Spending by governments on "green energy jobs" as a cure for economic ills makes no sense. Governments create such jobs by spending unprofitably some of the money they siphon from profitable parts of their economies. The transaction moves labor from economic to uneconomic work, with obvious inefficiency. The inefficiency erodes wealth and, by association, the economy's ability to support employment.
This is simple logic. To fans of green energy, however, it represents untested theory meriting little or no attention. But test results are rushing into view. They don't favor costly green energy as a way to create jobs or stimulate economies.
Subsidies cut
As has been reported in this space earlier, Spain's strong commitment to renewable energy didn't keep the country's economy off the rocks or its unemployment rate out of the stratosphere (OGJ, Jan. 10, 2011, p. 16). In fact, the financially stressed government cut green-energy subsidies last year and relaxed controls on retail energy prices, just when Spanish households didn't need the added cost.
Other European countries, once eager to show leadership in energy greenness, are lowering their ambitions under fiscal duress. A new report by Kenneth P. Green, resident scholar at the American Enterprise Institute (AEI), describes problems not only in Spain but also in Italy, Germany, and Denmark:
• In Spain, Green says, the adventure with renewable energy and green jobs didn't just become unsustainable, it fostered corruption as well. According to news reports, an audit of solar-powered generation disclosed nighttime production of electricity from sunlight. And electric power fueled by diesel seems to have been sold as solar power at rates several times that of power generated from fossil energy.
• In Italy, researchers at the Bruno Leoni Institute found the capital required to create a job in renewable energy to be nearly five times that required in the general economy. Furthermore, renewable-energy jobs tended to be temporary. Green added that corruption spawned by government handouts to renewable energy involved organized crime.
• In Germany, aggressive subsidies encouraged investment in wind and solar energy but raised household energy costs and pushed the price of carbon emissions to levels far above those of the European trading system. Green cites a study by Manuel Frondel concluding the country received no compensating benefits related to emissions, employment, security, or technical innovation. The German government is trimming subsidies.
• In Denmark, wind turbines generate the equivalent of 19% of electricity demand, but wind energy actually meets an average of only 9.7% of the country's power needs. A study by the think tank CEPOS, cited by Green, notes the convenient proximity to Denmark of Norway and Sweden, which have interruptible hydro capacity and thus can absorb power produced in excess of Danish needs in windy periods. Because Danish electricity prices are the highest in the European Union, public opposition to wind energy is surging. And the study found damage to the country's economy from the subsidized shift in employment from productive to less-productive activities.
More-supportive studies
Studies can be found, of course, that reach conclusions about green-energy jobs more supportive than those published by the conservative AEI. But they have problems, according to a recent review by Gurcan Gulen, senior energy economist at the Center for Energy Economics at the University of Texas at Austin's Bureau of Economic Geology. Large among them are inconsistent definitions of "green jobs," failure to distinguish between temporary construction and longer-lasting operational jobs, and inattention to employment losses elsewhere in the economy.
Other flaws noted by Gulen, in a study published by the Copenhagen Consensus Center, include aggressive assumptions about growth in renewable power, insufficient attention to cost, and frequent failure to consider the opportunity costs of green investment. Gulen concludes, "Adding 'net jobs' cannot be defended" as a benefit of investment in green technologies.
Money spent on money-losing ventures instead of on profitable ones cannot produce net gains in employment. Governments can spend themselves broke pretending otherwise.
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com