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UCS: Increasing Fuel Economy Would Generate Jobs in the US Economy and Auto Industry
13 July 2007
Increasing the average fuel economy of new light duty vehicles to 35 mpg by 2018 would increase US employment by 241,000 jobs in the year 2020, including 23,900 in the auto industry, according to a new analysis from the Union of Concerned Scientists (UCS). The increase in fuel economy would also save consumers $61 billion at the gas pump.
According to the analysis, nearly $24 billion of the fuel savings would become new revenue for automakers in 2020—paying for the improved technologies plus some profit. Consumers could then choose how to spend the remaining $37 billion saved on gasoline in that year.
Putting technology to work means putting people to work, whether it’s in the computer industry or the auto industry. A 35 mpg standard means billions of dollars helping to create more US jobs, not lining the pockets of the oil industry and their overseas suppliers.—David Friedman, author of the study and research director of the Clean Vehicles Program at UCS
Shifting that money from the oil industry to more productive parts of the economy would generate 82,900 new jobs in the service industry; 44,400 jobs in the retail trade industry; 33,100 jobs in the finance, insurance, and real-estate industries; and 17,800 jobs in manufacturing industries outside the auto industry, according to the report.
Thousands of other jobs would be created in agriculture, construction, transportation, utilities, and government. Oil and associated industries would see their job forecasts drop by 21,000, though these jobs would be shifted to other sectors of the economy, yielding a net increase of 241,000 new jobs.
UCS used a macroeconomic model that includes industry-specific data derived from a government designed analysis tool to analyze the job impacts on 528 different economic sectors. Overall, states that use more gasoline and that have more industry will gain the most jobs. Seven states will add at least 10,000 jobs in 2020: California 32,500; Texas 14,700; Florida 14,300; New York 13,100; Michigan 11,000; Ohio 10,500; and Illinois 10,300 jobs.
In the analysis, UCS used industry-specific data derived from a macroeconomic impact analysis tool, IMPLAN (Impact Analysis for PLANning). This model incorporates interactions among 528 industrial sectors using 21 economic variables to trace supply linkages and evaluate how changes in spending affect employment, wages, and the national gross domestic product.
To estimate the costs and savings resulting from an increase in fuel economy to 35 mpg by 2018, UCS used a modified version of the LEAP vehicle stock model from Tellus and its own cost/performance analyses.
Key assumptions in the analysis include:
A mileage rebound of 10 percent;
A vehicle price elasticity of one;
A real discount rate of five percent;
An average gasoline price of $2.55 per gallon;
An average 15-year, 170,000-mile vehicle lifetime;
A discount factor of about 0.8 to convert federal test fuel economy values to real-world values; and
Combined vehicle and upstream emissions of 11.1 kg/gallon of gasoline (24.5 pounds per gallon of gasoline).
UCS analyzed both the direct and indirect investments generated by technology improvements, as well as the re-spending of fuel cost savings. The analysis provided a national industry-by-industry breakdown of job impacts for the years 2020 and 2030.
UCS allocated the national impacts among the states using gasoline consumption data and prices in each state, along with state employment projections for each industry from the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA).
Overall, states that use more gasoline and that have more industry will gain the most jobs. Seven states will add at least 10,000 jobs in 2020: California 32,500, Texas 14,700, Florida 14,300, New York 13,100, Michigan 11,000, Ohio 10,500, and Illinois 10,300 jobs.
According to the UCS analysis, the increase in fuel economy would cut oil consumption by 1.6 million barrels per day and reduce greenhouse gas emissions by more than 260 million metric tons, akin to taking nearly 40 million of today—s average cars and trucks off the road in 2020.
The study comes as the House of Representatives begins wrangling over a package of energy legislation that could include debate over a bill introduced by Rep. Ed Markey (D-MA) and Rep. Todd Platts (R-PA) that calls for increasing fuel economy standards by four percent per year, with guaranteed progress to 35 mpg by 2018.
In March, automotive engineers at UCS unveiled a minivan design they said showed that automakers could build affordable vehicles with existing technology that would meet or exceed the global warming pollution standards for cars and trucks that have been adopted by California and 10 other states. (Earlier post.)
Creating Jobs, Saving Energy, and Protecting the Environment: An Analysis of the Potential Benefits of Investing in Efficient Cars and Trucks (download from UCS site)
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