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Green investment does create jobs

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"Green investment does create jobs"

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Robert Pollin has issued a direct rebuttal, “Green Investments and Jobs,” to the Heritage Foundation’s lame “debunking” of Green Recovery, a study Pollin co-authored for the the Center for American Progress. My line-by-line response to the disanalysis by Heritage’s Donald Kreutzer is here.

Pollin, Co-Director of the Political Economy Research Institute at U. Mass-Amherst, concludes:

Public investments in energy efficiency and renewable energy can overturn the long-held conventional wisdom reflected in Kreutzer’s critique, which claims we can have a green economy or a growing economy, but not both. In fact, green public investments to fight global warming are both a powerful engine of job creation and a necessary instrument for achieving environmental sustainability.

Pollin has included a summary of his basic arguments that is well worth reading:

First, green investments–including energy efficiency measures such as building retrofits, public transportation, freight rail, and “smart grid” electrical transmission systems; and renewable sources such as wind, solar, and biomass energy–are all potent sources of net job creation relative to spending on traditional fossil fuels, including oil, coal, and natural gas. By “net job creation,” I mean that green investments will create more jobs for a given amount of spending than expenditures within the oil, natural gas, or coal industries. For instance, spending $1 million on green investments will create about 17 jobs within the U.S. economy, while spending the same $1 million within the oil industry will create about 4.5 jobs.

Second, the main reasons green investments are a source of net job creation relative to spending within the traditional fossil fuel industries actually has nothing to do with whether the investments are “green.” Rather, there are two primary factors at play. The first factor is higher “labor intensity” of spending–that is, more money is being spent on hiring people and less on machines, supplies, and consuming energy. This becomes obvious if we imagine hiring construction workers to retrofit buildings or install solar panels, or bus drivers to expand public transportation offerings, as opposed to drilling for oil off the coasts of Florida, California, and Alaska. The second factor is the “domestic content” of spending–how much money is staying within the U.S. economy as opposed to buying imports or spending abroad. When we retrofit public buildings and private homes to raise their energy efficiency, or improve our public transportation systems, virtually every dollar is spent within the U.S. economy. By contrast, only 80 cents of every dollar spent within the oil industry remains within the United States.

Third, “Green Recovery”advances a short-term economic stimulus proposal as a tool for fighting the severe current recession. The first purpose of any short-run stimulus program–regardless of whether it is centered around green investments, household consumption, or expanding unemployment insurance benefits–is to inject more spending into the economy as quickly as possible. We pay for such short-run measures primarily through allowing the federal deficit to rise. As such, in “Green Recovery,” we do not propose any tax increases whatsoever in the short term. A $1 million increase in spending on green investments will therefore produce 17 new jobs, with no offsets in spending cuts or job losses elsewhere in the economy.

Fourth, over the longer term–once the current recession is behind us–any further increases in green investments financed by the government will indeed need to be matched by corresponding increases in tax revenues or cutbacks in government subsidies. Let’s consider a simple case in which $1 million in public green investments is financed by cutting subsidies for oil companies by $1 million, and that green investments thus rise by the same amount that spending in the oil industry falls. This will still produce a large net increase in jobs, since the $1 million in new green investment spending will produce 17 jobs, while the $1 million cut in oil industry spending will produce a loss of 4.5 jobs. The net gain in jobs–adding up the expansion of green investments along with the reduction in oil industry spending–is therefore 12.5 jobs.

Fifth, the green investment program does not result in higher energy costs with any investments that are capable of improving energy efficiency. As we report in “Green Recovery,” for a $2,500 up-front investment in home retrofitting, the average U.S. household is likely to save about $900 per year in its overall energy bills. That means that the household would fully recover its up-front retrofit investment in three years ($900 in energy savings every year produces $2,700 in savings for three years). Thereafter, the household would be paying $900 per year less for energy than it would if it hadn’t invested in the retrofit. Meanwhile, the project of retrofitting the homes will produce jobs for electricians, carpenters, roofers, truck drivers, accountants, and secretaries, among other occupations.

Finally, most forms of renewable energy–wind, solar, geothermal, and biomass fuels–are more expensive to purchase now than conventional oil, coal, or natural gas. But this is primarily because we take no account of the costs of emitting carbon into the environment through burning fossil fuels–that is, we continue to ignore the realities of global warming in setting prices for fossil fuels. Because global warming does indeed represent a great peril to our environment and our economy, it is imperative that we invest now to lower the costs of clean energy alternatives. Tremendous advances have already been made in this area–to the point where some types of renewable energy are approaching cost competitiveness with fossil fuels. Advancing these new renewable forms of energy is also a powerful source of job creation for people working in a wide range of occupations, including sheet metal workers, agricultural workers, and chemical technicians, as well as research scientists and patent lawyers.

For a discussion of how investments in clean technology deployment are helping to bring down their price to levels competitive with fossil fuels (even without a price for carbon that reflects its damage to the climate), see Is 450 ppm (or less) politically possible? Part 3: The breakthrough technology illusion.

