Amid the public health and economic crisis that succeeded it this year, economists, environmentalists, social justice advocates, and policymakers are calling for the prioritization of a climate-focused federal stimulus — which could be the “difference between success and failure when it comes to avoiding dangerous climate change.” A green recovery has been advocated for worldwide, and a handful of countries have already released their plans to make it a reality. If elected president, Joe Biden has pledged to make green investments a cornerstone of the United States’ economic recovery as well.
Clean energy and green infrastructure typically make up a tiny percentage of federal spending, especially under the Trump administration, but a notable exception to this is the American Recovery and Reinvestment Act (ARRA), also known as the Recovery Act, adopted during the Great Recession.
Signed by President Obama, the ARRA was a stimulus package responding to unemployment soaring to its highest levels in almost 40 years in 2009 — a record that has since been broken during the COVID-19 pandemic. Through tax cuts and federal spending, the $787 billion stimulus, later adjusted to $840 billion, aimed to jumpstart the economy and put money in the pockets of families and small businesses that were struggling during the Great Recession.
Taxes were cut by almost $300 billion, and the Recovery Act set aside government funding for expanded unemployment benefits, education and health care spending, and small business loans. Beyond this, billions of dollars were invested in science R&D, infrastructure, and clean energy to create thousands of jobs and get the U.S. “on track to a sustainable 21st century economy.” Recovery Act investments can provide key lessons on what a successful green recovery could look like in the United States, and what mistakes to avoid when considering another infrastructure stimulus.
What worked?
The Recovery Act is the single largest clean energy investment in U.S. history — $90 billion in tax incentives and direct federal spending, and $150 billion in private and state spending. Most of this funded renewable energy, energy efficiency, transit, and grid modernization projects, with smaller investments in clean vehicles, carbon capture and storage, and job training programs. The Recovery Act also funded close to $90 billion in projects to modernize transportation, buildings, and water infrastructure.
Overall, the clean energy-related investments of the Recovery Act successfully got people back to work quickly, supporting more than 900,000 job-years (a full-time job for one year) between 2009 and 2015 from federal investments alone.
Growth of clean energy industries
Tax incentives and grants funded more than 100,000 clean energy projects — mostly wind and non-residential solar — and created opportunities for private investment in renewables.
The production tax credit (PTC) and the investment tax credit (ITC) were both expanded or extended by the ARRA, which reduced uncertainty around the credits’ renewal and prevented the typical “boom and bust” cycle in renewable development at the time. The PTC provided a rebate per kilowatt-hour (kWh) for wind, geothermal, and biomass generation; while the ITC provided tax credits of 30 percent of total project costs for solar, fuel cells, and small wind and 10 percent for geothermal, microturbines, and combined heat and power systems.
These tax credits, along with grant and loan programs, made renewable development more affordable and laid the foundation for unprecedented growth in clean energy. Between 2008 and 2016, solar electricity generation increased by more than 30 times and wind generation more than tripled. In addition to electricity generation, ARRA investments created hundreds of thousands of jobs in the clean energy sector, and maintained this growth through 2020. Prior to the COVID-19 shutdown and economic downturn in March, the clean energy industry was adding jobs 70 percent faster than the overall economy — a trend supported by Recovery investments made more than a decade ago.
Low-income weatherization programs
Over $27 billion was spent on a range of energy efficiency programs, including smart appliances, R&D for new technologies, energy conservation grants, and energy efficiency tax credits. The ARRA drastically increased funding for the Weatherization Assistance Program (WAP), which increases energy efficiency of low-income households, from $230 million annually to $5 billion over three years. With this expanded capacity, more than one million units were weatherized between 2009 and 2012, and over 28,000 jobs were created in 2010 alone.
Beyond just job creation, the WAP investments offered long-term financial and public health relief. The Oak Ridge National Laboratory estimated that $4.50 in energy savings, health, and economic benefits was returned for every Recovery dollar spent on WAP.
Unprecedented accountability systems
The Obama administration made a commitment to unprecedented transparency on stimulus funding, so the ARRA also created the Recovery Accountability and Transparency Board to oversee the use of Recovery funds, ensure accountability, and to prevent fraud, waste, and mismanagement of billions of taxpayer dollars.
