Unfortunately, we may hear about “green jobs” in President Obama’s upcoming speech to Congress. The thesis is that by leading new markets in energy technologies, the U.S. can create good jobs. It sounds too good to be true, and it is.
There are many ways to create jobs, and there are several options to support green energy, but the two worlds are entirely distinct. The push for jobs through energy policy risks making both the Administration’s employment and renewable energy policies look like failures.
Alas, the timeframe of jobs and energy policy are completely distinct. Jobs are needed soon, but investments made today in energy technology may take a decade or more to result in big growth industries. Most new markets work that way. Whether they involve high-tech products such as semiconductors, or unfamiliar services such as healthcare IT, industries often need years to win over their first customers, prove their worth, and build the capabilities required to penetrate the broader market. This isn’t to say that we shouldn’t support new energy technologies, but justifying those efforts because of their job creation is a bit like saying that a key benefit of NASA’s Apollo program was employing a lot of astronauts.
Green energy is a global business whereas job creation is inherently local. The United States has strong advantages in fields such as materials science, and high-tech start-ups in these areas can prosper. Yet these businesses may create relatively few jobs in the U.S., and those positions will be most relevant to the sort of highly-skilled, well-paid individuals who are already faring best in the economic recovery. The firms may end up licensing these technologies to manufacturers worldwide, with the labor-intensive work occurring in countries such as China.
We can learn from other countries that have tried and failed in their attempts to champion new green energy industries while creating jobs. Through direct subsidies and artificially high prices paid for solar energy, Germany spent over $70 billion from 2000-10 to become a leader in solar cells. Ultimately the country did create a few well-positioned enterprises, yet low-cost Chinese manufacturers have nonetheless seized the lead in this industry. While some German firms may succeed as global businesses, but this was not an effective job-creation program. The country’s Environment Ministry commissioned a report counting a grand total of 74,000 jobs in the solar sector in 2009. The program was not even an environmental success, with each ton of CO2 reduced costing more than 20 times the rate at which carbon credits have been trading in Europe (solar just isn’t a great energy source in a dark and rainy country). Recognizing these failings, Germany has now cut back solar subsidies sharply.
What can the U.S. government do? It could facilitate investments in electric grid improvements that enable long-distance transmission of renewable energy, as well as provide consistent long-term policy on grid upgrades and electric vehicle charging that makes utility investments predictably worthwhile. Potentially through a carbon tax, it could create greater certainty in fuel pricing to make natural gas and renewables a better option than coal for power generation. The government could also invest more in long-term, basic science efforts in fields such as advanced chemistry and carbon capture; private industry struggles to prioritize those sorts of lengthy and speculative projects.
While some jobs would result from these approaches, this would be an energy policy, not a jobs program. Energy investment would go to relatively inexpensive efforts that can have a high impact over the longer term, while forsaking the dream of abundant clean energy jobs arising in the immediate future due to government subsidies.
As it has with new markets ranging from biotechnology to the Internet, government would help to create the underlying policy infrastructure and science that leads to new markets, without spending big money to subsidize the industry itself. Policymakers would be behind the scenes, playing a valuable technical role. There would be few photo opportunities, but real and inexpensive success over the long term.
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NEW MARKETS ADVISORS