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14 Responses to Green investment does create jobs

  1. alex says:

    “…most forms of renewable energy–wind, solar, geothermal, and biomass fuels–are more expensive to purchase now than conventional oil, coal, or natural gas. But this is primarily because we take no account of the costs of emitting carbon into the environment through burning fossil fuels…”

    I agree with this argument but worry that renewables may be more expensive because the true lifetime carbon cost of them is also higher than fossil fuel.

    Fabricating silicon wafers takes massive energy inputs. Then you have to add in all the fuel consumed by the workers who design, build, market, install, maintain and decommission the panels. Sunlight is carbon-free but all the other parts of the process are certainly not.

    There is a strong argument that economic activity is proportional to CO2 emissions, period. Unless coal, oil and gas consumption is capped and then reduced I don’t think any progress will be made on emissions.

  2. Jim Bullis says:

    The kind of “green” projects that get the emphasis here tend to be a little tenuous as business activities, since they have to use the limitless argument that any cost is ok since we should be comparing with status quo systems that should be charged for damage to the environment. This is certainly a valid argument, but it looks like it is going to be hard to get the public to see this as a compelling reason for what would appear to be unaffordable costs.

    Hopefully there will be cost breakthroughs that will make the economics seem more attractive.

    However, a more immediate “green” solution could be the manufacture of high efficiency cars that are also safe and comfortable.

    And no, I am not talking about the current crop of electric and hybrid offerings. When these are looked at carefully, some of these seem to offer modest progress, but there seems to be more effort made pretending to be green than actual development. This is discouraging since we have in our present predicaments a real opportunity to make progress.

    Should our industrial system respond to this opportunity and take up the challenge to completely innovate the automobile, there could be a massive awakening of our nearly dormant industrial capacity. And that will create jobs like the production build up in response to the World War II threat.

    The public must be willing to consider new approaches to the automobile. Of course, nothing will happen if the public is not satisfied with what they see. However, there has to be general rejection of the fashion setting power of the auto industry as we now know it.

    Basic engineering has been done on a new type of car which is an example of what I am talking about. The results now show that there are amazing possibilities for the future. This example, which is my approach, is called the Miastrada (see http://www.miastrada.com). There are other examples of significantly original thinking such as the Aptera (see http://www.aptera.com).

    We could be very well served if there was a large scale competition between these and other contenders as if we were in the early days of the automobile. Global warming, oil dependency, and a depressed industrial capacity are problems that could all be solved with this course of action.

  3. Ad o lf Hit l e r says:

    @JR Are YOU a member in my new Global Warming NSDAP ?

    Al Gore is my Gauleiter for the USA !

  4. red says:

    “We could be very well served if there was a large scale competition between these and other contenders as if we were in the early days of the automobile.”

    This sounds like the Progressive Automotive X PRIZE, but Miastrada and Aptera are already in that competition, so maybe you mean something else?

    xprizecars.com/CarPages/Miastrada.pdf

    xprizecars.com/CarPages/Aptera_typ1.pdf

  5. exusian says:

    You bet green investment creates jobs.
    I recently saw an interview with a contractor specializing in residential ground-source geothermal systems and he complained that he could not hire installation staff fast enough to keep up with demand.

  6. David B. Benson says:

    exusian — I assume he was doing heat pumps with pipes in the ground?

  7. exusian says:

    Ye, David, that is correct.

  8. mauri pelto says:

    The BBC was reporting yesterday that both Shell and BP are diverting additional resources to develop wind power in the US. The timing of the announcement from both corporations seems to have been timed to the election. They had a plan, and was waiting to see who would win. BP is pulling funding from offshore wind projects in the UK and investing that money in the US.
    http://www.bp.com/sectiongenericarticle.do?categoryId=9025014&contentId=7046507#7166853
    Very interesting. I look forward to the role of alternative energy in the stimulus plan.

  9. Peter Sinclair says:

    so, within 3 days of the election, an immediate bump by giant players to the
    US wind industry.
    This is the leading edge of a gigantic wave.

  10. Jim Bullis says:

    Reported in the Economist was that 40 wind projects in UK have been rejected due to the interference of the wind turbines on air traffic control radar. They discussed an effort to provide an electronic fix for this which seems ulikely (my evaluation) to succeed.

    This might be the reason BP is backing out of UK projects in favor of US projects. In the US there is a lot more room which makes avoiding interference effects a more manageable task.

  11. Jim Bullis says:

    red,

    Your observation is right. I am referring to something like the XPRIZE for cars, except it needs to be an activity that is given much more support.

    Problems include (1) The major auto companies are not as yet interested, (2) competition entrants are self funded projects, and
    (3) the “mainstream” category gets most attention and this requires near production status which is not realistic for self funded entrants.

    My sense of the problem is that a bigger activity is needed, perhaps something with large industry or government sponsorship would be appropriate in the present environment.

    (Miastrada is my project, and though it has no immediated prospect for financial gain, I have a potential financial interest in it.)

  12. bill says:

    Horsesh#@$!

    Look at pp.162-165 of this EPA analysis of LIeberman-Warner…

    http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf

    33 of 35 sectors exprience reduced output in a green world. This document isn’t speculation and/or advocacy…it’s real numbers-crunching by people who know their stuff.

  13. msn nickleri says:

    v33 of 35 sectors exprience reduced output in a green world. This document isn’t speculation and/or advocacy…it’s real numbers-crunching by people who know their stuff.