April 11, 2011
Opinions, U.S.

The green jobs myth

Jerry Taylor and Peter Van Doren, www.forbes.com 11 April 2011Jerry Taylor and Peter Van Doren, www.forbes.com 11 April 2011

One gets the sense from the rhetoric coming out of the Obama administration that the main road to recovery and future economic growth will be paved by an energetic federal commitment to renewable energy (often referred to as “green” energy). Such a state-directed campaign, they tell us, will create millions of new jobs and cement America’s global economic leadership in the 21st century. If they really believe this, we’re in a lot of trouble.

On its face, the argument that green energy is more labor intensive than “brown” (fossil fuel and nuclear) energy is dubious. After all, once the wind turbines or photovoltaic panels are put in place, there’s no need to mine the earth for fuel and, unless the windmills or panels break down a lot, there’s little call for large numbers of workers to keep the generators running.

This is the first clue that something is amiss in the ubiquitous “green jobs” studies that are constantly forwarded to support green energy mandates and subsidies. Careful examination reveals that those studies don’t even bother to tally the number of brown energy jobs that might be lost in the transition. Hence, there’s no evidence at all that a green energy future would yield more energy jobs than the status quo.

Even if we could find evidence that green energy is more labor intensive than its brown counterpart, that’s an argument against green energy because one does not go about creating wealth by maximizing the inputs associated with production. Were that the case, one might suggest that future green energy facilities (and brown, for that matter) be built without any mechanized construction equipment whatsoever–only hand tools allowed!

Nor do we find any consideration in these reports of the economic impact of higher electricity prices. President Obama’s own Energy Information Administration estimates, for instance, that for new facilities coming on-line in 2016, biomass will cost 34% more than electricity produced by combined cycle, natural gas-fired power plants; geothermal will cost 39% more; onshore wind will cost 80% more, offshore wind 2.3 times as much, thermal solar 3.1 times as much, and photovoltaic solar a whopping 4.8 times as much.

More money spent on green energy job creation means less money spent on everything else. How many jobs might be lost to that dynamic alone? Again, these reports don’t say. The implicit answer seems to be, “none.” This strikes us as unlikely. Economist Gabriel Calzada examined green energy mandates in Spain and found that 2.2 jobs were lost for every green job that was created in that country.

Even though renewable sources cost more, some claim that subsidized renewable supply will result in lower electricity prices because of overall increased supply–a phenomenon known as “price suppression” in the literature. This is plausible but misleading. The savings enjoyed by consumers because of additional supply (lower prices multiplied by quantity consumed) can be less than the cost of the renewable power subsidies, but overlooked in such an analysis is the reduction in revenue to existing conventional fuel generation displaced by the new renewable supply.

This wealth transfer from existing non-renewable energy producers to consumers is the source of the reduced prices rather than an overall improvement in economic efficiency. Moreover, mandates and subsidies that serve to substitute green energy for brown will not increase the overall supply of energy and thus will not produce price suppression.

Three other rather straight-forward problems arise in the reports marshaled to justify the administration’s green jobs campaign. First, new government employees hired to oversee this green energy shift are counted as “new jobs created.” Second, existing jobs are recategorized from brown to green if employers meet some bureaucratically dictated definitional shift to “greenness,” and those jobs are misleadingly tallied as “new jobs created.” Third, most new manufacturing jobs created to build the equipment necessary for new green power plants are assumed to come from U.S. manufacturers, a highly unlikely prospect given that most of the manufacturers at issue are overseas. Hence, the tallies of job creation from policies designed to promote green energy are about as reliable as Enron balance sheets.

The political obsession with green jobs is particularly odd given that it comes while the nation is experiencing a real–not hypothesized–revolution in “brown” energy in the form of hydraulic fracking, a technology that allows access to natural gas in previously difficult to exploit substrata. Economist Timothy Considine employed the same economic model used by the Pennsylvania Dept. of Labor to estimate the number of policy-created green jobs (ostensibly, the third-highest state total of green jobs in the nation) to estimate the number of jobs created in that same state by fracking.

The model suggests that, in 2009, 44,000 new jobs were created by fracking compared with 35,000 created by government green energy programs. In 2010 89,000 fracking-related jobs were created relative to 40,000 green jobs. And in 2011 another 111,000 new jobs will likely be created by fracking compared with 41,000 green jobs. And remember, that’s only if we don’t consider the jobs lost from the higher energy costs associated with green energy. In short, if the economy is going to hitch itself to a domestic energy sector to maintain growth in the 21st century, it ought to hitch itself to natural gas, not to the wind or sun.

The arrogant conceit that we can induce economic growth by forcing people to by costly, subsidized energy is absurd in practice as it is in theory. The sooner we realize that, the better.