13 Jul 2011

Brookings and American Enterprise Institute on green jobs – how much of a real economic engine?

Written by Jim Pierobon

As economic stimulus spending winds down and efficiency and renewable energy projects take root from the array of grants, rebates and tax incentives seized by energy consumers, the focus on just how many new ‘green’ jobs comprising the “clean economy” is sharpening. The early returns present a less-than-compelling — albeit incomplete — economic snapshot fueling skeptics’ claims.

In one corner, the Brookings Institution.

Credit: EcoInstitution.com

A report rolled out today by the Brookings Institution — “Sizing the Green Economy: A National and Regional Green Jobs Assessment” ” — tallied the clean economy as employing about 2.7 million workers, including a significant number of jobs in establishments spread across a diverse group of industries.

“Though modest in size, the clean economy employs more workers than the fossil fuel industry.” the report stated. “Most clean economy jobs reside in mature segments that cover a wide swath of activities including manufacturing and the provision of public services such as wastewater and mass transit. A smaller portion of the clean economy encompasses newer segments that respond to energy-related challenges. These include the solar photovoltaic (PV), wind, fuel cell, smart grid, biofuel, and battery industries.

What might surprise some stakeholders is the study’s finding that the clean economy broadly defined by Brookings grew more slowly in aggregate than the national economy between 2003 and 2010. That said, the newer “cleantech” segments produced explosive job gains and the clean economy outperformed the nation during the recession.

“Overall, today’s clean economy establishments added half a million jobs between 2003 and 2010, expanding at an annual rate of 3.4 percent. This performance lagged the growth in the national economy, which grew by 4.2 percent annually over the period (if job losses from establishment closings are omitted to make the data comparable).

“This measured growth heavily reflected the fact that many longer-standing companies in the clean economy—especially those involved in housing- and building-related segments—laid off large numbers of workers during the real estate crash of 2007 and 2008, while sectors unrelated to the clean economy (mainly health care) created many more new jobs nationally. At the same time, newer clean economy establishments— especially those in young energy-related segments such as wind energy, solar PV, and smart grid—added jobs at a torrid pace, albeit from small bases.”

In the other corner, the American Enterprise Institute.

The Brookings report is likely to draw scrutiny if not outright opposition from the likes of the American Enterprise Institute (AEI). Earlier this year the conservative think tank released a study of the green jobs experiences in the European Union and found a markedly different results.  In the The Myth of Green Energy Jobs: The European Experience,” AEI focused on renewable energy jobs, a subset of what Brookings addressed.

“Both economic theory and the experience of European countries that have attempted to build a green-energy economy that will create green jobs reveal that such thinking is deeply fallacious. Spain, Italy, Germany, Denmark, the UK, and the Netherlands have all tried and failed to accomplish positive outcomes with renewable energy. Some will suggest that the United States is different, and that US planners will have the wisdom to make the green economy work here.”

“There is no getting around the fact that you do not improve your economy or create jobs by breaking windows, and US planners are no more omniscient than those in Europe.”

Underlying AEI’s conclusion is a basic tenet that governments do not “create” jobs; the willingness of entrepreneurs to invest their capital, paired with consumer demand for goods and services, does that. All the government can do is subsidize some industries while jacking up costs for others.

In the green case, it is destroying jobs in the conventional energy sector–and most likely in other industrial sectors–through taxes and subsidies to new green companies that will use taxpayer dollars to undercut the competition.

The subsidized jobs “created” are, by definition, less efficient uses of capital than market-created jobs. That means they are less economically productive than the jobs they displace and contribute less to economic growth. Finally, the good produced by government-favored jobs is inherently a non-economic good that has to be maintained indefinitely, often without an economic revenue model, as in the case of roads, rail systems, mass transit, and probably windmills, solar-power installations, and other green technologies.

The AEI study encompassed job assessments in Spain, Germany, Italy, Denmark, The Netherlands and the United Kingdom.

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