More Doubts on “Green Jobs”

More Doubts on “Green Jobs”, by Robert Murphy
Master Resource, March 6, 2009

As time passes, the skepticism grows about the ability of government funding for “green jobs” to simultaneously (a) pull the economy out of recession and (b) reduce the risk of climate change. In the March 4 edition of Slate–hardly a bastion of reactionary conservatism–Senior Fellow Michael Levi of the Council on Foreign Relations took the greenwash off of “green jobs” in the essay, ”Barking Up the Wrong Tree: Why green jobs may not save the economy or the environment.” Levi also directs CFR’s Program on Energy Security and Climate Change.

At first it sounds as if Levi is merely echoing the thoughts of Harvard’s Robert Stavins, who has recently been pointing out that it’s not necessarily optimal to try to use a single-bullet policy to address two different objectives. (This led to criticism from the always-entertaining Joe Romm that Stavins was incapable of walking and chewing gum at the same time.) Along the same lines of Stavins’ argument, Levi writes:

But just because “green” and “jobs” are both in demand doesn’t mean that policies focused on creating “green jobs” make sense. In fact, a close look at the economics of “green jobs” suggests that if we try to find a lasting solution to these challenges with a single set of policies, we might fail to deliver on both fronts.

But Levi doesn’t stop there. He goes on to challenge the efficacy of government funding for green jobs itself:

The fundamental problem is that there’s no solid evidence that green policies—even those aimed explicitly at creating jobs—will actually lower the long-term unemployment rate. Most of the research on how these sorts of programs might build up the work force simply tallies the payrolls, current or projected, of companies in renewable energy and other sectors…This approach is a natural winner: Green policies inevitably generate jobs in green industries, so the studies inevitably deliver good news. But skeptics argue that simple windmill-counting ignores an important fact: Every unit of energy generated from alternative sources displaces a similar amount generated by traditional means, so forgoing those other energy sources means giving up whatever jobs they were providing. This doesn’t mean that greening the economy will have no net impact on jobs, but it muddies the math considerably.

Levi has done his homework; he knows that the proponents of green jobs have a good comeback to the above argument. But then Levi gives the response to that:

[In response to my objection above,] the green jobs community…points out that a dollar spent on renewable energy or higher energy efficiency will generate more U.S. jobs than a dollar spent on traditional power. That’s probably true, since many green jobs are labor-intensive and clean energy is more likely to be generated at home rather than to be imported. But this misses a critical point, too: The dollar spent on green sources also generates less energy. (Renewables will be more expensive than traditional power for the foreseeable future.) Part of the gap can be closed by energy conservation, but other money will need to be diverted from elsewhere in the economy to make up for the remaining energy shortfall. The result is a loss of jobs somewhere else.

My point in the present blog post is not to definitively settle the score; for a more comprehensive analysis, I point readers to the study I co-authored with Robert Michaels on green jobs. What I am warning about is that many of the estimates of green jobs (that allegedly will be created by government funding) commit very naive mistakes.

To give a diferent example from the ones Levi discusses: Just the other day I heard a politician at the federal level (I forget who it was) talking about the “green” provisions in the stimulus bill. And the questioner asked whether the critics were right, when they said that cap and trade would harm the economy. In response, the politician pointed out all the jobs that would be created through the need to retrofit buildings, switch to alternative energy sources, etc.

This is crazy talk. Someone like Yale’s William Nordhaus can make a plausible case (.pdf) for a carbon tax, using the climate models of the IPCC (and in my opinion a heroic faith in the governments of the world to “get it right”). But Nordhaus is a sensible economist and recognizes that you don’t help the private sector by saddling it with another set of constraints. According to the politician’s logic, if the government required that all buildings be outfitted with polka dot wallpaper, it would stimulate the economy.*

* Unfortunately, there are Nobel laureates who would say that with a straight face. These days it’s getting hard to come up with a reductio ad absurdum…