Get Energy Smart! NOW!

The Western Business Roundtable continues its contribution to deceiving Americans about the opportunities before us in a move to a clean energy future.  An analysis of the latest piece of deceptive truthiness from Eternal Hope. Earlier GESN posts re WBR:

• Ah, the smell of western astroturf
• Media “Fair and Balanced” extraordinaire

UPDATE: The material below was just a first look at this deceptive and poorly constructed “study”. For more about the “Spanish Green Jobs” study, see Credit for Trying.  Also, see DOE eviscerates right-wing Spanish ‘green jobs’ study

The latest piece of right-wing scaremongering is now making the rounds. The Western Business Roundtable, a right-wing organization that I have never heard of before. Ah, the sme , is touting a study in Spain which they say shows that every green job results in two jobs being destroyed. The study was prepared under the direction of Dr. Gabriel Calzada, an economics professor at Juan Carlos University in Madrid.

The first thing that I notice is that the study fails to establish cause and effect. In other words, there may have been 2.2 jobs lost for every green job created, but that says nothing about whether there is a causal relationship between the two variables. Just because Event A and Event B happened does not mean that Event A caused Event B. It could well be given the current economic climate that the creation of green jobs had nothing to do with the loss of 2.2 jobs because of the worldwide economic crisis. In other words, these jobs might have been lost no matter what the Spanish government did. And it could be that the creation of these jobs, given the worldwide economic recession, prevented a bad situation from getting worse.

The one possible cause that the study suggests is the cause of these lost jobs is the fact that the money could have possibly gone towards funding the creation of actual businesses through, say, tax cuts. But the problem here is that this is not a causal relationship, but an appeal to guilt. Of course there are always as many different alternatives as there are people interested in these projects. But a proper way to compare would be to study the effects of tax cuts, say, as opposed to the effects of creating green jobs. And a proper way might to be to consider the long-term implications of not creating these jobs — the possible creation of a massive humanitarian crisis that could wipe out the Straights of Gibraltar, among other low-lying Spanish areas and create more unemployment than the Western Business Roundtable’s worst nightmares for green jobs.

The study goes on to look at other studies which have been done in the area:

Of course other studies including by U.S. academics have also noted several related impacts, for example:

Raising energy costs kills. According to a Johns Hopkins study, replacing three fourths of U.S. coal-based energy with higher priced energy would lead to 150,000 extra premature deaths annually in the U.S. alone (Harvey Brenner , “Health Benefits of Low Cost Energy: An Econometric Case Study,” Environmental Manager, November 2005).

Reducing emissions, a major rationale for “green jobs” or renewables regimes, hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap-and-trade system aimed at reducing greenhouse gas emissions by just 15% will cost the poorest quintile 3% of their annual household income, while benefiting the richest quintile (“Trade-Offs in Allocating Allowances for CO2 Emissions”, U.S. Congressional Budget Office, Economic and Budget Issue Brief, April 25, 2007).

Raising energy costs loses jobs. According to a Penn State University study, replacing two-thirds of U.S. coal-based energy with higher-priced energy such as renewables, if possible, would cost almost 3 million jobs, and perhaps more than 4 million (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006) The latter point is the principal focus of this study, an analysis that quantifies actual net job creation in renewable energy resulting from government aid, to the detriment of alternate uses. In other words, we attempt to identify how many unseen jobs are lost for each one created – those that are seen – thanks to government aid to green energy.

The rationale for the first study is the low cost of coal as opposed to other forms of energy. But the fact of the matter is that these things can be worked around. If people are dying prematurely because they can’t pay their electric bills, the problem is much greater than that of coal vs. the other forms of energy. Since the study was done in 2005, well before the latest recession, that means that even if Obama succeeds in getting us out of the current mess, the structural weaknesses in our economy still remain. Thus a policy to create a green economy would help because it would create jobs by driving up wages and thus lifting people out of poverty, which would more than offset any increases in energy costs.

