Tucson, Arizona, like many places across the Southwest, faces an uncertain economic future because of climate change. The increased risk of extreme heat and drought will limit where and how the region can grow, even as workers and small businesses already face mounting economic pressures.

Within this context, the “green economy”—which includes investments in clean energy and climate-resilience—offers a potential strategy for long-term sustainable economic growth. The region has several strategic assets to build on that align with key sectors of the green economy, such as a diversified industrial base, high-capacity research institutions, a desert climate well-suited for renewable energy, and a history of conservation and water management.

Through the Climate Capacity Initiative, Urban Institute researchers partnered with Local First Arizona and the City of Tucson to better understand the region’s climate-oriented economic development landscape, including opportunities from the green economy and the bounding constraints of extreme heat and water scarcity. In a series of publications, we provide a baseline assessment of Tucson’s sustainable and resilient economy and identify barriers, opportunities, and strategies for advancing inclusive and climate-resilient economic development in the Tucson region.

This report defines six key sectors aligned with the region’s climate challenges and economic development priorities, examines how they contribute to the local economy, and explores their potential as pathways for durable and inclusive growth. Two companion publications examine opportunities and challenges for workforce development and small business engagement across Tucson’s sustainable and resilient economy.

Why This Matters

In Tucson and across Southern Arizona, persistent affordability challenges, relatively low labor-market participation and wages, and increasing climate risks strain households and limit broad-based economic gains. Local leaders are seeking economic development strategies that align with community values, deliver benefits to residents and businesses, and strengthen the region’s long-term economic resilience. There is growing interest locally in driving growth through sectors of the sustainable and resilient economy, but to bet on that strategy, leaders need to understand the potential of these sectors to drive durable and inclusive economic development.

What We Found

Demand for clean energy and climate resilience in Tucson will likely increase over the next decade, driving growth across the six sectors of Tucson’s sustainable and resilient economy: building decarbonization and weatherization; clean energy development and generation; clean technology manufacturing; sustainable transportation and land use; water, waste, and resource management; and resilience professional services.

Our key findings include the following:

• Taken together, the six sustainable and resilient sectors are expected to grow slightly faster than the overall economy, at 4.6 percent growth compared with 4.0 percent overall. We find that these sectors will contribute more than 21 percent of total net employment growth between 2024 and 2034, roughly 2,350 new jobs.
• These sectors comprise more than 50,000 jobs and 5,000 businesses already, with building-related industries accounting for the largest share of employment.
• The degree of “greening” varies widely across sectors. Roughly 33,900 jobs—about 49 percent of employment across the six sectors—are classified as sustainable and resilient jobs according to a resilient classification system of industries and jobs developed by the Arizona Office of Economic Opportunity.
• Many jobs classified as sustainable and resilient are accessible without a four-year degree and offer pathways through apprenticeships, credentials, and on-the-job training, although job quality, access, and inclusion can vary.
• Workers face barriers to accessing high-quality jobs in these sectors, including upfront training costs, literacy requirements, child care needs, and exclusionary eligibility requirements, and many have an outsized exposure to extreme heat.
• Transferable skills that enable workers to move across climate-related sectors as market demand evolves can allow for more durable career pathways and a stronger economy.
• Small businesses will need intentional workforce and business development strategies to take advantage of opportunities within these sectors as barriers related to financing, procurement, and technical capacity continue to limit participation.

These takeaways suggest that Tucson leaders can work toward inclusive and durable economic development by building from existing strengths, using public investments to spur demand in locally-anchored markets like building decarbonization and weatherization, applying a regional lens to high-growth traded sectors like clean tech manufacturing, investing in transferable workforce pathways that cut across sectors and in green and nongreen contexts alike, and reducing barriers for small businesses to participate in and benefit from opportunities in the sustainable and resilient economy.

To build a durability across the economy, local leader leaders in Tucson will also need to integrate a climate resilience lens into economic development planning more broadly, contending with how escalating heat and water scarcity intersect with emerging sectors and industries that are downstream, adjacent, or separate from the sustainable and resilient sectors identified in this report.

How We Did It

We designed a mixed-methods study to develop a framework for defining and assessing Tucson’s sustainable and resilient economy. Informed by partner interviews, an assessment of Tucson’s regional economy, and existing efforts to define the green economy, we classified industries and occupations into six sectors aligned with region’s climate and economic development priorities, using NAICS industry codes and SOC occupation codes. We then analyzed these sectors using labor market, education, and demographic data to assess the region’s strengths, opportunities, and challenges. To contextualize the findings, we conducted interviews with 29 leaders from government, industry, workforce development, education, nonprofit organizations, and tribal communities, as well as a focus group of 11 small business owners in Tucson.