Green Jobs Black Hole

Political Intervention in the Market Process Yields Pricy Failures

BY PETE GEDDES

A friend asked me to support federal legislation ostensibly designed to reduce carbon emissions, speed our transition to alternative energy, and create green jobs. He believes this can only happen through government intervention. While his intentions are good, his reliance on government is misplaced. Here’s why.

Europe’s promotion of green energy has come at a high cost and delivered few of the claimed benefits. Germany has spent $73.2 billion over the last decade subsidizing solar power. Yet solar provides only 1 percent of the country’s electricity. Hence, Germany must build coal power plants to meet growing demand. (A note to Greenpeace: if you successfully shutter existing German nuclear plants, you’re explicitly promoting the burning of massive amounts of the dirtiest fuel on the planet—lignite.)

Denmark, with more wind turbines per capita than any country in the world, hasn’t displaced the carbon emissions of a single coal-fired plant. A wind farm of 2,500 turbines could theoretically offset the emissions of one large coal or nuclear plant. Unfortunately, it cannot functionally do so. The intermittence of wind requires utilities “firm” base load generation from natural gas-fired plants. This means carbon-free wind (and solar) is an illusion.

Energy Secretary Steven Chu laments, “99 percent of the batteries that power America’s hybrid cars are made in Japan. We manufac-tured more than 40 percent of the world’s solar cells as recently as the mid-1990s; today we produce just 7 percent.” Chu’s fear of “dependence on foreign products” becomes a plea for a protectionist industrial policy. And government indus-trial policy never efficiently allocates resources. Whenever nations have adopted such policies pain and misery follow—especially for the poor. Venezuela is the most recent example.

If green technologies have the potential to yield attractive profits, U.S. firms will enter the game. Witness Exxon Mobil’s recent $600 million investment in algae-based biofuels. As an energy company, they are continually alert for new oppor-tunities. If a technology is not eco-nomically competitive, no amount of public subsidy or special political favors will make it so. The waste of human and financial capital, plus environmental damage from corn ethanol mandates, offers a cautionary tale of the consequences of political intervention in the market process.

Last February Congress passed a $787 billion stimulus program with the promise of creating 3.5 million new jobs. The President’s   economic advisors predicted that unemploy-ment would rise to 9 percent without the bill, but that with it, unemployment would crest at 8 percent. Unemployment is at 10 percent, its highest levels in more than 25 years. It is a durable fiction, but a fiction nonetheless, that reshuffling resources in response to political pressures can improve the economy.

The President just announced an additional $2.3 billion in funding to create 17,000 “clean tech” manufacturing jobs, about $135,000 per job. These claims, like the previous ones, are exaggerated. The entire green jobs model implies an inefficient use of labor and other resources. Using resources efficiently is key to environmental improvement. Producing the same good with less input not only makes it more affordable, it more importantly makes financial and physical resources available for more highly valued uses.
Entrepreneurs have strong incentives to discover technologies that efficiently create and deliver energy. If it takes more jobs to produce green energy than the current alternatives, this is a net cost, not a benefit, to the economy. Few seri-ously advocate eliminating tractors to boost agricultural employment.

Economic growth comes from increases in productivity, not political mandates. If politicians continue pretending that their green jobs schemes are a free lunch, i.e., all benefit with no cost, they should not be surprised when voters don’t believe them. And they especially won’t like the reaction when the inevitable bill comes due.

 

 

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