The Grass Is Always Greener

Saving the planet and creating jobs may be incompatible.

What is more, public investment in green technology brings costs as well as benefits. Taxpayers, for example, will ultimately have to pay for government debt, while prodigious government borrowing makes it harder for businesses to raise money. Spending on renewable electricity, meanwhile, tends to raise the price of power, since wind- and solar-power plants cost more to build and run than coal-fired ones, say. These effects can cost jobs.

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.

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.

Solar Eclipse

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.


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