Irony of Green Jobs

By Christopher Lingle

ATLANTA ― A report by the Asian Development Bank identified Southeast Asia as being very vulnerable to climate change. In turn, it encouraged governments to provide incentives for green investment schemes to shift toward renewable and clean energy options for the power and transport sectors.

This echoes the commitment of President Barack Obama to push for a ``Green Stimulus'' as a component of his strategy to remedy the crisis. Indeed, the image of the shift toward ``green'' energy use in the U.S. economy has been portrayed as an engine of economic growth that would rival the computer.

The presumption behind these commitments is that emission controls and subsidies for ``green'' energy generation will reduce CO2 emissions at low cost and led to more jobs. But government-funding to ``create'' green jobs may involve the worst of both worlds.

As it is, schemes that expand public-sector debt based on populist calculations rather than economic realities impose the burden of these ploys onto future generations.

In framing his recovery plan, President Obama often refers to Spain's green job creation as a model. Unfortunately, a report from the Institute Juan de Mariana in Madrid demonstrates that subsidies from the Spanish government destroyed employment elsewhere in the economy.

The study found that total subsidies to ``create'' each green job averaged 571,138 euros (over $600, 000) while those for wind farms exceeded one million euros. By contrast, the private sector generates jobs for a fraction of the cost of subsidized green ones.

While only one of 10 green jobs is permanent, each green job ``created'' led to about 2.2 other jobs being lost. In terms of alternative energy programs, each green megawatt of power installed led to a loss of nearly six jobs on average.

In sum, the Spanish experience suggests that Obama's plan to ``create'' up to five million green jobs will causes 11 million other jobs to be lost. Gaudy headline numbers about ``green'' jobs always overlook how the use of subsidies will crowd out or destroy jobs in other economic activities.

Supporters insist that subsidized renewable energy leads to construction and operation of renewable facilities using more labor than conventional ones. But that is bad, not good, news.

The build-out for alternative fuel production does require more labor to build than conventional power stations. But this higher labor-intensity of production is a non-economic use of labor that cannot lead to a net increase in employment.

New jobs based on higher taxes divert funds that could be used in other economic sectors. And subsidies that support of inefficient technology and raise the labor-to-capital ratio will lead to lower demand for labor so that real wages would tend to fall.

In all events, the enormous economies of scale of conventional power stations lead to lower unit costs so that more jobs can be created throughout the economy.

In the end, these subsidies will require higher electricity rates or more taxes or, more likely, both. Neither bodes well for an economy that is struggling to right itself.

But there is yet more. President Obama seeks higher energy prices with the aim of inducing lower carbon dioxide emissions to move them 80 percent below 1990 levels by 2050.

And proposed climate-change legislation, like a 648-page bill introduced by Congressmen Waxman and Markey, would lead to many new regulations and more taxes.

They project revenues of $656 billion from ``cap-and-trade'' between 2012 and 2019 to subsidize green energy and green jobs. But this requires diverting those funds from other parts of the economy.

As it is, raising energy prices will kill off jobs in industries with high-energy inputs by inducing them to move where energy costs are lower, including offshore. And transforming the nature of energy use will certainly kill jobs in non-renewable energy sectors.

At risk are the jobs of 1.6 million workers in the oil and gas industry as well as hundreds of thousands of employees that are directly and indirectly involved in coal mining in the U.S.

Forget the hype and political posturing. Destroying jobs in efficient industries to ``create'' jobs in inefficient sectors cannot lead to net economic gain since subsidies divert resources from sectors that suffer offsetting losses.

The simple truth is that public-sector spending projects to promote eco-friendly growth will not and cannot lead to sustainable economic development. Unfortunately, the myths of economic policy serve the interests of opportunistic politicians and avaricious bureaucrats too well.

Even the basic premise that it is necessary to reduce carbon emissions to thwart climate change might be in error. A more important driver of climate change is solar activity and the impact upon absorption and reflection of solar dimming and brightening of the sun.

These factors tend to be ignored and were left out of the climate-change models of the U.N. If human contributions to greenhouse gases are not the main cause of climate change, policies to reduce CO2 emissions will unnecessarily impose costly burdens.

Christopher Lingle is Research Scholar at the Centre for Civil Society in New Delhi and Visiting Professor of Economics at Universidad Francisco Marroquin in Guatemala. He can be reached at CLingle@ufm.edu.