The Green Subsidy/Job Loss Nexus

Government subsidies for renewable energy projects are creating very few green jobs and destroying lots of real ones.

By Peter C. Glover and Michael J. Economides

Job creation is what oils a politician’s campaign and tenure. Ideology alone can take one only so far. Jobs, good jobs, will keep people around. Otherwise, they will bolt. A recent case in point is Barack Obama’s recent talk on American jobs, in which he finally seems to realize that his own job depends on his ability to create more jobs for American voters.

Ideology also permeates other human concerns, such as “saving the planet.” But there comes a point when even how to save the planet boils down to hard economics – what can we afford? Bottom line: The green refrain of “whatever it costs” won’t do in the real world. Whichever side of the Atlantic we live on, the economic indicators are all registering in the red zone when it comes to the destructive impact of diverting precious economic resources into green subsidies. But the impact has been most pronounced in the area of jobs.

It was all supposed to be so different. A new, if almost wholly subsidized, green industry was expected to create hundreds of thousands of new, lasting jobs. It created some. But, alas, a wealth of evidence has emerged revealing how green jobs are largely created at the expense of real jobs, or only exist so long as the umbilical cord of public subsidy isn’t cut, or both. 

Nowhere is this so blatant as in the energy sector, the engine room of Western civilization and all modern society. So you might well be wondering why it is that the greatest impediment to economic revival is the gullibly “green” bull-headedness of many leading politicians – left and right of the ideological divide – and their complete inability to grasp “sound money” economics and realistic energy policies. Here’s why.

Obamanomics: Job-Buster-in-Chief 
Given the conveyor belt of White House spin, you might actually believe that the Obama Administration was in the “job creation” – or at least the “aiding job creation” – business. As such, you might put your hard-earned money on Obama’s latest notions, including a new and far-fetched “Department of Jobs” that would merge one or more existing government agencies. Back on Planet Reality, however, a whole bunch of studies and indicators reveal plainly that government patently isn’t in the job creation business. In fact, the government penchant for creating green jobs ultimately reveals it is actually in the job-destruction business.

If you want clear evidence of just how many real energy sector jobs are being blocked by President Obama, the EPA and other federal and state bureaucracies, consider the recent report, Progress Denied: A Study on the Potential Economic Impact of Permitting Challenges Facing Energy Projects, published by the U.S. Chamber of Commerce. According to the study, Obamanomics (our term, not theirs) right now has its foot on the throat of prospective energy sector job growth to the tune of millions of new, real jobs. The detailed report asserts that, if allowed to flourish, an “investment phase” for planning and construction of new energy projects – that’s real hydrocarbon energy projects, not the renewable kind – including offshore drilling, would generate $577 billion in direct investment and a $1.1 trillion increase in U.S. GDP, including $352 billion in employment earnings. The report estimates that would create up to two million new energy sector jobs during each year of the construction phase.

Next up, the “operations phase” would likely generate $99 billion in direct annual output, yielding a further $145 billion in GDP and $35 billion in employment earnings. Taken together, that would create an average of 791,200 jobs per year of operation. In total, assuming 20 years of new energy sector construction and operation if off-limits drilling and other initiatives were allowed, approximately $3.4 trillion would be added to GDP, including $1.4 trillion in employment earnings, and an additional one million+ jobs per year.

And what can be seen in macrocosm can also be seen in microcosm.

On the eve of Earth Day 2010, Seattle Mayor Mike McGinn and Vice President Joe Biden announced, amid much fanfare, a new green job-creating scheme via a $20 million federal grant to invest in “weatherization.” That means insulating roofs, attic spaces and the like. It was claimed the scheme would create around 2,000 jobs and retrofit 2,000 homes in poorer neighborhoods. After more than a year into the program just three homes have been retrofitted and 14 jobs – mostly administrative – created.  Biden’s “triple win” of boosting the economy, reducing consumer bills and lowering gas emissions turns out instead to be a “triple whammy” – for federal taxpayers, that is. The problem is that the Seattle experience of finding green jobs comes at a ludicrously high cost per job, much as it has wherever the dead hand of Obamanomics has utilized federal funds to create them. But then, it isn’t just  Obamanomics that sponsors the green subsidy/job loss nexus.   

Euronomics
In early August the UK manufacturers’ association, the EEF, said that green taxes and climate-change policies had reached, using an Al Gore phrase, a “tipping point” where they are negatively impacting jobs and investment and economically “crippling the recovery.” The litany of green-climate levies cited as counter-productive by the EEF include: fuel duties, air passenger levies, levies on waste and landfill, the carbon reduction commitment, and the government’s move to increase taxes on North Sea oil and gas.

According to a separate hard-hitting report, The Green Mirage, published by the UK think-tank Civitas and written by the director of the Renewable Energy Foundation (REF), the government’s plans to boost renewable energy projects will actually destroy up to 30,000 British jobs. Describing the UK government’s green policies as “staggeringly far-fetched,” the director of the REF warned that green subsidies would put people on the dole and lead to higher energy prices. The report went on to point out that the government’s £5 billion subsidy for renewable electricity generators in the eight years to 2010 was “the equivalent of paying every worker in the wind industry £230,000.” In 2010, “every wind industry job was subsidized to the tune of £54,000.”

And for what benefit? The Civitas report quotes European Commission models which suggest the EU’s climate policies generally will have only “slight” benefits for GDP and employment by 2020, benefits that, for all the world-leading UK domestic investment in renewables, will not be felt by the UK at all. In June, a spokesman for the European Metals Association, speaking to European Energy Review, warned that the EU’s “inward-looking unilateral climate policy” would put European producers of non-ferrous metals out of business, stating: “What we are seeing is a slow process of delayed or cancelled investments, and even factories closing. This could spell the end of aluminium and other non-ferrous metals in the EU.” And all this at the very time that global demand for metals is increasing!

The evidence for how green jobs literally “feed off” real jobs – diverting resources from real into phony jobs – has been well-documented. Not least is its disastrous effect on the Spanish economy, an economy currently approaching the same dire straits already tossing Greece, Portugal and Ireland around like corks. The fact is that simple economics reveals a clear nexus between regimes of green subsidies that create a green jobs mirage and the mass disappearance of, or delay in creating, real jobs. 

Time to Get Real
It was precisely this point that Chevron’s Vice President for Global Exploration, Bobby Ryan, was making on Fox News in mid-August as Big Oil, for once, came out swinging on the Obama Administration’s offshore drilling moratorium. Ryan pointed out that the energy sector already employs 9.2 million Americans. In an example of masterly understatement, given the figures we saw above, Ryan averred, “It could employ a lot more.” Showing a map of the off-limits continental shelf, he made the case that 2.8 trillion barrels of oil equivalent await tapping off the U.S. coastline. Extraction of that alone, not to mention onshore shale gas, would require a whole lot of extra manpower.

The green subsidy industry is not even close to having any impact on still rising global carbon emissions. It further hampers struggling national economies with no discernible benefit. And it threatens national electricity generation and thus future prosperity because the scheduled phaseout of fossil fuel power plants in countries like the UK may occur before there is sufficient renewable energy available to replace them. It does, however, make bundles of cash for the central government, some of which ends up recycled as yet more job-busting green subsidies.

If political “greens” could, for once, put the best interests of their country first, taking their ideological foot off the throat of potentially explosive real energy sector growth, the markets could yet be primed to strike an energy-led economic gusher. – MarEx

Glover is European Editor and Economides Editor-in-Chief of the Energy Tribune.