The problem with their entire line of reasoning here is that they are caught in short-term thinking as opposed to long-term thinking. In the short term, coal may well be the best alternative. But in the long term, given the alarming studies that show that man-made global warming is a major problem, we can’t afford not to switch to a carbon neutral economy. So, the solution here is clear — combine antipoverty problems with efforts to become carbon neutral. That would mean supporting the Employee Free Choice Act, universal healthcare, more money for education, as well as other programs that are designed to lift people out of poverty and into the middle class. These are difficulties that can be worked around, not excuses to ignore the long-term threat to our planet.

The report suggests that some of the jobs lost would be from those in conventional utility industries as a result of a loss of competitiveness. But that is not an excuse to ignore the threat to our planet any more than the horse and buggy industry had a right to complain about the rise of the auto industry at the start of the 20th century. When progress is made in science and technology, some jobs are lost — that is a fact of life. When Copernicus discovered that the Sun was the center of the Solar System, that did the Geocentric earth theorists out of jobs over the next 150 years or so. And all of the church bannings and inquisitions could not put the genie back in the bottle again. What we can’t do is refuse to push for more technological progress just because it might make the coal  industry obsolete. What we can do is to help communities that are economically dependent on coal to get back on their feet and help them find other career paths so that we can minimize the displacement as much as possible.

Now, nobody is suggesting that we should close down all the coal mines in this country tomorrow. But what we have to recognize is that resources like coal are finite resources that are not going to be here forever. That is why, as President Zapatero stated when campaigning for President in 2004, we have to diversify our energy resources. That way, when we do run out of coal, we don’t have the kind of panic that set in when gas prices went to $4 per gallon here. There is a big difference between solar and wind and coal — solar and wind are infinite resources; coal is not. Nuclear is better than coal, but there is only a finite amount of space to store left-over waste. And it is getting increasingly less likely that coal can expand, seeing that more and more places are getting used up and there will be more and more NIMBY opposition to any new so-called “clean” coal plants being built.

And the study, which appeals to guilt by bringing up poverty, fails to take into consideration the benefits that would happen when renewable energy is brought into the equation. Utilities are required to purchase renewable energy. Therefore, if we put solar plants or wind farms in every community in this country, then utilities would purchase any left-over electricity. Cities could own these solar and wind utilities and charge customers like they currently do water and sewer and gas, meaning that there would be a much bigger tax base to work with. That way, local authorities would have a lot more money to do public works projects and thus attract new residents and jobs, growing the tax base.

The study then suggests that renewable energy is subject to boom and bust. But the more one reads their analysis, the more it is clear that the problems with Spain’s boom and bust cycles have nothing to do with renewable energy in and of itself, but with the boom and bust mentality that was part of the Bush years. In other words, if the US government creates a sound financial basis for renewable growth that is not based on out of control debt and which rewards people who live within their means, then we can avoid the problems of boom and bust that have plagued previous efforts.

The study then pans previous studies because of what it claims is anecdotal information. But in fact, there have already been studies which contradict the claims of the Western Business Roundtable. For instance, a study by the Union of Concerned Scientists finds that if we are to go to a 25% alternative energy plan by 2025, then we would create a net 200,000 new jobs as well as 200,000 new jobs total. Jeff Deyette explained the reason for the job creation to the New York Times:

The reason, Mr. Deyette said, is that more expenditures go into manufacturing, equipment, installation and maintenance for renewable energy systems than they do for fossil fuels. “Obviously, the mining sector has become incredibly mechanized in recent years,” he said.

When asked about the flip side of this scenario — that renewable energy could be viewed as inefficient because it required more labor per unit of energy than fossil fuels — he said, “Jobs for dollars is essentially the trade-off there.”

So, we can see right away why the UCS study is superior to the Spanish study — it took into account such things as manufacturing, equipment, installation, and maintenance, while the Spanish study did not.

In addition, green collar jobs in Germany expanded from 160,000 to 240,000 in the last three years and could reach 400,000 by 2020. Also, the total number of green collar jobs around the world is forecast to be 40 million by the year 2020. That is several times the number of jobs that are available now. This means that if you are laid off from work, it might be a good idea to consider pursuing a career in green collar jobs, since it is an industry that is growing, unlike many career fields these days.

