By Michael Economides and Peter Glover Energy Tribune
Creating ex nihilo – literally, out of nothing – used to be a theological concept, God’s prerogative. Today it seems, President Obama and certain Western politicians claim to possess the ability to do it. Against all the laws of economics and the marketplace, President Obama and others believe they can create millions of “green” jobs ex nihilo, literally, out of thin air, via cap and trade.
The basic assumption is that technology per se generates jobs. Mostly, it does not. Rather, technology enables jobs – real and sustainable jobs – based on how useful the technology is to the marketplace. To generate real industrial jobs, however, you need a basic commodity to trade, such as oil, gas or coal. Yet green politicians and eco-lobbyists expect to create a revolution in green jobs based on alternative energy sources. The trouble is that alternative energy technologies currently don’t work. That is to say, they remain inefficient, offering a very poor energy return on investment. Cut off the flow of public subsidies and the alternative energy industrial revolution would grind to a halt tomorrow – as the European experience already bears out.
The EU’s experience shows that for every green job created, a real job is destroyed elsewhere in the economy. Not to mention, it aids the reduction of competitiveness, investment in expansion and, ultimately, promotes the relocation of major companies to countries without draconian carbon regimes that cause energy price hikes.
It’s a shame that the members of the US Congress who voted for the recent cap and trade bill did not bother to check up on the economic realities which are causing European states to insert all kinds of escape clauses into the EU’s cap and trade plans. Germany’s Angela Merkel is insisting on major exemptions for German heavy industry come December’s global climate summit in Copenhagen. Merkel’s government is also supporting the building of 26 new coal-fired power plants across Germany. Italy has rocked the EU climate boat by insisting on exemptions for its own energy-intensive industries. Most significantly, it is an exemption that requires the EU to renegotiate Europe’s entire climate policy after the UN summit in December – effectively, giving Italy a veto. A veto it will use if, as expected, China and India and others exempt themselves from binding targets. In June, deputy head of Poland’s Solidarity trade union, Jaroslaw Grzesik, estimated that the EU’s climate policy would cost 800,000 European jobs. The think-tank Open Europe has estimated that the same policies will cost the UK $9 billion a year, leaving an extra 1 million in fuel poverty by 2020.
These are the real world economic realities for “countries like Spain, Germany and Japan” that Barack Obama insisted in January 2009 are “surging ahead of us” in the low carbon-green jobs revolution. Cited as a role model, Spain is the only country to have produced an in-depth analysis of the impact of renewables on the jobs market. Now if you are squeamish about having green economic theories wrecked, you had better look away now.
The Study of the Effects on Employment of Public Aid to Renewable Energy Sources was published by the team at the Universidad Rey Juan Carlos in March, 2009. Though it grabbed a few headlines in the spring, it was largely ignored by the mainstream press. Yet it is the most intensive review of the impact of a state-aided green job creation policy available. Here are just a few of its key statements suggesting why the state should stay the heck out of manipulating the job creation market:
- “Despite its hyper-aggressive (expensive and extensive) ‘green jobs’ policies … Spain has created a surprisingly low number of jobs.”
- “Since 2000 Spain has spent $800,000 to create each ‘green job’, including subsidies of more than $1.4 million per wind industry job.”
- “The programs creating those jobs also resulted in the destruction of nearly 110,500 jobs elsewhere in the economy or 2.2. jobs destroyed for every ‘green job’ created.”
- “Each ‘green’ megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaic (solar), 4.27 by wind energy, 5.05 by mini-hydro.”
The report also notes that according to Spain’s energy regulator, “The price of a comprehensive electricity rate (paid by the end consumer) in Spain would have to be increased 31 percent to repay the historic debt generated by the subsidies to renewables.”
The report cites key examples of resulting “massive unemployment, loss of capital, dismantlement of productive facilities and perpetuation of inefficient ones” the direct result of, “the arbitrary, state-established price systems inherent in ‘green energy’ schemes.” The report also cites specific examples of domestic companies choosing not to expand specifically because of the carbon regime, and other companies indicating they would move abroad if binding carbon schemes forced up energy prices making them less competitive.
At each stage the report carries clear and compelling statistics in support of its findings and expansively reveals its rationale for coming to the conclusions it does. In doing so it carries a dark warning for any state desiring to pursue the same economy-busting, job-destroying path. It concludes, “Policymakers must recognize that because of government action, other jobs are not created.” And, most significantly for international consumption, “These costs do not appear to be unique to Spain’s approach but instead are largely inherent in schemes to promote renewable energy sources.”
President Obama maintains his planned 5 million new jobs will cost the taxpayer $30,000 per job. Bad enough, we might think. But The Center for American Progress, whose CEO headed-up Obama’s transition team, calculates it would take government spending of $100 billion to create 2 million green jobs. That’s a cost to the taxpayer of $50,000 to create a single green job. The Apollo Alliance, whose founder served on Obama’s campaign, calculates it would take $500 billion to create 5 million jobs. That’s a mere $100,000 per green job created. Commenting on these figures, the Institute for Energy Research (IER) demonstrates how the market itself is far better at creating real jobs, including using Google as an example. The IPR says, “Without imposing on the American taxpayer, they [Google] made a superior product for consumers creating 20,000 new jobs. As a result humanity reaps the benefit … and, as an added bonus, Google pays millions in taxes each year.”
Real and sustainable industrial jobs are market-led, technology-aided; not state-subsidized, technology-inefficient. Real jobs are rooted in trading a material commodity, not created ex nihilo. Obama and his allies are not miracle-workers and they will not buck the trend of how the market works. Worrying about others surging ahead no longer matters once you realize it’s along the fast-track to economic suicide.
Green jobs? It’s not good for the economy, stupid.
See post here.