Why "green jobs" programs may not save the economy or the environment.

News and commentary about environmental issues.
March 4 2009 4:09 PM

Barking Up the Wrong Tree

Why "green jobs" may not save the economy or the environment.

The Green Jobs Now group. Click image to expand.
The Green Jobs Now group

"Climate change. What's the solution? A green jobs revolution." So chanted thousands of protesters who braved the frigid cold Monday in Washington to demand aggressive government action on alternative energy. They have reason to be optimistic. The recently passed economic stimulus bill promises to create thousands of green jobs. Vice President Biden's new Middle Class Task Force devoted its first meeting, last Friday in Philadelphia, to praising their virtues. President Obama contends that his policies will deliver 5 million green jobs in the next two decades.

Indeed, for a nation facing dire economic and energy challenges, green jobs seem to be an ideal solution. 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.

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. (Analyses typically include not only jobs installing solar panels or engineering algae for biofuels but also secondary activities like making widgets for use in windmills.) 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.

Hence another level of sophistication from the green jobs community, which now 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.

Indeed, most comprehensive economic models that look at the long-term effects of aggressive climate policies consistently forecast a small net decrease in national job growth. (The models predict robust growth under all scenarios, but the positive effect is diminished slightly if green policies are pursued.) These studies are far from perfect, but they suggest that the burden of proof lies with those promising a major expansion in jobs.

Advocates and analysts have tried to counter these models with an appeal to history. Last October, for example, a Berkeley economist published a widely reported study claiming that the state's energy efficiency policies had "created nearly 1.5 million jobs from 1977 to 2007" in areas like the service sector and retail "while eliminating fewer than 25,000" in the electric power industry. But the empirical study had the same flaw as its theoretical counterparts: It assumed that consumer spending on products like efficient washing machines and home insulation hadn't diverted demand from other parts of the economy. That diversion is likely to have led to diffuse but real job losses somewhere else.

That's not to say that good energy-efficiency policies aren't net job creators—there's actually a strong argument that they are. Many efficiency measures (like adding home insulation or using better lights) more than pay off their initial costs in energy savings, and those savings can be reinvested in the economy to create more jobs. But we can't count on improvements in efficiency to address all of our energy and climate challenges. Many of the other steps we'll need to take—like moving away from traditional coal technology and electrifying the transportation system—will bear real costs.

For many environmental advocates, of course, these discussions are of secondary importance; what matters most is that green jobs will help the planet. They'd be wise to be careful there, too. Indeed, the most successful green jobs program to date is one that no environmentalist wants to brag about: the conversion to corn-based ethanol. A recent United Nations report estimated that the heavily subsidized U.S. ethanol industry provides employment for 154,000 Americans, about five times as many as the wind power industry and nearly 10 times as many as the solar industry. That goes a long way to explaining why, despite mounting evidence showing that corn ethanol is a failure (some would say a disaster) on the environmental front, U.S. policy appears to be on cruise control. At its base, corn ethanol is not a green policy so much as a jobs policy—and its success in that respect has made it almost impossible for the government to change course.

To be certain, there are times when opportunities to solve our energy and employment problems converge. The current recession and recent economic stimulus provided one such case—with capital and labor sitting idle, government can push green efforts without needing to worry so much about distorting the rest of the economy. That means that many of the green investments in the stimulus package will create jobs in the short term and hence accelerate a return to full employment and economic growth. But even that logic has limits. Most serious energy programs take a long time to implement; in its zeal to spend stimulus money on the green sector, Congress directed a significant amount of its limited resources to long-term efforts that won't maximize job creation when it's needed most.

None of this is to say that we shouldn't hope for a future replete with green jobs. Our economy is hurting, and our energy policy is broken. We need a broad-based economic policy that focuses on job creation and an ambitious energy policy that protects the planet and makes us more secure. But if we try to build both efforts around a single goal of creating green jobs, we may fail to deliver over the long term on either front. If we succeed independently on each, though, the green jobs will come.

Michael Levi is the David M. Rubenstein senior fellow for energy and the environment at the Council on Foreign Relations. He blogs at CFR.org.