Extensive reporting requirements pushed federal agencies and state and local governments to adopt accountability and transparency measures related to Recovery projects. The Board made information on Recovery contracts and grants available to the public on Recovery.gov (a website that ironically does not exist anymore) — taxpayers could track the flow of dollars from the federal government all the way to individuals and browse an interactive map to search spending down to the ZIP code. Making this information publicly available increased collaboration and information sharing between all levels of government.
What didn’t work?
Investments didn’t curb emissions
Despite a commitment to invest in climate-friendly projects, the United States still didn’t significantly cut greenhouse gas emissions after the recession. The 2009 financial crisis led to a rapid decline in global greenhouse gas emissions, however, emissions quickly rebounded in 2010 — and even reached an all-time high that year.
Despite the Recovery Act’s goal to invest in a sustainable 21st century, the results of the infrastructure and clean energy investments tell a different story. Most electric sector emissions reductions were attributed to the switch from coal to natural gas powered electricity, rather than the increase in renewable generation funded by the Recovery Act. In addition, most infrastructure funding went towards fixing existing roads and bridges as well as building new roads — better road and highway systems don’t act as a disincentive to driving. In fact, there has been a steady increase in annual vehicle miles traveled (VMT), and therefore increased vehicle emissions, in the United States post-ARRA.
The “shovel-ready” approach is flawed
The Recovery Act prioritized “shovel-ready” projects, meaning projects that could start within weeks or months of receiving funding and typically be completed within a few years of starting. In Massachusetts, for example, municipalities were asked to identify projects that could start within 180 days of receiving funding and be completed within two years. This gets people back to work quickly and gives an immediate boost to struggling local and state economies. In this sense, the Recovery Act was successful — around 80 percent of jobs created from clean investments were supported from 2009 to 2012.
Yet this highlights a couple major flaws with the shovel-ready approach to stimulus. While short-term relief is crucial, only funding rapidly deployed projects can result in an inefficient use of funds.
Take highway spending, for example. All states were required to allocate highway funding within just 120 days after the Recovery Act passed — a remarkably quick timeline. According to Rebecca Higgins, a senior policy advisor at the Senate Committee on Environment Public Works, this accelerated projects that would’ve happened without the stimulus, meaning states used federal funding to displace their own cutbacks, or funded projects that were most likely shelved for a reason.
Shorter planning timelines for roads than for public transportation consequently meant states prioritized building new roads instead of repairing their deteriorating public transit systems — a mistake that ultimately missed out on higher job creation and public health and climate benefits. Despite public transportation creating 70 percent more jobs than new roads from Recovery funds, just 1.7% of states’ flexible transportation funds were used for transit projects.
Furthermore, the majority of funding was allocated to existing government programs and was spent by groups that traditionally already receive federal funding, leaving very little room for innovative and transformative projects. Infrastructure projects that are shovel-ready now likely reflect past needs, instead of current needs or the needs 20 to 30 years into the future. Planning for the future requires knowledge from groups and individuals beyond the traditional government agencies, as well as time to carefully plan new, climate-friendly projects, build new relationships and engage with community members about projects they need.
Uncertainty around funding prevented long-term change
During the Great Recession, political tensions and economic concerns created a lot of uncertainty around whether or not another stimulus would pass after the Recovery Act.
Ultimately, once Republicans gained control of the House of Representatives and held a majority of governorships after the 2010 midterm election, the prospects of another stimulus bill — and climate action — essentially vanished. Without long-term government spending, states could not commit to large, transformative projects that were (and are) desperately needed, meaning short-term, shovel ready projects were the only feasible investments.
Even shovel-ready projects failed to make long-lasting change, since most government funding stopped or significantly decreased after Recovery funds were exhausted. After a major increase in spending between 2009 and 2012, funding for the WAP drastically declined and by 2014, only a couple thousand units were weatherized annually. Renewable energy generation experienced similar funding cuts by the federal government. Despite contributing significantly to the growth in clean energy by making development more affordable, both PTCs and ITCs were either phased out completely or phased down between 2016 and 2020.
Can the U.S. afford another stimulus bill?
