By Institute for Energy Research ——Bio and Archives--August 5, 2009
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The building of a clean-energy economy in the United States can also serve another purpose: to create new ‘pathways out of poverty’ for the 78 million people in this country (roughly 25 percent of the population) who are presently poor or near-poor, and raise living standards more generally for low-income people in the United States. (p. 2)Such claims sound good, but simply don’t hold up to scrutiny. The government can’t make the economy richer by siphoning resources away from the private sector and spending them on political pet projects, nor does it raise living standards by weaning businesses off the most efficient techniques of production. The “green recovery” advocates are trying to have their cake and eat it too. Assume that some of the most dire global climate computer simulations are accurate, and that drastic reductions in greenhouse gas emissions are necessary to literally avert global catastrophe. Even in this case, the government’s preferred solution—taking away options from business and forcing them to make their products using less efficient energy—will lower total domestic economic output. To some, the tradeoff of averting the “what if” scenario would be worth it, but the point is, there would be a tradeoff. Americans would be forced to enjoy a lower material standard of living for the (theoretical) benefit of lower long-run temperatures. To see how far-fetched the green jobs rhetoric is, notice that the argument has nothing intrinsically to do with “clean” energy. If cap-and-trade in carbon dioxide emissions will be such a boon to the economy, then why stop there? The government could also declare a cap on how many tons of steel businesses could use in a given year. By ratcheting down the steel cap every year (as they plan on doing with carbon dioxide), the politicians would force businesses to come up with other ways of making their products with less and less steel. According to the PERI study’s logic, this would be great because of all the new job opportunities in plastics and other soon-to-be invented sectors.
[O]ur findings show that clean-energy investments create more job opportunities than spending on fossil fuels, across all levels of skill and education. The largest benefits will accrue to workers with relatively low educational credentials. (p.2, emphasis added)Sounds too good to be true, doesn’t it? That’s because it is. In a relatively free market economy, where for the most part lawmakers and unelected bureaucrats don’t control economic decision-making, labor and capital moves towards those sectors where they are the most productive. Some businesses, such as hair salons, are relatively labor-intensive, whereas other businesses, such as airlines or oil rigs, would be more capital-intensive. Loosely speaking, the economy’s overall output would be maximized, because every worker and machine would be deployed in the sector where they could produce the most value (and earn the most money). Now enter the policymakers and bureaucrats who start rearranging resources. They look at businesses that generate electricity by harnessing wind and solar power, and then they look at businesses that produce electricity by harnessing coal power. Since it takes more workers to produce electricity from windmills and solar panels, they decide to cripple the coal burners and give subsidies to the wind harvesters to try to create a “green recovery.” But if it really helped workers for them to move from efficient energy industries into “green” energy sectors, why would the government have to force them to do it? Part of the answer is that the new jobs will actually not be very high paying, as the PERI study unwittingly admits when it says, “Out of the 1.7 million net increase in job creation, roughly 870,000 of the newly available jobs would be accessible to workers with high school degrees or less.”
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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.