US Metros and the Green Economy

In the United States, the broader discourse about the benefits and viability of a clean economy, like most other critical national issues, has become mired in partisan and ideological divisions. The 2012 US Presidential campaign provided only the latest example of the deep chasm that separates our political parties. On the one hand, Republican Presidential nominee Mitt Romney, who supported a state green energy fund as Governor of Massachusetts, criticised the Obama Administration for an ‘unhealthy obsession with green jobs’, while President Obama defended his administration’s investments in renewable energy projects over the past four years and argued that Governor Romney policies show a ‘disdain for green energy’.

This partisan debate at the national level occurs at a time in which US federal government support for the clean energy and energy-efficiency sectors are likely to decline, even though President Obama has just been re-elected for another term. In the past several years, through subsidies, loan guarantees, and tax expenditures, the US government became a major supporter of the nascent clean economy, committing more than US$150 billion to clean energy projects between 2009 and 2014. Over the next few years, however, it is likely that federal support will be radically reduced as numerous programmes and policies are set to expire, from production tax credits for wind energy to investment tax credits for solar energy. In total, 63 of the 92 federal clean energy finance policies that were in place in 2009 will have expired by 2014. Given the difficult budget challenges the US government faces as it attempts to control the skyrocketing federal deficit, it is likely that many of these programmes will be scaled back if not eliminated altogether.

The irony, of course, is that in the midst of uncertainty and division at the federal level there is a large, diverse, and growing clean economy emerging in the US, concentrated primarily in America’s largest cities and metropolitan areas. Over the past two years, Brookings research has identified nearly 2.7 million clean jobs, making the clean economy nearly 60 per cent of the size of the America’s IT sector (4.8 million jobs), and larger than its fossil fuel industry (2.4 million jobs). These jobs span five major categories – renewable energy; energy and resource efficiency; greenhouse gas reduction, environmental management, and recycling; agricultural and natural resources conservation; education and compliance – and naturally break down into 39 fine-grained segments. Renewable energy, for instance, has 9 segments, including solar and geothermal power and renewable energy services, while energy and resource efficiency has 13 separate segments, from electric vehicle technology to water efficient products.

Beyond these large groups, Brookings also identified a group of young, innovative ‘cleantech’ industries that cross multiple categories and show enormous growth potential. This portfolio of segments, including wind power, battery technologies, biofuels, and smart-grid technology, grew about 8 per cent a year between 2003 and 2010, twice as fast as the rest of the US economy.

The clean economy is not just broad and diverse; it is disproportionately productive and export-oriented. In 2009, US clean economy establishments exported almost US$54 billion, including about US$49.5 billion in goods and an additional US$4.5 billion in services, making the clean economy twice as export-intensive as the national economy. Over US$20,000 worth of exports is sold for every job in the clean economy each year compared to just US $10,400 worth of exports for the average US job. The export orientation of the clean economy today provides a platform for more exports tomorrow. With rising nations rapidly urbanising, the demand for sustainable growth in all its dimensions will only grow, and the US has the potential to serve that demand.

The American clean economy also supports a production-driven innovation economy. In fact, 10 per cent of clean economy jobs are in science and engineering fields, compared to 5 per cent in the US overall, and 26 per cent of all clean economy jobs are involved in manufacturing, compared to just 9 per cent of jobs in the US economy as a whole. Manufacturing accounts for a majority of the jobs in over half of the clean economy segments, with many sectors having a super-majority of production-oriented jobs. Solar and wind energy, for example, have more than two thirds of their jobs in manufacturing. And some segments, including appliances, water-efficient products, and electric vehicle technologies have over 90 per cent of their jobs in manufacturing. Clean manufacturing is a growing sector, part of an overall resurgence of manufacturing in the US over the last few years.

Finally, the clean economy is opportunity rich, providing prospects for a wide range of American workers, and good wages up and down the skills ladder. Forty-five per cent of all clean jobs are held by workers with a high-school diploma or less, compared to only 37 per cent of US jobs. Once a worker enters the field, they are more likely to receive career-building training, as 41 per cent of clean jobs offer medium to long-term training, compared to 23 per cent of US jobs on average. The pay-off is higher wages, as the median wage in the clean economy is almost US $44,000 for the average occupation, significantly higher than the national equivalent of slightly over US$38,000.
America’s 100 largest metropolitan areas, which take up only 12 per cent of its land mass but harbour two-thirds of the population and generate 75 per cent of the country’s GDP, are driving growth in the clean economy. In 2010, the top 100 metropolitan areas in the US constituted almost 64 per cent of clean economy jobs overall, and an outsized share – 74 per cent – of jobs in cleantech industries, including extraordinarily high shares of jobs in solar photovoltaic, battery technologies, smart grid, and wind energy. Innovative clean jobs are predominantly located in the top 100 metropolitan areas because these places concentrate the assets that drive innovation, from initial research to commercialisation and, ultimately, to deployment.