The Recovery Act has been criticized for not providing enough financial support to states and individuals — which resulted in a prolonged economic downturn and slow recovery. Although the Great Recession technically ended in June 2009, based on the definition of a recession, both the economy and American households felt its effects long after June. With a Republican-dominated House and a heightened concern over the national debt, the Obama administration was unable to push another stimulus bill forward.
Yet, when experts are asked if the U.S. can afford another stimulus right now, the answer is clear: we can’t afford not to pass another stimulus bill.
The most recent unemployment rate in June was reported at 15.7 percent, more than five percent higher than peak unemployment during the Great Recession, and experts predict it will remain higher than 10 percent for years. This will take a massive amount of government stimulus to recover — even more than the $2 trillion Coronavirus Aid, Relief and Emergency Security (CARES) Act passed in March.
Beyond just unemployment, though, the current crisis has highlighted the fragile state the U.S. economy is in, and how much the country’s failing infrastructure desperately needs improvements to meet peoples’ needs.
A third of all American households face energy insecurity, meaning they have difficulty paying energy bills or maintaining safe, healthy temperature levels at home — with low-income households, Black and Latinx households, and families with young children disproportionately impacted. Close to 25 million energy insecure households are forced to make an impossible and unjust choice — whether to spend money on food and medicine or to pay energy bills — including more than 7 million households that are forced to make this choice almost every month.
Skyrocketing unemployment and racial disparities worsened by the pandemic have added to this burden. A recent survey found that around one quarter of low-income households were unable to pay their energy bills in May due to the pandemic. With expanded unemployment benefits and utility shut-off moratoriums coming to an end, it’s likely that energy insecurity will continue to increase. Fortunately, solutions like WAP and renewable energy credits can help to alleviate the energy burden on households — as long as there is time for planning and long-term funding to efficiently do this.
Almost one in four Americans lack access to another basic need: clean water. Rural America and Indigenous nations and communities have the highest percentage of clean water violations, because small systems face more financial and capacity restraints than larger, urban systems. Many of the water systems that do provide clean water are old, inefficient, and have a lot of unaccounted water. Not only is this a major concern amidst a global pandemic that requires safe, reliable water to protect ourselves from the spread of the coronavirus, but it also highlights a major failure from the federal government — one that can simply be fixed by spending the necessary money on water infrastructure.
Spending too much carries risks of its own, but the biggest mistakes the federal government can make right now are spending too little, and failing to invest in communities in need (instead of corporations).
Now is the time to consider a green stimulus — even if the money is nowhere in sight
With Congress unable to agree on another stimulus bill extending unemployment benefits, passing a major infrastructure stimulus anytime soon seems almost impossible.
This doesn’t mean that state and local governments are on standby for now, however. When asked what policymakers should be prioritizing on a recent webinar, Quincy, Massachusetts Mayor Thomas Koch said, “We in government have to be prepared. We have to do the planning now and be ready for when the time comes.”
Building relationships with community members and nonprofits on the ground, to ensure they are at the table with decision makers, is a key part of this preparation. An infrastructure stimulus does not need to solely focus on physical infrastructure — by protecting and expanding community power, investments in social infrastructure will play a key role in our economic recovery. As Mayor Koch pointed out, “community needs and wants are not always the same as the Chief Executive’s.”
Further, rethinking metrics of a successful stimulus should be considered by governments now — rather than getting people back to work as quickly as possible, how can a government stimulus improve our infrastructure and transform our society to one that works for everyone?
Beyond traditional measures of success, like jobs and the amount of spending, a focus on environmental justice and quality of life offers a more holistic approach to stimulus projects. This can include prioritizing cleaner air and its associated health benefits, access to clean drinking water and urban green spaces for BIPOC communities, and climate benefits. Job training and education programs, unionization, and local and diverse hiring requirements for stimulus funding can open the door to people that traditionally have been left out of the clean energy transition.
These priorities must also hold governments accountable to avoid making the same mistakes they made during the recovery to the Great Recession. An infrastructure stimulus that mirrors the Recovery Act, and doesn’t center communities and the climate will ultimately fail to make long-lasting change — and miss the critical opportunity to build back better.
