The Grass Is Always Greener

Saving the planet and creating jobs may be incompatible.

“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.

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.

Roland Berger, a firm of consultants, wants the German government to do something similar. It estimates that global spending on environmental technology is €1 trillion ($1.3 trillion) a year, and will grow by 5.4% a year until 2020. This business sustains 1.5m jobs in Germany, by its reckoning. But the number could double, the consultants believe, if the government offered more tax breaks, subsidies and other incentives for investment in greenery. The United Nations Environment Programme has produced a report lauding government schemes to promote green employment. It sees scope for ten times as many jobs in clean energy by 2030.

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).

The green stimulus schemes the authors looked at perform so well because they catalyse private investment in things like windmills and fuel-efficient cars. But that also flatters the employment numbers, in so far as the authors assume that the stimulus induces private spending that would not otherwise occur. They note that if it simply redirects capital from one use to another, then the number of jobs created might not be so great.

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