Engineering News

EDITORIAL: Will 'Green Energy' Trickle Down?
August 05, 2009

The propaganda blitz over the virtues of "green energy" is still running strong. The pressure group "Green For All" recently commissioned a study by the Political Economy Research Institute (PERI). The study is titled, "Green Prosperity: How Clean-Energy Policies Can Fight Poverty and Raise Living Standards in the United States." Unfortunately, the new study's arguments are as weak as the rest of the "green jobs" rhetoric.

Contrary to the claims of the study, both the Obama administration's "stimulus" plan and the House-passed Waxman-Markey climate bill will indeed lower living standards for most Americans. It's true, some groups will benefit financially from the government's massive deficit spending and power grab—solar panel manufacturers and Wall Street carbon dioxide allowance brokers are good examples. But the nation's poor are not politically connected, and thus will not benefit from these backroom deals. Instead, the poor will suffer the most from rising energy prices and reduced transportation options.

Helping Business By Crippling It?

The fundamental flaw with the notion of a "green recovery" is that it overlooks all the jobs the government will destroy with its mandates and stealth taxes. For example, the PERI study tells us:

The building of a clean-energy economy in the United States can also serve another purpose: to create new 'pathways out of poverty' for the 78 million people in this country (roughly 25 percent of the population) who are presently poor or near-poor, and raise living standards more generally for low-income people in the United States. (p. 2)

Such claims sound good, but simply don't hold up to scrutiny. The government can't make the economy richer by siphoning resources away from the private sector and spending them on political pet projects, nor does it raise living standards by weaning businesses off the most efficient techniques of production.

The "green recovery" advocates are trying to have their cake and eat it too. Assume that some of the most dire global climate computer simulations are accurate, and that drastic reductions in greenhouse gas emissions are necessary to literally avert global catastrophe. Even in this case, the government's preferred solution—taking away options from business and forcing them to make their products using less efficient energy—will lower total domestic economic output. To some, the tradeoff of averting the "what if" scenario would be worth it, but the point is, there would be a tradeoff. Americans would be forced to enjoy a lower material standard of living for the (theoretical) benefit of lower long-run temperatures.

To see how far-fetched the green jobs rhetoric is, notice that the argument has nothing intrinsically to do with "clean" energy. If cap-and-trade in carbon dioxide emissions will be such a boon to the economy, then why stop there? The government could also declare a cap on how many tons of steel businesses could use in a given year. By ratcheting down the steel cap every year (as they plan on doing with carbon dioxide), the politicians would force businesses to come up with other ways of making their products with less and less steel. According to the PERI study's logic, this would be great because of all the new job opportunities in plastics and other soon-to-be invented sectors.

The Lower the Wage, the More Jobs You Can "Create"

The PERI study relies on a typical claim from the "green recovery" literature:

[O]ur findings show that clean-energy investments create more job opportunities than spending on fossil fuels, across all levels of skill and education. The largest benefits will accrue to workers with relatively low educational credentials. (p.2, emphasis added)

Sounds too good to be true, doesn't it? That's because it is. In a relatively free market economy, where for the most part lawmakers and unelected bureaucrats don't control economic decision-making, labor and capital moves towards those sectors where they are the most productive. Some businesses, such as hair salons, are relatively labor-intensive, whereas other businesses, such as airlines or oil rigs, would be more capital-intensive. Loosely speaking, the economy's overall output would be maximized, because every worker and machine would be deployed in the sector where they could produce the most value (and earn the most money).

Now enter the policymakers and bureaucrats who start rearranging resources. They look at businesses that generate electricity by harnessing wind and solar power, and then they look at businesses that produce electricity by harnessing coal power. Since it takes more workers to produce electricity from windmills and solar panels, they decide to cripple the coal burners and give subsidies to the wind harvesters to try to create a "green recovery."

But if it really helped workers for them to move from efficient energy industries into "green" energy sectors, why would the government have to force them to do it? Part of the answer is that the new jobs will actually not be very high paying, as the PERI study unwittingly admits when it says, "Out of the 1.7 million net increase in job creation, roughly 870,000 of the newly available jobs would be accessible to workers with high school degrees or less."

Saving Consumers Money By Taking Away Their Products

As bad as their arguments for "helping" workers are, the PERI approach to "helping" consumers is even worse. The government will "save" households money by forcing them to consume less energy and transportation. For example, in discussing the benefits of increasing the availability of mass transit—funded with taxes taken from the private sector—the PERI study says (p.3):

  • The largest benefits will accrue to households that can replace a car with public transit.
  • These households would see their annual transportation expenditures fall by roughly $2,000.
  • This would represent a reduction in total expenditures for these families of about 10 percent.

Applying the same logic, if the government expanded public housing projects and doubled property taxes at the same time, that might encourage families to "save money" by moving into government-owned apartments, but it wouldn't make them better off as a result.

What the PERI authors fail to explain is why the poor would need to be forced to reap all the benefits that will allegedly accrue from new government "green energy" mandates. For example, if it makes economic sense for a poor household to install better insulation and fluorescent lights, why does the government need to be involved at all? At best, PERI should conduct an educational campaign alerting poorer households of all these alleged savings. Or better yet, maybe they could provide free compact fluorescent light bulbs to citizens of modest means. Both would be certainly be less intrusive to the poor than fundamentally reorganizing energy markets, and consequently harming the U.S. economy, for the sake of promoting politically correct energy.

Conclusion

The $787 billion Obama "stimulus" (pork) package and the 1400-page Waxman-Markey energy tax bill will not help the poor. You don't improve the economy or raise living standards by rearranging resources and imposing artificial constraints on the private sector. These two government programs do nothing more than siphon money from taxpayers and into the hands of lawmakers and bureaucrats to shower onto their politically connected friends. Unfortunately, the working poor are not lucky enough to be members of that exclusive club.

Source: Institute for Energy Research

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