Next, the Western Business Roundtable-championed study claims that Spain has only created 50,000 jobs through their renewable program. However, a UNEP study says the figure is 188,000. There is a significant difference between the Spanish study and the UNEP study; the latter takes into account jobs indirectly created as the result of Spain’s investment in green collar jobs. The UNEP study breaks down the job creation; they say that 89,000 jobs have been directly created and 99,000 jobs have been indirectly created by the Spanish government’s investment in renewables. The Spainsh study does not take into account jobs indirectly created as the result of their investment in green jobs; however, it does take into account jobs which they say are indirectly lost as a result of Spain’s investment in the green economy. Thus, they are stacking the deck in favor of their side. Finally, even if we take their job losses at face value and accept their figures, Spain’s investment in renewables has still resulted in a net gain of 80,000 jobs.

But the Western Business Roundtable study continues by oozing “concern” over what they call “capital destruction:”

Public investment in renewable energy has job creation as one of its explicit goals, which, given the current economic crisis, suggests an intention of seeding a future recovery with “green job” subsidies. The problem with this plan is that the resources used to create “green jobs” must be obtained from elsewhere in the economy. Therefore, this type of policy tends to create not just a crowding-out effect but also a net destruction of capital insofar as the investment necessary must be subsidized to a great extent and this is carried out by absorbing or destroying capital from the rest of the economy.

The money spent by the government cannot, once committed to “green jobs”, be consumed or invested by private parties and therefore the jobs that would depend on such consumption and investment will disappear or not be created. Investment in green jobs will only prove convenient if the expense by the public sector is more efficient at generating wealth than the private sector. This would only be possible if public investment were able to be self-financing without having to resort to subsidies, i.e., without needing to absorb wealth generated by the rest of the economy in order to support a production that cannot be justified through the incurred incomes and costs. We have calculated that the total public subsidy in Spain, both spent and committed, totals 28,671 million Euros (€28.7 billion or appx. $37 billion USD), and sustains 50,200 jobs.

The study hammers on the guilt trips here, trying to appeal to guilt. This is an attempt to generate some sort of buyer’s remorse over what might have been. But one could use these sorts of appeals to guilt to pan any kind of government spending; therefore, these appeals are pointless. Secondly of all, it is simply not true that money spent on these projects would no longer generate wealth; the fact of the matter is that workers would spend the money that they got and thus generate wealth that way.

Then, they get into the math. They take the amount of money invested in renewables (around 28 billion euros) and divide it for each worker (50,000) and come up with a subsidy of around 571,000 euros per worker. By way of comparison, they estimate, based on average capital per worker, is 259,000 euros. Therefore, they estimate that for every green collar job that they create, they lose 2.2 workers. But all that is dependent on the accuracy of the 50,000 worker figure. And the problem, as noted above, is that study does not take into account jobs indirectly created by green collar jobs; the UNEP study does and comes up with a much higher figure of 188,000 jobs. So, plugging the much more accurate UNEP figures yields a much different figure — the average capital per worker is 152,805 euros per worker, which means that for every two jobs lost through this program, three are created. And that means that their calculations about worker productivity are similarly off.

The authors of the Spanish study then go on to pronounce judgment on themselves:

This case is similar to the one that French economist Frédéric Bastiat denounced in his famous “Petition by the candle-makers,” in which he ridicules the intentions of protectionist entrepreneurs by comparing them to candle-makers clamoring for the state to crowd-out the sun, which was competing with them unfairly when providing light. In their opinion, if the sun was barred from providing light, numerous jobs would be created in the candle manufacturing industry. Obviously, this is not so: precisely by not being able to profit from the sun’s light we would be wasting scarce resources in the production of candles instead of producing other goods and services that would increase our wealth.

And it works the same way here as well — if the government had passed laws against autos on public roads around the turn of the 20th century, the horse and buggy industry would have survived and millions of jobs would have been saved. Not only is the creation of green collar jobs more efficient than the creation of average jobs, the long term future of our planet demands it as well.

And finally, even the authors of the study admit that the numbers of the Spainish experience can’t be directly translated into the American experience. That is why the UCS study is much more reliable than this one in determining the future of our energy policy, because it takes into account American jobs, not someone else’s situation. And the UCS study suggests that we would stand to gain much more than the Spanish would if we were to implement Obama’s plans for renewable energy here in this country.