Wednesday, September 28, 2011

Does Water Efficiency Create More Jobs Than Conveyance?

From Tranforming Water: Water Efficiency as Stimulus and Long-Term Investment, a report done by David Mitchell at M.Cubed (with co-authors) who has done consulting work with David Sunding and the water contractors in the past.
Our consultant team modeled a wide range of water/energy efficiency program possibilities, across all water‐using sectors and involving indoor, outdoor, and water system efficiencies. This modeling clearly confirms that economic stimulus benefits could be broadly distributed throughout the national economy:

1. The economic output benefits range between $2.5 and $2.8 million per million dollars of direct investment.

2. GDP benefits range between $1.3 and $1.5 million per million dollars of direct investment.

3. Employment potential ranges between 15 and 22 jobs per million dollars of direct investment.

Thus, direct investment on the order of $10 billion in water/energy efficiency programs can boost U.S. GDP by $13 to $15 billion and employment by 150,000 to 220,000 jobs and could save between 6.5 and 10 trillion gallons of water, with resulting energy reductions as well.
Yesterday, David Sunding presented the employment effects of conveyance, about 10 jobs per $1 million invested, and estimated operations and maintenance of conveyance would create about 7 jobs per million spent.

Comparing 15-22 jobs per million dollars from efficiency investments to 7-10 jobs per million invested in conveyance, it looks like efficiency delivers double the job stimulus bang per buck as new conveyance.  

Whether it is building canals, low flow shower heads, schools, stadiums or anything; the problem with the one-sided job creation stimulus studies is that there is always an alternative use of the dollar, a cost to getting the dollar from someone else's pocket, and they are almost always presented without proper context.  It is something of an occupational hazard as an applied economist, we are all guilty of it to various extents.

On a positive, somewhat tangential note, I was very pleased to hear Jerry Meral announce at yesterday's BDCP meeting (in response to questions) that David Sunding is going to be working on more comprehensive analysis of BDCP effects.  Previously, I had heard that the contractors weren't interested in any real economics, so this is an interesting development and we will see if we get the real cost-benefit analysis that is desperately needed. 

Hopefully, he is allowed to properly define the alternative scenarios, rather than letting the water contractors frame the questions.  Nobody knows all the aspects of California water economics better than David, and he is generally pretty careful with the numbers even when the contractors are paying the bills.  To improve and create trust in the final product, Dr. Meral ought to form an advisory group (or another workgroup) to help ensure that David can frame the analysis correctly, define the alternatives fairly, and that the results are released no matter how it turns out.

No comments:

Post a Comment