Blog | 5th Aug, 2020

Helping people and our planet: Why energy efficiency is the perfect economic recovery option

Since the COVID pandemic hit, it seems like everyone is talking about the importance of making our homes and businesses more energy efficient. Suddenly, while freezing through a chilly winter stuck at home and trying to keep down costs, we all get why energy efficiency makes sense.

And because homes and businesses can be made more efficient through a series of simple measures, government investment in energy efficiency is a fantastic job creator that can be rolled out quickly and at scale while helping people saving money.

“If you’re looking for consensus – broad-based support for something – I’ve not seen anything like what we’re seeing in terms of support for investment in energy efficiency”
– Cassandra Goldie, CEO Australian Council of Social Services, 2 July 2020, National Summit: Energy efficiency and Australia’s economic recovery.

Why energy efficiency ticks all the boxes for creating jobs now

Home energy efficiency upgrades make for the perfect economic stimulus from the COVID pandemic.

In its recent economic stimulus report, Design Principles for Fiscal Policy in a Pandemic’, the Australia Institute outlines the principles that should guide government spending during a major economic downturn.

Home energy efficiency upgrades tick all the boxes.

Go early

In order to minimise job losses and further economic pain, “fiscal stimulus should be rolled out as jobs are being lost, if not before.”

Go hard

The size of the stimulus is also crucial. The total, annual value of production per worker in Australia is estimated at $412,000, so in a pandemic, public spending must match this to make up for the contraction in private sector spending. For every 100,000 jobs, this equates to public spending of $42.1 billion per annum. If governments don’t match the contraction of private sector spending, the economy is at risk of recession.

Go households

Focussing stimulus on households is a win-win for state and federal governments. The report points out that ‘government transfers to individuals and businesses are not stimulatory until they are spent on goods and services – which brings forth additional production and employment.’

Upgrading people’s homes to use less energy helps people save money on their energy bills which then allows them to spend this money in other parts of the economy, especially if they’ve lost income during the economic downturn.

Target those most impacted by the crisis

Using stimulus money to target particular geographic regions or industries being hardest hit by the economic downturn not only cushions vulnerable communities through the crisis, it also helps the economy bounce back quicker.

Given people on low incomes spend at least 4%[1] of that income on energy bills, targeting these people will have greater impact than helping higher income households. This raises broader questions around the Morrison Government’s HomeBuilder program, which effectively subsides high-income households to undertake expensive renovations, with no requirements around energy efficiency improvements.

Target domestic production

Stimulus money spent on imports like cars or defence equipment will do little to stimulate domestic jobs and production. Spending money on local jobs and industries keeps jobs and investment onshore.

Targets activities with high direct employment intensities

Research is now emerging demonstrating that home energy efficiency upgrades are one of the best ways governments can spend their money to create jobs and kick-start our economy during the current economic downturn.

Beyond Zero Emissions’ recent report, the One Million Jobs Plan, shows that a comprehensive home energy efficiency program is by far the most effective and jobs-rich stimulus measure state and federal governments could undertake to steer us toward economic and environmental recovery.

The report proposes a five year plan to provide deep energy efficiency retrofits to 2.5 million homes across Australia over five years (500,000 homes/year). The proposal would cost $8.2 billion per year and create 430,000 jobs over that period – more than twice as many jobs as their plan maps out for the construction of renewable energy projects.

Does it work?  

International examples demonstrate how energy efficiency retrofit programs are a highly successful intervention to steer countries out of recession.  

California  

California is one of the leading energy efficiency jurisdictions in the United States. The state embarked on a building retrofit program in the 1970s following the oil crash, which was accelerated after the global financial crisis (GFC). California now employs over 321,000 people in the industry[2] 

At the national scale, the Obama Administration’s USD $11 billion energy efficiency upgrades program in 2009-11 is estimated to have created 200,000 jobs.[3] 

Europe  

After the GFC, countries across the European Union, including Austria, Germany and France spent billions of Euros upgrading their buildings to be more energy efficient – an investment that has paid off in spades with substantial improvements to their building stock, reduced emissions and major energy bill savings for homes and businesses.  

Morocco and Tunisia  

Morocco and Tunisia embarked on an energy efficiency and renewable energy journey in the late 1990s in an effort to wean themselves off oil and the economic disruptions caused by violent commodity price fluctuations.   

The results speak for themselves. Today, Morocco is on track to meet one of the most ambitious 2030 clean energy targets in the world. Meanwhile, Tunisia is credited as a regional leader in public, industrial and household energy efficiency and also for its wind power generation, which has steadily increased since 2014.[4] 

What is the Victorian Government doing? 
 

We applaud the Andrews Government’s recent $500 million social housing package to build new and upgrade existing social housing homes.  

However, so far the government has not committed to a comprehensive home energy efficiency upgrade package, other than a $10.3 million energy efficiency and solar package for sport and community facility upgrades, plus $4 million towards hot water and lighting upgrades for public housing.  

While these commitments are to be commended, we urge the state government to urgently commit to a transformative home energy efficiency package that matches the scale of the opportunity and the scale of the problem – Australia has amongst the worst household energy efficiency in the developed world. Such a package would create much needed jobs right across Victoria, stimulate local industries and supply chains, as well as making our homes more comfortable, efficient, and sustainable.  

See our detailed policy roadmap which we’ve sent to the state government >>

Get involved

Our people-powered, Build Back Better campaign, is calling for the Andrews government to put climate solutions at the centre of our economic recovery.  

Join a calling party Thursday 6 August at 12pm or Tuesday 11 August at 1pm. We’ll be making calls to state government MPs asking them to make sure we build back better.  

Register here

[1] Sustainability Victoria 2015, Energy Efficiency Upgrade Potential of Existing Victorian Houses, Melbourne.

[2] Advanced Energy Economy Institute 2016, Advanced Energy Jobs in California

[3] Energy Efficiency Council 2016, Australian Energy Efficiency Policy Handbook, Melbourne.

[4] United Nations Industrial Development Organisation 2020, COVID-19 stimulus packages must carry energy efficiency incentives to help industries and economies rebound, accessed 5 August 2020.