The Washington Post published a report on the bleak outlook for green jobs. Many have eagerly gone through training programs, only to find that there are no jobs to be had:
The Obama administration channeled more than $90 billion from the $814 billion economic stimulus bill intoclean energy technology, confident that the investment would grow into the economy's next big thing. ...
But the huge federal investment has run headlong into the stubborn reality that the market for renewable energy products - and workers - remains in its infancy. ...
The industry's growth has been undercut by the simple economic fact that fossil fuels remain cheaper than renewables. [A]dministration officials acknowledge that it is likely to be years before the spending on green energy produces large numbers of jobs.
There is a lot of potential in the green revolution, particularly around the "cradle to cradle" concept of building technology which has a recycle cycle similar to biology. A lot of folk believe you either accept the whole package, or are a denier of some sort. I rather think one should discriminate between the fact and the phantasm, the promising and the promoted. An important question is whether the diffusion of green technology throughout the developed countries can provide the foundation for coming out of the Great Recession. Are green jobs the ace in the hole for the future?
The promise of green jobs, looked at critically, unfortunately comes up a joker.
The Warning From Spain
Spain warned us of their failure with a green jobs program. You can download their report here. For every job created, 2.2 jobs were lost, or 9 jobs lost for every 4 created. And this does not even include opportunity cost - new jobs if the money had been spent elsewhere. Worse, only one out of ten green jobs were permanent.
The White House response to this report was pretty awful and did nothing to treat this issue with seriousness, only spin.
The White House response to the Spanish warning is a striking example of how the proponents for green jobs often seem to have flown to Fantasy Island.
The White House claimed close to 200,000 green jobs, but many of them turn out to be spurious, such as counting reporters who write about green jobs. The Dept of Energy claims around 80,000 jobs, but it is likely to be even less than that: of the $20B spent so far on green initiatives in the Stimulus, 80% of some programs went overseas (eg. to Chinese makers of wind turbines or solar cells). While it is hard to know what "some programs" encompass, it nonetheless means some or perhaps many of the green jobs were created outside the US. Paying $20B for 20-50,000 US jobs is $500k to $1m per job, a pretty steep price to pay, especially if most turn out to be temporary.
California put out the results of a survey claiming 500k green jobs in the State, but most appear to be existing activities (recycling, insulation, etc.) and not an estimate of new venture-created jobs.
Arnold Schwarzenegger likes to say "as goes California, so goes the nation." Stephen Moore looked into his claims for California green jobs, and concluded it was not a dream of a green future, but a green nightmare:
A new 2010 study by the University of California-Berkeley comes to the sobering conclusion that "the green economy accounts for just 1 percent of California's jobs." That's right: of the roughly 15 million California workers, only about 159,000 have green jobs (and this was an expansive definition of green jobs, including trash sorters at the dumpsters). ...
Gov. Schwarzenegger's own economics team concluded this year that the state's green regulatory structure is a menace to the state's economy. The governor's office study concluded that California's already iron-fisted environmental and workplace regulations translate into about $176 billion in lost output and nearly 4 million lost jobs. ...
Joseph Vranich, a business relocation expert, has a database of firms that move in and out of California. "Thanks mostly to California's hostile regulatory climate," he says, "for every three new businesses that move into the state of California, about 100 move out." ...
One former manufacturer in Los Angeles complained that "the regulators come onto your facility, and they want to shut you down. They view businesses as enemy combatants." Earlier this year, the EPA chased out of town the last steel foundry in Los Angeles, a firm that had hired hundreds of Southern California workers with good wages for decades. ...
Perhaps even more embarrassing is that when California's investments do generate new jobs, they are increasingly located outside the state. In June, the hot Silicon Valley firm MiaSolé reported that its planned home for one of the largest solar factories in North America, a 500,000-square-foot 1,000-worker plant, will be built in Atlanta. ...
Similarly, CalStar Products has erected its newest green plant in Wisconsin. Since then, it has been awarded nearly $2.5 million in federal clean energy tax credits through the American Recovery and Reinvestment Act, and the company said, "We expect to build additional plants down the Mississippi Valley and East Coast over the next couple years" -- and conspicuously, not in California.
The Promise of Venture Capital
Stepping back, the bigger dilemma is what new industry sector or factor of production will drive us out of the Great Recession. In past depressions something pulled us out, like railroads, autos, or the jet age. Green jobs have a surface appeal of applying to construction, manufacturing, installation and other blue collar professions. But is the promise real?
Dian Chu took a look at the math of green jobs. The immediate problem is that the new, venture-capital type of green job is at the wrong side of the Industry Life Cycle curve - at the R&D side, not the growth & maturity side (see chart).
The venture capital industry has experience with launching new industries, such as PCs, which grew fast and created many new jobs, but the green industries are not expected to show any similar sort of growth; instead they require large-scale, long-term infrastructure changes that eventually could become large, as the energy industry is very big.
Unfortunately, this means it will take too long to have enough green jobs to make the type of impact on an economy as large as the US to pull us out of the Great Recession. Worse, the US lacks a comparative advantage in many of these jobs, and ramping up projects to create demand for green products may benefit manufacturing in China as much as in the US - as we have already seen.
The Trap of Subsidies
Certainly a number of new green jobs have been funded by the venture capital industry, although I have not seen solid estimates of how many. Venture-backed job growth is promising, but to too great an extent these jobs depend upon continued government subsidies, and thus are at huge risk of evaporating. The green jobs of the '80s were gone by the '90s when the subsidies ran out. Already Europe and Japan are cutting back their subsidies to get their budget deficits under control. Are we that far behind?
Spain's green dream is turning into a nightmare for families who invested on the promise of those subsidies. Bloomberg ran a story on how the government is about to stiff green investors by pulling the subsidies they had promised:
Solar investors such as Vilimelis were lured by a 2007 law passed by the government of Prime Minister Jose Luis Rodriguez Zapatero that guaranteed producers a so-called solar tariff of as much as 44 cents per kilowatt-hour for their electricity for 25 years -- more than 10 times the 2007 average wholesale price of about 4 cents per kilowatt-hour paid to mainstream energy suppliers.
Thanks to the incentives, the family met the monthly cost of the loan and even earned a small profit. Once the debt was paid off in 2018, Vilimelis looked forward to making even more money during the 15 additional years of subsidies guaranteed under Spanish law.
Now Vilimelis and more than 50,000 other Spanish solar entrepreneurs face financial disaster as the policy makers contemplate cutting the price guarantees that attracted their investment in the first place.
“You feel cheated,” he says. “We put our money in on the basis of a law.”
The potential size of the losses is an astounding: Euro126 Billion. The goal of sustainable green jobs never materialized, as the solar panels and wind turbines were imported. What is left is the wreckage of lost life savings, expensive energy, collapsed projects, and few green jobs.
Too Cheap to Meter
There is something fundamentally different about green jobs than prior sectors like autos or railroads that pulled us into prosperity and growth. We used to have a goal of energy "too cheap to meter." Now we see innumerable steps to make energy more expensive, to encourage conservation and close the gap with high-cost renewable energy (wind, solar). It is hard to see how making energy expensive can drive growth in the economy and make the US more competitive with Asian rising powers. Worse, it is abject nonsense to believe a subsidized industry can pull us out - all we are doing is pulling money from profitable industries and sinking them in an unprofitable one.
The cleantech venture firms will say the subsidies are needed to get the new approaches to scale, where they can run down a cost curve and be viable without subsidy. Perhaps, but until the green industry gets to profitability on its own merits without subsidy, the jobs created will come at the expense of other jobs driven out by more expensive energy, and like Spain, we might find we lose more than we gain.