Metro economies, of course, do not exist in the aggregate. Each metropolitan area has a distinctive starting point and distinctive assets, attributes, and advantages. Brookings research has profiled the clean economy potential of each of the top 100 metropolitan areas. Four of these – New York, Los Angeles, Chicago, and Washington – are supersized job centres, with more than 70,000 jobs each in the clean economy in 2010. The New York metropolitan area alone has more than 152,000 clean economy jobs, while other major metropolitan areas, such as Philadelphia, San Francisco, Atlanta, Boston, Houston, and Dallas, are also large clean job centres, with more than 38,000 jobs each in 2010.

Yet this is not just about the largest metropolitan areas. A number of small and medium-sized metropolitan areas, including Knoxville, Tennessee, Harrisburg, Pennsylvania, and Toledo, Ohio, have more than 3.3 per cent of their jobs situated in the clean economy, while Albany, New York, leads the way with clean jobs accounting for an impressive 6.3 per cent of its total employment.

The power of cities and metropolitan areas is the power of agglomeration, networks, and clusters. Brookings research found that clusters – the proximity of firms to businesses in related industries – boost metropolitan areas’ growth performance in the clean economy, and also that metropolitan areas facilitate clustering. There are numerous examples of clean clusters throughout the US, including professional environmental services in Houston, solar photovoltaic in Los Angeles, fuel cells in Boston, wind in Chicago, water industries in Milwaukee, and energy efficiency in Philadelphia.
As America continues to struggle with the challenge of high levels of joblessness – 11.1 million jobs are needed by the most recent estimates – and an overall sluggish economic recovery, how does one unlock this engine of growth in its cities and metropolitan areas?

A strong policy platform is critical for the clean economy to realise its full potential. In an ideal world, an economy shaping of this magnitude should start at the national scale, with the federal government implementing policies to scale up markets to catalyse demand for clean economy goods and services, drive innovation by investing in advanced R&D at scale and over a sustained period of time, catalyse finance to produce and deploy more of what the US invents, and align its policies with cities and metropolitan areas to realise the synergies of clustering and place.
But, as mentioned before, political polarisation and fiscal retrenchment at the federal level will likely prevent this from happening. Fortunately, the US has a default proposition when the national government falters – US states act as ‘laboratories of democracy’, and cities and metropolitan areas act as the laboratories of innovation.

America’s states, cities, and metropolitan areas are awash with leadership. This ‘Pragmatic Caucus’ of political, business, civic, university, and environmental leaders prize place over party, collaboration over conflict, and evidence over ideology. And this Caucus is building the clean economy the hard way – from the ground up, despite political odds and fiscal obstacles.

There is no shortage of policy innovation and political commitment to highlight in America’s states and metropolitan areas.

To scale up markets, California has set an aggressive renewable portfolio standard (RPS) that mandates 33 per cent come from renewable sources by 2020. With this strong foundation, San Jose and other cities and counties in California are doing their part to facilitate consumer adoption by streamlining or even eliminating building permitting for solar panels.

To drive innovation, Wisconsin has created the School of Freshwater Sciences at the University of Wisconsin-Milwaukee to leverage that metro’s rising position in the “blue economy.” The Milwaukee Water Council is building on this, spearheading a network of scientists and companies to realize Milwaukee’s ambition to be a global hub for freshwater research, firm creation and business expansion.

To catalyse finance, Connecticut recently created the Connecticut Clean Energy Finance and Investment Authority. This Green Bank, capitalised with some US $50 million annually, could accelerate the generation, transmission and adoption of alternative energy in the state. At the municipal level, Connecticut’s neighbour New York City has capitalized an Energy Efficiency Corporation to spur the financing of energy efficiency in the building sector.

And, finally, smart metros are now moving to build out their distinctive industry clusters. In Greater Seattle, for example, the Puget Sound Regional Council has developed a business plan to cement that metro’s natural position as a global hub of energy efficient building technologies. The smart public-private initiative to date is the establishment of a facility to test, integrate and verify promising energy efficient products and services before launching them to market. Significantly, this metro vision is being supported by the State of Washington, which has committed to match any federal investment in the testing network.

These examples from states and metropolitan areas demonstrate that the United States – and the world – is in the early stages of a clean economy revolution. This revolution will be determined, shaped, and delivered by cities and metropolitan areas, both in mature economies and rising nations alike. As in any industrial revolution, benefits will accrue disproportionately to those firms and communities that are the first movers, the first inventors, the first adaptors, and the first producers. To update an old maxim, “to the innovative belong the economic spoils: jobs, investment, and a higher quality of life.”

Will the US step up to the challenge? Over the next four years, President Obama will let us know.

Bruce Katz is Vice President and Director of the Metropolitan Policy Program at the Brookings Institution.