visible results.
Good Economic Policy
The GCA’s health and environmental benefits are assumed, but until recently, the GCA’s economic effects remained unclear. This month, however, economic and financial consulting firm Analysis Group released a study that sought to answer a single question: How does the GCA affect the Massachusetts economy, considering economic costs and benefits? The study compares real impacts of the GCA as measured from available data, with a hypothetical case where the GCA was never implemented. The study examines neither societal and environmental costs and benefits, nor GCA impacts outside Massachusetts.
The study’s findings confirm that the GCA is not only good environmental policy, but good economic policy as well. After analyzing data collected since the GCA became law in 2008, the study finds that the legislation has created nearly $1.2 billion in net economic benefits to Massachusetts including state and local tax revenues of $155 million and over 16,000 jobs (with a job being defined as employment for one year).
The study recognizes that these economic benefits are highly sensitive to natural gas prices, because Massachusetts consumes large quantities of that fossil fuel for electricity and heating. If natural gas prices rise, economic benefits increase; but if prices fall, the benefits decrease. Such a price drop is possible, given the vast natural gas resources in North America and new extraction methods. Therefore, a final judgment on the economic benefits remains to be seen.
The study was funded by the Barr Foundation, which has committed millions of dollars to fight climate change, raising the possibility of bias in the study. However, Analysis Group engaged outside advisors to review the study before its release, which should allay such concerns. In any event, the study offers credible findings based on real data, and it delivers encouraging news about the GCA from a purely economic perspective. As of today, one can safely say that according to the best available information, the GCA modestly improves the Massachusetts economy.
Christopher R. Vaccaro is a partner at Looney & Grossman LLP in Boston. His email address is cvaccaro@lgllp.com
