Association for Public Policy Analysis & Management

Nations, states, and cities are increasingly concerned about resilient development against climate change. Energy-based economic development (EBED), a term recently coined by Carley (2014), reflects the emerging convergence of two disciplines: energy planning and economic development. EBED captures the integration of policy-driven transformations of energy systems for low-emission and efficient energy generation and regional concerns for economic competitiveness.

Meanwhile, Hurricane Sandy and other catastrophic blackouts have strengthened the demand to secure energy systems during weather-related or human-induced disruptions. Distributed generation (DG) systems have received renewed interests because of the growing demand for resilient power supplies, low-carbon energy generation, regulatory changes, and advances in DG technology efficiency with declining life-cycle costs. Among various technology options for DG, this research focuses on a combined heat and power (CHP) system that is a mature and innovative technology promising efficient production of energy on site. However, the CHP deployment is challenged by financial, regulatory, and workforce barriers. To fill the gap between private and public interests, policy-makers have implemented incentive-based and/or regulatory policies, which aim to promote EBED.

This research began from recognizing the lack of theoretical approaches and empirical analyses in current EBED strategies, and raised the question: How does clean energy policies affect clean energy use and job creation? I assume that consumers are more likely to adopt CHP technologies where the state government provides a number of clean energy policy instruments. To test this hypothesis, this research examines two relationships—state governments’ activities on clean energy policy entrepreneurship and 1) firms’ adoption of CHP technology, and 2) the growth of relevant employment opportunities.

I developed an empirical method to address the influence of state clean energy policies on technology adoption and job creation. I first identified types of state policy instruments, and then scored states by the intensity of policy implementations. Using a framework of types of environmental policy instruments defined by Goulder and Parry (2008), I characterized the state clean energy policies by selective criteria, including the first year of policy enactment and the range of eligible CHP technologies. Second, I investigated regional differentiations of CHP generation by state and by year. I also collected private-sector employment data by state and by year. Third, I found a relationship in two groups. The first group examined the policy impacts on CHP technology adoption, while the second group examined the policy impacts on job generation. Fixed-Effect regression models were employed to analyze panel data by controlling for all time-invariant differences. To control for non-policy conditions, time-varying variables were added to the models to explain energy market conditions (electricity generation by fuel and fuel prices) and economic characteristics (income per capita and CO₂ emission). A panel data set for the 50 states and Washington D.C. within a time period from 1980 to 2014 was created for the FE analyses.

Within this framework, I demonstrated how EBED is embedded in reality, how firms act along with clean energy policies, and how energy efficiency and clean energy could be a source of economic development.