The Economist discusses the the issue of creating jobs by focusing on renewable energy projects may be not as good a deal as it looks. The good thing for the data center industry we don’t look at green as a job creation benefit.
The grass is always greener
Apr 2nd 2009
From The Economist print edition
Saving the planet and creating jobs may be incompatible
Illustration by Jac Depczyk
“THINK of what’s happening in countries like Spain, Germany and Japan where they’re making real investments in renewable energy,” Barack Obama instructed Americans earlier this year. “They’re surging ahead of us, poised to take the lead in these new industries. This isn’t because they’re smarter than us, or work harder than us, or are more innovative than we are. It’s because their governments have harnessed their people’s hard work and ingenuity with bold investments—investments that are paying off in good, high-wage jobs.”
Mr Obama is right that many governments, not least his own, are spending heavily in a bid to create green jobs. Countries as diverse as Canada, China, France and Indonesia have vowed to cultivate greenery in an effort to fertilise their wilting economies. Religious leaders, trade unionists and the secretary-general of the United Nations, among others, have hailed green stimulus as a cure for the world economy’s ills. After all, it holds out the hope of a triple benefit: a return to economic growth, deliverance from global warming and an escape from dependence on imported fuels, all wrapped up in an appealingly high-tech package.
As the greenwashing goes, who can figure out what is going on?
There is no shortage of studies on green jobs that support this optimistic view. The Center for American Progress, a think-tank with close ties to Mr Obama’s administration, called last year for the government to spend $100 billion on various green initiatives. The reward, it calculated, would be 2m jobs.
Critics jump in
Critics of these studies, however, argue that they leave important questions unasked. For one thing, it is hard to know how impressive the employment figures are without considering how many jobs would be created by spending the money in other ways. A recent paper from the Peterson Institute of International Economics and the World Resources Institute, two think-tanks, tries to do just that for America’s stimulus package. It finds that $1 billion in green-tinted spending creates 30,100 “job-years”. That compares well with 25,200 job-years for road construction and only 7,000 for temporary tax cuts (permanent ones do better).
And special interests like the coal industry.
In 2006, in a study prepared for a pro-coal lobbying group, Adam Rose and Dan Wei of Pennsylvania State University looked at how increasing the share of renewables in electricity generation at the expense of coal might affect employment. Displacing a third of generation from coal by 2015 would put 1.2m people out of work, they concluded, and displacing two-thirds would raise the figure to 2.7m. The job losses came chiefly as a result of higher energy prices.
They do think of models to analyze the impacts.
Those findings, however, are based on modelling, with all the complications and caveats that entails. Mr Rose’s subsequent research, using different assumptions, has produced more ambiguous results. By contrast, Gabriel Calzada Álvarez, a professor at King Juan Carlos University in Madrid, has tried to use empirical data to estimate how Spain’s subsidies for renewables, which so impressed Mr Obama, will affect employment. He calculates that the subsidies for existing renewable-electricity plants, which the government has promised to pay for 25 years, will cost €29 billion. Those subsidies, in turn, have created 50,200 jobs, according to data from the European Commission. That equates to a subsidy of over €570,000 per job.
here is an example for Spain. and, the author does close with the point, the biggest benefit is the environment.
Spain’s private sector, on the other hand, creates a job for every €260,000 or so invested, by Mr Calzada’s reckoning. So if the government had left the €29 billion in the hands of the private sector, it would have created 113,000 jobs with it—2.2 times as many. In other words, the government, Mr Calzada finds, is destroying 2.2 ordinary jobs for every green one it creates.
The result is particularly garish because Spain’s subsidies for renewables have been so generous (it recently scaled them back for new projects). Green subsidies bring other benefits that Mr Calzada does not consider, such as reducing demand for, and thus the price of, fossil fuels. The biggest benefit of all, of course, is to the environment, in the form of reduced emissions of greenhouse gases. Taking all of that into account would doubtless make the numbers look better. Nonetheless, Mr Calzada’s paper does suggest that Mr Obama should temper his enthusiasm for Spain’s “bold investments” in renewable energy. As all the studies discussed suggest, some ways of creating jobs—or fighting global warming, for that matter—are cheaper than others.